This labor dispute concerns the validity of a hot cargo clause in a collective bargaining agreement between Local 12 of the International Union of Operating Engineers and several associations representing building contractors in the San Diego and Los Angeles areas.1 The agreement, which encompasses nearly 10,000 employers, restricts the freedom of the contractors to employ non-union heavy equipment repairmen for, primarily, postwarranty repair work. Under the terms of the agreement all repairs and servicing done 'on or near the jobsite' on new equipment owned for more than 180 days and used equipment owned for more than 30 days2 must be performed by a member of the Operating Engineers.3

Traditionally, the seller of the equipment has been called upon for servicing and repair. Though most equipment dealers in Southern California are not unionized, the union for years has been quietly content to permit contractors to utilize dealers despite the presence of variants of this hot cargo clause in successive labor-management contracts. However, coincident with an Operating Engineers' drive to organize the dealers in 1969, the union began to enforce the clause by assessing fines, under the grievance provisions of the agreement, against a few contractors4 and threatening others with the same penalty. Charges were then brought before the National Labor Relations Board by certain equipment dealers.

The Board found the clause to have the intended hot cargo effect of restricting the contractors from using the services of secondary employers--the dealers. Such provisions are normally forbidden by § 8(e) of the National Labor Relations Act, 29 U.S.C. § 158(e), quoted in pertinent part in the margin.5 The union does not here contest that. However, it does contend that the agreement is protected by the 'construction proviso' to § 8(e):

Provided, That nothing in this subsection ((e)) shall apply to an agreement between a labor organization and an employer in the construction industry relating to the contracting or subcontracting of work to be done at the site of the construction, alteration, painting, or repair of a building, structure, or other work.

The Board disagreed, finding that onsite heavy equipment repair was not such an integral part of the construction process as to be within the proviso. Furthermore, the Board found that the union assessed penalties and threats thereof constituted unlawful assertions of economic pressure in violation of § 8(b)(4)(ii)(B) of the NLRA, 29 U.S.C. § 158(b)(4)(ii)(B). That provision makes it an unfair labor practice

to threaten, coerce, or restrain any person engaged in commerce . . . where . . . an object thereof is . . . forcing or requiring any person to cease using, selling, handling, transporting, or otherwise dealing in the products of any other producer, processor, or manufacturer, or to cease doing business with any other person . . ..

However, the Board declined to order the union to repay the fines actually levied.

The case is here on the petition of the union to review the Board's order, the cross petition of the Board to enforce its order, and the petition of those contractors penalized to review that portion of the order denying restitution of the fines. We enforce the Board's order except that we direct it to order refund of the fines.

In order to better understand this issue, it will be helpful to give an abbreviated sketch of the manner in which dealers service heavy construction equipment.6 When a dealer's repairman is dispatched to a construction site, he makes an initial diagnosis. If the trouble is minor, the repair is performed on the site, though often away from the construction activity. For the most part, these visits are of rather short duration. If the problem is major, as it often is, the machinery is removed to the dealer's shop. In addition, field repair is frequently performed after the construction laborers have quit for the day--during 'down time'--so as to minimize disruption of the project. The significance of all this, as the Board found, is that repairmen work alongside other laborers infrequently and for brief times only.

To the union, this does not matter. Its position is simply that the § 8(e) proviso employs a purely physical test: whatever labor is performed at the site of the project comes within the protective ambit of the provision.

As the Board recognized, however, this ignores the purpose of the congressional exemption. Although the legislative history of the proviso is ofttimes vague and inconclusive, what does emerge is an underlying congressional concern with minimizing jobsite tension. In contrast to most other industries, a variety of craftsmen employed by different contractors and subcontractors work continuously side by side on construction projects. Where the employees of some are union members and the employees of others are not, there is a potential, or so Congress believed, for jobsite conflict. Hence, 'the purpose of the section 8(e) proviso was to alleviate the frictions that may arise when union men work continuously alongside nonunion men on the same construction site.' Drivers, Salesmen, Etc., Local 695 v. NLRB, 124 U.S.App.D.C. 93, 361, F.2d 547, 553 (1966) (emphasis added).7 What appears critical is that the potential for conflict is likely to arise only when the non-union laborers are in frequent and relatively close contact with the union craftsmen.8

Given this view, it becomes evident that the on-site heavy equipment repair involved here is not the type of activity encompassed by the proviso. As we have outlined, a repairman works only occasionally and for rather brief times on the construction site. As a result, the danger of union, non-union friction or related work disruption is slight.

Comparable is the situation of those who deliver supplies or materials to the jobsite. Probably in part because their contacts with those working on the construction itself were likely to be insubstantial, Congress exempted them from the proviso.9 In applying this exemption, for example, the Board has held ready-mix drivers outside the scope of the proviso. E.g., Teamsters, Local 294 (Island Dock Lumber, Inc.), 145 N.L.R.B. 484 (1963), enforced, 342 F.2d 18 (2d Cir. 1965). Such drivers usually mix the cement ingredients while on the construction site and then assist in pouring the finished product. Thus they have some contact with those workmen assigned full time to the site. But, like the equipment repairman (who is, in a sense, delivering a service), the contact is neither very regular nor prolonged.

We, therefore, enforce the Board's finding of a § 8(e) violation.

We also think that the Board's finding of a § 8(b)(4)(ii)(B) violation should be enforced. That section limits the means which can be employed to enforce even a lawful hot cargo agreement. Although the means used here--fines via a grievance clause--were part of the industry-union contract, we have held that 'the construction industry proviso may not be read as permitting the inclusion of provisions into a collective bargaining agreement which purport to authorize 8(b)(4) violations.' NLRB v. International Bhd. of Electrical Workers, 405 F.2d 159, 163 (9th Cir. 1968). Moreover, in that same case we observed that 'Congress did not intend to countenance provisions in (§ 8(e)) agreements that provide for enforcement by means of union coercion or economic pressure.' Id. Rather, 'it appears that Congress intended to limit the enforcement of (even) proviso-saved agreements to judicial means.' Id.10 We agree with the Board that this unilateral fining mechanism constitutes a form of coercive economic pressure not judicial in nature.

We cannot agree, however, that the fines paid by certain of the contractors need not be refunded. To be sure, the Board has wide discretion over its remedial orders. E.g., Marriott Corp. v. NLRB, 491 F.2d 367, 371 (9th Cir. 1974). But once it was determined that the fines were unlawful, restitution with legal interest should have followed in the absence of some rational ground to the contrary. See generally Sheet Metal Workers, Local 223 (Continental Air Filters Co.), 196 N.L.R.B. No. 12 (1972).11

On remand the Board shall order refund of these fines unless it has good cause not to do so. Such good cause shall be reported to this court expeditiously; otherwise an amended order complying with this decision shall be prepared and submitted to us for our approval and filing.