First National Maintenance Corporation v. NLRB

Supreme Court of the United States
69 L. Ed. 2d 318, 101 S. Ct. 2573 (1981)

ELI5:

Rule of Law:

An employer's economically motivated decision to shut down part of its business is not a "term or condition of employment" under § 8(d) of the National Labor Relations Act, and thus is not a mandatory subject of collective bargaining.

Facts:

First National Maintenance Corporation (FNM) provided cleaning and maintenance services to commercial customers, including Greenpark Care Center, a nursing home.
FNM employed approximately 35 workers at the Greenpark location.
Due to an unprofitable fee arrangement, FNM was losing money on its contract with Greenpark.
In March 1977, the employees at the Greenpark location selected District 1199 (the Union) as their bargaining representative.
On July 6, 1977, after its request for a fee increase was not met, FNM informed Greenpark it would terminate their service contract effective August 1.
On July 28, 1977, FNM notified its Greenpark employees that they would be discharged three days later.
When the Union requested to bargain over the closing decision, FNM refused, stating the decision was final and based purely on finances.

Procedural Posture:

The Union filed an unfair labor practice charge against First National Maintenance Corporation (FNM) with the National Labor Relations Board (NLRB).
An Administrative Law Judge found that FNM had violated the National Labor Relations Act by failing to bargain over both the decision and the effects of the closing.
The NLRB adopted the judge's findings and ordered FNM to bargain and issue backpay to the discharged employees.
FNM, as petitioner, sought review in the U.S. Court of Appeals for the Second Circuit, with the NLRB as respondent.
The Court of Appeals enforced the NLRB's order, though it applied a different legal standard based on a 'rebuttable presumption' in favor of bargaining.
The U.S. Supreme Court granted certiorari to resolve a conflict among the circuit courts.

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Issue:

Does an employer have a mandatory duty under the National Labor Relations Act to bargain with a union over its decision to close a part of its business for purely economic reasons?

Opinions:

Majority - Justice Blackmun

No. An employer's decision to close a part of its business for purely economic reasons is not a mandatory subject of collective bargaining. The court established a balancing test, weighing the benefit for labor-management relations against the burden on the business. Here, the harm to the employer's need to operate freely and make unencumbered decisions about the scope and direction of the enterprise outweighs the incremental benefit that might be gained from the union's participation in the decision-making process. Management decisions that are at the core of entrepreneurial control, such as this partial closing, are distinct from those concerning the terms and conditions of employment. The union's interests are adequately protected by the mandatory duty to bargain over the 'effects' of the closing (e.g., severance pay) and by § 8(a)(3) of the NLRA, which prohibits partial closings motivated by anti-union animus.

Dissenting - Justice Brennan

Yes. An employer should have a duty to bargain over a decision to close part of its operation. The majority's balancing test is flawed because it is one-sided, considering only the interests of management while failing to account for the legitimate and pressing employment interests of the workers. The Court's conclusion that bargaining would offer minimal benefits is based on pure speculation, ignoring real-world examples where union concessions have helped save failing operations. The primary responsibility for determining the scope of mandatory bargaining lies with the National Labor Relations Board (NLRB), and the Court should defer to the Board's expertise rather than substituting its own judgment on a complex issue of industrial relations.

Analysis:

This decision significantly narrows the scope of mandatory bargaining by carving out a major category of management decisions from the negotiating table. By establishing a balancing test that weighs the benefits to the collective bargaining process against the burdens on management, the Court provided a framework for analyzing future cases involving other types of operational changes. The ruling solidifies the critical distinction between 'decision bargaining' and 'effects bargaining,' affirming that while an employer may not need to negotiate the 'whether' of a partial closing, it unequivocally must negotiate the 'what happens next' for the affected employees. This provides employers with greater certainty and flexibility in making core entrepreneurial decisions but reduces a union's power to directly prevent job losses resulting from such economic choices.

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