Elawyers Elawyers
Washington| Change

US Can Company v. NLRB, 99-2828 (2001)

Court: Court of Appeals for the Seventh Circuit Number: 99-2828 Visitors: 26
Judges: Per Curiam
Filed: Jun. 19, 2001
Latest Update: Mar. 02, 2020
Summary: In the United States Court of Appeals For the Seventh Circuit Nos. 99-2828 & 99-3049 United States Can Company, Petitioner, Cross-Respondent, v. National Labor Relations Board, Respondent, Cross-Petitioner, and United Steelworkers of America, afl-cio-clc, Intervening Respondent. Petition to Set Aside, and Cross-Petition to Enforce, an Order of the National Labor Relations Board. Argued September 20, 2000-Decided June 19, 2001 Before Coffey, Easterbrook, and Evans, Circuit Judges. Easterbrook, Ci
More
In the
United States Court of Appeals
For the Seventh Circuit

Nos. 99-2828 & 99-3049

United States Can Company,

Petitioner, Cross-Respondent,

v.

National Labor Relations Board,

Respondent, Cross-Petitioner,

and

United Steelworkers of America, afl-cio-clc,

Intervening Respondent.

Petition to Set Aside, and Cross-Petition to Enforce,
an Order of the National Labor Relations Board.

Argued September 20, 2000--Decided June 19, 2001


  Before Coffey, Easterbrook, and Evans,
Circuit Judges.

  Easterbrook, Circuit Judge. A long time
has passed since United States Can Co. v.
NLRB, 
984 F.2d 864
(7th Cir. 1993),
enforced the Labor Board’s substantive
decision in this case, 
305 N.L.R.B. 1127
(1992). Now we’re at the remedy stage;
the Board has ordered the employer to
fork over about $1.5 million in back pay,
plus pension credits and other fringe
benefits, plus more than a decade’s worth
of interest, to 28 employees who between
1987 and 1989 were denied opportunities
to transfer to other plants in lieu of
layoffs. See 1999 NLRB Lexis 310, slightly
modifying the ALJ’s decision at 1998 NLRB
Lexis 268. We shall cut to the chase;
exhaustive recitations of events may be
found in the decisions just cited.

  The Board concluded in 1992 that, when
United States Can Co. acquired four
packaging plants, it also acquired a
collective bargaining agreement governing
labor relations at those plants. As a
result, U.S. Can was obliged for the
duration of the agreement (which expired
early in 1989) to offer employees laid
off as a result of a plant closing the
opportunity to transfer to vacant
positions at other plants under an Inter-
Plant Job Opportunity Program (ipjo). The
Board’s order left open the calculation
of back pay for employees who could have
used the ipjo (had U.S. Can honored its
obligation) to remain on the payroll for
a while. Because U.S. Can eventually
closed all four acquired plants,
transfers would have postponed but not
prevented the employees’ need to find
work elsewhere.

  U.S. Can’s principal contention in this
court--that the 28 employees would not
have transferred even if offered the
chance--goes nowhere given the standard
of review. We must enforce the Board’s
decision if substantial evidence on the
record as a whole supports it. Universal
Camera Corp. v. NLRB, 
340 U.S. 474
(1951). This decision is supported by the
employees’ testimony. Each was asked
whether he or she would have transferred
if given the opportunity; each answered
yes; the Board believed these answers.
Such a decision is all but invulnerable.
Anderson v. Bessemer City, 
470 U.S. 564
,
570 (1985). U.S. Can grumbles that the
Board shifted the burden of persuasion,
forcing it to disprove the possibility
that the employees would have
transferred. That’s not what happened.
Once the employees testified that they
would have moved, U.S. Can had an
opportunity to persuade the Board not to
believe that testimony. Extending such an
opportunity does not "shift the burden of
proof"; the Board chose in the end to
credit the employees because they are
believable, not because U.S. Can failed
to carry some burden.

  What U.S. Can did in an effort to
undercut the employees’ position was
offer the testimony of a labor economist,
David S. Evans, that the employees did
not have much to gain by transferring.
Evans began with the salary each could
have earned at a new plant following an
ipjo transfer. He subtracted what the
employee would give up: unemployment
compensation, supplemental unemployment
benefits (sub) under the collective
bargaining agreement, and pension
benefits for which many of the laid-off
employees were eligible. (Access to ipjo
transfers depended on seniority, and it
is not surprising that the most senior
employees in a closed plant were eligible
for either early or regular retirement.)
According to Evans, the difference
between the wages (and increases in
future pension benefits) these 28
employees would have received and the
benefits they would have surrendered was
just about the minimum wage. What kind of
person, U.S. Can asks, will move to
another part of the country to take a
minimum-wage job when low-paying work is
available close to home? One answer might
be "the kind who work in packaging
plants"; after all, these 28 swore that
they would do this. It is not as if Evans
calculated that their returns from ipjo
transfers would be negative, so that
moving would be irrational.

  And the employees may have been better
economists than Evans, for their net
wages would have been well above the
minimum. Evans assumed that if the
employees moved then sub and unemployment
benefits would vanish. Not so. These
payments would be deferred until the next
layoff, when employees would enjoy them
(less the time value of the delay) even
if they took ipjo transfers. Although
afuture layoff was not certain, the
probability was high given the ongoing
consolidation in the industry. Evans,
however, implicitly assumed that the
probability was zero and that
transferring employees never would
receive unemployment or sub payments to
make up for what they would lose by
transferring. Employees themselves would
not have made that error. Similarly with
pension payments, which not only would be
deferred but also would increase as the
employees made additional contributions
to their pension accounts. For an
employee eligible to retire, the decision
to work another year at a distant plant
is no different from the decision to work
another year locally. The employee gives
up the pension benefit that could have
been received immediately, getting in
return a salary plus pension
contributions that increase the monthly
benefit later; delay in retirement
increases the monthly benefit for the
further reason that actuarial tables
predict that the pension will be paid out
for fewer months. Whether the exchange is
sensible depends on what the person will
earn in the interim, on the rate of
interest implicit in the pension plan
(that is, how fast do monthly benefits
increase if the employee postpones their
commencement?), and on how long the
employee expects to live after
retirement. U.S. Can did not demonstrate
that none of these 28 employees could
have deemed it sensible to work another
year.

  U.S. Can would have done better to
examine its predecessor’s experience in
operating the ipjo program. When
Continental Can, whose business U.S. Can
acquired, closed a plant and offered
transfers, what happened? If no one
accepted, then U.S. Can would have had
powerful support for the proposition that
the testimony of these 28 employees
should not be believed. The Board should
place what people do above what they say,
for talk is cheap (and employees who know
that a "yes" answer to the question
"would you have moved?" will bring a
large financial reward, without any risk,
will find that this sways their beliefs
about what they would have done a decade
earlier, even if they are trying to be
candid). Whether these 28 would have
declined transfers is not dispositive; if
they had said no, then the opportunity
would have fallen through the seniority
table until all eligible employees had
been offered the chance to transfer. Only
if vacancies would have remained at open
plants after all eligible employees at
the closed plants had a chance to move
would U.S. Can be off the hook. A look at
Continental Can’s experience would have
revealed whether that happened. But at
oral argument counsel for U.S. Can
replied that it had not examined
Continental Can’s experience (or at least
had not put this experience in the
record). What is in the record, Evans’
flawed calculation, fell well short of
the evidence needed to disable the Board
from crediting the employees’ testimony.

  On to the calculation of back pay.
According to U.S. Can, the back-pay
period should not start until the union
filed its unfair-labor-practice charge,
or perhaps until the General Counsel of
the Board commenced the unfair labor
practice proceeding. U.S. Can concedes
that both the union’s charge and the
General Counsel’s complaint were timely
but contends that it is inequitable to
require it to afford back pay for earlier
conduct. The idea that judicial notions
of equity trump the statutory timeliness
rules in cases commenced by the United
States (or one of its agencies) runs
headlong into Occidental Life Insurance
Co. v. EEOC, 
432 U.S. 355
(1977), and
Costello v. United States, 
365 U.S. 265
,
281 (1961), which hold that equitable
principles such as laches play little if
any role in the federal government’s
litigation. See also NLRB v. P*I*E
Nationwide, Inc., 
894 F.2d 887
, 893 (7th
Cir. 1990). Cf. NLRB v. Ironworkers, 
466 U.S. 720
(1984) (long administrative
delay, while back pay accumulates, does
not prevent enforcement of the Board’s
award); NLRB v. J.H. Rutter-Rex
Manufacturing Co., 
396 U.S. 258
(1969)
(same); Reich v. Sea Sprite Boat Co., 
50 F.3d 413
(7th Cir. 1995) (reserving
question whether laches ever applies to
the federal government’s cases). There’s
an additional problem here: U.S. Can did
not establish prejudice from the delay.
If it had allowed the employees to make
ipjo transfers as soon as the union
complained, then it might have had a good
claim that delay in making the complaint
caused injury by requiring it to pay
twice for the same work (one payment to
the person actually hired to do the job,
the other in back pay to the employee who
might have transferred). But U.S. Can dug
in its heels and refused to transfer the
employees. Its back-pay obligation
therefore would have been the same had
the union and the General Counsel acted
immediately.

  The Board awarded as back pay the gross
wages the 28 employees would have earned
at other plants, had they transferred and
worked until those plants too were
closed. It refused to give U.S. Can
credit against this award for
supplemental unemployment benefits and
pension benefits that the employees
received in lieu of wages. Whether to net
out sub and pension benefits divided the
Board: Chairman Truesdale and Member Fox
were the majority; Member (now Chairman)
Hurtgen dissented. Member Hurtgen
concluded that sub and pension benefits,
unlike unemployment benefits, see NLRB v.
Gullett Gin Co., 
340 U.S. 361
(1951),
fall outside the collateral-source
doctrine because they are provided by the
employer rather than a third party.
(These are noncontributory, defined-
benefit pension plans.) He concluded:

[The] benefits at issue are not part of a
governmental program that is broadly
applicable to employees generally and
aimed at addressing a general "policy of
social betterment." [Language quoted from
Gullet Gin.] Rather, the pension and sub
payments came from employer-sponsored
private benefit programs. These benefit
programs, which inure solely to the
benefit of [U.S. Can’s] employees, are
sponsored and funded by [U.S. Can], and
[U.S. Can] is responsible for
administering the payments to its
employees. Thus, there are no overriding
social policy considerations that support
the discriminatees’ retention of these
payments. To the contrary, the relevant
"policy" consideration is that the
discriminatees should not receive a
double-recovery windfall. [A footnote
here continues: "In F&W Oldsmobile, [
272 N.L.R.B. 1150
(1984)], the judge,
affirmed by the Board, spoke, generically
of benefits, without distinguishing
between governmental and private
benefits. Indeed, it does not appear from
the decision in that case that the
distinction was even argued. Since the
distinction is made by the Supreme Court
in Gullett, I shall follow the Court’s
teaching and not that of F&W."]

  Faced with this challenge based on the
Supreme Court’s reasoning in Gullett Gin,
the majority of the Board did not respond
in the text of its opinion but did drop
this footnote:

In accord with Board and judicial
precedent cited and fully discussed in
the judge’s decision, we affirm the
judge’s conclusion that [U.S. Can] is not
entitled to an offset for retirement
benefits and supplemental unemployment
benefits paid to discriminatees during
the backpay period. Although funded as
part of the benefits earned by employees,
the trusts are, as the judge correctly
found, separate and distinct entities
from [U.S. Can]. The dissent would
effectively overrule the precedent cited
by the judge. We decline to do so.

  That the majority relegated to a
footnote the only significant issue in
the case is bad; that it gave no reasons
is worse. Member Hurtgen made a serious
argument; the majority did not give a
serious answer. Nor did the ALJ’s opinion
tackle this subject, except to claim that
cases such as F&W Oldsmobile support the
outcome. We have no idea why the majority
thought it important that the payments
come from "separate and distinct
entities" that are funded 100% by the
employer. If an employer arranged for
wages to be paid by a parent, subsidiary,
or corporate affiliate-- "separate and
distinct entities" all--would the Board
conclude that these payments should be
ignored when computing back pay? Surely
not. Why, then, does it matter that
fringe benefits such as sub and pension
payments are funneled through separate
entities? Why not treat wages and fringe
benefits identically for this purpose
(especially when the employer is liable
if the "separate and distinct entity"
does not pay in full)? The Board did not
say.
  The idea behind the collateral-benefits
doctrine, which originated in tort law,
is that damages measured by the injury
are essential to deterrence. See Steven
Shavell, Economic Analysis of Accident
Law sec.sec. 6.6.7, 10.3 (1987). Suppose
A negligently trips B, who incurs $10,000
in medical expenses. Suppose further that
B had medical insurance covering these
costs. To deduct the insurance proceeds
from A’s damages not only would give the
tortfeasor the benefit of the victim’s
expense on insurance but also would
curtail deterrence. Why should A take
care in the future if his victims bear
their own loss? If the government rather
than B supplies the insurance, the
analysis is the same. B paid for the
coverage through taxes, and giving A the
benefit would reduce if not eliminate A’s
incentive to take care. That’s a central
point of Gullett Gin, which held that
unemployment insurance benefits are
within the scope of the collateral-source
doctrine. Although employers pay a tax
that funds some of these benefits, some
come from general revenues and all are
portable; it would be a mistake to say
that the employer that laid off a worker
fully pays for the resulting benefits and
therefore takes the employee’s whole loss
into account when deciding what to do.

  Contrast unemployment benefits, whose
level and eligibility criteria are out of
the employer’s hands, with severance
benefits. Think of an employer that
promises its workers that, if they are
discharged, it will pay six months’ wages
in a lump sum. An employer discharges a
worker and pays the promised benefit. Six
months later the Labor Board concludes
that the discharge was unlawful and
orders the worker reinstated. How much
back pay should the employer be required
to tender to make the employee whole?--
for make-whole remedies are the NLRB’s
financial tool. 29 U.S.C. sec.160(c);
Sure-Tan, Inc. v. NLRB, 
467 U.S. 883
,
900-01 (1984); NLRB v. Strong, 
393 U.S. 357
, 359 (1969). The answer is zero. The
employer already has paid six months’
wages, and once restored to the payroll
the employee will not have missed a dime.
The employee loses nothing tomorrow
either, because the employer’s promise to
pay severance benefits remains; if the
employer makes a lawful discharge in the
future, the employee gets another check
for six months’ wages. (This restoration
proviso is important, lest the employer
be able to appropriate the value of a
fringe benefit promised to its workers.
We return to this subject toward the end
of the opinion.)

  Now suppose that instead of paying six
months’ wages as a flat benefit, the
employer coordinates severance benefits
with unemployment compensation (as many
pensions are coordinated with Social
Security retirement benefits) and pays
only the difference between six months’
wages and any unemployment benefit the
former employee receives. Per Gullett
Gin, the unemployment benefits--which
come from the public fisc--are not
deducted from a back-pay award. But the
severance benefit surely would be
deducted. And that still would be true if
the employer’s severance package lasted
not a flat six months, but until the
employee found a new job. The amount of
back pay the employee would receive would
remain the wages lost, less other
payments (including the severance benefit
from the employer).

  One more step and the hypothetical
becomes the actual case. Suppose that
instead of paying the severance benefit
from general corporate funds, the
employer sets up a second entity--call it
the Severance Benefits Administrator--
that disburses the money. Instead of
making an unfunded severance-benefit
promise, the employer writes a check to
the Administrator every month to cover
the actuarial cost of its severance
promises. Advance funding of promises
reduces the cash-flow drain if the
employer should decide to close a plant
or lay off many employees at once. But
from the employee’s perspective it is a
detail whether a promise is funded in
advance or met on a pay-as-you-go basis,
and whether the Administrator is
incorporated separately from the
employer. It is all the same--the same
benefits, the same source, and, one would
suppose, the same legal consequences. Yet
we have now described the sub program,
which is a severance benefit, coordinated
with the unemployment insurance system
and administered through a separate
entity.

  If ordinary severance benefits are
offset against back-pay obligations--
something that the Board concedes is
proper-- then sub payments also must be
offset. Pension promises are
fundamentally the same; severance
benefits with a longer payout. It is
impossible to see why unfunded benefits
would be offset, while funded benefits
administered by a separate entity would
not be offset. This distinction is the
nub of the Board’s decision, yet the
Board offered no logical support. The
make-whole goal of putting the employees
in the position they would have occupied,
but for the employer’s unfair labor
practice, is unaffected by whether the
benefits are funded or unfunded, paid
directly from the employer’s treasury or
disbursed by an intermediary.

  The Board’s majority did refer to
"judicial precedent cited and fully
discussed in the [ALJ’s] decision". Here
is what the ALJ had to say about pension
benefits (adding later that sub payments
are identical in principle):

[I]t is well-settled that "application of
the collateral source rule depends less
upon the source of funds than upon the
character of the benefits received."
Haughton v. Blackships, Inc., 
462 F.2d 788
, 790 (5th Cir. 1972). Thus, the mere
fact that an employer contributes money,
either by paying premiums, making
contributions, etc., to the fund from
which benefits are derived does not
establish that the fund is not a
collateral source. 
Id. Also, Blake
v.
Delaware and Hudson Railway Company, 
484 F.2d 204
, 206 (2nd Cir. 1973); Phillips
v. Western Company of North America, 
953 F.2d 929
, 929 (5th Cir. 1992); Molzof v.
United States, 
6 F.3d 461
, 465 (7th Cir.
1993); Russo v. Matson Navigation
Company, 
486 F.2d 1018
, 1020 (9th Cir.
1993). As was more succinctly stated in
Folkestad v. Burlington Northern, Inc.,
813 F.2d 1377
, 1381 (9th Cir. 1987),
"courts have been virtually unanimous in
their refusal to make the source of the
premiums the determinative factor in
deciding whether thebenefits should be
regarded as emanating from the employer
or from a ’collateral source.’"
Respondent’s assertion, therefore, that
the benefits should be found not to be
collateral because it alone funds the
pension trust account is without merit.
Further, while Respondent may fund the
pension trust, under ERISA the trust
remains a separate and distinct entity
independent from Respondent. See, NLRB v.
Amax Coal Co., 
453 U.S. 322
, 332-333
(1981); Doyne v. Union Electric Company,
953 F.2d 447
, 451 (8th Cir. 1992);
Garland-Sherman Masonry, 
305 N.L.R.B. 511
,
513 (1991). As the source of pension
benefits received by the discriminatees
was the trust fund and not the
Respondent, said payments were clearly
from a collateral source and not
deductible from backpay.

1998 NLRB Lexis 268 at *36-37. Most of
these cases concern insurance. It is
economically irrelevant whether the
employer pays an employee $1 per hour
extra, and the employee uses the money to
buy health insurance, or whether instead
the employer offers health insurance as a
fringe benefit. (The difference may be
vital for tax purposes, but these do not
concern us here.) The insurance, like the
wages, becomes the employee’s asset.
Severance benefits cannot be conceived
that way. It is therefore not surprising
that, whatever may be the rule in the
ninth circuit (the source of the lengthy
quotation from Folkestad), this circuit
has concluded that severance benefits and
their economic equivalents in pension
packages must be offset when calculating
make-whole awards. See, e.g., Orzel v.
Wauwatosa Fire Department, 
697 F.2d 743
,
756 (7th Cir. 1983) (dictum); Kossman v.
Calumet County, 
849 F.2d 1027
, 1032 (7th
Cir. 1988). Although, as the Board’s
appellate brief (though not the Board’s
or ALJ’s opinion) notes, we held in EEOC
v. O’Grady, 
857 F.2d 383
, 389-91 (7th
Cir. 1988), that particular pension
benefits should not be deducted from a
make-whole award of back pay, we
emphasized in O’Grady that the benefits
in question came from a state agency
other than the employer, making them more
like Social Security retirement benefits.
The benefits in this case, by contrast,
come ultimately from the employer’s
resources.

  What is economically important for
deterrence is not whether benefits pass
through an intermediary but how the
wrongdoer’s actions affect the victim’s
well-being, and whether those costs are
brought home fully to the wrongdoer. What
is important for compensation is not
whether benefits pass through a financial
intermediary, but whether the victim is
put in the same position he would have
occupied had his rights been respected.
So we set the financing arrangements
aside and ask the important questions
directly. The employer would indeed gain
from its wrong--and the employee would
lose out--if the employer were allowed to
subtract, from the back-pay obligation,
pension and welfare benefits that serve
as deferred compensation for work
performed. See Hunter v. Allis-Chalmers
Corp., 
797 F.2d 1417
, 1428-29 (7th Cir.
1986). That is why health insurance is
treated as a collateral source even when
the employer provides insurance as a
fringe benefit. Likewise with sub and
pension benefits. A direct offset would
permit the employer to appropriate a
portion of the employee’s own economic-
benefits package. Deterrence would be
reduced, and the employee would be worse
off to boot. U.S. Can therefore is wrong
to say that it is entitled to a dollar-
for-dollar offset. That’s the same
mistake David Evans made, a fallacy we
discussed above. Think back to our first
hypothetical, the lump sum severance
payment. Allowing a simple offset would
be equivalent to permitting the employer
to treat the severance benefit as wages
(canceling the back-pay obligation for
the six months of unemployment), without
restoring that benefit when the employee
was lawfully let go. If the employer is
to deduct the benefit from the back-pay
obligation, it must restore the benefit
for later use; otherwise the employee’s
fringe benefit has vanished into the
employer’s pocket.

  Here’s a concrete illustration. Suppose
that Alex Baugh, one of the employees not
offered the opportunity to transfer,
would have moved to a new plant on
January 1, 1988, and been laid off on
January 1, 1990, if all of his
entitlements under the collective
bargaining agreement had been honored.
Instead Baugh retired at the start of
1988 and began collecting both sub and
pension benefits. (These are not the
actual details for Baugh; we are
simplifying for illustrative purposes.)
The Board held that Baugh is entitled to
about $90,000, representing the wages he
could have earned during 1988 and 1989,
plus pension credits and interest, on top
of the unemployment, SUB, and pension
benefits that he actually received. U.S.
Can wants to proceed as follows: deduct
from the gross wages that Baugh would
have received during these years the sub
payments that effectively guaranteed him
his full pay through July 1, 1988, and
then subtract all of the pension benefits
he received during those years, cutting
the total to about a quarter of the
Board’s actual award. Just as the Board
erred in saying that sub and pension
benefits must be ignored, so U.S. Can
errs in saying that they must be deducted
dollar for dollar. Suppose that Baugh had
worked at another plant through the end
of 1989 and then been laid off. He would
have been entitled to sub payments for the
first six months of 1990, plus higher
monthly pension benefits (increased not
only by the contributions made to his
account during 1988 and 1989, but also
because he would have been two years
older on retirement). U.S. Can’s approach
effectively strips Baugh of the sub
payments--he does not keep what he
received in 1988, and he does not get
them in 1990 either. Moreover, U.S. Can’s
calculation takes away the two years of
pension benefits in 1988 and 1989 without
higher monthly benefits in 1990, an
increase that Baugh would have received
had he worked through the end of 1989.
(The Board’s position suffers from the
same problem in reverse. Under the
Board’s award Baugh is entitled to keep
the pension benefits he received in 1988
and 1989, plus receive pension credits as
if he had worked in those years and thus
could retire in 1990 with higher monthly
benefits.)

  Pension and sub offsets are therefore
considerably more complex than either the
Board or U.S. Can supposes. Everyone’s
rights are respected if, and only if, the
offset puts each employee in the position
he would have occupied had the collective
bargaining agreement been respected--and
that position is one in which the
benefits are deferred but not
obliterated. To make this concrete: U.S.
Can is entitled to offset the sub payments
from its back-pay obligation only if it
also restores those benefits as of the
time each employee finally would have
left its employ. It is entitled, in other
words, to the time value of the money: in
Baugh’s (hypothetical) case it would make
sub payments in 1990 rather than 1988, and
thus would gain two years of interest on
the obligation. With respect to pension
benefits, the employer may deduct them
from back-pay obligations during the time
they were actually received, only if the
employer also recalculates the payments
for later months and increases them to
the level they would have achieved had
retirement been deferred. We suspect that
U.S. Can would not reduce its net payouts
all that much by these recalculations.
Many employers therefore might be content
to disregard sub and pension benefits,
just as the Board did in this case. But
the Board may not deprive an employer of
its opportunity to make the more accurate
calculation we have described, a
calculation that fully respects the
employer’s entitlements as well as each
employee’s.

  The Board’s order is enforced, subject
to the proviso that if within 30 days
U.S. Can informs the Board that it wishes
to offer actuarial calculations along the
lines we have described, the Board must
reopen the record and make new back-pay
awards using the methods approved in this
opinion.

Source:  CourtListener

Can't find what you're looking for?

Post a free question on our public forum.
Ask a Question
Search for lawyers by practice areas.
Find a Lawyer