National Labor Relations Board v. Sands Manufacturing Co.
59 S. Ct. 508, 306 U.S. 332, 1939 U.S. LEXIS 1094 (1939)
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Rule of Law:
An employer does not commit an unfair labor practice by discharging employees who repudiate their collective bargaining agreement through a concerted refusal to work under its clear terms. When employees breach their contract, the employer is at liberty to treat the employment relationship as severed and hire replacements.
Facts:
- Sands Manufacturing Co. and the Mechanics Educational Society of America (Mesa) union had a history of collective bargaining and contracts.
- On June 15, 1935, after negotiations where Sands insisted on the change, the company and Mesa executed a new contract establishing a seniority system 'by departments,' which restricted the transfer of senior employees between departments during layoffs.
- In August 1935, a dispute arose when Sands wanted to hire new workers for its machine shop while other departments were slow due to lack of work.
- The Mesa union committee demanded that laid-off senior employees from other departments be transferred to the machine shop, a position contrary to the newly negotiated 'by departments' seniority clause.
- The union presented an ultimatum: Sands could either transfer the senior employees in violation of the contract or shut down the entire plant.
- On August 21, 1935, after the union confirmed its refusal to work under the contract's terms, Sands closed the plant.
- Sands then entered into a contract with a new union, the International Association of Machinists, and reopened the plant on September 3, 1935, with new employees.
- When a Mesa representative requested a conference on September 4, Sands refused, stating the former employees had been discharged for their breach of contract.
Procedural Posture:
- The National Labor Relations Board (NLRB), after a hearing, found that Sands Manufacturing Co. had engaged in unfair labor practices.
- The NLRB issued an order requiring Sands to cease and desist and to reinstate the discharged employees with back pay.
- The NLRB petitioned the U.S. Circuit Court of Appeals for enforcement of its order.
- Sands Manufacturing Co. filed a cross-petition with the Circuit Court of Appeals to have the NLRB's order set aside.
- The Circuit Court of Appeals denied the NLRB's petition for enforcement and granted Sands' petition to set aside the order.
- The U.S. Supreme Court granted the NLRB's petition for a writ of certiorari to review the judgment of the Circuit Court of Appeals.
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Issue:
Does an employer commit an unfair labor practice under the National Labor Relations Act by closing its plant, discharging employees, and hiring replacements after the employees' union insists on working conditions that are in direct violation of a valid collective bargaining agreement?
Opinions:
Majority - Mr. Justice Roberts
No. An employer does not commit an unfair labor practice by discharging employees who have repudiated their collective bargaining agreement. The court found no evidence of anti-union discrimination; rather, the employer had a long history of bargaining in good faith with the Mesa union. The dispute arose from the union's demand that the company ignore the clear terms of the contract regarding departmental seniority. The employees' collective refusal to work under the agreed-upon terms constituted a material breach of the contract. This breach justified the company's decision to treat the employment relationship as severed, discharge the employees, and hire replacements. The National Labor Relations Act does not protect employees from the consequences of their own repudiation of an employment agreement.
Dissenting - Mr. Justice Black and Mr. Justice Reed
Mr. Justice Black and Mr. Justice Reed dissented without providing a written opinion.
Analysis:
This decision establishes that the protections of the National Labor Relations Act are not absolute and do not shield employees who breach their own collective bargaining agreement. It clarifies that an employer's duty to bargain does not extend to endlessly debating a union's demand to violate the clear terms of an existing contract. This case provides employers with a significant defense against unfair labor practice charges, allowing them to lawfully discharge and replace workers who engage in a concerted refusal to perform work as specified in their agreement. It distinguishes such a breach from a protected economic strike, setting a precedent that an employee's status can be forfeited through repudiation of their contract.
