National Labor Relations Board v. American National Insurance Company/Opinion of the Court
This case arises out of a complaint that respondent refused to bargain collectively with the representatives of its employees as required under the National Labor Relations Act, as amended. 

The Office Employees International Union A.F. of L., Local No. 27, certified by the National Labor Relations Board as the exclusive bargaining representative of respondent's office employees, requested a meeting with respondent for the purpose of negotiating an agreement governing employment relations. At the first meetings, beginning on November 30, 1948, the Union submitted a proposed contract covering wages, hours, promotions, vacations and other provisions commonly found in collective bargaining agreements, including a clause establishing a procedure for settling grievances arising under the contract by successive appeals to management with ultimate resort to an arbitrator.

On January 10, 1949, following a recess for study of the Union's contract proposals, respondent objected to the provisions calling for unlimited arbitration. To meet this objection, respondent proposed a so-called management functions clause listing matters such as promotions, discipline and work scheduling as the responsibility of management and excluding such matters from arbitration.  The Union's representative took the position 'as soon as (he) heard (the proposed clause)' that the Union would not agree to such a clause so long as it covered matters subject to the duty to bargain collectively under the Labor Act.

Several further bargaining sessions were held without reaching agreement on the Union's proposal or respondent's counterproposal to unlimited arbitration. As a result, the management functions clause was 'by-passed' for bargaining on other terms of the Union's contract proposal. On January 17, 1949, respondent stated in writing its agreement with some of the terms proposed by the Union and, where there was disagreement, respondent offered counter-proposals, including a clause entitled 'Functions and Prerogatives of Management' along the lines suggested at the meeting of January 10th. The Union objected to the portion of the clause providing:

'The right to select and hire, to promote to a better      position, to discharge, demote or discipline for cause, and      to maintain discipline and efficiency of employees and to      determine the schedules of work is recognized by both union      and company as the proper responsibility and prerogative of      management to be held and exercised by the company, and while      it is agreed that an employee feeling himself to have been      aggrieved by any decision of the company in respect to such      matters, or the union in his behalf, shall have the right to      have such decision reviewed by top management officials of      the company under the grievance machinery hereinafter set      forth, it is further agreed that the final decision of the      company made by such top management officials shall not be      further reviewable by arbitration.'

At this stage of the negotiations, the National Labor Relations Board filed a complaint against respondent based on the Union's charge that respondent had refused to bargain as required by the Labor Act and was thereby guilty of interfering with the rights of its employees guaranteed by Section 7 of the Act and of unfair labor practices under Sections 8(a)(1) and 8(a)(5) of the Act.  While the proceeding was pending, negotiations between the Union and respondent continued with the management functions clause remaining an obstacle to agreement. During the negotiations, respondent established new night shifts and introduced a new system of lunch hours without consulting the Union.

On May 19, 1949, a Union representative offered a second contract proposal which included a management functions clause containing much of the language found in respondent's second counterproposal, quoted above, with the vital difference that questions arising under the Union's proposed clause would be subject to arbitration as in the case of other grievances. Finally, on January 13, 1950, after the Trial Examiner had issued his report but before decision by the Board, an agreement between the Union and respondent was signed.  The agreement contained a management functions clause that rendered nonarbitrable matters of discipline, work schedules and other matters covered by the clause. The subject of promotions and demotions was deleted from the clause and made the subject of a special clause establishing a union-management committee to pass upon promotion matters.

While these negotiations were in progress, the Board's Trial Examiner conducted hearings on the Union's complaint. The Examiner held that respondent had a right to bargain for inclusion of a management functions clause in a contract. However, upon review of the entire negotiations, including respondent's unilateral action in changing working conditions during the bargaining, the Examiner found that from and after November 30, 1948, respondent had refused to bargain in a good faith effort to reach agreement. The Examiner recommended that respondent be ordered in general terms to bargain collectively with the Union.

The Board agreed with the Trial Examiner that respondent had not bargained in a good faith effort to reach an agreement with the Union. But the Board rejected the Examiner's views on an employer's right to bargain for a management functions clause and held that respondent's action in bargaining for inclusion of any such clause 'constituted, quite (apart from) Respondent's demonstrated bad faith, per se violations of Section 8(a)(5) and (1).' Accordingly, the Board not only ordered respondent in general terms to bargain collectively with the Union (par. 2(a)), but also included in its order a paragraph designed to prohibit bargaining for any management functions clause covering a condition of employment. (Par. 1(a)).  89 N.L.R.B. 185.

On respondent's petition for review and the Board's cross-petition for enforcement, the Court of Appeals for the Fifth Circuit agreed with the Trial Examiner's view that the Act does not preclude an employer from bargaining for inclusion of any management functions clause in a labor agreement. The Court of Appeals further found that the evidence does not support the view that respondent failed to bargain collectively in good faith by reason of its bargaining for a management functions clause. As a result, enforcement of the portion of the Board's order directed to the management functions clause (par. 1(a)) was denied. Other portions of the Board's order (pars. 1(b) and 2(a)) were enforced because respondent's unilateral action in changing working conditions during bargaining does support a finding that respondent had not bargained collectively in good faith as required by the Act. 5 Cir., 187 F.2d 307. We granted certiorari on petition of the Board for review of the denial of enforcement as to paragraph 1(a) of the Board's order. 342 U.S. 809, 72 S.Ct. 40.

First. The National Labor Relations Act is designed to promote industrial peace by encouraging the making of voluntary agreements governing relations between unions and employers.  The Act does not compel any agreement whatsoever between employees and employers.  Nor does the Act regulate the substantive terms governing wages, hours and working conditions which are incorporated in an agreement.  The theory of the Act is that the making of voluntary labor agreements is encouraged by protecting employees' rights to organize for collective bargaining and by imposing on labor and management the mutual obligation to bargain collectively.

Enforcement of the obligation to bargain collectively is crucial to the statutory scheme. And, as has long been recognized, performance of the duty to bargain requires more than a willingness to enter upon a sterile discussion of union-management differences. Before the enactment of the National Labor Relations Act, it was held that the duty of an employer to bargain collectively required the employer 'to negotiate in good faith with his employees' representatives; to match their proposals, if unacceptable, with counter-proposals; and to make every reasonable effort to reach an agreement.'  The duty to bargain collectively, implicit in the Wagner Act as introduced in Congress, was made express by the insertion of the fifth employer unfair labor practice accompanied by an explanation of the purpose and meaning of the phrase 'bargain collectively in a good faith effort to reach an agreement.'  This understanding of the duty to bargain collectively has been accepted and applied throughout the administration of the Wagner Act by the National Labor Relations Board and the Courts of Appeal. 

In 1947, the fear was expressed in Congress that the Board 'has gone very far, in the guise of determining whether or not employers had bargained in good faith, in setting itself up as the judge of what concessions an employer must make and of the proposals and counter-proposals that he may or may not make.'  Accordingly, the Hartley Bill, passed by the House, eliminated the good faith test and expressly provided that the duty to bargain collectively did not require submission of counter-proposals.  As amended in the Senate and passed as the Taft-Hartley Act, the good faith test of bargaining was retained and written into Section 8(d) of the National Labor Relations Act. That Section contains the express provision that the obligation to bargain collectively does not compel either party to agree to a proposal or require the making of a concession. 

Thus it is now apparent from the statute itself that the Act does not encourage a party to engage in fruitless marathon discussions at the expense of frank statement and support of his position. And it is equally clear that the Board may not, either directly or indirectly, compel concessions or otherwise sit in judgment upon the substantive terms of collective bargaining agreements.

Second. The Board offers in support of the portion of its order before this Court a theory quite apart from the test of good faith bargaining prescribed in Section 8(d) of the Act, a theory that respondent's bargaining for a management functions clause as a counterproposal to the Union's demand for unlimited arbitration was, 'per se,' a violation of the Act.

Counsel for the Board do not contend that a management functions clause covering some conditions of employment is an illegal contract term.  As a matter of fact, a review of typical contract clauses collected for convenience in drafting labor agreements shows that management functions clauses similar in essential detail to the clause proposed by respondent have been included in contracts negotiated by national unions with many employers.  The National War Labor Board, empowered during the last war '(t)o decide the dispute, and provide by order the wages and hours and all other terms and conditions (customarily included in collective-bargaining agreements)',  ordered management functions clauses included in a number of agreements.  Several such clauses ordered by the War Labor Board provided for arbitration in case of union dissatisfaction with the exercise of management functions, while others, as in the clause proposed by respondent in this case, provided that management decisions would be final.  Without intimating any opinion as to the form of management functions clause proposed by respondent in this case or the desirability of including any such clause in a labor agreement, it is manifest that bargaining for management functions clauses is common collective bargaining practice.

If the Board is correct, an employer violates the Act by bargaining for a management functions clause touching any condition of employment without regard to the traditions of bargaining in the particular industry or such other evidence of good faith as the fact in this case that respondent's clause was offered as a counterproposal to the Union's demand for unlimited arbitration. The Board's argument is a technical one for it is conceded that respondent would not be guilty of an unfair labor practice if, instead of proposing a clause that removed some matters from arbitration, it simply refused in good faith to agree to the Union proposal for unlimited arbitration. The argument starts with a finding, not challenged by the court below or by respondent,  that at least some of the matters covered by the management functions clause proposed by respondent are 'conditions of employment' which are appropriate subjects of collective bargaining under Sections 8(a)(5), 8(d) and 9(a) of the Act.  The Board considers that employer bargaining for a clause under which management retains initial responsibility for work scheduling, a 'condition of employment,' for the duration of the contract is an unfair labor practice because it is 'in derogation of' employees' statutory rights to bargain collectively as to conditions of employment. 

Conceding that there is nothing unlawful in including a management functions clause in a labor agreement, the Board would permit an employer to 'propose' such a clause. But the Board would forbid bargaining for any such clause when the Union declines to accept the proposal, even where the clause is offered as a counterproposal to a Union demand for unlimited arbitration. Ignoring the nature of the Union's demand in this case, the Board takes the position that employers subject to the Act must agree to include in any labor agreement provisions establishing fixed standards for work schedules or any other condition of employment. An employer would be permitted to bargain as to the content of the standard so long as he agrees to freeze a standard into a contract. Bargaining for more flexible treatment of such matters would be denied employers even though the result may be contrary to common collective bargaining practice in the industry. The Board was not empowered so to disrupt collective bargaining practices. On the contrary, the term 'bargain collectively' as used in the Act 'has been considered to absorb and give statutory approval to the philosophy of bargaining as worked out in the labor movement in the United States.' Order of Railroad Telegraphers v Railway Express Agency, 1944, 321 U.S. 342, 346, 64 S.Ct. 582, 585, 88 L.Ed. 788.

Congress provided expressly that the Board should not pass upon the desirability of the substantive terms of labor agreements. Whether a contract should contain a clause fixing standards for such matters as work scheduling or should provide for more flexible treatment of such matters is an issue for determination across the bargaining table, not by the Board. If the latter approach is agreed upon, the extent of union and management participation in the administration of such matters is itself a condition of employment to be settled by bargaining.

Accordingly, we reject the Board's holding that bargaining for the management functions clause proposed by respondent was, per se, an unfair labor practice. Any fears the Board may entertain that use of management functions clauses will lead to evasion of an employer's duty to bargain collectively as to 'rates of pay, wages, hours and conditions of employment' do not justify condemning all bargaining for management functions clauses covering any 'condition of employment' as per se violations of the Act. The duty to bargain collectively is to be enforced by application of the good faith bargaining standards of Section 8(d) to the facts of each case rather than by prohibiting all employers in every industry from bargaining for management functions clauses altogether.

Third. The court below correctly applied the statutory standard of good faith bargaining to the facts of this case. It held that the evidence, viewed as a whole does not show that respondent refused to bargain in good faith by reason of its bargaining for a management functions clause as a counterproposal to the Union's demand for unlimited arbitration. Respondent's unilateral action in changing working conditions during bargaining, now admitted to be a departure from good faith bargaining, is the subject of an enforcement order issued by the court below and not challenged in this Court.

Last term we made it plain that Congress charged the Courts of Appeals, not this Court, with the normal and primary responsibility for reviewing the conclusions of the Board. We stated that this Court 'is not the place to review a conflict of evidence nor to reverse a Court of Appeals because were we in its place we would find the record tilting one way rather than the other, though fair-minded judges could find it tilting either way.' National Labor Relations Board v. Pittsburgh S.S.C.o., 1951, 340 U.S. 498, 503, 71 S.Ct. 453, 456, 95 L.Ed. 479. We repeat and reaffirm this rule, noting its special applicability to cases where, as here, a statutory standard such as 'good faith' can have meaning only in its application to the particular facts of a particular case.

Accepting as we do the finding of the court below that respondent bargained in good faith for the management functions clause proposed by it, we hold that respondent ws not in that respect guilty of refusing to bargain collectively as required by the National Labor Relations Act. Accordingly, enforcement of paragraph 1(a) of the Board's order was properly denied. 

Affirmed.

Mr. Justice MINTON, with whom Mr. Justice BLACK and Mr. Justice DOUGLAS join, dissenting: 

Notes