Cases by Issue - Unions

IBP, Inc. v. Alvarez - Oral Argument

Fri, 09 Jan 2009 14:48:59 +0000

Case:

IBP, Inc. v. Alvarez

Media File:

03-1238_20051003-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Carter G. Phillips

Chief Justice Roberts: The Court will now hear argument in IBP, Inc. vs. Alvarez and Tum vs. Barber Foods, Inc.--

Mr. Phillips.

Mr. Phillips: Thank you, Mr. Chief Justice, and may it please the Court:

There are two issues in this case.

One concerns walking time, and the other concerns waiting time.

And unless the Court has a different order, I'd propose to start with the walking time.

Section 4(a)(1)'s language, which comes from the Portal to Portal Act, which was enacted in 1947, by its plain terms clearly covers the walking that's involved in these two cases.

The statute, which is reproduced at the appendix of the petition, at 88(a), says that there is no mandatory compensation for, quote,

"walking to and from the actual place of performance of the principal activity or activities which such employee is employed to perform. "

It's difficult for me to imagine language that could more directly cover what we're dealing with in this particular case, because the Plaintiffs here are... for IBP... are employed to slaughter and to process beef.

The employees at Barber Foods are employed to process chicken.

And thus, the actual place where they perform those services are obviously on the lines where the processing takes place.

Justice Scalia: I would have thought that, but we've held otherwise.

Mr. Phillips: Well, I don't know that we've... I don't know of any case where this Court has held otherwise.

Justice Scalia: Well, we've held that they're... that the principal activity consists of doffing... donning and doffing the clothes required, haven't we?

Mr. Phillips: Well, this Court said that donning and doffing was a principal activity in contradistinction to a preliminary or postliminary activity for purposes of Section 4(a)(2), but the Court specifically said, in Steiner, that that holding does not apply to matters that are specifically excluded under Section 4(a)(1), which deals with walking time, Justice Scalia.

Justice Kennedy: So, you think Steiner is irrelevant?

Mr. Phillips: For... no, I don't think it's irrelevant to the workplace.

I think it is irrelevant to the proper disposition of this case, yes.

Justice Breyer: Well, it is if we don't accept the continuous workday rule.

If we do accept the continuous workday rule, why isn't it, in effect, the premise from which the conclusion for the other side falls?

Mr. Phillips: Well, we don't have any quarrel with the continuous workday rule.

The question is, When does the workday begin?

And our assessment of the workday, as defined in Section 4(a)(1), which controls, specifically, the walking time in this particular case, begins when you arrive at the actual place where you're going to perform the services--

Justice Souter: No, but your argument--

Mr. Phillips: --or primary activities.

Justice Souter: --assumes that there is only one actual place.

And their argument, which is consistent with the text of the statute, is that there may be more than one principal activity, and hence, more than one place.

And if the... if the place of donning and doffing is such a place, then wouldn't it be at least administratively odd to apply the continuous workday rule immediately to exclude some walking time that follows that?

Mr. Phillips: No, I don't think so.

I think it is perfectly sensible and a clear bright line rule, Justice Souter, to say that when you arrive at the actual place where you perform, not just any activities, and not just activities that are integral and indispensable to your working activities, but to the principal activities for which you're hired... and, admittedly, there can be more than one of those, but that doesn't... you know, donning and doffing is not a principal activity--

Justice Souter: So, you're saying that--

Mr. Phillips: --of anyone who's cutting beef.

Justice Souter: --so called "integral activities" are not principal activities.

Mr. Phillips: Right.

They don't have to principal activities.

They're better understood as--

Justice Scalia: They felt otherwise.

Justice O'Connor: Mr. Phillips, I... the Steiner opinion explicitly agreed with the lower court in that case, which said that the term "principal activity or activities" embraces all activities that are integral and indispensable.

Mr. Phillips: --Right.

Justice O'Connor: And if... if you think that putting on the clothes fall within that, then that covers walking, too--

Mr. Phillips: It--

Justice O'Connor: --after that.

Mr. Phillips: --The problem with that analysis is that the court was only analyzing Section 4(a)(2) for these purposes.

And what it was saying is,

"We are prepared to accept that there are certain activities that are either preliminary or postliminary, and then there are others that are primary activities. "

"And if you are integral and indispensable to a primary activity, it is a compensable event. "

Recognizing that Steiner is probably the most extraordinarily extreme facts that you could imagine, because we're talking about clothings that had... clothing that had to be changed in order to protect the public--

Justice Ginsburg: But, Mr. Phillips--

Mr. Phillips: --health and safety.

Justice Ginsburg: --you're asking us to interpret the same words, (2) that was at issue in Steiner, and in sub (1), and then the clause that follows both of those.

The same phrase is used.

So if (2), why wouldn't the same follow for sub (1) and the following clauses?

Mr. Phillips: Because you have to read the language (a)(1) within the context of what Congress was trying to achieve by the Portal to Portal Act, which was to absolutely and categorically exclude walking time from being part of mandatorily compensated activities of a particular employee.

Justice Ginsburg: But it is included if it's... once the workday begins, if there's a rotation, you walk from one station to the other.

That walking time, I think it's conceded, would be included.

Mr. Phillips: Right.

But that--

Justice Ginsburg: So, if your date... if the principal activity is donning and doffing, then the walking time thereafter would also be included.

Mr. Phillips: --But, Justice Ginsburg, if you step back and think about this language in the context of the words that are written here, it says,

"walking to and from the actual place of performance of the principal activity. "

No one would think that that--

Justice Souter: "Or activities".

Mr. Phillips: --Or activities.

But, again, Justice Souter, all that suggests is that there are times when somebody who's working in a clothing operation may... you know, may spend time distributing the cloth or may spend time actually sewing the cloth.

Those are two separate activities.

They're different activities.

But it doesn't mean... and it certainly doesn't convert anything that had... can be described as "integral and indispensable" into a primary activity which such employee is employed to perform.

No employee, in these cases, was employed to perform the act of putting on clothes or the act of picking up equipment.

Justice Breyer: But what do you think about the possibility,

"it depends on the clothes and depends on the equipment. "

so that, in Steiner and here, it's a lot of protective gear, it's really quite part of the job and special and unusual.

In Mt.

Clemens, it's a kind of uniform.

It's just washing your hands, putting on an apron.

So, where it's minor putting on clothes, as someone might in his house, doesn't come in substantial, doesn't come in integral and indispensable; but where it's quite a big deal, it does.

And who decides?

The agency.

Mr. Phillips: Well, there are two parts about that that are worth focusing on.

One is, I don't think you can lump the two cases together, because the clothing or the equipment that has to be put on with respect to the Barber Foods company is barely... is quite minimal and, indeed, is deemed to be diminimus.

So, I'm not... I'm not sure you can lump the two cases together in that way.

But also, in terms of where the Secretary comes out on this, let's not forget 79.7(g), footnote 49, which is, candidly, the clearest statement from the Secretary with respect to, What do you do when you have donning and doffing that is followed by walking time?

And what does the... and what does the regulation specifically say?

And that's on, I think, 92 and 93 of the appendix to our petition.

It specifically says that that walking time is not excluded, not necessarily--

Justice Scalia: Not necessarily excluded.

It's really noncommittal on the point.

Mr. Phillips: --Well, except that, under their theory of this case, it is always excluded.

Always.

So that whatever else you can say about the meaning of that particular language, the interpretation the Secretary offers to you today flatly rejects--

Justice Breyer: But "in certain"--

Mr. Phillips: --that language.

Justice Breyer: --that footnote... that's where I actually got the idea... it says,

"We reserve, in certain situations. "

To me, that meant sometimes it can be a major big deal to don clothing... protective gear; sometimes it isn't... an apron.

And whose job is it?

Now I'm repeating myself.

Mr. Phillips: Right.

Justice Breyer: The Secretary's.

Mr. Phillips: No, but... and if we were talking about that in the context of other kinds of activities... if you're back in the (a)(2) world of looking at whether something's preliminary or postliminary, I have less of a problem with dealing with that.

The problem is, here we're talking about (a)(1) activities, the core of what Congress enacted the Portal to Portal Act to protect employers for.

The Portal to Portal Act is not a statute that remotely provides protections for the employees.

This is a statute that was designed to protect employers from billions of dollars of liability.

And so, when you're talking about,

"Under what circumstances can you ignore the flat prohibition on requiring walking time to be regarded as a mandatory subject of compensation? "

then it seems to me the distinction you're proposing doesn't work.

And it's also, Justice Breyer, again, flatly inconsistent.

Their... that's not their theory of the case.

Their theory of the case is,

"If we can describe it as in any way integral and indispensable to some other activity, that makes it a primary activity, that starts the workday, and everything after that then becomes compensable. "

Justice Scalia: Mr. Phillips, can I call your attention to the text of Section 254(a)?

It's in the red brief in the Alvarez case, at App. 1.

What it... what it says is that you don't have to pay overtime compensation or minimum wages or on account of any of the following activities: (1) "walking, riding", blah, blah, blah.

This is (1).

Mr. Phillips: Yes.

Justice Scalia: --for the

"place of performance of the principal activity or activities which such employee is employed to perform. "

Mr. Phillips: No, you skipped over "actual place", there--

Justice Scalia: Right.

Okay.

Mr. Phillips: --Justice Scalia, but... which I think is an important--

Justice Scalia: Okay.

Mr. Phillips: --word.

Justice Scalia: (2)

"activities which are preliminary to or postliminary to said principal activity or activities. "

You're trying to sever (1) and (2), when the text itself joins them.

The activities referred to in (2) are "said principal activity or activities".

The (1).

Mr. Phillips: Right.

But that--

Justice Scalia: How can we possibly sever (1) and (2) and say that for purposes of one, it means one thing; for purposes of two, it means something else?

Mr. Phillips: --Because when the court was interpreting (a)(2) in Steiner, it wasn't interpreting (a)(2) to determine whether something was a preliminary or postliminary activity in connection with "said preliminary... primary activities".

What it was saying is, these are not preliminary and postliminary activities, that they are excluded from that.

And so, the court's really coming up with what is a third category of cases, which deals with integral and indispensable activities to a primary activity.

They didn't have to analyze it as a primary activity.

All they had to say was, it's not... that the preliminary and postliminary activities are not simply temporal, that there is a substantive component to it.

And that is essentially the holding of the court in Steiner.

It says there's a substantive component; and, therefore, we're not going to just simply look in... time wise, whether it comes before or after principal activities.

We're going to decide that there are some... there are some situations that are so important that they need to be compensated under (a)(2), because they don't fall within preliminary or postliminary language.

Justice Ginsburg: But, Mr. Phillips, it says it... either something is before... preliminary; or after... postliminary.

And if it's neither of those, then, it seems to me, it fits... it's not before the principal activity, and it's not after the principal activity, so what else is it, other than the--

Mr. Phillips: It's work--

Justice Ginsburg: --principal activity?

Mr. Phillips: --that's mandatorily compensable under the Fair Labor Standards Act.

Remember, the Fair Labor Standards Act, under this Court's interpretations from Mt.

Clemens Pottery and the cases that preceded it, I mean, it... you know, it had a very sweeping definition of what is work within the meaning... within the meaning of what is compensable as minimum wages and as overtime.

And that's in place.

And now Congress has stepped in and said,

"Well, wait a second. "

"When we did it... when that got interpreted that broadly, we're talking about $6 billion in liability. "

So, it's very important, given that we're talking about fairly minimal activities on the... on the... that are involved here, triggering potentially massive liabilities.

And so, what we've done is, we've excluded from those massive liabilities the walking, riding, and traveling time, because that's the basis on which you end up with big numbers.

Chief Justice Roberts: So, your approach introduces, really, a third concept.

You have the principal activities in your... either preliminary or postliminary... and now you've got a third concept: integral.

But the statute... that's nowhere in the statute.

Mr. Phillips: Right.

Well, I mean, that... but that's... this Court's decision in Steiner was the one that reached out to decide that "integral and indispensable" was a category of activities that were going to be compensable, even though, on the face of them, they may have appeared to be--

Chief Justice Roberts: Well, unless they were saying those activities were, in fact, principal activities.

If it's integral, if it's embraced by the principal activity, it is a principal activity, and that at least is more consistent with the statute in keeping it in two categories rather than inventing a third.

Mr. Phillips: --Well, I don't think that creates any particular problem, but what you end up doing, Mr.--

Chief Justice, under those circumstances, is, you completely eliminate the protection that Congress meant to provide here for walking, riding, and traveling time, which is... which is a vital consideration--

Chief Justice Roberts: Well, how does... how does your analysis apply?

Let's say these employees had to change their equipment several times during the course of the day.

Mr. Phillips: --You mean after they've--

Chief Justice Roberts: Yeah, I mean, the--

Mr. Phillips: --arrived at the actual place--

Chief Justice Roberts: --the equipment is only good for, you know, an hour, two hours, then they have to get new ones.

They have to walk back to the place--

Mr. Phillips: --Right.

Chief Justice Roberts: --they have to doff the other equipment, don new equipment, and walk back.

Wouldn't your analysis say that that walking time is excluded?

Mr. Phillips: No.

No.

Once you--

Chief Justice Roberts: Why not?

Mr. Phillips: --We don't have any quarrel with the argument that once you, for the first time, arrive at your actual place of performing the principal activity for which you were hired, which is cutting beef or whatever it happens to be in your hypothetical... once you arrive there, that does begin the workday.

That's the definition of what starts the workday, which is why I... to our mind, this is a much clearer and brighter line rule.

We can tell you precisely when you start the workday.

It's when you get to the place where you got hired to work, and start to do that work.

Justice Kennedy: But do you have compensated activities that do not begin the workday?

Mr. Phillips: Yes, you do have compensated... and that's true for lots of different situations, Justice Kennedy.

You could have a situation where you go home, and you get called back in on an emergency, and nobody disputes that that's clearly compensable time, and nobody has ever seriously argued that you ought to extend the workday--

Justice Kennedy: What happens with the microchip or a laboratory with highly contagious viruses where there's got to be two hours of scrubbing and then there's a walk?

What do you do with that?

Mr. Phillips: --If the--

Justice Kennedy: Two hours of scrubbing--

Mr. Phillips: --You know, it's... it's very possible that the scrubbing will be regarded as an integral and indispensable part of the... of the... of the employment, and--

Justice Kennedy: --But then there's... but then there's--

Mr. Phillips: --therefore, it's compensable.

Justice Kennedy: --but then there's a walk.

What about the walk?

Mr. Phillips: The walk is not compensable, because Congress didn't want you to have walking until you got to the actual place where you would perform the services.

And nobody's principal activity as an employee is to go take a shower or to go and pick up certain types of clothing.

That's not--

Justice O'Connor: But the problem--

Mr. Phillips: --the understanding of "principal activity".

Justice O'Connor: --Mr. Phillips, the problem I continue to have is that I thought Steiner embraced, explicitly, the notion that principal activity embraces all activities that are integral and indispensable.

You take issue with that, but do you want us to overrule Steiner--

Mr. Phillips: No.

Justice O'Connor: --or make some changes in it?

I just don't understand.

Mr. Phillips: I want you to limit Steiner to the very unusual facts that arose in that particular context.

I... we don't have any quarrel with the "indispensable and integral" test as a reason for beginning... as a reason for compensating certain activities.

Chief Justice Roberts: What was--

Mr. Phillips: What we do--

Chief Justice Roberts: --so unusual about the facts--

Mr. Phillips: --I'm sorry?

Chief Justice Roberts: --What was so unusual about the facts in Steiner?

They're pretty common.

Mr. Phillips: Well, no, I... the notion that if you didn't shower and change, you would expose not only yourself, but your family and everybody else to the risks of lead poisoning is a pretty extraordinary--

Chief Justice Roberts: No, but the--

Mr. Phillips: --circumstance.

Chief Justice Roberts: --the routine where you have to don, you know, safety equipment, and you have to shower when you're done, whether it's being... the meatpacking or the stuff at Steiner... that's a pretty common occurrence.

Mr. Phillips: Right, well, I would... I would argue that you could make a... you could make a claim that none of that donning and doffing ought to be compensable.

And, candidly, we've made that argument.

But, unfortunately, the court didn't grant the petition on that particular... on that particular question.

So, we have to take it as a given.

But I don't... I don't... I... for exactly the reason you identify, Mr. Chief Justice, that does create a problem.

I mean, part of this problem is a bit contrived.

I don't think that the ordinary donning and doffing ought to trigger the beginning of the workday.

But, assuming that it does--

Justice Souter: But you're--

Mr. Phillips: --I still don't think... I'm sorry, Justice Souter.

Justice Souter: --No, no, I didn't mean... finish.

Mr. Phillips: But I still don't think that, even if you accept that that is compensable conduct within the meaning of Steiner, which I... that's what it's talking about... but Steiner, Justice O'Connor, doesn't say anything about the fact that there was going to have to be walking or traveling, or the workday.

The court, in Steiner, clearly had in mind the workplace, where you're producing batteries.

There's a lot of language in that opinion that says,

"This is where you really do the work. "

That's your battery, and here's where you're going to get... engage in activities that we think you need to be compensated.

"But the court never remotely suggested that you were entitled to the walking time between those two. "

And, if you go back to 790.7(g), that language specifically told every employer that simply because you have to pay for certain kinds of activities at the outset, because they're integral and indispensable, as decided by a court, that doesn't necessarily mean you have to pay for all the walking time.

And so, you've got to come up with--

Justice Scalia: You would say that's--

Mr. Phillips: --a theory that supports that.

Justice Scalia: --so for all activities that are... that are integral and indispensable?

What about sharpening tools?

Mr. Phillips: Well, sharpening tools is the easiest one, because you do that right on your workplace.

I mean, that's exactly what Congress had in mind in its legislative history--

Justice Kennedy: No, no, no.

Justice Scalia: But your--

Justice Kennedy: But that's... but suppose--

Justice Scalia: --but your time shouldn't start from then.

Justice Kennedy: --that's not the hypothetical.

Suppose you sharpen the tools outside, by your locker, and then you... then you go for a ten minute walk to get to the... and you carry the sharpened tool?

Mr. Phillips: --Well, again, if the Court decided that sharpening the tools, even though it's done not at the same time, which is what Congress had in mind when it... when it identified that hypothetical... but, even if you assume that, that that's integral and indispensable, it still isn't what triggers the time for starting the actual employment.

Justice Souter: No, but isn't your... in the answer that you just gave, and an answer which you have, in fact, consistently repeated, inconsistent with Steiner... Steiner didn't say there is a separate category of integral activities.

Steiner said that activities which are integral are part of the principal activity.

And isn't your argument premised on denying that identity?

Mr. Phillips: No, I can accept that identity for purposes of distinguishing between what's preliminary and postliminary activity.

What I cannot do is to... is embrace that for purposes of deciding when walking time/traveling time ought to be included.

Congress was as plain as it could humanly be in saying that,

"We're not going to allow walking and traveling time to be included in an unexpected fashion. "

And that is precisely... as the Chamber of Commerce brief says, that is precisely what we're talking about here.

And, candidly, as Judge Boudin said in his concurring opinion, the circumstances arising in this context bear a very eery resemblance to the situation that gave rise to the Portal to Portal Act in the first place.

And so... and I think it's important to put this into context.

You know, the language of the statute, as I read it, clearly is in our favor.

The purpose of the statute is clearly in our favor.

And then the question is, Did this Court, in a decision that dealt solely with 4(a)(2), mean to vastly change the scope of 4(a)(1) in a way that would dramatically expose employers to liability--

Justice Ginsburg: Why is it--

Mr. Phillips: --and--

Justice Ginsburg: --why is it so dramatic, if we recognize that nothing begins until the donning and doffing... that is, the travel to wherever you don and doff?

Mr. Phillips: --Well--

Justice Ginsburg: None of that is included, even from the plant gate to the place where you don and doff.

Mr. Phillips: --But the... well, in part, because plants are not... have never been designed... remember, we've got 79.6... the Secretary of Labor told employers for 50 years,

"You can set up your plant without fearing that you're going to suddenly be hit with walking time after somebody engages in donning and doffing, even if it turns out to be integral and indispensable. "

For 50 years, they followed that advice.

They set up all of their plants with that expectation.

And now this Court,--

if it follows the ninth circuit's lead, will suddenly say,

"Okay, what you need to go out and find is all of the integral and indispensable activities. "

--not just donning and doffing... any integral and indispensable activity that you can get a court to buy into, that will start this ever expanding workday, such that any walking that goes on after that and before you get done with all of these ever expanding post doffing activities.

Then you have the... that's... you know, so you have this broad... and that's why you're going to have these... substantially greater and totally unexpected liabilities on--

Justice Scalia: Where is that advice contained, that you say was given to--

Mr. Phillips: --790.7(g), footnote 49, and it says, as--

Justice Scalia: --Not--

Mr. Phillips: --plain as day--

Justice Scalia: --not necessarily.

Mr. Phillips: --Right, but... there... there, it means always.

Always.

Justice Scalia: And you say that they operated on the assumption that it meant never.

Mr. Phillips: No, I'm prepared to--

Justice Scalia: It seems to me they were on notice that, although it did not, necessarily, it might.

I think you're--

Mr. Phillips: --It might, and... but--

Justice Scalia: --you're exaggerating the effect of that statement.

Mr. Phillips: --But, Justice--

Chief Justice Roberts: Right, they don't say... I mean, they exclude, for example, the canine cases, where you have to walk and feed the dog in the morning before you show up at work.

So--

Mr. Phillips: --Well, the--

Chief Justice Roberts: --they're not saying only--

Mr. Phillips: --the Secretary does.

I don't know whether the plaintiffs necessarily do.

And certainly the plaintiffs in those cases didn't.

They took the position that the workday started as soon as you engaged in protecting the canines, just as in... insurance industry, they... the insurance adjusters are all taking the position that as soon as they have to get on the computer, that's an integral and indispensable part of their day, and everything after that, including traveling and movement, are all part and parcel of what gets added in there.

What I'm suggesting to you is that once you go down this path and you say,

"Okay, we're going to define the workday by reference to whatever somebody determines is integral and indispensable. "

you are going to have an expandable workday, and that if you are really looking for a fairly clear rule, you sit... you stick with what the language of the statute says, which is, the actual place of the performance of the activity for which you were hired.

Once you've got that in place... that's not to say that's the full length of when you get compensated.

You can be compensated for activities outside of that workday.

Happens every day, when you have to come in for an emergency or if you have to come in--

Justice Kennedy: My problem with your argument is Steiner.

Mr. Phillips: --I understand the problem with Steiner, Justice Kennedy, but I think it is inappropriate to read Steiner, which says, point blank,

"Our holding does not deal with conduct that is specifically excluded by 4(a)(1). "

and then... and ignore that.

That whole... that statement of the holding of the court seems to me to say,

"All we're telling you the answer to-- "

Justice Scalia: No, it doesn't.

Mr. Phillips: --4(a)(2)> ["].

Justice Scalia: The only thing specifically included in (a)(1) is walking, riding, or traveling to and from the actual place of performance of the principal activity or activities.

And once you assume that (a)(1) doesn't cover it.

Mr. Phillips: No, you can get to the logic of that.

The question is, Is it appropriate to apply the 4(a)(1) and the fundamentally important values that it was designed to serve?

And what I'm suggesting to you is, that's a mistake.

And we know that, because the regs protected us against this precise event.

It is exactly what the Portal to Portal Act was designed to accomplish, and it's the better interpretation of this particular statute.

Justice Ginsburg: Mr. Phillips, may I just ask you a preliminary question about the IBM case... IP... IBP--

Mr. Phillips: IBP.

Justice Ginsburg: --IBP case?

As I understand it, whatever we do here is irrelevant to what the bottom line is going to be in that case, because the determination is going to be made only under State law.

The court below said that's what it was going to do.

And the employees are not objecting.

So, it seems that that case, as distinguished from Tum, is really not anything that this Court should decide, because it would be academic.

Mr. Phillips: Well, they don't argue that it's moot.

And it's not purely academic.

There are collateral consequences to deciding what the Federal law issue is in this particular context.

We briefed this issue a the cert stage at some length, and the court granted cert, so I'm assuming that, in some respects, you, sort of, pass by that particular problem.

There are collateral consequences.

And the other side, again, doesn't say it's... that it has mooted this case; it simply says that there's this serious issue on remand as to precisely how it'll all play out.

Justice Souter: Could you give us a collateral consequence--

Mr. Phillips: Yeah, because it... reas judicata collateral estoppel effects from the ruling that we've... that we have violated federal law, both that might be available to the Secretary of Labor and otherwise.

If there are no further questions, I'll reserve the--

Chief Justice Roberts: --Thank you, Mr. Phillips.

Mr. Phillips: --balance of my minutes.

Argument of Thomas C. Goldstein

Chief Justice Roberts: Mr. Goldstein.

Mr. Goldstein: Mr. Chief Justice, and may it please the Court:

As the previous questioning suggests, the outcome of this case follows directly from Steiner.

The Portal Act, by its terms, applies only to activities that occur before the commencement of... before the commencement of, or after the conclusion of, the employees' principal activities.

Steiner holds that donning and doffing, such as in this case, is "part of"... that's a quote... the employees' principal activities, and it, therefore, follows that the Portal Act applies only to activities either prior to, or after, that donning and doffing.

Justice Scalia: But why isn't walking from the gate of the... of the factory to the... to the place where you're on the assembly line, why isn't that integral and essential to the performing of the activities?

Mr. Goldstein: Because... and this is the language that Mr. Phillips is referring to in Steiner... 4(a)(1) itself makes clear that a walk will not be the first principal activity, including on the theory that it's integral and indispensable.

The first principal activity has to be something other than a walk, and that's what happens in this case.

As in Steiner, there is donning at the beginning of the day.

That's part of the principal activities--

Justice Scalia: No, no, but if... once you accept the theory that the principal activity includes those things that are integral, you can say walking from the gate of the plant to the assembly line is part of the principal activity.

Now, walking to the gate may not be part of the... may not be part of the principal activity, but... I--

Mr. Goldstein: --Two reasons, Justice Scalia.

The first is the one that I gave, and that is, the Steiner court concluded that... and that was the end of the sentence, where it said, 4(a)(1)> ["], that Congress made clear in 4(a)(1)... that the initial walk wouldn't be the first principal activity.

Second, the walk won't be integral and indispensable.

The test for whether or not something is integral and indispensable is whether it's work that's required and closely related to the productive activities.

And simply walking to the donning station is not.

That's in contradistinction to putting on the clothes that are required here, required as a matter of law in order to do your job.

That's the line that the statute draws.

Justice Kennedy: Well, what about the dog grooming case?

Mr. Goldstein: The dog cases, Justice Kennedy... and I... let me make sure we're... I have your hypothetical, and that is, the police officer at home grooms the dog.

Justice Kennedy: Yes.

Mr. Goldstein: Then it comes into the office.

That is part of their principal activities.

The subsequent commute is not compensable, on the ground that it is a break and a commute.

That's covered by the Fair Labor Standards Act.

The Portal Act is concerned with something else... that is, before the beginning and after the end of your day.

The dog cases are, of course, also entirely different from this one.

You have... you have arrived at the place of the performance of your principal activity.

Steiner said that occurred, quote/unquote,

"on or off the production floor. "

And so, you're at the plant, and your workday has started.

Justice Scalia, you made the point, and I simply want to reinforce it, that the reference in... to 4(a)(2) is the same as the reference to 4(a)(1), but it's also the reference to principal activities in the concluding clause of Section 4.

If I could just take the Court to that.

The statute is obviously reproduced in a variety of places, but it's also at page 3 of our brief.

And so, after 4(a)(1) and 4(a)(2), there's this concluding clause, and the text frames the workday.

And it says that the Portal Act, 4(a)(1) and (2), will apply to activities which occur... I'm quoting now...

"which occur either prior to the time on any particular workday at which such employee commences, or subsequent to the time on any particular workday at which he ceases, such principal activity or activities. "

And it simply follows, as a matter of the plain text, that when Steiner held that those activities, "such principal activities", include the donning and the doffing, that everything that happens between those two events is not encompassed by the Portal Act.

Chief Justice Roberts: Your--

Justice Scalia: --What if... what if--

Chief Justice Roberts: --answer to Justice Kennedy said that the dog cases were distinguishable because there was a break in the principal activity.

So, if we were to rule in your favor, all the employer has to do is make sure that the donning and doffing station's far enough away from the production line so that there will be a sufficient break between the two activities.

Mr. Goldstein: Well, the... both the donning and the doffing and the walking in between and the wait for the equipment, which is the bulk of the time in all these cases, would be compensable.

The Department of Labor has regulations--

Chief Justice Roberts: What do you mean "it would be"... that's my question.

Mr. Goldstein: --Yes.

I'm sorry, Mr. Chief Justice.

There... the donning and doffing in the Alvarez case, by and large, happens in one place: in a locker room.

In the Tum case, by contrast, the employees show up at a cage, they wait for things, they walk, they pick up something else, they wait, they pick up something else.

And so, there's a body of time that I refer to as the donning and doffing process.

All of that would clearly be compensable, even in your hypothetical.

Your hypothetical would address the final piece of time, and that is, you get your last piece of clothing on, and you have to go to the floor, and the employer could say, 15 minute break> ["], in there.

I suppose that's hypothetically possible.

I think the reason it doesn't happen in these cases and in the other cases I've studied is that the employer has an incentive, when they're forced to compensate, to do things efficiently.

What happens is, the employer will say,

"All right, your shift is going to start at 6:30 in the morning; therefore, you can clock in and start donning at 6:23. "

That's a seven minute window, and that forces the employees to do everything efficiently.

They don't insert artificial breaks.

Justice Scalia: --Yeah, but why... if you're talking about efficiency, it may well be that the employees, instead of imposing upon the employer the costs of moving the donning and doffing location closer to the... to the place where the real work is being done, they might prefer, instead, to get a slight salary increase per hour.

But... and that is... that is possible, under the petitioner's scheme, because it is left to private negotiation; whereas, what you say is that they must pay for that.

They must pay for that walk from the donning and doffing.

They cannot negotiate out of it, because if it's in the Fair Labor Standards Act, it is mandatory.

So I... don't talk to us about efficiency.

It seems to me that the efficiency arguments are on the other side.

Leave it to the private sector.

The employers... the employees can decide what they care more about.

Mr. Goldstein: Well, Justice Scalia, I... all I have in... before me that I can rely on is the statute that Congress enacted.

Your point would cover, of course, equally, the donning and doffing in Steiner itself.

Congress made some choices about things that were going to be compensable.

It's worth noting that Congress drew a line about whether... in terms of whether there was a collective bargaining agreement involved, because under Section 203(o) of the statute, in workplaces covered by a collective bargaining agreement, you can negotiate out of at least clothes changing.

But I think within the framework of the statute that we do have, I am actually quite correct, and that is, right now, today, the employers have no incentive to adopt an efficient scheme for arranging donning and doffing.

They can put things in different buildings if they like.

The employees here are required to spend 10 or 20 minutes waiting for different clothing at different times, depending on how long the lines are.

It is a workable scheme that Congress designed that said,

"We're going to have a workday. "

And the employer is in charge of deciding when the workday begins or ends, but, during that workday, they're going to have to pay.

I did want to--

Justice Ginsburg: Mr. Goldstein, I just wanted to have a clear answer to the question Justice Scalia asked you.

Is it so that collective bargaining could not trade off the compensation for the walking and the donning and doffing for some other benefit that the employees might prefer?

Mr. Goldstein: --Justice Ginsburg, it is an unsettled question, is the answer.

I will give you the best answer I can.

203(o) allows for the negotiation away of clothes changing time.

The question whether clothes changing time includes safety equipment is a matter in dispute.

The ninth circuit held that it didn't.

This Court denied certiorari on that question.

The further question, if you did negotiate away the clothes changing time, whether that would negotiate away the walking and waiting time has not been confronted by a court, so far as I am aware.

It might be said to logically follow, but it hasn't been decided.

It's not presented by this case, because cert was denied.

And so, I haven't--

Justice Ginsburg: So, you say it's an open question.

Mr. Goldstein: --It is.

I'm confident it's an open question.

Justice Ginsburg: What--

Mr. Goldstein: Could--

Justice Ginsburg: --about what gear qualifies?

That is, here we have no dispute that this is protective gear.

But it's not any changing that counts.

So, how do we know whether this is the kind of donning and doffing that's compensated in... or the kind that isn't?

Mr. Goldstein: --The line that has been drawn by the Department of Labor, is where I will start, and the Department of Labor... and let me give you some citations... says that the line is between whether the employer requires you to do the donning and doffing on the plant or not.

The citations for that are Section 785.24(c) of the regulations, 790, note 65.

And then it contrasts clothes changing that's by your own choice, in 790.7(g).

I think that's a sensible line, but it's not presented by this case.

Justice Breyer, it goes to your characterization of the final sentence of footnote 49, and that is: sometimes.

The reason I think it's sensible to draw the line that the Department is in required clothes changing is that the employer will only require you to do it onsite if it is truly integral and indispensable to your job; otherwise, it'll be optional, or they'll let you do it at--

Justice Breyer: Can I ask you about a... the other part of the case?

I mean, I think, as I've suggested, most of these things are up to the agency.

They're minor things in the law, so... but it seems well established in the agency reg, as well as in Skidmore, the famous line about waiting being,

"Are you waiting to be engaged, or are you engaged to wait? "

So, assuming that this is just putting on and off clothes that are essential... so, assume you win on that part... when they wait to put on the clothes, you would think... if it's like an airport, sometimes you wait; if you're lucky, you don't.

Well, under those circumstances, you wouldn't be engaged to wait.

You're waiting to put on the clothes, not... you know, it's a... so, why would you win on that part?

Mr. Goldstein: --Can I, again, make sure I have the hypothetical in terms... we are, in a sense, talking about the first wait.

You show up at the first--

Justice Breyer: The... what happens... you win on the--

Mr. Goldstein: --Yeah.

Justice Breyer: --clothes.

They're protected gear.

That's the assumption.

That's part of the job.

The workday begins.

But you have to get there, and you wait to get the clothes.

On that--

Mr. Goldstein: But--

Justice Breyer: --one, why not Skidmore?

Why not the reg?

And, if so, why don't you lose on that one?

Mr. Goldstein: --You are... in that situation, you're waiting for the very first piece of equipment.

In the Tum case, you fill up at the cage at the beginning of the day.

You are engaged to wait.

The regulatory citations are two: 790.6(b) and 790.7(h).

There's also a case that's confronted this, which is the Metzler case, 127 F. 3d 959.

All those authorities make clear that if the employer tells you,

"Show up to do something, show up here to put on your clothes. "

and, because of the way the employer has designed the system, you have to wait, through no fault of your own--

Justice Breyer: But suppose sometimes you have to wait?

Sometimes it's a minute, sometimes it's nothing.

Is it like an airport?

Or does the employer here say,

"You must show up seven minutes early, because there'll be a wait? "

Mr. Goldstein: --It's the... it would be the same result whether the employer puts a time on it or not.

The employer says... I'll give you an example we could agree on, when it's a time--

Justice Breyer: Is that what the reg says?

Mr. Goldstein: --The reg doesn't--

Justice Breyer: It's surprising I didn't see that in the reg, if it says that.

Mr. Goldstein: --The regulation gives this example, which I think is on point, and that is, if you are told to show up for when the production begins... the meat's going to come across... and the machine breaks down or they simply don't start sending the meat until five minutes later, the fact is that you get compensated, because you're supposed to be there.

The fact that they tell you, "Be there for the"--

Justice Breyer: Where it's first in the day.

Mr. Goldstein: --Yes.

Justice Breyer: First thing--

Mr. Goldstein: Yes.

Justice Breyer: --in the day.

Mr. Goldstein: Yes.

Unquestionably.

Justice Scalia: I thought you would say that the whole principle of, you know,

"Are you engaged to wait, or waiting to be engaged? "

just contradicts the principle that was adopted in Steiner.

I mean, are you putting... are you employed to put on your... to put on your clothes, or are you putting on your clothes to do your work?

And Steiner essentially repudiates that.

So, you know, let's forget about Skidmore.

Mr. Goldstein: Well, Justice Scalia, I think Justice Breyer is testing a very particular piece of time.

Justice Scalia: No, I understand.

Mr. Goldstein: He's trying to say, What is... let me take you to the text of the statute--

Justice Scalia: No, I--

Mr. Goldstein: --The... he's trying to figure out when the... the final clause of 4(a) talks about commencement... he want to know when it commences.

Does it commence when you get in line or when you--

Justice Scalia: --Right.

Mr. Goldstein: --first get the piece of clothes?

It's a fair question.

The other side hasn't made any argument that it doesn't include the first wait, I think, because you're told that you have to don, it's part of your principal activity.

Let me also say, this, I think, is a somewhat academic question when it comes to... and nothing against academics, but the... it's a somewhat academic question when it comes to actual workplaces, because what happens is what I described before, the employers, under employers that are following our rule, do set up a time clock, and they say,

"Show up at 6:23, and that's when you can clock in. "

They have computerized swipe cards, and the computer won't recognize them until 6:23.

And it's the time after that that will be compensable.

So, if the Court were to say the donning and doffing process starts and ends the workday for purposes of the Portal Act, everyone will understand what the--

Justice Ginsburg: That wasn't decided below, was it?

It was just a question of walking and waiting, and they weren't specific about whether that included waiting or walking, pre donning.

Mr. Goldstein: --That's right.

The reason for that is, there isn't a pre donning wait in the Alvarez case, where the plaintiffs won, and the Tum plaintiffs lost on an unrelated theory that the actual donning and doffing couldn't start the workday.

Justice Ginsburg: So, perhaps we shouldn't reach a question that hasn't been aired and decided below.

Mr. Goldstein: And my formulation, which is simply the donning and doffing process, would, in fact, leave the... to the lower courts the question of precisely when donning begins and doffing ends.

That's a fair--

Justice Scalia: Mr. Goldstein, since you display such respect for the agency here--

[Laughter]

--what do you do about the agency's footnote that flatly contradicts your theory of the case, and which says that the mere fact that donning and doffing may require compensation does not necessarily mean that travel between the clothes changing place and the actual place of performance would be excluded?

Mr. Goldstein: --Justice Scalia, my answer, I--

think, is that... you had it right in the first half hour, and that is, that phrase--

[Laughter]

i.e., we're denying that it follows a fortiori, or we're simply not deciding the question.

The agency itself, which... the Secretary wrote this guidance... the agency explains that it meant that we're simply not deciding it.

That's actually perfectly intelligible and a correct understanding of the history.

Remember, the Portal Act gets enacted, and, right afterwards, the Secretary issues this guidance that then gets put in the CFR.

This was their first reaction to the Act.

Subsequently, after several years, these are... what you're referring to is something in the... what are known as the Part 790 guidance.

Later on, the Secretary issued what's called the Part 785 guidance.

And, in 785.3, it said, anything that, in 785, contradicts 790, controls.

And 785.38 is the relevant citation.

And there they say,

"If you show up at the beginning of the day and you're given instructions, or you show up at the beginning of the day and you get a set of tools, what follows after that, in terms of travel time, is compensable. "

Can I answer two... make two other very quick points?

Justice Ginsburg, you asked about mootness.

I would refer you to the Deposit Guarantee case, 445 U.S. 326, which talks about collateral estoppel effects.

There is ongoing litigation against this defendant on this question, a case called Chavez, in the district court.

The citation for the proposition that it will collaterally estop them is the restatement section of judgments, section--

Justice Ginsburg: I wasn't questioning that, so much as it is... it is extraordinary for this Court to take a case when the bottom line is going to be the same.

And, since we have the identical issues, with no such preliminary question in Tum, if we decide in your favor in the Tum case, then the other case is taken care of.

Mr. Goldstein: --It's true, you could dig the case.

My only point is that it is not moot.

And perhaps the variety of workplaces shown in the two cases would illustrate things for the lower courts.

I suspect that may have been why the court granted cert.--

I also wanted to respond to the suggestion that this is a surprise to industry, with just a couple of citations.

Walking and waiting time has been held compensable since at least 1961.

The Mitchell case, 286 F. 2d 721, the Barrentine case, 750 F. 2d 47.

There was a meatpacking plant at least seven years ago, 127 F. 3d 959.

And this has been the agency's enforcement position at least since the late 1980s.

It's sufficiently settled that the court of appeals here held that IBP's failure to pay for this time was a willful violation of the statute.

If there are no further questions.

Argument of Irving L. Gornstein

Chief Justice Roberts: Thank you, Mr. Goldstein.

Mr. Gornstein.

Mr. Gornstein: Mr. Chief Justice, and may it please the Court:

The Portal Act excludes walking time from compensation only when it occurs outside the workday, before an employee commences, or after he ceases, his principal activities.

And Steiner held that the term "principal activities" includes activities that are an integral and indispensable part of the principal activities.

It follows that when donning and doffing are integral and indispensable parts of the principal activities of the employees, then walking that occurs after donning, and before doffing, occurs within the workday, and it is not excluded from compensation by the Portal Act.

Now, the employers in these cases have argued that the term "principal activities" does not encompass activities that are integral and indispensable parts thereof, and that Steiner did not so hold.

But, at the very outset of its opinion, the court, in Steiner, posed the question presented as whether changing clothes and showering are compensable as part of the employee's principal activities, and had answered that question several pages later by stating that it agreed with the conclusion of the court of appeals in that case that the term "principal activities" includes activities that are an integral and indispensable part of the principal activities, and that the activities in question in that case fit within that description.

Now, that was the only textual basis on which the court could have reached the conclusion that it did, because, if the only principal activities in that case had occurred on the production floor, then the changing of clothes at the beginning of the day, and the showering at the end of the day, necessarily would have been preliminary to and postliminary to said principal activities, and thereby expressly excluded from compensation.

Justice Scalia: What if I think that opinion was just flatly wrong, that Congress, when it referred to the "principal activity or activities", was talking about the cutting of the meat or whatever the employer hired the person to do?

He didn't hire him to put on clothes.

What if I think that?

Why do I have to extend what I think to be an erroneous decision beyond its narrow holding?

Mr. Gornstein: Justice Scalia, we are not asking for an extension of what you would regard as an erroneous holding.

All we're saying is that you read the term "principal activities" as the court interpreted it in Steiner.

Once you do that, and you plug it into the statute, the plain language of the statute takes over, because it says that walking is only excluded when it comes before the employee commences, or after he ceases, the principal activities.

Once you plug "integral and indispensable" into that sentence, as Steiner requires, then you are... the plain language of the statute tells you that that time is not... is compensable when it occurs after donning and before doffing.

Justice Scalia: Why can't I say that Steiner requires that interpretation of what constitutes a "principal activity" only for purposes of determining what is compensable, and that when we... when we come to examine the separate question, of when the workday begins, we can... we can apply, as far as precedent is concerned, a different interpretation of what is a "principal activity"?

Mr. Gornstein: Because the term (a)(1).

That's the first place it appears.

Everywhere else it appears, including in (a)(2) and in the concluding sentence, it says "said principal activities".

So, the statute itself tells you that the term "principal activities" has to mean the same thing everywhere it appears.

And since you have already interpreted that term, in Steiner, to include "integral and indispensable activities", that terminology has to appear everywhere in the statute.

Chief Justice Roberts: Mr. Gornstein, do you agree that just because it's a compensable activity doesn't necessarily mean that there isn't going to be a break in the workday?

People have talked about the dog example, and there are others.

I mean, and... so, all you're talking about is the determination that this is a principal activity.

It seems that there's a separate... second question, such as, How do we tell if the space in time between two different principal activities, because they're two very different types of activities, is a break or part of the continuous workday?

Mr. Gornstein: Well, first of all, that question arises not under the Portal Act, which only applies before the principal activities begin and after they end, but under the Fair Labor Standards Act, itself.

And that question would be governed by the Court's prior decisions on what constitutes hours worked, together with the Department of Labor's regulations that address what constitute hours worked.

And... within the workday... and what the Department of Labor has said is, generally, everything within the workday is compensable, except for a meal period and except for a time period where there is a break that is so substantial that the employees can effectively use that time for their own purposes.

And so, it says things like 5 to 20-minute breaks are not periods where the employee is not working, but they are resting for the further work.

That is common in the industry.

And so, that would be an issue that would arise when you had a break that was much longer than that, probably at least a half hour, where you can actually effectively use that time for your own purposes and are not required, essentially, to stay around on the employer's premises and to wait or rest to begin your work anew.

So--

Justice Souter: I take it you then agree that the answer for which you argue here follows not merely from the text of 4(a), but the text of 4(a) plus a continuous... some variety of a continuous workday rule.

Mr. Gornstein: --That's correct.

Justice Souter: You've got to have both.

Mr. Gornstein: That you... that you have to have a... work under the Fair Labor Standards Act, and then you have to have the exclusion from that not apply.

Justice Souter: Yeah.

Mr. Gornstein: The issue here, the exclusion doesn't apply, and nobody has raised the question about whether this is hours worked under the Fair Labor Standards Act.

But clearly it is, under the court's decisions.

Justice Souter: But you don't... but you don't get the answer from simply the text itself.

Mr. Gornstein: That's correct.

Justice Scalia: Did you say--

Justice O'Connor: Mr. Gornstein, what about in the Tum case, the walking and waiting before the donning of the clothes?

Mr. Gornstein: Yes.

On the... on the waiting before the clothes, there's... there are two series of waits: the first wait and then later waits.

As to the later waits, once you decide that the donning begins the process of principal activities--

Justice O'Connor: I'm talking about the--

Mr. Gornstein: --The initial wait.

Justice O'Connor: --these.

The initial.

Mr. Gornstein: The initial wait--

Justice O'Connor: You don't think that's covered.

Mr. Gornstein: --We do think that's covered.

And under... the Department of Labor's approach is to treat a required wait for an activity as an integral part of that activity.

So, if that activity is, itself, compensable as a principal activity, then the required wait for that would also be--

Justice Breyer: But the word--

Mr. Gornstein: --compensable as part of that.

Justice Breyer: --"# required" is what I didn't understand in that.

My airline example, what's required?

Mr. Gornstein: What the... the Department distinguishes--

Justice Breyer: "Required" is... sometimes there's a wait, sometimes there's not a wait.

Is that required?

Mr. Gornstein: --Well, if the employee is simply voluntarily arriving earlier than--

Justice Breyer: But he has to--

Mr. Gornstein: --he has to and wait--

Justice Breyer: --put on his uniform.

And sometimes there's a wait, sometimes there's--

Mr. Gornstein: --When--

Justice Breyer: --not a wait.

Mr. Gornstein: --If--

Justice Breyer: Is that a required... or not?

And, if it is, where does it say that in the regs?

Mr. Gornstein: --It's a required wait anytime, in order to get to the production floor on time, the employee has to be at the donning station in a sufficient period of time to get there, and if there's a wait at that time, then he's being required to wait.

Justice Ginsburg: Mr. Goldstein acknowledged that that issue, the pre donning wait, was not decided below.

Mr. Gornstein: I'm not sure I view that the... the question as not having been decided below.

And the court also did grant certiorari on waiting time.

Justice Ginsburg: But it wasn't, obviously, decided in the first circuit, because they ruled against the employee's position.

Mr. Gornstein: But they said

"unreasonable period of time for waiting. "

is non compensable.

And that, at least as a general rule, is not--

Justice Ginsburg: But the... but the question of when... what waiting are we talking about?

Before the principal activity or only after?

That specific issue, as I understand it, was not aired below.

Mr. Gornstein: --Well, I'm... my memory, at least, of the court of appeals opinion, is that it was saying that the wait before the donning was not compensable, because it was a preliminary activity.

But I... if you've read it differently, then that may be--

Justice Breyer: Do we have to decide the second question?

I think it's actually quite difficult.

I can find a lot of authority that seems to me just a random--

Mr. Gornstein: --The Court always has discretion not to decide--

Justice Breyer: --No, no, no.

Mr. Gornstein: --the question.

Justice Breyer: I don't mean that.

Mr. Gornstein: It's--

Justice Breyer: I mean, is there... is there a basis in this record... will it make a difference?

It's not really well briefed, I don't think.

Mr. Gornstein: --I... the--

Justice Breyer: It's a thorough brief.

Mr. Gornstein: --Justice Breyer, if you do not want to decide that question, you don't have to decide it.

Justice Breyer: I don't do things on the ground--

Mr. Gornstein: The Court granted--

Justice Breyer: --I'd like it or not.

Mr. Gornstein: --certiorari as an issue that can be, and should be, resolved, in our view.

But if the Court doesn't want to resolve that issue, that's fine.

Justice Ginsburg: Mr. Gornstein, one thing I'm curious about.

With all the trouble of various interpretations and famous footnote 49--

Mr. Gornstein: Forty nine.

Justice Ginsburg: --why, in all these years, hasn't the Department of Labor gotten rid of it?

[Laughter]

Mr. Gornstein: It should have.

Because even at the time it was written, that reservation was in tension or not in conflict with the plain language of the regulations.

And certainly by the time of Steiner, it was clear that this kind of time was compensable.

Rebuttal of Carter G. Phillips

Chief Justice Roberts: Thank you, Mr.--

Gornstein.

Mr. Phillips, you have four minutes remaining.

Mr. Phillips: Thank you, Mr. Chief Justice.

I just have a couple of points I'd like to make.

First, Justice Breyer, I want to start with the waiting times.

I didn't actually have an opportunity to spend much time talking about them.

But I think the answer that the Solicitor General's Office has offered with respect to the waiting time simply illustrates the expandable nature of the workday.

Their position--

Justice Ginsburg... or Justice O'Connor specifically asked that question,

"You're not saying that waiting time prior to engaging in a primary activity, in fact, starts the workday. "

And the answer is, absolutely, it does, because they find that everything that is integral and indispensable triggers the start of the workday.

So, put it into fairly graphic terms.

If you have to show up in order to put on a coat in order to go onto the floor in order to do your services, then the waiting time for that coat counts.

If, however, you also have to put in earplugs in order to get to the place where you have to get the coat, not only do putting in the earplugs count, under that theory, but, if you have to wait, you have that, and that extends the workday, and all of the walking in between that.

So, if you're asking,

"Is this going to become a significant liability? "

the answer is clearly yes.

For very significant compensable acts... and, indeed, in this context, some of those compensable acts were found by the jury to be utterly diminimus... you're going to end up with significant waiting time, and you're going to end up with significant walking time.

Justice O'Connor: Was the pre donning waiting issue decided below?

Mr. Phillips: Yes, Justice O'Connor, they specifically held that all of the waiting time is not--

it is to excluded.

And they did that on the basis of 790.7(g), before you get to the footnote... because that's the tag to the footnote... as to what is... what is the ordinary meaning of wait... of preliminary and postliminary for waiting time?

And the expectation is that if you're waiting to get your check, and if you're waiting to check in, the recognition is that those... those are completely fortuitous, just as it is here.

There's nobody who structured this arrangement so that you will end up spending time waiting.

Indeed, the scheme is designed to get people in as efficiently--

Justice Ginsburg: They decided--

Mr. Phillips: --as possible.

Justice Ginsburg: --no waiting time.

They didn't decide "if" waiting time... "which" waiting time.

But they said no... it's irrelevant whether it's before or after, because waiting time isn't covered.

So, I don't see how they specifically decided, yes, waiting time is covered, but not pre donning.

Mr. Phillips: Well, I think, Justice Ginsburg, if they specifically decide that there is no waiting time that's covered here, and the plaintiffs have sought compensation for both pre and post waiting time, then the issue is squarely posed, and they've certainly posed it in their petition, and the court granted it.

So, again, obviously, you're free to decline to decide issues, but it seems to me that one is posed.

I want to--

Justice Ginsburg: Well, it seems the court below said waiting time isn't covered, so we're not going to engage in any debate about what... if waiting time is... were covered, which waiting time?

Mr. Phillips: --Right, but that just goes to the question... I think it disposes of the issue of, if you have waiting time that otherwise looks to be fairly ordinary preliminary/postliminary activity, it, nevertheless, can be converted into primary activity under their interpretation of the statute.

And they clearly suggest that the answer is yes.

Our suggestion is, that's inconsistent with the way waiting time is handled under the regulations; and, therefore, the answer clearly should be no.

And, at a minimum, the Court ought to affirm that part of the Tum decision.

With respect to the holding of Steiner... I mean, it's important to put in mind, Steiner... one of the things... two things that Steiner focused on... it focused on Section 3.0, and it recognized that there are going to be situations where you're going to be able to bargain away clothes changing.

And so, then you're in a situation where, for some... for... in some circumstances, because you've bargained away compensation for clothes changing, walking that takes place before or after that will never be compensable; in other situations, it will be compensable.

That's an absurd outcome in a situation where Congress clearly had one thing in mind that it absolutely wanted to accomplish, and that was to ensure that walking, riding, traveling to the place where you actually perform the services for which you've been hired, has been... has... is excluded from being mandatorily compensated... Steiner doesn't deal with 4(a)(1); the language is as plain as it can be... are not... you know, unless specifically excluded by Section 4(a)(1).

Thank you, Your Honors.

Chief Justice Roberts: Thank you, Mr. Phillips.

The case is submitted.

Attribution:

The Oyez Project

Featured:

BE & K Construction Co. v. NLRB - Oral Argument

Fri, 09 Jan 2009 14:50:27 +0000

Case:

BE & K Construction Co. v. NLRB

Media File:

01-518_20020416-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Maurice Baskin

Chief Justice Rehnquist: We'll hear argument next in No. 01-518, the BE&K Construction Company v. the National Labor Relations Board.

Mr. Baskin.

Mr. Baskin: Mr. Chief Justice, and may it please the Court: This case presents an important question arising under the Petition Clause of the First Amendment.

Petitioner BE&K Construction is asking the Court to hold that the First Amendment protects objectively based lawsuits from being declared unlawful by the National Labor Relations Board.

Now, the Court has already held that the First Amendment does protect lawsuits from statutory sanction under both the NLRA and the antitrust laws so long as the suits are meritorious, meaning that they are not objectively baseless.

In the Bill Johnson's case, the Court said... and I quote... it is not unlawful to pursue a meritorious lawsuit under the National Labor Relations Act.

In fact, the Court said it twice and specifically cited the Noerr-Pennington doctrine of the antitrust law.

Then it--

Justice O'Connor: How do you describe the test applied by the board?

Mr. Baskin: --Well, the test by the board is one which says that the employer must be... must prevail, must be 100 percent prevailing in the lawsuit.

As a standard that's impossible for any employer to anticipate in advance.

No... no employer can ever be 100 percent sure of prevailing.

Justice O'Connor: Should there be any other component?

I mean, I think your client lost basically.

So--

Mr. Baskin: Well, the question is what was--

Justice O'Connor: --What else should be part of the test?

Mr. Baskin: --The test is what is the... was there an objective basis for the litigation.

It's not a win-or-lose test, as the Court said in Professional Real Estate... and I'll quote again... it's got to be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits.

Chief Justice Rehnquist: Well, should the test from Professional Real Estate automatically be carried over to the Labor Relations Act?

Mr. Baskin: Well, in this case, Your Honor, an answer is yes because the Court itself has interacted with the... both of the acts.

They cross reference with each other.

Bill Johnson's referred directly to the California Motor Transport.

Professional Real Estate referred to Bill Johnson's as if it's one consistent whole.

And it is.

Chief Justice Rehnquist: Well, but I... I wonder if... if the National Labor Relations Board doesn't have some discretion to say that the labor situation is somewhat different, as they apparently do, from the antitrust situation.

Mr. Baskin: Well, but the irony here is that the NLRB has not... has not interpreted its own statute.

It's not being deferred to here.

The NLRB is interpreting this Court's decision in Bill Johnson's.

Justice Breyer: Which happened to say precisely what the NLRB said it said.

Mr. Baskin: Well, no, Your Honor.

In Bill--

Justice Breyer: If a judgment goes against the employer in the State court, if it goes against him, then he's had his day in court.

And then the board may proceed to adjudicate the unfair practice claim, and then the employer's suit, having been proved unmeritorious, the board can take that fact into account when it decides the labor law violation.

Mr. Baskin: --Three--

Justice Breyer: And you've been reading three cases to us, so that seems to be the language that you have.

I... I read that as saying you lose.

Period.

End of the matter.

That's what the board decides.

Now, I put that so you'll reply to it.

Mr. Baskin: --Yes.

Three things in the phrasing that you just said.

First, the Court said the board may proceed, did not say it's an automatic result.

Said may adjudicate the unfair labor practice, did not say it's an automatic result.

And then key phrase, having proved to be unmeritorious, what does unmeritorious mean?

Well, this Court has consistently said what unmeritorious means.

It said so before Bill Johnson's in the Christiansburg case.

Justice Ginsburg: Mr. Baskin, back up a bit.

Mr. Baskin: Yes.

Justice Ginsburg: The... the Court in that very paragraph gave a definition of what it meant.

So, I wouldn't look outside this document for what the Court meant by with merit/without merit when the... look at the sentence in the middle of that paragraph.

It says if the judgment goes against the employer and the State court.

Mr. Baskin: Yes.

Justice Ginsburg: Judgment against you.

Or if his suit is withdrawn or is otherwise shown to be without merit.

Otherwise shown to be merit.

I took that to mean if you lose, it's shown to be without merit.

There may be other situations in which it's shown to be without merit.

So, it seems to me the best place to find out what the Court meant merit/without merit is the very opinion that we're construing.

Mr. Baskin: Yes, and if it were the holding of the opinion, it would have greater weight.

But this is not the holding that we're talking... that we're parsing out here.

This is dicta because the essential--

Justice Souter: Well, there are two responses to the dicta point it seems to me.

The first one is it was dicta, but it was dicta that preceded a remand in which this issue in fact would be explored.

And the second response is the... as I understand it, the board itself has followed the... the dicta for... I forget how many years now, but consistently followed it and Congress has done nothing about it.

So, A, query whether it's dicta, and B, even if it is, isn't it the kind of dicta that at this point definitely should be followed?

Mr. Baskin: --It is clearly dicta because the Court stated what was the issue before it, and the sole issue before it in Bill Johnson's is stated at the beginning of the opinion, whether the NLRB may issue a cease and desist order to halt the prosecution of a State court civil suit brought by an employer to retaliate against employees.

And the holding of the case, which analyzes the First Amendment at great length, says that the right of access to the courts is too important to be an unfair labor practice.

And it also defines meritorious as being reasonable basis, language in the Court's opinion.

Justice O'Connor: I think there's another element that you're ignoring.

I thought the board looked both at whether it was a meritless lawsuit against the unions and whether it was for a retaliatory purpose.

Mr. Baskin: Yes.

Justice O'Connor: Isn't that the other element?

Mr. Baskin: Yes.

Both elements must be present.

Justice O'Connor: Okay.

And how do we define retaliatory purpose?

What... what constitutes that--

Mr. Baskin: Well, it's--

Justice O'Connor: --do you think, in the board's rule?

Mr. Baskin: --Yes.

It's very... pretty much the same as the improper motivation purpose test that was in the Professional Real Estate case, which also has the two-part test.

You look at the objective basis first, and then and only then if there's no objective basis, you look at whether there was a retaliatory motive.

And how that's defined, although the Court did not grant cert on that issue, we contested vigorously the... the board's finding of retaliatory motivation here... because in fact the board has made it a rubber stamp.

It's become automatic if the case relates in any way to union activity, the board finds that it's retaliatory motivation.

But the first part of the test is an objective one that the Court has spelled out both in Bill Johnson's itself and in Professional Real Estate.

And to take any... to take the board's standard puts employers in an impossible situation.

It is unworkable.

Going back to the question of dicta or not, you have ambiguous language at best because we have several different references to meritorious throughout the Bill Johnson's opinion.

Justice Stevens: May I just ask this, Mr. Baskin?

Do you think there is a distinction between an ongoing case and a completed case?

Mr. Baskin: It's one mostly as to timing and facts available to the board, and I think that's what the Court was--

Justice Stevens: But the... in your view, the standard is the same.

It's not that the board tries to enjoin the proceeding as... as opposed to later on bringing an unfair labor practice after it's over.

Mr. Baskin: --The substantive standard should be the same.

Justice Stevens: It should be, but--

Mr. Baskin: Should be.

Justice Stevens: --do you think that Johnson says it's the same?

Mr. Baskin: We're all here today because the language in the tail end of the Bill Johnson's opinion is ambiguous as to what they intended the standard to be.

Justice Stevens: But at least it says there's a different standard.

Mr. Baskin: As to... the... the impact was--

Justice Stevens: And your view is there should be no different standard.

Mr. Baskin: --Correct.

Justice Stevens: And that's the whole key to the case.

Mr. Baskin: That really is the whole key to the case.

Justice Breyer: And why not?

Justice Scalia: Mr. Baskin, is your... is your argument... in your opening remarks, you... you referred only to the First Amendment.

Is... is it... is it a constitutional argument you're making?

To... to agree with you here, do I have to agree that if Congress passed a law adopting the English rule on... on attorney's fees, that would be unconstitutional?

Mr. Baskin: No.

We are not saying that.

We are not seeking to constitutionally... we are asking no more than that you apply this standard to the two statutes you've already applied it--

Justice Scalia: Which says... so, it's a statutory argument.

Mr. Baskin: --No.

It is a constitutional and statutory argument, which is what the Court itself said in both of these cases because there's a sanction involved.

Justice Scalia: That's too fuzzy for me.

I don't know what you mean by a... is it... does the Constitution prohibit it or not?

Mr. Baskin: It prohibits a statute from prohibiting it.

Justice Scalia: The Constitution prohibits.

So, your answer to my question is--

Mr. Baskin: Constitutional and statutory.

Justice Scalia: --You... you cannot... that Congress could not adopt the English rule.

Mr. Baskin: No.

The difference... here's the important difference.

Justice Scalia: It would do that by statute.

Mr. Baskin: But is there an... a declaration of unlawfulness involved?

There are many fee-shifting statutes.

We're not taking issue with mere fee-shifting, but the National Labor Relations Board is saying that BE&K broke the law, and that's what also happened under the antitrust laws.

They're saying... they're issuing a cease and desist order from filing so-called nonmeritorious litigation.

Justice Ginsburg: But the fact that it's triple damages is a little different than fee-shifting.

So, one could easily say, when you're exposed to treble damages, putative damages, yes, that's a punishment.

Here fee-shifting is the rule in most countries in the world.

So, what is the more here?

I understand the more in antitrust cases, treble damages.

Here you say, well, there's a finding that you have committed an unfair labor practice.

What are the consequences in addition to that you have to pay the other side's legal fees?

What are the adverse consequences--

Mr. Baskin: First, the most important is the declaration that you are a law violator in and of itself.

You have to post a notice for your employees not only at this job site but all across the country.

You have your... your customers become aware of it.

The unions certainly make sure your customers become aware of it.

There's the serious danger of debarment either privately or by governmental action.

Justice Ginsburg: --Explain that.

You did say that in your brief about debarment, and I didn't... I can understand when you say someone... someone's reputation is affected by being labeled a law violator.

But you said something about... about the jeopardy of debarment and I wasn't clear how that would work.

Mr. Baskin: It's not meant in the legal sense and the Government... we're not... we're not talking about whether the Government has to debar the company, but both private actors and many Government contracting officers take the view they don't want to deal with people who have been declared to be law violators.

The goodwill and reputation of the company is at stake.

Chief Justice Rehnquist: Well, in our lower case, the... Wisconsin set out to do that on a State basis, didn't it?

If you violated the Labor Act, the State was not going to deal with you.

Mr. Baskin: Yes, they did.

And then the Federal Government just last... 2 years ago in the previous administration, had come through with a set of rules saying that companies would be debarred if they were found to have violated labor laws.

So, having this... a declaration of illegality in place is what makes this different, Justice Scalia, from a random fee-shifting statute, and that's why we are not asking you to do anything other than what you've already done, which is to apply the First Amendment to two statutes which you have determined have great commonality over the years, as each one keeps referring back to the other in this doctrine.

Justice Ginsburg: What do you do with the 2 decades that have elapsed... about 2 decades... since Justice White's opinion which has been interpreted by the board the way the language most naturally reads?

The one thing is to say when the case first came out it was ambiguous.

But now we have 2 decades of consistent interpretation of that language by the board.

Mr. Baskin: I regret to say it's a tribute to the speed of the board's processes and the process of getting this case up to this level on this issue because this case alone has taken 7 years to work its way through the board.

When the litigation was begun in this case, it was 1987.

The Bill Johnson's case was fresh.

There was considerable doubt as exactly... as to exactly what it meant.

I should note that in the district court opinions that are part of the appendix, the unions raised Bill Johnson's and said that it... they were protected under it, citing it interchangeably with Professional Real Estate.

Justice Stevens: They won over half their cases, didn't they?

Mr. Baskin: Excuse me?

Justice Stevens: Didn't they win... they won some 15 out of their 29 cases.

Mr. Baskin: Depending on how you count, they just barely got over 50 percent.

Justice Stevens: Did you ask... talking about the history of the case, could you tell me how did this case end up in the Sixth Circuit?

Mr. Baskin: Well, in fact, by the time this case got to the court of appeals, BE&K was no longer doing business in California.

The gravamen of its doing business was in the Sixth Circuit.

Justice Stevens: I see.

Mr. Baskin: And that's why the decision was made--

Justice Breyer: I'd like you to address, if I can go back to the... what I think was the Chief Justice's question.

Your... your basic point, I take it, assuming with you, as I will, for the moment that the language is ambiguous in Bill Johnson, is that we should treat or the statute should be interpreted as treating the antitrust statute and the labor statute a case brought by a defendant the same way.

And obvious differences, which I'd like you to address, are that, one, there is a history in the labor law of employers using cases brought at law either to break unions or to win disputes.

And that was one of the reasons why the NLRA was passed.

That had nothing to do with the antitrust laws.

There is no such history.

Second, the employer... the... the matter is committed to an expert board in the labor area, which apparently believes that the way to enforce the labor law, unlike the antitrust law, is to say the sham exception exists before the case is decided, but once the case is decided, we're going to keep employers out of the courts by saying if they lose, that's the end of any immunity that they get.

And we will now look to what their motive was in bringing this lawsuit.

We have an expert board.

We have a different history.

We have different statutes.

Mr. Baskin: --The--

Justice Breyer: And now, what is your response?

Mr. Baskin: --The irony is that the Court considered those purported differences in the Bill Johnson's case and rejected them.

Justice Breyer: All right.

Obviously... look--

Mr. Baskin: No, no.

I'm talking about the first part.

Justice Breyer: --I... but I'm trying to stay away from Bill Johnson because obviously if you're right that the statute holds it, I mean, I... all right.

Go ahead.

Sorry.

I didn't mean to interrupt.

Mr. Baskin: Well, to me it's... the interesting thing about this case is the Court has itself considered these very questions that you're raising and you have answered them, and you do not need to revisit them to... to come out with the conclusion that the NLRB has either misinterpreted the standard or that the standard is unworkable.

Justice Kennedy: Well, but I... I have... I have the same question that I think underlies Justice Breyer's concern.

You would seem to give zero weight to the board's interest in stopping a purely retaliatory suit.

The board says, now, you have organized this clerical unit and if... if you persist in your union activity, we're going to sue you for the way you've been keeping our books.

We're going to sue you for malpractice, blah, blah, blah, blah.

And so long as there's any basis for the suit, they can do that in your... or am I misstating your view?

Mr. Baskin: Well, only in one respect.

It has to have an objective basis.

We are not here defending sham litigation, baseless litigation.

Justice Kennedy: Well, I suppose there's always abuse of process if there's... but if there's some basis, then you can use it specifically to retaliate.

Mr. Baskin: More than some.

It must be reasonable basis.

And yes, yes.

Justice Kennedy: You can specifically use it to retaliate.

Mr. Baskin: The Court... this Court has said that if there is an objective basis, that means it's a meritorious lawsuit.

Then there may also be a motivation of retaliation.

Weighty, countervailing considerations.

Justice Kennedy: But... but we're talking... we're talking in... in the labor context.

Mr. Baskin: Yes.

Justice Kennedy: And you lose the suit.

So, there's... you do not... you're not the prevailing party in the suit.

And you... you lose on the merits.

There's nothing the board can do about it if you've done it specifically to retaliate and for no other purpose.

Mr. Baskin: If it is a reasonable, meritorious suit, as this Court has defined it, where the right of access to a court is too important to be called an unfair labor practice solely on the ground that what is sought in the court is to enjoin employees from exercising a protected right because of the First Amendment to the Constitution, the right to petition the courts with a meritorious lawsuit.

Justice Stevens: But the First Amendment argument goes by the boards once the case is over.

Mr. Baskin: No, Your Honor, because... for the same reasons that the Court held in Professional Real Estate.

The employer has the right not to be second guessed with 20/20 hindsight as long as it had a reasonable basis for the suit.

Justice Souter: Yes, but that ignores the fact that we're not concerned solely with chilling; we're also concerned with retaliation.

And if we didn't have the retaliatory character of the lawsuit involved, I would think you would have a much stronger argument as you just made it.

But the retaliation is there and I don't see how we can accept your... in effect, your chilling argument without ignoring the retaliatory character.

Mr. Baskin: Because the employers are being chilled and, in effect, the retaliation--

Justice Souter: Well, they're being chilled in... in engaging in retaliation for the exercise of statutory rights.

Mr. Baskin: --But there's actually less retaliation that's going to take place once the suit is completed.

If that were the standard, then the board should be instructed to intervene sooner to keep the employees from having to spend more money to defend themselves.

Justice Souter: And the... the answer to that, it seems to me, is set out in the cases.

We've got a... we've got a federalism interest in letting the State courts at least adjudicate their cases.

So, that's the answer to that objection.

Mr. Baskin: Well, here there's even a more compelling interest.

You have two statutes, Federal statutes, that the employer was invited to file lawsuits under.

Justice Souter: All right.

Let's go back then to the... to the difference between the two Federal statutes.

The premise of Justice Breyer's question a moment ago accepted the ambiguity.

If we are not that indulgent and if we read Bill Johnson's the way Justice Ginsburg read it... and I will be candid to say I read it... number one, the ambiguity does not leap out at us.

And number two, I'd like to go back to Justice Ginsburg's question.

Even if we assume there was ambiguity at the beginning, we have had 20 years of board practice which seems to me to have dissipated any ambiguity.

What's your response to that?

Mr. Baskin: Well, the ambiguity was in the opinion that led the board to take an erroneous view--

Justice Souter: That's right I believe, and the board has made it very clear how the board is reading it, and after 20 years, we've got a pretty clearly settled body of law, haven't we?

Mr. Baskin: --Well, a settled body of erroneous law.

And is that what the Court--

Justice Souter: And we're interpreting statutes... the... the settled body is clear and Congress is apparently quite agreeable to it.

Mr. Baskin: --Well, first, the Court has said you don't defer... that... that you can't read anything into congressional inaction, particularly when it has taken this long before the board ruling really was definitive.

And it has taken that long.

The issue has been in doubt for most of that 20-year period.

But the... going beyond that, the... the board--

Justice Scalia: I don't understand that.

Why do you say it's been in doubt for most of the 20-year period?

Mr. Baskin: --Because it's been in doubt.

Cases like this one have been taking a long time to wind their way through the process.

At each step, the board said, well, we think that it... there... it was contested, as the board said--

Justice Scalia: You mean it has been contested constantly during that--

Mr. Baskin: --Yes.

Justice Scalia: --20... 20-year period?

Mr. Baskin: Absolutely.

Justice Souter: Has the board ever taken a different position in the 20-year period?

Mr. Baskin: There have been dissents, but no, the board has generally taken a consistent view.

Justice Souter: So, the board's position has been clear for 20 years.

Mr. Baskin: Yes, but the board--

Justice Souter: The board is slow.

It may take the... the cases may be in wending their way through.

Mr. Baskin: --But the board is not entitled to deference in its interpretation of the U.S. Constitution or of this Court's decision.

And that's all that we're talking about here is the board's interpretation of the Constitution and this Court's opinion.

It's not interpreting the statute.

Justice Souter: I think we're not raising... I think Justice Ginsburg's question and my question is not so much geared to an issue of deference.

We're... we're trying to... to get at the... what seems to us the fact that the law has become settled.

It may require no deference.

It may have become settled because an administrative agency was interpreting what you think was an ambiguous opinion of this Court in the first place.

But it seems to have become settled.

And there is a good reason, which underlies ultimately our... our approach to stare decisis in statutory cases, for letting settled statutory understandings stayed settled unless the legislative branch wants to change them.

And that's the argument we're getting at, not deference.

Mr. Baskin: Well, it is... stare decisis is a form of deference, and we're talking about stare decisis would apply to the Court's own opinion.

Only this Court is required to defer to itself about its own opinion.

Your... and so that's why we are talking about deference, I would submit.

At least I interpret your question as asking should you stick with what the board has come up with.

This Court has not ruled on--

Justice Souter: I'm saying that--

Mr. Baskin: --on Bill Johnson's since Bill Johnson's.

Justice Souter: --I'm saying that in... as... as your own answers indicate, for 20 years there seems to have been a... a settled practice on the part of the board which at best is not inconsistent with our opinion.

Why shouldn't we let a settled statutory regime stay settled unless the legislative branch wants to change it?

Mr. Baskin: I contest that it's a settled statutory regime, that we are dealing with a First Amendment right, and that the board's outcome, which it has taken this long to reach back to the court, is wrong under the First Amendment.

It has proved to be unworkable and it subjects employers to the impossible situation in future cases and in cases going on right now that they are expected to have 100 percent certainty of the outcome.

Indeed, the... the board could, under this standard, say that you can win a jury verdict, go... have it upheld by the district court, only to be reversed by an appeals court, and still be found under this Court's standard to be nonmeritorious and you lose.

You have... you have violated the law.

Justice Kennedy: If there's a retaliatory motive.

Mr. Baskin: If there's a retaliatory motive.

And that's all it takes.

There's a retaliatory motive.

You go through all of that based on an attack on your businesses, which is why employers tend to file these lawsuits.

They don't like lawyers that much, don't want to spend the money to do it, but they're under attack.

BE&K was under attack in every conceivable forum.

Justice Breyer: But, I mean, that's a normal problem, isn't it, with the labor statutes and most other statutes.

It forbids retaliatory behavior.

Of course, you'll have cases where people make the wrong decision about it, where it's hard to predict, and so forth.

But that's the general situation.

Mr. Baskin: Well--

Justice Breyer: We're trying to carve out a... an exception where you're home free from that.

Mr. Baskin: --Well, no, it's the board that's carving out an exception from the basic First Amendment protection that this Court has recognized already.

Justice Ginsburg: Mr. Baskin, that... that goes back every time to how you construe this paragraph, and so if the position that Justice White is making a distinction here between, on the one hand, an ongoing proceeding... the First Amendment says you can't stop it.

Never mind deference to State courts.

That's another consideration that weighs it to the same end, but traditionally under the First Amendment, a prior restraint, stop it, has been what the Court has looked at most cautiously.

Then Justice White tells us, but it's different once the adjudication is over.

The... the line between prior restraint and subsequent punishment goes all the way through First Amendment learning, and you treat this as, well, ambiguous, but if it were clear it's that there's any difference between stopping an ongoing proceeding and looking at a situation after it's been adjudicated?

Mr. Baskin: There... there can be a difference, mainly the difference of having more facts, having an outcome in front of the board at that point.

And what the Court wanted to get across... the issue in front of the Court in Bill Johnson's was don't interfere with an ongoing lawsuit.

We don't know how it's going to turn out.

All right.

Once it turns out, if it's without merit... meritorious... I'd just invite the Court to look at each use of the word meritorious in the Bill Johnson's opinion.

You will regrettably find some inconsistencies not only internally but with other opinions of this Court both before Bill Johnson's and after.

You have the opportunity to clarify the law now in a way that is very straightforward under the Professional Real Estate Investors test.

If there are no other questions, I'd like to reserve the remainder of my time for rebuttal.

Argument of Lawrence G. Wallace

Chief Justice Rehnquist: Very well, Mr. Baskin.

Mr. Wallace, we'll hear from you.

Mr. Wallace: Thank you, Mr. Chief Justice, and may it please the Court: The board and the courts of appeals have had no difficulty in reading Bill Johnson's the way I think most people would read this Court's opinion as comprehensively addressing what the board was doing with respect to the unfair labor practice under section 8(a)(1) of the filing of--

Chief Justice Rehnquist: Mr. Wallace.

Mr. Wallace: --retaliatory lawsuits.

Chief Justice Rehnquist: Mr. Wallace, when I ask you a question, please stop.

Mr. Wallace: I didn't hear you.

I'm sorry.

Chief Justice Rehnquist: Well, listen a little more closely.

Do you disagree with Mr. Baskin's contention that the word meritorious is used inconsistently in the part of Bill Johnson's that we're talking about?

Mr. Wallace: I do disagree with that, and... and no court of appeals that has reviewed board decisions since Bill Johnson's has read it that way.

The Court quite clearly distinguished between enjoining ongoing lawsuits, which it said could be done only if the lawsuit was baseless.

Otherwise, the board has to wait until the lawsuit has been resolved.

If the lawsuit turned out favorably to the employer, then it could not be an unfair labor practice.

But if the lawsuit turned out to be unmeritorious, if the employer lost, then the board could consider whether it was filed for a retaliatory purpose.

Justice Scalia: It did say that, but of course, that was not the situation before the Court.

I mean, it... it may be the clearest dictum in the world.

It may be the dictum closest to a holding possible, but it is still dictum.

The Court did not have before it a case in which the employer had already brought the suit and had lost.

Now, you know, it said what would happen in that situation, and you know, I think that's entitled to some weight.

But the issue that your opponent wants to argue here is whether the Court was wrong to say that.

Mr. Wallace: I beg to differ.

The Court specifically noted that some of the claims of the employer had already been dismissed in the State courts, and in footnote 15, at the end of the... its opinion, it said the board, therefore, can use the criteria we--

Justice Scalia: But those cases were not before them.

It said what the board can do in those cases that are not now before us.

As I say, it may be a dictum that is the very next thing to a holding, but it is not a holding.

Those were not cases that the Court had in front of it.

Mr. Wallace: --It... it was a direction for how further proceedings in the case should be handled.

Justice Scalia: Exactly, as many dicta are.

As many dicta are, and we do not always observe those directions when we... when we have the opportunity to examine the matter in a... in a more immediate context.

Mr. Wallace: In any event, if I may turn now to address the question that the Court asked the parties to address in formulating the question presented here.

Our submission in this case is that this Court's holding in Professional Real Estate Investors interpreting the antitrust laws and the Court's decision in Bill Johnson's, including this... these dicta to govern further proceedings interpreting the National Labor Relations Act, are entirely compatible with one another in light of the important differences in the purposes, processes, remedies, and practicalities of enforcement that were implicated in the two statutory schemes at issue.

Justice Scalia: Well, I... I have one particular difference in mind that I'd like you to comment on.

I... I... it's... it seems to me that what is sought to be done here is much worse as far as the independence of the courts and the guarantee of access to the courts by... by the citizenry is concerned than what was sought to be done in... in... what case... Professional Real Estate.

And this is the difference.

In Professional Real Estate, it would have been the courts that would have decided the facts which would have imposed upon the losing party attorney's fees.

In this situation, it is going to be the Labor Board that will decide the factual question of whether there was a retaliatory motive, and the courts will have to defer to that factual finding if there is a basis in the record, whether the courts agree with it or not.

I find it quite offensive to think that Article III courts are going to be told that certain people who have come to them for relief will pay a penalty for doing so on the basis of a retaliatory motive found not by Article III courts at all but by the labor court... but by the Labor Board.

In that respect, this case is much worse than... than what was going on in... in Professional Real Estate.

Mr. Wallace: Well, the board is not contradicting anything found by the courts.

The question of retaliatory motive was not at issue in the underlying litigation, and the board has to wait under this Court's decision in Bill Johnson's before it addresses the question of whether there's been an unfair labor practice--

Justice Scalia: They will address it in a proceeding before the board.

They will find an unfair labor practice on the basis of their finding of a retaliatory motive.

And I... I note, by the way, as to, you know, how... how much we can trust those... those findings... I had one of my law clerks look up how many... how many times the board has imposed this kind of an unfair labor practice penalty for... for bringing a lawsuit.

Since the Power Systems case in '78, which is when they started this process, they have 26 decisions ordering the employer to pay attorney's fees incurred in defending a lawsuit and 3 decisions in which it... it ordered a union to do so.

Now, is... is there some reason that unions are not using lawyers as much as companies are these days?

Mr. Wallace: --Well, the... the cases against unions are much less numerous to begin with because unions are less apt to bring lawsuits to interfere with the rights of employees under section 7 for concerted activity.

We're talking about a retaliation against section 7 rights.

Usually that's been the subject of employer suits, but the board does apply the same test when--

Justice Scalia: There were union lawsuits in this present case, weren't there?

Plenty of them.

Mr. Wallace: --But those were against the employer, and... and they--

Justice Scalia: But suits... suits against the employer can certainly be brought to impair the... the rights of the employees not to... not to unionize.

Mr. Wallace: --That would have to be a showing a violation by the union of 8(b)(4), not... not that the lawsuit was an 8(a)(1) violation against the concerted activities rights of employees.

The employer would have to show that the union lawsuit violated duties that the union owes, and that was resolved against the employer on the merits in this case because the... the subject of the lawsuits was about working conditions at the site of employment, which was a legitimate union concern.

Justice Scalia: Never... never mind the 26 to 3.

Just... just tell me why I... as... as an Article III judge, I should not be concerned about leaving it to a Federal agency to make the factual finding that will determine whether somebody will be punished for bringing a reasonable lawsuit, although one which ultimately loses in Federal courts.

Why shouldn't I be concerned about that?

Mr. Wallace: Well, this isn't punishment.

It's make-whole relief under an administrative scheme which is meant to protect employees in the exercise of their concerted rights, and it involves no contradiction of any issue that was before the... the court in the underlying litigation which did not have occasion to address whether the suit was brought for a retaliatory purpose.

Justice Ginsburg: Mr. Wallace, Mr. Baskin told us that there are punitive aspects to this that could lead to debarment he said.

So, it's not simply to provide for fee-shifting, but that there are heavy consequences.

Mr. Wallace: Well, the... the case to which the Chief Justice referred earlier, Wisconsin Department of Industrial Relations against Gould, was one in which this Court held that Wisconsin law was preempted, and Wisconsin could not refuse to make purchases, State purchases, from companies that had been found to have violated the National Labor Relations Act because the whole purpose of the remedy scheme under the National Labor Relations Act is remedial and the remedies are limited, and the idea is to get labor disputes behind us, not to have disruptions of the economy, to keep productivity going, and to keep the people employed.

Justice Kennedy: Well, is... is the point of this colloquy whether or not this act can be called punitive or this NLRB doctrine can be called punitive?

I... I had thought you said that it is punitive, or am I wrong?

Maybe you think nothing... maybe you think nothing turns on that.

Mr. Wallace: Well, I... I wouldn't think that... that anything would turn on it, but it is not punitive.

The only remedy that's granted is a make-whole remedy that the costs incurred by the prevailing defendants in a suit brought for an improper motive, namely to coerce those defendants in the exercise of rights granted them by Federal statute when suit turned out--

Justice O'Connor: But is there any other effect by virtue of the finding of the unfair labor practice?

Mr. Wallace: --Well--

Justice O'Connor: I mean, true in terms of money, it's the fees.

Is there any other effect-- --by virtue of their finding?

Mr. Wallace: --Notice is to be posted.

The cease and desist order issues.

Those... those parts of the remedy were not challenged in this case.

Justice Scalia: Well, let's just talk about the make-whole remedy.

We held in 1982 that in a private suit for an unfair labor practice, which provides for making whole the... the plaintiff for... for his damages, there was no authority in the court to award attorney's fees, that making whole there did not include attorney's fees.

What... and... and, you know, the language was very clear about the American rule and what a... what a change it would be.

Why... why should it be any different when the unfair labor practice is... is decreed by the board rather than in a private action?

It doesn't say explicitly that you can get attorney's fees, just as... just as the other... the... the private action provision didn't say explicitly.

It just said, you know, whatever damages you have.

And damages were not intended to include that.

Why should we hold any differently in this situation, especially when the result is to leave it to the board to decide whether... whether somebody will be punished for bringing a meritorious but ultimately unsuccessful suit in Federal court?

Mr. Wallace: Well, board proceedings are much less burdensome than... than court proceedings to those that are issue, and the Court held in Bill Johnson's that the board remedy of recompensing the defendants who prevailed in this suit for their costs, because the suit was brought to defeat their section 7 rights, was a permissible remedy by the board.

Justice Scalia: We held it or... or said it.

I mean, that... that's one of the disputes here, isn't it?

Mr. Wallace: Yes.

They held it in the sense of... of prescribing that rule for the further proceedings to be held in that very case on remand from the Court's order.

Justice Scalia: We're just going around the dictum point again.

I consider it dictum, and... and the issue is whether that was a wise thing to say.

Mr. Wallace: Well, when the Court prescribes a rule of that nature, the United States considers itself bound by it in its further handling--

Justice Scalia: Yes.

I'm... I'm not criticizing you for arguing the point, certainly not.

Justice O'Connor: Mr. Wallace, I... do you agree that under the board's rule here that it does allow the board to find the unfair labor practice and impose the sanctions on litigation brought by employers that is not limited to just shams and abuse of process?

Mr. Wallace: --That's--

Justice O'Connor: It does allow the imposition of these things for an employer suit that could be considered objectively reasonable at the time it was brought.

Mr. Wallace: --Exactly so.

That... I thought the Court made it quite clear in Bill Johnson's that as long as the suit was an unmeritorious one, in the sense that it did not prevail, the board could afford the limited remedy that's available under the act.

Justice O'Connor: Well, does that have the necessary effect of at least chilling some conduct that is protected by the First Amendment?

I mean, it seems to me it does.

You have to... you would have to concede that it does.

Mr. Wallace: But it... it's a far less daunting situation than what the Court was faced with under the antitrust laws in the Professional Real Estate Investors case.

Justice Stevens: Mr. Wallace, isn't it correct that the scope of chilling is limited to those with a retaliatory motive?

Mr. Wallace: Absolutely.

Justice Scalia: I thought it's where the board finds--

Justice Stevens: --should be chilled in those cases.

Justice Scalia: --to those where the board and not Federal courts on their own find a retaliatory motive.

Mr. Wallace: But, of course, the board's findings are subject to judicial review.

Justice Scalia: For... so long as there's substantial evidence, which means... you know.

Mr. Wallace: Correct.

Justice Breyer: All right.

So--

Justice Stevens: --In every 8(a)(1) case, the retaliatory motive is found by the board.

That's part of the statutory proceeding, isn't it?

Mr. Wallace: That is correct.

Justice Scalia: The other parts of this statutory proceeding do not exclude the Federal courts from their business, do they, which this does by imposing penalties upon people who come to the Federal courts?

Mr. Wallace: Well, I think this Court's make it quite... this Court's decisions make it quite clear that under the National Labor Relations Act, it is board rather than courts that have the responsibility of ruling about unfair labor practices.

Justice Scalia: We agree with that and the only issue is whether that statutory provision places within the board the power to impose this particular sanction for an unfair labor practice, a penalty for bringing a meritorious lawsuit.

Mr. Wallace: Well, make-whole relief--

Justice Breyer: Isn't the make-whole relief simply that they've said, since ours is a statute which foresees taking labor disputes out of the courts and putting them into the board, since that's why it was passed, we're going to say a... a loser in a Federal lawsuit that violates that basic underlying purpose has to pay attorney's fees to the winner?

Now, is there anything here other than that?

Mr. Wallace: --Not... not at all.

That's... that is what is at issue, and the... the National Labor Relations Act authorizes the board, under this Court's opinion in Bill Johnson's, to afford that kind of a limited remedy--

Justice Stevens: Well, isn't what--

Chief Justice Rehnquist: --Is the courts'... is the board's definition of a unmeritorious lawsuit simply one which... in which the plaintiff does not get what the plaintiff wants.

It's thrown out of court, so to speak.

Mr. Wallace: --That's approximately it, yes, Mr. Chief Justice.

Chief Justice Rehnquist: How... how would it vary?

Why do you use the term approximately?

Mr. Wallace: Well, there can... there can be cases in which a voluntary dismissal was taken with prejudice.

Sometimes the question of whether it was an unmeritorious suit becomes a debatable question.

But ordinarily it's one, as it was in this case, in which the courts have ruled against claims that the employer made.

Justice Breyer: Is... is... I'm sorry.

Is there any authority?

I mean, I thought, as a matter of proposition, maybe there would be some authority like a... an electricity generating regulator would have said in certain kinds of lawsuits, you have to have fee-shifting.

The SEC might say in certain kinds of lawsuits, certain companies have to pay attorney's fees.

The barbers' regulator might say in certain union... or certain... certain instances the barbers have to pay the legal fees of somebody else.

Is... is there any comparable authority any other place that you've found?

It... it doesn't seem to me an absurd proposition of law or of constitutional law that a regulator who's in charge of a particular group of individuals or businesses says in particular circumstances there will be fee-shifting.

But maybe that's total... maybe this is the only case that's ever come up.

Mr. Wallace: Well, we... we didn't come up with analogies in which regulatory agencies do the fee-shifting.

There are certainly many statutes that provide for fee-shifting.

The Fogerty case discusses a number of them.

Justice Scalia: But they have to be very explicit because it's such an extraordinary thing.

That's what our jurisprudence very clearly says.

And here with... with no more explicitness than there was in the case in Summit Valley, the... the agency is assuming the power to fee-shift and to make the factual determination upon which the fee-shifting turns.

I think that's extraordinary.

Mr. Wallace: Well, there is not a reference to fee-shifting as such in the National Labor Relations Act, but Congress did say in section 8(a)(1) that it shall be an unfair labor practice to an employee to interfere with, restrain, or coerce employees in the exercise of the concerted activity rights for mutual aid and protection that are guaranteed in section 7.

And this Court in Bill Johnson's recognized that there had been a history of the use of the courts for that purpose.

Justice Ginsburg: Mr. Wallace--

Justice Kennedy: --In... in a case like this, if we have essentially these facts, if the finding of the board was is that the purpose of the employer in bringing the suit was because the employer's board of directors met and they say, we are being hurt in the marketplace, public opinion is against us, we must bring these suits to protect our position in the business community, I take it that is a retaliatory motive.

Mr. Wallace: Well, the retaliatory motive would be... it would have to be shown that the suit was brought for the purpose of coercing, discouraging, suppressing, restraining the employees in the exercise of their rights.

Justice Kennedy: Well, but you... you know what I'm trying... trying to get at.

The... the union is doing these to weaken the employer and the employer meets and says, this is hurting our business, it's hurting us in the marketplace.

Is that retaliatory?

Mr. Wallace: Well, the... the board addresses that question in light of all the circumstances of the case.

To the extent that the suit was not baseless in law or fact that the employer brought--

Justice Kennedy: Assume... assume that there... it's not baseless.

Mr. Wallace: --That weighs in the employer's favor.

There are other factors that weigh against the employer.

In this--

Justice Kennedy: But it can be retaliatory for the employer to protect its business against suits by the union which are brought by the union for the motive of weakening the employer.

That's retaliatory.

Mr. Wallace: --Well, only if the employer has brought suits against the union or the employees.

It certainly can defend against any suit--

Justice Kennedy: No.

It's been bringing suits in order to stop the other suits.

Mr. Wallace: --Well--

Justice Kennedy: Let... let me ask you in a related vein.

Maybe it's an unrelated vein.

Can... could Congress overrule Noerr-Pennington?

Mr. Wallace: --This Court did not indicate in any way that it could not reexamine, modify the rules of Noerr-Pennington or of Professional Real Estate.

The Court--

Justice Kennedy: In other words, Noerr-Pennington doesn't have a constitutional underpinning.

Mr. Wallace: --It... it certainly construed the antitrust laws in light of the fact that those laws focus mostly on private conduct in the marketplace, not on petitioning for Government-imposed restraints, and that there was a need in construing them not to... to allow improper chilling of the bringing of lawsuits or other forms of petitioning activity.

And in... in Professional Real Estate itself, the procedural posture focused on the need for summary judgment to be available against a counterclaim for treble damages under the antitrust laws in circumstances in which the counterclaimant, after the underlying copyright infringement suit was found to be objectively reasonable, was saying, but I still need further discovery in order to ascertain the intent and motives of the original plaintiff in bringing the copyright infringement suit because it's my view that... that they didn't really expect to prevail and that they were bringing it for anticompetitive purposes.

And the danger that the Court was addressing there was that much of the protective quality of the Noerr doctrine itself could be undermined if the original lawsuit that supposedly is protected could be chilled by the prospect of burdensome discovery and treble damages.

Justice Kennedy: My... my concern... my concern is... is this, is that the First Amendment has its own corrective counterspeech, but what the board has done here is it's defined retaliatory motive so broadly that it's taken away that First Amendment corrective.

And that is itself a distortion of First Amendment principles which allowed the unions to bring these suits in the first place, it seems to me.

Mr. Wallace: Well, there... there is a very limited remedy available here compared to the prospect that treble damages might be awarded on the basis of rather unpredictable findings about subjective motivation in bringing the lawsuit.

And it... it... it's a remedy that's been applied against a background of what this Court in Bill Johnson's referred to as a... a powerful tool.

Powerful was the word the Court used.

Justice Ginsburg: Mr. Wallace, is retaliatory motive... is that before us in this case?

I mean, it may be that this Court, by saying that the board... that there was, even in this case, insufficient evidence of retaliatory motive, but I didn't think that was the question presented here.

Mr. Wallace: I agree with you on that point, Justice Ginsburg.

Justice Ginsburg: Because on that, I was going to ask you, well, what is it that shows that this was in retaliation for violation of section 7 rights instead of being in... in response to the union's desire simply to harass the employer?

I think that there are very serious questions about that, but my view was of this case that... that wasn't before us.

Mr. Wallace: I... I agree with you completely.

In fact--

Justice Kennedy: I take it... I take it the background of this case is that there was a finding of retaliatory motive and we have to make our decision based upon the way the board interprets retaliatory motive in cases such as this.

Mr. Wallace: --Well, it's certainly part of the background of the case, but the Court did limit the grant of certiorari to whether these two decisions are compatible given the differences between the two acts.

Justice Scalia: And we have to defer both to the board's determination of what constitutes a retaliatory motive and, even more so, to the board's factual determination that retaliatory motive existed.

All it takes is one witness who says it existed, and that would constitute substantial evidence.

And if the board goes with that witness, the courts have to effectively penalize the company for seeking resort in the courts.

Mr. Wallace: Well, there is seldom direct evidence of that kind, although occasionally there is direct evidence of animus in the bringing of the suit.

But the board has relied on a number of factors, which we've set out on page 47 of our brief, in various... in various cases in seeing retaliatory motive.

In this case one of the more persuasive ones was that the lawsuit was brought against parties that the plaintiff knew or should have known did not participate in the allegedly unlawful conduct.

They included as defendants unions that had not--

Justice Stevens: That's an issue that was raised by question 3 of the cert petition, and we didn't grant it.

Mr. Wallace: --That's correct.

That's correct.

The... the petition--

Justice Ginsburg: But... but--

Mr. Wallace: --was about the compatibility of the Court's decision in Professional Real Estate with what we had taken to be the Court's clear prescription of the limits on the remedy of the 8(a)(1) and unfair labor practice in the Bill Johnson's case.

Justice Ginsburg: --Mr. Wallace, we are concerned with the Bill Johnson's case, and a question has been raised about where does the authority to come... come from for this fee-shifting.

It does appear in the Court's opinion in Bill Johnson's.

If a violation is found, the board may order the employer to reimburse the employees, whom he has wrongfully sued, for their attorney's fees.

Where did the Court come up with that fee-shifting?

Was that something that the board had been doing?

Did the Government propose it?

But it's right there in the Court's of opinion that the proper remedy is fee-shifting.

Mr. Wallace: Precisely so.

But the board had been doing it regardless of the merits of the underlying lawsuit.

The board had become so concerned with the use of the courts for retaliatory litigation that whether the lawsuit was meritorious or not, if it found that it was brought for the purpose of defeating section 7 rights, it was awarding fees.

And the Court said, no, wait a minute.

You can't do that and you can't enjoin lawsuits that are not baseless.

The Court was really correcting the board and reining in that remedy in a way that the board has complied with.

Rebuttal of Maurice Baskin

Chief Justice Rehnquist: Thank you, Mr. Wallace.

Mr. Baskin, you have 4 minutes remaining.

Mr. Baskin: Thank you, Your Honor.

I would just briefly like to address the question of retaliatory motive, but only as I understood the Justices' questions to be does it suffice alone so that they... the board can rightly ignore the question of the objective basis.

And... and the reason it does not suffice, among others, is perhaps looking at the 26 decisions Justice Scalia found, there's only one among them where there was no finding of retaliatory motive and there only because it was found that the action didn't relate in any way to the union activity.

Justice Scalia: There was only one... one where what?

Mr. Baskin: Where there was no finding, where the board found no retaliatory motive.

It found against the employers 25 out of 26 times.

Once it found that the employer had lost the lawsuit, automatically according to the board, no merit.

Even though they had all the best circumstances leading up to the loss, they lost.

No merit.

Then the board proceeds to the retaliatory motive step supposedly going to protect employers, and all they say is does it relate to union activity.

Well, if it relates, except for one case where it didn't, boom, you lose.

The employers lose.

And what the result of that is, is that no employer can go to court if any sort of protected activity is even arguably involved because even if you convene a panel of experts, as BE&K did in this case, and go as far as you can to make sure you are not trampling on any employee rights, if you go to court, you will be found to have violated the law unless you can say with 100 percent certainty that you're going to win.

And no one can say that.

Justice Breyer: I didn't know... as long as you're finished, I thought the 26 cases were 26 cases in which they awarded attorney's fees.

Mr. Baskin: No. 26 cases with attorney's fees plus, attorney's fees--

Justice Breyer: All right.

Now, I thought they weren't supposed to award attorney's fees or anything unless there was a retaliatory motive.

Mr. Baskin: --Yes.

The board found retaliatory motive.

Justice Breyer: All right.

No, but I mean, of course they did.

I mean, how many cases where there where people alleged retaliatory motive and they found the opposite?

Mr. Baskin: In the 26 cases--

Justice Breyer: No.

Those are the ones where they won.

How many did they lose?

I mean, I don't understand this 26 case business.

I thought the 26 cases were the ones that they awarded it in, and I thought they were only supposed to award it where it's retaliatory.

So, it's hardly surprising it's retaliatory.

Mr. Baskin: --No.

As I understood Justice Scalia, and frankly our own research, is these are 26 cases that reached the board where the board could have gone either way, and every time, except for the one, they found no merit and retaliatory motive.

And they did so almost automatically because of their misreading of a principle.

We say a misreading.

But either way, it's a bad principle.

Justice Souter: Well, when you say the board could have gone either way, you don't mean that you know the evidence and that, in fact, on the evidence, the board could have gone either way.

You simply mean that it's a case in which if the evidence showed there was retaliation, they could award the fees, and if the evidence did not show retaliation, they couldn't award the fees.

Right?

Mr. Baskin: The 26 cases are--

Justice Souter: So, all we know is that in those cases, they found retaliatory motive.

We don't know that they're wrong.

Mr. Baskin: --Yes, that's... that's what we know.

They found retaliatory motive.

And the limited point that I'm making here at the end is that this retaliatory motive idea is no more... not enough protection under the NLRA just as it is not enough protection... and you've already found it to be not enough protection... under the antitrust laws.

And that's why the Professional Real Estate standard is the correct standard and it's the only one that protects employers' rights under the First Amendment.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Baskin.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Chao v. Mallard Bay Drilling, Inc. - Oral Argument

Fri, 09 Jan 2009 14:50:21 +0000

Case:

Chao v. Mallard Bay Drilling, Inc.

Media File:

00-927_20011031-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Matthew D. Roberts

Mr. Roberts: Mr. Chief Justice, and may it please the Court: This case arises out of an explosion that killed four employees on a drilling barge on the inland waters of Louisiana.

The barge is not inspected for certification by the Coast Guard, which therefore has almost no regulations that address occupational safety and health on the barge.

The question presented is whether the Coast Guard has, nonetheless, exercised authority over the working conditions on the barge so as to displace application of the Occupational Safety and Health Act.

Justice O'Connor: Well, Mr. Roberts, the Coast Guard does have regulations, though, that require an emergency plan and fire control devices.

Mr. Roberts: Not... not that apply to this vessel, Your Honor.

The... the only occupational... the only regulations addressed to occupational safety and health issues on this barge that have been identified by respondent and its amici are regulations that address risk from the marine sanitation devices, or the toilets, on the vessel.

The only other regulation of which I'm aware that deals with occupational safety and health is a regulation that... that addresses operating the vessel while intoxicated.

Those regulations... there are regulations that address emergency procedures on inspected vessels, but not on this type of uninspected vessel.

Justice Kennedy: Fire safety regulations are... are different from... from--

Mr. Roberts: No, no.

There are no fire and safety regulations on... on this vessel, Your Honor.

There are some specific fire and safety regulations required by some statutes on particular types of vessels, particularly vessels propelled by machinery.

Those are the ones covered by... by 46 U.S.C. 4102.

Justice O'Connor: --Well, if... if the Coast Guard has regulations that try to contain a hazardous event, after it occurs, as opposed to regulations trying to prevent it in the first place, do you say that the containment approach just doesn't qualify under this statute as a Coast Guard regulation?

Mr. Roberts: No, Your Honor, but... but with respect to... to this vessel, as I... as I was saying, they don't have such regulations.

The... the containment approach would... would qualify, although if... if a regulation was addressed to preventing a fire for occurring, that would address a... a different... a different hazard than a regulation that was addressed to responding to that after the fire had occurred and... and could be put out.

But... but here, the Coast Guard has not exercised statutory authority over the working conditions involved in this case, and under section 4(b)(1) of the act, the--

Justice Ginsburg: Mr. Roberts, do you think you could explain to us... just go back to the basics.

What is the difference between an inspected vessel and an uninspected--

And also, you introduced just now not this type of an inspection.

So, there are subcategories within an inspection.

If you could just tell us what fills those categories--

Mr. Roberts: --Yes.

Yes, Your Honor.

First, to... to start at the... the beginning of your question, there are certain categories of vessels that are listed under the statute as inspected vessels and with respect... under Coast Guard statutes as inspected vessels.

On those vessels, the Coast Guard inspects them at the beginning and then periodically for certification that they're in satisfactory condition, fit for the service for which they're intended and seaworthy.

The Coast Guard also has comprehensive regulatory authority over those vessels, and it's exercised that authority comprehensively over those vessels.

So, for those vessels, the Secretary and the Coast Guard agree the... the Occupational Safety and Health Act doesn't apply.

Then there's another set of vessels--

Justice Kennedy: --May I... may I interrupt you right there?

And I don't want to interrupt this whole answer.

Does... OSHA doesn't apply just as to those measures... just as to those working conditions on those vessels that have been covered?

Suppose OSHA has a regulation about kitchens.

You have to have guards on the carving knives or something.

And the Coast Guard, on an inspected vessel, does not have that provision.

Under the scheme, as it works, can OSHA regulate the... the kitchen knife problem, or... or is it completely displaced?

Because--

Mr. Roberts: --It's completely displaced on the inspected vessels because the Coast Guard has comprehensive authority over those and has exercised its comprehensive authority on the inspected vessels by promulgating comprehensive regulations, and those regulations include specific ones addressing specific hazards, as well as general provisions such as the one that I was referring to that requires that the vessels be fit for the service that they're intended and safe and seaworthy.

And therefore, with respect to those, all the working conditions are covered either by the specifics or by the general, and the OSH Act does not apply.

But what we're concerned with in this case is a... is a vessel on which... over which the Coast Guard has much more limited authority and with respect to which it... it has authority to and has regulated only very specific conditions.

Justice Kennedy: --Getting back to the inspected vessels, because this might have a bearing on... on how we write the opinion in this case, even though it's uninspected.

Are there instances in which there are... there is concurrent jurisdiction between the Coast Guard and OSHA on inspected vessels?

Mr. Roberts: Not with respect to regulation in terms of setting occupational safety and health standards and enforcing occupational safety and health standards.

There is, with respect to reporting or investigation on inspected vessels... I mean, not... no.

I guess the answer is no.

Justice Kennedy: I hope I didn't take you too far off the track.

You were talking about inspected and uninspected vessels.

Mr. Roberts: To get back to the uninspected vessels that... that Justice Ginsburg had asked about and which is what we... we have in this case, on those vessels, there's very limited authority.

It flows from specific statutory grants that deal with specific items of safety.

And therefore, the Coast Guard regulation of working conditions on those vessels is spotty, depending on the statutory grants of authority.

And as I said before, on... this particular type of inspected vessel is a... is an inland drilling barge, and on this barge there... the statutory authority doesn't give the Coast Guard authority to require fire extinguishers or... or those kind of things, and it gives the Coast Guard no authority over the hazards from oil and gas drilling, which are the hazards involved in this... in this case.

Justice Ginsburg: But some... some uninspected are more closely watched?

Mr. Roberts: Some uninspected are more closely watched, and we... we would submit that no uninspected vessel is comprehensively watched as to occupational safety and health.

But that... the Court doesn't need to... to get into that to... to resolve this case.

All... all we're asking here is that the Court reject the holding of the Fifth Circuit, which is that there's an industry-wide exemption for all seamen on all vessels from the Occupational Safety and Health Act, even in situations where the Coast Guard has not regulated the particular working conditions on that vessel and the particular working conditions that result in the occupational and safety and health citation in the... in that case.

Justice Ginsburg: How could one know that this is a little-inspected vessel, as... as distinguished from uninspected but more inspected?

Mr. Roberts: Well, there are different types of... of uninspected vessels, and the... depending on the type, different sets of regulations apply to them.

And the vessel operators are well aware of what regulations apply to them.

But... but on all uninspected vessels, it doesn't really matter whether it's little or more, because the way the statutory scheme works is that the Coast Guard regulations that govern them apply to them.

And the OSHA standards apply to the extent that the working conditions are not covered by Coast Guard regulations.

And that comes from the... the language of section 4(b)(1) of the OSH Act, which makes clear that displacement of the act is limited to those working conditions with respect to which other agencies exercise authority to prescribe or enforce occupational safety and health standards.

That--

Justice O'Connor: Now, Mr. Roberts, it seemed to me here the administrative law judge seemed to say that the OSHA regulations were not preempted because the Coast Guard didn't require precisely the same thing that OSHA did.

And I would have thought it was a much more general proposition, that if the Coast Guard adopted some general regulations in this area, that's enough, and that you wouldn't look to see how closely OSHA's regs matched in every detail the Coast Guard regs.

What is the Government's view?

Mr. Roberts: --The Government's view is that you don't look to see if there's precisely the same regulation in precisely the same manner of the same... the same degree of stringency.

You look to see whether the... whether there is a regulation on the part of the Coast Guard that addresses the same working conditions, the same hazards that are involved.

And if there are, then no matter whether that's more stringent, less stringent, or goes about it in a different way, it's displaced.

But here there's no regulation that addresses this hazard--

Justice O'Connor: Apparently both the Coast Guard and OSHA agree here.

Mr. Roberts: --Yes, they agree.

And the agencies, not only the Coast Guard and OSHA, but other agencies where this comes up, are... have been in agreement.

These kinds of disputes about coverage haven't arisen because the agencies have been disputing about what... when it applies and when it doesn't and what working conditions are covered by their different regulations.

They've arisen when employers have asserted that the OSH Act doesn't apply so that nobody... there would be no regulations covering--

Chief Justice Rehnquist: How much of a dispute would survive the Solicitor General's review of the two agencies' decision?

Mr. Roberts: --Well, we didn't... we didn't need to resolve any dispute because there's been a longstanding understanding between the two agencies, based on the language of the OSH Act, as to how the... how the two... the authority of each agency interacts with the other.

Justice Kennedy: If I can go back to inspected vessels just for 1 minute.

I thought the answer you would give me to the question about, you know, the kitchen knives would be just what you told Justice O'Connor now with reference to the uninspected vessels, that we look to see if the working condition is regulated.

Or maybe I just misunderstood your answer.

Was your answer to the effect that on inspected vessels, generally, all working conditions are regulated, or at least they've been looked at and there's been a decision not to regulate and that's sufficient to displace OSHA?

Mr. Roberts: Yes.

Yes, Your Honor.

It's the same--

Justice Kennedy: That's the best understanding--

Mr. Roberts: --My answer was intended to say the same thing, that at bottom, the same test applies whether the particular working conditions have been addressed, but with respect to inspected vessels, the working conditions have been addressed comprehensively by the Coast Guard through specific regulations and through general regulations.

And so, there aren't... there aren't any gaps where workers would be unprotected that the OSH Act would need to... to step in.

But on uninspected vessels, the... the situation is quite... quite the reverse and almost the polar opposite where there aren't just little gaps, but there are potentially whole vessels that are almost completely unregulated with respect to occupational safety and health.

So, the industry-wide exemption that the Fifth Circuit has crafted here would, as a result, leave many workers unprotected from many hazardous conditions and... and really frustrate the express purpose of the act which is to assure, insofar as possible that every working man and woman in the Nation has safe and healthful working conditions.

And moreover, to... even if there was any ambiguity about how the statutory scheme should work, from looking at its text and from looking at the... and from the fundamental purpose of the act, the Secretary has interpreted the act this way for 30 years.

It's been the Secretary's longstanding and consisted view.

It's reflected in citations over those 30 years and regulations that the Secretary promulgated in 1972 in a statutorily mandated report to Congress on coordination between the OSH Act and other laws that the Secretary submitted in 1980.

And the Secretary's view would be... would be entitled to deference.

Justice Souter: --That... that view is also expressed in the... in the joint agreement.

What... could you tell me... I should know this, but I just don't... how was the joint agreement promulgated, if it was?

Or is it simply just a private memorandum of understanding exchanged between the two agencies?

Mr. Roberts: It was published in the... in the Federal Register at... at the time that it was... it was entered into, Your Honor.

To... to... without... without belaboring the point, turning to the facts that are here briefly, the respondent does not dispute that the Coast Guard hasn't addressed the particular hazards involved here.

And as I said before, the only regulations that respondent and amici have... have pointed to that address the working conditions here are... are very limited, those addressing the marine sanitation devices, and there is in fact almost no regulation here, so that under any understanding of the term working conditions, any reasonable understanding of what working conditions is under the statute, the Coast Guard hasn't exercised authority over the working conditions here.

Justice Souter: I take it the reason you say we don't have to get into the distinction between the... the hazard view and the area view is that the area view has been interpreted, I think as you put it, narrowly to take into consideration the particular area in which the particular hazard occurs.

Is that about--

Mr. Roberts: That's... that's one... one reason.

If... if the area view was interpreted broadly, it would, in effect, completely eviscerate--

Justice Souter: --Yes.

Mr. Roberts: --the act because it would mean that the regulations of the toilets preempt the... any regulation of the vessel and expose all those... all the hazards that might exist on the vessel would not be subject to... to regulation.

So, it has been interpreted narrowly.

Justice Souter: I... I guess my only question is, given that narrow interpretation, I wonder if there is all that much difference between the hazard view and the... and the area view as it has been... been stated.

Mr. Roberts: Well, I... I think that... that there is the potential for... for different results to arise between the two views, even with the... the narrow interpretation of... of the area view because the area is identified, say, as the... the atmosphere on the boat.

The atmosphere might be regulated by the Coast Guard with respect to particular injuries that... that might be caused by problems in the atmosphere like explosion, which it isn't here, but assume that it were.

Yet, it wouldn't be regulated for... for other problems that might result from that like respiratory problems, particles that would be in the atmosphere that would get into the... the workers' lungs.

Chief Justice Rehnquist: Are you saying that the regulations just have to be an exact... if the regulation is not an exact duplicate of what OSHA would do, it isn't covered?

Mr. Roberts: No, Your Honor.

Not that it... that it has to be an exact duplicate, but that it has to address the same injury, the same kind of injury from the same source in essence.

Chief Justice Rehnquist: So, if you regulate smoke... if the Coast Guard regulates smoke because of some reasons but doesn't address the particulates in the smoke, OSHA could come in and have a regulation for smoke coming out of the vessel?

Mr. Roberts: Yes, if... if the Coast Guard's regulation didn't address the injury... the particular injury that would result from the smoke, that the... that the OSHA regulation was trying to--

Chief Justice Rehnquist: Well, what if the--

Mr. Roberts: --to get at.

Chief Justice Rehnquist: --Coast Guard regulations said that we're going to regulate this aspect of smoke.

Insofar as particulates are concerned, we think seamen are... can take particulates.

Mr. Roberts: If the Coast Guard had made that determination and expressly concluded that a regulation of that was not warranted, then that would be an exercise of its authority over... over that working condition and the OSH Act would be displaced.

But there's no... no contention that... that that is what happened here, and there couldn't be because the Coast Guard doesn't even have authority to regulate the hazards that are involved... involved here, Your Honor.

If there are no further questions, I'll reserve the remainder of my time for rebuttal.

Argument of Patrick J. Veters

Chief Justice Rehnquist: Very well, Mr. Roberts.

Mr. Veters, we'll hear from you.

Mr. Veters: Thank you, Mr. Chief Justice, and may it please the Court: The Coast Guard has absolute authority to regulate uninspected vessels, as well inspected vessels, and there's not one iota of difference between the two.

Justice O'Connor, if I could go to your question earlier, you're absolutely correct.

The ALJ in this case said that we did not... the Coast Guard did not have a statute that mirrored the language of... of the OSH Act.

As a result thereof, she concluded that the act was displaced.

Justice O'Connor: Yes.

It sounds like the ALJ's description was probably... didn't get it quite right, and I take it that your opposing counsel here concedes as much.

Mr. Veters: I would hope so, Your Honor.

And, Your Honor, to get right to the point, with all due respect to counsel, the Coast Guard has absolutely regulated emergency response.

46 C.F.R. 26.

Operators of inspected vessels must prepare and post an emergency checkoff list.

Justice O'Connor: Now, where are you... you're reading from a Coast Guard regulation?

Mr. Veters: Yes, sir, Your Honor.

Chief Justice Rehnquist: Where... where will we find it in the papers?

Mr. Veters: We'll find that on page 13 of the amicus brief on behalf of the AWO, Your Honor.

They had... they require an... quote, an emergency checkoff list.

Justice Souter: Now, is this for uninspected vessels?

Mr. Veters: For uninspected vessels, Your Honor, operators of uninspected vessels covering emergencies, including rough weather, crossing hazardous bars, man overboard, as well as fire at sea.

We have a parallel regulation.

It doesn't read verbatim as the OSH Act, but clearly it has been addressed.

But to go back to Justice O'Connor's question, that is not even required by the Coast Guard for preemption purposes.

The Coast Guard has a statute... the OSH Act, 4(b)(1) reads that it will not apply to working conditions that are... so long as the other Federal agency exercises statutory authority.

The Coast Guard has exercised statutory authority.

It's not a question of degrees in the statute.

It's not light exercise, moderate exercise, or heavy exercise.

It's once there has been exercise by a Federal agency such as the Coast Guard, the OSH Act is displaced.

Justice Ginsburg: Well, there's a difference between having statutory authority and discretion to exercise it.

And the Coast Guard may have statutory authority which it chooses not to exercise.

But on... to the extent that I understand, your argument is if the Coast Guard has authority and exercises it to any extent, then that's preempted.

Is that... do I understand that?

Mr. Veters: That's... that's fairly correct, Your Honor.

And... and the only question... the Government is mischaracterizing the extent of regulation in this case.

You cannot tell... in this case, the Coast Guard... there is no gap in coverage for... for worker safety.

The Coast Guard stepped in and investigated a serious marine accident pursuant to 46 U.S.C. 63.

We had multiple deaths.

We had multiple injuries.

We had property damage in excess of $100,000.

Three Coast Guard investigators came out over a 6-month period.

They got control of this well, of this blowout situation, and they exercised their authority.

Chief Justice Rehnquist: But let's take a... perhaps a practical example in response to Justice Ginsburg's question.

Supposing all the Coast Guard had regulated here was marine toilets: don't dump your toilets into the navigable water.

Would you say that OSHA could not do anything then?

Mr. Veters: I would say that's an extreme example, Your Honor.

But, yes--

Chief Justice Rehnquist: Those are the... the kinds of examples that perhaps focus your attention.

Mr. Veters: --Your Honor, yes.

I would say that there has been an exercise of authority, and if... if OSHA has a complaint, it is not properly directed to the Court.

It's properly directed to Congress to have the Coast Guard promulgate regulations that address the needs of the seamen.

That's the proper complaint.

It's not for this Court to step in and give OSHA... carve out exception after exception where there are no express regulations.

If I may refer to Justice Kennedy's question, he's... you're absolutely correct.

OSHA gets... OSHA gets their jurisdiction in this case from a memorandum of understanding, a peace treaty, an informal memorandum that is not a delegation of law.

That memorandum says, Your Honor... it says... the memorandum of understanding says nothing in this MOU pertains to uninspected vessels.

That's what it says.

That does not disclaim Coast Guard regulation of inspected vessels, nor does it cede to the Government jurisdiction over uninspected vessels.

Your example about the kitchen knife is absolutely correct.

The Government has come in and said if the Coast Guard does not have an express provision... in this case, we did not have an express provision regarding the working conditions of the presence of natural gas in the atmosphere of an inland drilling barge... there's no such creature.

If... if the Coast Guard does not have that or if the Coast Guard does not articulate a policy that they will not regulate the presence of natural gas in the atmosphere of an inland drilling barge, then OSHA can step in and regulate that.

OSHA can step--

Justice Kennedy: Well, but it seems to me to that that argument... that position of the Government is just consistent with the statute because the... the statute applies to working conditions.

Mr. Veters: --Correct.

Justice Kennedy: And I... I would be surprised if the Coast Guard had regulations on... on drilling barges that related to... to blowout preventers, mud cavity depressors, chemical mixturing material for mud, drilling bits.

That's... that's OSHA stuff not Coast Guard stuff.

Mr. Veters: Well, Your Honor, they... what the Coast Guard has is broad, general authority according to 14 U.S.C. 2, and they can board an uninspected vessel.

They can inspect... they can investigate any uninspected vessel on the navigable waters of the United States.

They can seize it partially or seize it fully.

They can take an uninspected barge out of service if it poses a danger or threat to property or persons.

It can even sink an uninspected barge if it's a threat to property or... or life.

With that being said, the Coast Guard does not have to... to have every minute regulation that tailors that of the OSH Act to... to assert their authority in this case.

Justice Breyer: Well, but they said... the Government said, for example, in respect to the... the regulations that you cited having to do with safety on page 13--

Mr. Veters: Yes, sir.

Justice Breyer: --where they said that part 27, which is what you were quoting from, applies only to towing vessels, that it didn't apply to barges.

So, that's what they said in their reply brief.

And you're dealing with a barge.

So, when we look through this, it seemed to me that their claim... and I'd ask you if that isn't right... that... that the only... the only Coast Guard things that seem to apply at all to the barges, an uninspected barge, had to do with fire extinguishers, life preservers, ventilation for tanks and engines, and also a general requirement that when there's an accident, they look into it to see if a law has been violated.

Mr. Veters: I would disagree.

Justice Breyer: Is that right?

Which are the ones, in addition to those that do apply?

Mr. Veters: Those do apply under the subchapter C uninspected vessels.

But we submit, Your Honor, 46 C.F.R. 24, 25, and 26 apply to all uninspected vessels.

And not only that, Your Honor, the important thing is there are many regulations that apply to both uninspected vessels--

Justice Breyer: Well, I'm just saying which ones apply--

Mr. Veters: --Which ones.

Justice Breyer: --other than the ones I listed.

Mr. Veters: Your Honor--

Justice Breyer: I mean, you know, they go through this in a big appendix, and... and are they wrong in their appendix?

Mr. Veters: --Yes, I think they're reading--

Justice Breyer: Which... which part of the appendix is wrong?

Mr. Veters: --I think they're reading the... the statutes too narrowly, Your Honor.

I would submit 33 C.F.R., part 160.

It's... that governs ports and waterways safety.

It applies to all vessels.

That... under that statute, inspected as well as uninspected, the Coast Guard can deny entry to a port.

It can seize a vessel that it feels is operating unsafely.

It can tell the operator of that vessel how to operate that vessel.

It can take that vessel out of service.

It doesn't... it doesn't come under the subchapter of uninspected vessels, yet the authority is very broad.

It's just like the... the drug testing of people that have accidents, Your Honor.

Any--

Justice Breyer: Okay, 160.

Is there any other one that you think that they're wrong about?

Mr. Veters: --Yes.

I think the COLLREGS, Your Honor.

The... the--

Justice Breyer: Well, you better tell me the... I mean, you know, I'm just checking them and I'll look up later.

Mr. Veters: --Okay.

Your Honor, I don't have the... the COLLREGS, what we call the rules of the road, but it's the navigational rules that apply to vessels as well as uninspected vessels.

Clearly, there are rules that apply to both species.

These... these regulations are designed to prevent collisions and to prevent accidents and injuries to seamen.

They... that's another example of rules articulated that are... that govern the working conditions--

Justice Breyer: What I'm getting at is that they... let's say a few minimal applications... applied to the Belden, all right, which is, I take it, your... your barge, to Mr. Belden.

Mr. Veters: --Yes, Your Honor.

Justice Breyer: And they have a big appendix designed to show that.

And if their appendix is right, they're right.

So, I want to check the ones that you disagree with about that appendix, so I can go back and look them up.

What I've looked up so far, I've checked section 160.

I'll go look that up.

Is there any other thing I should check?

Mr. Veters: Your Honor, I don't have their appendix in front of me, but yes, I would go... we have... we have a list of regulations that we've... we've applied to--

Justice Breyer: I know and they went through those, and they went and said that every one of those that you say, by and large, don't apply with certain exceptions.

So, I'm just going to make my work a little easier--

Mr. Veters: --Oh, I understand, Your Honor.

Justice Breyer: --to find out what I do have to look up and what I don't.

Mr. Veters: Your Honor, we would... we would submit that, yes, the ones we talk about 33 C.F.R., part 160 clearly applies.

We believe 46 C.F.R. 24, part 24, part 25, part 26 apply.

We believe the rules of the road, the COLLREG, related to navigation apply.

We believe the... the regulations concerning drug and alcohol testing, 46 C.F.R., part... part 16... they apply.

We believe 33 C.F.R., part 155; 33 C.F.R., part 81, navigation lights.

When this vessel is towed... it's a non-self-propelled barge... when it's towed out to location, Your Honor, it has to have certain navigation lights.

These are all application of specific regulations.

Justice Kennedy: But I don't know what that has to do with the complexity of a... of a well drilling operation.

It's just night and day.

There are separate working conditions that prevail to oil field operations that--

Mr. Veters: Your Honor, I think it does go back that... that this is actual exercise of authority by the Coast Guard.

Justice Kennedy: --But... but this applies to working conditions that... that I've just mentioned.

The statute says, with respect to working conditions.

Mr. Veters: Your Honor, we think the working conditions... I believe Justice Souter mentioned it... is clearly the working conditions on the barge itself.

I don't think you have to regulate... the thousands of potential working conditions that could be regulated cannot be addressed in minute detail.

This Court recognized 60 years ago in Southern Steamship--

Justice Kennedy: Well, that... that's OSHA's problem.

Mr. Veters: --Your Honor, I guess we haven't discussed is the relationship of master to seaman is entirely different from that of employer to employee.

Justice Souter: But before you get into that, I... I just want to touch base on one thing.

Your... your argument... your response to Justice Kennedy, as I understand it, depends on the point that you made in response to the Chief Justice's question.

If they are regulating marine toilets, then they are regulating for purposes of... of excluding OSHA jurisdiction.

If they're regulating in... in a later example that you used, running lights when the barge is being towed, then they're regulating to the exclusion of OSHA.

Period.

I mean, that's... that's the essence of your argument, and as I understand it, in response to Justice Kennedy, just as... as in response to the Chief.

Am I right?

Mr. Veters: Yes, Your Honor.

Justice Souter: Yes.

Mr. Veters: They have... they possess statutory authority to regulate and they have exercised that authority.

And they've emphasized it in a general way, maybe not in the same exact way OSHA does, maybe not as aggressively, but the preemption cases from this Court say that once there's been an exercise of statutory authority, we don't look at the quality of the regulations, we don't look at the consistency or the extent.

Justice Stevens: No, counsel, but isn't it true that what it really boils down to is whether rules of the road or navigation lights are regulations of working conditions?

Mr. Veters: I believe so, Your Honor.

If you work on a semi-submersible drilling rig and you're being towed at night and having the presence of navigation lights is to protect you from injury from a colliding vessel, I believe that does... that goes to health and safety of those seamen on that vessel.

I think it clearly does.

I don't think you can take very specific, you know, regulations... the working environment out... out at sea is very much different than it is at the, you know, manufacturing facility in New Jersey.

It's two different kind of... two different types of animals.

And that's why this Court has always considered seamen to be wards of the Court.

That's why they enacted the Jones Act for their protection, the... the warranty of unseaworthiness.

Seamen have been treated differently for as long as--

Chief Justice Rehnquist: But your client isn't a seaman.

It's an employer.

Mr. Veters: --It's an employer of seamen, Your Honor.

And one... one thing we haven't addressed also, Your Honor, I think the Fifth Circuit, which I would submit is the preeminent admiralty circuit court at least in this... in this country, has... has hit the nail on the head.

Adopting the definition of working conditions espoused by the Government would create an absolute disastrous and unworkable concept.

I do not think Congress in its wisdom could have ever intended that a barge within 3 miles is subject to... to OSHA jurisdiction.

As it leaves the 3-mile area, now it's not subject to OSHA jurisdiction, and in... within 3 miles and outside 3 miles, it is still subject to the jurisdiction of the United States Coast Guard.

Justice Ginsburg: Mr. Veters, that might have been a more persuasive argument if we didn't have 30 years of experience with this understanding between the... the two agencies.

So, what you describe as unworkable has apparently worked for some 30 years and it's open and notorious.

Congress hasn't stepped in to say, agencies, you've got it wrong.

Mr. Veters: No, Your Honor.

I believe that the MOU is important.

In this case, the... the OSHA inspector... it's in the trial transcript... who testified, where did you get your jurisdiction in this case?

He said, I looked at the memorandum of understanding and I came to the conclusion I had jurisdiction.

The Fifth Circuit is correct.

14 U.S.C. 2, the enabling statute of the Coast Guard, says it covers all matters not delegated by law specifically to some of the Federal agencies.

Two Federal agencies cannot contravene--

Justice Ginsburg: You're now addressing a different question, whether there's any statutory authority for this arrangement.

You're not addressing the question I asked you.

Mr. Veters: --I'm sorry, Your Honor.

Justice Ginsburg: Where is this massive confusion if for 30 years this has been in place and at least the agencies are telling us that... that it's working okay?

Mr. Veters: Your Honor, there's no confusion in the Fifth Circuit because the Fifth Circuit in the Clary cases and the Donovan cases says with respect to the working conditions of seamen, the OSH Act doesn't apply.

Period.

The confusion is in the Ninth Circuit.

The confusion is in the Eleventh Circuit when you have OSHA standards being applied to seamen.

And, Your Honor--

Justice Ginsburg: I thought you said... I thought you said that it confused it.

You could not have these two agencies... that there would be pandemonium out there by the people who are regulated.

Mr. Veters: --That's correct.

Justice Ginsburg: And the Government is telling us that's not so.

It's been that way for 30 years, and even the Clary case is what?

1980?

Mr. Veters: Yes, 1980.

Justice Ginsburg: The Government said, well, as they read it, that just goes to... it wasn't clear that it wasn't an inspected vessel.

Mr. Veters: No.

The Fifth Circuit had handled that, Your Honor, and said it was a special purpose drilling barge similar to the Mr. Belden.

And... and the Fifth Circuit was right.

It didn't matter if it was inspected or it wasn't inspected.

But, Your Honor, I would submit the Fifth Circuit is correct.

If you let two agencies regulate the working conditions of seamen and have OSHA come in with a nook and cranny theory and fill in gaps every place there's not a Coast Guard regulation, outside of the Fifth Circuit of the United States, you will have absolute confusion.

You will have redundancy.

Justice Ginsburg: --you've had it for 30 years outside the Fifth Circuit, and there hasn't apparently been this massive confusion.

Is the Government dissembling when it tells us that there hasn't been such confusion?

Mr. Veters: Your Honor, I think that we have three amicus briefs that were filed.

We have the American Waterways Operators and two other entities I think strongly urging this Court to adopt the position we're espousing for the very reason that they anticipate that, yes, that there will be confusion if there's two sets of regulations.

Marine operators have to know who to look to--

Justice Ginsburg: Well, why should it be anticipate since this has been going on so long?

Mr. Veters: --Your Honor, I would submit that there is... there has been confusion on this issue.

I... I would submit to you that where the OSH Act has... has supplanted or overreached into the area of the Coast Guard, there has been confusion.

But there has not been confusion in the Fifth Circuit, where we have the Mississippi River and the Gulf of Mexico, because marine operators know what the law is and they've been able to apply that.

Justice Souter: What about a... a kind of contrary parade of horribles to yours if... if we were to accept the Fifth Circuit view, and that is assuming that the Coast Guard regulates running lights and marine sanitation devices, as they were called, and things like that and does nothing more, and it does nothing more than it purports to do right now?

There's an enormous gap in... in safety coverage for a whole class of workers.

It seems to me very odd that Congress, in writing the... the statute that we're dealing with, would have intended such a kind of a huge gap in safety coverage.

What's your response to that?

Mr. Veters: Your Honor, I do not believe there is a huge gap.

They... as I had mentioned earlier--

Justice Souter: Well, if they... on your theory, if they... if the Coast Guard regulates running lights, OSHA can do absolutely nothing about blowouts like this, and that seems to me a pretty big gap.

Mr. Veters: --Your Honor, the... the Coast Guard has the absolute authority, statutory authority, to board, inspect, investigate any vessel they choose randomly at will, whatever they want to do, and to seize that vessel, to control it--

Justice Souter: If that were... if that were... I mean, if that were the answer to my problem, I would have expected Congress to tell the Coast Guard not only that it may regulate, but that it must.

I would have expected some statute that would in... in effect, have... have required or have extended as a matter of law Coast Guard regulation regardless of the Coast Guard's discretion.

But we have nothing like that.

What we have, on your theory, is regulation of running lights by the Coast Guard means safety in blowout situations is not covered by anything.

And... and that's what I find it difficult to believe that Congress could have intended.

Mr. Veters: --Your Honor, what... I go back to what I said earlier.

Under 14 U.S.C. 2, the Coast Guard has been charged with the responsibility of safety and life at sea.

If they are not doing their job, if they need to have more regulations, then yes, that is a question properly addressed to the Congress, not to this Court.

I respectfully submit that.

Then they have to go to Congress and say, we need more regulations in this area.

You need to do that.

Under the marine--

Justice Souter: Congress apparently has... has not been... been particularly concerned about the... the Secretary's interpretation of this statute and the... to the effect of the... OSHA jurisdiction.

And I gather that has been a... a subject of... of published standards for what?

15 years, 25 years now?

Mr. Veters: --Yes, Your Honor.

Justice Souter: So, if... if you say, well, if Congress doesn't like it, Congress can do something about it, Congress could do something about the... the administrative position and it hasn't done anything about it, which suggests that that's a... a good reason behind the rule of deference.

Mr. Veters: Your Honor, the rule of deference only applies if the... it is consistent with the intent of Congress and the statute is unambiguous in its intention.

I believe 14--

Justice Souter: And you say this is an unambiguous statute despite the... the presence of the word exercise there?

Mr. Veters: --I do, Your Honor.

I think the enabling act says, covering all matters not specifically delegated by law to some other Federal agencies.

It was enacted in 1915.

There's been no specific delegation by law to OSHA, and OSHA has assumed jurisdiction, so to speak, of uninspected barges through a private treaty, informal agreement between them and the Coast Guard.

That is improper.

The Fifth Circuit has said Federal modalities may not shift and exchange responsibilities between themselves.

If they want to go to Congress and they want to carve out an exemption for uninspected vessels in State territorial waters, they can do that.

The Congress can enact that, and I have no complaints.

But that cannot be something done between agencies among themselves, Your Honor.

And this--

Justice Breyer: The antitrust division and the FTC do it all the time.

Mr. Veters: --Your Honor, I can't speak--

Justice Breyer: Is that illegal too?

Mr. Veters: --I'm not an antitrust lawyer, Your Honor, about which I could... I could speak to that.

Justice Breyer: I mean, I just wondered how general statement was.

You mean in this instance they can't do it.

Mr. Veters: No.

Your Honor, if I could go back to what Justice Kennedy had said earlier, though, about the kitchen knives, I think he's absolutely correct.

The theory espoused by the Government, if there is not an express regulation for inspected vessels, inspected vessels being 900-foot passenger vessels, Your Honor, if there is... if there is not a Coast Guard regulation that... that specifically addresses kitchen knives, then under the theory espoused by the Government, OSHA can absolutely step in and regulate--

Justice Breyer: Well, that's why I wondered maybe it has to do how comprehensive the regulation was, and that's what I was interested in.

Mr. Veters: --Your Honor, they've just chosen... OSHA has chosen not to regulate inspected vessels pursuant to a memorandum of understanding, but it does not... it doesn't change the statutory scheme one bit.

Justice Breyer: Well, the word is exercise.

The word is exercise in the statute.

Mr. Veters: Yes, Your Honor.

Justice Breyer: So, if they decide not to exercise their authority, then I guess they're not exercising it.

Mr. Veters: You're right, Your Honor.

Justice Breyer: They can choose not to exercise it, I suppose.

If they're not exercising it, they're not.

Then the Coast Guard can come in.

I mean, that's what the statute says.

Mr. Veters: But, Your Honor, the statute doesn't say comprehensive, pervasive exercise; it says exercise.

And I think we give its plain meaning.

And... and if there's been an exercise of authority by one Federal agency, I think it will create confusion, I think it will create redundancy, and it will create a proliferation of regulations that are not needed.

Justice Ginsburg: So, if the Coast Guard didn't regulate the toilets, then OSHA could regulate it.

Mr. Veters: According to OSHA, Your Honor, that's correct.

But we say--

Justice Ginsburg: What about you?

I mean, you... you have said if they exercise any authority, that's it.

It's totally preemptive of what the regulate and what they don't regulate.

Suppose they don't exercise any authority at all.

Would this be just a no regulation plan?

Mr. Veters: --If there were no express--

Justice Ginsburg: If the Coast Guard didn't regulate anything on this particular class of uninspected vessels, then would there be authority in the Occupational Safety and Health--

Mr. Veters: --If there was just the mere possession of authority without the exercise, I would argue, Your Honor, that they still... the Coast Guard still has been charged with their responsibility and they still would have that responsibility.

They just were not doing their job.

But in this case, they have--

Justice Ginsburg: --But you don't... you don't put anything... I misunderstood your argument before.

I thought you said if they exercise any authority, then everything is preempted.

Mr. Veters: --Yes, Your Honor--

Justice Ginsburg: So, if they didn't choose to exercise any authority, that OSHA could... could regulate.

But now you're saying there is no authority at all with respect to these uninspected vessels in any agency other than the Coast Guard.

Is that what you're saying?

Mr. Veters: --That's correct, Your Honor.

I'm saying that the Coast Guard has absolute, exclusive jurisdiction over uninspected vessels.

They have the statutory authority and they have exercised the statutory authority through regulations.

Justice Souter: No, but... as I understand your theory now, it wouldn't matter even if they had not exercised it.

Mr. Veters: Your Honor, I'd say... I would agree with that.

I'd say that even if they had the possession of authority given to them by Congress and they choose, for whatever reason, not to exercise that, then the complaint is still not properly before this Court.

It's properly with Congress as to why they're not doing their job and to ensure that they do it or to take the jurisdiction away.

But that's not our case.

If you just look at the facts of this case, Your Honor, there was... there... there was no regulations regarding atmospheric presence of natural gas.

Yet, what did the Coast Guard do?

They immediately dispatched people to the scene.

They took control of the well.

They prevented pollution.

They saved lives.

They did a 6-month investigation.

OSHA did nothing.

OSHA came out to the site, turned around, never... never interviewed a... a crew member, never stepped foot aboard the Mr. Belden, and received in the mail a certified letter with respect to citations.

The Coast Guard did their job in this case, even though there's not express regulations and provisions in minute detail, and they continue to do that for any... any marine accident or any serious marine accident that fits the criteria of deaths, personal injuries, or property damage.

They do the job.

There... there is not this gap in coverage, Your Honor.

If there's a death on a vessel in navigable waters or an injury, whether it be an uninspected vessel of whatever length or... or something larger, the Coast Guard is charged with the responsibility to investigate.

And the Marine Safety Manual says, when they investigate, one of the other things they must do is to... to look at existing regulations to determine if there is a need for a change in the regulations, to supplement the regulations, or to leave them as they are because they have the expertise.

They've been doing this since 1915, since the Department of Transportation enabled them and empowered them to do their job.

They have the special expertise in this area.

If there are no further questions, Your Honor, I--

Chief Justice Rehnquist: Thank you, Mr. Veters.

Mr. Veters: --Thank you very much.

Rebuttal of Matthew D. Roberts

Chief Justice Rehnquist: Mr. Roberts, you have 11 minutes remaining.

Mr. Roberts: With the exception of part 160, which doesn't regulate occupational safety and health, none of the regulations identified by respondent applied to the Mr. Belden as is explained in the... in the appendix in our reply brief.

Just to... just to briefly mention part 26, which he started about the emergency checkoff list, that specifically applies to small passenger vessels based on specific authority given to the Coast Guard to regulate small passenger vessels in more detail.

Many of the others deal with navigational issues like running lights, have nothing to do with regulation of occupational safety and health.

None regulates the hazards from oil and gas drilling.

Section 14 U.S.C. 2 on which respondent relies, first of all, as Justice Ginsburg points out, that only goes to the existence of authority, not to the exercise of it, and the statute is very clear that... that the other agency must exercise authority to displace the OSH Act.

Justice Stevens: What do you say about his argument that, yes, oh, that may be true in writing, but in fact the people who did investigate this accident was the Coast Guard?

Mr. Roberts: The Coast Guard has... has responsibility for investigating marine accidents.

Investigative authority doesn't necessarily imply that you have regulatory authority as the National Transportation Safety Board is an illustration of.

Congress wanted the Coast Guard to... to investigate.

It does.

If it finds violations, finds situations that indicate violations of other agency laws, it coordinates with those agencies, as it did here, and those agencies take appropriate enforcement action.

The authority to investigate accidents after they happen, even if they might have been caused by unsafe working conditions, is not regulation of those working conditions, and it doesn't preempt the... preempt the OSH Act.

Justice Stevens: Mr. Roberts, how far can a memorandum of understanding go?

Supposing two agencies, just the two Secretaries or whoever is representing, sit down and say, let's... let's just divide up this area... there can be some conflict... and just sign a very simple understanding that, you know, you regulate A and I'll regulate B. How much authority should a court give to that?

Mr. Roberts: The... the question of who has authority here is governed by section 4(b)(1) of the OSH Act, not by some agreement between the... Coast Guard and OSHA.

That agreement reflects the Coast Guard's regulations and the interpretation of the OSH Act that the Secretary--

Chief Justice Rehnquist: So, you don't... you don't rely on the memorandum as any independent basis for a ruling--

Mr. Roberts: --None whatsoever, Your Honor.

We rely... we rely on the text of... of section 4(b)(1) which is... is quite clear that it displaces the OSH Act with respect to particular working conditions.

That's in stark contrast to the Fifth Circuit's holding here that there's an industry-wide exemption for all seamen on all vessels from the OSH Act.

That's the approach that respondent endorses, admitting that regulation of the toilets would preempt regulation of the act altogether, and that you don't even need to regulate that, that... that the OSH Act simply doesn't apply because respondent mistakenly believes that the Coast Guard has authority, plenary authority, under section 2, when the Coast Guard has never interpreted section 2 to give it plenary authority.

And it's repeatedly gone back to Congress to get specific authority to address specific issues on particular uninspected vessels, and Congress has given the Coast Guard that authority, which indicates that neither Congress nor the Coast Guard thought section 2 gave it that authority.

The... the Secretary's view that the Coast Guard has to regulate the particular working conditions at issue in order to displace the OSH Act is supported by the text.

It's supported by the purpose of the act.

It's been the Secretary's longstanding view.

It's been followed by all the other circuits except for the Fifth Circuit.

The Second Circuit, the Ninth Circuit, the Eleventh Circuit, with due respect to the maritime expertise in the Fifth Circuit, those circuits also have a great deal of maritime... of maritime expertise.

And the working conditions here, as Justice Kennedy pointed out, are not maritime-specific.

They're matters over which OSHA has expertise, and 4(b)(1) allows the Coast Guard to step in and displace the OSH Act when it has authority and when it believes that its expertise warrants it to address the particular working conditions that are at issue.

The Coast Guard doesn't have authority here.

It hasn't exercised authority here, and the OSH Act applies here.

Justice Kennedy: --Are there some drilling platforms on the Outer Continental Shelf which are registered vessels and so are completely under the Coast Guard's jurisdiction as to drilling--

Mr. Roberts: Yes.

A drilling vessel that went to the Outer Continental Shelf, in most cases, would be an inspected mobile oil drilling unit, which the Coast Guard has comprehensive regulations covering.

The Coast Guard also has regulations specifically addressed to all facilities at the Outer Continental Shelf which include a general duty clause, similar to the OSHA general duty clause, that requires that work places there be free of... of recognized hazards.

In addition, the Interior Department has some regulatory authority out there specifically related to mineral drilling.

Justice Kennedy: --On those vessels, if the Coast Guard chose, could it allow OSHA a specific regulation of a concurrent... sort of a concurrent jurisdiction?

Mr. Roberts: The... it... it could have if it... if it hadn't exercised its comprehensive authority over those vessels, but it has exercised its comprehensive authority over those vessels, in contrast to the situation here.

If there are no further questions.

Chief Justice Rehnquist: Thank you, Mr. Roberts.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

EEOC v. Waffle House - Oral Argument

Fri, 09 Jan 2009 14:50:24 +0000

Case:

EEOC v. Waffle House

Media File:

99-1823_20011010-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Paul D. Clement

Chief Justice Rehnquist: We'll hear argument now in No. 99-1823, Equal Employment Opportunity Commission v. Waffle House, Inc.-- Mr. Clement.

Mr. Clement: Mr. Chief Justice, and may it please the Court: Respondent Waffle House and Eric Baker agreed to arbitrate rather than litigate disputes between them.

That agreement precludes Waffle House and Baker from having an action take place between them in court.

But the EEOC was not a party to that agreement.

Accordingly, the agreement does not preclude the EEOC's ability to bring a public enforcement action against Waffle House, nor does it limit the remedies available to the EEOC in such an action.

Title VII gives the EEOC a public enforcement action that's independent of and, in many respects, superior to the individual employee's cause of action.

Justice Scalia: Mr. Clement, suppose the individual employee had settled with the employer, not just an agreement to arbitrate, but there had been a complete settlement.

They said, you know, in exchange for so much money, I waive any cause of action I had.

Would the Government still has... have a cause of action for damages?

Mr. Clement: We believe the Government would still have a cause of action in that case, though we admit it would be a much more difficult case.

Justice Scalia: Wow.

Mr. Clement: Because in the case of settlement, of course, judicial or arbitral resources have already been expended.

There's an agreement of the parties that specifically extinguishes the individual's right--

Justice Scalia: What are the damages?

The Government gets damages that have already been paid to the individual to... I don't understand.

And these damages go to the individual?

Mr. Clement: --The... the damages could go to the individual.

I think, to give you an example of the kind of case--

Justice Scalia: So, if he'd settle and get the damages, and then... and then he'd get additional damages recovered for him by the EEOC.

Mr. Clement: --That's right.

But let me give you an example of the kind of case we have in mind, and it may help illustrate why the Government thinks it still may have a cause of action in that situation.

If you can imagine a case where an employer has retaliated against an employee and... simply for filing a charge with the EEOC, and then that employee settles that retaliation claim for a nominal amount of money, without any judicial supervision, let's say, it may be that in that kind of case, the EEOC has a legitimate public interest in, nonetheless, bringing an action, getting some additional amount of damages to really take the employer--

Justice Kennedy: Well, but that's... that's a separate wrong.

I don't know if that's a really fair answer to Justice Scalia's question.

If there's retaliation, I... I would think that's a separate component.

But just suppose a case with no retaliation.

The... the employee recovers $10,000 and then the EEOC can recover $20,000 more?

Mr. Clement: --Well, in a case like that, I'm sure as a matter of its prosecutorial discretion, the EEOC would not bring that case.

Justice Kennedy: Well, let's say the prosecutor doesn't exercise his discretion that way that day.

Mr. Clement: Well, in that case I think they would have cause of action.

But again, I want to make clear that we think that's--

Justice Kennedy: And what... and what happens--

Mr. Clement: --a much more difficult case.

Justice Kennedy: --What would happen... what would happen if the employee recovered $10,000 in the arbitration, then only $5,000 in the litigation?

Does he have to give $5,000 back?

Mr. Clement: I don't think that would follow.

But again, I want to make clear that's a much more difficult case because there there's been--

Justice Kennedy: Well, but... but we're asking what the... what the logical consequences of... of your position are, and that's why we're putting the more difficult case so we can test the general proposition.

And the general proposition, it seems to me, has to withstand some analysis under these more difficult instances.

Mr. Clement: --Well, let me do... let me make two responses.

One, let me try one more time to defend the general principle, which is simply that Congress in Title VII gave the EEOC a distinct cause of action, and so the extinguishment of the individual employee's cause of action shouldn't automatically extinguish the EEOC's cause of action.

But let me hone in on why I think that's so much more of a difficult case because in that case, the individuals settled their claim, so they have no claim to damages in an arbitration proceeding.

And so, it might make some sense to say that the EEOC has no claim to damages in a litigation proceeding.

What is so anomalous about the decision below and the rule that respondent seeks in this case is that it seeks to limit the EEOC's ability to get victim-specific remedies in court even though those victim-specific remedies are available to the employee in the arbitration.

All of the cases that respondent cites--

Justice O'Connor: Well, here we have a case where the employee did not settle, but we were really discussing with you the possibility not presented in this case of a full settlement or a judgment in arbitration, disposing of the victim-specific relief, and asking you why then should EEOC continue to have a cause of action for the victim-specific relief, as opposed to broad injunctive relief, to address the overall problem.

Mr. Clement: --And I guess I do think there are two reasons why they would still have a cause of action in that situation.

One is that Title VII does give the EEOC an independent cause of action.

It's quite a remarkable statute in that respect.

It's unlike statutes this Court has analyzed in, say, the Newport News Shipbuilder case where it specifically contrasted Title VII as being the rare statute that gives the EEOC a duplicative cause of action to the individual.

The second reason, though, is that generally, as a matter of privity, res judicata principles, the reason that you hold one party in... in... to a judgment that they didn't participate in to the consequences of that is because the party in the first action adequately represented the interests of the party that wasn't present.

I--

Chief Justice Rehnquist: Well, why did the EEOC decide to get into this case?

Is there some sort of a pattern or practice involved that goes beyond this individual establishment?

Mr. Clement: --My understanding is that the EEOC picked this case because this case... the events here took place in 1994.

So, the ADA was still quite new at the time that this... that this case took place, and I think the EEOC was concerned that employers were not sure of what their obligations under the ADA were.

So, they picked this case to litigate to help establish what employers' obligations were under the EEOC--

Chief Justice Rehnquist: This is... this is not any broad pattern or practice.

This is simply honing in on an individual case?

Mr. Clement: --That's fair enough.

But again, Congress has specifically allowed the EEOC to use its modest litigation resources to vindicate the public interest both in pattern and practice cases or cases that seek injunctive relief and victim-specific cases where there's some aspect of the case that helps illustrate an important principle of law.

Justice Souter: Mr.--

Justice Ginsburg: --Mr. Clement, may I ask you to back up on how we would get to the point of having a settlement after... or an arbitral determination?

I thought when the EEOC sues, then the individual has no right to come to court, that EEOC would be the exclusive litigator.

And so, I think it's clear that the... the individual employee couldn't bring a suit, a rival suit, in... in court.

Doesn't that extend to arbitration as well?

I thought that the... giving the primacy to the EEOC meant it would control this entire claim in all of its aspects, but you answered the question as though, even though the EEOC had filed, the employee could go on on a separate track.

Mr. Clement: Well, I had taken the import of the hypothetical as being that the individual had already sued and settled and then, only after that had taken place, that the EEOC decided to initiate a duplicative action.

But your question certainly highlights the anomaly of having this predispute arbitration agreement--

Justice Ginsburg: Can the individual bring a suit?

I mean, is the... within the 180 days, doesn't EEOC have total control?

Mr. Clement: --That's absolutely right.

The statute gives the EEOC the exclusive right to initiate a cause of action for the first 180 days and then, for an extended period, until a right to sue letter issues.

And that's why in light of the... the congressional determination that... that EEOC had not only a different action, but one that took primacy, that they had the right to initiate the action once they found that there was a determination that the suit would serve the public interest, it seems particularly--

Justice Scalia: Once they... once they do initiate the action, though, the individual cannot also bring an action.

Right?

So, what you're saying is that the... that the EEOC suit is independent of the individuals, but somehow the individual suit is not independent of the EEOC's.

Mr. Clement: --Well, allow... allow me to make two responses.

One is it's clear that under the ADA and Title VII, it's not that the EEOC's filing of a suit simply extinguishes the individual's cause of action entirely.

They... the individual has a absolute right to intervene in the EEOC's action.

So, if those actions were 100 percent duplicative, there would be no need to allow the individual to intervene in the suit.

Justice Scalia: Exactly.

I... I don't know why you think that cuts in your favor rather than against you.

It seems to me the whole structure of the thing indicates that there's one cause of action.

It can be brought by the EEC or by the individual, but not by both.

Mr. Clement: I mean--

Justice Scalia: Not by both successfully, anyway.

Mr. Clement: --I respectfully disagree because, unlike the ADA, the ADA does not make the EEOC suit the exclusive vehicle and extinguish any cause of action or any basis to get into court for the individual.

They can still intervene in the EEOC's action.

Chief Justice Rehnquist: So, you're saying that if the EEOC brings an action in circumstances such as this, an individual who has agreed to arbitrate the claim can intervene and not be bound?

The individual is not bound by the arbitration agreement?

Mr. Clement: No, we do not take that position.

To the contrary, we think that the arbitration agreement does preclude in this case Mr. Baker from intervening in the EEOC's action.

And I think that's quite a persuasive answer to the argument that the other side has made that somehow allowing the EEOC to sue in these circumstances renders the arbitration agreement a dead letter.

It doesn't.

Justice Kennedy: It's a very strange use of the Article III courts to have litigation proceeding in which one of the real parties in interest is not permitted to intervene.

That--

Mr. Clement: Well--

Justice Kennedy: --that strikes me as a... a distortion of the whole case in controversy rule.

Mr. Clement: --It may be, but I think that is the consequence of the arbitration agreement and the implication of the FAA.

Justice Kennedy: Well, if it is a distortion of the case in controversy rule, then we're in real trouble, aren't we?

Mr. Clement: Well, even if you disagree with me on... on that particular point and you say that the FAA does not prevent Baker from intervening on this action, it's still true that the arbitration agreement is... has a meaningful benefit to Waffle House because before Waffle House entered that arbitration agreement with Baker, it was subject to a suit in court by either the EEOC or Baker.

The agreement with Baker limited Baker to an arbitral forum.

But absent a similar agreement with the EEOC, Waffle House has simply no expectation and no basis to keep the EEOC out of court or to limit its remedies in court.

Justice Souter: Do you think it is... do you think it is going to be very comfort to Waffle House to know that, yes, it can't be sued in court by the individual, but the entire prosecutorial power of the United States can be brought to bear on it in... in a suit in court?

What Waffle House wants to do is to stay out of court, and that's what they're getting at when they talk about undercutting the... the... in effect, the arbitration agreement.

Mr. Clement: Well, with respect, if Waffle House wants to stay out of court, then it needs to reach an agreement with every party that has a statutory right to get them into court.

And as a practical matter, I still think--

Justice Scalia: Unless one statutory right is derivative of the other.

I mean, that's the... that's the whole issue in the case.

Mr. Clement: --Yes, and we think there are good--

Justice Scalia: And you... you keep saying the Government has an independent right to sue, but you know, that begs the question.

That... that's the whole issue.

It is given a right to sue, but is... is that right to sue derivative of the individual's right so that it disappears when the individual's does?

Mr. Clement: --And I do not think it is.

And it's... and I think in fact the text of Title VII is quite clear.

Justice Souter: Then I think your answer has got to be that the settlement clearly does not bind the Government.

Mr. Clement: That's exactly right, and that's... that's a well-established principle.

I mean, look at... look at Firefighters Local No. 93 against... against the City of Cleveland.

The Court says it's a fundamental principle that a settlement cannot bind non-parties to the litigation.

Justice Ginsburg: How does this compare with the Fair Labor Standards Act where the Secretary of Labor could sue or the individual could sue, say, for a wage and hour violation?

Or let's take a violation of the Equal Pay Act.

How... how does that work when the Secretary brings a suit?

Mr. Clement: I think in all of those cases, the statutory scheme works effectively the same.

There are independent causes of action given to the Government entity and to the individual.

And this Court held in the Tony and Susan Alamo Foundation case that just because the individual forswears a cause of action or right to sue under the Fair Labor Standards Act, that does not preclude the Secretary of Labor from bringing their own independent action.

Chief Justice Rehnquist: Of course, the... the cause of action for... that EEOC has could be vindicated by an equitable remedy.

Mr. Clement: I... I don't think that's necessarily true.

It's certainly not going to be true in every case.

And Congress specifically made all forms of relief available to the EEOC in its public enforcement action.

The court below drew a distinction between equitable relief on the one hand and victim-specific relief on the other hand to avoid a perceived conflict with the FAA.

But with respect, I don't think there is any conflict.

Chief Justice Rehnquist: But in this case then you say EEOC can go into court and that Baker can probably not... not intervene, but the EEOC could get whatever he could have gotten and give it to him.

Mr. Clement: That is true, but I don't think that is particularly anomalous or limited to this area of law.

Take, for example... I mean, this Court has held that an individual can agree to arbitrate his or her civil RICO claim.

I wouldn't think, though, that that agreement to arbitrate the civil RICO claim would in any way prevent the Government from bringing a criminal RICO action or prevent the Government from getting a restitution order that agreed to give restitution directly to the victim.

Justice Scalia: Who had already recovered?

Mr. Clement: No.

Let's... let's take this... let's make it parallel to this case where the individual--

Justice Scalia: No.

I'm assuming a RICO victim who's already been... been compensated, and you think the Government can bring a RICO action in which it gets not just criminal sanctions but also requires the... the RICO defendant to pay again what's already been paid.

Mr. Clement: --Well, actually they could get the order, and then there are specific provisions in the Federal restitution statute that allow a set-off for amounts that have already been paid or that will be paid.

Justice Scalia: Oh, well, that's quite different.

Mr. Clement: But I don't think it--

Justice Souter: Okay.

Then let's go back... then let's simply go back to the damages case.

You said a second ago in... in response or you... you agreed with the suggestion of mine that in fact the Government can perfectly well sue independently.

My question then is, why do you concede that the settlement case in which the individual settles for... for money in lieu of damages is a harder case?

Why don't you say no?

It's just as easy as this is.

And... and in neither case is the agreement between the individual and the defendant binding or affecting in any way what the Government can do.

Mr. Clement: --Again, we don't think the agreement is binding, but let me give you three reasons--

Justice Souter: But why... but--

Mr. Clement: --Let me give you three reasons why I think it's a harder case.

Justice Souter: --you did say earlier that you thought the settlement case more difficult.

So, I guess I want you to explain why you think it is.

Mr. Clement: Okay.

Let me give you three reasons why I think the settlement case is more difficult.

First, there's already been some expenditure of resources in that case, either... likely, either judicial or arbitral.

Second, Title VII seems to place particular importance on the EEOC's ability to be able to initiate the action and consider the early stages of litigation.

If, for whatever reason, we've gotten to the point where somebody has filed a claim and it's settled, that role has already been filled.

The third reason is another particularly important function of the EEOC under Title VII is to act as a safety valve, so if for some reason the individual is not willing or able to sue, maybe out of a fear of retaliation or something, in a particular case that vindicates the public interest, the EEOC has the ability to step in and fill that gap.

If there's already been a settlement--

Justice Souter: Well, but in each of the... in each of the cases that you posit, even the third one, the... the essence of the objection to your position is that an agreement has been made between the individual and the defendant.

And in the case of the arbitration agreement, an agreement has been made between the individual and the defendant.

And I don't see why the one class... the one kind of agreement should be treated any differently from the other kind of agreement in determining whether the Government really is in an autonomous position.

Mr. Clement: --Well, I actually think there is a reason to treat that one agreement different, which is the agreement to settle a case extinguishes any claim to relief.

An arbitration agreement does not.

It's simply a forum selection provision.

And the anomaly of the Fourth Circuit's ruling is they take an agreement that limits Baker's access to a judicial forum, but does not limit his remedies and somehow transmogrify it into a rule that limits the EEOC's available remedies but not their access to a judicial forum.

Justice Souter: Then your objection is the transmogrification, not to the... not to the recognition of the agreement as such.

Mr. Clement: Again, we have no... absolutely no objection to having the agreement bind the parties to the agreement.

Justice Ginsburg: But you do say that the employee could not proceed even in the arbitral forum once the EEOC starts.

It's clear in the statute that that's true as to a court action, but you I thought agreed with me that the employee, once the EEOC starts, can't go into the arbitral forum either.

Mr. Clement: Actually the EEOC is of the opinion that the... that the individual could bring an arbitration action at that point.

That is a consequence, though, of the view that they cannot intervene in the EEOC's enforcement action.

I think... I think they--

Justice Ginsburg: So, then the EEOC--

Mr. Clement: --they have to have one action or the other.

Justice Ginsburg: --says we can have this... we can have this... you've just told us that the substantive law is the same.

And I think you're quite right about that, and... and it's just a question of which forum.

But now you're saying it can be both forums simultaneously.

The individual can go forward in the arbitration; the EEOC can go forward in the court with all the problems that duplicative litigation can have of potentially conflicting results.

Mr. Clement: That's equally, of course... I mean, I... I agree that there is that problem.

That is equally a problem with the Fourth Circuit's rule, of course, because they said that the EEOC could be in court seeking general injunctive relief while the individual is arbitrating his claim for victim-specific relief.

Justice Scalia: Well--

Mr. Clement: But... but I think--

Justice Scalia: --that doesn't strike me as so terrible.

I mean, that... that's entirely understandable.

You have two different types of relief being sought in two different forums.

Mr. Clement: --And... and--

Justice Scalia: What Justice Ginsburg points out is... is the anomaly of... of the same relief being sought in two different forums.

Mr. Clement: --Well, and... and I think that... I mean, that may be a product of... that happens when you have an arbitration agreement that limits some parties but not others.

That seems to be the case in... in Moses Cone.

Justice Scalia: Only if we adopt your view of the thing, that the two... that the two are independent.

If... if the two are dependent, as the statute makes very clear they are when... when the Government brings... brings the suit first, barring... barring the individual from bringing a separate suit, if the two are... are dependent, then you don't face any of these problems.

Mr. Clement: Well, fair enough.

But in this case, the Government did bring suit first.

Baker has never arbitrated.

So, that position would lead you to the conclusion that the Fourth Circuit was wrong, that the EEOC can pursue this case, seek victim-specific relief and general injunctive relief, and that it's up to you to determine whether or not Baker gets to intervene in that action.

But that is... that is certainly a result that the Government is quite happy with.

It seems to me what's really sort of indefensible about the Fourth Circuit's reasoning is they take this forum selection provision and turn it into a restriction on remedies.

The... the ADA and Title VII have concurrent jurisdiction.

Suppose that an employer and an employee agreed to litigate their case in State court, not Federal court.

It wouldn't seem to me that that forum selection clause would bar the EEOC and bind the EEOC and limit them from bringing their public enforcement action in Federal court.

It certainly wouldn't seem to me that that agreement to litigate in State court would somehow prevent the EEOC from getting victim-specific damages in Federal court if in fact there was no State court action.

But... but in principle, there's no difference between the arbitration agreement and that forum selection clause agreement that picks the State court.

Chief Justice Rehnquist: Except there's a Federal Arbitration Act, and we've said it's designed to encourage arbitration of disputes.

Mr. Clement: Well, in fairness, I don't think that the FAA embodies a self-executing preference for arbitration.

The--

Chief Justice Rehnquist: No, but... a... a favoring where the... where an arbitration agreement has been entered into, as it was here.

Mr. Clement: --Well, that's true.

But I think the purpose of the FAA, as I understand it, was to put arbitration contracts on an equal footing with other contracts, not to give them some special private place.

And we think that that forum selection clause that picked the State forum would be enforceable between the parties, but we just don't think it makes any sense to say that that agreement between the parties somehow leaps out and bars the EEOC from bringing a Federal enforcement action, or even more puzzlingly I think, restricting the remedies available to the EEOC in that public enforcement action.

It seems to me that at... at bottom Title VII gives the EEOC a right to bring a public enforcement action.

Justice Scalia: The trouble is it's not a public enforcement action to the extent that it is seeking damages for this individual.

To that extent, it... it's an action that seeks to compensate this individual for the damage he has suffered.

Now, that... that has some public benefit I... I assume, just as his own suit, should he recover, would have such... some public benefit.

But to call it a public enforcement action seems to me quite unrealistic.

Mr. Clement: With fairness, I think that's a position that Congress rejected in Title VII itself.

If Congress wanted to say that the only time that the EEOC vindicates the public interest is when it seeks general injunctive relief, it would have been quite easy for Congress to limit the EEOC to general injunctive relief or limit it to bringing pattern and practice cases.

Instead, it gave it the right--

Justice Scalia: Why?

That would have been very foolish.

Why... why require two separate suits: one... one by the private individual, the other by the... by the agency?

If the agency is going to be in there, it may as well go for the whole ball.

Mr. Clement: --Well--

Justice Scalia: But... but to say that the portion of it that compensates the individual is essentially, you know, a vindication of the public doesn't seem to me... doesn't seem to me reasonable.

And... and that is demonstrated by the fact that if the agency brings the suit, the individual can't because he's going to be getting his individual relief.

Mr. Clement: --Again, with all respect, I disagree.

I think restitution statutes reflect and vindicate the public interest, even though the restitution goes to the victim, and not the Government.

It's the fact that the--

Justice Ginsburg: If the model... if the model is the Fair Labor Standards Act, which antedated these discrimination acts by many years, where the Secretary can sue for the money to go into the pocket of the employee, I thought that those were characterized as public interest actions.

Mr. Clement: --That's absolutely right.

I mean, every time a wrongdoer pays money, the payment of that money serves a public interest that's independent of the destination of the payment, whether it goes to the individual who was wronged or some sort of public enforcement action.

And again, I suggest the example of a retaliation action.

In a retaliation action, when an employer has retaliated against an employee for filing a charge with the EEOC, the EEOC clearly vindicates the public interest when it files suit to take the employer to task for the retaliation.

And that's true even if the retaliation and the most effective remedies are victim-specific.

In a case like that, you really need the victim-specific remedies because, after all, it is clear as day from Title VII itself that an employer can't retaliate against an employee for filing a charge.

So, to simply get an injunction that says that is of somewhat limited utility.

On the other hand, to get back pay, compensatory and capped punitive damages I think does vindicate the public interest.

Justice Kennedy: Well, what are your best authorities for the proposition that when litigation has been concluded, another party can recommence the litigation alleging its own injury?

Mr. Clement: I guess I would point--

Justice Kennedy: --some other areas.

You cited the Firefighters case?

Mr. Clement: --Yes.

I would... I would direct you to Local No. 93 v. City of Cleveland.

There's a statement in that case that I think was just meant to reflect a general principle that parties to a litigation can't, through a settlement, bind a non-party to the litigation.

Justice Kennedy: Well, but that was because the other parties had their own injury of a pecuniary nature, as I recall the case.

I... I don't see the case cited.

Justice Stevens: As a practical matter, how often does the EEOC seek victim-specific relief in the form of monetary damages after there's been a settlement between the victim and the other side?

Mr. Clement: I'm actually aware of no case where that's happened.

Justice Stevens: This is all a hypothetical.

Mr. Clement: This is all hypothetical.

And what we're concerned about is a case like this one where there is an arbitration agreement, but the individual has never even sought to arbitrate.

I think that's a much easier case.

I'd like to reserve the remainder of my time for rebuttal.

Justice Stevens: Very well, Mr. Clement.

Mr. Gordon, we'll hear from you.

Argument of David L. Gordon

Mr. Gordon: Mr. Chief Justice, and may it please the Court: The answer to the question presented today is found in the broad terms and policies of the Federal Arbitration Act.

The question, of course, is what effect does Mr. Baker's arbitration agreement have on the EEOC's litigation remedies.

The Fourth Circuit correctly held that the EEOC could bring in court a claim for broad-based injunctive relief and declaratory relief.

However, because Mr. Baker had agreed to arbitrate his claims, he could not seek relief in court specifically for Mr. Baker.

Now, I... I listened carefully to Mr. Clement's argument about the issue of settlement of a claim, and I must respectfully disagree with the authority and line of cases that he's citing.

As a matter of fact, the position, as I understand it from Mr. Clement, is that an individual can settle a claim and then the EEOC can later sue on behalf of that individual and recover relief for that individual.

And that particular principle, if that is what the EEOC is espousing today, contradicts their own policy guidance--

Justice Stevens: Mr. Gordon, if I understood him correctly, he did take that position, but he said you don't have to take that position to prevail in this case.

Is that right?

Mr. Gordon: --Well, perhaps I perceived it differently, Your Honor.

But I... I do think that from our position it's very important for the Court to understand that the cases are almost uniform for the proposition that if an individual settles a case--

Justice Ginsburg: Mr. Gordon, but that's so highly hypothetical because the likelihood that the employee would have proceeded... if the EEOC in the beginning is the only one who can bring an action in court, EEOC brings an action.

Now, even if it's limited only to injunctive relief, isn't it clear that the basic finding of fact, was there discrimination, has to be made for any kind of relief.

And are you going to permit a viable set of proceedings to determine that question?

Once the EEOC brings in... the case in court, mustn't its suit be given primacy to determine the basic question, was there discrimination in violation of the act?

Mr. Gordon: --Your Honor, we do not believe it should be given primacy when an individual has signed an arbitration agreement in which he says I agree that all claims arising out of my employment shall be resolved in arbitration.

We don't see any reason why that case needs to wait for the EEOC to--

Justice Ginsburg: Well, because one of them has power to bind the other.

Does it not?

I mean, suppose the EEOC proceeds and there is a finding that discrimination, unlawful under the statute, occurred.

That would be binding on the employer in any other forum, wouldn't it be?

Mr. Gordon: --Well, Your Honor, it should be, but the EEOC doesn't take that position, as I understand it.

As I understand their position, whatever happens in their court proceeding is an independent action and that Mr. Baker really doesn't have any control over.

And they're doing their own thing in court.

Justice Ginsburg: But we're not talking about Mr. Baker.

We're talking about the employer who has been found to have been a discriminator.

That would have issue preclusive effect against the employer in any other forum.

We're not talking about the individual now, but we're talking about the employer who has been found to be a discriminator in a Federal district court.

Mr. Gordon: It would, Your Honor, if there were findings of fact that were common to the other proceeding.

Justice Ginsburg: But the other way around, if the arbitrator, say, finds no discrimination in that arbitration forum, couldn't bind the EEOC because the EEOC wasn't party to that litigation.

Am I right about that?

Mr. Gordon: Well, I would have to disagree with you on that because I believe that in the arbitration, if there were... an adjudication was made as to Mr. Baker and in... as in this particular case... if I may use this case as the example, in this particular case, Mr. Baker is the only game in town here.

The EEOC is seeking relief solely on behalf of Mr. Baker.

All damages will go to Mr. Baker.

Justice Ginsburg: Let's... let's cut out the relief aspect of it and again concentrate on the issue, was there discrimination or not, as to which there might be injunctive remedies.

If Mr.... Mr. Baker loses on that, that can't preclude the EEOC from getting the determination, was there discrimination.

So, the only point I'm making is when you've got one show that will be binding and the other that can't preclude the EEOC from litigating that basic question, whatever remedies would attach to it, doesn't it follow that the EEOC's suit must be allowed to go forward and have the question of discrimination determined in that forum?

Mr. Gordon: Your Honor, I... I still believe that there's no reason to wait in this case, that the arbitration can go forward to resolve Mr. Baker's individual claims, that the EEOC, under the Fourth Circuit rule, can go forward and have the claims for broad-based injunctive relief heard there.

And I... I must say that there may be separate issues being litigated in that EEOC court proceeding because--

Justice Ginsburg: But isn't it true that for any relief, there must be a finding that the employer has violated the act?

Mr. Gordon: --There must be, but in the court proceeding, there's going to be a broader finding, that there is some pattern or practice of discrimination going on that may or... may or may not apply to Mr. Baker.

If it does apply to Mr. Baker, I would agree with you.

Then that particular ruling would have some collateral estoppel effect in the arbitration.

Justice Kennedy: Well, what... what is your position... maybe you've answered this.

What is your position if the employer and the employee arbitrate and there's a finding of no liability, no wrong on... no wrong committed by the employer?

The EEOC then sues.

Is the EEOC not bound by the liability finding?

Mr. Gordon: Your Honor, in that particular case, if the arbitrator makes a ruling that there was some practice--

Justice Kennedy: No.

My hypothetical is the arbitrator rules for the employer.

No discrimination.

There was no firing in violation of the ADA.

The employer was taking... the employee was taking money or something.

That... that was the reason.

Can the EEOC then re-litigate the issue of liability?

Mr. Gordon: --Not that particular very issue of liability, but what I'm... what I'm anticipating--

Justice Kennedy: And why... and why is that?

Mr. Gordon: --What I... what I'm anticipating--

Justice Kennedy: Why is it that the employer cannot... that the EEOC cannot re-litigate the raw finding of liability?

Mr. Gordon: --I am anticipating from your hypothetical that a specific finding is being made about Mr. Baker being discriminated against based on the facts and circumstances of his case.

What I am anticipating going in the court proceeding is some claim for broad-based injunctive relief that may... may involve Mr. Baker and may not.

Justice Kennedy: I just want to make it clear what your position is.

Is it your position that when the EEOC sues in... in the Federal court and there has been a previous finding of... of non-liability on the part of the employer, that the employer did not discriminate against this person, is the EEOC bound in court by that finding?

Mr. Gordon: Your Honor, the EEOC, to the extent that it's bringing a public enforcement action, something involving a pattern or practice of discrimination, something--

Justice Kennedy: Suppose it's not.

Suppose it's just interested in this--

Mr. Gordon: --Just--

Justice Kennedy: --employee and it's going to base the injunction on the wrong that the employer allegedly committed against this employee, but the arbitrator has found that there is no such violation.

Mr. Gordon: --If it... if the injunction is solely based on relief specific to Mr. Baker and the facts of his case, yes, it would be binding.

Justice Kennedy: And what's your authority for that proposition?

Mr. Gordon: Well, Your Honor, the... the authority would be that based on general principles of collateral estoppel where there's been... these issues have been litigated and--

Justice Ginsburg: Against a particular person.

I thought the basic principle of preclusion was that someone who has not litigated cannot be bound.

You would have to establish that there was some kind of privity between the employee and the EEOC, but I think that would be certainly unprecedented.

The main rule is you have a right to a day in court, not two days in court, and if the EEOC has not been a party in the arbitral forum, I don't see how it can be bound, unless you're making up some new preclusion rule.

Mr. Gordon: --No, Your Honor, I'm not making--

Justice Kennedy: Or unless you say the statutory scheme necessarily finds that there is privity because the EEOC's interests in this case, where there's no broad pattern or practice, are allied solely with those of the... of the employee.

But it's... it's a little odd to say that a party in privity is... is bound if that party cannot intervene in those proceedings when it's a public agency.

But it seems to me that that has to be your... your proposition.

Mr. Gordon: --Well, it is and it runs throughout our brief, Your Honor, and it runs throughout what I'm... what I'm going to say to the Court is that basically what... what is happening here, in the... in the terms of seeking individual relief, is that the EEOC is acting on behalf of Mr. Baker.

Justice Souter: Why... why--

Justice Scalia: --The EEOC is... is effectively a party to the earlier proceeding since its right in the later proceeding is purely derivative of the right of... of the individual employee.

That's essentially what you're urging.

Mr. Gordon: It is, Your Honor, and... and essentially the EEOC is standing in the shoes of Mr. Baker when you look at this case because it is... if you look at the joint appendix, page 51 and 52, the interrogatory responses from the EEOC, you see that they acknowledge they are seeking... when asked what... what damages are you seeking in this case, we are seeking relief on behalf of Mr. Baker.

Justice Breyer: That... that happens to be in this case.

They might have said that.

Doesn't the EEOC also pursue a public interest?

I mean, can't the EEOC... imagine individuals who don't want to bring suits.

They don't care.

They're cowed or they just don't care.

And the EEOC says, I don't care whether you want to bring a suit or not; we're bringing it.

Now, isn't that part of the EEOC's job to see that employers don't discriminate?

And isn't there a public interest in that, as well as the private interest?

Mr. Gordon: There is, Your Honor.

There's a public interest in a case such as that, and there's also a public interest in any claim that an individual brings to vindicate the anti-discrimination--

Justice Breyer: But isn't there a public interest?

Didn't Congress set this statute up so that it is more is involved than a simple tort action or a simple contract action?

There's a public policy in the United States against this kind of discrimination embodied in many laws, and this is one of those laws.

Mr. Gordon: --True, Your Honor, but that public interest can be vindicated just as effectively in arbitration.

Justice Breyer: That's the question.

If a person then in your view says to the EEOC, my employer discriminated against me because I'm black or because of gender or whatever, no doubt, but I like peace; I don't want to bother him; I'm a little worried about it; okay, drop it, if the EEOC says, I don't want to drop it, do they not have that right?

Mr. Gordon: They can continue to pursue that claim for broad-based injunctive relief involved.

But... but here's the rub.

Justice Breyer: I'm talking about can they not get appropriate relief.

That's what the statute says.

Mr. Gordon: It does say that, and the relief would not be appropriate where an individual has signed an agreement to arbitrate.

Justice Breyer: I'm not... I'm asking you my question, not your question.

I, at the moment, have an individual who doesn't care, doesn't really want the suit brought, says to the EEOC drop it, forget it.

The EEOC says, we don't want to forget it.

There's... I'm just repeating myself.

So, what's the answer to my case?

[Laughter]

Mr. Gordon: Well... well, the answer to your case I think is found in the Federal Arbitration Act because this individual agreed to arbitrate--

Justice Breyer: I'm not... there is no arbitration agreement in my case.

It's a person.

You're quite right.

As soon as you answer my question, I'm then going to ask you why does it matter that there's an arbitration agreement.

[Laughter]

But I'd like you to start with my case.

Mr. Gordon: --All right.

Your Honor, if... may I ask you to again assert your proposition?

Justice Breyer: The person is lazy, frightened, or whatever and says to the EEOC, I don't want you to bring this action to get me reinstated.

Forget it.

Drop it.

I'm indifferent.

Does the EEOC have the legal power to say we don't care?

We have a public interest here.

We want to bring this suit anyway because we don't think it's right for the employer to discriminate against you.

We want to make an example of him.

Okay?

Mr. Gordon: Yes.

Justice Breyer: They can do that.

Mr. Gordon: They can do that.

Justice Breyer: Fine.

Now, my question is, when they can do that, why does it matter if there's an arbitration agreement since once you... all right.

Go ahead.

Why does it matter?

Mr. Gordon: Well, there is, of course, the... the strong Federal policy favoring arbitration, the text of the Federal Arbitration Act that says, we're going to enforce agreements.

Justice Breyer: And, of course, my example is designed to show that all those interests have to do with the private interest of the individual perhaps.

Justice Scalia: Mr. Gordon--

Justice Breyer: --Not the other.

That's why I asked--

Justice Scalia: --I think... I think it is your position, is it not, that the... that the agency would not be able to bring such a suit if the individual had already sued and had been compensated, or indeed, if the... if the individual had already settled?

Mr. Gordon: True.

Justice Scalia: Isn't that your position?

Mr. Gordon: True.

Justice Scalia: And... and your further position is that the... that the conclusion of an arbitration agreement is similar to a settlement, that the agency's ability to bring the later suit depends on what the individual, on whose behalf it sues, has given away.

Mr. Gordon: That is correct.

Justice Breyer: Good.

That's perfect.

That's just my question.

Why is this arbitration agreement more like the settlement than it is like the instance we both agreed, the indifferent employee?

Mr. Gordon: Your Honor, the EEOC in these cases... and I hope I can be responsive to your question.

The EEOC in these cases takes its employee as it finds it, and in this particular case, the employee has an arbitration agreement.

And individual conduct can limit the ability of the EEOC to seek remedies in a case.

It happens in a number of different contexts.

Justice Ginsburg: But the remedy... I think we've agreed that what we're not talking about here is the substantive law... the substantive right and the remedy.

It is simply a choice of forum clause.

And if you have two parties that have a substantive right, who can assert the substantive right, one of them is bound by a choice of forum clause.

That's where that party must go.

And the other one is not so bound.

Then how do you stop the EEOC from choosing its forum?

The same question with respect to suppose it had been a State human rights commission that is going into the State court, and the employer says, no, State human rights commission, you can't do that because this employee has signed an agreement to arbitrate.

Mr. Gordon: Your Honor, the... the notion of the importance of the Federal Arbitration Act is that these agreements have to be put on the same footing as other contracts, and we must give force to an arbitration agreement such as this.

And to allow parties to come up with ways to get around these agreements completely undercuts the Federal Arbitration Act.

And I... I would disagree with your premise, if I... if I may, respectfully, that arbitration is a forum selection clause.

It's a lot more than that.

It is a... it is a method of resolving employment disputes.

Justice Ginsburg: But do you... procedural mode, but do you... you don't contest, do you, that Title VII or the disability act or the... whatever Federal law is the law that the arbitrator is to apply so that the substantive law to be applied, whether you're in court or in arbitration, is the same?

It would be Title VII.

It would be the Disabilities Act.

You're not suggesting that the arbitrator can apply some other brand of Federal law than the Federal court would apply, are you?

Mr. Gordon: No, I'm not.

But--

Justice Ginsburg: So, we're talking about the forum and forums have rules of procedure, which can be different, but the substantive law is the same.

It is Title VII or the Disabilities Act.

Mr. Gordon: --That's true, Your Honor, but... but still if we... if we go forward with the rule that's proposed by the EEOC, in... in my view we will be flying in the face of the Court's decisions in Gilmer, the Court's decision in Circuit City, the plain text of the Federal Arbitration Act.

We will be discouraging rather than encouraging arbitration, and--

Justice Scalia: Mr.... Mr. Gordon, I assume that giving up the whole cause of action is the greater and giving up the forum is the lesser.

Isn't your response that if... if the EEOC is bound by a settlement agreement, a fortiori it should be bound by an agreement only to bring the suit in a particular forum, if indeed its action is derivative of the individual's action.

The greater includes the lesser, and surely giving up the whole cause of action, if that binds the EEOC, is greater than giving up simply the forum in which the cause of action can be brought.

Mr. Gordon: --True, and if you take a step back... and let's... let's take the more general... general example where there... there hasn't been a claim filed and where an individual is having a dispute with his employer.

And the employer says, I will give you $300 in exchange for a... a settlement agreement, a release of all claims.

It doesn't involve where an EEOC charge has been filed or where there's a court case going on.

The EEOC and the courts take the position that that particular scenario would preclude it from later seeking relief on behalf of that individual in court.

Justice Breyer: Why is this greater?

You agreed that this is a... this is the greater, the arbitration.

The way I'm seeing it, which you can correct, is that the word in the statute is appropriate relief, and that there's a spectrum.

On the one hand, we have the indifferent employee.

Next is the one with an arbitration agreement who doesn't enforce it.

Next is the one who is in the middle of arbitration.

Next is the one who has been through arbitration and gotten some money, and finally, at the far end we have a settlement.

And whether each of those is appropriate, circumstances for the EEOC to proceed might differ one from the other.

But certainly the arbitration case is in the middle.

It's not way over at the extreme.

So, what... what is your response?

Mr. Gordon: I can't accept the spectrum analysis, if... if I may.

I have to revert to the fact that... that the individual signed the agreement to arbitrate.

Once signing that agreement to arbitrate, then he must pursue his individual claims in that forum and he cannot hand off the ball to the EEOC and have the EEOC do for him what he cannot do for himself, which is get individual relief in court.

That was the bargain that Waffle House made with this employee.

Justice Ginsburg: Would that carry over to, say, wage and hour claims?

Equal pay... I guess the Equal Pay Act is the closest.

Mr. Gordon: Your Honor--

Justice Ginsburg: Could the Secretary of Labor also be in privity with the individual employee who hasn't... who has been denied equal pay?

Mr. Gordon: --Under the... under the wage/hour laws--

Justice Ginsburg: Yes.

Mr. Gordon: --there... there are different interests there.

For example, the... the Department of Labor has to approve a settlement of a wage/hour claim because of the public policy involved in making sure that the lowest wage earners in our society get a particular wage.

It's different on an ADA claim, for example.

The EEOC does not have to approve the settlement of a claim.

Justice Ginsburg: How about an Equal Pay Act claim?

Mr. Gordon: Equal Play Act claim, Your Honor, I believe would be covered under the Department of Labor scenario.

Justice Souter: Mr. Gordon, may I just ask you a question sort of about the other end of this case?

Let's assume that... well, let's assume that there are parallel proceedings going on and that the EEOC suit comes to resolution first.

Now, you... you are... you at least agree that the... that the EEOC can get what I think you have described as sort of generalized equitable remedies on... on... in... in the public interest.

Would those remedies... let's... let's assume a case in which the EEOC sues on behalf of the individual who is subject to the particular arbitration agreement, say, in this case, but also brings in a... in effect, a... a class-wide claim and said, you know, there are... we'll prove that there are hundreds of other individuals who have suffered the same... what is it... Title I violation that this individual suffered.

Can the... and let's assume that in... in the... the EEOC suit, that they prove that.

Can the EEOC get generally class-wide remedy as... as part of its general equitable relief?

Mr. Gordon: Yes.

Justice Souter: Would that include back pay?

Mr. Gordon: No, it would not where there's been--

Justice Souter: Why not?

Mr. Gordon: --When there's been an arbitration agreement.

Justice Souter: Well, not back pay for this individual.

Back pay for everybody in the class except this individual.

This is just... I just want to know what your position is.

Mr. Gordon: Our position would be, Your Honor, that for those individuals who have signed arbitration agreements, then any relief specific to them must be awarded in arbitration.

For those individuals who have not signed arbitration agreements, then that EEOC class-wide relief action could encompass their claim for relief in court.

But to give force to the arbitration agreements that have been signed by the individuals, the... the general--

Justice Souter: Okay, but then... then I... is it also your position that the... that the general equitable relief could not include an injunction to rehire all of those who were improperly fired?

Mr. Gordon: --The... the equitable relief specific to the individual... specific to the individual--

Justice Souter: Well, the injunction is just a general injunction.

It says, rehire the people in this class whom you unlawfully fired in... in violation of this title.

Can... can they get that relief on your theory?

Can the EEOC get that relief on your theory?

Mr. Gordon: --It could if the relief was broad-based and not--

Justice Souter: Well, in my example, it's broad-based in the sense that it applies to everyone in the class, but in order to enforce it, it will have to be enforced against specific individuals.

Somebody quite apart from this proceeding will come forward and say, I'm one of them.

You've got to rehire me.

Can the injunction be... be enforced in that case?

Mr. Gordon: --Yes, it could, but--

Justice Souter: Then why can't back pay be enforced in that case?

Mr. Gordon: --But... but... well, it would be enforced in arbitration.

The relief specific to the individual would be enforced in arbitration.

Justice Souter: No.

You... if I... if I understood what you just said... maybe I didn't... the... the injunction to rehire those who were improperly fired could be enforced in... in court.

In other words, there's an injunction and a court that issued the injunction can enforce it.

Is that correct?

Mr. Gordon: The determination would be in court.

Justice Souter: All right.

Then why... why would not a similar determination and a similar power effect a back pay... generalized back pay order?

Give back pay to all of those... not this guy, but to all of those in the class generally who were improperly fired.

Mr. Gordon: Well, it could, Your Honor.

In court a determination such as that could be made that these individuals have been discriminated against and therefore remedies are available to them.

But the actual determination of the remedies must be made in arbitration for those individuals who signed arbitration--

Justice Souter: I can understand why you say that, but I don't understand why you say that a... a general equitable order to rehire could be enforced in court and would not have to be remitted to an arbitral forum.

Mr. Gordon: --The determination could be made in court, but the determination of what specific equitable relief, whether this person should be reinstated or... or this person should not, that should be made in arbitration.

Justice Souter: So, in... the only thing that on your theory then that is totally within the control of the court would be totally prospective relief, e.g., an order, don't do this again for anybody.

That would be enforceable in court.

Mr. Gordon: Yes.

Justice Souter: And purely in court.

Mr. Gordon: That would be.

Justice Souter: And let's say... let's say a claim is made then later on that that order has been violated, that the title has been violated again, and the injunction against violating the title has been... has been violated.

And let's assume that the employee who claims that... that he is the subject of that violation has also signed an arbitration agreement.

Does it have to go to arbitration?

Mr. Gordon: Well, in that particular case, Your Honor, I believe there would be contempt--

Justice Souter: Right.

Mr. Gordon: --of the injunction.

The contempt would be enforced in court.

Justice Souter: But why isn't your... why isn't your claim to the vindication of the arbitration agreement the same in the future case as it was in the past case?

Mr. Gordon: Because the relief that is awarded to a particular individual is awarded in arbitration.

Assuming that relief was awarded, then that would probably end the participation of the arbitrator at that point.

Justice Scalia: The contempt action wouldn't be brought by either the EEOC or... or the individual, I assume.

It would be brought by the United States attorney or, as we have said, some attorney appointed by the court.

Mr. Gordon: Your Honor, the Court... the Court should not allow... and I think this is the central... central theme of... of our argument here.

The Court should not allow the EEOC and its charging party who comes to it with an arbitration agreement to frustrate the purposes of the Federal Arbitration Act by making this end run around the agreement.

Mr. Baker entered into a private agreement with Waffle House to resolve any disputes he has arising out of his employment.

The Court--

Justice Ginsburg: Mr. Gordon, in... in the history of the anti-discrimination acts, there was legislative history that said the EEOC should be the main player; that is, they should be the main enforcer of these anti-discrimination laws.

Now, that model, which would have taken a lot more money than Congress has appropriated to carry out... but that model simply could not be realized under your view of things because the Federal Arbitration Act would always take primacy, I think you... you put it.

But the notion that the EEOC ought to be running these discrimination actions... they are the main show, and then the individual actions can supplement that.

But... but you couldn't have that model effected under your view of it because the arbitration agreement could always come in and interfere with it.

Mr. Gordon: --Well, I think we should... should take account of what the EEO still is able to do under the Fourth Circuit's rule.

The EEOC is still able to effectuate the public interest by seeking broad-based injunctive relief.

The EEOC is still able to get an injunction telling an employer that you are to certain things with the way you run your business.

The EEOC still has the opportunity to tell an employer that you must report back to us on a regular basis to tell us how you're complying with the employment discrimination laws.

Injunctive relief is not a toothless remedy.

But I will... I will say one other thing.

Justice Scalia: Excuse me.

Does it have to wait for the... for the arbitration to be completed before it brings such a suit?

Mr. Gordon: Before the EEOC brings a public--

Justice Scalia: Before it brings such a suit based upon the violation against an employee who has signed an arbitration agreement.

Mr. Gordon: --No, Your Honor.

It could... it could file its own action for broad-based injunctive relief if it wished.

Justice Scalia: And... and injunctive relief based upon the violation that is the same subject as the arbitration proceeding.

Mr. Gordon: It could if there is a pattern and practice involved in that scenario.

Justice Scalia: I don't know what you mean.

Mr. Gordon: Well, if there is a policy, for example, that is the root cause of--

Justice Scalia: Well, that's fine.

It says that policy is reflected in this one instance, and... and it's the same instance that's... that's before arbitration.

What happens?

Mr. Gordon: --Well, in that case, Your Honor, if the only... if I'm... if the only game in town is that Mr. Baker was discriminated against, and that's it, and there are no general... general... there's no general relief being sought, we're just mad about the employment decision directed toward him, then if the EEOC was in court just on that theory and was unable to show any broader application, then that... the court should dismiss that case.

Rebuttal of Paul D. Clement

Chief Justice Rehnquist: Thank you, Mr. Gordon.

Mr. Clement, you have 4 minutes remaining.

Mr. Clement: Thank you, Mr. Chief Justice.

I want to first pick up on Justice Souter's hypothetical about the contempt proceeding.

It seems to me that if that were enforced by civil compensatory contempt, rather than a criminal contempt action brought by the U.S. attorney, that he'd... he'd have the same problem at the end of the day.

Respondents invoke the proposition that the EEOC has to take the victim as we find him.

The problem with that is that principle applies with respect to damages problems, like a failure to mitigate, that apply to the individual employee whether or not he arbitrates or litigates and applies equally to an EEOC enforcement action and to the individual claim.

What's so unique about this is that respondent is attempting to take an agreement that does not restrict Baker's ability to get any remedy in the arbitration proceeding and turn it into a restriction on the remedies available to the EEOC in its action.

The problem is, this is not, at bottom, a restriction on damages or a problem with remedies.

It is a forum selection clause.

And you have a statutory structure that allows two people to initiate an action.

When one of those parties has signed a forum selection clause and hasn't even initiated the action, it seems that even in the general case there would be no reason to restrict the other party's access to forums or their remedies.

That would seem to be a fortiori true for a statute like Title VII that gives the EEOC a right of first refusal over the initiation of the action.

Another point I'd like to emphasize is that, as Justice Stevens made clear, there are currently no suits pending against employers in a situation where there has been a previous settlement.

In fact, there are only 450 suits currently in the entirety of the EEOC's docket, and I think that puts this case in perspective.

In the literally 99 cases out of 100, an employer's arbitration agreement will govern and the only Title VII claim that will be brought is the employee's claim in arbitration.

In the 1 case out of 100, in the extreme case where there's some important public principle at stake or there's particularly egregious conduct, the EEOC's public enforcement action serves as a valuable safety valve that allows it to preserve the possibility of precedent-setting in public judicial proceedings.

The third and final point I'd like to make is that whatever the answer is in the settlement context, there's absolutely no reason to take a restriction that only restricts the available forum and not the remedies and turn it into a restriction on remedies but not the forum.

Here respondent seeks not only to bind the EEOC to the results of an arbitration, but to prevent the EEOC from seeking all remedies even when there hasn't been any arbitration proceeding initiated at all.

For those reasons, we ask you to reverse.

Chief Justice Rehnquist: Thank you, Mr. Clement.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

NLRB v. Ky. River Cmty. Care - Oral Argument

Fri, 09 Jan 2009 14:50:31 +0000

Case:

NLRB v. Ky. River Cmty. Care

Media File:

99-1815_20010221-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Lawrence G. Wallace

Chief Justice Rehnquist: We'll hear argument next in Number 99-1815, National Labor Relations Board v. Kentucky River Community Care, Inc....

Mr. Wallace.

Mr. Wallace and Mr. Hawkins, we will recess at noon, come back at 1:00 and finish up.

Mr. Wallace.

Mr. Wallace: Thank you, Mr. Chief Justice, and may it please the Court:

The National Labor Relations Act confers organizational, representational, and bargaining rights on employees, broadly defined, including professional employees, but it expressly excludes supervisors from that protected class.

The term, supervisors, is defined in section 211 of the Act, which is set forth on page 2 of our brief, or also on page 2 of our petition, and to be a supervisor under this provision an employee must have authority in the interest of the employer to perform one of 12 specified supervisory functions, or effectively to recommend that such action be taken, and the employee's exercise of that authority must not be of a merely routine or clerical nature, but must require the use of independent judgment.

In 1994, in NLRB v. Health Care and Retirement Corporation, this Court held that the board had mistakenly applied a special test of supervisory status for the health care industry based on an incorrect interpretation of the phrase, in the interest of the employer.

The Court held that the board had set up a false dichotomy between action taken in connection with patient care and action taken in the interest of the employer, which is in the business of patient care, and in so doing, the Court did not at all suggest that the problem of reconciling the coverage of professional employees with the exclusion of supervisors was an insuperable one for the board.

It suggested some possible approaches that might result in a defensible solution.

It specifically agreed with the proposition that phrases in section 211 such as independent judgment and responsibly to direct, are ambiguous, and the board needs to be given ample room to apply them to different categories of employees.

Justice Scalia: So there were those three phrases that could possibly justify the exclusion of registered nurses generally, and one of them was disposed of in the earlier case.

There are two left, independent judgment, and responsibly to direct, but the Government has chosen not to put both in play in the present case, right?

Only independent judgment is at issue here, so that if you lose on this one, you still have the third swing, right?

Mr. Wallace: Well, this was a determination made by the board in going back to the drawingboard, so to speak.

Justice Kennedy: Well, that's the Government, right.

Justice O'Connor: I understand.

Mr. Wallace: Yes, of course, but the board made a determination that responsibly to direct in the abstract need not be defined because it is always qualified by the exercise of independent judgment not of a routine nature in order for these determinations to be made, and early on, after Taft-Hartley was passed, the board got burned by courts of appeals in trying to interpret responsibly to direct, particularly in a case called Ohio Power.

Justice Scalia: The trouble is that hanging it all on independent judgment is... that's much the broader way to go.

I think that suggests that no professional exercises independent judgment if he is acting on the basis of knowledge that is peculiar to his profession, or her profession, in the case of nurses, for the most part.

What... you really think you can sustain that position?

Mr. Wallace: Well, the board I think quite properly on the basis of textual analysis of this provision holds that there must be a nexus between the exercise of independent judgment and the exercise of one of the 12 categories of authority that define who is a supervisor, because that is what is qualified by the phrase, requiring the exercise of independent judgment.

Justice Scalia: But your basic position is that professional judgment is not independent judgment, that if something is required to be done, and any qualified professional would do it that way, this is not independent judgment.

It comes closer to routine.

Mr. Wallace: Well, the... if we're talking about when an employee is performing his own functions, his trade or his profession, carrying out his own tasks, that is not one of the functions that makes one a supervisor.

Justice Scalia: No, but let me give you a hypothetical, one that concerns me.

Let's say that you have a registered nurse in charge of a health care facility, and one of her tasks is to assign the other health care personnel to one or another patient.

She says, we need more help here.

This patient is in more need of help.

The other patient is in less need of help.

That seems to me to be supervisory activity, even though it is based upon her medical expertise.

That's opposed to the situation in which the registered nurse is merely supervising one of the practical nurses in the care of a particular patient, and she says, you know, put a bandage here, you know, or give him two aspirins.

There, you're not directing the employee to one task or another.

You're telling that employee how to do the task that employee is doing.

Well, if the registered nurse is really assigning all of the people, and saying, we need three more over here, we need two more down there, I don't know why that is not supervisory work.

Mr. Wallace: Well, assignment is a separate category in this, but let me respond more directly to your question.

If the nurse did not have anyone assisting her and had to decide which patient was in more acute need of care, the nurse would be making a professional judgment and carrying it out.

If the nurse has an extra pair of hands available with which the nurse has to communicate by more than brain waves in order to exercise the same professional responsibility, and this is a less-skilled employee, and the direction to that employee once that professional determination has been made falls into the category of routine, in giving the directions to the assistant, so that it would be in... for purposes of dividing labor and management, which is what this is about, in the category that also would include the journeyman directing his apprentice...

Justice Scalia: Sure, I understand.

I'm not sure where you came out on the hypothetical I gave you.

Is that nurse who is assigning other health care personnel to one patient or another, on the basis of her expert medical judgment of which patients need help more, is she in a supervisory position, or not?

Mr. Wallace: That would depend on further inquiry about whether she is making determinations about how the staff is to be deployed beyond direction that she got from her...

Justice Scalia: Yes.

No, no.

It's her independent judgment.

The owner of the home tells her, you know, we have 30 personnel here, and you know, some of them are in this ward, some in that ward.

We don't know which ones are... should be where.

It's up to you to assign them where they should be.

Mr. Wallace: That would be much further along what I think of as a spectrum between the journeyman apprentice and the managerial employees.

Justice Ginsburg: Mr. Wallace, maybe you can tell us when an RN, under the board's current definition, when would an RN not... would be an uncovered employee and would be ranked a supervisor, so that she would not come under the Act's protection.

Maybe that would be better.

Give us examples of RN's under this test who would not qualify as employees, but would be excluded as supervisors.

Mr. Wallace: Well, it was stipulated that the nursing coordinator here, who had authority to hire and fire, and made staffing decisions about who would be working in the wings of this facility was a supervisor.

Justice Ginsburg: Isn't that just the question that Justice Scalia asked about staffing, making staffing decisions, who goes to which ward?

Mr. Wallace: If it became comparable to that, yes.

I mean...

Justice O'Connor: Well, I thought in this very case, and maybe I'm wrong, but there is a mechanism whereby there's a registered nurse who's the building supervisor when the other folks aren't there, and that that amounts to about 72 percent of the time, in terms of total hours that the building is open, 24 hours a day, and there is an internal memo which states that these registered nurses, as building supervisors, are in charge of the facility, and all rehabilitation staff, and are ultimately responsible for quality patient care.

Now, why isn't that using independent judgment?

I have a hard time understanding why a person under those instructions, who is in charge, and the only person there at the building, isn't exercising independent judgment under your proposal.

Mr. Wallace: Well, there's also a finding that these registered nurses usually work on their own, without any assistance in performing their duties, and the other employees who may be present... we're talking about the evening hours when less is going on, are... do not report to the nurse, whether she's the building supervisor or not, and are performing tasks that are laid out for them by management in the facility, so of course she would be using judgment in performing her own nursing services, to the extent they're called for.

But what the board found in this case, the regional director found in the representation hearing, was that all that the building supervisor designation meant in practice was that she was to try to see to it that prescribed numbers of staff, and we're talking about rather small numbers, were met, previously prescribed staffing...

Justice Scalia: Mr. Wallace, I am less concerned about, you know, the outcome of this case, whether these particular nurses were, indeed, supervisory, as I am with the rationale that the board used, and the rationale that it used... I'll quote it from your brief.

It is that an employee's exercise of ordinary, professional or technical judgment in directing less-skilled employees to deliver services in accordance with employer's specified standards is not the exercise of independent judgment.

Now, if that's the principle on which the board is proceeding, it seems to me that would say that in the hypothetical I gave you before, that nurse, who is using her expert judgment to direct the less-skilled employees, you go here, you go there, she would not be a supervisory personnel, because she's using her professional judgment to know, you know, which medical services are needed where, and it seems to me she is a supervisor, on any reasonable analysis.

In other words, I think maybe you have to take the third swing, and go back and, you know, try to resolve this case under the remaining test, which is, what is it, authority to direct.

Mr. Wallace: Well, what... that standard that we've articulated was based on longstanding board experience with other employment situations involving skilled crafts, team leaders, lead men, group members, who they on their experience, or their superior technical knowledge, direct discrete tasks to be performed by other members of the group that management has assigned to be members of that team.

They're not deciding for themselves who should be members of the team to perform the function.

This has come up in a wide variety of...

Chief Justice Rehnquist: But most supervisors don't necessarily decide who shall compose the people that they're going to supervise.

That's usually a given by management.

Mr. Wallace: That's precisely my point, Mr. Chief Justice, that management is deciding who the team shall be and who shall be in the position of the leader.

Chief Justice Rehnquist: Why should the fact that management gives you a team of, say, 30, be fatal to your position as a supervisor, the fact that you don't pick them yourself?

That can't be right.

Mr. Wallace: Well, if you're exercising one of the 12 kinds of supervisory authority, of course you would be a supervisor, regardless of whether management prescribed the team, but that's one indication of the limited role that the team leader is playing.

Justice Scalia: Well, doesn't this turn on what the authority to direct consists of?

If all the supervisor has... the purported supervisor has authority to do is to tell the mechanic, no, turn the screw clockwise, not counterclockwise, okay, if that's all he has authority to do, you're turning the screw the wrong way, that's not supervision.

But if, on the basis of his expert knowledge, he says, listen, I want you to go over to this other job which needs immediate assistance, I want to take three fellows off of this job, put them over there, that's supervision, and... but that's not the basis on which the board decided this case.

It decided it on the basis that there's no independent judgment when you're using your professional standards, and that seems to me to be much too broad.

Mr. Wallace: Well, it is qualified by the degree of discretion that the particular skilled employee or professional is given, and the degree to which the exercise of any direction to others or assignment of people who had been put on the shift to discrete tasks is cabined by standards both express and implicit in the...

Justice Breyer: Is...

Well...

I thought that what Justice Scalia is talking about is not really involved in this case, so I must not understand it, because I thought there were three separate things.

One is a situation where you have a carpenter, and he has an assistant carpenter.

Now, the assistant carpenter may tell the carpenter a lot of things, all about carpentry, and if that's what's going on, that isn't supervision, because they're experts, they're carpenters, and as long as they're talking about carpentry, that falls within the rule we're talking about.

Am I right?

And that describes the relationship between the registered nurse and the licensed practical nurse.

The licensed practical nurse does things, gives shots or whatever, so that's the expertise point, but I thought this case primarily involved two other things.

One is, what does the woman do who is the nurse, let's say, during the night hours?

Now, if she's ordering building people around, like maintenance people or others, maybe she's a supervisor, but there was a finding she did nothing.

She's just there, doing her nurse's job.

And then there was a second thing.

It isn't quite true she does nothing.

In fact, she can call in substitutes, but when she calls in the substitutes, they don't have to come, or she has little discretion there.

Now, that I thought was the key question.

When she deals with those substitutes who are coming in when there's a shortage, that if I'm right, that doesn't have much to do with that aspect of the case that Justice Scalia's talking about.

That's a little long, but that's how I was seeing it, and I'd like you to correct me if I'm wrong.

Mr. Wallace: I think what you have said reflects the facts at issue in this case very accurately, Justice Breyer.

Justice Breyer: Then maybe your opponent will correct me.

Mr. Wallace: And the findings and the record are quite clear that her responsibility as the building supervisor is just to see that the prescribed head count that management has prescribed is there, so to speak, and in doing that she first asks for a volunteer that's falling short.

Chief Justice Rehnquist: Thank you, Mr. Wallace.

We'll resume at 1:00.

Justice O'Connor: You may continue, Mr. Wallace.

Mr. Wallace: Thank you, Mr. Chief Justice, and may it please the Court:

If I may briefly mention a couple of other hypotheticals along the spectrum which may shed some light on what the board has to decide here, supposing a nurse either has a broken arm, or has her hands tied up with another patient, and another... and a different patient needs something administered that requires two hands, and she directs someone to do that, even selecting from among the staff assigned to her someone that she knows knows how to do that, that would be very similar to the team leader, the skilled electrician or carpenter who is doing one thing and asks another man of his team to do the other thing that's required.

Moving much more toward management on the spectrum, if the nurse is anticipating a difficult night, and can authorize someone to stay overtime in addition to the regular staff, and therefore commit the employer's resources to decide how the business should be run, rather than what happens here, just seeing to it that the preordained head count is met, that would move the judgment much more toward the managerial side along the spectrum.

Perhaps it would move back a bit if this discretion were cabined by rather specific criteria from the employer.

The task of the board is to place these various fact-intensive situations, and we've shown them in many other areas of the workforce, to place them accurately along this spectrum and to decide where the line is to be drawn, and if there is to be coherence in the administration of the Act in this respect, it is important that when the board reasonably does so the court defer rather than second-guess those judgments.

Justice Scalia: Mr. Wallace, I agree with that, but my... again, my problem is, why is it that the phrase, independent judgment, is the key to distinguishing among those various hypotheticals?

Why is that the key?

Independent of what?

I gather the Government's position is, independent of the professional expertise of the individual, and I don't see how that distinguishes among the various hypotheticals along the spectrum that you've described.

Mr. Wallace: Independent of managerial directives, or the implicit understanding of the way that particular supervisory functions should be utilized, because the same question arises with respect to the function of assigning, with respect to the function, other functions that appear in section 211.

Justice Scalia: No, but with respect, it's not independent of managerial judgment, because even in the case where, in the first hypothetical, where she clearly is not supervisory, she's just telling another nurse to do this or that, that's independent of the managerial judgment.

It's her judgment as to whether this nurse should do this or that, so it isn't independent of managerial judgment.

The position of the Government has been that it has to be independent of her professional expertise, and for the life of me I can't understand how that has anything to do with distinguishing among these various hypotheticals.

Mr. Wallace: Well, because the exercise of her own professional expertise in carrying out her professional tasks is not one of the 12 functions of a supervisor, and the judgment that she's exercising in selecting the helping hands, if it's merely of a routine nature within the meaning of the other part of the independent judgment clause, would not make her a supervisor.

If I may, I'd like to reserve the balance of my time.

Argument of Michael W. Hawkins

Chief Justice Rehnquist: Very well, Mr. Wallace.

Mr. Hawkins, we'll hear from you.

Mr. Hawkins: Mr. Chief Justice, and may it please the Court:

This Court must reject the board's interpretation of independent judgment and the definition of supervisory status in this case in order to assure Americans throughout this country that when they put their loved ones in nursing homes, health care facilities, and home care facilities such as our client, that they are assured of an environment which will be supervised and well-managed.

No one in this room, or this country, would put themselves or their family or loved ones into a nursing home or health care facility where, unknowing to them, there was no one in supervision for 72 to 75 percent of the time.

Justice Ginsburg: But that's the description that the regional director gave.

I looked back at it, and he said that the only thing that the building manager, or... what was the term that was used?

Mr. Hawkins: Building supervisor, Your Honor.

Justice Ginsburg: Building super... the only thing that she did was to make sure that the count was met, that she had no discretion to order anybody to show up, that she just counted how many people were there.

She was to assure that the shifts were fully staffed, period, and that she had no further authority than that, so those are the fact-findings that were made.

Mr. Hawkins: Well, Your Honor, all I can say is that the regional director must have read some different record, because he didn't read the record in this particular case.

Justice Ginsburg: Are you saying that finding is clearly erroneous?

The only additional duty assumed by a building supervisor is to obtain needed help if for some reason a shift is not fully-staffed.

Mr. Hawkins: Yes, Your Honor, I would say that that is completely erroneous.

Justice Breyer: Did you raise that before the board?

Mr. Hawkins: We raised it in...

Justice Breyer: And then the board has said what, in response to your statement that that statement's clearly erroneous?

What did the board say?

Mr. Hawkins: They take the position that they take, and that they're right.

Justice Breyer: You raised, as a matter of objection, there's a finding, the only additional, et cetera, which Justice Ginsburg raised.

Mr. Hawkins: Well...

Justice Breyer: All right.

You say, you raised to the board that that finding was clearly erroneous.

My question to you is, in response to that statement to the board, what did the board say?

Mr. Hawkins: The board gave the rhetoric that it gave in this case.

Justice Breyer: Did it say, it is clearly erroneous, or it isn't?

Mr. Hawkins: No, they did not find... the board did not find it erroneous, but the Sixth Circuit did.

Justice Breyer: Did the board address it specifically?

Mr. Hawkins: The Sixth Circuit did.

The board did not address it.

Justice Breyer: The board did not address your statement, so when I read the record I'll find, objection, it was clearly erroneous, and the board just didn't address it.

Mr. Hawkins: Your Honor, the way this process works, this was our case hearing, and what ends up taking place is, it goes to the board, and then they issue a complaint for summary judgment for the employer's refusal to bargain, so you don't have a full, adjudicative burden of proof, burden of evidence hearing before the NLRB itself.

Justice Breyer: They don't have a system where you raise an... you object to an ALJ's finding, and... they don't?

Justice Scalia: This is the first time I've heard...

Mr. Hawkins: Well, the employer in this case raised an objection to the regional director's decision.

That was just rubberstamped by the NLRB.

We appealed to the...

Justice Breyer: I'm not used to words like, rubberstamped.

I'm used to words like, there's a statement, somebody objects to that, and then there's a finding by the higher administrative body.

Mr. Hawkins: Well, what I'm getting at, Your Honor, is that there is not a formal determination by the board.

It is a, we reviewed it, we agree with the regional director, the employer technically refuses to bargain to get this issue before the Sixth Circuit, and that's what this employer did in that situation.

Justice Souter: It's an enforcement action.

Mr. Hawkins: So... it's an... yes, sir.

Justice Souter: So there was no... I take it... implicit in what you're saying is, there was no way for you to raise a specific objection to that finding before the board itself, is that correct?

Mr. Hawkins: Other than raising the issue about the board's regional director's determination.

You raise it with the board, the NLRB...

Justice Souter: You say, okay, I object to the regional director's determination.

Do you have an opportunity to say, and, in particular, the finding that Justice Ginsburg just read was clearly erroneous?

Mr. Hawkins: In the...

Justice Souter: You have the opportunity to say that?

Mr. Hawkins: In odd case situation, which this arises out of, the employer's ability to challenge it is by refusing to bargain.

The NLRB...

Justice Souter: Is the answer to my question, then, no?

Mr. Hawkins: The answer to your question is no.

Justice Souter: Okay.

Mr. Hawkins: You do not have a formal process to resolve it before the board.

Justice Souter: So the first opportunity you had to make a specific claim that this was clearly erroneous was before the Circuit?

Mr. Hawkins: No, Your Honor.

You have the ability to raise the erroneous nature of it before the board, but you do not get a hearing before the board.

Justice Souter: Do you have an opportunity to make a specific objection with respect to the specific finding that it is clearly erroneous?

Mr. Hawkins: Yes, you do, Your Honor.

Justice Souter: Okay, and you did not do that?

Mr. Hawkins: No, that was done, to my understanding.

I did not handle the case at the board level.

Justice Souter: Well, regardless of who did it, was it done before...

Mr. Hawkins: To my knowledge, it was, Your Honor.

Chief Justice Rehnquist: Well, let's get into how this practice works.

The evidentiary hearing is before the regional director, or before an ALJ?

Mr. Hawkins: It's... no, it's not before an AL... it's before a hearing officer...

Justice Scalia: Before a hearing officer.

Mr. Hawkins: of that particular region.

Chief Justice Rehnquist: And he makes findings.

Mr. Hawkins: Yes.

Chief Justice Rehnquist: And then what happens?

Mr. Hawkins: And then the... well, he doesn't make findings.

He apparently makes some recommendations to the regional director, and the regional director writes up a report based on those recommendations.

Chief Justice Rehnquist: And then, if that is unsatisfactory to a party, the party has a right to appeal it to the NLRB?

Mr. Hawkins: It's not really an appeal.

You raise your objections about that determination, i.e., in this case that these individuals were supervisors, as opposed to were not supervisors.

That process then ends up forcing an election.

You don't have a choice about it.

They hold...

Chief Justice Rehnquist: Okay, but... so you're dissatisfied with the regional director's finding.

Does that go automatically to the board, without any submission on your part?

Mr. Hawkins: No.

You... they order an election and schedule an election.

You're stuck with that process.

Chief Justice Rehnquist: So there's no way that you can ask the NLRB to change the finding of the regional director?

Mr. Hawkins: Not in that process, no.

They direct an election, the regional director directs an election, and... he has an election.

The way you challenge that issue is by refusing to bargain and they end up filing a technical 8(a)(5) charge against the employer, the employer refuses to bargain, and then if your way of... they file a motion for summary judgment.

On a motion for summary judgment...

Chief Justice Rehnquist: A motion for summary judgment where?

Mr. Hawkins: The NLRB general counsel files a motion for summary judgment with the NLRB, and the NLRB... I mean, every case, our case I've had, they end up granting the motion for summary judgment.

Chief Justice Rehnquist: But you opposed the motion for summary judgment, I take it?

Mr. Hawkins: Yes, I did, in the lower level.

Justice Scalia: May I ask, in the unfair labor practice proceeding against you for refusal to bargain, are you limited to the evidence that was adduced originally?

Mr. Hawkins: No, Your Honor.

Justice Scalia: It's a de novo proceeding.

You can bring in new evidence about...

Mr. Hawkins: Well, you don't have a new hearing.

You're stuck with the record.

Justice Scalia: Oh, you are stuck with that.

Justice Souter: That's what I was asking.

Mr. Hawkins: Yes, you are stuck with the record.

Chief Justice Rehnquist: You are stuck with that record?

Mr. Hawkins: Correct, and... so the way in which you get review of it by a court is with the refusal to bargain, and then you end up with...

Justice Stevens: Yes, but in answer to the board's complaint you can assert as a defense one of the findings of fact was clearly erroneous, can't you?

Mr. Hawkins: Yes, and the Sixth Circuit so agreed that they were clearly erroneous.

Justice Stevens: And you did do that before the board?

Mr. Hawkins: Pardon, Your Honor?

Justice Stevens: You did, in your answer to the complaint before the board, on the refusal to bargain, you did make the point that this finding of fact was clearly erroneous.

Mr. Hawkins: That's my understanding.

Justice Stevens: On what did you base...

And did they rule on that?

Mr. Hawkins: They grant summary judgment.

Justice Stevens: But they did not make a ruling specifically...

Mr. Hawkins: They don't issue you a formal decision and write-up, and we find this, and we find that.

Justice Ginsburg: Mr. Hawkins, could you please tell me on what basis you urged it was clearly erroneous, because I went back to read Mr. Eichol's testimony, and it corroborates what the regional director reported exactly.

He said that the only authority that they had as building supervisor was to call employees, and they could use a list of employees who live nearby, the building supervisor had no authority to compel... Mr. Eichol's testimony is perfectly consistent with what the regional director found.

Mr. Hawkins: Your Honor, I believe this Court's standard is the record as a whole, and it's not on one particular page of a transcript.

If you look at the record as a whole...

Justice Ginsburg: Well, isn't that... that's not in the... where is it in the joint appendix?

Mr. Hawkins: Where's what in the joint appendix?

Justice Ginsburg: Is there anything in the joint appendix?

Mr. Hawkins: Yes...

Justice Ginsburg: Everything that I read in the joint appendix is consistent with what the regional director reported.

Mr. Hawkins: Well, Your Honor, if I may I'll be glad to point out some things to you.

Some 11 times in the transcript, in the administrator's testimony from transcript 138 to 221 he references responsible or responsibility 11 different times.

He talks about judgment, or judgment calls...

Justice Ginsburg: I would like to know specifically, what...

Mr. Hawkins: Okay.

Pages 140...

Justice Ginsburg: Mr. Hawkins, a statement was made that she has no authority to order anyone to stay, that yes, she can write somebody up, but anybody else can write anybody up.

Is there any... anything that contradicts the statement that... what was the expression that was used, that it was just to count, to make sure that the count was met, and that she could ask people to stay, if they said no, she had no authority to compel them to stay, she got not one penny extra for that building supervision...

Mr. Hawkins: Your Honor, there's nothing in section 211 that talks about pay being an issue.

I would submit to you at J.A.... joint appendix 62, 63, and 64, which are the three memos in question, and if you take all of Mr. Eichol's testimony in total, you will find that these individuals clearly had supervisory authority, and clearly had authority under 211 that surpassed and was not routine, and much more significant than anybody else in that building during the time that they supervised.

They had the ability to call in people for overtime, and even the hearing officer...

Justice Ginsburg: If a person said no, then what happened?

Mr. Hawkins: According to the memo, they have the authority to write them up, and I know the regional director made a to-do, well, they didn't write anybody up, but that assumes that all your employees must totally disrespect you as a supervisor, and that you have to be writing everybody up.

Justice Ginsburg: But where is it that says that somebody is obliged to say yes to the request for overtime?

I didn't find that.

Mr. Hawkins: Well, it says in the J.A. 63, please write up anyone who does not comply with the request immediately.

There was also testimony...

Chief Justice Rehnquist: With what request?

Mr. Hawkins: The request to work, or to cover the unit, or to pull someone from one unit to another, and so therefore, if... it was also testified that... and it's in the record, that every employee in the facility had to sign all three of these memoranda, read them, to acknowledge... I mean, a company and an employer cannot do anything more significant and more strongly to communicate to every one of their employees, this person is the supervisor, they are in charge of the building and you will follow their lead, to the point that...

Justice Breyer: We're talking about a legal definition.

We're not talking about who you can call a supervisor or not.

Call anyone you want.

And I didn't know until you started, which is why I was asking, that there were any facts in dispute in this case.

I thought, when I read the Sixth Circuit, that it was perfectly consistent with what the ALJ had found, and I thought the key facts are that KRCC directs that the registered nurses, 1) may direct the LPN in dispensing medicine.

I didn't think that was in dispute.

I thought that, 2) they regularly serve as the highest ranking employees in the building.

I didn't think that was in dispute.

Mr. Hawkins: Correct, Your Honor.

Justice Breyer: I thought 3) they seek additional employees in the event of a staffing shortage, all right.

Mr. Hawkins: Yes, Your Honor.

Justice Breyer: And I thought that they move employees between units as needed.

That I better put a question mark on, but I suppose if I read that carefully in the ALJ I'll find they have some authority to do that.

Mr. Hawkins: Correct, Your Honor.

Justice Breyer: And they have the authority to write up employees who do not cooperate with staffing assignments.

Mr. Hawkins: That's correct, Your Honor.

Justice Breyer: All right.

Now, I didn't know that there is a factual dispute.

Mr. Hawkins: I'm not disputing those facts.

I guess really more what the issue, then, is, is the substantial evidence issue, and that's...

Justice Breyer: Why is it substantial evidence?

I thought that the issue is whether the legal label called supervising can fit on those facts, as the record will support them, I imagine to some extent, and so we're dealing with a question of law, and normally you'd say it's... on that kind of a question we'd give a lot of deference to the board.

Mr. Hawkins: Unless there...

Justice Breyer: But here, you wanted... the Sixth Circuit said, the board does not have the legal power to say that the other side has the burden of proof, namely you.

They didn't have that legal power, and the other thing they said was that they have been saying certain things in the past, mouthing a standard but doing something the opposite, so we're not going to give them as much attention as normal.

Mr. Hawkins: Well, Your Honor, if we look at these...

Justice Breyer: Is that... am I right?

What are we...

Mr. Hawkins: Well, you certainly...

Justice Breyer: I'm trying to get what our issue is here.

Mr. Hawkins: This Court in Chevron and a number of the other cases said you certainly do not give the board deference when their interpretation of the Act and application of it is irrational...

Justice Breyer: Obviously not...

Mr. Hawkins: and is not consistent with the law.

Justice Breyer: but the classic case was the case of the newsboys, wasn't it... they were called newsboys at that time... are they employees, or are they supervisors, and I believe that this Court in that first case said that the board gets a lot of deference because they know about these things, and we don't.

Mr. Hawkins: This Court in HCR and Yeshiva, and Bell...

Justice Breyer: Yeah, a lot of them...

Mr. Hawkins: all these cases, is not giving deference to the board.

Justice Breyer: You mean you're saying we shouldn't give deference to the board on such a question?

Mr. Hawkins: No, you should not give deference to the board in this case because their interpretation of this particular statute is so irrational and so inconsistent with the Act.

In fact, addressing Justice Scalia's point earlier, you raised the question, Justice, about this issue of responsibly direction, the board go back, and come back, is that going to be the next one we're going to have.

If you read the definition that they have of independent judgment, and I would really address this and tell the... suggest to the Court that you pay attention to this... the board continues with employers to not be proactive.

They just keep telling employers what it's not.

It's a shell game.

What it's... they never say... if I read through the enter carpenter's brief you can't find where they say what independent judgment is.

They keep saying what it's not.

But in looking at their definition of it, and if you stack that up against Senator Flanders' comparison of what responsibly direct is, they have literally written out of the Act, responsibly direct.

Chief Justice Rehnquist: What is the board's definition?

Mr. Hawkins: The board's definition...

Chief Justice Rehnquist: Is that found in the briefs somewhere?

Mr. Hawkins: Yes.

They set it forth in the petition for cert, item number 1 and index 1, which is the reverse of, it's not independent judgment if an RN exercises ordinary professional technical judgment in directing less-skilled employees to deliver services in accordance with employer's specified standards.

Well, what did Senator Flanders say in the... at pages 14 and 15 of our brief, what did Senator Flanders say was responsibly direct?

Guess what?

He said, it's exercise personal judgment based on personal experience, training, and abilities.

He says, it's the direction of a department and the men under him, the less-skilled people.

He says he determines under general orders what to do, and he gives instructions for its proper performance.

Justice Ginsburg: Mr. Hawkins, then every professional employee would be excluded, because everything that you've read to me is what professional employees do.

Mr. Hawkins: No, I disagree, Your Honor, and let me explain why.

If you look at what Senator Flanders was talking about as to the definition of responsibly direct, he's hit all of these points.

He has hit the fact that you exercise personal judgment based on your skill and training, i.e., a professional.

He has hit... this is not what all professionals do, direct their men under them, do it pursuant to general orders of the employer, and gives instructions for its proper adoption.

Justice Ginsburg: The typical thing, I thought, that the RN who says to the LPN, do this injection, and supervises that process.

I thought that that would fall within the definition of professional employee, but not supervisor.

Mr. Hawkins: Well, Your Honor, I'm aware of the concern and the dissent that you wrote in HCR about this issue concerning when is someone...

Justice Ginsburg: There, the board was trying to have some special definition just for nurses and health care people.

Now, as I understand it, they're saying, we're not creating any different definition for nurses than any other professional employee.

We're trying to distinguish between professional employees on the one hand, and supervisors on the other.

Mr. Hawkins: And I would submit, Your Honor, they have not done that.

In fact, all they've done is, in different terms, defined professional.

If you look at their definition of independent judgment, and if you took it and put it up on a board next to definition of supervisor and definition of professional, and said, which one does this fit, you'd say, it fits professional.

Their definition of independent judgment is a professional.

That's why it's wrong, and that's why it's inconsistent with the Act.

Justice Scalia: Can I come back to the facts in this case?

Mr. Hawkins: Yes, Your Honor.

Justice Scalia: Is it really uncontested that the building supervisor had the ability to, as one of these memos say, if necessary, pull from one unit to another.

Mr. Hawkins: They had the ability to do that.

Justice Scalia: Well, you say they had.

Is that conceded?

I thought that the accuracy of these memoranda as a description of what their genuine authority was, was contested by the board.

They said these memoranda is just words on paper, and that's in fact not how it worked.

Mr. Hawkins: Your Honor, those memoranda were introduced without objection.

In fact, it was... when they were introduced...

Justice Scalia: Well, that's okay.

I mean, you can introduce... basis for... so on, right.

The point still remains, did they reflect the actual duties of the, responsibilities of the building supervisor, and the board said that in fact they didn't.

Isn't that what the board said?

Mr. Hawkins: Well, they may... yes, they did say that they didn't.

Justice Scalia: Okay.

Now, how can we say that that was wrong?

Mr. Hawkins: On the substantial evidence standard.

This Court...

Justice Scalia: Well, what evidence do you have that it did represent...

Mr. Hawkins: I'll give you a few examples, Your Honor.

Justice Scalia: Well, maybe the burden's on them, I guess.

It is a memoranda that goes to all nurses.

They don't deny that it went to all nurses.

Mr. Hawkins: And they don't deny that all the board signed for it.

Justice Scalia: And they... but they're just saying, it never happened?

Mr. Hawkins: No, Your Honor, they're not saying those different things did not happen.

Let me go through a few of these points in the record, and these are some questions that were posed by the hearing officer herself in this case.

In the record, it's very clear that there typically was oftentimes one individual on duty.

There was one question at J.A. 36 where the administrator was asked, even if you're on duty, say, beyond 3:00 and this building supervisor is there, what ends up happening, and would you handle it?

He says, no.

In other words, if I'm in the building, I would, you know, be surprised if they came to me and said, looks like we're going to be a little short on night shift, what do you think we should do?

In other words, the question is going to be asked of the building supervisor, not me, the administrator.

She's in charge of that issue.

That's as strong a granting of the right to independent judgment and section 211 duties as any.

Justice Scalia: Well, that just concerns being short on night shift, and that is really just a mathematical call.

That doesn't take any independent judgment there.

You're supposed to have 30 people there, we have only 29, pick up the phone and see if you can get a thirtieth in.

That's just not independent judgment.

Mr. Hawkins: Your Honor, if you apply that principle, then the vast array of supervisors throughout the United States are not going to be supervisors, because I believe, as Mr. Chief Justice indicated, it's very frequently the exact situation, where management tells you, these are how many people are allocated to your department, you're going to get the job done, if enough people don't show up, call people in, hold people over for overtime... that is an inherent part of supervision, making those judgments.

We can get the production out today with less people, so I won't call anybody in.

No, we can't get the production out today, we need to call someone in.

Justice Scalia: She wasn't given that discretion.

As I understood it, she had to make the call when they were understaffed.

Mr. Hawkins: Your Honor, at page, transcript 206, concerning overtime without restriction, the question by the hearing officer again was, so is there no restriction on that concerning overtime assignment and calling people in, and the answer was no.

Even a question at transcript...

Justice Ginsburg: What is the that, no restriction on... yeah, she was supposed to try to get them up to the full count, and to call people, but where is there...

Mr. Hawkins: But there's no... the point there is no restriction on overtime, and then at 208 she's got the ability to call in to increase the unit above five, and at transcript 334 one of the residence assistants says, yeah, I've been asked to stay over and called in a lot, so she clearly had those responsibilities.

Justice Breyer: I don't see how to deal with the case unless we're like a super-NLRB, unless... I could go this far, we take the facts as stated in the Sixth Circuit, you know, and we say that insofar as those are conclusory, what they actually mean, as long as it allows it, is what the board said.

I mean, we'd go back to the opinions of the board, which I agree is just a summary affirmance, so you'd go back to the opinions of the district director and say that's what the words mean, so when they talk about it, you know, when they talk about her super... how... unless you want us to go... you're saying we should go read through the whole record and decide whether all these...

Mr. Hawkins: Your Honor, I'm not saying that you have to go read through the whole record.

I'm saying that, absent showing that the Sixth Circuit was in some way arbitrary and capricious about the way in which they handled this matter, they should be affirmed.

The other point I would make, and I would like to propose, and I've been doing this work for some 25 years, and not unlike what this Court did in Ellerith & Ferriger, it provided good determinative standards for employers to follow to be able to comply with the law, to define in this situation what is a supervisor, and I'd like to propose six points for this Court that I think address these issues.

One is that the individual in question should have the authority from their employer to engage in one of the twelve activities.

In our case, they had the authority to assign, transfer, and responsibly direct the employees by those definitions.

Two, the individual should be responsible for other employees, a shift, a department, a unit, a facility.

In our case, the RN was in charge of the building and the shift, and of the residents, and the facility in general.

Senator Flanders talks about that in terms of direction of department, men under him.

Justice Scalia: Well, and you say it was her judgment as to how many of the extant employees would be in each of the various units.

She said, you know, we need eight here, rather than just five, so I'm going to pull three from the next-door units.

She could do that.

Mr. Hawkins: If the census was down in a particular period of time, if it was up she had those sorts of abilities.

Justice Scalia: No, no.

Everybody's there, the full complement of the staff is there, and you say she had authority to say, we need more in this unit than they need in the other unit.

Mr. Hawkins: Yes, she did.

Justice Scalia: I'm going to transfer three people to this unit.

Mr. Hawkins: Yes, she did, Your Honor.

Justice Scalia: And that, and the evidence for that is the memorandum which says, if necessary, pull from one unit to another.

Mr. Hawkins: It's more than that, Your Honor.

It's also at transcript 155.

It's also at transcript 140, 142, 43, 45, 146, 150, 206, 220 to 221, 227...

Chief Justice Rehnquist: Well, could you give us an example of what those citations... is that the testimony of a witness that you're referring to?

Mr. Hawkins: These are testimony of various witnesses about being assigned, calling people in, keeping them over...

Justice Scalia: I'm not talking about calling people in.

I'm not talking about that.

I'm talking about assigning the employees that are there and saying, I am going to make the independent judgment that we should have more people in this unit than the employer originally put there, because this unit has special needs today, and I am making that judgment, three people come from this unit and go here.

Mr. Hawkins: At...

Justice Scalia: Now, what evidence is there for that, beyond the statement in the memorandum?

Mr. Hawkins: At joint appendix 24, for situational issues building supervisors can decide if staffing is inadequate and that additional employees are needed.

Building supervisors can situationally ask for an increase.

Justice Kennedy: Well...

Mr. Hawkins: I'd also like to address...

Justice Stevens: Let me ask one question.

You've given us so much detail it's really kind of hard to follow the argument.

Am I correct in assuming that the factual basis for your position is entirely found on page 18a and 19a of the appendix to the cert petition?

That's what the Sixth Circuit relied on, as I understood it.

Mr. Hawkins: Yes, Your Honor, we rely on what the Sixth Circuit...

Justice Stevens: And so you don't think it's necessary to call our attention to any other facts than those that the Sixth Circuit relied on?

Mr. Hawkins: Well, I do to the extent the board's wanting to say these people aren't engaged in independent judgment, because I think these...

Justice Stevens: They have said, though, that these facts are sufficient to establish their status as supervisors.

Mr. Hawkins: Right.

Justice Stevens: And so either... it seems to me you either agree or disagree with what they say on that page.

Mr. Hawkins: With the Sixth Circuit, correct, Your Honor.

Justice Breyer: Your six points on what's the correct... are they in your brief, because I'd like to...

Mr. Hawkins: No, they're not, Your Honor, and I'd like to finish those quickly.

The fourth one is the authority they have in exercise under section 211 is different from those they supervise and thus not routine, and I think that addresses the routine issue.

It also addresses Yeshiva at 690 about it not being routine, and when you look at the totality of the activities that these RN's are engaged in, they're not routine as compared to the others they supervise.

Fifth, that the authority to exercise does not consist only of record-keeping or filing, and thus not clerical, and sixth, in exercising their authority they are not subordinate to those that they supervise, and use their personal judgment based upon experience, training, and ability, thus they use independent judgment, and these standards are rational, they're reasonable, they alleviate any concern that we're trying to suggest that all professionals are supervisors, or that somehow or another...

Justice Ginsburg: What RN under those standards... what RN would ever be professional and not supervisory?

Mr. Hawkins: Well, certainly in large health care facilities you'll have a floor in a hospital, as an example, where everybody's an RN, and you'll have one unit supervisor.

You wouldn't say all of those RN's, just because they simply periodically tell another nurse aide or LPN, oh, adjust this...

Justice Ginsburg: Well, typically isn't it so in hospitals nowadays that you have a lot of subpeople under... who are not RN's but are LPN's, and then other categories, and that the nurse on the shift would be telling those people... she wouldn't be the nurse in charge of assigning anybody any place, but she certainly would be directing the nurse's aides and the LPN's.

Mr. Hawkins: Well, Your Honor, if the RN is directing the facility, as this one was in this situation, they would be a supervisor.

Justice Ginsburg: I asked you to tell me who, under your definition, what nurse, assuming that the nurse is going to give instructions to an LPN, to a nurse's aide, and to other people who work in the hospital, what nurse would not fit the standards that you just read?

Mr. Hawkins: A nurse that doesn't have the authority from the employer to direct those employees.

A nurse that's not been told you're in charge of the unit.

Justice Ginsburg: What nurse in any hospital setup would not have the authority to direct the LPN, supervise the LPN in the way a treatment is administered, a treatment ordered by a doctor?

Mr. Hawkins: Your Honor, as an example, in some of the other cases that this Court has dealt with you talked about whether the individual is aligned with management or not.

That is a key component.

Is a nurse just performing her duties in a project sort of the straw-boss lead person, or are they actually aligned with management and charged with the responsibility of directing the facility or the unit or the group of individuals.

Chief Justice Rehnquist: Thank you, Mr. Hawkins.

Mr. Hawkins: Thank you, Your Honor.

Rebuttal of Lawrence G. Wallace

Chief Justice Rehnquist: Mr. Wallace, you have 6 minutes remaining.

Justice Scalia: Mr. Wallace, I hope at some point in your 6 minutes you'll tell us on what basis the board disregarded and apparently didn't accept the truth of the memorandum which said that these nurses had authority, if necessary, to pull from one unit to another.

Mr. Wallace: Well, the only nurse who testified said she had not read two of the three memoranda that had been introduced and had never been shown it.

The... on page 16 of our reply brief we respond...

Justice Scalia: What does that prove?

Mr. Wallace: with record citations to some of these factual claims.

I do think, to put this in context, it's important that the Sixth Circuit did not set aside any of the board's findings in this case as erroneous.

It just reached different legal conclusions based on its view of what constitutes supervision, based on the board's...

Justice Scalia: The Sixth Circuit did say that, in its opinion, that they have the authority to move employees between units as needed, and I don't think the board said that.

Rebuttal of Michael W. Hawkins

Mr. Hawkins: The board did not say that, and that is not my understanding of the findings.

I will say, I'm holding in my hand here the response to the general counsel's motion for summary judgment in the unfair labor practice proceeding before the board, and there was no effort to introduce any further evidence on any of the matters that we're talking about.

The only request to introduce further evidence was on the question of whether the employer was exempt from coverage because it was an arm of the State government, or because its board was controlled by public officials.

They...

Rebuttal of Lawrence G. Wallace

Chief Justice Rehnquist: Well, do you... Mr. Wallace, do you challenge the Sixth Circuit's... you say the Sixth... you agree the Sixth Circuit said there was the authority to move.

Now, do you challenge that finding?

Mr. Wallace: Well, to...

Chief Justice Rehnquist: You can answer that yes or no.

Try, anyway.

Unidentified Justice: [Laughter]

Mr. Wallace: I... the board did not make such a finding, and I don't know the basis on which the Sixth Circuit made the finding.

Chief Justice Rehnquist: Well, you have the memos in the record, and to follow up on Justice Scalia's question, you say that a nurse, one nurse testified she had read only one of the two memos.

Was there other... what was the other factual basis for the board saying these memos were not accurate, or were not used?

Mr. Wallace: Well, they... what the regional director said was that paper authority differs from authority in practice, and...

Chief Justice Rehnquist: What was his authority for saying that?

I mean, what was the testimony, or reason that he said that?

Mr. Wallace: All of the testimony was about what, in practice, the nurses understood their authority to be when they were acting in the capacity of building supervisor as well as in conducting their other activities.

The board does have a procedure for review of the regional director's findings, and that review was denied in this case, and that is in an order in our appendix to the petition for certiorari, which appears on page 34a, because they found that nothing requiring review had been presented, no substantial issues had been presented.

There is a practice of not receiving new evidence in the unfair labor practice proceeding unless there is something newly discovered, or there are special circumstances warranting it, because otherwise the contestants in the representation proceeding would not have sufficient incentive to present all of the relevant evidence and get that proceeding decided accurately.

Justice Breyer: Can I take it as some concession on this?

The Sixth Circuit says, they have, the registered nurse has authority to, quote, move employees between units as needed.

In respect to that... that's the only one that wasn't there before.

In respect to that, you say on page 16 of your brief, the building supervisors, namely the nurses here, transfer employees from one unit to another simply, quote, to make sure the head count is there, end quote.

Mr. Wallace: That is...

Justice Scalia: So I don't really see the conflict.

Mr. Wallace: That is our view, and we have citations on page 6 of our brief as well.

Justice Breyer: So they do have authority to move people to make sure the head count is...

Justice Scalia: Well, wait, I don't understand that.

As needed means to make sure the head count is there.

They have a full complement of people.

How... if you're short-staffed, moving it to another unit can't increase the head count.

I mean, it clearly means in that memorandum that they can decide they need more in one unit than are assigned to that unit normally.

Doesn't it clearly mean that?

Mr. Wallace: I don't think it's clear.

There certainly is indication that it's for the head count, and the burden wasn't sustained, and the burden is on the proponent of the exception.

Chief Justice Rehnquist: Thank you, Mr. Wallace.

The case is submitted.

The honorable court is now adjourned until Monday next at ten o'clock.

Attribution:

The Oyez Project

Featured:

Circuit City v. Adams - Oral Argument

Fri, 09 Jan 2009 14:50:32 +0000

Case:

Circuit City v. Adams

Media File:

99-1379_20001106-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of David E. Nagle

Chief Justice Rehnquist: We'll hear argument now in Number 99-1379, Circuit City Stores v. Saint Clair Adams.

Mr. Nagle.

Mr. Nagle: Mr. Chief Justice, and may it please the Court--

The Federal Arbitration Act is a declaration of Federal policy favoring arbitration, arbitration agreements, and its coverage extends to the very limits of Congress' Commerce Clause power.

There's an exception to the act, the scope of which is in dispute today.

The respondent asserts that all contracts of employment are excluded from the coverage of the act.

That simply cannot be correct.

The act does not say that it excludes all contracts of employment.

Section 1 excludes only certain kinds of employment contracts, the contracts of employment of seamen, railroad employees, any other class of workers engaged in foreign or interstate commerce.

Beginning nearly 50 years ago, 11 courts of appeals have read that text in a uniform, consistent manner, finding it to create a narrow exclusion applicable only to those workers who are actually engaged in the movement of people or goods across State lines, and we contend that that's the only interpretation consistent with the text of the statute.

Justice Kennedy: Is the word class important to your argument?

Mr. Nagle: Your Honor--

Justice Kennedy: Or would your argument be just the same without--

Mr. Nagle: --I do not believe that it significantly alters it.

I think the class is a term which is used in the Railway Labor Act, for instance, which was under consideration and passed the following year to refer to categories of craft or class of employees.

Justice Kennedy: --Well, it would seem to me to help your argument somewhat, because we... the statute asks us to think in terms of classes of workers, rather than individual workers engaged--

Mr. Nagle: Oh, certainly, Your Honor.

It identifies a group or a category of employees in the same manner that seamen and railroad employees are grouped.

Seamen, of course, was a recognized term.

As the opinion of the Court... as Justice O'Connor's opinion for the Court in McDermott International recognized, seamen was a term having specific meaning.

Railroad employees was a term defined under the Transportation Act of 1920 and also in the Railway Labor Act, so--

Justice O'Connor: --Mr. Nagle, I guess at the time that this act was adopted in... what, 1925?

Mr. Nagle: --Yes, Your Honor.

Justice O'Connor: We had not taken as broad a view of the Commerce Clause power as is true today, is that correct?

Mr. Nagle: I would acknowledge that, Your Honor.

Justice O'Connor: And so Congress probably didn't have in mind that its jurisdiction was as broad as we would have subsequently indicated, and apparently it intended at least that the act not include or cover contracts of employment over which their authority to regulate was very clear, right?

Mr. Nagle: That is correct, Your Honor.

They were specifying seamen and railroad employees.

Justice O'Connor: And the indications were that at least then Secretary of Commerce Hoover thought employees shouldn't be covered at all, and he presented language to the Congress which approved it, and yet you want us to say that Congress did intend to include for arbitration contracts of employment over which the jurisdiction was most questionable, and yet exclude it for those where the jurisdiction of Congress was clearest at the time, which seems a little odd to me.

Mr. Nagle: Well, there are several points in response, Your Honor.

First, the letter from Secretary Hoover was a letter submitted to the committee in 1923, written on the day that it was entered, and there was no further explanation.

I would also submit that we need to look to the language of the coverage provision, section 2 of the act, and contrast that with the language contained in section 1 of the act.

I acknowledge that Commerce Clause authority over seamen and railroad employees would have been clear, but I would also point... bring to the Court's attention, of course, the fact that there were statutory mechanisms in place, and also the single item that we know most clearly is that the seamen as a group, through their representative, Mr. Bruce, have specifically asked that they be carved out.

While it may be somewhat difficult to determine exactly what Congress' motive was, they were responding to a request from a constituency group to be carved out.

Justice O'Connor: Well, the other most troublesome point for me, anyway, is this Court's decision in Allied Bruce, which dealt with section 2, and said that we're going to interpret it now as reaching the full scope of Congress' Commerce Clause power.

Why would we not do the same for this section 1?

Mr. Nagle: Well, in Allied Bruce, which is one of the cases upon which we would principally rely, that was an interpretation of section 2, the coverage, and certainly was making it clear that the Court recognized that Congress was acting to the full with respect to its Commerce Clause power.

Section 1 is an exclusion.

It is to be narrowly construed.

I would submit that there is a general policy that whenever we have a statute which clearly enunciates a public policy of broad scope that any exclusion to that should be narrowly construed.

Justice Scalia: Why is that?

I mean, it seems to me an exception is just as important as the rule.

Why should we unrealistically construe it just because it's an exception?

Mr. Nagle: I certainly would not suggest that--

Justice Scalia: Would you tell that to the members of Congress?

When you vote for this exception, bear in mind that we're not going to take it to have its most reasonable meaning.

We're going to construe it narrowly.

Why?

Why would we do that?

Mr. Nagle: --I apologize, Your Honor.

I was not suggesting that we take an unreasonable meaning.

In fact, I'm suggesting that we take the most reasonable construction that Congress--

Justice Scalia: Well then, fine, so your case really turns, it seems to me, on the point that the language used by the Congress that enacted this statute in section 1 was at that time narrower than the language used in section 2.

Mr. Nagle: --Absolutely, Your Honor.

Justice Scalia: Now, what support do you have for that?

Mr. Nagle: I would point the Court first to... for contemporaneous construction of the language I would point the Court to Illinois Central Railroad v. Behrens, a 1914 case, where the Congress clearly recognized... the Court clearly recognized that the Congress had very broad authority under the FELA statute over interstate commerce, recognized that even trains, for instance, moving in intrastate commerce were nevertheless in the channels of commerce, and so when the FELA in 1914 limited its coverage to an employee who was injured while employed in commerce, this Court found that that was a narrower construction--

Justice Ginsburg: Employed in is not the same as engaged in, but I'd like to go back, first, to the involving term.

Mr. Nagle: --Yes.

Justice Ginsburg: You're using words and say that... saying that in the second section, involved is a very broad term, and in the first section engaged is a narrow term.

Mr. Nagle: Yes, Your Honor.

Justice Ginsburg: But some of the briefs in this case tell us that involved in is not affecting commerce, that indeed this is the only piece of Federal legislation that uses the words, involved in.

Is that so?

Mr. Nagle: To my knowledge it is, and that's what the Court indicated in the Allied Bruce decision.

Justice Ginsburg: So... but you're asking us to say that Congress meant in 1925 something different in using these two words.

Mr. Nagle: In involving commerce says, as this Court found in Allied Bruce, that it's the functional equivalent of affecting commerce, which is--

Justice Scalia: Well, let's be precise about the words.

Are we talking about, involved in commerce, or involving commerce?

Mr. Nagle: --Involving commerce, in section 2, the coverage.

Justice Scalia: That's quite different than involved in commerce.

You can say someone is involved in commerce.

I think that's quite different from saying that somehow this... it's a contract involving commerce.

Mr. Nagle: I... I'm sorry, Your Honor, I'm not using the phrase, involved in--

Justice Scalia: I think it's important to your case that involving commerce is a broader concept than involved in commerce.

Mr. Nagle: --Yes, Your Honor.

I'm not aware that involved--

Justice Scalia: Involving commerce means pertaining to commerce.

Mr. Nagle: --Yes, Your Honor.

Justice Scalia: Involved in commerce means pretty much the same as engaged in commerce, it seems to me, and so if involving commerce is the same as involved in commerce, and involved in commerce is the same as engaged in commerce, you lose.

Mr. Nagle: Your Honor, I--

Justice Scalia: To put it shortly.

Mr. Nagle: --I am not referring to the phrase, involved in commerce.

Justice Scalia: Because it doesn't appear.

The phrase is involving commerce.

Mr. Nagle: Yes, Your Honor.

Justice Scalia: That's the broad coverage of section--

Mr. Nagle: Section 2, yes.

Justice Scalia: --Of section 2.

Mr. Nagle: Yes.

Section 1's exclusion is for contracts of employment of seamen, railroad employees, and other workers engaged in commerce.

Justice Scalia: And they could have said in that section, don't you think... do you think it would have been any different if they had said, seamen involved in commerce, as opposed to engaged in commerce?

Mr. Nagle: As Your Honor has recognized, they did not use involved in.

That perhaps would have supported Mr. Adams' argument that they were trying to show parallel construction.

I would submit, Your Honor, that the fact that the Congress could have ended with the phrase, contracts of employment, then we would not be here today if that was their intent, or could have used parallel language, which would have supported respondent's suggestion that they had the same meaning.

Justice Ginsburg: But isn't the Congress' notion of the limits of its power, doesn't that explain why they didn't say contract of employment, period?

Mr. Nagle: I would not, Your Honor, because if section 2 is the coverage provision and Congress was making reference to its Commerce Clause power in coverage, there would certainly be no reason for them to make reference to or be concerned by the limits of their Commerce Clause power in drafting an exclusion from the statute.

If they had--

Justice Souter: Well, can you give us a better explanation?

I mean, this goes back to Justice O'Connor's question about the oddity of an exclusion which excluded those contracts which were most obviously at the time of drafting within the congressional power, without touching those as to which the power was doubtful, or perhaps absent, and as I understood your answer, your answer was a suggestion that perhaps politics was simply the answer.

I mean, the one particular political group had asked for it.

Can you think of any other reason to draw what to me also seems like an odd distinction in the congressional mind?

Mr. Nagle: --I would point to Judge Posner's opinion in the Pryner case out of the Seventh Circuit, in which he concluded that the Seventh Circuit concluded in his opinion that this section 1 exclusion should be narrow.

He pointed again to the advocacy of the seamen's union, and the recognition that they were a heavily regulated industry that already had a statute in place that provided for an administrative process for resolution of disputes.

Justice Souter: Then why didn't they just stop with seamen?

Mr. Nagle: His... Judge Posner's suggestion is that the railroad industry, the Railway Labor Act was in the works at the time.

Justice Souter: Okay.

Mr. Nagle: It was also a similarly heavily regulated--

Justice Souter: All right.

Mr. Nagle: --heavily unionized industry, and Judge Posner's opinion goes on that Congress may have anticipated, quite correctly, that motor carriers would also become a heavily regulated industry, and in the--

Justice Stevens: What conclusion do you draw from that?

I'm wondering, under your view, are employees of travel agents covered within the exclusion, or are they covered?

Mr. Nagle: --Travel agents, I would... under our interpretation I do not believe that they would be covered because they're not engaged--

Justice Stevens: How about ticket agents for railroads?

Mr. Nagle: --Railroad employees, to the extent that they fall within the definition of employee, for instance, under the Railway Labor Act, I would submit that because railroad employees is a... or employees is a term under that statute, which includes various employees--

Justice Stevens: So you draw a distinction between ticket agents who sell them as employees of the railroad and those who sell them as employees of the travel agent?

Mr. Nagle: --I draw a distinction--

Justice Stevens: You think that's what Congress had in mind?

Mr. Nagle: --I draw the distinction because Congress specifically referred to railroad employees.

When we get into travel agents... and I apologize if you were saying employees of railroads who are travel agents, but I think--

Justice Stevens: --railroad employees engaged in foreign or interstate commerce.

Mr. Nagle: --Yes, Your Honor.

Justice Stevens: But I take it what you're suggesting, you have to give some content to other class of workers engaged in commerce.

Don't you suggest that that's engaged in transportation or something?

Mr. Nagle: Yes, Your Honor.

Certainly, in trying to read the statute--

Justice Stevens: You see, if we accept your view we have to have a jurisprudence of what transportation is.

If we accept the respondent's view, we have to have a jurisprudence on what an employment contract is.

Both require interpretation, but the latter is a statutory term.

Mr. Nagle: --Yes, Your Honor.

Justice Stevens: The former is not.

Mr. Nagle: I would acknowledge that in order to determine the meaning of the final phrase there, any other class of workers engaged in foreign or interstate commerce, that we need to... that we need primarily to recognize the doctrine of ejusdem generis, and the fact that it does follow after the references to seamen and railroad employees.

They are specific groups in a list.

They certainly have something in common, that being that they are transportation workers, and I would also submit that it's inappropriate to read a statute to eliminate the reference to seamen and railroad employees.

If reading it as respondent contends, it's essentially an exclusion for all contracts of employment of all workers engaged in foreign or interstate commerce, and that's, as Judge Edwards said in the Cole v. Burns Security case--

Justice Scalia: Well, I suppose their answer is, Congress has already regulated seamen, they're about to regulate railroad employees, so they want to make very sure that those are excluded, and then they go on to the limits of their Commerce power, which were vague at the time, and give everyone else the same protection that seamen and railroad workers have.

Mr. Nagle: --I simply don't think that that conforms with the statute.

If we are just reading the exclusion, Congress has... section 2, the coverage is very broad, using the language to demonstrate the breadth of coverage.

The exclusion is very narrow, and if one chooses to look to the legislative history that Mr. Adams and his amici point to, there's very, very limited legislative history.

There's essentially one hearing before a Senate committee in 1923 with three Senators present.

Justice Ginsburg: Well, skipping the legislative history, Mr. Nagle, why is it so narrow?

It says, engaged in commerce, and even in 1925 that extended beyond transportation workers.

You want the cutoff to be transportation workers, I take it.

Mr. Nagle: Your Honor, I'm not aware of cases that in 1925 would have said, engaged in commerce would go beyond transportation workers.

I think that involving commerce would... the section 2 language goes to the breadth of it, but in commerce, this Court, as I mentioned, Illinois Central Railroad case, the Gulf Oil Corporation case, the Bunte Brothers case, in each of those the Court said that in commerce is not the equivalent of affecting commerce.

In the Bunte Brothers case the Court said, words derive vitality from the aim and nature of the specific legislation.

Justice Ginsburg: So communications workers, those were not included as engaged in commerce?

Mr. Nagle: They would not have been included as engaged in commerce.

Justice Ginsburg: You say as of 1925, the only workers engaged in commerce were those who were engaged in the moving of goods, is that--

Mr. Nagle: In the movement of people and goods across State lines, Your Honor.

Justice Souter: --Well, if that's the case, then I think what we're faced with on your own interpretation is an exclusion which is as complete in relation to the coverage of employees as the inclusion at the beginning of the provision is in relation to commerce in general, and so it seems to me that your argument supports the interpretive theory that Congress was, in fact, in each instance, in the coverage and in the exclusion, legislating to the limits, and if the limits change as to the one, we ought to recognize a change in the limits as to the other.

Mr. Nagle: I would disagree, Your Honor, in... with respect to the example that Justice Ginsburg just gave, with respect to telephone, telegraph workers.

In 1877 this Court in the Pensacola Telegraph case had found that telephone telegraph workers affected commerce, were involved in commerce, but they were not engaged in commerce in that they were not actually moving goods... certainly we would acknowledge that telephone operators were not moving goods across State lines.

Justice Breyer: When you are talking about all workers, a lot of water has flowed over the dam or under the bridge since 1925.

Mr. Nagle: Yes, Your Honor.

Justice Breyer: I just would like to focus, you to focus for a minute on the consequences.

One of the things that's strongest for you is that in all the other circuits but the Ninth, for a long time have limited to transportation workers this exemption.

Mr. Nagle: Certainly, Your Honor.

Justice Breyer: So what bad would happen if we bought the Ninth Circuit?

That is, in thinking about it, I thought that the purpose of this act is to stop State court hostility to arbitration.

Isn't that the basic idea?

Mr. Nagle: Yes, Your Honor.

Justice Breyer: All right.

So if we read workers out of it you still have the NLRB there today, and doesn't the NLRB have the power today to protect any worker, just... you wouldn't need this... to protect them because the NLRB operating under section 301, or just its general power, could protect all these workers adequately, and therefore there's no reason not to read them out and to invent distinctions between transportation and other kinds of worker.

Now, what's your response to that?

Mr. Nagle: Well, certainly the National Labor Relations Act and the Labor Management Relations Act come into play in the collective bargaining context.

Justice Breyer: Who wouldn't they have power to protect?

Who wouldn't they have power... if the States become unreasonable in respect to arbitration, i.e., they stop enforcing arbitration agreements with workers, couldn't the NLRB come right in there and say, don't be unreasonable, we want the right rules here, and we'll both get the arbitration and protect the workers?

Is there anyone on... in other words, on the Ninth Circuit interpretation, that's somehow going to be left out in the cold when they want an arbitration agreement?

Mr. Nagle: Your Honor, certainly the Ninth Circuit started its analysis in the Craft case, which was a collective bargaining agreement case--

Justice Breyer: I mean, I'm interested in a practical fact.

This statute is to stop the hostility of the States to arbitration.

I wouldn't want workers who wanted arbitration to be left out in the cold, any more than anybody else, and then I thought, well, if we accept the Ninth Circuit they're not going to be left out in the cold, because they have the NLRB in there to protect them and, moreover, it will help them somewhat in terms of the purposes because they won't get these agreements shoved in their face and they will be able perhaps to have more freedom to choose.

But I'm not... I'm not expressing a view on that.

Whatever the right thing is, we have people there on the board to protect them.

That's... so in other words, if I deny your interpretation, am I causing any harm?

Leaving the words out of it, I want to know the consequences.

Mr. Nagle: --The consequences, Your Honor, is that arbitration and the Federal policy favoring arbitration, which is designed to reduce litigation, will lead to a period of tremendous turmoil while the courts are trying to grapple with the application and enforcement of arbitration agreements.

The extent to which they're enforceable under various laws, choice of law provisions, when arbitration agreements contain a governing law provision, the question that I think is very significant, although it's only mentioned in Mr. Adams' brief in footnote 19, the question of arbitrability of Federal employment statutes, if the FAA is taken out of the mix, where this Court relied in part on the liberal Federal policy favoring arbitration in Gilmer and used that to... as a consideration with respect to enforcement of arbitration agreements, if the FAA is taken out of the mix, I think note 19 in Adams' brief suggests that there's an effort to avoid arbitration of even the Federal claims, and--

Chief Justice Rehnquist: Well, even if the FAA doesn't apply to employment contracts, State arbitration rules can... they can be used, can they not?

Mr. Nagle: --There are State arbitration rules which vary dramatically from State to State, Your Honor, certainly.

That I think does not solve the issue, because, as this Court has recognized on a number of occasions, one of the great advantages of the broad application of the FAA is providing that substantive law of arbitrability.

If we are to revert back to the State substantive law of arbitrability, we will have the determinations made on various statutes, we'll have the issues that arise when a contract arbitration agreement is entered into in one State, performed in a third, a claim is brought in a third, we'll have removal to Federal court and a question of which State substantive statute on arbitrability--

Justice Ginsburg: Why would you have removal to the Federal court unless you had diversity if it's State law that controls?

Mr. Nagle: --In... there may be cases where there is diversity, just a--

Justice Ginsburg: Well, if these are employment relations, wouldn't most of them be diversity... most of them be nondiverse, that is, a worker and employer in the same State?

Mr. Nagle: --I would disagree, Your Honor.

I think there are many large national corporations that... such as Circuit City which is primarily... principal place of business is in Virginia, and so to the extent that large companies have employees in many States there may very well be diversity, and then when the matter is removed on diversity grounds there will be the question as to which State substantive law of arbitrability would apply.

Justice Ginsburg: Wouldn't it be the place where the work is performed?

Mr. Nagle: Well, it may be, Your Honor.

On some occasions this Court has had arbitration agreements such as in Allied Bruce, where it was essentially one sentence in a termite prevention contract.

A number of employers since Gilmer, and in reliance on Gilmer, have developed very sophisticated arbitration programs which include, among other things, governing law provisions, and so you may have a corporation which is based in one State, has a detailed arbitration rules and procedures, as Circuit City does--

Justice Ginsburg: Nevertheless, it would be State law that would control, some State law.

Mr. Nagle: --It will be some State law.

One of the issues that the courts will need to determine is when we have a governing law provision such as in the Circuit City agreement, specifying that the Virginia Uniform Arbitration Act would apply, and then the question will arise whether, for instance, California would honor that reference to that State statute.

I think it's simply an issue that the courts will have to grapple with for a number of years until someone returns here on that issue.

Justice Souter: Mr. Nagle, at the time this... the exclusion was passed, can you tell me whether it was customary to require each party to bear a portion of the cost of the arbitration, so was it... would it have been customary at that time to require employees to pay part of the up front arbitration costs?

Mr. Nagle: Your Honor, I didn't hear the beginning.

Are you saying in 1925--

Justice Souter: Yes.

Mr. Nagle: --would it have been customary?

Justice Souter: Yes.

Mr. Nagle: It was an administrative machinery that was put in place.

I cannot represent to the Court that it would have been customary on that.

I do not know, Your Honor.

Justice Scalia: Could you tell me just for the record, what are the best cases that you have to establish the proposition that at the time this legislation was enacted it was already well established that engaged in commerce was not the limit of the Congress' power over interstate commerce?

What are your best cases?

Mr. Nagle: Illinois Central Railroad v. Behrens, the Shanks v. Delaware, the railroad case.

Those are pre FAA cases.

Certainly subsequent interpretation, if you look at Bunte Brothers case, which was involving... I'm sorry.

In commerce was not equivalent to affecting commerce.

It was sometime later, but it referred to the Clayton Act, which had been passed in 1908.

In fact, another point to note on that case is that they noted where it was reenacted in 1950, and that Congress did not change the language, despite the fact that this Court had made clear there was a difference between in commerce and affecting commerce.

The reenactment without change seemed to suggest that Congress had acquiesced in that.

I would point out that the Federal Arbitration Act was reenacted in 1949 without change, after the law had become quite clear over that respect.

Justice Stevens: Have you... just, I want to be sure you give us your best answer to Justice O'Connor's initial question as to the reason why there's this rather narrow exception from a broad provision.

Mr. Nagle: I would say that while Congress' motives are not always clear, and the very limited legislative history doesn't provide any guidance on that, what we know is that Mr. Furiceff of the Seamen's Union specifically asked that his union be carved out.

We know that seamen and railroad employees were groups that already had by statute an administrative mechanism for resolution of disputes.

Pryner and Asplundh Tree both point out that they were heavily regulated, and that there... I would conclude, if I could, that there is nothing in the legislative history to suggest that Congress was contemplating the scope of its authority when it crafted the words in section 1.

If I may reserve the remainder of my time.

Justice Ginsburg: Very well, Mr. Nagle.

Mr. Rubin, we'll hear from you.

Argument of Michael Rubin

Mr. Rubin: Mr. Chief Justice, and may it please the Court--

We agree with petitioner in response to the question from Justice Scalia that the focus of the Court's inquiry today has to be on what Congress meant in 1925, whether it intended the section 1 exclusion to go... to remain symmetrical with the section 2 coverage.

Justice O'Connor: In 19--

Chief Justice Rehnquist: --Mr. Rubin, if your position is correct, why didn't, in section 1, Congress simply stop with, shall apply to contracts of employment, period?

Mr. Rubin: Congress could have done it that way, but it used the language that was presented to it by Secretary Hoover, who stated... whose letter was both in the 1923 committee hearing and was also reprinted in the 1924 committee hearing.

Secretary Hoover--

Chief Justice Rehnquist: When was the bill actually passed?

When was the law passed?

Mr. Rubin: --It was enacted into law in February 1925.

Chief Justice Rehnquist: '25.

Mr. Rubin: Secretary Hoover, just 2 weeks after the seamen's union expressed concerns not only about its application to seamen, but according to Mr. Furiceff to seamen, railroad men and sundry other workers in interstate and foreign commerce, wrote a letter to the chair of the Senate Judiciary Committee in which he said, if there appear to be objections to the inclusion of workers' contracts, then he proposes that the following language be used.

The language that he proposed is the identical language that Congress used in the section 1 exclusion.

While--

Justice Scalia: That's very good sleuthing, but I mean, this is a letter.

This is not even a committee report.

It is a letter sent 2 years before this statute is enacted, and you want us to assume that that is the only reason, not only that Congress didn't end the sentence in section 1 with employment contracts, but it is... but also it explains why Congress didn't at least, if it was not going to end the sentence there, at least use the same language in section 1 that it did in section 2.

Mr. Rubin: --There is--

Justice Scalia: I mean, that is a very difficult thing to explain.

Mr. Rubin: --There is a linguistic explanation for what they did.

While Congress could have limited that way had it been presented in a different way, Congress'... Secretary Hoover asked Congress to expedite passage of the bill to satisfy the commercial interests who were urging it.

Chief Justice Rehnquist: I gather he failed, since he sent the letter in 1923 and the bill was passed in 1925.

[Laughter]

Mr. Rubin: He did... he was successful in getting the language that he proposed included in the bill immediately after he proposed it, but why is the additional language in there, what purpose does it serve, because that, I think, is the response to the Chief Justice's question.

Well, we start with the first two phrases, the first two classes, seamen, and railroad employees.

Now, in 1925, given how limited Congress' Commerce Clause power was, there weren't that many categories of workers who were actually covered by Congress.

In fact, the only private sector employees that were covered by any Federal statute under the Commerce Clause power in 1925 were seamen and railroad employees, so not only was--

Justice Scalia: They were covered by the Commerce Clause power, or by any Federal statutes?

Mr. Rubin: --I'm sorry.

They were covered by Federal statutes.

Justice Scalia: By Federal statutes.

Mr. Rubin: Excuse me if I misspoke.

Justice Scalia: No, I--

Mr. Rubin: Then... then, because the objection from labor, which Secretary Hoover at least urged Congress to overcome, however quickly or not it might have happened, referred more broadly to all classes of employees, because the underlying concern was the disparity in bargaining power, as this Court acknowledged in Prima Paint in its footnote 9, when it referred to the section 1 exclusion, because the disparity in bargaining power applies between all workers and bosses as perceived by labor at the time, and as reflected by Congress in 1932 in the Norris La Guardia Act.

Congress went beyond that.

Justice Scalia: --This would include an employment contract between a CEO and a corporation, I assume, right?

Unknown Speaker: You're--

Mr. Rubin: There is--

Justice Scalia: --I mean, you're painting this as--

Mr. Rubin: --Our position is yes.

Justice Scalia: --Your position is simply covering the hard hat lunch bucket worker, but I assume it would cover a contract between a CEO and his corporation.

Mr. Rubin: Just like FELA at the time, we believe, would have covered an on the job injury by a high executive of a railroad company, it is our construction that worker and employee means anyone employed by a company.

There is an amicus brief that argues otherwise.

Justice Breyer: Yes, because you'd say that it covers workers, and workers might have had a definition at the time that did not include the CEO.

Mr. Rubin: That is possible.

Justice Breyer: We don't have to decide that.

Mr. Rubin: You certainly do not have to decide that.

Justice O'Connor: Mr. Rubin, what was well established as of 1925 about the meaning of Congress' power?

Was it well established that engaged in commerce was narrower than Congress' full power?

Was there already the affecting commerce notion--

Mr. Rubin: There was not.

Justice O'Connor: --floating out there?

Mr. Rubin: There was not.

We have cited numerous statutes, as well as cases of the time.

There is not a single statute in effect in 1925 or a case describing the commerce power as it pertained to employees that used a broader term than engaged in.

Justice O'Connor: What about the case cited by opposing counsel, Behrens.

Mr. Rubin: Behrens and Shanks.

The Behrens and Shanks case arose under the amended FELA, the 1908 version of FELA.

That act referred initially to engaged in, but then on two separate occasions had what we characterize as a temporal limitation.

It said, while engaged in.

It specifically limited the scope to less than the full commerce power, as would have been expressed by the term, engaged in, and in Shanks and in Behrens, and in several other cases, this Court expressly noted that whether workers were covered by the amended FELA or not, turned upon whether the injury they suffered occurred while they were engaged in.

It didn't focus on the type of work they generally performed.

It... for instance, in Behrens, I believe, the worker was working on an interstate... intrastate traffic.

His job often included interstate traffic.

He would be engaged in commerce, but because at the time he was hit by the locomotive he was engaged in solely intrastate work, the Court said that, given the temporal limitation of FELA, it doesn't apply.

So those cases support our position.

Shanks in particular supports our position because Shanks goes to... the FELA law was very complicated.

There were many, many cases coming before this Court trying to decide who is and who is not covered by the various limitations.

Shanks goes through and summarizes the Supreme Court jurisprudence of the time under FELA and makes very clear that engaged in is as broad as it gets, because it includes not just those narrowly working on the trains as they were going down the tracks, but everyone whose job is sufficiently related as to be practically a part of the interstate commerce.

So at the time, in 1925, engaged in was a term of art.

It was a term of art that reached to the full scope of Congress' commerce power.

That is to complete the answer as to... actually, it doesn't quite complete the answer, because there are still some words that we have to address.

That explains, we believe, why there was the reference to in... engaged in foreign or interstate commerce, because that was the common use of art whenever--

Justice Scalia: But it wasn't... but then they would have used it in section 2.

I mean, you have a very difficult phenomenon to explain, that is the fact that Congress obviously and intentionally used different language in section 1 and section 2.

That is just terrible drafting, just terrible drafting if Congress was trying to do what you say they were trying to do.

Mr. Rubin: --The two sections were drafted at different times by different people.

A--

Justice Scalia: That may well be, but--

Mr. Rubin: --A--

Unknown Speaker: --that's terrible drafting.

Mr. Rubin: --The--

Justice Scalia: I mean, Congress is supposed to come up with a coherent bill, and we usually assume it was all drafted at the same time and somebody sat down and used the same words to mean the same things throughout the statute, and we usually assume that when they use different words they mean different things.

Mr. Rubin: --There is a reason why the locutions in section 2 are different from those in section 1, and that is because the language in section 2, the coverage provision refers to... and it's an odd locution, one that we've certainly not seen in other statutes... contract evidencing a transaction involving commerce.

The word engaged, had engaged come first, would not have fit in that phrase, because there can't be a contract evidencing a transaction engaged in commerce, because a transaction cannot engage in commerce.

By the same token, in the section 1 exclusion it would have made no sense to use the word, involving, because workers aren't involving commerce.

Now, perhaps they're involved in--

Justice Scalia: They're engaged in businesses involving commerce.

Workers in businesses involving commerce.

Mr. Rubin: --Then that has--

Justice Scalia: I mean, it's so easy to do.

Mr. Rubin: --It both adds more words, it does not respond to the concerns of those--

Justice Scalia: If you're worried about adding words, they could have ended it after workers and it would have achieved the same result.

Mr. Rubin: --It does not address the concerns of those who were objecting, because it used the exact language that they proposed.

There's one more phrase that I haven't addressed, and that's the any other.

I know Justice Kennedy asked about the class, but the complete phrase is, any other class of workers and, as this Court has stated on several occasions, when Congress uses terms such as... in fact, when it uses the language, any other, it means exactly that, any other.

That's as broad as it gets.

That is language without limitation, and instead of saying, any other class of workers in transportation, which is essentially what petitioner's argument would have the Court read section 1 to mean, commerce was a defined term of art.

Section 1 itself defined commerce as, interstate or foreign commerce, as broad as it gets.

It didn't say, commerce means transportation.

Petitioner would not only have the Court adopt the illogical explanation that Congress excluded from this bill those workers over whom its commerce power was the clearest and federalize the law of arbitration only those as to whom I believe Justice O'Connor said was most questionable--

Justice Ginsburg: Mr. Rubin, there's also the phrase, contract of employment.

You were candid in telling us that you consider workers to include any employee, even managerial employees.

What about collective bargaining contracts?

Are they... where do they stand as... do they fall within the section 1 exclusion?

Mr. Rubin: --Yes, and in fact the majority of the circuits agree with the proposition that collective bargaining agreements are excluded.

Various amici have totalled up, I think 5 to 3, but yes, collective bargaining agreements--

Justice Ginsburg: How was that consistent with... we're told that the Ninth Circuit is the only one that holds that all employment contracts are out under section 1, but--

Mr. Rubin: --I believe the more accurate statement would be that those circuits that focused solely on individual employment contracts drew that distinction, because in fact, going back to 20, 25 years, the majority of the circuits have said the collective bargaining agreements are excluded.

The practical effect is minimal, because the Labor Management Relations Act, Section 301, as this Court clearly held in Lincoln Mills v. Textile Workers, does ensure the Federal common law of arbitrability for collective bargaining agreements.

Justice Ginsburg: --What was the reasoning in the circuits for saying that collective bargaining contracts are excluded?

Is it that they were not contracts of employment?

Mr. Rubin: No, no, no.

It's precisely the opposite, because they were contracts of employment of any other class of workers.

Justice Souter: And some of the examples involve collective bargaining agreements outside of the transportation industry.

Mr. Rubin: Yes.

Yes.

Justice Kennedy: But why wouldn't those courts have said that the National Labor Relations Act is just a superseding statute?

Mr. Rubin: The National... the... section 301 of the LMRA is a different statute.

Justice Kennedy: Or, LMRA, yes.

Mr. Rubin: Is a... well, this Court in Lincoln Mills was faced with a choice as to whether, in deciding to hold collective bargaining agreement arbitration provisions enforceable, it should do so under the FAA, as the lower court had held, by the way, in the Fifth Circuit in Lincoln Mills, or whether to hold it enforceable under section 301, which was enacted in 1947.

The Court chose section 301.

The Court made no reference whatsoever in its opinion to the FAA, and that's where Justice Frankfurter in his dissent first laid out the argument that we're following up on in our briefs to say that the FAA is inapplicable for this--

Justice Kennedy: Why doesn't the 301 reasoning explain what the circuits have done and say, well, these are just controlled by another statute?

Mr. Rubin: --The circuits who have drawn that distinction have not relied on 301.

Sometimes the cases arise in the question of which statute of limitations applies, whether you borrow the Federal Arbitration Act statute of limitations or not, but that hasn't been the distinguishing characteristic and, of course, this case not being a collective bargaining agreement, certainly LMRA section 301 does not apply to this case.

Justice Breyer: Is it true that all the other circuits but the Ninth have restricted this to transportation workers?

Mr. Rubin: No.

Some have, as we pointed out, restricted it to employees of common carriers.

Justice Breyer: Well, all right, but I mean, restricted it, then it can't be that there are a lot of circuits that have held that collective bargaining agreements are excluded as a contract of other workers.

Mr. Rubin: Well, there are--

Justice Breyer: All right.

Mr. Rubin: --I think the First, Fourth, Fifth, Sixth, and Tenth have... and the Ninth.

Justice Breyer: I don't see the consistency there, but I need... that isn't your problem at the moment, nor mine.

The question I have is the same I addressed to your brother over... as I understand it... this is 75 years ago.

Mr. Rubin: Yes.

Justice Breyer: It's an old statute.

Mr. Rubin: Yes.

Justice Breyer: And it's possible the language is open and, given that possibility, I'd like to know what the consequence is.

As far as I understand it, when I'm focusing on workers... and I believe there still is hostility to arbitration in the States, and I also think that there are a lot of unfair arbitration agreements, but there are even more that are fair and many of them help the average worker, maybe not your client.

All right.

Given that background, who's going to be left out in the cold?

Are there a class of workers such that if we accept the Ninth Circuit they will suddenly not be able to get arbitration agreements that might help them because of State hostility or complex State rules, et cetera?

Mr. Rubin: No.

Justice Breyer: Can the NLRA, NLRB take jurisdiction over such a class?

Mr. Rubin: There--

Justice Breyer: Is there a problem?

Mr. Rubin: --There are several levels of responses, but I think to address what I understand your concern to be, workers and employers can always enter into voluntary arbitration agreements.

They can always decide between themselves after a dispute arises, for example, that they choose to pursue an arbitration mechanism rather than to go into court.

If they agree to arbitrate, there is no problem.

It's not like the old common law hostility to arbitration.

There's no question that it would be enforceable.

Justice Breyer: Your response is, then, look, they can still agree, just not in the employment contract.

Mr. Rubin: They... in a few... the ultimate issue here is whether States can determine whether the employment relationships in those States, whether an arbitration agreement is enforceable or not.

Chief Justice Rehnquist: Well, you're going to be--

Mr. Rubin: In those--

Chief Justice Rehnquist: --You're going to be arbitrating under the kind of agreements you describe simply between the... either under State law or under Federal law, aren't you?

I mean, there's no other way to do it.

Mr. Rubin: --If someone is to go to court--

Chief Justice Rehnquist: Yes.

Mr. Rubin: --to enforce an arbitration agreement that one side is objecting to--

Chief Justice Rehnquist: Right.

Mr. Rubin: --Yes.

It's either the State law or the Federal law that will apply in this case determines whether--

Justice Scalia: Mr. Rubin, your argument assumes that giving a broader modern meaning to section 2 and giving a broader modern meaning to section 1 are one and the same things.

I really don't think that that's what's going on here.

I mean, what you're really asking us to do is to change the language of section 1 in light of the fact that we now know that Congress could have gone further than it chose to go in that language.

I don't know any other case where we've done that.

You're not asking us to simply give that language its modern, more expansive meaning.

You're asking us to say, you know, in light of the fact that we now know that it's not just employees engaged in interstate commerce who can be covered.

Had Congress known that then, they would have written a different provision and so, Supreme Court, why don't you rewrite it for Congress, because they surely would have put it this way if they had known then what we know now.

Do you know any case where we've done that?

Mr. Rubin: --I'm not asking you to rewrite the language, Justice Scalia.

I'm asking you to accept that Congress in 1925 saw a symmetry, saw an objection, responded to it by making sure that any worker that might be... if there were any worker out there whose contract of employment evidenced a transaction involving commerce, they would be taken out of the act completely.

Justice Scalia: You're saying they saw a symmetry which now no longer exists because we've given the first part a much broader meaning, and now this other part, which they once thought was symmetrical, is no longer symmetrical, so now we should read it to mean something more--

Mr. Rubin: To--

Justice Scalia: --than a class of workers engaged in foreign or interstate commerce.

Mr. Rubin: --To get back to the very first question you asked petitioner's counsel, what did Congress mean by the language used in 1925.

Involving, which had never been used before in a commerce relationship and has never been used since, could not have meant anything more than engaged in, because engaged in was as far as it got.

So to the extent there has been a rewriting... and I'm not contending there's been a rewriting.

I'm contending there's been an application under the modern interpretation of the Commerce Clause.

As this Court in Terminex said, you have to look to see what Congress is trying to achieve.

What were the purposes?

And when the Court read, involved in--

Justice Scalia: Even when it doesn't achieve that by reason of future changes, future changes in the law, or future changes in circumstances.

What you're asking us to do is, in light of future changes in the law, make this statute read the way Congress thought it was going to operate when it was enacted, but we don't usually do that.

If, in fact, engaged in interstate commerce is something narrower and is no longer symmetrical, tough luck.

Congress can amend it.

But we don't go around rewriting it in order to preserve symmetry.

Justice Kennedy: Maybe your answer is, we've already rewritten section 2.

Mr. Rubin: --In fact, in Terminex in 1925, that... that's what happened.

The language in 1925 maintained that symmetry, maintained that symmetry for purposes that were stated that are in the record.

There is no indication of any reason why Congress would have disrupted that symmetry, what purposes could be served, how it could be--

Chief Justice Rehnquist: But it isn't symmetry.

I mean, there's different language used in the two sections.

Mr. Rubin: --It's symmetry, Your Honor, in the sense that because some felt that the coverage language might encompass workers' contracts of employment, Congress, to the fullest extent it could, pulled those workers out.

Chief Justice Rehnquist: That's a very odd definition of symmetry.

Mr. Rubin: Symmetry may not be the right word.

The concept is the word that I'm trying to convey to the Court, and the concept is the concept of ensuring that no contracts of employment that might be covered under Congress' commerce power would be covered.

One provision should not be read dynamically, as this Court did in Terminex, while the other is read statically.

There's no indication that Congress intended that.

Congress didn't use the word, transportation.

It had enacted numerous statutes by 1925 that had limited the scope to transportation, or to common carriers, or to common carriers by railroad.

It had that language readily available to it had it intended the carve out, but there is no gap between the section 2 coverage and the section 1 exclusion and, therefore, just as in 1925, all workers' contracts of employment were excluded, any other class of workers, the broadest possible language, so, too, we urge the Court to construe the statute that way now.

If there are no further questions--

Chief Justice Rehnquist: Thank you, Mr. Rubin.

Mr. Rubin: --Thank you.

Rebuttal of David E. Nagle

Chief Justice Rehnquist: Mr. Nagle, you have 2 minutes remaining.

Mr. Nagle: Thank you.

Very briefly, first, with respect to the particular questions that have arisen regarding our citation of Behrens, I would ask the Court to look at the sections on pages 7 and 8 of our reply brief, where we specifically tried to address that the 1925 Congress that had used the words, engaging in interstate commerce, that... I'm sorry, with respect to Behrens, had indicated that that applied only to employees who were actually engaged in interstate transportation or closely related functions, and not to other employees that Congress had the constitutional authority to regulate.

Justice Kennedy: You cite Behrens... you cite... never mind.

Go ahead.

Mr. Nagle: Yes, Your Honor.

With respect to the questions on section 301 of the Labor Management Relations Act, that, of course, affects those in the unionized context.

I would note, as Justice Scalia had pointed out, that this would lead to the anomalous result that a CEO of a multinational corporation who has an arbitration provision in his or her employment contract, that it would not be enforceable pursuant to the FAA.

I would note that in Prima Paint, at note 7, the Court made reference... albeit it in dicta the Court made reference to certain kinds of employment contracts being excluded under section 1, which is consistent with our view that it was not intended to cover the entire range of that which was covered.

Ultimately, I would suggest that as the court of appeals have consistently held, the narrow reading of section 1 is the only reason which is based on and consistent with the text, that makes use of the full text and conforms with the principles of statutory construction, so that we don't read words to be meaningless and that we do apply the canon of ejusdem generis.

As this Court noted in Allied Bruce, and particularly in Justice O'Connor's concurring opinion there, there's value in uniformity and stability of the case law which has developed.

Since Gilmer, untold number of agreements to arbitrate employment claims have been entered into in reliance, and I would suggest that Congress is certainly well aware of this case law development, has had the opportunity to correct it if they thought the Court had gotten it wrong, and they have declined to do so.

If there are no further questions--

Chief Justice Rehnquist: Thank you, Mr. Nagle.

The case is submitted.

Attribution:

The Oyez Project

Featured:

Christensen v. Harris County - Oral Argument

Fri, 09 Jan 2009 14:50:16 +0000

Case:

Christensen v. Harris County

Media File:

98-1167_20000223-argument.mp3

Related Transcript:

1999_98_1167_argument.xml

Transcript:

Argument of Michael T. Leibig

Chief Justice Rehnquist: We'll hear argument next in Number 98-1167, Edward Christensen v. Harris County.

Spectators are admonished do not talk until you get out of the courtroom.

The Court remains in session.

Mr. Leibig.

Mr. Leibig: Mr. Chief Justice, and may it please the Court:

In July 1992 the county council, attorney for Harris County, Texas wrote to the Department of Labor and asked, while it is clear that the... I'm quoting from their letter to the county manager, to the Department of Labor, and they asked whether... while it was clear that the sheriff may authorize an employee to use comp time when he requests to use it, that the regulations and the statute did not make clear whether an employer could compel an employee to use compensatory time under the Fair Labor Standards Act when the employee did not want to use it, and they asked for an opinion from the Department of Labor as to whether, under the regulations and the statute, that would be allowed, and the Department of Labor answered that on September 14, 1992 that absent an agreement that was willingly accepted by the employees, an employer could not compel the use of comp time under the Fair Labor...

Justice Scalia: Agreement or understanding, is that it?

Mr. Leibig: I'm sorry... agree... yes.

Agreement...

Justice Scalia: Or understanding, in terms of our understanding come in there?

Mr. Leibig: It says agreement or understanding, and also...

Justice Scalia: And do we know whether this is the case?

How many of these people were hired after this policy was already in effect?

Mr. Leibig: Well, there's... in the record in this case it's not clear when the parties came in effect.

It came into effect sometime between 1992 and 1993.

Most of the plaintiffs were working then.

Justice Scalia: But certainly, as to any plaintiffs who were hired after 1992 or '93, if the Department said this is going to be our program, and they took the job, would that qualify as an agreement or understanding?

Mr. Leibig: It might, and I'll explain how, but it depends on whether or not that was a... clearly communicated to the employees and the employees accepted it when it was communicated.

Chief Justice Rehnquist: Well, if they...

Mr. Leibig: In this case...

Justice Souter: All it has to be is...

Mr. Leibig: In this case the facts are...

Justice Scalia: clearly communicated when they accepted the job.

Mr. Leibig: Excuse me.

In this case the facts are that there was a county regulation saying that comp time would be used, but it did not include an agreement with regard to compelled use.

Chief Justice Rehnquist: Well, so far as an employee accepting... if you come to me looking for work and I say, you know, you work 40 hours a week, and you'll be paid at $10 an hour, and you go to work, you've accepted my deal, have you not?

Mr. Leibig: Yes.

Chief Justice Rehnquist: I mean, you don't have to say... it's not a question of voluntary confession or something like that.

Mr. Leibig: Right, but under the regulations and the statute, and this is in section 207(o) itself, it says the... and in the regulation, it says that compensatory time off in lieu of cash may be used, and may be a condition of employment.

There's a specific reference to the regulations that could make it a condition of employment, which I think is the question, but it says so long as the comp time agreement is pursuant... is with the individual employees and pursuant to their knowing and under... knowing and voluntary acceptance of it.

So, for example, in your accept... in your example, I could come... you could say, I want you to come to work with me for $10, which you unilaterally decided, and I could accept that, and I would be knowingly, voluntarily accepting it.

On the other hand, you could offer me the job and I could say, no, I want $15, and you could say, well then, you're not hired, but you could also say, then you are hired, and then we'd have a bilaterally determined condition of employment, and I think if you look at the regulations, while the regulations are clear that it could be a condition of employment, they're also clear that it can only be a condition of employment so long as it is accepted by the employees knowing in advance what the rules on preservation...

Chief Justice Rehnquist: You're not suggesting there has to be some sort of a written acceptance.

Mr. Leibig: No, but at least there has to be... which there's not in this case... a clear enunciation first how the comp time will be preserved and used, and that the employer would have the authority to compel it, which didn't exist in this case.

There would be comp time, but there was no... nothing in the record, and there wasn't anything that said, we can compel use.

They adopted a... they... it says a practice in the stipulation, but it means a policy of compelling use, but that wasn't in the regulation that estopped...

Justice Breyer: What are we supposed to do about that, because I thought that everybody agrees if the employee knowingly and voluntarily agreed to the understanding...

Mr. Leibig: I think...

Justice Breyer: at issue, then everybody agrees that then the county would win, and I think everybody... then the issue is here, though, on the assumption that they didn't knowingly and voluntarily agree, and is there now a question in the case about that so that we should send it back, or...

Mr. Leibig: Well, the suggestion of Judge Dennis in the dissent...

Justice Breyer: Yes.

Mr. Leibig: in the Fifth Circuit was exactly that.

Justice Breyer: All right, so what are we supposed to do about that?

Mr. Leibig: What we ask the Court to do is send the case back for reconsideration in...

Justice Breyer: Of that point.

Mr. Leibig: consistent with the Department of Labor rules.

That's what we've asked for in the complaint.

Obviously, we could have asked for, to overturn the court of appeals and uphold the trial court, but the trial court did not make findings with regard to whether or not an agreement existed and what the agreement was, therefore that's not in the record, and if you want to make it a condition of employment, first of all you have to have exactly what the agreement was and, secondly, that the employees knowingly and willingly accepted it.

Justice Ginsburg: Was there any allegation by the employer that there was anything other than an agreement that there would be comp time?

There wasn't any allegation that any of this was fleshed out.

Mr. Leibig: No.

In fact, the employer, both in the answer to the amended complaint and the stipulation, it's clear, and in their brief, they don't claim that there was a specific provision on compelled use, and there wasn't.

I mean, in fact there wasn't, but... and neither the district court nor the court of appeals, nor the stipulation, includes that important factor...

Justice Breyer: Then why would it...

Mr. Leibig: which is why Judge Dennis suggested that the trial court would have to make such a determination in order to allow any court to apply the applicable regulations.

Justice Ginsburg: Well, why would a trial court have to make such a determination if the employer is not alleging anything more than we had an understanding, they knew when they took the job that it was going to be comp time instead of overtime pay, and we didn't... we're not alleging that we spelled out the details of it.

We're not alleging that they specifically consented to this...

Mr. Leibig: Compelled use.

Justice Ginsburg: Compelled use.

Mr. Leibig: Well, I think the problem is in the record the way the district... the trial court did that, they didn't get to the second point where they actually said we're not alleging, the county is not... that's why I would...

Chief Justice Rehnquist: In any event, you...

Justice Scalia: Even if they didn't, do you think it is a reasonable interpretation... when the employer says, you're not going to get overtime, you're going to get comp time, do you think a reasonable interpretation of that is that I can sit on my comp time, refuse to use it until I finally retire, and then cash it in...

Mr. Leibig: Yes.

Justice Scalia: at time and a half?

You think that's a reasonable interpretation...

Mr. Leibig: Well...

Justice Scalia: when the employer says, what you're going to get is comp time, and my follow-up question is, do you think it's a reasonable interpretation of a statute...

Mr. Leibig: Yes.

Justice Scalia: which says you can give an employee comp time instead of overtime, that it means the employee can sit on the comp time until he retires and then cash it in for overtime pay?

Mr. Leibig: Yes, I do, because the statue also says... first of all, yes, I think it's reasonable.

Second of all, the statute itself also says that there's a... expressly in the statute there's a 480-hour cap on comp time banks, and that after the employees reach that cap, they then can use the comp time, and it has... it deals with how to use it, by making requests and so forth, and therefore it... the statute doesn't give an employer a permanent right to use compensatory time.

Justice Scalia: Well, as I understood the statute, it was enacted in response to the complaint of the States that now that you're applying the Fair Labor Standards Act to us we're going to go bankrupt.

We cannot pay time and a half to firemen, policemen and so forth.

So Congress said, well, okay, if you want you can give them comp time instead of time and a half.

But what you're urging here, to wit, that the policemen and firemen can simply refuse to use the comp time.

Mr. Leibig: Right.

That's because...

Justice Scalia: And then get it in cash.

It just makes... it just makes nothing of the concession that Congress made to the States.

Mr. Leibig: Justice Scalia, I would argue that the Congress didn't quite make as broad a concession as you indicated, because...

Justice Breyer: No, I...

Mr. Leibig: first of all the statute itself says that an employer may use comp time only pursuant to an agreement with the employees, and only pursuant to a number of other conditions.

The statute also says, delegates to the Department of Labor to make regulations about what that means, and the Department of Labor has made regulations that make precisely clear what those are.

In addition, while the legislative history indicates that Congress was trying to respond to Garcia and allow employers to operate more efficiently, the legislative history is also clear that the comp time provisions were meant to accommodate preexisting arrangements between employers and employees, and that they weren't the major part of the cost saving.

They gave greater flexibility to the employer, but the statute and the legislative history repeatedly is also clear they gave a right to the employees to use it to control the comp time in the legislation.

Chief Justice Rehnquist: Mr. Leibig...

Within reason.

Mr. Leibig, let me get the procedural history of this case straight.

The district court granted summary judgment for your client.

It went to the Fifth Circuit, the Fifth Circuit granted summary judgment for the county and Judge Dennis said, really neither side should get summary judgment, and your position here is that Judge Dennis was correct?

Mr. Leibig: Our position, and what we asked for in both of our briefs, is that the case should be remanded for further hearing in terms of the Department of Labor regulations, which required the investigation of the extent and meaning of the agreement and how the agreement fit into the rules.

That's basically correct, Your Honor, and the... I would...

Justice O'Connor: Could I ask you what Department regulation covers this exactly, and where we might find it in the material with this case?

Mr. Leibig: Yes, Your Honor.

Basically, that the... covers compels use exactly?

Justice O'Connor: Yes.

Mr. Leibig: Yes, Your Honor.

The regulation that deals with it is 553.23, and the...

Justice O'Connor: Where do I find that...

Mr. Leibig: Yes...

Justice Breyer: in these materials?

Mr. Leibig: In the appendix, the original appendix to the petition, which contained most of the appendix, at page 46...

Justice O'Connor: Just a minute.

Justice Breyer: I would look at the petition for...

Mr. Leibig: It's the white... the white large...

Justice Ginsburg: This?

Mr. Leibig: Yes, Your Honor.

Justice Breyer: And where would I...

Mr. Leibig: It's 46a.

There's a couple of things, but the first is 46a, and that is... 553.23(a)(1) describes how you get an agreement, and then (2) says the... it deals with the agreements, and this is a discussion of the kind of things that would be in an agreement, and...

Justice O'Connor: Where does... where do I find language here, on page 46a, that tells me the employee does not have to use it?

Mr. Leibig: No, you don't.

I mean, I was... as I say, I have to go to a couple of places.

What it says there is that the agreements for comp time may include provisions governing preservation, use, and cashing out of comp time.

Justice O'Connor: Yes.

Mr. Leibig: And then in addition to that it says in... back on page 45, it says agreements of understanding may provide comp time off.

In addition to the agreement an understanding may be a combination... it goes through the various things that would be in a comp time agreement.

Justice O'Connor: Well, I think everyone agrees that there can be an agreement covering it.

Where do I find in the regulation a directive about what happens absent an agreement?

Mr. Leibig: As the letter that I cited from the county, in the regulations themselves there's no express treatment of the compelled use question.

Justice O'Connor: That's what I thought.

Mr. Leibig: Yes.

Justice O'Connor: So to what do we defer, then, in terms of the Labor Department?

Mr. Leibig: The Department of Labor's interpretation of their own regulations, which is expressed... well, first of all, there's three of them.

First of all, it's expressed specifically in the letter... the specific letter, which in this case was actually a letter to Harris County saying compelled use, they interpret this regulation to prevent compelled use, and that relies on their interpretation of this regulation, plus I think it's important...

Justice Scalia: Who is that letter from?

Justice Breyer: Who did that letter come from?

Mr. Leibig: It came from Harris County's... specifically asking about the facts of this case.

Justice Scalia: To the Labor Department?

Mr. Leibig: Went to the Labor Department.

It was by the Administrator of the Wage & Hour Division.

Justice Scalia: The administrator...

Mr. Leibig: Right, and that was September, I think 14, 1992.

Justice O'Connor: And where is that?

Mr. Leibig: Of the letters... the letter itself is not reprinted in the record, but it's cited in all the briefs in this...

Justice O'Connor: So that's all we have, really.

Mr. Leibig: No.

Well, I wanted to... no.

And then in support of that, the question is, how did the Department of Labor get from the regulations to the thing, and there's two things in support of it.

First of all, the legislative history itself, of the... the congressional legislative, both the House and the Senate report, refer to the right of employees to use comp time 10 times and they refer to, 14 times, that it's a benefit of the employees, and that the employees can cash out comp time.

Justice O'Connor: Well, these are all statutory provisions.

Let me ask you this.

There's no collective bargaining agreement here...

Mr. Leibig: No.

Justice Souter: covering this...

Mr. Leibig: There's an earlier case before the State.

In Texas and Harris County, collective bargaining is illegal.

Justice O'Connor: There is no collective bargaining agreement that we worry about here?

Mr. Leibig: No, that's correct.

Justice O'Connor: Can the employer say, well, maybe it wasn't clear in the past, but I want to make it clear from this date forward, if you want to continue to work here, you're going to have to use your comp time, so if you want to stay a county employee, that's the rule?

Can they do that?

Mr. Leibig: Under the statute and regulations they can do that, and then the employees have the option of then either accepting it and continuing to work...

Justice O'Connor: Or leaving.

Mr. Leibig: Or... and by the way, under the regulations they not only could... the regulations both provide a condition of employment with those conditions.

They also provide, in 553.23(c)(1) at the bottom that you could just give notice, which... there may be... I'm not sure there's a debate, but there may be a condition between making a condition of employment and giving notice, but it also says if they give notice that we will have compelled rules, and if the employee then works a day after that, it can be presumed that he accepted it, but then if...

Justice O'Connor: Well, has the county give notice here...

Mr. Leibig: No.

Justice Breyer: do you think?

Mr. Leibig: No, because it also says that if the employee...

Justice O'Connor: No.

Justice Breyer: These employees don't know that the county thinks they have to use...

Mr. Leibig: Well, the regulation also says if the employees fail to express an unwillingness to accept it, it will be presumed, but in this case the employees did express an unwillingness to accept it, and therefore the opposite presumption I think would occur, and again you have to read the last two sentences of the section I cited, so that in this case, first of all...

Justice Kennedy: You mean, if the employee says nothing, then the county has to either fire them or assume that the deal's off?

Mr. Leibig: No.

I think the rule is if an adequate notice is given and the employee says nothing and works, the presumption is that he accepted it, but if he expresses an unwillingness to accept it, then the presumption is that he did not accept it.

Justice Souter: But then...

Mr. Leibig: Then if the employer lets him continue to work, he doesn't... can't compel him to use comp time, but he would have the option to terminate.

I mean, if they think it's that serious a thing to do, why, that would happen.

In this specific case all those cases, facts haven't been developed, but I think that's the way it would go.

Justice Souter: I presume they would also have the option to say, we're not going to fire you, but if you won't use the comp time, we're simply going to reduce your weekly hours to 35 a week.

Mr. Leibig: Well, I think they could, 1) say we're not going to let you work any more overtime.

Whether they could reduce their hours to a low, or below the statute...

Chief Justice Rehnquist: Why not?

Justice Breyer: Why not?

Mr. Leibig: Well...

Justice Souter: They're saying, look, we're doing it because we've got this great overhanging liability out there, and the only way we're going to be able to fund it is to save money in some other way.

Mr. Leibig: Well, first of all...

Justice Souter: And the wage and hour law doesn't tell us how many hours we have to let you work.

Mr. Leibig: The regulations say that the employee's decision to accept comp time has to be made free of coercion or pressure, and that's clear in the regulations and the legislative history.

Justice Scalia: But firing is not coercion?

Mr. Leibig: No, because...

Justice Scalia: You say you can fire him, but I can't reduce your hours to 35?

Mr. Leibig: Well, the regulations say you can make it a condition of employment, so if you make it a condition of employment, the person is free whether to accept the job or not, but if they do accept the job, then it is the system covered by the regulations, and part of this is to make sense out of all the regulations and the legislative history.

If the legislative history, which is trying to...

Justice Scalia: If possible.

If it says that, I don't call that making sense out of it.

You can fire him, but you can't reduce his hours...

Mr. Leibig: No, no.

I think you can reduce his hours unless you've expressed to him the intent of your reducing his hours is in order to pressure him into accepting comp time.

Justice Scalia: No, I'm not...

Mr. Leibig: But other than that...

Justice Souter: No, I'm not pressuring him.

He can keep his saved up time in the bank.

I'm not telling him he's got to draw that down.

Mr. Leibig: Yes, Your Honor.

Justice Souter: And he'll get... if he keeps it till the end he'll get paid time and a half.

I'm simply saying, I've got to provide for my liability, and therefore I've got to employ people less hours in order to put the money aside for a rainy day.

Is that coercion?

Mr. Leibig: No, I don't think it is...

Chief Justice Rehnquist: Okay.

Mr. Leibig: in that context.

If the employee could demonstrate actual coercion they may have an argument in the case, but absent that...

Justice Souter: But the example that I just gave you would not, as a matter of law, be coercion, you concede?

Mr. Leibig: I don't think so.

Justice Breyer: Yes.

Mr. Leibig: Also I think that, along the same lines because I want to make it clear, the odd thing about this case is the burden between the employer imposing this without an agreement with the employees, and what he would have to do to get an agreement, is not a long road.

The facts in this case are, they imposed compelled use without either the notice, the condition of employment, or...

Justice Souter: In fact, the road isn't any longer than my hypothetical, is it?

Mr. Leibig: No.

Justice Souter: We know it's going to happen.

Mr. Leibig: Right.

In addition to that, though, one thing in your hypothetical, that you assumed that the county would save money by paying people in comp time rather than cash, and I don't think Congress assumed that.

There's a slight additional flexibility.

In fact...

Justice Souter: I was assuming some fat there.

Mr. Leibig: Yes.

Justice Breyer: I must be...

Mr. Leibig: Comp time in fact would cost more than...

Justice Breyer: You have to... I may have to...

Mr. Leibig: so they may want to avoid it by paying it out later, but they...

Justice Stevens: Enlighten me about what you mean by saying paying in comp time instead of cash.

If they take comp time, don't they get paid in cash for the time they don't work?

Mr. Leibig: Yes, Your Honor.

That's what I was trying to explain, but they do, but hypothetically there's a slight way they can... it can cost the employer more, because if the employee is making $10 an hour in 1992, works for comp time and then banks it as Justice Scalia suggested, and then cashes it in 5 years later, probably he'll be making $12, so that could cost... over the long haul that could cost the employer a little bit more money.

Now, the...

Justice Breyer: Yes, but that's...

Mr. Leibig: In fact, you have a defense against that, because the employer is free at any time to cash out the contract, so they could avoid that, not only by cashing out the comp time, but I suggested in my brief three or four other ways that an employer can protect themselves from that happening, but in theory that's the additional cost of comp time if it's stored, and so...

Justice Stevens: But if he... of course, as the employer used his comp time a year later and the wage rate's gone up, the time he uses the comp time he will stay home and get paid at the rate... then current rate, will he not?

Mr. Leibig: Yes, Your Honor.

Justice Breyer: Yes.

Mr. Leibig: If he waits till he retires, there's another rule.

He either gets the regular rate or the higher...

Justice Stevens: Of course, in the meantime the employer's had the use of the money, too.

Mr. Leibig: Yes, and inflation's... but I'm just saying, other than that, and Congress is clear about this both in the regulations and the legislative history, Congress' view was that you're not supposed to use comp time... they meant comp time to be an equivalent of being paid in cash, because eventually you have to pay the money, and in fact in the real world it works out there would be areas I've described, and as we've described in our brief, there are methods by which the employer can save it.

Chief Justice Rehnquist: Thank you, Mr. Leibig.

Mr. Leibig: Thank you.

Argument of Matthew D. Roberts

Chief Justice Rehnquist: Mr. Roberts, we'll hear from you.

Mr. Roberts: Mr. Chief Justice, and may it please the Court:

An employer may not require an employee to use his comp time against his wishes unless the employee has agreed to that arrangement in advance.

That conclusion follows from two features of the act.

First, the act gives the employee the absolute right to overtime pay in cash.

An employer cannot substitute comp time for overtime pay in cash unless he first secures the employees' agreement.

Second, the act makes clear that comp time is a substitute for cash pay.

An employee has the absolute right to use that cash pay as he pleases.

The employer can't tell the employee when or how it may be spent.

Just as the control over cash is a central aspect of its value, control over the use of comp time is central to its value, and therefore the Secretary has reasonably construed the act to permit the employee to use the comp time he has earned as he wishes, except to the extent he's otherwise agreed...

Justice O'Connor: Now, where do we find some departmental regulation that spells out what happens...

Mr. Roberts: Well, the Secretary has construed its... her regulations to provide that in reliance on three provisions in the regulations.

First, section 553.23(a)(1), which is on page 45a of the joint appendix, which provides, just as I explained that the statute did, that comp time is a substitute for overtime payment in cash, and that there must be an agreement with the employee.

Justice Breyer: Well, that doesn't get you there.

Justice Scalia: That just says there has to be an agreement before you can use comp time.

It doesn't say what the consequence of using comp time is.

I mean, it just says there has to be an agreement before you can use comp time.

Mr. Roberts: Yes, Your Honor, and the Secretary is also relying on the provision in (a)(2) that says that the agreement may include provisions governing the use of comp time.

That's on page 46a...

Justice Breyer: Right.

Mr. Roberts: the first sentence, and also relying on (c)(1), which is on page 47.

Justice Scalia: Well, let's do (a)(2) first.

An agreement may contain other things.

It doesn't say it must contain other things.

Mr. Roberts: That's correct.

Justice Scalia: I mean, the regulation could have said that.

Any other things... you know, any other conditions on comp time must be included in an agreement.

It doesn't say that.

Mr. Roberts: The regulation doesn't require that it address that, but the Secretary has construed the regulation as a whole to mean that if it doesn't address that, then the employee retains the right to use comp time...

Chief Justice Rehnquist: Well, why on earth doesn't the Secretary say that in a regulation, rather than having to construe something that's ambiguous.

Mr. Roberts: Well, the Secretary didn't address it in the regulation, but did address it in the opinion letter, which provides clarification of the regulation...

Justice Breyer: Well, it still...

Mr. Roberts: and the Secretary's interpretations.

Justice Breyer: I just want to... I may be misremembering this, but I can't... let's just ask you that even if it's not a formal interpretation of the regulation, which I could see how it would be, what it means to say you can put extra conditions there, in terms of the... a background rule where nobody says anything.

I could understand that, but even if not, isn't there a famous administrative law case, Skidmore, which talks about this Court paying deference to a wage and hour administrator on the ground that even if he lacks... he possesses the power to persuade even though he lacks the power to control?

Mr. Roberts: Yes, Your Honor.

We contend that the interpretation of the regulation is entitled to stronger deference that Skidmore.

Skidmore was decided...

Justice Breyer: I never knew there was a difference of deference.

I never was able to measure it.

Mr. Roberts: Well, the courts of appeals, and I think this Court as well, recognized a difference between Chevron-type deference or the kind of deference in our, and what might be called Skidmore-type deference, which is that the... reasoned judgment is entitled to respect for its power to persuade and...

Justice Breyer: I mean, all we're talking about is, what is the background rule if, in fact, nobody puts a condition in the agreement?

Now, they're free to put it in or not, but what's the background rule, which is a pretty sort of interstitial minor point, isn't it?

Mr. Roberts: Yes, Your Honor.

It imposes very little burden on the employer.

The employer is well-situated to obtain the employee's agreement to that condition, and...

Justice Stevens: May I ask, Mr. Roberts, what's the opposite rule?

If the employer can't decide when it's used, does the employee have the right to say, well, I've decided to take it whenever I choose?

Mr. Roberts: The employee has the right to use comp time within a reasonable period when the employee requests it, unless it would unduly disrupt the employer's operation.

Justice Scalia: No, excuse me.

I thought he doesn't have to use it within a reasonable time.

I thought the position here is that he can sit on it and choose not to use it as he wishes, and cash it in at the end of his career?

Mr. Roberts: The employee can accrue the comp time so that the employee can use it on request, as provided by 207(o)(5).

The employee also could accrue it up to the maximum provided by the statute.

Justice Scalia: He has no obligation to be reasonable in his use of it at all, isn't that right?

I thought that's what we're arguing about here.

Mr. Roberts: He has an obligation to not... he's unable to use it on request if it would unduly disrupt the employer's operation, but...

Justice Stevens: Doesn't that cut against... I'm just trying to think it through.

Doesn't that in a way cut against you, in the sense that there is a restraint on the ability of the employee to use it whenever he wants to.

He can't just say on Friday I'm going to take off next Monday and Tuesday.

He must consider the employer's wishes, but there's no restraint on the employer's imposing, under the regulation, his desires on how it should be used, no express restraint.

Mr. Roberts: Because Congress did not expressly address the situation when the... if the employer could require the employee to use comp time.

I submit that that's because Congress didn't conceive that the employer would assert that authority, because Congress understood that the comp time belongs to the employee, and that the employee would ask when to use it and not be told when to use it, and that follows, as I said, from the features of the act that I described earlier, so Congress didn't have a need...

Justice Stevens: But the Congress did impose a ceiling on how much comp time that could be accumulated.

Mr. Roberts: Yes, but once that ceiling is reached, Congress specified that the employee would have to be paid in cash, which returns the employee to getting his basic rate under the act.

Justice Scalia: But what I don't understand, Mr. Roberts, is what good it does for Congress to say, you don't have to pay these people cash.

You can let them have comp time instead.

I don't see what good that does if Congress also says, oh, and by the way, the employees don't have to use this comp time.

They can just sit on it and bank it, and cash it in at the end of their careers.

What has Congress accomplished?

Mr. Roberts: Congress doesn't say you can pay these employees comp time.

It says, the employees have the right to overtime pay in cash, and the employees may agree with you when it's mutually beneficial to get comp time, and those mutually beneficial arrangements may save the employer money, but Congress was very clear, the statute is absolutely clear, the employee has the right to overtime pay in cash.

Justice Breyer: If they decide to bank it and never spend it, and the employer would like them to, and eventually get cash for it, when do they get the cash, when they retire?

Mr. Roberts: If they bank it, they get... they can accumulate under the 240 or 480 hours, and on termination of employment they have to...

Justice Breyer: On termination of employment, so it's quite possible that... it would be an unusual case where they'd want to bank it.

I mean, if you refuse it you get paid time and a half next month, and if you decide to take the comp time and save it, you're going to be paid when you retire.

Do you get paid more when you retire?

Mr. Roberts: You get paid... you might get paid more, but I don't think it would be worth more 20 years down the road.

You would get paid at the rate then.

It's unlikely...

Justice Scalia: Well, at the rate for your rank then, to.

Mr. Roberts: At the rate for your rank then, or the last 3 years.

Justice Scalia: If you're a captain then you'd get a captain's 240 hours, right?

Mr. Roberts: Yes, Your Honor but...

Justice Breyer: They must not make decisions based on these prospective calculation of what it's worth years down the road, or maybe they do, do they?

Mr. Roberts: I don't know whether they do.

There's no indication in this case that these employees wanted to do that.

Another feature of their complaint, which wasn't pursued on appeal, was that they were not being allowed to use comp time when they requested to do so, so it suggests that they did request to use comp time.

Justice Ginsburg: Mr. Roberts, does it come down to whether the default rule is, you get overtime, or the default is, as Judge Hickinbotham said, the employer sets the work rules?

Mr. Roberts: Yes.

You could look at it that way.

The reason that the default isn't that the employer sets the work rules is that Congress has displaced that principle that the employer can set the rules in the act by making... by giving the employee the right to overtime and by providing that the employer can only have a comp time arrangement pursuant to the employee's consent.

Justice Ginsburg: The question is, how detailed the consent must be.

Mr. Roberts: Right.

Justice Ginsburg: Just the comp time, or the working out of it.

Mr. Roberts: Yes.

That's the issue, and it is simply a default rule.

The parties... everyone agrees the parties can contract out of that principle, so it's not imposing an onerous burden on the employer, and what it is doing is furthering the underlying scheme in the act.

Argument of Michael P. Fleming

Chief Justice Rehnquist: Thank you, Mr. Roberts.

Mr. Fleming, we'll hear from you.

Mr. Fleming: Mr. Chief Justice, and may it please the Court:

One reason, or the main reason on why there aren't any regulations that address this issue, and there really aren't, is because of the... what's really taking place in this, what's been termed a forced use of compensatory time.

The Fair Labor Standards Act basically provides for a minimum wage rate and maximum number of hours.

There's no provision in there that guarantees a 40-hour week, work week.

An employer is always free to cut the work week short, to have an employee work 30 hours, 20 hours, 10 hours, 1 hour, and in the Fair Labor Standards Act there's a very specific provision that allows employers to cash out accrued compensatory time at any time.

It's in the statute and more specifically in the regulations.

Now, if they could do each of those two separately, there's nothing that prevents a public employer from doing so simultaneously to achieve the objectives which were set out in the amendments following the Garcia decision, that is, to protect the county's resources and budgets and really, in this situation, to protect against employees that do bank their comp time and hold it to the maximum.

Justice Scalia: You mean, the employee normally has a 40-hour week, say, you just come in 35 hours this week, I'll pay you for 40, right, and the other 5 will be paying down your comp time, right?

Mr. Fleming: Yes, Justice Scalia, and in fact...

Justice Scalia: So what's the big deal, then?

Why do we have this case in front of us?

Why don't they just do that?

Mr. Fleming: That's what we do.

What happens is that they'll... after the supervisor tries to reach an agreeable time for the employee to start taking time off and getting paid in cash from their compensatory time that's been accumulated, if the employee doesn't do it, then he meets with him and orders him to do it, and still tries to get a reasonable period of time when they can do it, and if not, then issues an order for the employee to do it.

And what will happen is, for instance, if it's a week the employee is going to take off, the employee doesn't come in to work that week but he still gets his paycheck, 40 hours of pay, and mind you, that pay has been accumulated at time and a half, so they're still getting the benefit of the time-and-a-half provisions of the Fair Labor Standards Act.

That's what the practice is, and that's what happens.

Justice Breyer: Well, why don't you put it in an agreement?

I mean, you know... that's what I don't understand, is why is this case such a big deal, since everybody agrees you should be able to do that, but you have to get your employees' agreement to it, just as you'd have to to get his agreement to comp time in the first place, and so you have to get that agreement anyway.

What's the big deal?

Mr. Fleming: I think...

Justice Breyer: And if there are good arguments on both sides, which there are, you could have a background rule either way.

The reg, I agree with you, doesn't say much about it.

Mr. Fleming: Sure.

Justice Breyer: And so why not just go with the agency?

I mean, that's a... why... you know, trivial matter, interstitial, background agreement, they have the experience, et cetera, et cetera.

Mr. Fleming: Well...

Justice Breyer: So that's sort of where I... what I'm thinking about it.

Mr. Fleming: Well...

Chief Justice Rehnquist: What is your response?

Mr. Fleming: That's a good question, and in addition to the default rule, which Judge Hickinbotham of the Fifth Circuit said, where he sort of filled in the gaps of what he perceived the agreement would be, in addition to the fact that under the statute we don't have to have an agreement, is our position, really how the case evolved, though, is up until we got to this Court the petitioner was saying that it's completely prohibited by the act, agreement or no agreement, and it was our position that it's... we're allowed to do it by the act, and that's still our position.

Justice Ginsburg: Well, and now in this Court everybody agreed that there can be an understanding.

We're talking about what notice the employees have to be given, so there's no question that from now on Harris County can say, this is the deal, employees.

The only question is when they didn't say that, when all they said was comp time, what should be the consequences?

Mr. Fleming: Well, we agreed that we could do it by agreement, but it's our position we don't have to do it by agreement, and whether we want to go back and issue a new...

Justice Ginsburg: Well, what's the it?

I mean, certainly you can't substitute comp time for overtime pay except by agreement or understanding.

Mr. Fleming: Yes.

Chief Justice Rehnquist: Right?

Mr. Fleming: That's...

Justice Ginsburg: So you must have an agreement to comp time.

Mr. Fleming: Which we have.

Justice Ginsburg: And the question is, what are the terms and conditions of that comp time?

One we know from the statute, that the employee can request it, and the employer has to accommodate unless the time that is being sought would unduly disrupt...

Mr. Fleming: Yes.

Justice Ginsburg: operations.

Mr. Fleming: Yes.

Justice Ginsburg: So we have that one condition on it directly out of the statute.

Mr. Fleming: Yes, Your Honor.

Justice Ginsburg: But why, if Congress is trying to say, employees, it's your option, or at least you have to be given notice, why shouldn't that notice be, here it is, and at a certain point you're going to have to take it?

Why shouldn't that be spelled out, instead of the employee thinking, well, this is fine.

If I need it, I'll use it, and if I don't need it, I'll bank it, and the statute says after X number of hours I get paid in cash.

Mr. Fleming: Justice Ginsburg, I agree that it can be in an agreement, certainly.

But just as the Fifth Circuit said, that there are workplace rules which the employee governs, in this case, this is something that is outside of the act.

They could be... setting the number of hours below 40 is not covered by the Fair Labor Standards Act, and the employer is not required to enter negotiations with the employees on when they're going to set those hours or cut them back.

Justice Scalia: Is that what you did here?

I am in some perplexity.

I thought your opponent had acknowledged that it would be okay for the employer just to say, next week only come in 35 hours, and for the employer to take the money that it saves, the 5 hours, add a little bit more to it for the time and a half, and voluntarily, as it's entitled to do, buy out 5 hours worth of the comp time.

Now, is it common ground that that is okay?

Mr. Fleming: I don't know if... I don't think that's what the petitioners are maintaining.

That's our position.

We're telling them, don't come in next week, or, you know, in a couple of weeks...

Justice Scalia: No, you're doing something a little different.

You're saying, don't come in next week, take your comp time instead.

Mr. Fleming: Yes.

Justice Breyer: Right?

Mr. Fleming: That's what... as we have maintained, we're doing two things, and they...

Justice Scalia: That's a little different from saying... you're directing them to take their comp time.

Mr. Fleming: Yes.

Justice Scalia: Which means, you know, they won't get any... well, they'll get their regular pay, and they'll have time and a half off, I guess, right?

Is that how it comes?

Mr. Fleming: Yes.

I mean, they've accrued the comp time for time and a half, and...

Justice Scalia: Well, that... it seems to me that's a bit different from simply saying, look at... God, you've got 240 hours here.

I can't afford that.

Don't come in for 5 hours next week.

Say nothing else about the comp time, and then the employer just buys off 5 hours worth of comp time.

That's a little different, and I'm not sure that the other side says that that's bad.

That's not what you've done here, though.

You've instructed them to take their comp time.

Isn't that the facts of the case?

Mr. Fleming: Yes, but by doing it, it's in two phases.

I agree that it's a forced use, but as far as finding a statutory authority for doing it, it's the way I explained.

There's nothing that can stop us from shortening the work week, and we can cash out the comp time at any time without any restrictions.

Justice Scalia: Why don't you do it the other way, and save us all this trouble?

Unidentified Justice: [Laughter]

Justice Souter: But I think that was the answer to my hypothetical.

I said, what if they... if they do nothing but say, we've got to make up some money somehow to pay for this overhanging liability, so we're only going to employ you 35 hours a week, and I understood your friend on the other side to say that would not be coercive, and that would be okay.

In practical terms, that would get you exactly where you want to go.

Mr. Fleming: You mean... if I understand your question...

Justice Souter: Because... excepting in one case.

If the employee says, all right, by Godfrey, I'll work 35 hours a week, but nothing is going to induce me to touch my accrued comp time.

That nest egg is going to stay there until the day I retire.

The employee could do that.

In the real world, I presume that would not happen.

Justice Scalia: He can't do that, can he?

Doesn't the employer have a right to buy out the comp time?

Mr. Fleming: The employer has a right to buy out the comp time.

Justice Stevens: That's right.

That's right.

Justice O'Connor: That's right.

Justice Stevens: That's the issue.

That's the issue.

You can make him work 30 hours a week, but the question is, can he refuse to be paid for 40?

Mr. Fleming: No, because we can cash it out.

Justice Stevens: That's your position.

Mr. Fleming: That's...

Justice Stevens: His position is, he can say I don't want to take the 10 hours in cash, I want to keep it in the bank.

Mr. Fleming: I don't think that they're saying that they can refuse to take the payment, because the statute and the regulations are very clear about that, cash them out at any time, and so if we can do either of those separately, we can do them simultaneously.

Justice Ginsburg: And that's what protects the employer against excessive accumulations.

The employer can always say, well, the main rule is time-and-a-half pay.

Here's your pay.

Mr. Fleming: Yes.

We can cash them out.

Chief Justice Rehnquist: That...

Mr. Fleming: The employer can cash out at any time.

Justice Ginsburg: But then, if you look at it as the comp time being an exception to the overtime pay, then it would be logical to say the employer can go back to what is the main rule, what is the rule in workplaces that are not public.

There's no comp time option in the private sector, is there?

Mr. Fleming: No.

Justice Ginsburg: So the underlying premise of the Fair Labor Standards Act is, you pay time and a half.

Then there's an exception that operates only in the public sector, but Congress has provided that the employer can always do what employers all over the country must do.

That is, pay time and a half.

Mr. Fleming: Pay time and a half, or we can cash them out.

Justice Ginsburg: Well, that's what I mean by cashing them out, by... instead of letting them accumulate the time, giving them the money.

Mr. Fleming: Yes, as they... as they're accumulating it, if we... when they reach the 240 hours, if they do, if we don't cash them out they're going to get time and a half.

Justice Stevens: May I confess to total stupidity here, because if you've got your 30-hour-a-week example, you say you have an absolute right, and they don't contest the fact you can pay them for the extra 10 hours if you want to.

Mr. Fleming: That's right.

Justice Stevens: Well, what exactly does...

Then why aren't you doing that?

I don't understand why that isn't... what you're fighting about, if everybody agrees you can do that.

Isn't that just making them take 10 hours of comp time each week?

Mr. Fleming: If we did it each week, we could.

We don't do it each week, though.

I mean, they wait till it gets up to near the maximum of 240 hours in our case, and then they try and get it to come down a little bit, so they're not cutting back their time every week.

Chief Justice Rehnquist: Give me a specific example of what cashing out means.

Mr. Fleming: Cashing out is if an employee has some accrued compensatory hours, whether it's 1 hour or 240 hours, that the employer can pay for those hours in... at the... whatever rate the employee has at that time, or... and they can also do it when the employee leaves or is terminated, and they pay it out dollar for dollar based on the number of hours.

Now, the hours have been accumulated at time and a half.

Chief Justice Rehnquist: Yes.

There is no such thing as comp time for regular... for not overtime, is there?

Mr. Fleming: No, there's not.

Justice Souter: I want to go back to your answer to Justice Stevens' question.

If I understand it correctly, what this case boils down to is this.

If you reduce hours on a regular basis, and you also choose to cash out a portion of the accumulated time every week, no problem, no argument, but if you do it on an irregular basis, if you make a judgment that the fire department, sheriff's department says, gee whiz, next week we haven't got much process to serve, so I think we'll make so-and-so take Wednesday afternoon off, not a regularly scheduled thing every week, an irregular judgment from time to time, that's what we're fighting about?

Mr. Fleming: I don't want to state the petitioner's position, but...

Justice Souter: That's what you think we're fighting about?

Mr. Fleming: Yes.

Well...

Justice Scalia: It's not even as substantial as that.

You could, on an irregular basis, say we have so many... so few processes to serve next week, you know, Jones, take next Wednesday off.

Mr. Fleming: Yes.

Justice Scalia: Right?

And then make the decision to pay Jones... pay Jones' comp time down.

Mr. Fleming: If Jones didn't have any accrued compensatory hours we could do that.

He gets nothing.

Justice Scalia: So you don't... it really doesn't... it doesn't make any difference, and that leaves me in something of a quandary, whether the fact that it doesn't make any difference means that we should find for your opponent, because you can do what you want to do anyway very easily, or the fact that it doesn't make any difference should make me wonder why it should be prohibited to do it the more honest way by the Fair Labor Standards Act, why...

Mr. Fleming: Well...

Justice Scalia: I don't know which resolution that leaves you with.

Mr. Fleming: See, Justice Scalia, in looking at the Fair Labor Standards Act, there's nothing in there that prohibits us from doing this.

Justice Breyer: But it's symmetry.

Mr. Fleming: Well, it's symmetry...

Justice Breyer: You see, basically the statute says, we prefer money.

You work overtime, we'll give you money.

Now, you work overtime, you get the money.

Now, if you agree to take the comp time, that's fine, and that kind of idea, that it's money or you get their agreement... it says its money and they get their agreement, they get the comp time.

It says it's money, or you get the agreement if you want to force them to take the comp time rather than wait till the end and get the cash, all right.

I mean, it's symmetry.

Mr. Fleming: It's symmetry, but if you go back to what Justice Scalia said at the very beginning of the argument, was that the purpose of these amendments in the first place was to help out the governmental entities so they can manage their budgets and wouldn't have to pay this overtime in cash, and it was expected that the employees would use the compensatory time, and not expected that they would bank it...

Justice Breyer: I don't see why most of them don't, to tell you the truth.

I mean, why are they going to wait around for 20 years and cashing it out, instead of... don't most of them?

Mr. Fleming: Well, if they don't do it...

Chief Justice Rehnquist: Yes.

Mr. Fleming: okay, and we get to the position where they're reaching the maximum level and the Government's going to have to start paying time and a half in cash, then a fair reading of the...

Justice Breyer: Do we know any facts here, by the way, what actually happens?

Mr. Fleming: There's nothing in the stipulation, which is basically the record, as to exactly how many this occurred would amount to the...

Justice Scalia: It is not an unknown phenomenon in the Federal service for some people to save up sick time, which they're entitled to be compensated for at the end of their service, and it was not an unheard-of practice for people to save up vacation time, which is why some employers require you to take your vacation, because people would work the whole year and then, you know, save up all their vacation time, retire a year earlier.

I don't think it's at all fanciful to think that people would bank this stuff.

Justice Breyer: What about the other... sorry.

Did you want to answer that?

Justice Souter: Go ahead.

Mr. Fleming: Oh, I agree that... I mean, it's easy to see that people will do it, but under the act and the '85 amendments it was expected that people were going to use it, and that was their concern, is that the employees have the time, and the Fair Labor Standards Act makes sure that people aren't overworked, without getting paid time and a half for it.

It's not to make sure they get to work 40 hours.

Justice Stevens: Could you explain something else to me?

I think we understand now the 30-hour... you can make them work 30 hours a week, and pay them the extra 10 even if they don't want that.

How is it that you are in fact compelling them to use their comp time if it's not by that example?

What do you do to them when they get 220 hours, and they're getting close to 240?

Mr. Fleming: That...

Justice Stevens: How do you... what is the arrangement which makes the expend their comp time?

Mr. Fleming: They're told to do it.

Justice Breyer: They're told...

Mr. Fleming: That is how we're doing it.

Justice Breyer: Pardon me?

Mr. Fleming: That is how we were doing it.

Justice Stevens: You make them work 30 hours a week instead of 40?

Mr. Fleming: And 30's just an example, but it's, they're going to take the time off...

Justice Kennedy: Short week.

Mr. Fleming: And then we're going to cash you out under the act, some of your hours, to make sure you get a full paycheck.

Justice Stevens: I see.

Chief Justice Rehnquist: So they get the same paycheck that they would if they had worked the regular hours?

Mr. Fleming: They get the same paycheck, but they haven't had... they've got... the hours that are cashed out they accumulated at time and a half anyway, so that it's for a less amount of work, so they do get the same pay.

Justice Scalia: But you require... I mean, you require them to give you a slip of paper saying, I choose to take my comp time, or something like that?

No?

You just say, you are taking your comp time?

Mr. Fleming: They are asked to start reducing it voluntarily.

Justice Scalia: Right.

Mr. Fleming: Just under the stipulation.

If they... and within a reasonable time.

If they don't do it...

Justice Scalia: If they don't do it, then what?

Mr. Fleming: Then the supervisor can order them to do it, and try and... and still work with them to try to reach mutually agreeable times, but the effect is an order to do it.

Chief Justice Rehnquist: Well, to the extent you're talking now beyond the stipulation the record simply isn't developed, I suppose.

Do you feel you can speak for every division of the county government on this, that this is exactly how they do it?

Mr. Fleming: No, just as to the Sheriff's Department, which is the defendant in the case.

Chief Justice Rehnquist: The Sheriff's Department is the only defendant in the case?

Mr. Fleming: The county is a defendant as a result of the Sheriff's Department.

Chief Justice Rehnquist: All that's being challenged are the practices in the Sheriff's Department?

Mr. Fleming: Yes.

Justice Souter: If it's proper for you to do what we have been assuming in these hypotheticals you could do, why does the statute place a cap on the amount of comp time that can be accumulated?

There's absolutely no need to do that.

You and other employees can... employers can protect yourselves.

The cap implies to me that you don't have the autonomy that we have been assuming here.

Mr. Fleming: The cap, I believe, is for those employers that just don't... can't or won't let the employees take the time off, and I think the concerns when these enactments of '85 went into effect was that the employees are able to use the time, are able to take the time off.

On the other side...

Justice Souter: So they're protective devices so that we do not build... the employee does not build up so much comp time that the employer in effect is not, at the end of the road, going to be able to pay it.

It's for the protection of the employee, you're saying.

Mr. Fleming: It's a balancing.

An employee's protection is this, is that in the statute, as was mentioned, the employee is allowed to use it within a reasonable time if there isn't an undue disruption, and so the focus there is on the employee's ability to use the time.

On the other side, the employer's controls over this, since it is a balance, is the employer's ability to cash them out.

And I might add that on the ability of the employers to cash them out, it's an important distinction, because it is... that division gives the employers control, and the petitioners have maintained well, this comp time accumulation is under the sole control of the employees, and there certainly would be circumstances where the employers would choose to cash out the comp time, and it would be contrary to what the employees wished to do, such as if they wanted to stop them from using it at a certain time of the year, or if there had been an increase, county-wide budget increase in pay, the employer, the Department could cash them out before that goes into effect.

That hasn't been done in this case, but in... that certainly reflects that the act provides the employer with a certain degree of control over these comp time hours, and it's not within the sole discretion of...

Justice Ginsburg: Well, why doesn't that just underscore that the default rule should be, you pay them, not, you set the work rules any way you like?

I mean, the statute says, there's an exception, but the main rule is time and a half.

If the main rule is time and a half, then it's perfectly logical for the statute to say, you can... employer, you can always pay time and a half.

You can do the other if the employees agree to it, but you can always go down to the bedrock rule under the Fair Labor Standards Act, which is time and a half.

Mr. Fleming: Yes, they could, once they go over the 240.

Yes, Justice Ginsburg, that's correct, you could do that.

Justice Ginsburg: But you could cash out the credits at any time, right?

Mr. Fleming: Yes, that's correct.

Justice Ginsburg: And so it does suggest to me that this is a statute where the main rule is time and a half, but you have an exception.

Usually we construe exceptions narrowly, not broadly, and if Congress' idea is, let the workers know what you're doing, then it's just a question of notice, and you didn't give them notice of anything other than you were going to install comp time.

You didn't give them any notice that, quite contrary to what the statute indicates, that is, they may request it and the employer has to give it to them if it won't unduly disrupt.

It just doesn't seem... the statute doesn't seem to have space for a rule that says, and without prior notice you can require them to take it.

Mr. Fleming: It doesn't, but I don't think it's necessary, because I don't think that scheduling less than 40 hours a week is within the purview of the Fair Labor Standards Act.

Cashing them out at any time is, specifically, and so when we have the comp time agreement, which we have with the employees, it's to use the comp time, and then it's in accordance with the Fair Labor Standards Act, which it says, and so if we do that, though, within the Fair Labor Standards Act we can cash them out.

Chief Justice Rehnquist: Now, Mr. Fleming, your opponent says he agrees with Judge Dennis' view that neither side was entitled to summary judgment, and that you go back to the district court for development of a factual record.

Do you disagree with that?

Mr. Fleming: No, I... yes, I disagree with that, Mr. Chief Justice.

Chief Justice Rehnquist: You think that your side was entitled to summary... that the county was entitled to summary judgment, as the Fifth Circuit said?

Mr. Fleming: Absolutely.

On the deference issue, which was raised briefly by the opposing counsel, I would just say this.

The main case, of course, is Chevron, and the standard is if Congress has not directly spoke on the precise question... excuse me.

If the intent of Congress is clear, it's the end of the matter, and I think the intent is clear, if you look at what we're doing.

Shortening the work week is not within the Fair Labor Standards Act.

Cashing them out is.

Clearly, we can do it.

And as far as whether you use Chevron or you use Skidmore, Skidmore certainly is a lesser standard, but you can see in the regulations promulgated by the Secretary it cites Skidmore as to... that the regulation...

Justice Stevens: Wouldn't it be complicated... I understand you don't have that, but supposing your employees all had a contract that we'll work 40 hours a week.

Then what would you do?

Mr. Fleming: Then I think that they would be bound by contract law for that.

Justice Stevens: So they couldn't... then you could not compel them to take the contract...

Mr. Fleming: But their right would not arise from the Fair Labor Standards Act.

It would be under the contract.

Justice Scalia: It would be based on the contract, okay.

Mr. Fleming: Yes, Your Honor.

Well...

Chief Justice Rehnquist: You don't have to use all your time.

Unidentified Justice: [Laughter]

Mr. Fleming: I was going to invite some more questions, but I will... if there aren't any more questions, Mr. Chief Justice, I'll just stop there.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Fleming.

The case is submitted.

The Honorable Court is now adjourned until Monday next at ten o'clock.

Attribution:

The Oyez Project

Featured:

NASA v. FLRA - Oral Argument

Fri, 09 Jan 2009 14:50:12 +0000

Case:

NASA v. FLRA

Media File:

98-369_19990323-argument.mp3

Related Transcript:

1998_98_369_argument.xml

Transcript:

Argument of David C. Frederick

Chief Justice Rehnquist: We'll hear argument next in No. 98-369, National Aeronautics and Space Administration v. Federal Labor Relations Authority.

Mr. Frederick.

Mr. Frederick: Mr. Chief Justice, and may it please the Court:

This case concerns whether an office of Inspector General investigator interviewing a Federal unionized employee for alleged misconduct is a, quote, representative of the agency who must allow the participation of a union representative under the Federal Service Labor-Management Relations statute.

The FLRA and the court of appeals held that the OIG agent is such a representative either because the Inspector General is under the control of agency management or because the office of Inspector General investigative work product provides a benefit to agency management.

Both theories are mistaken.

Justice Scalia: Mr. Frederick, before you get too far into it, how is the FLRA appointed?

Is it a independent agency?

Mr. Frederick: Yes, it is, Justice Scalia, appointed by the President.

Justice Scalia: But once appointed, cannot be removed by him?

Mr. Frederick: No.

The President can remove the officers in the FLRA.

Justice Scalia: Well, if all of the agencies don't like this ruling that the FLRA has come up with, why don't they just tell the President to... you know, to tell them to shape up or ship out and put in people who will agree with what the agencies want?

Why do you come to us to solve this internal executive branch problem?

Mr. Frederick: This Court has made clear on numerous decisions, Justice Scalia, that this particular statutory scheme is permissible and acceptable and that the courts are the appropriate place to resolve disputes that arise between the FLRA and agency management.

And this case is no different from those other types of disputes.

Justice Stevens: You're right.

Justice Scalia: We've done it before, but I must say, it just seems surpassing strange.

I mean, here you have the agencies... usually when you have a disagreement among the agencies, you go to the... you go to the chief executive and you say, you know, the FBI and the CIA are in disagreement.

Tell us which one is going to prevail.

Chief Justice Rehnquist: We had the Federal Power Commission suing the Department of Interior 50 years ago, 60 years ago here in this Court.

So, this is nothing unusual.

Justice Scalia: Well, the Power... isn't the Power Commission an independent... wasn't the Power Commission an independent regulatory agency?

Mr. Frederick: I'm not an... I am not prepared on the Federal Power Commission.

Justice Scalia: Well, I think it was so the President couldn't control it.

Now, whatever the constitutionality of that, I could understand why you had to come here, but here you have two agencies one agency against the rest of the Government, all of them within the control of the President, and... well, all right.

You say we've done it before.

I guess... I guess that's enough of an answer, but it seems surpassing strange.

Mr. Frederick: If I could return to this case, the control theory upon which the court below based... part of its theory is based on a mistaken construction of the Inspector General Act, a statute that is outside the FLRA's expertise.

Although the Inspector General Act requires that the Inspector General be under the, quote, general supervision of the head of the agency, that requirement does not transform the Inspector General into a representative of the agency.

Rather, the general supervision requirement requires the Inspector General to comply with the generally applicable rules and regulations of the agency, such as procurement rules, equal employment opportunity regulations, limitations on outside employment by the Federal employees that are partisan, political...

Justice O'Connor: Well, Mr. Frederick, normally we would defer to the agency interpretation of the meaning of the language, and here the FLRA wants to tell us that they interpret this language of representative of the agency as including the Inspector General.

Mr. Frederick: Deference...

Justice O'Connor: So, why don't we defer?

Mr. Frederick: Two reasons, Justice O'Connor.

First, that interpretation rests not so much on an interpretation of what representative of the agency means, but an application of that to the Inspector General Act.

The theory... and I have given two theories.

One is that the control by the agency representative constitutes who a representative of the agency is.

The FLRA is wrong about that because they have misconstrued the Inspector General Act.

They are not entitled to deference because that is not a statute within their expertise.

The second theory is that the IG provides a benefit to agency management.

The FLRA is not entitled to deference under that theory for several reasons.

First, their interpretation that any entity that provides a benefit to agency management is... is seriously overbroad.

That construction departs from the purposes behind the labor statute and it would also encroach on an Inspector General's independence.

It would reach not only an agency's Inspector General, but it would also apply to Federal and State law enforcement officers who investigate criminal wrongdoing by agency employees and submit an investigative report to the head of the agency who then uses that report for disciplinary purposes.

Justice Scalia: Could I come to your first point?

You say the FLRA does not have the expertise.

Is... is that the criterion for whether we give deference?

thought it was rather whether the agency was acting within its scope of administration.

If it's a field that the agency has been given authority over, whether or not it's very expert, even if in this aspect of it it may not know any more than courts, if it has been given authority over that area, we generally defer.

And hasn't the FLRA been given authority over this area to... to stop this or to permit it?

Mr. Frederick: Justice Scalia, the answer is no, and the reason is that there is nothing in the Inspector General Act that gives the FLRA authority to construe the provisions of that statute just as this Court in the ATF case held that the FLRA was not entitled to deference in... in construing the travel allowance statute, which is a statute that was outside its area of presumed expertise.

Justice O'Connor: Well, I thought the statute we were construing was 5 U.S. Code, section 7114 (a)(2)(B).

Is that right?

Mr. Frederick: That's correct, Justice O'Connor.

Justice O'Connor: Is that within the jurisdiction of the FLRA?

Mr. Frederick: Yes, it is, Justice O'Connor.

Justice O'Connor: So, why can't it say what is meant by the term a representative of the agency?

Mr. Frederick: Well, there are two bases on which it has done that, and... and let me try again.

What a representative is depends upon the application of various other laws, and the basis of their decision is... is based on two theories.

One is that a... to be a representative, one has to be under the control of agency management.

To answer that question, you have to look to the Inspector General Act, which is the statute that the FLRA has no particular expertise in construing, and they simply misconstrued that statute.

Justice Ginsburg: But, Mr. Frederick, I didn't understand them as doing that.

I thought they said, well, we're dealing with a statute that codifies the Weingarten rule.

So, the focus of our inquiry is, first and foremost, the person who's supposed to benefit from that rule, the employee who was there alone confronted by the employer with an allegation of serious misconduct, frightened and needful of help.

That's what the Weingarten rule was meant to take care of, and that's what the FLRA has in its charge.

And then it says, for this purpose and this purpose only, does the Inspector General represent the agency vis-a-vis that employer?

And it was only in that very limited sense with the first view of FLRA its bailiwick, which is we've got this statute that codifies the Weingarten rule.

What was Weingarten supposed to do?

Mr. Frederick: I have several responses to that, Justice Ginsburg.

First, the Weingarten decision itself was based on equalizing the balance of power between labor and management.

It... it... as has been construed in subsequent decisions, it does not include those employees who are not unionized.

It does not include outside law enforcement agencies.

It only includes management interviewing a unionized employee for the... so that the rights that were collectively bargained would not be undermined by management by using the investigatory process.

That concern is not present here because the Inspector General is precluded from participating in the collective bargaining process and is not part of that process.

Justice Ginsburg: What was the... all the language in Weingarten... and I realize that Weingarten itself is not what's before us, but 7114... that the employee may be too fearful or inarticulate to relate accurate... accurately the incident being investigated?

That doesn't sound like we're concerned about equalizing bargaining power across the table over an agreement, but the concern is 262 to 263 of Weingarten where the Court speaks of the fearful, inarticulate employee who may not be able to relate accurately the incident that's being investigated or being too ignorant to raise extenuating circumstances.

Mr. Frederick: That was a factor, Justice Ginsburg, but as we have quoted in our main brief at pages 20 to 21 from the Court's Weingarten decision at pages 260 to 261, the safeguard is to redress the perceived imbalance of economic power between labor and management.

Chief Justice Rehnquist: The... the statute says an exclusive representative of an appropriate unit in an agency shall be given the opportunity to be represented.

The representation is of the union.

Justice Souter: It isn't of the individual.

Mr. Frederick: That's correct, Mr. Chief Justice.

And it's also clear that if a person is not an employee or is not a... a person as defined under the Federal labor statute, that person cannot invoke the rights under the Weingarten statute.

At present approximately 45 percent of the non-uniformed Federal work place... work force cannot invoke these Weingarten rights.

So, it is perfectly clear that what Congress was intending to get at was the balance of power between management which would negotiate collective bargaining agreements and the unionized work force which would be on the other side of that...

Justice Breyer: Why wouldn't Congress have just wanted to, just thinking about it crudely, say, well, if a person who can afford it can have his lawyer in the room, many of those who can't afford it could have their union rep?

I mean, the union rep would just represent the same kind of thing, not in every case, but by and large... protect the individual, particularly ones who can't afford to pay for the lawyer.

I mean, maybe they didn't think that at all, but that's my question.

Why wouldn't they... why wouldn't you want that?

Mr. Frederick: Well, that would be...

Justice Breyer: Why isn't that a reasonable interpretation of what Congress was doing here?

Mr. Frederick: No, Justice Breyer, it is not.

And it is reasonable if management is conducting the interview, and we would concede that in those... throughout the Federal Government in virtually every department, management conducts interviews for disciplinary purposes of employees.

And in those contexts, it is perfectly appropriate for a union representative to be present at that interview.

But an Inspector General investigation is not an interview that is being conducted by or for agency management.

Agency management doesn't have the authority to designate the Inspector General to do anything, to order the Inspector General to designate what the Inspector General...

Justice Breyer: No, that's right.

But, I mean, my... my question is really just focusing on assuming it's linguistically possible, is it a reasonable interpretation of what Congress might have been after?

I mean, obviously, if Congress is trying to protect the individual by giving him a right to have his union rep present, this would be the classic case where he needs the protection.

Mr. Frederick: No, it would not, Justice Breyer.

Justice Breyer: All right.

Well, that's what I would like you to explain.

Mr. Frederick: In the private sector, if an FBI agent shows up at a company to interview an employee who is accused of criminal wrongdoing, there is no Weingarten right.

And the reason why there is no Weingarten right is that the FBI doesn't represent the corporation's management.

In the same way here, the Inspector General is provided with independence within a... within the agency so that it does not represent agency management...

Justice Stevens: Would the Weingarten right apply in the private sector if the employer hired the Pinkerton Detective Agency to come in and conduct the interview?

Mr. Frederick: Yes.

Justice Stevens: It would apply.

Mr. Frederick: Yes, because...

Justice Stevens: Why isn't that the same as this?

Mr. Frederick: The Pinkerton control... the Pinkerton Agency would be within the control of agency management, and it would simply be a designatee... a designatee of agency management.

Here the agency manager is precluded by the terms of the Inspector General Act from ordering the Inspector General to conduct...

Justice Stevens: No, but doesn't the statute provide that there... that they report to and under the general supervision of the... of the agency?

Mr. Frederick: That's correct.

Justice Stevens: And wouldn't they normally, if they discovered some kind of employee misconduct, report it to the agency?

Mr. Frederick: That's correct, but that doesn't transform the Inspector General into an agents... anymore than the FBI is...

Justice Stevens: No, but the whole purpose of the Weingarten rule, it seems to me, is duplicated in that... in that setting.

Mr. Frederick: No.

The distinction, Justice Stevens, is that...

Justice Stevens: I understand that they have to be a member of the bargaining unit and so forth, but that's... this fellow was a member of the bargaining unit, wasn't he?

Mr. Frederick: That... that's correct.

And here the focus is on whether the Inspector General is an independent entity, and that is where...

Justice Stevens: Well, he's like an independent contractor.

He's got some control and some independence.

Mr. Frederick: No.

In fact, that's... that's not true because the... an independent contractor would be designated by the head of the agency.

Here this person, the Inspector General, is not being designated by the head of the agency.

Rather, the Inspector General Act provides organic authority for the Inspector General to conduct such investigations as he or she deems necessary or desirable, to obtain the documents within an agency that the Inspector General thinks are necessary to conduct the investigations.

The Inspector General is required to keep confidential the criminal information that he obtains or she obtains.

Justice Ginsburg: Mr. Frederick, inside of an agency like this one with an Inspector General, what percentage of the employee misconduct would go to an ordinary manager and what percentage would be under the wing of the Inspector General?

Mr. Frederick: I can't give you that percentage, but what I can tell you is that approximately 15 percent of the NASA-OIG's investigative caseload concerns employee misconduct cases.

The other 85 percent deal with other types of criminal misconduct by persons that are outside the agency attempting to perpetuate a crime against the agency.

Justice O'Connor: Does it ever happen that the agency head would request the Inspector General to make an investigation?

Mr. Frederick: Certainly, but that also does not transform...

Justice O'Connor: It's not an order, but I guess the agency can request it.

Mr. Frederick: Yes, just as an agency head has requested the FBI to conduct an investigation too, and that doesn't transform the FBI into a representative.

Justice O'Connor: And I guess the agency head has to order the employee to appear and be available.

Mr. Frederick: That's correct, which further indicates the insulation of the Inspector General's investigative function.

The Inspector General can't show up and order an employee to submit to an interview, just as an Inspector General who finds evidence of wrongdoing has no authority to punish.

Justice Kennedy: Well, it seems to me your case would be stronger if he did have that authority.

Mr. Frederick: No, I don't think so, Justice Kennedy, because this shows that the Inspector General has to... in order to complete his... his function, has to do what he does, and then the agency manager does what he or she does.

Justice O'Connor: Well, but now, if the employee doesn't want to cooperate with the interview, is it the employing agency that says if you don't, I'll discipline you or fire you?

Mr. Frederick: That's correct, Justice O'Connor.

Justice O'Connor: So, there is to that extent control over...

Mr. Frederick: It's the same in an FBI interview.

If if... if a Federal employee does not want to submit to an interview by the FBI, the agency manager can order the Federal employee to submit to that interview, but that doesn't transform the FBI into a representative of agency management either.

And in the disciplinary function, the IG has no role whatsoever.

Once the investigation is completed and the report is transmitted to the head of the agency, that process carries...

Justice O'Connor: What position does the FLRA take concerning an FBI investigation or a grand jury investigation?

Have they said?

Mr. Frederick: They have hinted in their decision in this case, which is at 43a of the petition appendix in footnote 23, that the D.C.... and they're referring to a D.C. Circuit case which pointed out that the FLRA's construction would also apply to the FBI in the context of an... of an investigation done of a Department of Justice employee.

And they have pointed out there that there is a statute which they construe to exempt the FBI in certain circumstances.

That statute is 28 U.S.C. 535(a).

But I would like to give... I would like to point out to this Court that that statute has been seriously misconstrued by the FLRA.

That statute was enacted in 1954 to resolve the dispute that had arisen between the Treasury Department and the Department of Justice over whether or not FBI employees could investigate wrongdoing committed by Treasury employees.

The dispute that had arisen had blocked the FBI basically, and... and Congress passed this statute to ensure that the FBI would have jurisdiction to investigate those matters.

The House report which accompanies that... it's House Report 2622 at pages 2 to 3, published in 1954... makes perfectly clear that that statute was not intended to change anything about investigative procedures.

It was simply jurisdictional, to provide the FBI with concurrent jurisdiction so that it also could investigate allegations of wrongdoing.

If the FLRA is correct in this construction of the statute, it would only apply to title 18 offenses, as by the plain terms of 535(a).

It would not apply to drug offenses in title 21 or money laundering in title 31 or anti-kickback and public contracting offenses in title 41 or in harboring a... an immigrant or a fugitive under title 8.

So, the FLRA in relying on this statute, has... has construed the phrase, notwithstanding any other provision of law, in a... in a very erroneous way.

Justice Ginsburg: Mr. Frederick, I... I understood the FLRA to take the position that the FBI and external agencies, grand juries are not... are out of this, and perhaps it would be best for the FLRA to speak for itself on that point.

Mr. Frederick: Could I just have one point, though, Justice Ginsburg?

And that is that the FLRA has held that in a joint investigation by the FBI and an Inspector General, that the Weingarten rights are appropriate under the theory that the information is shared with agency management.

And the NASA-OIG... two-thirds of its investigations are criminal investigations, and over half of those, nearly 60 percent, are joint investigations with another law enforcement agency like the FBI or the Department of Defense.

Justice Ginsburg: May I ask you a question about something that is in... in your agency's domain and... or at least in the executive domain?

There's just been a change for the IRS.

Now they have a real Inspector General.

Up until now the members of the union, NTEU, have had the union representative with them.

Now those same people, I take it, will no longer have the representative because of the new installation of an Inspector General.

Is that right?

Mr. Frederick: When they are being investigated by the Inspector General.

When they are being investigated by agency management, they are still entitled to have a union representative.

Justice Ginsburg: Well, they had something that was pretty close to an Inspector General, but not quite.

Right?

Mr. Frederick: No.

They had an internal affairs committee that did internal affairs investigations.

This happened throughout the Government, Justice Ginsburg, as amendments to the Inspector General Act were made.

Justice Ginsburg: But in any event, there were people who... doing the same thing now that they... if they had done it a year ago, would have the union representative with them and now will no longer.

Mr. Frederick: It would be no different than if, instead of creating an office of Inspector General, Congress had said, we want the investigative function of the agency transferred from under agency management's control and given to the FBI.

There would be no difference.

Justice Ginsburg: Well, there is... there is a difference between a wholly external agency, an FBI or CIA, and something that's still under the roof of the... of the department.

Mr. Frederick: It's a policy decision that Congress made to create entities that would be developing particular expertise, sources of information, and have expert knowledge of the kinds of wrongdoing and other frauds and abuses that might be committed within Federal agencies.

Justice Souter: But... but maybe what that argues for is that we've really got a... a third alternative here, and instead of looking at it in an either/ or situation, there's a new possibility.

Let's assume that we conclude that, in fact, the... the statute does guarantee the... the right to have the presence of the union rep.

Might it be the case that... that where things are going wrong here is in assuming that the agency, for purposes of an unfair labor practice determination, is the normal head of the agency, as distinct from the Inspector General for that agency.

The reason I suggest that is the object of the unfair labor practice determination is to change the behavior of management.

Well, the agency here is being represented, to the extent that it's represented at all, by the Inspector General.

Conversely, management in the sense of the usual line of authority can't control the Inspector General.

Is it open to us here to conclude that, number one... and I realize you disagree with this... that the... that there is a guarantee of the rep at the interview, but that any determination of unfair labor practice has to run against the Inspector General as opposed to running against the agency in the usual sense?

Mr. Frederick: Justice Souter, that would... that would impose a penalty on an Inspector General for violating something in the collective bargaining relationship to which the Inspector General is not a party.

Justice Souter: Well, he's not a party, but he... he has... he certainly has as much knowledge or is entitled to as much knowledge of the collective bargaining arrangement as the... as the normal head of the agency is.

And... and the point is, if you're... I mean, the rationale is if Congress wants these investigations to be done not by the FBI but within the agency itself, there's... there's nothing conceptually odd about saying that they've got to be done within the... the confines of the agreements that the agency has made, including a collective bargaining agreement.

And as long as the Inspector General has access to it and has as much chance to know what's going to violate it as the nominal head of the agency would, there's... there's nothing odd about saying that the... that the Inspector General should be bound by it.

Mr. Frederick: Yes, there is, Justice Souter, for two reasons.

First, the agency head would be given extraordinary leverage to decide how independent an Inspector General could be by being able to bargain over the Inspector General's independence in exchange for concessions by...

Justice Souter: Well, that might violate the statute creating the Inspector General.

I'm assuming that we've got a situation like this in which there is... there is no claim that there is a... a... in effect, a... a statutory... or a conflict between what the collective... what the... the labor right is and... and the Inspector General's capacity to investigate.

Mr. Frederick: My second point then I hope will satisfy you is that nothing in either statute would... gives the FLRA the authority that it asserts in this case, which is to decide on a case-by-case basis whether or not the prerogatives of the Inspector General, as defined in the Inspector General Act, have been defeated.

The FLRA has no expertise in law enforcement matters, and it is... is attempting to arrogate to itself the authority to decide on a case-by-case basis whether the Inspector General Act is being hindered by particular demands made by the union.

Justice Kennedy: Right.

Justice Souter: Let me go back to my... my question with maybe a slight more exact question.

Is it textually possible to come out the way I have just suggested?

Mr. Frederick: I don't think so, Justice Souter.

Justice Souter: What's the textual bar to it?

Mr. Frederick: Because it requires you to determine that an Inspector General is under the control of agency management.

Justice Souter: No, it doesn't.

I mean, my assumption is... is exactly the contrary.

My assumption is that the Inspector General is part of the agency.

Administratively we know that's so.

My... my assumption also is that the agency head, whoever that may be, cannot control the Inspector General in... in structuring his investigation.

I... I'm saying that the object to be served by an unfair labor practice determination is an object to change behavior, and the relevant agency behavior here is the behavior of the Inspector General.

Mr. Frederick: And the Inspector General does not...

Justice Souter: Now, textually if that... if you... if that rationale is... is roughly sound, is there any textual basis that precludes our indicating that that is the way the... the two schemes ought to fit together?

Mr. Frederick: Yes.

It's overbroad.

It interprets representative far broadly and sweeps in outside law enforcement agencies as well.

Justice Souter: How does... how does it do that?

The rationale is that the Inspector General is part of the agency, and... and we know that the statute constituting the Inspector General so provides.

Mr. Frederick: It would make the FBI a representative of the agency...

Justice Scalia: Why?

Mr. Frederick: an internal Department of Justice investigation of a Department of Justice employee.

Justice Scalia: It might well.

It might well.

Mr. Frederick: If I can reserve the balance of my time.

Chief Justice Rehnquist: Very well, Mr. Frederick.

Mr. Smith, we'll hear from you.

Mr. Smith, the Government in its brief in this case, the... the part of the Government that is petitioning...

Unidentified Justice: [Laughter]

Argument of David M. Smith

Chief Justice Rehnquist: says that the Federal Labor Relations Authority has greatly expanded on Weingarten rights.

They are no longer just the right to have the union be represented alone.

They... they say... and they cite cases... the... the right to be informed in advance of the general subject of an examination so the employee and union representative can consult before questioning begins, the right to halt an examination and step outside the hearing of investigators to discuss with the union representative answers to the investigator's questions, the right to negotiate for 48 hours' notice before an investigator can begin an examination.

Do you agree that those are correct descriptions of rulings of the FLRA?

Mr. Smith: No, Your Honor.

I'm sorry.

No, Mr. Chief Justice.

I think they would be distorted explanations of what the Authority has held in a number of cases.

It is true, in point of fact, that unions have come forward and attempted to expand on the basic Weingarten right and to bargain for matters over and above the basic right to have a union representative present during an investigation.

And it is true, in some of the examples you cite, the Authority might have held certain proposals to be negotiable.

What they failed to cite in their brief is when the Authority makes such a ruling, if we are deemed to be overbroad in our interpretation of what the right under section 7114 (a)(2)(B) includes, we're subjected to judicial review and have, in some of those cases, been corrected by the courts of appeal on review.

Chief Justice Rehnquist: But presumably you... if the argument that you're making here, you ought to get deference so that if... if the thing is debatable one way or the other, your view ought to prevail.

The view of the agency ought to prevail.

Mr. Smith: Of course, we would make that argument.

And in point of fact, I think the Authority's interpretation of how the statutory right in section 7114 (a)(2)(B) should be interpreted is pretty much in line with how the courts have interpreted the Weingarten right in the private sector.

For instance, you... you advert to the right to prior notice to an interview.

The D.C. Circuit ruled in the Postal Service case, which is cited in the brief, that this would actually facilitate the interview if the union representative, where possible, knew in advance what was going to be discussed at the interview.

Then the union representative would be prepared and be able to... to adequately advise the individual being subjected to the interrogation about what was going on.

So, this is a private sector rule.

I'm not aware that the Authority has specifically adopted it.

The other rule, the right to stop an interview, the Authority has specifically gone the other way and said there is, in fact, no right to cease and stop an interview.

In one case, we did say that where it would not have interrupted the flow of the legitimate function of an employer to do an interrogation, that that was a permissible... permissible thing to acquire an occasional break to allow conferences.

But there's no per se right to break during an investigation.

The Authority has embraced this Court's rule that the employer has the right, when... when interrogating an employee, to... to get to the bottom of what's going on, to hear the employer's... the employee's story and to perform the interrogation.

The... the Authority's rule in this case...

Justice O'Connor: Has the Authority taken a position in the situation of an FBI investigation or a grand jury investigation?

Mr. Smith: We note in... in our... in our brief, as counsel adverted to, Your Honor, that the FBI would not be a representative of the agency under our statute in all likelihood because the FBI has, number one, concerns outside of the internal agency.

If you will, in this case, the NASA-OIG only has concerns that relate to the... that particular agency.

An FBI agent, on the other hand, has concerns that relate outside of the Department of Justice and to any other agency.

We also note 28 U.S.C., the particular section that says that FBI agents have the ability to conduct interrogations notwithstanding any other provision of law.

I think it's important to note that the Inspector General statute contains no such language.

So, when we look at the FBI statute on the one hand, which says, you've got the right to... to investigate a crime notwithstanding any other provision of law, the IG statute starkly contains no such provision, which led the Authority and the Eleventh Circuit to conclude that the Inspector General must comply with, among other laws, the labor statute when interrogating a bargaining unit employee.

Justice Ginsburg, if I could return to a point that you raised.

It is in fact true that the trend is that investigations are being conducted more and more by agency Inspectors General.

In the Fourth Circuit's NRC case, which is cited in our brief, the Fourth Circuit noted that all investigations within the Nuclear Regulatory Commission are conducted by the office of Inspector General.

You noted that the amicus NTEU had filed a brief recognizing that under the IRS Reorganization Act of 1998, investigations previously performed... excuse me... by the office of Chief Inspector are now being performed by the Department of Treasury IG for tax matters.

The... the upshot of this is, employees who previously enjoyed the Weingarten right under our statute are being stripped of it because of the... the growing trend of Inspectors General doing interviews.

This is very significant.

There's no indication that that was the will or the intent of Congress when they... when they passed any of these... any of these bills or that agencies should, by the simple expedient of its assigning an investigation or requesting an investigation by the Inspector General, to be able to avoid section 7114 (a)(2)(B) of our statute.

Justice Kennedy: Does the NASA Inspector General appoint to anyone other than the head of NASA?

Mr. Smith: No.

Justice Kennedy, as we read the statute, the NASA-OIG reports to the Administrator of NASA.

Justice Kennedy: Well, I assume... could he go directly to the FBI or does he have to go first to the head of NASA, if he sees something he thinks the FBI should know about?

Mr. Smith: In this case?

Justice Kennedy: No, generally.

Mr. Smith: Generally, I think the Inspector Generals might well receive tips or advice from an external law enforcement agency, but they have the right to investigate on their own.

They don't have to be ordered to investigate by the head of the agency.

Justice Kennedy: Does the... does the Inspector General for NASA report to anybody in... in the office of Inspector General?

Mr. Smith: If I understand your question, the... the office of Inspector General has a number of people that work in it.

This particular individual...

Justice Kennedy: Yes.

Mr. Smith: that did this interrogation was at the Marshall Space Flight Center and reports to the NASA-OIG in Washington at headquarters NASA.

Justice Scalia: To the NASA-OIG.

Mr. Smith: That's correct.

So the... so the line of command is that the OIG personnel work OIG personnel.

Justice Kennedy: Was... was the employee in this case entitled to counsel to be present?

Mr. Smith: Yes.

Justice Kennedy: Why?

Mr. Smith: The employee requested counsel and the request to counsel was acceded to.

Justice Kennedy: But was he entitled?

Was the employee entitled as a matter of law to have counsel present if... assume the OIG objected.

Mr. Smith: As I understand the OIG position, they acknowledge that the right to counsel is present.

Justice Kennedy: Assume that... and why?

Is that because of the APA, section 555?

Mr. Smith: The Eleventh Circuit found as much.

We think the Eleventh Circuit is correct.

They quibble with this in their reply brief.

I don't know that it matters so much where the right to counsel comes from.

There seems to be agreement... and... and once again, as I understand their position... that there is, in fact, a right to counsel at an investigative interview.

Now, this makes a good point, if you will.

If the right to counsel can be done without affecting and harming the... the... the sanctity of the investigation, if the OIG can perform their... their important and independent investigative role with a counsel present, it does cause the question, as the Eleventh Circuit noted, why a union rep would cause more of a problem than... than the right to counsel.

Justice Kennedy: Well, because I suppose the answer is, is that the union rep has a obligation to... to report to the union.

The... the OIG could tell the counsel and the employee, look it, this is going to be confidential.

If... if you people do not cooperate with me, if you do not keep this confidential, I'm going to lower the boom on you.

I'm going to recommend discipline and so forth and so on.

He can't say that with the union because the union's obligation is to... to report back to the union.

Mr. Smith: In point of fact, the Authority has responded to that very concern, Justice Kennedy, in a recent decision of the Authority, which we... which we cite in our brief.

The Authority has interposed no objection to the bargainability of proposals that would place confidentiality constraints on the representative during an investigation.

So, in fact, to the extent that the sanctity of the investigation requires that confidentiality attain, then the Authority has said this is a permissible way to go.

Justice Kennedy: Yes, but that's troublesome because that seems to me to compromise the union representative's function and role vis-a-vis the union...

Mr. Smith: Well...

Justice Kennedy: which is the whole reason that he's there under... under Weingarten.

Mr. Smith: No.

The whole... I think there's a... there's a two-part reason that... that a representative is... is there during such an interrogation.

In the first place, the representative is representing the employee.

In the second place, he... he or she is representing the interests of the bargaining unit.

It is not fair to assume that representing the interests of the bargaining unit requires that at the conclusion of the interview the union rep tell everybody what transpired during every aspect of a particular investigation.

The interests of the bargaining unit are served by the fact that other... other employees know that if I'm interrogated by the Inspector General, I'll have a representative there.

They'll be looking out for my interest.

I'll have an opportunity to... to be represented, and I won't get treated unfairly in such a case.

Justice Ginsburg: Mr. Smith, you mentioned NRC, and while you may not agree with that case, I take it that Judge Kravitch thought that the Eleventh Circuit decision was compatible with the NRC decision.

Mr. Smith: That's correct.

The Fourth Circuit held that bargaining on the Weingarten right to enhance it over and above the basic representation right was improper, but the Fourth Circuit noted that its position was consistent with the Third Circuit.

And... and I think Judge Kravitch in the Eleventh Circuit agreed with as much.

If you're looking at sheer numbers now, the Third Circuit, the Eleventh Circuit, and the Fourth Circuit have all agreed with the Authority's rule that an office of Inspector General investigator is a representative of the agency when interviewing a bargaining unit employee.

If there are no other questions...

Justice Ginsburg: The D.C. Circuit seems to think that the NRC case was dispositive of this situation, and according to the Eleventh Circuit, it is not.

Mr. Smith: The D.C. Circuit errs in a number of respects, Judge Ginsburg.

In... in the first place, the D.C. Circuit conflates a case over negotiability with a... with a straight case of the application of the right to have someone present in the room, and we think that's a significant difference.

Building on the Weingarten right is... is different from the simple... simple application of the Weingarten right.

And... and the D.C. Circuit is... is erroneous in that respect and we think that's a salient distinction between the D.C. Circuit, which is out on its own here, and all the other courts of appeal which have reviewed and affirmed the Authority's interpretation in this case.

We think that it is for the Authority to determine the breadth and scope of the term representative of the agency, and that unless the Authority's interpretation is unreasonable or impermissible, that interpretation is due to be affirmed.

We submit to this Court that it is.

Justice Thomas: Mr. Smith, I'd like to revisit with you.

You said there is a trend away from or toward Inspector Generals investigating these types of cases.

Mr. Smith: Yes, sir.

Justice Thomas: Now, isn't that only a part of the story?

Wasn't there a trend some years ago away from internal auditors in agencies?

Mr. Smith: Prior to the passage of the Inspector General?

Justice Thomas: That's right.

Mr. Smith: It might get before my time, but I'll have to take your word for it.

Justice Thomas: Well, not all before your time.

Justice Thomas: For the independent regulatory agencies, wasn't that during the '80's?

Mr. Smith: Well, the Inspector General Act was passed in 1978.

Justice Thomas: Well, there's a separate Inspector Generals act for the smaller agencies.

Justice Thomas: Wasn't there then an attitude in Congress that the investigation should not be controlled by the agency heads?

Mr. Smith: I'm not aware of that particular attitude, Your Honor.

I can't...

Justice Thomas: Well, that was the attitude.

Mr. Smith: I can't dispute your point.

I'll certainly accept it.

Justice Thomas: The point was, I don't think you can have it both ways.

You can't say that the Inspector General is under the agency head when we know that the purpose was to do just the opposite and to get the investigations from under the agency heads.

Justice Thomas: And let me ask you this question.

Justice Thomas: Do you agree that in the old days that the head of the agency could actually direct the auditor's investigation of these matters?

Mr. Smith: Yes.

Justice Thomas: Do you agree that the head of the agency cannot direct the investigation by the IG?

Mr. Smith: The... the legislative history says that if an agency head requested an Inspector General to undertake an audit or an investigation...

Justice Thomas: No, that's not what I'm talking about.

Mr. Smith: it is assumed that they would do so.

Justice Thomas: No, that's not what I'm talking about.

Justice Thomas: If the IG said, I want to investigate this matter...

Mr. Smith: Yes.

Justice Thomas: can the agency head say, no, you can't?

Mr. Smith: They cannot do so.

Justice Thomas: If the IG said, I want to investigate this matter in this manner, can the agency head say, you cannot?

Mr. Smith: I think so.

I think the agency head...

Justice Thomas: The agency head can tell them that?

Mr. Smith: Yes.

I think the agency head can say to the Inspector General...

Justice Thomas: By what authority?

Mr. Smith: I think the authority is you are expected under the IG Act to comply with, quote, other statutes when you perform your investigative function.

Justice Thomas: Well, I don't know where you get that authority.

Justice Thomas: I think you... that's... you know, that's... that's an interpretation.

Justice Thomas: Doesn't the... doesn't the IG... let's say the... the... the IG and the agency head were at loggerheads about a matter.

To whom would the IG then report this dispute?

Mr. Smith: Well, the IG would have to go to their employing authority if they chose to do so, which would be either, depending on the size of the agency, the agency head or the President of the United States.

Justice Thomas: Isn't it true that the IG has a separate line of communication and separate reporting authority to Congress?

Mr. Smith: Right.

They have... they have the obligation under their statute to file semiannual reports to the Congress.

Justice Thomas: And in reality they have separate reporting authority to Congress.

Mr. Smith: Yes.

Justice Thomas: If they are at loggerheads with the head of the agency.

Mr. Smith: Yes.

Justice Thomas: Do you know of any instance where the agency head has been directed by or the IG has been directed by... an IG has been directed by an agency head to conduct an audit or an investigation in a certain way?

Mr. Smith: Well, in this case, the Authority directed the NASA headquarters to inform the NASA-OIG to comply with the 7114 (a)(2)(B) right in subsequent cases.

Justice Thomas: No.

Justice Thomas: Earlier you asked... you said that the agency head can direct an investigation.

Do you know of any instance in which that has happened?

Mr. Smith: Where an agency head has requested an Inspector General to perform an investigation?

Justice Thomas: No.

Justice Thomas: Where an agency head has said to an... an IG, this is the manner in which I want you to conduct this investigation.

Mr. Smith: We have no... we have no such case, but I think it's fair, Justice Thomas, to conclude that an Inspector General can be told to comply with the law when you conduct an investigation.

The Privacy Act, for example.

It's acknowledged that the Privacy Act must be complied with, a host of criminal and civil laws.

Justice Scalia: Well, you could be told... the IG can be told anything.

I... my question is, can the agency head direct the IG to do what the agency head wants the IG to do or the agency head believes to be the law?

Mr. Smith: In our view, the... the Inspector General can be told by the agency head and/ or the appointing authority, the President of the United States, to comply with the law, yes.

Chief Justice Rehnquist: Okay.

Justice Scalia: Now, do you have any examples of that?

Mr. Smith: The only examples that we would refer to would be the ones I previously mentioned, that in the... in the statute, in the legislative history it's conceded, for example, that the Inspector General must comply with the Privacy Act.

If an Inspector General, in performing an investigative function, was refusing to comply with the Privacy Act, we think it would be appropriate for the agency head to inform the IG to comply.

Failing the IG's compliance, we think the agency head, if they appointed the IG, would remove him or discipline.

If they did not, they would report this to the President of the United States.

Justice Scalia: But you would have to agree... I mean, you can't to a specific provision in the IG Act for that.

But if the agency head agreed with you that the union representative should be in such an interview and the IG said no, you can't point to any provision authorizing the agency head to direct the IG to include a union representative in such a meeting or interview.

Mr. Smith: The IG's position would have to be, in such a case, that the inclusion of a union rep prohibited or precluded me from conducting an investigation because that's the statutory string that we go through to analyze...

Chief Justice Rehnquist: No, but if your argument is, if... if this were my chief of staff who was conducting the... the investigation and I said, look, you are to include the union representative, my chief of staff theoretically as the agency representative would have to do that.

Justice Scalia: But I don't think you can point to any authority where if the head of the agency, the head of NASA, says, look, I'm sensitive to this problem and I want the union representative included in this investigation, and if the IG says, buzz off, I don't know where the... the head of NASA would get the authority to force that or... to force that individual, the IG, to include such an individual.

Mr. Smith: We think the authority...

Justice Scalia: And I'd like you to point to me where that authority is.

Mr. Smith: Well, the... the premise of your question is that it is the agency head that is imposing this requirement on the Inspector General.

Justice Stevens: That's right.

Mr. Smith: We think that's incorrect.

It is the Congress that imposes this requirement on the agency, any representative of the agency conducting the...

Justice Kennedy: But your argument is that this IG reports to the Administrator, and if the Administrator can't direct the IG to do precisely what you think the IG should be doing, then I don't know how you can say that the IG reports to the Administrator.

Mr. Smith: Well, I don't want to... I don't want to butt heads with you.

We think Inspector Generals are not free agents in conducting their investigations...

Justice Stevens: I bet you the agency head does.

Unidentified Justice: [Laughter]

Mr. Smith: In conducting their investigations, they have to comply with the law.

This is but one law.

Argument of Stuart Kirsch

Chief Justice Rehnquist: Thank you, Mr. Smith.

Mr. Kirsch, we'll hear from you.

Mr. Kirsch: Mr. Chief Justice, and may it please the Court:

That the OIG investigator was acting here as representative of the agency is manifested in a multitude of activities that actually occurred and is also consistent with the roles and duties and responsibilities under the IG Act.

Here we had an IG investigator at the outset invoke the disciplinary authority of the agency.

This is not a right inherent to the IG, but one that is routinely unleashed... this disciplinary hammer... upon employees to compel their attendance and to assure that they cooperate fully and answer all questions.

This was not an isolated situation in this NASA case.

To review the Second Circuit case and the D.C. Circuit case, agents that were specifically appointed and selected by the OIG, who are not OIG agents since they have the authority to gain further assistance from others within the office, those agents also advise the employees that they must appear or they will face dismissal.

Justice Scalia: Excuse me.

It was my understanding that the OIG could not issue such directives on his own, but can only do so with the authority of... of the agency.

Isn't that right?

I mean, he doesn't have delegated authority from the agency to summon employees.

He has to go to the agency head and say, I'm going to have a hearing, would you make arrangements to have this employee appear.

Am I wrong about that?

Mr. Kirsch: Typically it is correct, I would say, that an agency will instruct the employee to appear before the IG.

The IG apparently implicitly adopts an authority, an apparent authority, because there was nothing in the record here or in any of these cases that it can invoke the disciplinary authority of the agency.

Whether... whether they have that or not, the appearance is certainly clear and they hold themselves out as having the disciplinary authority of the agency.

Moreover, here we have an...

Chief Justice Rehnquist: You say here, Mr. Kirsch.

You're talking about the facts of this particular case.

Mr. Kirsch: Yes.

Chief Justice Rehnquist: And what did happen in that respect here?

Mr. Kirsch: In this case we had a referral from the FBI to the OIG.

The OIG then contacted the... the agency and told them that we have some concerns about the activities of an employee.

Management then issued a letter of discipline to the employee to immediately remove him from the facility and to impose a fitness for duty exam.

Within several days, the OIG sought to set up an interview to be conducted of this employee.

They agreed to allow the employee to have an attorney and a union representative present at the attorney's office in this particular case, and that's when they said that the employee must answer all questions or face dismissal.

Justice Breyer: What is it...

Chief Justice Rehnquist: So, how did this case ever get here if that's what happened?

Answer Justice Breyer's question.

Justice Breyer: Can you give me an example of... if you start with the proposition the head of the agency can tell the IG exactly nothing, nothing that anyone in the audience couldn't tell him, and moreover, he carries out no authority of the agency.

All right.

Now, you're going to say that statement is wrong.

So, can you give me the best examples you can think of of things that the head of the agency could tell the person, not just obey the law.

Any citizen can go to the IG and say, obey the law.

I mean, is there any authority at all that the head of the agency has to tell the IG anything?

Mr. Kirsch: Nothing about specifically that he has to tell...

Justice Breyer: No, I'm not saying...

Mr. Kirsch: But...

Justice Breyer: Does the... does the head of the agency have the authority to do anything whatsoever in respect to the IG...

Mr. Kirsch: Yes.

Justice Breyer: that an ordinary citizen of the United States wouldn't have?

Mr. Kirsch: Yes, and also...

Justice Scalia: What?

Mr. Kirsch: the OIG has duties and responsibilities vis-a-vis the agency head and access to certain information that others outside an agency would not have.

Typically, as we said from the outset, an employee is directed to appear before the OIG who has a physical location at that office.

They have access to all documents and access to the agency head at any time.

They have the right to select, appoint, and employ any official to work with them as part of that OIG investigation.

Moreover, they have the duty and responsibility to recommend corrective action wherever they see fraud, waste, and abuse to the agency head.

So, in a number of respects, there is an interaction between the two.

Justice Breyer: Those are examples of instances in which the IG might have some authority that he wouldn't have were he not part of the agency.

I got that half.

What about the other half?

Is there anything at all that the head of the agency can tell the IG?

Mr. Kirsch: By... by... he can tell him to not assert the disciplinary authority of our agency here to compel the attendance of our employees, if he so chose to do that.

But apparently they don't do that and so they by... by implicitly allowing the IG to go in and exercise that authority of the agency, that compels the attendance of the... of the employees there.

Justice Kennedy: Could the agency head tell the employee directly, now, when the IG calls you, you don't have to go and I won't give you any discipline unless you have the union rep there?

You're entitled to the union rep.

Mr. Kirsch: Yes.

Justice Kennedy: Would that... that would not be an interference with the OIG's authority?

Of course, it depends on the answer in this case, but...

Mr. Kirsch: There's nothing in the OIG act that gives the OIG subpoena power over a particular employee within his agency, and there's nothing that could compel the employee to appear there and to fully cooperate other than disciplinary...

Justice Kennedy: Well, if that's so, then he wasn't entitled to counsel here, was he?

Mr. Kirsch: I'm sorry.

Justice Kennedy: If he was not compelled, he wasn't entitled to counsel in this case.

Mr. Kirsch: If he was not compelled in this particular case, the... the statute says compelled to appear before any agency... then he would be entitled to counsel.

Correct.

Chief Justice Rehnquist: But if he was not compelled, then he was not entitled to counsel.

Mr. Kirsch: Perhaps he may not have been entitled to counsel unless there was a custodial interrogation, a criminal type investigation, or some way otherwise overbearing the will of the individual...

Chief Justice Rehnquist: Well, that would... that would mean that the evidence might not be introduced... introducible in a criminal trial, but that doesn't necessarily mean that he has a right to counsel.

Mr. Kirsch: If he... the statute... you are both correct... indicates where an... where an employee is compelled to appear before the agency.

Now, that compulsion may...

Justice Ginsburg: Mr. Kirsch, I... I would... I had assumed... and please correct me if I'm wrong... that if an employee is told show up at that interview or you lose your job and the employee then says, okay, can we meet in my lawyer's office, that that employee is being compelled to show up at the interview even though he says okay.

But the threat is you lose your job and you're not going to be paid.

Mr. Kirsch: That's exactly our position, that absent an affirmative statement that you don't have to be there, the... the appearance is clear to any employee that their job is in jeopardy for refusal to participate or cooperate fully in an investigation.

And the compulsion exists both... either through the circumstances or the specific statements here.

Moreover here, we have a situation where an agency routinely utilizes the information that's gathered by the... by the investigator for purposes of going forward with the discipline in the case, and often where the IG testifies on behalf of the agency where an employee contests that particular discipline.

The... one statement about the FBI, if I may.

The FBI is specifically excluded under the labor statute from coverage as an agency.

So, the issue would not even apply with respect to the FBI.

Moreover, the FBI has...

Chief Justice Rehnquist: You say it's excluded under the labor statute.

Does that mean that the ability to bargain with management and so forth is not given in the... in the case of the FBI?

Mr. Kirsch: They're explicitly excluded by definition of being an agency and therefore would not be subject to the provisions of the labor statute in any respects.

Chief Justice Rehnquist: So... so that... you say an FBI investigation is by definition not covered by the...

Mr. Kirsch: An exclusive FBI investigation, yes, that would be correct.

The... and as I attempted to take you through the IG Act, as you can see, the only authority of an IG to act for or on behalf of the agency is by virtue of that employee's existence and creation as a vehicle of that agency.

The legislative history says that this IG is to be the strong right arm.

Thank you very much.

Rebuttal of David C. Frederick

Chief Justice Rehnquist: Thank you, Mr. Kirsch.

Mr. Frederick, you have 2 minutes.

Mr. Frederick: Justice Kennedy, I'd like to return to your question about who the IG reports to because Executive Order 12993, which is not cited in the briefs, provides that the President shall engage a process to investigate wrongdoing by an Inspector General.

So, in those instances when the Inspector General and the agency head are at loggerheads, pursuant to this delegated authority, the deputy of the Office of Management and Budget convenes a committee called the President's Committee of Integrity and Efficiency.

The PCIE investigates outside the realm of the agency whether or not the Inspector General has committed any wrongdoing, and pursuant to that process, the agency head is basically taken out of the disciplinary process through the investigation of whether or not the IG has committed wrongdoing.

So, in answer to your earlier question, the IG really reports not only to Congress through those mechanisms created in the Inspector General Act, but also to the President who has the authority to appoint and to remove and to create this mechanism for the discipline of the Inspector General.

That creates a further insulation and independence of the Inspector General in performing its function.

I would also like to point out that the remedy that the FLRA asserts in this case runs against the agency and the agency, therefore, has to be able to have the authority to direct the Inspector General to comply in a certain way.

And that's exactly contrary to the... to the prerequisites of the Inspector General Act which provide for investigative independence on the part of the Inspector General in conducting investigations.

Allowing a union representative in these contexts allows the union representative to serve as an advance beacon of all of those types of questions that an Inspector General might ask not only of the worker who is being investigated, but also of the coworkers, and in the D.C. Circuit case, in which the D.C. Circuit held that a union... that an IG was not a representative, the court there specifically noted the problem where the worker had confided to the union representative having committed a number of crimes and the D.C. Circuit there held that the IG was not the representative.

Chief Justice Rehnquist: Thank you, Mr. Frederick.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

NFFE, Local 139 v. Department of the Interior - Oral Argument

Fri, 09 Jan 2009 14:50:11 +0000

Case:

NFFE, Local 139 v. Department of the Interior

Media File:

97-1184_19981109-argument.mp3

Related Transcript:

1998_97_1184_argument.xml

Transcript:

Argument of David M. Smith

Chief Justice Rehnquist: We'll hear argument now in Number 97-1184, the National Federation of Federal Employees v. The Department of the Interior, and a companion case.

Mr. Smith.

Mr. Smith: Mr. Chief Justice, and may it please the Court:

This case involves the Federal Labor Relations Authority's interpretation of its own organic statute.

The Authority has concluded that the Federal Service Labor-Management Relations statute obligates an agency to bargain over union-initiated proposals offered during the term of a collective bargaining agreement.

Chief Justice Rehnquist: Didn't the agency at one time have a different position and then changed its position just as a result of the decision of the Court of Appeals of the District of Columbia Circuit?

Mr. Smith: Mr. Chief Justice, the Federal Labor Relations Authority indeed did originally come down on the opposite side of this question in its IRS I decision.

However, subsequent to the reversal by the Court of Appeals for the District of Columbia the Authority reevaluated the issue and changed its mind, and decided that the statute did, in fact, obligate the agency to bargain.

Chief Justice Rehnquist: How much choice did it have in the light of the court of appeals decision?

Mr. Smith: The Authority has in several cases, Your Honor, chosen to nonacquiesce in a court of appeals decision with which it disagreed.

We cite in brief cases where we've done this when we disagreed, so the Authority could have, given the multiple venue provisions of our statute, have chosen not to have followed the Court of Appeals for the District of Columbia's decision in this case, but did, in fact, reconsider its original position and decide that the D.C. Circuit was, in fact, correct.

Justice Kennedy: Are the terms and the substance of the reconsideration set forth on remand from the agency in the IRS case?

Has the agency issued any other adjudicative dispositions or any rules to indicate that it continues to adhere to this position and to add to its reasoning in any respect?

Mr. Smith: Yes, Justice Kennedy, the Authority has, on numerous occasions, subsequent to its IRS II decision in 1987, adhered to the position it took in IRS II and determined that mid-term collective bargaining is required under the statute.

The Authority said originally in the case on remand from the District of Columbia that it had reconsidered the issue and thought the District of Columbia Court of Appeals was correct and, despite several reversals by the Fourth Circuit Court of Appeals, the Authority has stuck to its position.

This has, in fact, been our position since 1987.

Justice Scalia: Mr. Smith, you're here representing the Authority which is, as I recollect, three individuals, no more than two of whom can be from the same political party, appointed for 5 years and not removable except for cause.

Mr. Smith: That's correct.

Justice Scalia: And also appearing is... in today's argument is the Solicitor General, who, I suppose, is appearing on behalf of the President of the United States.

Mr. Smith: Well, he will, of course, tell you on whose behalf he is appearing.

I appear on behalf of...

Justice Scalia: Well, so we have a disagreement between these three individuals and the President of the United States regarding a statute that goes to the internal management of the personnel of the executive branch.

Is that a fair description of what's going on here?

Mr. Smith: I think we interpret the statute differently.

The agencies of Government have a view...

Justice Scalia: And you want us to give deference to these three members of the Federal Labor Relations.

Authority in preference to the views of the President of the United States as to what the efficient management of the personnel of the executive branch requires?

Mr. Smith: Well, there are several points raised there, Justice Scalia.

We don't think deference is required in this case because we think the statute is clear that there is an obligation to bargain midterm.

If you think it unclear, yes, we would seek deference in this case.

The Congress, of course, passed the Federal Service Labor-Management Relations Statute.

While it was signed by a President we are, in effect, carrying out the will of the Congress, not necessarily the will of the President, in what we do vis-a-vis Federal sector labor relations.

Justice Ginsburg: Mr. Smith, how could it be the will of the Executive, since the Executive is always an adversary in all the proceedings that are before the FLRA, so Congress set you up to be an arbiter between the unions and the Federal Executive.

Mr. Smith: That is, of course, correct, Justice Ginsburg, and on the several occasions when we've had the privilege of being before the Court before, we are virtually always in opposition with agencies on...

Justice Scalia: I'm not questioning whether you're an arbiter.

Of course you are.

But the question is, do you come here with some assumption of validity of what you have done in the narrow situation where what is at issue is the internal management of the personnel of the executive branch, and the President has chosen to disagree with you to such a degree that he's willing to go to court about it?

I mean, initially, very often two agencies of the Government disagree, and that is usually resolved internally, but here we have two agencies disagreeing, and they've come to the Court and asked us to settle it and the question... it's a very narrow question I'm asking.

In settling this particular question, do you really think we... it fits our scheme of Government to give deference to these three individuals, never elected by anyone, appointed without removal power by the President, over the views of the President, and I have serious doubts whether it's proper to give deference in that situation.

Mr. Smith: Justice Scalia, I would only point out that the members of the Authority are on a quasi-independent body.

As you noted in your question to me earlier, they are appointed by the President, confirmed by the Congress, and can only be removed by the Congress for good cause, so the President in the scheme of things...

Justice Scalia: But Congress is not free to create any scheme of things it wishes.

I mean, maybe Congress does want that scheme of things and does not want the President to be in control of the personnel of the executive branch, but I... that's just not the way I read the Constitution.

Mr. Smith: Well, at the end of the day, Congress' statute has articulated several rights that Federal sector employees have when they bargain collectively under the statute, and if it is that we read the statute different from the agencies of Government, so be it.

Chief Justice Rehnquist: Maybe the Pendleton Act, passed back in 1983, was unconstitutional, if Congress can't do anything to regulate the way the Executive deals with Federal employees.

Mr. Smith: Well, clearly Congress can, Mr. Chief Justice, do things to regulate the way the Executive deals with its employees.

We've...

Justice Scalia: Well, it can tell them, as the Pendleton Act did, just what the President must do, but it can't tell the President to obey somebody else as to how he should treat Federal employees.

Isn't that a different question?

Mr. Smith: Perhaps it is, but we are at this point reevaluating some 20 years of judicial review of Authority decisions, and disagreements between the Federal Labor Relations Authority and agencies of Government over what the Federal Service Labor-Management Relations Statute requires are not rare.

They're commonplace.

Justice O'Connor: Mr. Smith, tell me a little about the practicalities of this situation.

Since the CADC decision saying that midterm bargaining is allowable, how often has that been sought in the jurisdiction of the District of Columbia by unions with Federal employees?

Mr. Smith: In point of fact, one of the points we make, Justice O'Connor, is it's very seldom come up.

The basis upon which the Authority originally thought that there was no right to engage in midterm bargaining, and upon which the Fourth Circuit specifically concluded that there's no right to engage in midterm bargaining, was that this would cause enormous disruption to the Government, it would lead to inefficiencies, and all the rest.

Well, we're here after 11 years of midterm bargaining being the law of the land in every court of appeals in this country except the Fourth, and there are no problems.

There are no cases.

We've had no controversies.

Justice O'Connor: Well, have there been requests by the unions for midterm bargaining?

Mr. Smith: Yes, there have.

Justice O'Connor: And... frequently?

Mr. Smith: Well, yes, there have, but to a certain extent we're in the complaint business.

We don't know when there's a request to engage in midterm bargaining and it goes down without a dispute, but what comes to the attention of the Federal Labor Relations Authority and the courts is when there is a disagreement over whether or not there's an obligation to engage in midterm bargaining, and there have been few disagreements that have come forth.

Justice O'Connor: Well, because within the CADC you've taken the position that it's okay, so it just goes forward.

Do you know how often that these requests have resulted in arbitration so that it's resolved?

Mr. Smith: The... noted in the copetitioner's brief are only five instances in some 12 years that there have been disputes resolved by the Federal Service Impasses Panel involving midterm bargaining, so they've been rare indeed.

Justice O'Connor: This is a very curious proposal for midterm bargaining, a provision that says, we have the right to have midterm bargaining, isn't it?

I mean, it's a very curious provision that was sought after in this case.

Mr. Smith: I don't know that I understand the use of the word curious.

It's more limited than that, though, because as we point out the obligation and the right to engage in midterm bargaining only pertains to matters that are not contained in or covered by the collective bargaining agreement, which of course is...

Justice Scalia: Where does that...

Mr. Smith: the rule in the private sector.

Justice Breyer: Where does that come from?

I mean, I can understand a position that says the FLRA has the power to decide when or whether midterm bargaining should exist and what sorts, but you're saying it doesn't have the power, that even if it thinks midterm bargaining is terrible, it has to allow it because of the statute, so if that's so, then why can't they reopen in the middle of the term every closed agreement?

Mr. Smith: Justice Breyer, the Authority reads the statute as creating an obligation to engage in midterm bargaining without limitation.

However, we think that rule would not be appropriate, so we have developed and applied the private sector rule to the Federal sector.

Justice Breyer: Where... if you're talking about the... your position differing from the Government I would be repeating myself, but I don't see how you can read the statute as you do, which is that it forces midterm bargaining, it requires it.

That's your position, isn't it?

Mr. Smith: If the union... I want to be clear...

Justice Breyer: It requires it at the request of the union.

Mr. Smith: On matters that are not covered in the collective bargaining agreement.

Justice Breyer: Where does it say that in the statute?

What I don't see is how you can say the statute requires midterm bargaining, but by the way, only on certain subjects, in a statute that says not a word about midterm bargaining.

That's why I'm having trouble.

I'd like you to explain... I can understand how a statute could delegate to the agency the power to decide whether and under what circumstances, et cetera, et cetera, namely the SG's position, I think, basically.

Mr. Smith: Yes.

Justice Breyer: But I don't understand the position that it would require midterm bargaining even if the Authority were to say, midterm bargaining's the worst idea we've ever heard of.

Mr. Smith: It requires midterm bargaining because there's a broad obligation in the statute to bargain with no limitation on the time or circumstances when bargaining is to occur.

Justice Breyer: Okay, so in your view, if they come in, the union, and they say, we signed an agreement 3 weeks ago, and it promised to say nothing for 10 years, but by the way, we want to reopen everything right today, midterm, in your view, does the statute require that?

Mr. Smith: Absent the Authority's contained and covered by policy which the Authority has adopted to place reasonable constraints on midterm bargaining, it would.

Justice Ginsburg: Mr. Smith, I don't understand that, because I thought that the... that even the D.C. Circuit had made it clear that you could have a zipper clause, so as Justice Breyer phrased the question, the union could say in the collective bargaining agreement we promise not to ask for midterm bargaining during the term of this contract.

So the answer to his question is the zipper clause, but that would be something to bargain for, is that not so?

Mr. Smith: Certainly the agencies can bargain for zipper clauses to put an end to any midterm bargaining, and that could be a provision in a collective bargaining agreement.

Justice Scalia: Why couldn't the union come around in midterm and say, by the way, we want to renegotiate the zipper clause?

I mean, how can you lift yourself by your own petard that way?

If the entire agreement is up for midterm bargaining, why isn't the zipper clause up for midterm bargaining?

Mr. Smith: We don't start with the premise that the entire agreement is up for midterm bargaining.

The premise is, those portions of the agreement that are... those matters that are not contained in the agreement can be negotiated midterm.

Justice Scalia: That was Justice Breyer's point.

I don't know where you get that limitation from.

It's contained in the National Labor Relations Act, but it's not contained in your legis... I mean, there's a significant difference between the two, and I would think, if that difference meant anything, it would mean that everything is negotiable midterm if anything is negotiable midterm.

Mr. Smith: There are many broad divisions in our statute that provide for basic rights without limitation and without explanation.

It's the Authority's responsibility, as this Court has recognized in interpreting decisions of the National Labor Relations Board, to fill in the gaps.

Justice Souter: Well, when you fill in the gaps on the general question of the permissibility or perhaps the obligatory nature of midterm bargaining, I assume that what you're doing is interpreting, if I remember the statute correctly you're interpreting the phrase, reasonable in... the word reasonable in reasonable times as those times at which collective bargaining is obligatory.

Am I right that you're saying, well, midterm bargaining is a reasonable time?

That's what you're interpreting, isn't it?

Mr. Smith: Yes, sir.

I...

Justice Souter: Okay.

Do you have a similar word that you're interpreting when you come to the conclusion that they are obliged to bargain on matters which are not covered by the agreement but they in fact would be precluded from bargaining on matters that are covered?

Is there a textual basis for it the way there is on the time question?

Mr. Smith: I don't think so.

I thought I'd answered that question.

Absent the Authority's contained and covered by doctrine, which of course is adopted from the private sector, I think there would be no specific limitation on the right to engage in midterm bargaining.

Justice Souter: May I ask you just a technical question about the agency's position?

You say that midterm bargaining with respect to a matter covered by the agreement would be barred.

I think it's the position that a matter that the union had raised and had failed to get an agreement on, in other words which it had dropped in the initial collective bargaining, would also be barred?

Justice Stevens: Is that correct?

Mr. Smith: That's correct.

Justice Souter: What about a matter raised by the governmental agency upon which nobody got any agreement in the collective bargaining agreement?

Would that be barred as well?

Mr. Smith: It would, of course, depend on the nature of the bargaining history and what transpired at the bargaining table.

If it was dropped in exchange for another concession, yes, it would be barred, but I'm reluctant to...

Justice Souter: Well, is the rule exactly the same whether the union wanted something or whether the agency wanted something...

Mr. Smith: I...

Justice Souter: which did not find its way into an express provision of the collective bargaining agreement?

Mr. Smith: I think that's...

Justice Souter: You treat each side identically?

Mr. Smith: Yes.

Justice Souter: So that I suppose, then, the agency could protect itself, as it were, from being subject to midterm bargaining on a subject that it didn't want to be... it didn't want to have to bargain on midterm, simply by raising it and trying to get an agreement favorable to itself, and if it failed, that would be it until the collective bargaining... the original collective bargaining agreement itself came up for renewal, is that right?

Mr. Smith: That's our point.

I'd like to...

Chief Justice Rehnquist: So it's not just things that are covered by the agreement, then, that are... you're precluded from midterm bargaining, but things that were raised and not made into an agreement at the bargaining session?

Mr. Smith: In the Authority's IRS II decision, Mr. Chief Justice, we broadened the matters that would be precluded to include matters that were contained in or covered by the collective bargaining agreement and matters that were waived, either waived by bargaining history, or waived by a zipper clause.

If I could reserve the remainder of my time.

Justice Souter: Okay.

Justice Kennedy: Thank you.

Argument of Gregory O'Duden

Chief Justice Rehnquist: Thank you, Mr. Smith.

Mr. O'Duden.

Mr. O'Duden: Mr. Chief Justice, and may it please the Court:

I'd like to spend just a moment taking the Court through a textual analysis here and explain how we get to our conclusion that midterm bargaining is required by the statute, and then I'd like to spend a moment, if I could, talking about the practicalities in connection with midterm bargaining.

The question was asked earlier, where is it in the statute that provides for the FLRA's conclusion that midterm bargaining is required.

Obviously, if you look at the statute you see in section 14(a)(4) of the statute that it imposes on the agencies and the unions the obligation to engage in bargaining for the purpose of arriving at a collective bargaining agreement.

Well, what does that mean?

I think the answer to that is to be found in the statute's definition of a collective bargaining agreement.

When you turn to that definition in 7103(a)(12), what do you see?

You see that it says that a collective bargaining agreement is an agreement entered into as the result of parties bargaining.

That's a very broad definition.

It includes...

Chief Justice Rehnquist: Well, it's almost tautological, too, that a collective bargaining agreement is the result of collective bargaining.

Mr. O'Duden: That is the way Congress chose to define it, though, in a very broad fashion without qualification, without temporal limitation, and it certainly did not choose to define that phrase as the respondent wants this Court to redefine it, namely, to mean only a basic, comprehensive agreement.

Justice Breyer: What about... just... I just want to be sure you focus on... I see a broad word.

Mr. O'Duden: Yes.

Justice Breyer: I see an Authority.

Mr. O'Duden: Yes.

Justice Breyer: It looks a little like the NLRB, looks a little like the labor statutes, a little like a lot of statutes that delegate to the Authority questions to decide what is or is not... to fill in the blanks.

So what I don't get is the position that says, they don't have the authority to fill in the blanks.

They have to, no matter what they think...

Mr. O'Duden: Well, of course...

Justice Breyer: permit midterm bargaining.

Mr. O'Duden: Of course, to the extent the statute is ambiguous the Authority is performing a classic function.

Justice Breyer: That's exactly... I understand that argument.

Mr. O'Duden: Okay.

Justice Breyer: I'm saying the reason my question is on a different argument is on your position which is more extreme than that, which is the position that says, even if they think it's a terrible idea, they'd still have to allow it because the statute requires it.

That's the argument I don't fully understand, and why I was asking.

Mr. O'Duden: Even if the Authority thought it was a terrible argument?

Chief Justice Rehnquist: Yes.

Justice Scalia: Yes.

Chief Justice Rehnquist: You...

Mr. O'Duden: Well, I think that the statute answers the question that is presented to the Court, and that's of course what the NTEU v. the FLRA case was about.

Justice Breyer: In other words, are you satisfied with the... you think the law is correctly satisfied with an opinion that says, these things are up to the Authority.

Language is broad, up to the Authority.

If they think it's a good idea...

Mr. O'Duden: Absolutely.

Justice Breyer: sometimes, always... yes, all right.

Mr. O'Duden: And of course it was just a couple of years ago in the Fort Stewart case where this Court recognized that it was the Authority's job to give a rational interpretation to the statute, and it was entirely proper to give deference to the Authority, notwithstanding the fact that it was adjudicating disputes between employees and Federal agencies.

Justice O'Connor: Well, that argument has to rest on your notion that the statute, then, is not clear, it's ambiguous on the question.

If you leave it open to the Authority, then you have to say the statute's ambiguous, that's why it's open to the Authority.

Mr. O'Duden: That's right.

Our starting point...

Justice O'Connor: And that's your position.

Mr. O'Duden: Our starting point is that...

Justice Stevens: Yes?

Justice O'Connor: That is your position?

Mr. O'Duden: Our position is that if the statute is ambiguous, then this case is uniquely suited for deferral to the Authority's interpretation of those words.

Justice O'Connor: Well, then you haven't answered my question, because I'm confused.

Is it your position that the statute is ambiguous, or is it clear?

Mr. O'Duden: No.

It is our position that the statute answers the question presented to the Court.

Justice O'Connor: Well, if the statute is clear, then the Authority would not have an option.

It has to be one way or the other, I think.

Mr. O'Duden: No.

As I said earlier, I don't think that the Authority does have an option to conclude anything other than what the D.C. Circuit said 10 years ago, but to the extent that the party, the respondent is now suggesting, as the Fourth Circuit did, by the way, that the language is ambiguous, if that is the premise, then...

Justice O'Connor: Well, it's a pretty good argument in light of the fact that a court of appeal has differed from the D.C. Circuit and says yes, indeed, the statute requires something else.

I mean, it does appear to be somewhat ambiguous.

You can't find in the text anything referring to midterm bargaining, certainly.

Mr. O'Duden: No, and we've never...

Justice O'Connor: And you do find in the text references to a collective bargaining agreement.

Mr. O'Duden: Yes, but...

Justice O'Connor: Not a continuing process.

Mr. O'Duden: But that begs the question, of course, of what a collective bargaining agreement is, and that's why you have to go to the statutory definition of that phrase.

Chief Justice Rehnquist: Well, you really have two positions, don't you?

One is the statute is clear and, second, if the court doesn't agree with that, it's at least ambiguous and the agency could do what it's done here.

Mr. O'Duden: That sums up our entire argument, Your Honor.

Justice Ginsburg: Mr. O'Duden, before you finish, I do hope that you will get to what seems to me a very key issue here.

It's, Chief Judge Wilkinson put great stress on the absence of a provision like 8(d).

He said, if you're trying to be like the NLRB, the NLRA says, specifically says no bargaining on subjects that are already included in the contract.

The FLRA doesn't have similar language to deal with.

Mr. O'Duden: Right.

I think that the absence of this 8(d) proviso ultimately is of no consequence here.

I think it's almost counterintuitive.

It's a kind of no-exception-proves-no-rule type of argument.

I think it's important to bear in mind that even before this 8(d) proviso was added to the NLRA there was no question under that statute that employers did have to engage in midterm bargaining.

I think that the principle...

Justice Scalia: But was there any question whether they had to engage in it even with regard to issues that had been decided in the collective bargaining agreement?

Mr. O'Duden: I believe that there was some question along those lines, and that's why...

Justice Scalia: Which is why they adopted the proviso.

Mr. O'Duden: That's why they adopted the proviso.

Justice Scalia: So by parity of reasoning, without the proviso, they would... if you say, they must bargain midterm, it seems to me they must bargain midterm on everything.

I don't know...

Mr. O'Duden: Well, obviously the Authority has interpreted the statute in a different way, and thought it was appropriate to fill that gap by adopting the covered-by doctrine.

Justice Kennedy: You're telling us the statute is clear, as your argument number 1.

Mr. O'Duden: With respect to the obligation to engage in midterm bargaining, yes.

Justice Kennedy: How about with respect to the obligation to engage in midterm bargaining with respect to matters previously bargained upon?

Mr. O'Duden: As my cocounsel says, the statute doesn't speak to that directly, and that is the reason why the authority filled in the gap to furnish the covered-by doctrine.

The principle that the parties...

Justice Kennedy: Well, if you think the statute is clear that there must be midterm bargaining, I don't know where you get this qualification.

You're the one that wanted to walk through the statutory text.

Mr. O'Duden: Yes, I do.

Justice Kennedy: But you... what is it you point to to show that there may not be midterm bargaining with respect to matters previously decided?

Mr. O'Duden: I think that that is an appropriate function for the Authority to have performed here in interpreting the policies of the act and trying to balance the competing interests here in favor of collective bargaining versus the interest in having repose during the term of the agreement.

Justice Scalia: It can add provisions that the act doesn't contain?

It can say, even though the act says you must bargain midterm without qualification, we are going to import a qualification because it's, quote, appropriate?

That goes beyond...

Mr. O'Duden: If that is a reasonable construction of what the plan of the statute was, yes, I think it is appropriate.

Justice Scalia: That's what Justice Kennedy asked you, is it a construction of any provision in the statute, and you can't come up with any.

Mr. O'Duden: Your Honor, the principle that the parties do not have to engage in bargaining regarding matters contained in the contract is such a well-settled principle of labor law, it's such... a principle that's so well-integrated into the labor law jurisprudence...

Justice Scalia: So well-settled that Congress found it necessary to say it explicitly in the National Labor Relations Act.

Justice Breyer: If it was so well...

Mr. O'Duden: That was 30 years before they wrote the statute and, given that fact, I think that it's hardly surprising that Congress didn't choose to spell it out when it came time to write this statute.

I think it's important, if I may finish by emphasizing the benefits, the good things about midterm bargaining.

It allows the parties flexibility to deal with topics that are not covered by the parties' agreement such as health and safety issues that might arise during the term of the agreement.

The respondent will no doubt get up and say that it will be terribly disruptive to the Federal Government if it has to put up with midterm bargaining.

We know that we have lived with this regime for 10 years now all over the country, except for the Fourth Circuit, and there's simply no indication of any kind of disruption along the lines that are described by the respondent.

Unless there are further questions, I thank the Court for its time.

Argument of Irving L. Gornstein

Chief Justice Rehnquist: Thank you, Mr. O'Duden.

Mr. Gornstein, we'll hear from you.

Mr. Gornstein: Mr. Chief Justice, and may it please the Court:

A Federal agency has a duty to negotiate with a union for the purpose of arriving at a collective bargaining agreement.

Once such an agreement is reached, the agency does not have an ongoing duty to negotiate over union-initiated proposals for the purpose of supplementing that basic agreement during its term.

Justice Kennedy: On the threshold question raised by Justice Scalia as to whether or not we should give Chevron deference to the petitioner agency here rather than to the President and to the executive branch as a whole, you did not take the position that Chevron deference cannot be given to the petitioning agency, did you?

Mr. Gornstein: That's correct, we did not, and the reason is, this Court's decision seems to have... seemed to have settled that question, including the Fort Stewart Schools decision and others that, as a general matter at least, the FLRA is entitled to Chevron deference.

Is the reason because the Federal Labor-Management Relations Agency has more expertise on this general subject than does the Government Executive's establishment in general?

That would not be the reason.

I think the reason would be that Congress has delegated the authority to the FLRA to administer the act, to decide on fair labor practice charges, to adapt policies to further the purposes of the act...

Justice Scalia: Well...

Mr. Gornstein: and that is consistent with the general way, the approach the Court takes in deciding whether an agency gets Chevron deference.

Justice Kennedy: Well, but Chevron deference means that because of this delegation it develops an expertise, does it not?

Mr. Gornstein: Well, that does become part of it, but I would just say that it's first and foremost the delegation of authority that leads to Chevron deference, and expertise is a factor that goes along with that.

Justice O'Connor: And what do you rely on primarily for saying we don't owe deference to this decision?

Mr. Gornstein: That you do not owe deference to this decision because Congress has clearly resolved this issue in the text of the act.

Unlike the National Labor Relations Act...

Justice O'Connor: So you also take the position that the text is clear but just directly contrary.

Mr. Gornstein: That's correct, Justice O'Connor.

Justice Souter: The text being the efficiency of Government text?

Mr. Gornstein: No, the text being 7114(a)(4).

Unlike the... which appears on the white petition at 27a.

The... unlike the National Labor Relations...

Justice Scalia: What exactly is the language that you refer to?

Mr. Gornstein: The precise language is, shall meet, negotiate in good faith for the purpose of arriving at a collective bargaining agreement.

Justice Souter: It's the singular, a collective bargaining agreement?

Mr. Gornstein: It is the combination of arrive and collective bargaining agreement.

The ordinary and only, the established meaning of collective bargaining agreement is comprehensive term agreement.

The product of negotiations that occur midterm are amendments, or supplements, or modifications to a collective bargaining agreement.

They are not collective bargaining agreements themselves.

So if you have a single collective bargaining agreement, a term agreement, and it is amended four times during its term, the product of that is a single collective bargaining agreement consisting of the original provisions and the amendments.

It is not, as they would suggest, five separate collective bargaining agreements.

Justice Ginsburg: Mr. Gornstein, I don't understand how it works differently on the union side than it does on the management side, because I think you agree that if management wants to... chooses to negotiate midterm, it can, and that will end up with something, some kind of agreement, whatever you call it.

Mr. Gornstein: It will.

It will end up with either an amendment, a supplement, or a modification to the collective bargaining agreement.

Justice Ginsburg: Well then, why can't you call when the union initiates it the same thing, a modification?

Mr. Gornstein: You can call it that, but that's not what's provided for in 7114.

What's... management changes is provided for in 7106, which is in 25... 26a of the white petition, in (b), which describes the duties that managements have to negotiate not just at the point that it's arriving at a basic comprehensive collective bargaining agreement, but also throughout on a continuous basis, so if management exercises management rights at any point during the course of the agreement, it has a duty to negotiate by virtue of the duty spelled out in 7106(b)(2) and (3).

Justice O'Connor: Well, do you read the effect of that provision as negating a similar authority for the union?

Mr. Gornstein: It...

Justice O'Connor: You read the provision saying that if management makes certain changes it must initiate...

Mr. Gornstein: That's correct.

What I would...

Justice O'Connor: midterm bargaining.

Mr. Gornstein: That's...

Justice O'Connor: You read a negative in that.

Mr. Gornstein: I don't think you necessarily have to read the negative.

You just note that there's no corresponding provision for union-initiated changes which forces the petitioners to fall back on 7114 itself to find any obligation.

Justice Stevens: May I interrupt?

I'm just looking at (b) now.

It would preclude any agency and any labor negotiation... organization from negotiating.

That doesn't say who must initiate the negotiation.

And then you go to (2).

(2) doesn't tell you which one has to initiate the negotiation, does it?

Procedures which management officials will observe in exercising any authority.

Mr. Gornstein: But the whole subject is about management rights, 7106, and what that is qualifying is the exercise of management rights, so what that is saying is that when management exercises rights, that it does not have to negotiate with respect to number 1, but it may, but it does have to negotiate with respect to the procedures which management officials will observe in appropriate arrangements, and I don't think anybody has disputed that 7106(b)(2) and (3) is exclusively about impact and implementation of bargaining over exercises of management rights.

Justice O'Connor: But Mr. Gornstein...

Justice Stevens: If management exercise some... put into... some new procedure into effect, and the union came to them and said, we'd like to negotiate about that because... would they have to negotiate or not?

Mr. Gornstein: They...

Justice Stevens: This is a midterm request that we now negotiate about the change you've just made.

Mr. Gornstein: They... we would have to negotiate about that, yes.

Justice Stevens: Even though it's a midterm request made...

Mr. Gornstein: That's correct, as a result of 7106(b)(2) and (3).

Justice Stevens: You're not as...

Justice Scalia: It's only the procedures.

I mean, you can make the change.

Justice O'Connor: You just have to...

Mr. Gornstein: That's correct.

I misspoke if I said more than that.

We have... we can make the change, but we have to bargain over the procedures and the impact of those changes.

Justice Breyer: Why doesn't that... the Author... look, that particular provision that Justice Stevens mentions says... doesn't give anybody the authority to negotiate collective bargaining.

If the management says, we're going to contract out, and if the union says, it's midterm but we want to protect our people when you do, you have the right to do it, it says... it says nothing precludes them from negotiating appropriate arrangements for employees.

It says nothing precludes it.

Well, where do they get the authority to do it?

The obvious place is right over here in 7114(a)(4), where it says, a collective bargaining agreement, which isn't defined and, since it isn't defined, the obvious thing is that by a collective bargaining agreement, they meant... well, they meant whatever's reasonable given the whole statute, and they delegate authority to the FLRA to decide.

I mean, that would be the sort of basic, naive approach to this.

Why isn't that naive approach...

Mr. Gornstein: Well, Justice Breyer, you state the case...

Justice Scalia: Right, yes.

Mr. Gornstein: as well as it can be stated for the other side, and...

Justice Kennedy: All right...

Mr. Gornstein: but the answer to that is...

Justice Ginsburg: the other side.

Mr. Gornstein: that in 7106, if Congress inserted the words, at the election of the agency into number 1, in (b)(1)...

Justice Scalia: 7106(b).

Mr. Gornstein: That's right, 7106(b)(1), it inserted the words, at the election of the agency there, and deliberately did not insert those same words into (2) and (3), and the entire purpose of that was to transform what looks like a nothing precludes into something that says, nothing precludes (1) but (2) and (3) are required, and that is the source of the obligation.

Justice Breyer: On a related...

Mr. Gornstein: It does not go back to 7114.

Justice Breyer: Related, why... this is... might be... I... you know, there's a general authority here, as there is with most agencies, like the NLRB and others.

It says that the Authority has broad power under the statute to resolve issues relating to the duty to bargain in good faith, it has what I'd call a normal agency power

"to take such other actions that are necessary and appropriate to effectively administer the provisions. "

so given those normal provisions, I don't know why we'd even refer to Chevron.

I mean, here you have a word, a collective bargaining agreement.

It's very broad.

It should be stretched at least to cover (b)(1), (2), and (3), and you have a general delegation of authority to the agency.

Again, I'm putting the argument because I want to get your response.

Mr. Gornstein: Well, the answer is that the term, collective bargaining agreement, is not subject to the kind of interpretation that you're suggesting.

Collective bargaining agreement, the established meaning of that in the private labor field, is comprehensive term agreement.

When this Court in its decisions refers to collective bargaining agreements, it is always referring to comprehensive term agreements.

When it refers to the products of midterm discussions, it is talking about supplements to the agreement, modifications to the agreement, amendments to the agreement, and that is... the FLRA does not have authority to read that term in a different... other than in its ordinary usage.

Justice Stevens: May I just get your help, because I really am having trouble with following part of your argument.

I'm looking at (b)(3), about appropriate arrangements for employees, and supposing an agency decides to contract out a portion of the work, and it does not make any appropriate arrangements for employees whose duties will be changed by that transfer.

You're saying that it's perfectly clear that only management could initiate negotiations to... about those appropriate arrangements?

Mr. Gornstein: No, Justice Stevens.

We're saying that the only bargaining that takes place arises by virtue of management making the change, and then once management makes the change midterm, the union could request negotiations, and in fact management is required when it makes the change or even before it makes the change to offer the union an opportunity to negotiate over impact of implementation.

Justice Stevens: Does that mean that whenever management makes a significant change that triggers a union desire to negotiate with somebody, in that case, midterm negotiation initiated by the union would be appropriate?

Mr. Gornstein: Well, I would say that it's not initiated by the union per se, because when management makes the change it must offer the union an opportunity to negotiate over...

Justice Stevens: Where do... where does the statute say that?

Mr. Gornstein: Well, that is how (b)(2) and (3) have been interpreted in light of the very same executive order experience that preexisted the act.

Justice Stevens: You don't get that out of the text of the statute.

Mr. Gornstein: Well, it is an interpretation of the text of the statute.

Justice Stevens: Well then, the... then it isn't all clear from the text itself.

Mr. Gornstein: Well, not from (b)(2) and (3), but it is clear from... that the duties in 7114 are limited to negotiation for the purpose of arriving at a comprehensive term agreement, and then 7106(b)(2) and (3) picks up only midterm bargaining as a result of management changes.

Justice Scalia: Well, why just midterm bargaining?

I mean, as I read (b) it would have been procedures or the exercise of authority to reassign work, which occurred in the past.

Mr. Gornstein: Correct.

Justice Scalia: When a new collective bargaining agreement, as you use the term, is being negotiated.

Mr. Gornstein: That's correct.

7106 applies to both.

It's unrestricted.

It's not limited to either midterm or bargaining at the point of reaching a comprehensive term agreement.

Justice Scalia: Well then, doesn't it make sense that, just as those rights would otherwise exist for the collective bargaining agreement, as you use the term, those rights as far as this section is concerned could also exist midterm?

I mean, it doesn't narrow in on some nonexistence of midterm authority.

Justice Stevens: It just says...

Mr. Gornstein: Well, whatever rights exist under 7106(b)(2) and (3) that there are, whatever those rights are, and we would say they are limited to bargaining about impact and implementation of management changes, not the substance of...

Justice Ginsburg: Yes.

Mr. Gornstein: but those rights, yes, they apply midterm as well as at the point of the comprehensive term agreement.

The point is, there's no corresponding provision for union initiated changes through proposals that have nothing to do with management changes, or that have nothing to do with the impact and implementation of management changes, and so unions must fall back and the petitioners must fall back on 7114, which only creates a duty to negotiate for a comprehensive term agreement.

Justice Stevens: Does that mean that what we're fighting about... I really have trouble knowing how important this case is, that if you concede that every time management makes a change it has a duty to negotiate about it.

Is it very often going to happen that the union is going to request midterm bargaining when the management has done nothing?

Mr. Gornstein: Yes, and that's the problem in the case.

Justice Stevens: I see.

Justice O'Connor: That's what you're worried about.

Mr. Gornstein: Yes, that's the concern.

Justice Stevens: They just come up with a brand-new idea.

Give me an example, would you.

Mr. Gornstein: Justice Stevens, anything could come up in the term that could come up...

Justice Stevens: Give me a specific example of a specific kind of request by the union that we're fighting about in this case.

Mr. Gornstein: Well, in this particular case we're fighting about inserting a provision.

Justice Breyer: Oh, I understand.

Mr. Gornstein: But in other cases there's a proposal about relocation expenses, about working at home, about parking, about...

Justice Breyer: In other words, the union... I see.

Mr. Gornstein: any matter that could come up, any matter that...

Justice Stevens: The union initiates a request for more parking space or something.

Mr. Gornstein: That's correct.

Chief Justice Rehnquist: Okay.

I have trouble with 7106(b)(1), exactly what it does.

It says, at the election of the agency you can negotiate, and then it has some things that would appear to be pretty important.

Does that mean that the union cannot initiate bargaining about the subjects in (1)?

Mr. Gornstein: That's correct.

Justice Breyer: If you're right, which is that the collective bargaining agreement is a term of art, always meant to refer to the end of term agreements, and anything in the middle is called a supplement to a collective bargaining agreement...

Mr. Gornstein: Or an amendment, or a modification...

Justice Breyer: Or an amendment or something like that, then what would forbid a union and the agency from negotiating in what you consider the correct end of term agreement a promise that on certain matters they could open it up in the middle?

I mean, you see... does that require any stretch of the statute?

I mean, that's what's really before us, too, isn't it?

Mr. Gornstein: What is before you is not what you just said.

It's something that completely duplicates the statutory duty.

Your hypothetical was to open up a particular matter.

Justice Breyer: Well, they would make a list.

They make a list.

Mr. Gornstein: That's correct, and that would present a different question than the question we have in this case, which concerns solely whether they can propose something that replicates entirely the rejected scheme of open-ended midterm bargaining.

Justice Breyer: Well, to be specific, then, let me rephrase it, taking your definitions.

What in the statute would forbid them from at the end of term putting in a clause that says, we will have midterm bargaining on matters not covered by this agreement?

Mr. Gornstein: What... that would be precluded by 7103(14)(C), which appears at 25a of the white brief and that... what that says is that a proposal is not negotiable if it is specifically provided for by a Federal statute, and here Congress has specifically provided for the basic bargaining structure, and it has rejected open-ended midterm bargaining, so a proposal that merely duplicates that is not a permissible subject of bargaining.

I did want to...

Justice Kennedy: While you're on that section of... subsection (12) defines collective bargaining so that the units have to negotiate... meet at reasonable times.

Can't you say that in the event of a change in the workplace it's a reasonable time to negotiate about that right after it occurs?

Mr. Gornstein: Well, on... 7103(12) is a definition.

Ultimately the duty that you find, Justice Kennedy, is in 7114(a)(4), which also talks about meeting at reasonable times, but it ties the meeting at reasonable times to the overriding duty, which is to negotiate for the purpose of arriving at a collective bargaining agreement.

Justice Scalia: Yes, but (12)...

Mr. Gornstein: So reasonable times would be for the comprehensive agreement.

Justice Kennedy: But (12) defines collective bargaining as meeting at reasonable times to reach agreement, not a collective bargaining agreement, but to reach agreement with respect to the conditions of employment.

Mr. Gornstein: But collective bargaining means the performance of the mutual obligation, and the mutual obligation that is referred to there, it begs the question of what is the mutual obligation.

The mutual obligation is the obligation, and the only obligation, which appears in 7114(a)(4).

Justice Ginsburg: Mr. Gornstein, I'd like you to comment on the opinion in the D.C. Circuit following up the original decision, Judge Edwards and Judge Silberman joining and saying, this is all a tempest in a teapot, after all, the agency can negotiate for a zipper clause, and that's the end of it.

Mr. Gornstein: I think the problem with a zipper clause... and what a zipper clause is is a provision that would say, the union agrees not to negotiate about anything midterm.

The problem with a zipper clause are several.

First of all, no one has ever said that a union must negotiate a zipper clause other than two judges in that opinion.

The FLRA has never said that that is something that is mandatory and, if they have...

Justice Ginsburg: How about a reopener clause?

Mr. Gornstein: Well, I...

Justice Ginsburg: Has the FLRA said that that's okay?

Mr. Gornstein: Well, a reopener clause, like the one that's in this...

Justice Scalia: That's sought here.

Mr. Gornstein: A complete reopener clause?

Justice Ginsburg: A clause like the one that's sought here.

Mr. Gornstein: That is not a negotiable matter, because it is... that is a matter that Congress has specifically provided for by a Federal statute, and that is that Congress has decided on the basic structure of bargaining, and it has ruled out open-ended midterm bargaining.

It has specifically provided for the basic structure, and so that is not a permissible subject of bargaining.

Justice Souter: Why isn't the teapot proportion sort of dictated by the position that Mr. Smith described to us, that the... that the... that... I keep wanting to say the board.

What do I want to say?

Justice Scalia: The...

Authority.

Justice Souter: The Authority takes, that if a matter has been raised by management at the time of negotiating the basic agreement and has been rejected without reaching agreement, that subject is precluded as a subject of bargaining midterm.

Why doesn't that protect management and reduce the argument here really to something pretty small?

Mr. Gornstein: Well, if the FLRA interpreted it in exactly that way, which it hasn't up until this point, it would improve the matter some, but you would still have all the unforeseen issues that can be raised, and a union really, in this context, when it can take an issue to impasse and then take the issue to the binding arbitration, has an incentive to raise any issue of any concern...

Justice Scalia: Then why hasn't...

Mr. Gornstein: to any Federal employee...

Justice Souter: Why hasn't it been doing it to a disturbing degree for the last 11 years outside the Fourth Circuit?

I mean, if we were... if this were the first day of creation, I think you might have a stronger argument there, but we've had 11 years' experience, and it doesn't seem to have become a source of great difficulty.

Mr. Gornstein: We have not had experience in a regime in which this Court has said, there is a duty to bargain midterm.

What we have had experience with is a regime in which the D.C. Circuit has said there is such a duty and the Fourth Circuit has said that there is not.

Justice O'Connor: But not for a while.

Justice Ginsburg: How many years was it before the SSA decision in the Fourth Circuit?

Mr. Gornstein: I believe it was...

Justice Ginsburg: About 5 years?

Mr. Gornstein: It was about 5 years, and I frankly do not know the dimensions of the problem, but the fact of the matter is, a D.C. Circuit decision is very different than a decision from this Court.

I would not want to gauge or predict what the experience will be after a decision by this Court based on a single court of appeals decision.

Justice Ginsburg: Except that that court of appeals is in a rather special position, because it's always an alternative venue in these cases.

Mr. Gornstein: It is an alternative venue, but there are many other venues for... as the Fourth Circuit case's experience indicates for Federal agencies to go, and for Federal agencies that did not want to engage in midterm bargaining, like the Department of Energy and the Department of Interior here, there was an option to take the issue to the Fourth Circuit, and that would be true in many other circuits.

So I... in point of fact, I just don't think it's a fair test that the Court...

Justice Ginsburg: Have there been circuits that have followed the D.C. Circuit?

Mr. Gornstein: There have been no other circuit decisions on this particular issue, on midterm bargaining, other than the D.C. Circuit decision in the Fourth Circuit.

Justice Stevens: May I ask you one narrow question?

Supposing, on a brand-new subject, the union asked the agency to bargain, and the agency said yes, we will bargain, would they have been acting lawfully?

Mr. Gornstein: I would say what... you could call it bargaining, but really what would be going on is the agency... the Government seeking input from whatever source it wants to to solve a problem, including an agency.

There's nothing wrong with the Federal Government consulting with an agency when a problem comes up midterm, after the fact.

Justice Stevens: No, no, the Federal Government can... I was talking about the agency consulting with the union.

Mr. Gornstein: Yes.

Justice Stevens: The union comes in and says, we want to bargain about some more parking spaces and they say, okay, we'll sit down and bargain with you.

That would not be unlawful.

Mr. Gornstein: That would not be unlawful, that's correct.

Justice Scalia: But the key is that it would not go to arbitration if it came to an impasse.

Mr. Gornstein: That's correct.

Not only that, but if the bargaining did not seem productive from the agency's point of view it could cut it off, and it would not be an unfair labor practice of not bargaining in good faith.

Justice Stevens: Could they, do you think, say well, if we can't agree among ourselves we'll let it be arbitrated by the agency?

Mr. Gornstein: That's possible, Justice Stevens.

I wouldn't want to rule out single after-the-fact solutions to problems on particular issues, but what is objectionable here is a clause that commits the agency to open-ended midterm bargaining without limit.

Justice Breyer: Is... if you were going back hypothetically, putting yourself in the position of a Congressman who thought this... realized this was all going to come up years later, would you have thought, or why not... I'm putting it against you.

Wouldn't it have... leave it up to the agency.

You know, if these things... we don't know if it will work out well or badly.

If it works out well, then they'll follow it.

If it works out badly, the FLRA itself will change the rule, as it might have the authority to do.

Wouldn't that be a practical... if we're talking practicalities, isn't that practical?

Mr. Gornstein: I think that Congress had a very big concern that it expressed in 7101(b), that this statute should not be interpreted in a way that threatens the effective and efficient administration of justice, and that is... administration of the Government, and that is in 24(a).

Justice Ginsburg: But Congress also thought that collective bargaining would advance the interest of the Government...

Mr. Gornstein: That's...

Justice Ginsburg: in efficient management.

Mr. Gornstein: That's correct as a general matter, but it did not believe that unending bargaining would, and Congress recognized that there were special needs, and that's what 7101(b) reflects, that there are special needs in the Federal Government and in Government in general that there have to be reasonable limitations that are not present in the private sector.

Justice Ginsburg: Is there anything that suggested that Congress thought that the agency was differently situated than private... in the private sector, where by this time, by the time this statute is enacted midterm bargaining is long-established?

Mr. Gornstein: Well, I think there are two things.

One is the text of the act, which is very different.

There was an open-ended duty to bargain collectively in the National Labor Relations Act, subject to a specific exception for matters contained in the agreement.

Justice Ginsburg: Yes, but there was no... nothing originally.

Taft-Hartley brought in the 8(d) exception, but originally there wasn't anything that said, there shall be midterm bargaining, was there?

Mr. Gornstein: Well, there was an open-ended duty to bargain collectively, which the National Labor Relations Act... Authority, the NLRB interpreted to lead to wide-open bargaining, and then Congress cut that back to the contained in.

But even the open-ended term, bargain collectively, is bigger than the term here, which is bargaining for the purpose of arriving at a collective bargaining agreement, a narrower obligation than the original NLR... National Labor Relations Act duty that was subsequently reduced.

Justice Scalia: The big difference, as I understand your position, is that there is no disincentive here to raise it midterm, as there is in the private sector.

In the private sector, if you come to an impasse midterm and you want to make something of it, you have to call a strike.

After you've gone through a big collective bargaining agreement you're usually not going to get your union members to be willing to do that.

Whereas here, if you raise it midterm and you go to an impasse, it's cost-free.

You go to an arbitrator.

Maybe he'll rule for you.

I mean, it's, you know, heads I win, tails you lose.

Mr. Gornstein: Justice Scalia, I was going to make that point first but I thought the text would go first better.

Justice Scalia: For me of all people.

Yes.

Justice Stevens: He's basically a policy...

Unidentified Justice: [Laughter]

Justice Scalia: Basically a policy wonk, you're right.

Mr. Gornstein: But that is... yes, Justice Scalia, that's absolutely correct.

That was the second enormous difference that Congress faced when it was looking at this act as it compared to the private sector experience.

The kind of incentives that would be in play for midterm bargaining are just completely different, and when you can take every issue to impasse, you have the incentive to raise any issue of any concern to any Federal employee...

Justice Stevens: Of course, I'm not really convinced that every mid-term bargaining in the private sector that doesn't reach an agreement results in a strike.

Mr. Gornstein: I... Justice Stevens, what happens is that unions do not raise things midterm in the private sector unless they are of crucial importance, and therefore there isn't a lot of union-initiated midterm bargaining in the private sector because their only recourse is to strike at impasse, and it was something which is very difficult to accomplish midterm except over some very crucial issue.

Justice Kennedy: On that point, is there some source, some body of authority that we could consult to determine how midterm bargaining works in the private sector?

Mr. Gornstein: Justice Kennedy, I think we cited in our brief a text that talked about that this was something that was not done very frequently, and I think that the law review article that we refer to also in the brief discussed the fact that this is not something that is done in the private sector very often.

Justice Scalia: Thank you.

Mr. Gornstein: If the Court has nothing further...

Rebuttal of David M. Smith

Chief Justice Rehnquist: Thank you, Mr. Gornstein.

Mr. Smith, you have 3 minutes remaining.

Mr. Smith: The very first sentence of the Federal Service Labor-Management Relations Statute notes that Congress has examined both the public and private sectors and has determined that collective bargaining is in the public interest.

That collective bargaining as set out in the statute has no limitation as to the circumstances when it must occur.

We've heard the respondent offer their spin of what collective bargaining agreements mean.

They don't look to the term of art in the statute set out in section 7103(a)(8).

Instead they say, this is what it's come to mean in the private sector.

In point of fact, we have specific terms of art defined in the statute before you that tell you what a collective bargaining agreement is...

Justice Breyer: Well, but he says the collective bargaining agreement in labor relations means an agreement that's negotiated from term to term, and anything else is called a supplementary agreement or an additional agreement.

Now, is there some example that you could point to where that isn't so?

Mr. Smith: That isn't so in the wording of our statute, Justice Breyer.

Justice Breyer: No, no, but I mean, let's find... that's what's at issue, so let's find an agreement somewhere that was made midterm, in any context whatsoever, where it was labeled by some person in a case or in a statute or something to say that's a collective bargaining agreement.

They don't use the word supplementary agreement.

They don't use the word additional agreement.

Mr. Smith: We have the word local agreement used in our statute to describe agreements entered into at the local level between those that are not at the national level, so there's one example for you where the word is used.

That is specifically set out in section 7114(c)(4) of the statute.

Chief Justice Rehnquist: 7114(c)(4)?

Mr. Smith: Yes.

Justice Scalia: That could be a local collective bargaining agreement in the sense that the Solicitor General uses it.

Mr. Smith: Which would disprove their...

Justice Scalia: I mean, it could be a local agreement that lasts 3 years, couldn't it?

Mr. Smith: Which would disprove the point that there's only one collective bargaining agreement and everything else is simply a modification or a supplement to it.

Our view is there can be numerous collective bargaining agreements, and their view that any side agreement entered into as a result of a management-initiated change is a supplement to or an addition to finds no warrant in the statute.

There's no suggestion in... any place in the statute that says these subsequent agreements are supplement to a comprehensive term agreement.

In fact, the words, comprehensive term agreements, are not found in the statute.

If I could address one other matter briefly, we have not talked about the negotiability of this provision.

We stand on the statutory right analysis and we believe, in fact, there is a right to engage in midterm bargaining.

Chief Justice Rehnquist: Thank you, Mr. Smith.

The case is submitted.

Attribution:

The Oyez Project

Featured:

Wright v. Universal Maritime Service Corp. - Oral Argument

Fri, 09 Jan 2009 14:50:13 +0000

Case:

Wright v. Universal Maritime Service Corp.

Media File:

97-889_19981007-argument.mp3

Related Transcript:

1998_97_889_argument.xml

Transcript:

Argument of Ray P. McClain

Chief Justice Rehnquist: We'll hear argument next in Number 97-889, Ceasar Wright v. Universal Maritime Service Corporation.

Mr. McClain.

Mr. McClain: Excuse me.

Mr. Chief Justice, and may it please the Court:

Petitioner Ceasar Wright seeks a hearing on the merits of his claim that the respondents violated his rights under the Americans with Disabilities Act when they refused to accept him for work when he was referred from the union hiring hall.

As the district court found when Mr. Wright was refused work, he took the matter to the union.

The union protested on his behalf, but when the employers would not accede to the union's protest, the union decided, as the district court found, that they would not pursue the matter as a formal grievance, and recommended that Mr. Wright should take the matter to private counsel to bring the case under the Americans with Disabilities Act.

Justice O'Connor: Do you think that the ADA claim could have been resolved in a grievance procedure?

Mr. McClain: This grievance procedure I do not believe was thought by the union to cover it.

Justice O'Connor: I'm not asking you what the union thought.

I'm asking you whether... if... suppose the union said, fine, we'll process it.

Do you think under this agreement that under the grievance procedure this claim could have been resolved?

Mr. McClain: Not with finality.

No, not binding on the petitioner, if it was... if it had been addressed, no.

Chief Justice Rehnquist: Why would it not have been binding on the petitioner?

Mr. McClain: Because the grievance procedure itself did not specifically provide for a statutory claim to be pursued through that manner.

Chief Justice Rehnquist: So then you're saying that the collective bargaining agreement, because it didn't specify statutory claims, didn't include this kind of a claim?

Mr. McClain: That's been the holding of this Court for years, Your Honor.

Chief Justice Rehnquist: In what cases?

Mr. McClain: Livadas v.... the Livadas case is the most recent one, in which it was indicated that the waiver of an individual's right to proceed under a law that was applicable to all workers would not be inferred.

Chief Justice Rehnquist: Well, you said a holding of this case, and now you say... the case you cite for the holding, you say it was indicated in the case.

Was Livadas a holding on this point?

Mr. McClain: I believe it actually was part of the holding of that case, Your Honor.

I'd have to read it more carefully to be absolutely sure of that.

Justice O'Connor: If there had been a nondiscrimination clause in the collective bargaining agreement, would that have changed the situation here?

Would that have been enough?

Mr. McClain: No, because as in Alexander the petitioner had both remedies recognized by this Court's decision.

Chief Justice Rehnquist: Well, Alexander's been cut back in later cases by our Court.

Some of the reasoning of Alexander has certainly been undercut as to arbitration not being a satisfactory way of handling these cases.

Mr. McClain: That's correct, Your Honor, but however, an essential part of the reasoning of Alexander which this Court emphasized in the decision in the Gilmer case is as applicable today as it was when Alexander was decided, and that is that Mr. Wright had no legal authority to compel a hearing on his claim.

He was at the mercy of the union's decision as to whether or not the matter would be pursued.

Justice Scalia: Why is that worse for a statutory claim than it is for... is that only bad for Federal statutory claims, or is it State statutory claims as well?

Mr. McClain: The same rule applies to the State statutory...

Justice Scalia: To State statutory claims.

Mr. McClain: Which Livadas was an example of.

Justice Scalia: Why is a State statutory claim against... well, let's assume... or a Federal, against discrimination, why is that more important to the worker than his common law right to get the money owed him for work performed under a contract?

I mean, you know, as between one and the other, which one would you rather give up?

Mr. McClain: I don't want to give up either one, Justice Scalia.

Justice Scalia: Yes, me neither, but if I had to pick I would think my right to agreed-upon contract compensation might be the more important to me, to tell you the truth.

Mr. McClain: Well...

Justice Scalia: What's the reason for this rule?

And what if California codifies its law of contract so that your right to get money for a day's work as agreed upon in the contract becomes a statutory right?

It then becomes, what, nongrievable in the union contracts?

Mr. McClain: Your Honor, basically... let me back off just a minute and try to start with the questions one at a time.

Justice Scalia: All right.

Mr. McClain: First, Congress has determined that certain minimum standards should apply to all workers, and they have determined that these minimum standards are enforceable in court, and they've determined that they're only... as this Court held in Alexander, it has been determined that there are only two jurisdictional requirements for going to court.

Justice Scalia: But congressional law is interstitial.

I mean, Federal law, especially in these areas of contract, is really not the dominant law.

The States have determined, I can say just as...

Mr. McClain: Well, I would...

Justice Scalia: just as ponderously the States have determined that a man or woman should get a day's pay for a day's work as agreed upon, and has determined that there should be a lawsuit available for that.

Mr. McClain: But in the unionized contract context, it is in fact Federal law that governs because of the statutory relationship between the union as the exclusive bargaining agent for the workers in that unit, and so the union has to be the party to enforce the rights, and the rights that it can enforce are those which it has negotiated with the employer.

That's the nature of that particular workplace.

It has been organized pursuant to Federal statute, as construed and applied for decades by this Court.

Justice Scalia: I'm not sure what you're saying.

Are you saying that the rule you're arguing for is that only Federal statutes cannot be made... cannot be disposed of in the collective bargaining arbitration process?

Mr. McClain: No, sir.

What I was stating... I was trying to answer your question about whether this was a matter of State law, the contract right, and the fact is that the contract right under the collective bargaining agreement is totally regulated by Federal law, and the rights, the manner in which those contract rights are created, and the manner in which those contract rights are enforced are thoroughly regulated by...

Justice Ginsburg: You're talking about 301.

Mr. McClain: That's correct.

Justice Ginsburg: And Lincoln Mills, and that...

Mr. McClain: Yes, ma'am.

Justice Ginsburg: And that under that whole regime you have a right to go to court but you have to use the grievance arbitration procedure...

Mr. McClain: First, under 301...

Justice Ginsburg: So that works for the whole collective bargaining regime.

Mr. McClain: That's correct.

Justice Ginsburg: And was your distinction of Gilmer primarily that the... it is not the worker that has a claim in the grievance procedure, it is the union that is in control and that's...

Mr. McClain: That's...

Justice Ginsburg: That's how you differ it from Gilmer?

Mr. McClain: That's absolutely right.

That's why the union is not capable of making the same promise that Mr. Gilmer made, because the union cannot say, under the labor grievance mechanism, that Mr. Wright will have the power to enforce this contract.

Chief Justice Rehnquist: Well, but that simply states the conclusion.

What if this case had come up under the Federal Arbitration Act, that these people were not longshoreman, but the Federal Arbitration Act would apply to their contracts?

There we would probably hold that this was arbitrable, don't you think?

Mr. McClain: Well, Your Honor, of course this Court has not decided the question of whether or not the Federal Arbitration Act applies to any contract of employment.

Chief Justice Rehnquist: No, but let's assume we did decide that point in favor of arbitration.

Mr. McClain: And then... well, no... the critical distinction between Mr. Gilmer's situation as an individual and Mr. Wright's situation as a member of an organized bargaining unit is absolutely critical.

Both Mr. Wright has not in fact...

Chief Justice Rehnquist: Are you answering my question, or...

Mr. McClain: I'm trying to.

Chief Justice Rehnquist: Okay.

Mr. McClain: Sorry.

Chief Justice Rehnquist: Keep trying.

Mr. McClain: The answer is no under the FAA, because the promise... the union just can't make the same promise.

Chief Justice Rehnquist: Well, but the union certainly is capable of enforcing the contract rights, and it may have to give away some of Mr. Wright's claims there, and you're saying that there's some magic difference between statutory rights and contract rights?

Mr. McClain: That is the case because the whole labor grievance arbitration process for enforcing the contract rights is an integral part of the bargain.

Chief Justice Rehnquist: Well, if you made the arbitration clause broader, supposing it said specifically that we include statutories, then you could say that was an integral part of the thing, too.

That just states the conclusion.

To say it's an integral part...

Mr. McClain: No, sir, I'm sorry, I didn't make myself clear.

When I say it's an integral part of the bargain I mean that the decision... in other words, the way in which disputes under the contract are to be resolved is in the contract...

Chief Justice Rehnquist: Well...

Mr. McClain: and there is... it doesn't have any source in external law, in public law.

Chief Justice Rehnquist: Well, but why does that make a difference?

Mr. McClain: As between the FAA and...

Chief Justice Rehnquist: Well, either between the FAA and the present situation or between statutory rights.

I mean, if arbitration is favored, I mean, why don't we encourage the inclusion of arbitration clauses in Federal labor contracts, allow for the arbitration and statutory rights?

Mr. McClain: Because that would threaten the union's role as the exclusive bargaining agent.

Chief Justice Rehnquist: How would it do that?

Mr. McClain: Well, the control, as this Court has emphasized in decisions such as Vaca v. Sipes, the control of the grievance process in the hands of the union subject to only an extremely limited review is essential to the union's role as... in enforcing the contract, in continuing to maintain labor peace by not only making an agreement with the employer in the first place but by then resolving disputes that arise under the agreement with that employer.

And if the union does not have the authority to make these decisions with a very limited scope of review, then it will not be able to have the same give-and-take that this Court has approved...

Chief Justice Rehnquist: Well, maybe it does have authority to make these decisions with limited scope of review.

Mr. McClain: That's correct, and then that... that deprives the individual of his right under the Federal statute.

Chief Justice Rehnquist: Well, but if his right to... if his right to contract for wages is subject to that, why shouldn't his statutory rights be subject to that?

Mr. McClain: In part because this Court concluded in Alexander that...

Chief Justice Rehnquist: Well...

Mr. McClain: that was not the case, and it has been reaffirmed in numerous cases since that time, because of the absence of the ability of the individual to control the prosecution of his claim, and Congress has approved that arrangement, and...

Chief Justice Rehnquist: How did Congress approve it?

Mr. McClain: In the same way that Congress approved this Court's decision in the Meritor case, as was discussed in the Faragher and Ellers decisions at the end of last term, that the... in the 1991 Civil Rights Act Congress specifically addressed and modified some eight decisions of this Court.

It did not address Meritor.

Chief Justice Rehnquist: So by not addressing a case Congress confirms it?

Mr. McClain: Well, in... that's... I'm simply citing the decisions of this Court.

Justice Scalia: You must not be familiar with the legislative process.

Justice Souter: Mr. McClain, I thought your argument at least in part is somewhat different from what you have been saying to the Chief Justice, and let me just put forward what I thought was at least one strand of your argument, and you tell me whether it is or it isn't.

I thought at least one strand of your argument was that the line represented in Alexander, for example, or drawn in Alexander still applied here, was that it was the only way to respect what Congress has in fact done.

And Congress has in fact given a crucial bargaining role to unions in contract formation, and therefore there's nothing really inconsistent with that with saying, okay, we're also going to give the union an equally significant role in determining how we negotiate enforcement of this contract, if you will.

But Congress has not given the union any role in the formation of the right under title... rights under title VII or the ADA, and that's why we are simply respecting the will of Congress in saying, you can't let the union bargain away what the union has had no role in giving, whereas when you have given the union a role in contract formation it is consistent with congressional intent to let the union have a role in enforcing it.

I thought that was the guts of your argument.

Mr. McClain: I think... I certainly agree with your... the case as stated, or the propositions as stated, Justice Souter.

I don't disagree with that at all.

I was trying to articulate that earlier and failed to do so as well as you have.

Justice Ginsburg: May I ask if the end result, then, is what you're saying is, in any employment covered by a collective bargaining contract you simply cannot have a Gilmer-type deal because the employer, under the NLRA the employer cannot contract with the employee, but only with the union?

Mr. McClain: Well, that is the case unless the union authorizes the employer to make a separate agreement with the individuals.

Justice Scalia: Can the union do that?

I didn't know that.

Mr. McClain: If the union and the individual agree to do so we believe that they can.

They cannot do it directly.

Justice Scalia: Do you know of any instances where they... you see, one of the things that affects me about this case is, if I were an employer, I would have a severe... and with the multiplication of Federal laws affecting the employment relationship, the ADA and a number of others, I would be very disinclined to have a unionized shop if it means that neither the union can agree to have all of these common disputes arbitrated, nor can the individual employee.

Mr. McClain: I think I'm trying to state that our position is that if the union and the individual employee concur, each individual employee as to his claims, then it can be done.

Justice Scalia: But...

Mr. McClain: It cannot be done...

Justice Scalia: I thought the rule was the individual employee cannot negotiate... in a unionized situation the negotiation between the employer must be through the union.

It cannot be with the individual.

So you cannot get each individual employee to agree, we'll go to arbitration on all these title VII claims, these ADA claims.

You can't go to the individual employees.

Whereas the employer who doesn't have a union, when he hires people as part of the employment contract, any disputes about title VII, about the ADA, will go to arbitration.

That would be lawful in that situation, wouldn't it?

Mr. McClain: Not if it's a condition of employment, Your Honor.

I don't believe that's Congress' intent.

Justice Scalia: Not if it's a condition of employment?

Mr. McClain: Not if it's a unilaterally imposed condition of employment.

There's no voluntary right...

Chief Justice Rehnquist: Maybe what you're saying is that the JI case law is for the benefit of the union, that you can't... the employer can't make individual contracts.

If the union wants to waive that benefit, and say... and agree that the individual can contract directly with the employer, that would be the only person who could complain.

Mr. McClain: That's correct, Your Honor, and... or the union could negotiate a framework and allow individual members of the union... the bargaining unit to opt into that framework.

Justice Kennedy: In that hypothetical could the employer make it a condition of employment?

Mr. McClain: Could the... well, the employer...

Justice Kennedy: Could the employer say, we've agreed on this framework and you're going to let me go to individual employees, but if they don't sign this they can't work for me?

Mr. McClain: I don't... well, he has to bargain with the union, and if the union doesn't... certainly if the union does not agree to make it a condition of employment the employer could not impose it unilaterally without the union's consent.

Justice Ginsburg: The union is in the driver's seat on all of this, so what you said is, the union if it wants to can say, we're going to give up the control rein that we hold over the grievance procedure and we're going to let this person make this deal with the employer, but the union stands at the gate, and unless the union says yes, the employer cannot make a deal with the individual employee, right?

Mr. McClain: That's the nature of the union's role...

Justice Ginsburg: Yes.

Mr. McClain: as exclusive bargaining agent.

Justice Ginsburg: So it is the case that in a collective bargaining situation the employer will not be able to make a Gilmer deal, because he can't deal, get past the union.

Mr. McClain: Well, but even if he made an agreement with the union and... that's correct, but even if he made an agreement with the union it would not be a Gilmer deal because individual employees have not...

Justice Ginsburg: Yes.

Mr. McClain: Don't have the power to enforce it.

Justice Ginsburg: What I mean is he can't get... he can't get... he can't go directly to the individual employee.

He can go only if the union says okay, which seems unlikely that the union's going to give up control over the grievance procedure.

Mr. McClain: Well, that may be, and then it's a question for bargaining between the employer and the union.

Argument of Barbara D. Underwood

Chief Justice Rehnquist: Thank you, Mr. McClain.

Ms. Underwood, we'll hear from you.

Ms Underwood: Mr. Chief Justice, and may it please the Court:

A worker's right to a judicial hearing on a claim of employment discrimination is an individual right that can't be waived by a collective bargaining agreement between the union and an employer.

This Court said so in Alexander in 1974 and has reaffirmed that principle many times since then.

It's a matter of statutory interpretation, as Justice Souter said earlier, and the Court said so recognizing a fundamental tension between individual statutory rights conferred by Congress and collective representation.

The Court said that unions are properly concerned with the collective interests of their members, and that it would be inconsistent with the individual focus of at least the antidiscrimination laws to let a union decide whether and how to enforce claims under those laws.

Justice Scalia: I know we said that, but I...

Ms Underwood: Well, I'd like to say that not...

Justice Scalia: I'm still not sure I understand why it's so.

It might seem...

Justice Breyer: And Alexander was different.

Justice Scalia: like my individual right to money is no less individual than my individual right not to be discriminated against.

Ms Underwood: Well, but your right to money, your wages and... except for the minimum wage requirements established by the Federal... by the Fair Labor Standards Act are precisely what the union was set up and authorized by Congress to negotiate.

This, as I said, is a question of interpreting statutory regimes, and this Court concluded correctly that there were two regimes here, one in which Congress conferred the power to invoke and waive both rights and procedures ancillary to those rights on individuals, and the other on unions, and there's an additional reason for adhering to that regime now, because...

Justice Scalia: Both of these laws apply to the employment relationship equally.

My right to get paid for the work I do is a right that relates to the employment... my right not to be discriminated against by the employer, not to be fired for reasons that would violate the ADA, they relate to the employment relationship just as well.

I don't know how you can...

Ms Underwood: That's true.

The question is, who did Congress intend to confer the power of enforcing those rights upon in a unionized workplace?

Justice Breyer: But wait, Alexander, I take it a different case.

In Alexander there was a question of a contractual claim, and the Court said that delegating to the union the power to settle the contractual claim did not delegate to the union the power to settle a statutory claim, which was a different claim, and so what you seem to be arguing is a different thing, which I would like to know the answer to.

If I say to you, I like you, you're my friend, I would like you to settle my lawsuit against somebody else, I can do that, no matter whether it comes under a statute or not, so why couldn't I say, the union is my friend.

I delegate to the union the power to settle my statutory claim against the employer in this area?

Now, I think there's a question of whether this has done that, but suppose it were absolutely clear.

The worker says, I delegate to my friend the union the power to meet with my employer and settle my statutory discrimination claim.

Is there something in the statute books that would prohibit that from happening?

Ms Underwood: Well, I think there's a question about whether Congress intended to permit unions to settle in advance, which is what this is, not to...

Justice Breyer: I mean in my case.

I have a piece of paper...

Ms Underwood: Oh, to settle the existing claim?

Justice Breyer: No.

They say, now, we settle the existing claim.

Fine.

What I do is, I say, it may be this employer, whom I don't trust all that much, will one day discriminate against me, and I hereby give to you, the union, the power to settle any future discrimination claim against me by this employer.

Is there something in the law that prohibits that?

Ms Underwood: Yes.

I would read the...

Justice Breyer: What?

Yes.

Ms Underwood: antidiscrimination laws as prohibiting that for several reasons.

One, the structural analysis that I believe the Court undertook in Alexander, because the Court said not only the contract did not give the union the power to settle the statutory... to waive the judicial forum for the statutory claim, but that it could not.

But beyond that, I think it's implausible to think that Congress gave unions the power to assert or waive their members' rights.

Justice Breyer: It wouldn't be a power given to the union.

The question would be, normally I take it you are my lawyer.

I could say to you, lawyer, if Mr. Smith ever does anything bad to me in a certain area, I hereby delegate to you the power to settle it.

Now, that's the normal background rule of law, and it doesn't limit it only to lawyers, so I suppose you'd have to find something that would suggest in this statute that although I could delegate this power to my lawyer, I couldn't delegate it to the union.

Ms Underwood: Well, one of the things...

Justice Breyer: And if so, what is that?

Ms Underwood: One of the things I'd point to is the fact that in the antidiscrimination laws, in title VII in the ADA and the ADEA, the unions are identified as potential defendants, and it seems implausible that Congress would, in the same statute that it... and there's a historical reason why that's so.

That is, the unions had been and perhaps still are sometimes participants in the discrimination.

Chief Justice Rehnquist: Why is that different from the Securities Act cases, where we've said you can agree to an arbitration, and the... you know, the obviously the arbitration is going to be against your employer, very often, or perhaps your broker, and you have a board of arbitrators in which the broker has a large part of saying who's going to be appointed.

Ms Underwood: Well, we're not challenging the Gilmer propositions that you can agree to arbitration of these antidiscrimination claims as well.

The point is that you can't... that Congress didn't intend that the union, who will frequently be, or sometimes be allied with the discriminator, couldn't... could make the agreement on your behalf, that the union doesn't have the same undivided duty of loyalty in relationship to employees, particularly with regard to these discrimination issues, as does your lawyer, whose obligation is entirely of direct loyalty to...

Justice Souter: What if... I'm sorry.

What if the employee knows all of that?

He says, look, I realize that our positions are not exactly right, but I don't want to have to go through this myself and hire a lawyer.

I'm willing to take my chances with you.

I make a specific agreement with you, the union, which says you can arbitrate and otherwise deal with my rights in any way you see fit.

Why, if the agreement is the kind of knowing agreement that I've just described, should that not be allowed, because the... I mean, the point of the ADA is to protect the person who is making this knowing and willing agreement, and if he wants to agree, why is there a congressional purpose to disallow it?

Ms Underwood: Well, I think the statutes, the antidiscrimination statutes are fairly read as reserving to the individual the right to assert or waive both the statutory right itself and the judicial forum for it, but it would...

Justice Souter: Well, why should that be, because there is such a danger that the union is going to be a coparticipant in the kind of discrimination?

Is that why you think Congress intended as a matter of law to disallow the kind of agreement that Justice Breyer has and, if not, what would the reason be?

Ms Underwood: Well, I think that's one of the reasons.

I think it's not just, however, being a coparticipant in the discrimination.

It is the nature of the union's obligation that it has a broad discretion, consistent with the duty of fair representation, to decide which claims to enforce, how vigorously to enforce them, that it may make a judgment, for example, that it would be more productive in the area of sexual harassment to negotiate policy changes with the employer and leave the pressing of individual claims alone for the time being while these general policy negotiations are going on.

Justice Ginsburg: Do I understand...

Justice Scalia: Am I missing... am I missing the boat here, or is it really not Justice Breyer's question that we have before us here?

As I understood his question, it was the individual employee who would agree to waive it, and that's not the situation here.

It was a collective bargaining agreement that this individual employee had no control over, right?

Ms Underwood: This individual employee... this compuls... this arbitration clause was a) agreed to by the union and not by the employee and 2) constructed an arbitration process that was controlled by the union and not by the individual.

So yes, it does not present the question, could such a contract exist, although I think that there's a serious question about whether it could.

I do want to address a question that was raised earlier about whether the union workplace would necessarily be a Gilmer-free world, that is to say, whether it would be possible to negotiate such contracts in the union workplace.

And I think... and the point was made, but I'd just like to emphasize it, that the union could, under Case, authorize such contracts.

It might in some workplaces be unlikely that it would do so.

In workplaces where individuals have a great deal of power themselves, union contracts often do reserve the possibility of individual contracts about all manner of things, to baseball players and people in the entertainment industry, perhaps not so often to longshoremen.

Chief Justice Rehnquist: Fickle workers, eh?

[Laughter]

Ms Underwood: Yes.

Yes.

But to return to Justice Souter's question, it would be possible... I believe the statutes prohibit the employee from delegating to the union the power to make these agreements, but another...

Justice Souter: Because the risk is just too great, right?

Ms Underwood: Yes.

But an alternative would be to indulge... to establish a strong presumption against such a delegation so that when the contract is being interpreted... and perhaps that was what informed Alexander.

After all, this Court said that if the Alexander did not in fact cover statutory rights...

Chief Justice Rehnquist: Thank you, Ms. Underwood.

Ms Underwood: because it could not.

Argument of Charles A. Edwards

Chief Justice Rehnquist: Mr. Edwards, we'll hear from you.

Mr. Edwards: Mr. Chief Justice, and may it please the Court:

We believe it's clearly a question presented to the Court to hear as to whether there should be two rules of law, one applicable to nonunion employees, and I mean that in the broader sense... that is, employees not covered by a collective bargaining agreement, rather than just simply union members, and one for those who actually are bargaining unit members.

The...

Justice Ginsburg: Either way we're going to have that, is that not true, unless we overrule Alexander, because Alexander says it comes in after the grievance and arbitration procedure has been used, and then the Court says, but title VII is something different, so there's already a separate regime.

Mr. Edwards: Well, Justice Ginsburg, in the Gilmer decision this Court brought up three issues which were not before the Court in Gilmer, and said that those three issues represented grounds upon which Alexander had continuing vitality.

Two of those grounds, I would respectfully submit, are distinctions without a difference, one being the presumption in favor of arbitration under the Federal Arbitration Act, which in my careful reading of this Court's decisions seems to be totally the same as the presumption in favor of labor arbitration.

The second was the question of, in Alexander and in Barrentine and in McDonald, the three cases that were characterized by this Court as Alexander and its progeny, the question was, what is the binding effect in terms of res judicata, collateral estoppel, issue preclusion, fact preclusion, whatever you want to call them, of an already completed arbitration award, or arbitration decision which you cannot tell from the record of the case considered the discrimination question whatsoever, and so it is certainly possible to continue to distinguish Alexander on those two bases or on the basis... on the second ground, and never get to a need to overrule.

The question, however, though...

Justice Ginsburg: I don't understand, because it seems to me that if... unless there's going to be very limited review of the arbitration, then all this is is a protraction thing.

It says, yeah, you've got your good old title VII right in court with a jury trial, but you have to wait and go to arbitration, and then whatever the result is, if you don't like it, come to court.

Mr. Edwards: Well, the question of scope of review was, of course, addressed in a sense in Alexander by saying there can be no estoppel effect whatsoever, so there is nothing to review, but the question of the scope of review of an arbitration award involving statutory claims is, of course, not properly presented in this case.

It is... that's one which has been litigated in great detail in other cases which I certainly presume are going to find their way in this direction sooner or later, and I think that one of the most instructive decisions in that regard is Judge Edwards' decision in the Cole case in the D.C. Circuit, in which he advocates a heightened scrutiny standard.

Because after all, rather than deferring to the arbitrator's contract interpretation in a statutory claim arbitration the arbitrator is, at least in some sense, resolving either questions of law or mixed questions of law and fact which go beyond the terms of the contract per se and, therefore, a court would be empowered to determine whether, in fact, the procedures employed in the arbitration, the remedies available to the grievant in the arbitration comported with title VII, the ADEA, and the Americans with Disabilities Act.

Justice Ginsburg: Well, instead of talking about Judge Edwards' decision, could you tell me how you think, if you prevail in this case, what happens when the employee says, I don't like what the union got for me, I'm bringing my own title VII case?

Can he do that?

Mr. Edwards: Certainly I can, Your Honor.

In that particular situation, if we're talking about a hypothetical employee rather than about the petitioner in this case, a hypothetical employee dissatisfied with the union's conduct of the arbitration would actually have, or the union's willingness to go forward with the arbitration would have several remedies available to them.

Justice Ginsburg: I'm not asking about several.

I'm asking about, does he have a title VII remedy?

I'm not asking anything about bad faith, duty of fair representation.

He... is this just a question of primary jurisdiction, as it seemed to be in Alexander?

Then you come to title VII.

The employee files his title VII claim.

He doesn't like the result of the arbitration, as the employee didn't in Alexander.

He comes to court, and then what?

Mr. Edwards: When he is in court he... the... a... the problem then is determining what standard of review, if any, applies to the prior arbitration proceeding, because he'd have to show...

Justice Ginsburg: Well, let me ask you...

Mr. Edwards: Yes.

Justice Ginsburg: a very particular question, then.

Mr. Edwards: Yes.

Justice Ginsburg: Title VII nowadays gives a plaintiff a jury trial.

In my case, yes or no, would my person who goes to title... who goes to court on his title VII after the grievance procedure and he doesn't like the result, does he get a jury trial?

Mr. Edwards: I don't believe so, Your Honor, because the same statute that afforded the title VII plaintiff a right to a jury trial, the Civil Rights Act of 1991 gave on the one hand, took away on the other by encouraging alternative dispute resolution through a section of that statute, a section of the... and an, virtually identically worded section of the Americans With Disabilities Act.

Justice Ginsburg: Well, now you're going on to another point about the... what was the ADR thing in the 1991 act, and I think Judge Posner takes a view of that quite different from the one that you...

Mr. Edwards: He certainly does, and...

Justice Ginsburg: But anyway, let's... so you're saying that in essence you are asking us to overturn Alexander, because you've given me the answer that if you prevail here you come to court and you get some kind of standard of review that's less than de novo, and you don't get a jury trial.

Mr. Edwards: The plaintiff in Gilmer didn't get a jury trial, either, so...

Justice Scalia: You're not asking us to agree with you on the second one.

Mr. Edwards: No.

Justice Scalia: You're just saying that that's what you think will happen, but we could agree with you as to what should happen to this case and disagree with you as to what happens when whatever the result of the arbitration is is brought before a court.

Mr. Edwards: Certainly.

Justice Scalia: I don't have to agree with both just because I agree with one.

Mr. Edwards: You do not have to agree with both.

Justice O'Connor: Now if... may I ask, Mr. Edwards...

Mr. Edwards: For that matter, you don't have to agree with either.

[Laughter]

Justice O'Connor: Mr. Edwards... Mr. Edwards.

Mr. Edwards: Yes.

Justice O'Connor: Hello.

May I ask...

Mr. Edwards: Pardon me, Justice O'Connor.

Justice O'Connor: May I ask a question of you?

Would this person, this employee have been entitled to go to grievance on this claim, this ADA claim?

Mr. Edwards: Independent of any action by the union?

Justice O'Connor: When the... the union says no, we're not going to do it.

Now...

Mr. Edwards: If that were the case, if the union had flatly refused, which is not established in the record, if the union had flatly refused, there is, as I read section 9(a) of the National Labor Relations Act, an opportunity for the individual to attempt to present a grievance on his own with the proviso that the union has to be given notice of his intent to do so, and I think he could have prosecuted it.

I will confess to Your Honor that I have no basis under this particular collective bargaining agreement for that...

Justice O'Connor: For saying that.

Mr. Edwards: For saying that.

Justice O'Connor: No.

Mr. Edwards: But this is the only employment discrimination claim that has ever arisen in this context.

Justice O'Connor: And could the grievance procedure deal with the ADA issue, do you think?

Mr. Edwards: The grievance procedure could deal with the ADA issue presented in this case because, and only because... I'm not making a position here that under the general language of the collective bargaining agreement in question all discrimination claims can be arbitrated.

There is no discri... no clause prohibiting discrimination per se in the agreement.

Chief Justice Rehnquist: But nothing that specifically includes statutory claims.

Mr. Edwards: Nothing that specifically includes statutory claims except that section 17 of the collective bargaining agreement requires that the agreement not be construed so as to violate any State or Federal laws, which would mean that, in Ceasar Wright's case, in order for an arbitrator to determine whether he wasto return to work from his medical leave of absence he would have... the arbitrator would have had to determine whether the plaintiff wasunder the terms of the ADA.

And therefore this is one of those instances in which the issue to be arbitrated is specific to a statutory claim, unlike the generalized kinds of discrimination claims that are more fairly presented in cases such as Austin, Pryner, Brisentine, and various other cases.

Justice Scalia: Why are they less specific?

I mean, give me an example of why they're less specific.

Mr. Edwards: Well, the agreements in many of those cases, not in Brisentine but in Austin and Pryner, specifically refer to statutory claims, say that statutory claims are dealt with by this agreement, that the affirmative obligations of Federal law with respect to discrimination specifically apply.

If Mr. Wright's claim had involved something less integral to contract language than the question of qualifications, then it is quite conceivable that this issue would not have been argued by us to be one committed to the grievance and arbitration process.

Justice Stevens: Mr. Edwards, may I ask you a question about the Civil Rights Act in 1991 to which you referred...

Mr. Edwards: Certainly, Your Honor.

Justice Stevens: and which you quote on your brief?

Would you assume for a moment that legislative history is relevant, and just take that premise.

Are you familiar with the passage in the House report that states that this provision was intended to supplement rather than to supplant the rights and remedies provided by statute, and that the minority had proposed a bill that would have made it clear that one was a substitute for the other, and they rejected that proposal?

Mr. Edwards: I'm quite familiar with that.

The same language appears in the conference report of the 1990 Civil Rights Act, and I believe also in the conference report with respect to the Americans With Disabilities Act.

That conference report goes on at one point to say that Alexander is the way the law ought to be applied.

However, by the time the Civil Rights Act of 1991 was enacted, Gilmer was the law of the land with respect to arbitration and much of that language in the legislative history becomes rather meaningless, and...

Justice Stevens: Why is it meaningless if it expresses an intent to adopt the earlier view?

There's nothing in the report suggests they favor the Gilmer view.

Mr. Edwards: There's no floor debate on any of this.

Justice Stevens: And it is clear, is it not, that the... a bill was proposed and rejected that would have clearly adopted your view?

Mr. Edwards: And it's also true, Your Honor, that there have been bills proposed since Gilmer was decided to overrule Gilmer, and those haven't been enacted.

Justice Stevens: Right.

Mr. Edwards: So...

Justice Stevens: We're talking about the history of the statute on which you rely, the 1991 act.

Mr. Edwards: That's correct, and in the... a statement by Senator Dole immediately prior to passage in the Senate, Senator Dole said that this provision on encouraging ADR is designed to further the goals expressed in Gilmer, so apparently there are legislators of different views which...

Of course, Senator Dole was speaking for the minority, and he had supported the bill that was rejected.

But he was speaking in favor of the bill that was signed by both Houses, and therefore... I'm...

Justice Scalia: It's really hard to tell, isn't it?

[Laughter]

Mr. Edwards: It's extremely hard to tell.

That's why I quoted...

Justice Scalia: Spent a lot of time on it, though.

Justice Breyer: Can I...

Mr. Edwards: I would hate to do that.

I think this is one of those...

Justice Breyer: If you would like... not like to spend more time on it, could I ask you the...

Mr. Edwards: Certainly, Justice Breyer...

Justice Breyer: sort of the second half of the question I asked Ms. Underwood.

You heard her response.

I don't know if you remember it.

But I was thinking of the individual employee, and he simply delegates expressly to the union the power to settle a discrimination claim under a statute, and she was taken a little aback, and she mentioned the history, and I take it the history shows that unions, too, are very much involved in discrimination, and that was one of the reasons why these acts were passed.

All right.

My question is, given that history, and given what Justice Scalia said, that we're not dealing with an individual here, we're dealing with a group of people who may or may not be focusing on what's in this particular collective bargaining agreement, and given ambiguous language in that agreement, why should there not be a presumption that there is no delegation of authority in the union to settle such claims, which are not like typical CBA claims.

The typical collective bargaining agreement, after all, sends to arbitration disputes arising under the agreement, not normally statutes, unless they're directly related to certain labor areas.

So given all that, why wouldn't we say under 301 in the discrimination area there is a presumption that the claim is not delegated to the union to settle unless it pretty clearly... you know, like a first options type of language, unless it pretty clearly says that it is, and that would solve the problem, perhaps not the way you would like it solved, but what is the objection, legally, to doing that?

Mr. Edwards: The critical problem there it seems to me is that then what would really be being said is that except under the most exceptional circumstances an employer which has a collective bargaining relationship with a union cannot have statutory discrimination claims for employees covered by that relationship...

Justice Breyer: It does not say that.

Mr. Edwards: with the arbitrator.

Justice Breyer: It says that it would have to be... it would have to be stated pretty explicitly, and now, if there is such a situation, if there does turn out to be a collective bargaining agreement where the union really goes to the employees and says, do you want us to settle these claims, and they write it right into there, and the employer signs it, that's the time to deal with the question that I asked Ms. Underwood.

But not here, where in fact it doesn't say anything like that.

It's very general.

It's vague.

It's like all other collective bargaining agreements but for the fact that it doesn't say, explicitly limited to arising under.

Mr. Edwards: I think the hypothetical assumes certain facts which are highly unlikely to occur in today's labor management workplace, but certainly if a union were to agree that individual employees could consent to arbitration, prospectively, of future disputes, then that would present a clearer case.

I do not necessarily think that it follows...

Justice Kennedy: No, no.

But Justice Breyer's question is, what's wrong with a decision... you would lose in this case, but from the standpoint of logic and rationality, what's wrong with our saying, look, these grievance procedures, grievance committees are not set up as adjudicative bodies.

They're set up to negotiate under the collective bargaining agreement having to do with longshore work.

These people don't know anything about adjudicating a claim under this act.

So what's wrong with saying that it simply doesn't cover such claims unless it specifically says so?

Mr. Edwards: I believe your question presumes, Your Honor, that labor arbitrators are less competent than other arbitrators to resolve statutory claims.

I think that...

Justice Kennedy: Well, that is part of my question.

After all, this is a grievance committee consisting mostly of employees and representatives of employers.

They're not an adjudicative body in the normal course, and why isn't... what's wrong with Justice Breyer's suggestion that we simply presume that claims of this type are not to be submitted to that kind of agent, absent specific language?

Mr. Edwards: Well, if all there were, Your Honor, were a grievance committee, I would agree with you.

However, we've got the further step of arbitration here by a neutral selected by the parties.

Justice O'Connor: Well, let me ask you on that precise point...

Mr. Edwards: Yes.

Justice O'Connor: I take it that this agreement isn't governed by the Federal Arbitration Act.

Mr. Edwards: I think that even under the broadest interpretation of the Federal Arbitration Act I would be hard-pressed to contend that the FAA covered...

Justice O'Connor: Yes, it's interstate or foreign commerce.

They're not covered by that.

Mr. Edwards: It's interstate or foreign commerce, and I think we... sections 1 and 2 of the...

Justice O'Connor: Right.

Mr. Edwards: Of the FAA just take us out of that loop, but the principles are, I would submit, the same, so I don't believe that the FAA or National Labor Relations Act issue is one that should be determinative.

Justice Breyer: Your answer is no, it does not cover it, the FAA?

Mr. Edwards: No, the FAA does not, not under binding Fourth Circuit precedent, which is what I'm having to deal with in the absence of any specific ruling by this Court.

Justice O'Connor: Well, in the language of the FAA itself, the...

Chief Justice Rehnquist: These people are longshoremen, are they not?

Mr. Edwards: They are longshoremen.

There...

Chief Justice Rehnquist: So...

Mr. Edwards: are arguments that have been raised and that I have seen concerning the FAA that say that the exclusion was intended to deal only with seamen and railroad workers, but I think that it's pretty hazardous for us to speculate about the legislative history of a statute enacted in 1925, which as has been interpreted by this court so many times...

Justice Kennedy: Is your answer to me that there's an independent arbitrator, that's only if the committee's unable to reach a majority decision within 72 hours.

Mr. Edwards: Well, actually there's a... there are two steps in the appeals process.

There's the port committee and then there's the district committee.

But in actual practice, the way it has always worked under this collective bargaining agreement, and under the bargaining agreement that applies in the five southeastern ports that have the same language, is that management votes one way, labor voters the other way.

There is a deadlock.

It goes to arbitration.

Justice Souter: But the...

Justice Ginsburg: May I ask you, Mr. Edwards, about some... a part of this picture that is troublesome to me, particularly in light of a case that we heard Monday and that I think really distinguishes Gilmer, however arm-twisting you think that arrangement might be, it's signed by the individual.

Now, we know that there are people covered by collective bargaining contracts who don't want to have one thing more to do with that union than they are absolutely forced by the law to do, so I'm thinking about, if you're right, what about Abood, Beck... do those people who say, I don't want the union to be my representative, have to say that the union is going to be in the driver's seat and handling all these claims?

Mr. Edwards: The nature of collective representation is that the union is in the driver's seat except to the extent that the individual can and will assert his or her rights under section 9(a) or can show, for example, that the grievance and arbitration process would be futile, which is quite another exception recognized by this Court on numerous occasions for avoiding a collectively bargained grievance and arbitration procedure altogether.

Chief Justice Rehnquist: How could you show that an arbitration process would be futile?

Mr. Edwards: If the grievant is able to show that there is a manifested hostility toward protected rights by the union in question, I think that brings us back...

Chief Justice Rehnquist: Well, but...

Mr. Edwards: Yes.

Chief Justice Rehnquist: But the union wouldn't control the arbitrator.

Mr. Edwards: No, the union doesn't control the arbitrator, but the union to some degree is involved in the presentation of the grievance.

Now, in... under this agreement there is no prohibition of the grievant being separately represented by counsel.

There are many agreements that do prohibit such activities, but this one does not, and so we're writing pretty much on a blank slate, and it's rather hypothetical to allege futility, or to conceive of futility in this context, and in fact...

Justice Ginsburg: My only question was...

Mr. Edwards: Right.

Justice Ginsburg: in deciding what these two statutes mean, putting them all together, isn't that a relevant consideration, that Gilmer is an individual who speaks for himself or herself.

Here is a collective bargaining contract, and it includes some people who may just love the union, other people who hate it.

Mr. Edwards: Actually, I believe it cuts in the other direction, Your Honor, because the employee covered by a collective bargaining agreement is given enhanced bargaining power, is given free representation, is given a representative experience...

Justice Ginsburg: But we know there are workers who say, we don't want it.

We just... we don't believe in unions.

We don't want to be represented by unions.

The Federal law forces us to some extent, but...

Mr. Edwards: Then that employee's remedy is the same as Robert Gilmer's remedy was.

He doesn't work there.

The situation with Gilmer was that he was faced with what by anything that any of us I think could conceive of would be properly characterized as a contract of adhesion.

He signed on to a forum which required a registration, which required the applicability of the New York Stock Exchange arbitration rules, and so to look at that as a knowing and intelligent waiver of a right to the choice of a forum is pretty much of a stretch, but the...

Justice Stevens: Yes, but at least...

Mr. Edwards: The question of...

Justice Stevens: At least...

Mr. Edwards: knowing and intelligent, it doesn't seem to me...

Justice Stevens: At least he individually, on his own, signed that piece of paper.

That's not true of this employee.

Mr. Edwards: No, it's not true of this employee.

He was represented by someone far more experienced than he in dealing with employers.

We're not talking about the kind of sophisticated employee that this Court deemed Mr. Gilmer to be.

Instead, we're dealing with an employee who the record shows has a functional fourth grade education level, and therefore the representation by a collective bargaining representative should have been quite beneficial to him.

Justice Ginsburg: But the union said they didn't want to take it, told him to go to court.

Mr. Edwards: That's not exactly correct, Your Honor.

The union said that... referred him to private counsel.

There's nothing in the record that specifically indicates whether the union refused to process his grievance.

There were, in fact...

Justice Ginsburg: But in any event, unions don't have to process every grievance.

Mr. Edwards: Certainly they don't, but from the very beginning the union recognized this as a potential ADA claim.

Counsel, or the...

Justice Souter: Which it did not want.

I mean, it seems to me that... you say, well, it didn't unequivocally refuse.

When the representative who would otherwise be pursuing the claim says, I advise you to bring it as a private action, the handwriting's on the wall, isn't it?

Mr. Edwards: They suggested that he go to private counsel.

Justice Souter: Yes.

Mr. Edwards: He went to Mr. McClain, and...

Justice Souter: They didn't want to press forward with it, which is a pretty good idea of the vigor with which they would have gone forward if they had had to.

Mr. Edwards: I don't necessarily accept that, Justice Souter, because...

Justice Souter: Not necessarily, but if you were a betting man, isn't that what you'd bet?

Mr. Edwards: No...

[Laughter]

No, I would not, because this local union has been enjoined under Boys Markets four or five times because they don't take anything to arbitration.

Most of these are individual claims, and they have to be required by the court to take them to arbitration, so this is a matter of conserving resources on their part, I would suppose.

[Laughter]

But in point of fact it winds up being more expensive than less, and that's the whole point of the arbitration choice.

Justice Stevens: And if you win with that history we'll surely cut down the volume of litigation, I guess.

[Laughter]

Mr. Edwards: I doubt that very seriously, because since the third Boys Markets injunction we obtained there have been no further wildcat strikes, so I think that the message has gotten across, and therefore I believe... and we've had numerous arbitrations since then that were not required by... or several arbitrations that were not required by court order.

With that in mind, I think that the appropriate focus really is, should it make any difference that Ceasar Wright was a longshoreman covered by a collective bargaining agreement rather than a foreman working for the same stevedoring contractor in the port of Charleston.

If one had an arbitration clause that was incorporated in an application for employment, or an employee handbook, or a policy and procedure manual, while this Court certainly hasn't squarely addressed any of those issues, it would seem to me that the clear weight of Gilmer would be that this agreement, quote unquote, reached without bargaining by the individual would be binding upon him or her as a forum choice.

Why should not an agreement reached between an employer and a collective bargaining representative who is obligated under statute and under Federal common law to provide a duty of fair representation to the employee receive a similar degree of deference?

We think that the result is quite clear, and that whatever continuing vitality there might be to Alexander has been so severely undermined both by the course of this Court's decisions and by changes in the historic framework, if you will.

In 1974, this Court was concerned with massive, systemic discrimination by employers and labor organizations.

We have come a long way since that time, and during that period of time it's instructive in my view to note that labor organizations have been accorded standing to represent the rights of members of collective bargaining units in asserting claims under title VII and other antidiscrimination statutes.

So if they can do that in court, why can't they do it in arbitration?

I see no basis for a distinction.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Edwards.

The case is submitted.

Justice Breyer: The honorable court is now adjourned until Tuesday, the thirteenth of October at ten o'clock.

Attribution:

The Oyez Project

Featured:

Air Line Pilots Association v. Miller - Oral Argument

Fri, 09 Jan 2009 14:50:05 +0000

Case:

Air Line Pilots Association v. Miller

Media File:

97-428_19980323-argument.mp3

Related Transcript:

1997_97_428_argument.xml

Transcript:

Argument of Jerry D. Anker

Chief Justice Rehnquist: We'll hear argument next in Number 97-428, Air Line Pilots Association v. Robert Miller.

Mr. Anker, you may proceed whenever you're ready.

Mr. Anker: Mr. Chief Justice, and may it please the Court:

Section 211 of the Railway Labor Act permits unions and employers to enter into what are you called agency, shop, or similar forms of union security agreements.

Under an agency shop agreement, represented employees are not required to become union members, but they are required to support the union financially through the payment of the equivalent of union dues, initiation fees, and assessments.

However, in a line of cases stretching back now more than 35 years, this Court has said that a union may not use such an agreement to require objecting nonmembers to pay for union activities that are political and ideological in nature or are otherwise unrelated to the collective bargaining function.

In 1986, in Chicago Teacher's Union v. Hudson, the Court went one step further and held that unions must provide three procedural safeguards to ensure that objectors' funds will not be spent improperly, and those safeguards are, first a notice containing an adequate explanation of how the fee is calculated, second, a reasonably prompt opportunity to challenge the fee before an impartial decisionmaker, and third, an escrow for the amounts reasonably in dispute while those challenges are pending.

The issue in this case is whether employees who wish to challenge the fee that they're being charged must present their claim to that impartial decisionmaker before bringing any kind of a lawsuit.

This case arose in November of 1991, when the Airline Pilots Association, or ALPA, as we called it, entered into an agency shop agreement with Delta Airlines, very much like the agency shop agreements ALPA has with most of the country's airlines.

Before the agreement even became effective, five Delta pilots, later joined by about 150 intervenors, filed a lawsuit to enjoin implementation of that agreement.

They had many grounds for their lawsuit, but for present purposes the only one that's relevant here was the allegation that ALPA does not, or does charge objectors improperly for activities which are outside the scope of collective bargaining.

Now, ALPA has written procedures in compliance with the Hudson decision that include an impartial decisionmaker for the purpose of resolving such disputes.

Unknown Speaker: Mr. Anker--

Mr. Anker: Yes.

Unknown Speaker: --would you mind telling me as a practical matter how these fee challenges typically come up?

Are they usually brought to challenge the amount of past payments, or are they typically prospective in nature?

How does the union notify people--

Mr. Anker: You're talking about specifically--

Unknown Speaker: --of the breakdown?

Mr. Anker: --in our case?

Unknown Speaker: Yes.

Well, the typical situation.

Mr. Anker: All right.

I think, Your Honor, the procedures vary from union to union.

The way it works in ALPA is the following way.

The books are closed... we're on an annual year basis, so that the books are closed at the end of each year and then there is a general audit of the books, and in connection with that audit, or once that audit is completed, then a statement is prepared and that statement itself is also audited, setting forth the germane and nongermane expenses, the major categories, which is essentially our Hudson notice.

At that point, any--

Unknown Speaker: Usually there's been some prospective estimates.

Mr. Anker: --That's correct.

Unknown Speaker: So that they're not charged the full amount.

Mr. Anker: That's--

Unknown Speaker: But then you... it doesn't get serious until after the fact.

Mr. Anker: --Let me... if I can just finish, I think I'll... you'll see that part of it.

Unknown Speaker: Yes, okay.

Mr. Anker: The statement is issued.

At that point, for the year in which it's issued, there is an immediate but only provisional adjustment put into place.

Then when that year is finished there is a final calculation and we actually either add charges or refund, depending on what the differences are.

It's at that point that the pilot has the right to challenge that calculation.

Now, when he does that, of course, he's challenging both the retrospective one and also the provisional one for the coming year, but that's the way our system works.

Other unions have a different system.

Other unions are always running 1 year behind, and they don't go back and make the retroactive adjustment, which we do.

Unknown Speaker: Have... has this Court ever required a nonsignatory to a contract to submit to arbitration rather than going to court?

Mr. Anker: No, Your Honor, not to my knowledge, and I think that--

Unknown Speaker: It's kind of a big step to do.

I mean, it may--

Mr. Anker: --Well, it's... it may--

Unknown Speaker: --help as a practical matter, but I just... I wondered what kind of authority there would be for that.

Mr. Anker: --All right.

I think that's the core of this case, and I think to call it arbitration, which in a sense it is, is also in another sense misleading, because it is really not consensual arbitration, which is what most arbitration is, although I gather there are statutes... one of the Article III cases cited by counsel involves the FIFRA statute, which has a compulsory arbitration.

I think ERISA has a compulsory arbitration that's not consensual.

But in any event--

Unknown Speaker: Of course, it is compulsory for the union here.

Mr. Anker: --That's correct.

This is a--

Unknown Speaker: I mean, we've done that half-way--

Mr. Anker: --This is a special procedure.

We call it arbitration because it most resembles arbitration, but what the Court called it in Hudson was an impartial decisionmaker, and I think the vision that the Court had is that these disputes should be decided by some form of private process, arbitration-like process, or at least they should be submitted to such a process before they go to court.

That--

Unknown Speaker: --Is this, Mr. Anker, strictly speaking, an impartial decisionmaker?

How are the people picked?

Mr. Anker: --How are they picked?

Unknown Speaker: How at the people picked for the tribunal or the--

Mr. Anker: All right--

Unknown Speaker: --person who would make this decision?

Mr. Anker: --In our case, and I think here we follow the pattern that most unions have adopted, we use a procedure which the American Arbitration Association created.

In the wake of Hudson the American Arbitration Association created a procedure specifically for this purpose called the arbitration rules for the impartial determination of union fees, and under those rules the union may request an arbitrator and invoke those procedures and then the AAA, from a panel that they have selected, designates an arbitrator.

He's not selected by either of the disputing parties.

He's designated by the American Arbitration--

Unknown Speaker: From a panel that the AAA has selected?

Mr. Anker: --That's correct.

Unknown Speaker: And do the dissidents have any part in selecting that?

Mr. Anker: No.

Neither party has.

Unknown Speaker: Neither party?

Mr. Anker: Neither party does, although there are, of course, provisions for challenging an arbitrator for cause if there's some ground to believe that he is biased in some way, or has some interest--

Unknown Speaker: Mr. Anker, can I ask you a preliminary question--

Mr. Anker: --Surely.

Unknown Speaker: --I just get out of the papers?

What are the annual dues of the pilots here?

How much money are we talking about if you change it from 15 percent to 20 percent?

Mr. Anker: In the year that this case arose, which was 1992, the fees were 2.35 percent of their airline earnings.

They've since been reduced to about 1.95, but in that year it was 2.35.

Unknown Speaker: So for each member of the union it's a different dollar figure.

Mr. Anker: It's based... it's a percentage of his earnings, right.

Unknown Speaker: And if they made, say, 100,000 a year they would get a... the dues would be--

Mr. Anker: 2,350.

Unknown Speaker: --I see, so that a... and then if you reduce that, say 10 percent was in dispute, it would be a couple of hundred dollars in dispute for each person.

Mr. Anker: That's about right.

That's about right, just... for example, in this case the arbitrator found that there were some items that had been improperly allocated and should not have been charged, and we rebated those, and it came to, I think, of the order... this is not in the record, but it's of the order of 55 on average for the individuals that were involved in this case.

Unknown Speaker: Justice O'Connor's question was, what is the source of our authority to do this?

I mean, if we think this is a good idea for national labor policy, does that give us the authority to require people who have never consented to the arbitration to arbitrate?

Mr. Anker: Well--

Unknown Speaker: Where do I have the power, does this Court have the power to do that?

Mr. Anker: --I guess I would answer it this way, Your Honor.

We are dealing here... all the statute says, as I indicated at the beginning, is that the union and the employer has a right to have this kind of an agreement, but the Court has found beneath the language of the statute and sort of in the underlying legislative history and the purpose of the statute, an intent by Congress that fees be used only for certain purposes and not for others, and based on the determination that there is such an intention, that that's what Congress wanted, there is a body of law which has had to be necessarily developed by this Court.

It's not that different from the body of law that has been developed surrounding the duty of fair representation, or surrounding collective bargaining agreements under section 301 of the Taft-Hartley Act.

Unknown Speaker: Well, I think--

Mr. Anker: It's judicially made law.

Now, in Hudson--

Unknown Speaker: --But there's almost a history or tradition that Congress sets up remedial schemes.

We don't set up remedial structures.

Mr. Anker: --Well, my answer would be, Your Honor, that that's exactly what the Court did in the Hudson case.

Unknown Speaker: But--

Mr. Anker: The Court said that the union must provide this procedure.

It's not an option.

Unknown Speaker: --But that was under the Due Process Clause, wasn't it?

You know, you go back to the Hanson case, where the Court says, well now, the Government has its hand on the scale here so there's some constitutional provisions involved.

Mr. Anker: Well, certainly in Hudson there were constitutional provisions, Your Honor.

I don't think it was the Due Process Clause.

I think it was the First Amendment.

Unknown Speaker: Well, First Amendment.

Mr. Anker: Right, which is not, of course, a procedural provision of the Constitution.

It's a substantive provision.

But the Court decided that in order to protect the substantive right which the... in that case the challengers had under the First Amendment--

Unknown Speaker: There had to be--

Mr. Anker: --There had to be these procedures.

Now--

Unknown Speaker: --But now, to me it seems there is a difference here suggested by Justice Kennedy, perhaps, that there isn't any similar constitutional compulsion to set up the procedure you want to.

Mr. Anker: --No, there's not a constitutional compulsion, but there is... the same kind of a right which exists in the public sector under the First Amendment exists under the... in the private sector under the statute, based upon--

Unknown Speaker: Yes, but this could be invoked by the dissidents--

Mr. Anker: --All right--

Unknown Speaker: --but I think not by the union.

Mr. Anker: --but the union has rights here too, Your Honor, and those are the rights after all, to collect these fees and to have a functioning agency shop agreement and to have it work without excessive burdens that make it impractical.

In the Hudson opinion the Court said... I'm not sure if I can quote it exactly, but the Court said that the object should be to ensure... define procedures which will en... protect the dissidents against having to subsidize ideological activities without impairing the right of the union to have this agency shop and to obtain these funds in timely fashion and to use them in a way that they're permitted to use them.

Unknown Speaker: May I ask--

Mr. Anker: There's a balance.

Yes, Your Honor.

Unknown Speaker: --May I ask one other detail, if I may?

This opinion said in substance the union had a duty to provide this impartial... we didn't use the word arbitrator, as I remember, just impartial person--

Mr. Anker: Correct, impartial decisionmaker.

Unknown Speaker: --to look at what was done.

But does that mean the union has to pay for the arbitration?

Mr. Anker: I suppose in practice it does.

The way we've resolved that, Your Honor, is to say that we will pay for the arbitration unless any of the dissidents wants to share the cost for some reason and then they're certainly welcome to do that.

Unknown Speaker: Well, why would they ever want to do that?

Mr. Anker: Well, they might want to--

[Laughter]

We always thought they might want to do it to be more comfortable about the impartiality of the--

Unknown Speaker: Oh, I see what you're saying.

But in practice you do pay the arbitrator.

Mr. Anker: --In practice, we do.

Unknown Speaker: Mr. Anker, if I look at Hudson and don't go any further than that, I at least find it difficult to conclude that the provision for the neutral decisionmaker was intended to be anything but a protection for the dissidents.

It was their interests that were getting litigated there, and the court mentioned the value of a speedy determination.

All of that seems to take into consideration the interests of the dissidents.

However, my question to you is going to be, should we consider other interests in going beyond Hudson?

Should we consider, for example, the impracticality, if that is true, of litigating every one of these issues first and last in the Federal courts?

With that in mind, I would like to know what the experience has been, if you can tell me, about what has happened after there has been arbitration.

Have all of the arbitrated cases then simply been litigated de novo, all over again in the Federal courts, which I doubt, but perhaps that happened.

Is there a pattern that emerges about the relationship between the arbitration that has taken place in the instances that you know of and what later happens in Federal courts?

Mr. Anker: Well, I have to say, Your Honor, that my knowledge about that is fairly limited, but I think the union that has the most experience with it is the National Education Association, which has filed a brief as an amicus here, and they have informed the Court in their brief that in... I don't remember whether they said in most, but in some large percentage of their cases their... they do not go beyond the arbitration.

Unknown Speaker: Well, what--

Mr. Anker: Now, I have no personal knowledge of that and I really can't take--

Unknown Speaker: --You wouldn't, I take it... under the system you're proposing you wouldn't have the sort of deference to an arbitrator's finding that results when consensual arbitration has been in place, is that correct?

Mr. Anker: --We would not have that degree of finality to the arbitration, no, Your Honor.

There was an issue in the lower court here as to just what degree, if any, of deference is to be given, and the district took the view which we had urged upon it that the findings of fact of the arbitrator should be given deference under a clearly erroneous standard, but not the conclusion of law.

Unknown Speaker: Do any of the other briefs expand on the question that Justice Souter asked you?

What happens to these things after the neutral decisionmaker reaches a judgment?

Mr. Anker: My recollection is that the only one that has anything to say about it was the National Education Association.

Unknown Speaker: And of course, there, at least as I remember the case, the dues are a lot lower, so the amount in dispute sometimes was just pennies on these small amounts, and it might be that it's just not worth litigating, whereas here it seems to be a little more money at stake.

Mr. Anker: It's a little more money, Your Honor, but in every case the amount of money tends to be relatively small, certainly in relation to the income of the fee-payer.

I think very often these are thought to be great issues of principle by the--

Unknown Speaker: Is it typical for union dues to be calculated as a percentage of the income of the union member?

Mr. Anker: --Yes, I think it is, Your Honor.

Unknown Speaker: It is typical?

Mr. Anker: Yes.

Either a percentage or sometimes a number of hours of pay.

I can't tell you how many unions have that, but I think it's quite a common--

Unknown Speaker: When the suit is brought, is it brought under 1983, or another statute that gives the prevailing party attorney's fees, if the suit goes to the Federal court?

Mr. Anker: --If the suit goes to the Federal court--

Unknown Speaker: Yes.

Mr. Anker: --I suppose there is provision for attorney's fees, under 1983.

Unknown Speaker: Because... Is it 1983?

Mr. Anker: 19... I'm not sure I understand what you're... if you're asking, is this case under 1983, the answer is no.

Unknown Speaker: But the union members... I mean, the nonunion members' case in court would be under 1983.

Mr. Anker: No, it would not, Your Honor, not in the... well, not in the case of a private sector, because we are not a governmental entity.

Unknown Speaker: Right.

Mr. Anker: We cannot be sued under 1983.

We... the labor organization.

In the--

Unknown Speaker: Well, then--

Mr. Anker: --In the public sector the cases are brought under 1983, perhaps because they're usually brought against the State employer as well.

Unknown Speaker: --What's the basis of any sort of Federal--

Mr. Anker: Federal question jurisdiction.

Unknown Speaker: --There will be Federal question jurisdiction in a case of a private employer?

Mr. Anker: That's right, Your Honor, because the obligation here is derived from the Railway Labor Act.

Unknown Speaker: But no attorney's... no attorney's fees under the general Federal question jurisdiction, then?

Mr. Anker: It's general Federal question jurisdiction.

Unknown Speaker: But that doesn't provide for attorney's fees for the prevailing party.

Mr. Anker: No, it does not.

No, it does not.

Unknown Speaker: Can you... you might want to elaborate a little bit--

Mr. Anker: Yes.

Unknown Speaker: --if you'd like on the question the Chief Justice asked.

Seeing this as--

Mr. Anker: On the--

Unknown Speaker: --Because it seemed to me that the real objection on the other side, what they're upset about in part is that they see the union has a right to the 2,000, but it doesn't have a right to the part of the 2,000 that might go to nongermane expenditure, and then we decide, and this Court decides in Hudson that really the union can go and spend what it wants as long as it gives them, a dissenter a fair chance to see how much of that is being spent on nongermane things, and it says you have to have an escrow.

Mr. Anker: --Correct.

Unknown Speaker: You have to give them a list of what the expenditures were, and you have to provide for a decision by an independent decisionmaker.

Having done that, you're free.

Go do what you want.

All right.

But then they say, well, how do we challenge it, and I think what they're worried about is that there will be imported into this area of the law the whole law of arbitration which, of course, gives a tremendous leg up to whatever the decision of the arbitrator is.

I mean, a leg up way beyond what a master or others have, and I think that was a concern, and therefore I want to be sure that you address that point.

Mr. Anker: I appreciate that, Your Honor.

Let me say first of all that we have never argued in this case that that standard, which essentially is a standard of finality and almost no review at all in the case of normal arbitration... we have never argued that that standard would apply.

The argument we make in this case... and by the way, this issue is not before the Court, because the Court did not grant certiorari with respect to this issue of the standard of review, but what we argued in the lower courts was that the fact-findings of the arbitrator should be given some degree of deference, and those fact-findings would normally be the bean-counting issues, as I would describe them, exactly how much did the union spend on this or that or the other activity.

Unknown Speaker: Well, under your theory that the procedure has to be expeditious and efficient, what would prevent a court from saying that the usual rules of presumptive correctness should not be applied?

Mr. Anker: I think I would rely on the advocacy of my adversary to make that clear, and I would not--

Unknown Speaker: Well, but I mean, we're testing your theory.

Under your theory we can do whatever is efficient, and if we think that a binding arbitration is the most efficient, then we can do that.

Mr. Anker: --Well, I would just suggest, Your Honor, that that would be inconsistent with this body of law, because this is statutory law, and the Court has some jurisdiction, we don't deny that, ultimately to adjudicate the rights of the parties here, but... and just to finish the standard of review as we had proposed it to the lower courts, we would say that the legal issues, which really I think are the key issues here, is, for example, in our case the issue of the chargeability of our safety activity.

That's an issue of law basically, and that would be reviewable de novo, but the Court would have a package in which the facts would be at least preliminarily resolved, the issues would be defined, and the Court in quite expeditious fashion but in effective fashion could exercise its jurisdiction and define the rights of the parties properly here.

Unknown Speaker: Mr. Anker--

Mr. Anker: Yes.

Unknown Speaker: --everything that you've said sounds logical, sensible, a regime that might be legislated.

The problem in this case is, you start with a Court decision, not something from Congress but something from this Court, the Hudson, and then you say, well, the workers were benefited by Hudson but the Court now has to rule-make a little more so that it's even on both sides.

If the employer... if the union is stuck with this procedure, the union doesn't want to arbitrate either, let's say, but the court forced it on the union, then the court must... and it's all the court doing this with... as kind of ontoward from anything that Congress has done.

Mr. Anker: Well, that's correct, Your Honor.

I think that's unavoidable, but I... my only response to that would be I don't think it's any greater an act of judicial legislation to impose on the challenger the requirement of exhaustion than it is to impose on the union the obligation to provide this procedure in the first place.

Unknown Speaker: But with the union, Mr. Anker, there was a constitutional problem.

Mr. Anker: In that case, yes, right.

Unknown Speaker: Yes, and there isn't here.

I mean, it seems to me that's one significant distinction.

In other words, the Court said there had to be an impartial reviewer of these allotments in order to protect the dissidents' First Amendment rights, but here there's no corresponding claim that if there isn't this procedure, that the dissidents are required to... the union is going to lose any constitutional right.

Mr. Anker: No, not constitutional rights, that's correct, Your Honor, but they are rights, nonetheless.

We have statutory rights that are at stake here, and the Court has created a procedure which, if exhaustion is not required, essentially doubles the burden on the union, because we have to defend these cases if they're brought against us both in arbitration and in Federal court, which is essentially what happened here.

This group of plaintiffs who are before this Court now preferred the judicial forum, and they brought a lawsuit, and they resisted arbitration, and if they had had their choice they would have avoided the arbitration, but we had another group of people who are not before the Court at all who requested arbitration, and we had to go forward with an arbitration regardless of what the desires were here, and that's going to happen in very many cases.

Unknown Speaker: Yes, but the answer to that may be to, in effect to... in effect to rethink the need for the arbitration, or the legitimacy of it.

You spoke a moment ago in response to Justice Ginsburg's question, I think, of the inevitability of there being some such arbitration scheme, but I'm not sure that I see that.

Why couldn't the Court just as well have said the interests at stake here require that cases of this sort be handled expeditiously in the Federal court so that you get a quick hearing... I mean, the civil analogue of speedy trial... and have one proceeding in a Federal court and get it over fast?

Is that any less inevitable, if you will, than the scheme that we set up in Hudson?

Mr. Anker: Oh, I... no, Your Honor, it isn't, but the Court has set up--

Unknown Speaker: So you would be... would you be happy to have us go in that direction and say we really did not think things through properly in Hudson, in fact it will be for the Federal court to provide the speedy hearing?

Mr. Anker: --Instead of arbitration?

Unknown Speaker: Yes.

Mr. Anker: I think that would certainly be much better than the situation with having to deal with both of them, that's correct.

I don't know if we had our choice what we would choose, but we would certainly prefer to have one forum rather than two, and if there is no exhaustion requirement, then we would much prefer to have a Federal court procedure than have them both.

Unknown Speaker: What is your experience, again, if you can tell me, with requests to have one or the other proceeding, either the arbitration or the judicial proceeding, stayed if the other one has already gotten underway?

Mr. Anker: Well, there was such a request in this case.

It was denied by the Federal court.

Unknown Speaker: Do you know across the board, again in a broader spectrum of cases--

Mr. Anker: I don't know of any other case, Your Honor.

If I could, I'd like to reserve the balance of my time.

Unknown Speaker: --Very well, Mr. Anker.

Mr. LaJeunesse, we'll hear from you.

Argument of Raymond J. LaJeunesse, Jr.

Mr. LaJeunesse: Mr. Chief Justice, and may it please the Court:

As is apparent from the briefs of ALPA and the amici, and from ALPA's argument here today, ALPA has no legal authority for forcing the nonmember pilots to use its unilaterally created agency fee review procedure.

Neither ALPA nor either of its amici cites a single case in which this Court has required exhaustion where there was not one of two things.

Unknown Speaker: But isn't it also true that there was no case that, before Hudson, that said there had to be an impartial decision, impartial... what did we call it, impartial person who would verify these expenditures.

Where did we get the authority to do that?

Mr. LaJeunesse: As Chief Justice Rehnquist pointed out, that requirement is a matter of First Amendment due process, and it has to be imposed on the union if it's going to be able to exercise its statutory privilege of collecting the service fee, which in itself infringes on the First Amendment rights--

Unknown Speaker: No, but would not it have complied with, literally at least, with the Hudson opinion if, instead of using the American Arbitration Association, they had just said we've got all these figures here, we'll submit them to Price Waterhouse, or Young & Young, or whatever, some independent auditors and said you... you're independent, you verify these figures and let the minority members know what you think of them.

Would that have complied with Hudson, in your view?

Mr. LaJeunesse: --No, Your Honor, because--

Unknown Speaker: Why not?

Mr. LaJeunesse: --ALPA selects the--

Unknown Speaker: They have to select a person that everyone would agree is impartial.

Mr. LaJeunesse: --And Number 2, the court of appeals here held that that independent auditor does not audit the lawfulness of the allocation of the expenses between chargeable and nonchargeable.

All the auditor does is check the numbers.

Unknown Speaker: That's what this auditor does, but I'm asking whether, just starting from scratch, instead of setting up an arbitration procedure, suppose if they thought they'd comply with the language of Hudson to just say, we'll get an independent accounting firm to verify all the figures and decide which ones are germane and which ones are not, and we'll publish it in the report and make it available to the... to everybody, the members and the union officers.

Why wouldn't that have complied with Hudson?

Of course, if the members didn't agree with it they could then have brought suit and said, well, you know, there's a violation of the First Amendment and so forth.

But I don't see anything in Hudson itself that required an arbitrator.

Mr. LaJeunesse: I'll agree with that, Your Honor.

Unknown Speaker: Yes.

Mr. LaJeunesse: What I don't agree with, Justice Stevenson, is that it does not... that Hudson did require some form of impartial decisionmaker procedure to be made available--

Unknown Speaker: Correct, and it in effect said--

Mr. LaJeunesse: --primarily... if I may--

Unknown Speaker: --It in effect said, and your cause of action would not be ripe until that has been made available for everybody to look at.

Mr. LaJeunesse: --Well, the cause of action, Your Honor, is ripe at the time the funds are taken.

There's a deprivation of property at that point, and even as a matter of pure Fifth Amendment or Fourteenth Amendment due process the employee is normally entitled to a pre-taking notice and hearing.

Now, I can't explain why the court didn't make the requirement a pre-taking hearing.

Apparently the court felt that the union should get possession of the money and hold it in escrow so that it can later spend that portion which goes to the lawfully chargeable activities.

Unknown Speaker: We did require a hearing, though.

Mr. LaJeunesse: That's correct, Justice Scalia.

Unknown Speaker: You don't accept that a Price, Waterhouse review and then just a statement issued by Price, Waterhouse saying we have audited all of this and these statements are correct, that that would suffice.

Mr. LaJeunesse: No, I don't, Justice Scalia, because that's not a hearing.

Unknown Speaker: Under the language of our opinion--

Mr. LaJeunesse: That's not a hearing.

Unknown Speaker: --it did require it.

Mr. LaJeunesse: It's not an absolute--

Unknown Speaker: I didn't think that was the point.

I thought the point was simply whether, of course that your client has a cause of action, but is... the judge isn't going to decide this matter until, for example, the union's had an opportunity to do certain things, such as present your client with a piece of paper that says how the money's spent.

You agree with that, I take it.

Mr. LaJeunesse: --Hudson requires that.

Unknown Speaker: If they do it in a timely way.

Mr. LaJeunesse: Hudson requires that that--

Unknown Speaker: Fine, and it also--

Mr. LaJeunesse: --be done before the money is collected.

Unknown Speaker: --Exactly, and then Hudson also requires that the union should have a shot... I mean, they have to run their union, and they can't have five people going to five differing courts which could... or five different decisionmakers all putting them under different, you know, conflicting obligations.

Who knows what's going to happen.

So Hudson says you can go to an independent decisionmaker first, and I took it that that was Justice Stevens' question.

Should the court act before they go to an independent person and say, independent person, look at this and give us your opinion.

You know, it may be things will work out.

It may be that all the dissidents won't have to spend their money to hire a lawyer to go to Federal court, but if they want to afterwards, let them do it.

Now, I mean, what's wrong with that?

Mr. LaJeunesse: What's wrong with that, Your Honor, is that the individual employee has a cause of action which has been given to him by Congress, and this Court has never, never held that exhaustion is required where there is not one of two situations, one, either an agreement to arbitrate, or a statutory administrative scheme involving deference to another branch of Government, and that is not this case.

Unknown Speaker: This, I think... and I'm curious about your view of this, and that's why I was pushing it... is not classical arbitration.

I take it that they're prepared to give you the district judge who would afterwards look at how this arbitrator decides the matter and review everything de novo as to whether or not the factual thing gives rise to a nongermane or germaneness.

Now, that begins to sound like Price, Waterhouse.

What the arbitrator is doing is deciding what the facts were, and we give him such deference as is due, the power to persuade but not the power to control, something like that, and then the judge decides it de novo.

Now, from the point of view... not your individual clients but as a person experienced in this area, wouldn't such a thing be better as dissidents... I mean, wouldn't dissidents prefer such a thing, rather than have to go to Federal court, because they won't even give you that, you know.

If you have a Federal court judge, and only a Federal court judge, they'll say fine, so be it.

So what's your view on... do you see... I'm being a little elliptical for--

Mr. LaJeunesse: I'm not quite sure I--

Unknown Speaker: --I'm saying, that they're trying to say that within this statute, give us a chance before the judge goes ahead to do certain things that might resolve this in order to prevent us the union from being placed under potentially conflicting obligations.

That's a practical way of working this out.

It doesn't really hurt your clients because they can go in after the court if they don't like it, and they're better off than if we don't give it to them, and when they go into court later on they'll have a judge do this de novo, you know, on the law, and he'll give such weight to factual matters as you might give to an accounting firm, knowing that they know more about it than you.

Mr. LaJeunesse: --Justice Breyer--

Unknown Speaker: That's what I took out of this, and maybe I'm being... you don't have to answer if you don't want to, but I mean, I'm trying to--

Mr. LaJeunesse: --Justice Breyer, my clients--

Unknown Speaker: --Yes.

Mr. LaJeunesse: --And the typical dissident in the case where I have represented clients, and I've represented dissidents in many places, including the Lehnert case which this Court decided.

The typical dissident wants to obtain a judicial determination of his constitutional, in this case also rights under the statute, in which he has an opportunity for discovery, which is denied in this arbitration process, in which he has a determination by an Article III judge qualified to determine what speech and association he can be compelled to support, he wants a truly adversary hearing where he has discovery in which he can vet the potential evidence in advance of the hearing, as the Sixth Circuit held in the Bromley case.

That's crucial to these cases.

Unknown Speaker: Does the American Association... American Arbitration Association which Mr. Anker says has set up these... do they require that members of those panels be trained in the law?

Mr. LaJeunesse: I don't know the answer to that question, Your Honor, but I can answer one question, and that is, if you look at the law review article by Mr. Malin, who was... one of his articles was cited by ALPA in one of its amici.

I cite another one on the post Gilmer arbitration, and Mr. Malin points out in that article that the arbitrators have to receive recommendations from four employers and four unions to get on the panel to be selected in these cases.

My clients have no say over whether it's AAA or somebody else who picks the arbitrator and they have no say in the selection of the so-called arbitrator.

The essence of arbitration--

Unknown Speaker: Mr. LeJeunesse, you're essentially saying as far as you're concerned your clients, thanks but no thanks to Hudson, that... I mean, you really didn't want any of this.

You'd rather just go straight into Federal court?

Mr. LaJeunesse: --Clients, nonmembers who are lucky enough to have an attorney represent them are going to say no thanks to this particular arbitration procedure, or this particular decisionmaking process.

Hudson... put Hudson in context.

Hudson was a case, a public sector case decided under section 1983 where this Court had already decided that you could not be required to exhaust even a State administrative remedy, and Hudson imposed... after all, in Hudson it was the State who was ultimately compelling the employees to pay the agency fee.

It was under a State statute, and an agreement with a public employer.

Hudson placed the primary burden on the State to establish this alternative procedure, and that was only 4 years after this Court's decision in Patsy saying that you can't be required to exhaust a State administrative remedy, and so therefore I find it inconceivable to think that the Court in Hudson could have been supposing that the nonmembers could have been compelled to utilize this procedure.

This procedure is made available--

Unknown Speaker: You can't say it's inconceivable when Justice White and Chief Justice Burger both said that's what it meant.

They at least conceived of it.

Mr. LaJeunesse: --They conceived of it, that's correct.

Unknown Speaker: So it was not inconceivable.

Mr. LaJeunesse: That's correct, Justice Stevens.

[Laughter]

But I... but the majority did not agree with them, because the majority did not adopt--

Unknown Speaker: They didn't say one way or the other.

The majority said nothing at all about that--

Mr. LaJeunesse: --Well, I think the majority suggested the contrary at several points in its decision.

In footnote 20 the Court presumed that ordinary judicial remedies remain available.

In footnote 16 in Hudson the Court said that the nonmember's burden is simply the obligation to make his objection known, citing the earlier--

Unknown Speaker: --What we said in footnote 20 was that we reject the union's suggestion that the availability of ordinary judicial remedies is sufficient, and this was... we were insisting that the... we were imposing obligations on the union, and the union lost that case 100 percent.

Mr. LaJeunesse: --That's correct, Justice Stevens, and what the Court was doing there, as the Chief Justice has suggested, was providing a shield for the protection of employee rights, not giving the union a sword to take another right away from the employee, which is the right of immediate access to the Federal courts guaranteed to them by Article III of the Constitution and the right to redress of grievances under First Amendment--

Unknown Speaker: May I ask you this question.

Supposing you prevail with... because of the right to access to the courts, do you think the district judge having such a case could say, I think I'll stay proceedings until I see what happens in the arbitration?

Mr. LaJeunesse: --No, I don't believe so, Your Honor.

That would be... it would be exhaustion by using another term.

Unknown Speaker: How does Article III give anybody access to courts?

Mr. LaJeunesse: Article III says that where Congress has granted jurisdiction to the courts the litigation has a right to bring his case into court.

Unknown Speaker: Well, I'd be interested in seeing exactly what provision of Article III you're quoting, because I've looked at it often and I--

Mr. LaJeunesse: I was referring, Your Honor, to what this Court said--

Unknown Speaker: --Well, I'm not talking about what this Court said.

I'm talking about what does Article III say.

Mr. LaJeunesse: --Article III places the determination of Federal causes of action in Article III judges, and this Court has held that that means that a litigant has a right to have his Federal cause of action determined by an Article III judge, and those--

Unknown Speaker: But not in reliance on Article III.

Mr. LaJeunesse: --Yes, Your Honor.

Grande Financial S.A. v. Nordberg, 492 U.S. 33, which we quote on page 23 of our brief, the Court says, if a statutory right is not closely intertwined with a Federal regulatory program... in other words, the administrative scheme, which we don't have here... Congress has power to enact, and if that right neither belongs to nor exists against the Federal Government, then it must be adjudicated by an Article III court, end quote.

Unknown Speaker: Well, that's not saying that it's... Article III requires that.

We have said many things... times that certain things are required to be adjudicated by Article III courts, but not simply because Article III says what it does.

We're... obviously you and I are both perhaps straying from the central theme of the case--

Mr. LaJeunesse: Certainly, Your Honor--

Unknown Speaker: --so let's get back to it.

Mr. LaJeunesse: --and the central theme of the case--

Unknown Speaker: While we're in that mode--

--I think maybe the Due Process Clause requires it to be determined by an Article III court.

You wouldn't care whether it's the Due Process Clause or Article III--

--Yes, but isn't the question here not whether it must be determined, but rather, when it must be determined, because I guess everybody agrees that after the arbitration you get all the discovery you want.

You get everything you want.

It's just a question of whether you can get it while the arbitration is--

Mr. LaJeunesse: --That's correct, Justice Stevens.

Unknown Speaker: --still going on.

Mr. LaJeunesse: But as this Court said in both Patsy and later in Felder v. Casey the court does not have discretion to simply require exhaustion out of questions of practicality or judicial efficiency.

Unknown Speaker: I notice the--

Mr. LaJeunesse: It has to be consistent with congressional intent.

Unknown Speaker: --I notice the one... I've been trying to think of an example of compelled arbitration without statutory authority.

I notice that the Northern District of California for some years has had a mandatory arbitration requirement before you can proceed with your civil action.

It's nonbinding.

That's the only one I can think of.

Mr. LaJeunesse: I'm not familiar with that, Your Honor.

Unknown Speaker: Is... imagine on this early dispute resolution, which is common now, but the... suppose that the union... what I want to try to find out is how you do you think this is going to work?

Imagine a union with 5,000 members and 500 dissidents, and the dissidents range from the people who really are angry, you know, at being part of this to the ones who sort of don't care, and a lot of the ones who don't care, you know, would like to have a simple way to resolve this, but some of the ones who really do care want to fight to the last ditch.

All right, on your theory of how the statute is supposed to work out, how does it work out?

I mean, the union will think well, some of the people might... you know, these things are often close.

The courts will decide one way.

The arbitrators will decide another way on many close questions.

Perhaps they're intertwined, so that the reasonableness of a relationship between germane... you know, between objective and expenditure depends on, and then we can imagine all kinds of intertwined things.

On your theory of what Congress meant to do, how was that to work out?

Mr. LaJeunesse: Justice Breyer, your example points out the need for both systems.

That is, the impartial decisionmaker required by Hudson as a matter of First Amendment due process and the ability of the individual who has an attorney and really wants a judicial determination to go to court first.

That individual is only going to be delayed by the exhaustion requirement, but you have to have the impartial decisionmaker, a simpler, less formal procedure available for the nonmember who can't afford to hire an attorney, and... plus--

Unknown Speaker: All right.

Mr. LaJeunesse: --give him due process.

Unknown Speaker: So they say, we can tell you how this works out perfectly.

Give us a reasonable time to set up our impartial decisionmaker and let ones who are hell-bent on court go there, but only after our impartial decisionmaker has decided, and that will prevent inconsistencies, and that's probably what Congress meant.

On the other hand, if you take your theme, which is the ones that are hell-bent for court go there first, we're going to get conflicting decisions.

We won't know how to plan our expenditures, and it will be a mess.

Now, I take it that that's their argument, so how... what do you say about that?

Mr. LaJeunesse: It's an argument that doesn't hold water, Your Honor, because in any event there are going to be conflicting decisions from different courts, different arbitrations.

This union has employees, airline pilots throughout the entire Nation.

Some may bring a case in one Federal district court, others in another.

Unknown Speaker: Well, can the multidistrict litigation scheme solve that?

I'm not quite sure how that works.

Mr. LaJeunesse: Yes, it could, Your Honor.

Unknown Speaker: So that would eliminate the conflict, at least among courts, wouldn't it?

Mr. LaJeunesse: But in either event you're going to have a decision by an arbitrator and then a decision by the court, whether it's sequential or--

Unknown Speaker: If the court reviews the arbitrator the court has the last word.

If they're going on simultaneously, or the arbitrator comes later, or you don't know, interspersed, then you can get I suppose a fairly good mess.

That's... and if we're trying to figure out what Congress intended, can't we assume they wanted not a mess, rather than a mess?

Mr. LaJeunesse: --No, I don't think so, Your Honor.

I think you have to look at... you have to look at the cause of action involved here.

In the public sector it's a cause of action under 42 U.S.C. section 1983, and this Court held in Patsy and later in Felder that based on legislative history that the congressional intent was that these statutes for the paramount protection of individual rights were intended by Congress to be in the courts in the first instance.

Because the parallel situation under the duty of fair representation, which is the basis of the cause of action here.

The duty of fair representation was adopted by this Court in 1944 in Steel to protect individual employees from unions abusing their power of exclusive representation.

In fact, it was adopted by the Court to avoid having to declare the statute unconstitutional.

Unknown Speaker: Well, I suppose Hudson was probably beyond the contemplation of Congress.

I mean, it was a constitutional decision.

It wasn't based on the idea that this is what Congress would have wanted, so that once we get beyond what Congress would have wanted it's hard to say, when you try to see what possible remedies exist post Hudson, to translate that into what Congress would have wanted.

We're pretty far away already from congressional intent.

Mr. LaJeunesse: Two questions, Your Honor.

One, in Steel the Court said, we have to assume that Congress intended to impose the duty of fair representation on unions, because if we don't make that assumption the statute is probably unconstitutional.

The Court then said, there's no remedy provided under the Railway Labor Act, which is the statute in this case, for vindication of an employee's rights where he's accusing the union of breach of the duty of fair representation.

Later, in Vaca and Breininger the Court held that employees have the right to take that cause of action for breach of duty of fair representation directly to the Federal courts because the purpose of the statute, paramount purpose of the statute is the protection of individual rights, just as it is under section 1983, that the nonmember... that the employee under the National Labor Relations Act doesn't have to go before the National Labor Relations Board first.

Unknown Speaker: Mr.... is it clear to begin with that Hudson applies in your situation, where it is not the State--

Mr. LaJeunesse: Yes, it is clear.

Unknown Speaker: --that is depriving these workers of their First Amendment rights?

Mr. LaJeunesse: It's clear in this case for two reasons, Justice Scalia, first because this Court held in Hanson in 1956 that the Railway Labor Act authorization of agency shop agreements is governmental action, Federal governmental action, and so constitutional limitations do apply, and--

Unknown Speaker: Well, but so then the Federal Government should set up the arbitration scheme.

I mean, what Hudson said was that the person responsible for the First Amendment violation, what would otherwise be a First Amendment violation, had to set up an arbitration scheme.

If you're telling me in this case, since it involves a private employer, the person responsible for it is the Federal Congress, by having adopted the National Labor Relations Act that enables these dues to be charged, then let the Federal Government set up an arbitration scheme.

Mr. LaJeunesse: --You're making one of the points that I wanted to make, Your Honor, is that ALPA's in the wrong place.

It is asking this Court to construct a remedy scheme that Congress has not constructed.

It should be addressing the practical concerns that it's raising to Congress, not to this Court--

Unknown Speaker: Yes, but isn't that--

Mr. LaJeunesse: --which doesn't have the discretion to impose exhaustion simply as a matter of practicalities unless it is consistent with congressional intent, and there are two aspects in which this requirement is inconsistent with congressional intent.

One is the point I was making with regard to the duty of fair representation.

That is, that this Court has already held that Congress intended that these cases be considered in the courts in the first instance, because the paramount purpose of the duty is to protect individual rights.

And the second is that beginning with Hanson this Court has said that the only incident of union membership that can be imposed on the nonmember is the payment of the cost of collective bargaining, and here you're imposing on the nonmember an additional incident of union membership, exhaustion of a union remedy.

Unknown Speaker: --Mr. LeJeunesse, one of the things that you said about why you don't like this, you said there's no discovery, and I was trying to understand what the complaint is that you come to court with when you don't have any arbitration in the picture.

You just say, we don't think they drew the line in the right place.

Do you have to be at all specific?

Do you have to say, well, we think that their expenditure for, say, safety lobbying is no good, or do you just say, we challenge the whole thing, and then we can discover?

Mr. LaJeunesse: That's correct, Your Honor.

This Court held both in the Railway Labor Act cases back in the sixties, Street and Allen, and later in Abood, that the nonmember need only state a general objection and then the union is put to its burden of proof, and in Allen--

Unknown Speaker: Wait, wait.

In general... he has to have a basis for that general objection.

You just can't come in and say, I object.

Mr. LaJeunesse: --That--

Unknown Speaker: Don't you have to plead that you have reason to believe that the union is expending--

Mr. LaJeunesse: --How is the nonmember to have reason?

The nonmember doesn't have the facts.

Unknown Speaker: --Well, he does under Hudson.

Mr. LaJeunesse: They're solely in the possession of the union.

Unknown Speaker: He does under Hudson.

See, that's the very point of... the point.

Until a member has the facts, he doesn't know whether he should spend the money to hire a lawyer and bring a lawsuit, and one of the points of Hudson was, we put the burden, as you say, squarely on the union to assemble the facts, but not only its own version of the facts, but also those of an independent verifying that version.

And if they've done that, presumably then the employee has a basis for judging whether or not he's been short-changed, and if he has, he's free to sue.

You see, the difference between this arbitration and all others is the member is not bound by the arbitration in any way.

He hasn't agreed to anything, so he's totally free to sue once he gets the facts.

The question is whether we should ask him to wait till he gets the facts before he sues.

Mr. LaJeunesse: I return Your Honor to the principle that this Court has followed consistently, which is that you cannot just as a matter of judicial discretion require exhaustion unless--

Unknown Speaker: But it's not exhaustion.

The opinion itself says he need not exhaust.

There's no requirement of exhaustion on the member, as you put it correctly.

All he has to do is complain and he has his cause of action.

He can sue.

He doesn't like the arbitration.

He starts from scratch.

He at least has the facts before he files his complaint.

That's all we held.

Mr. LaJeunesse: --Your Honor, he doesn't have the facts, because the notice that the... Hudson requires--

Unknown Speaker: He has the union's version of the facts verified by an independent appraisal.

Now, whether that... he doesn't have to accept it, but he at least has that much, and then he decides whether--

Mr. LaJeunesse: --I'm not sure I understand you, Justice Stevens.

You're saying the employee merely states an objection, the union holds its arbitration ex parte, and then the employee can go to court.

I don't see the purpose of that.

Unknown Speaker: --How does it work when a union official complains that the employer... not... sorry, when an employee thinks the employer is trying to censor him or something, or he thinks that the employer should have given him an excuse... it's related to his religion or something.

I mean, there can be thousands of grievances.

Don't people have to go through the grievance procedure?

Mr. LaJeunesse: But they've agreed to go through the grievance procedure.

The union is their agent for purposes of their--

Unknown Speaker: Oh, I see.

Mr. LaJeunesse: --relationship with their employer.

It is not their agent for purposes of their dispute with itself, and those cases, Justice Breyer, also are cases in which... they're simple contract grievance arbitration cases in which both parties know most of the underlying facts.

Here we're talking about 68 million in union expenditures.

The pilot doesn't have a basis to make a detailed complaint.

All he's required to do by this Court's decisions, beginning with Allen in the sixties, is state a general objection to the use of his money for purposes other than collective bargaining, then he's entitled to discovery in court to find out what underlies the union's calculations, and the union has the burden of proving its case.

That doesn't happen in these arbitration proceedings, the ones that occurred here.

Discovery was denied to the pilots.

They were not given the opportunity... they could not compel the testimony of union witnesses.

Without discovery, they couldn't effectively cross-examine.

They couldn't narrow the issues, because they didn't know the underlying facts.

And in conclusion, I would say that the court of appeals correctly held that the pilots were not obliged to proceed first through ALPA's review procedure because there is no legal basis--

Unknown Speaker: May I ask one other question, though?

The... in the arbitration proceeding that's all cost-free for the... they don't have to participate if they don't want to, and they won't be bound, but once you start discovery, then you have to pay your own share of the cost, don't you?

Mr. LaJeunesse: --Yes, Justice Stevens.

Unknown Speaker: Yes.

Mr. LaJeunesse: And I'm talking here about the pilots who have an attorney, who want to go to court to get a judicial determination with an Article III judge in a proceeding where they have the right to discovery, where they can compel the production of witnesses, where the proceeding is truly adversary and they can get that judicial determination of their... what we're talking about here after all is Federal statutory and constitutional rights.

Unknown Speaker: It really is an extraordinary claim, that you just come into the court and say, I think they drew the line in the wrong place.

I'm not going to tell you anything about which expenses, we just say we want to have full discovery.

And I think that the notion of the arbitration is that it would put certain limits, because the... whether it's... some kind of deference to the arbitrator's findings, and you don't want to have any findings, as I understand your position.

Mr. LaJeunesse: Justice Ginsburg, it's a truly extraordinary statutory privilege that the unions have to compel nonmembers to pay these dues, and this Court held in Hudson that First Amendment due process and fundamental fairness, which means it's also a matter of the duty of fair representation, require the union to make available a procedure which is a shield to protect the employee's rights.

Unknown Speaker: Thank you, Mr. LaJeunesse.

Mr. Anker, you have 3 minutes remaining.

Rebuttal of Jerry D. Anker

Mr. Anker: Thank you, Mr. Chief Justice.

I think I have three quick points I would like to make.

First of all, there's been a lot of discussion by Mr. LeJeunesse about the intent of the statute, and I think it's clear to say that the statute simply sheds no light whatsoever on the question that's before us, and that's not unusual.

Very often these exhaustion questions are not resolved by any statute, and certainly this one doesn't have anything whatsoever to say on the subject.

Now, when the statute is silent, what this Court has said... and I think this is really the ultimate answer to the questions that were asked of me earlier by Justice Ginsburg and others, where does the authority come from to require this exhaustion, this Court has said on several different occasions that exhaustion of an administrative remedy or an arbitration remedy, as in Hudson, as in Republic Steel v. Maddox is a matter of judicial discretion.

Unknown Speaker: But one was... certainly Republic Steel was consensual, was it not?

Mr. Anker: Well, Your Honor, one could say that on the facts of Republic Steel, but the interesting thing about the case is, when you read it, that was not the principal reliance of the Court at all.

The Court spoke about several different policy considerations.

Unknown Speaker: Yes, but another... it seems another defect in your suggestion is that this is not a remedy.

The arbitration doesn't bind the union... I mean, bind the member in the slightest.

He... it may change the calculation, but it's certainly not a remedy.

Mr. Anker: Well, I agree it doesn't bind him, Your Honor--

Unknown Speaker: Which most remedies do.

Mr. Anker: --It's maybe just simply a semantic issue between us, but it's a remedy in the sense that it's a way in which he might get what he's looking for.

He might get the adjudication of the issue in his favor, and that would resolve the problem for him, or her, and that's why I would consider it a remedy.

But if the Court doesn't like that word, I think it's still analogous to a remedy in a typical exhaustion case such that the normal judicial discretion would apply.

Unknown Speaker: What's another typical exhaustion case that you're talking about, Mr. Anker, other than Maddox?

Mr. Anker: Well, any kind of an exhaustion of administrative remedies.

Unknown Speaker: But those are governmental remedies.

Mr. Anker: They are governmental remedies, but they're nonjudicial remedies, and even where the statute doesn't require--

Unknown Speaker: But the typical reason for exhausting judicial administrative remedies is to get the view of the administrator.

In other words, the Government policy maker might rule in your favor.

But we have never done that with a private organization.

Mr. Anker: --Well, I think, Your Honor, you're making two points.

Let me take the first one first.

One of the reasons is the reason relating to the governmental decisionmaker, but the cases have stated several reasons.

Other reasons are efficiency, reasons of avoiding controversy in court if it's possible to do so.

It isn't... that isn't the only reason for exhaustion of administrative remedies.

Now, I'm not sure I can come up immediately with another example, other than Maddox, of an exhaustion of a private remedy, but Maddox is certainly a case of one, and it's one in which... actually the plaintiff in that case, the individual never consented.

The consent is only kind of a constructive consent, because of the fact that he is represented by the union.

Chief Justice Rehnquist: Thank you, Mr. Anker.

The case is submitted.

Attribution:

The Oyez Project

Featured:

Allentown Mack Sales v. NLRB - Oral Argument

Fri, 09 Jan 2009 14:50:03 +0000

Case:

Allentown Mack Sales v. NLRB

Media File:

96-795_19971015-argument.mp3

Related Transcript:

1997_96_795_argument.xml

Transcript:

Argument of Stephen D. Shawe

Chief Justice Rehnquist: We'll hear argument next in Number 96-795, Allentown Mack Sales and Service v. National Labor Relations Board.

Mr. Shawe.

Mr. Shawe: Yes, Mr. Chief Justice, and may it please the Court:

Picking up on the commentary in Curtin Matheson, this case brings to the Court's attention the issue of whether deference to the board is owing when the board applies the same standard to three different approaches to challenging a union's continuing majority status.

In Curtin Matheson this Court acknowledged the board's oft-articulated standard that an employer can withdraw recognition from an incumbent union if 1) the union has in fact lost its majority status, or 2) the employer has, based on objective considerations, reasonable grounds to doubt the union's continued majority status.

The second test supposedly can be satisfied by a lower threshold of proof, although the board typically requires clear, cogent, concise articulations by individual employees disaffected totalling a majority, or a head count.

But conducting a secret ballot poll is not the same as withdrawing recognition.

Obviously, in the withdrawal of recognition the employer has preempted any vote.

In contrast, a secret ballot poll assuming fairness consistent with the board's Struksnes standards permits of the possibility that a majority will vote in favor of continued union representation, and the board in Texas Petrochemicals and its brief disclaims any interest or desire to do away with employer polls.

The board's standard for permitting an employer to take the grave and precipitous step of withdrawing recognition should not at the same time be applied in the contradictory context of secret ballot polling.

Unknown Speaker: Well, why is it contradictory?

I mean, I thought there was a rational structure for all of this along the following lines:

The board says, we're at the point at which the presumption is no longer absolute.

The employer in effect is going to be given three options, subject to the same condition, probable cause to believe.

The three conditions, the three options, however, have varying risks.

If the employer simply withdraws recognition and turns out to be wrong, the repercussions are presumably going to be very great.

If the employer asks for an election, perhaps the repercussions may not be so great, but they're going to be serious.

If the employer decides to take a poll, the repercussions... and loses, the repercussions perhaps will not be quite so great.

That's not quite so disruptive.

What is irrational about saying, subject to the same fact premise, the employer is going to be given an option of going A, B, or C, depending on the degree of risk that the employer wants to run if the employer turns out to be wrong?

Mr. Shawe: Well, I don't--

Unknown Speaker: How is that irrational?

Mr. Shawe: --No, I don't... I think it's not rational, given the predisposition of the board... the court, me, the... everyone, that a poll or an election is a much, much better preferred test to measure employee sentiment than what is... what has been for 40 years the board's articulated standard in Celanese that an employer can withdraw without a poll.

Unknown Speaker: I understood your claim to be here... if... perhaps it's a claim of irrational... that the board's requirements for taking a poll are so stringent that they almost make a poll unnecessary.

Mr. Shawe: Well, they make it irrelevant, a legally irrelevant act, the board's regulatory scheme that accepts as valid a secret ballot poll only, and only if the employer has so much evidence before taking the poll that it could have withdrawn recognition without it.

Unknown Speaker: Well, are you saying that if the... if the standard of cause that were applied to each of these three options were something less than what you characterize as the head count, that there would be nothing irrational, nothing to... nothing really to object to in having the three options subject to the same factual condition?

Mr. Shawe: Well, I suppose a reasonable doubt, if it were different from a head count and, indeed, it were applied as if it were the totality of the circumstances, perhaps the complaint wouldn't be so vehement, but--

Unknown Speaker: Well, but would it be... would the scheme be irrational?

Mr. Shawe: --Yes, I think it would be irrational to mandate the same requirement--

Unknown Speaker: Okay.

Mr. Shawe: --for a withdrawal of recognition without a poll, because--

Unknown Speaker: But isn't--

Mr. Shawe: --Because what the board has elevated, has valued in allowing an employer to withdraw recognition with or without a poll because the same standard applies, or even processing the favored RM petition, the management petition, is a head count, and--

Unknown Speaker: --But suppose the same standard didn't apply, isn't your real complaint here that reasonable doubt, that the agency says reasonable doubt, but that you had reasonable doubt here, but that would not suffice without--

Mr. Shawe: --Without a head count.

Unknown Speaker: --Without a head count.

Mr. Shawe: That's clearly a complaint, yes, sir.

Unknown Speaker: Well, isn't it the essential complaint, because if they... if they treated reasonable doubt as reasonable doubt, you would have the three-stage process that Justice Souter is talking about, the three different ways.

Mr. Shawe: Well--

Unknown Speaker: Reasonable doubt, the head count, or--

Mr. Shawe: --But I don't think the test should determine the... should be dependent on the risk factor.

I don't think the risk factor is--

Unknown Speaker: --Well, but you may have a gripe with the board that they set it up that way, but that's a very different thing from saying that it's irrational to the point that a court would be authorized to strike it down.

Mr. Shawe: --Well, the reason that it's irrational, I suggest, is that it is internally inconsistent.

It is... it encourages conduct that should be discourages.

It encourages conduct to withdraw recognition without any poll, board or employer-conducted, and--

Unknown Speaker: But it does that because they, as you put it they are insisting on a head count.

Isn't that the reason?

Mr. Shawe: --No.

I think that the reason that the board is insisting on it is that they are nervous about withdrawals of recognition, appropriately so, and would prefer, as they have acknowledged, and all would agree, that the RM petition be utilized as the standard, and what they have done is, I think mistakenly in U.S. Gypsum, after 20 years of not doing it in 1966 said we are going to have the same elevated standard for processing an RM petition as we have to permit an employer to withdraw recognition without any poll whatsoever, and--

Unknown Speaker: Do you have to say it's irrational before this Court can rule in your favor, or can you say that it's inconsistent with the board's precedents?

Mr. Shawe: --I think inconsistent with the board precedent.

I think either one.

Unknown Speaker: Why... can you tell me why this is inconsistent with the board's precedents?

Is it primarily because of the definitional content that we ought to give to the reasonable doubt standard?

Mr. Shawe: Yes.

I think the reasonable doubt standard, as articulated by the board in Celanese, and reiterated even in the 1990's cases--

Unknown Speaker: But doesn't--

Mr. Shawe: --is a totality of circumstances test, which they fail to apply.

Unknown Speaker: --But doesn't the reasonable doubt standard also apply to withdrawal of recognition?

Mr. Shawe: Yes, of course, and indeed the board's general counsel--

Unknown Speaker: Well then... then shouldn't--

Mr. Shawe: --Shouldn't we have--

Unknown Speaker: --the standard for a poll and withdrawal of recognition be the same?

Mr. Shawe: --No.

They should be different.

Unknown Speaker: Okay.

Why?

Mr. Shawe: Because a poll presumes that employees will fairly express their sentiments.

The withdrawal of recognition, the poll, the secret ballot, which is certainly the truest test of employee sentiments, has been preempted completely.

Unknown Speaker: Are you saying that reasonable... are you saying that reasonable... excuse me.

Are you saying that reasonable doubt must be given a different definition in the context of a poll than in the case of withdrawal of recognition?

Mr. Shawe: It should, but it hasn't been.

It surely should because of the... the withdrawal of recognition is--

Unknown Speaker: What do you mean, be given different content?

Shouldn't you use different words?

I mean, do words have no meaning?

Reasonable doubt's going to mean one thing here and something else there?

I mean, I take your complaint to be rested upon the fact that reasonable doubt ought to mean reasonable doubt.

Mr. Shawe: --I agree.

Unknown Speaker: But now you're saying reasonable doubt could mean two different things.

Mr. Shawe: Well, I'm... I'm--

Unknown Speaker: It's going to mean one thing for this and one thing for--

Mr. Shawe: --Right.

I'm afraid that if the reasonable doubt standard that the board has applied is accepted by the Court as a head count, that I won't prevail in this case.

Unknown Speaker: --Are you making two distinct arguments, and is... one, as I hear it, seems to be purely comparative.

That is, suppose the board said, we're simply not going to allow unilateral withdrawal.

That's too risky.

So all we have is the poll and what's been called the RM election.

Suppose we took out what you say is a glaring inconsistency in no more--

Mr. Shawe: No more withdrawals?

Unknown Speaker: --Yes.

Then what would your case be, if we had only the poll?

Mr. Shawe: Well, if the board continued to adhere to its elevated standard to process an RM petition, then I would continue to insist on the employer's right to conduct the poll.

If, however, the board accepted its own general counsel's recommendation in the Chelsea Industries case... that was one of the cases lodged by the board in opposition to our cert petition.

The board's general counsel, who's obviously much more familiar with this process than currently anyone else, has himself indicated... and I have the lodging where he says that, on page 9, the board's current policy, which applies the triple standard to the RM petition, to the poll, and to the withdrawal of recognition without any election, the board's current policy does little to encourage employers to act in accordance with what the Supreme Court has long thought to be the board's own view, namely that even after the certification year has passed, the better practice is for the employer with doubts to keep bargaining and petition... the RM petition... the board for a new election, citing the Ray Brooks case, the 1954 case that the Supreme Court heard after the... after reading the Celanese decision.

So rather, says the general counsel to the board, rather the Celanese rule, which he is proposing be eliminated... that's your suggestion... encourages employers to engage in self-help measures, and thereby to engage in potentially unlawful withdrawal of recognition rather than the, quote, better practice of proceeding to a board vote with the injuries to industrial peace and protracted litigation, which is always the result--

Unknown Speaker: But I still don't have a clear answer from you to my question.

To the extent that you're complaining about a comparison being irrational, isn't that objection at least taken away if, say, the board was to respond, they said, fine, we've always been nervous about these unilateral withdrawals.

We just won't allow them any more.

Suppose you didn't have that in your case, and all you had was the poll and the RM election governed by the same standard, would you have any complaint?

Mr. Shawe: --No.

I'd have a lot less complaint, but in my view the RM petition, in order to make it available, must be subscribed to in a much lower standard than the one that's currently in place, which does require still a head count in order for the board--

Unknown Speaker: I'm sorry, now you're losing me.

You--

Mr. Shawe: --Right.

Unknown Speaker: --I thought I understood your first argument that if they didn't permit unilateral withdrawal, you would not have a complaint, but now you seem to be saying even if they didn't--

Mr. Shawe: If they do not honor what's called a good faith doubt, which is a totality of the circumstances, still required a head count applicable to the RM petition, and the conduct of a poll before the poll would be validated, yes, I would still object because the good faith doubt would be obliterated within the meaning of what those words mean, at least what the Court has always assumed the board to have meant when it registers good faith doubt.

Unknown Speaker: --Then why couldn't the board say, this is our test and we want it to be a tight one because it's important to give the union a chance to operate, and that's why we have the 1-year free, and then we have the rebuttable presumption.

So to keep that tight we have to have a stringent standard of what we must show before we'll let you get an election or take a poll.

What would be illogical about that?

Mr. Shawe: Well, the reason for that is that it seems to me the best way to resolve a doubt is to have a poll rather than to require the employer to submit evidence in advance--

Unknown Speaker: But the board's rule is you have to have more than a doubt.

Is that what... tell me what... you seem to be saying that that would not be a permissible construction of the statute.

Mr. Shawe: --That would not be a permissible construction of good faith doubt, correct.

Unknown Speaker: But the good faith doubt doesn't come from the act.

Mr. Shawe: No, it comes from the board, and if the board says that a good faith doubt standard will apply to RM petitions and to polls, then the head count would be impermissible as the test to determine whether or not either the poll or the RM petition's processing should go forward.

Unknown Speaker: What was the good faith reasonable doubt in this... you assert that there was here--

Mr. Shawe: Yes, sir.

Unknown Speaker: --a good faith reasonable doubt.

Mr. Shawe: Yes.

Unknown Speaker: Based on what?

Mr. Shawe: Based on the six or seven employees credited by the board claiming disaffection from the union, several other statements from other employees not accepted by the board, but nonetheless indicating a lack of interest or support for the union, the statement of a night shift employee who said, all five or six night shift employees do not favor the union and, most importantly, the comment by Ron Mohr, the shop steward and union committeeman, who says to the employer that, with you as the boss, the new company, if a vote were taken, the people would not support the union.

I don't think the people want the union with you as the boss.

Unknown Speaker: Is there any theory you can advance to tell us that that should constitute good faith doubt in the context of taking the poll, even though it might not be for withdrawal of recognition?

Mr. Shawe: Yes, because the... what the board has articulated as elevated, as favored, are individual names.

Had Mr. Mohr said, and here are the names of the people that I think would vote against the union, the board would prefer that.

They'd like that.

But that's a remarkable elevation when everyone would agree that a better resolution of true employee sentiment would not be Mr. Mohr's articulation of here's the list over here, and here's the list over here, but rather to allow all the people vote in secret, and that's what happened here.

They voted in secret.

There is a specific finding that there was a noncoercive setting, that the union had notice, the union lodged no protest over the vote, nor made any comment concerning it.

All the employees participated.

I can't imagine a better test of true employee sentiment--

Unknown Speaker: Mr. Shawe--

Mr. Shawe: --than the poll that was conducted here.

Unknown Speaker: --I'm sorry.

Mr. Shawe, isn't one answer to the objection that you're making... which I have to say in the Mohr example is I think a very serious objection, but isn't one answer to it this:

Sure, the best way to find out what's really going on is to have an election.

We agree.

But we want the standard for calling the election to be high.

We want the standard of doubt to be a high one because there's another value involved, and the fact is the promotion of industrial peace and the promotion of stability is going to be served over the long haul by fewer elections rather than more elections, and that's why we're going to have a high standard, maybe not to the point of requiring Mohr to say, A, B, C, D, and E told me, but at least to the point of requiring Mohr to say, I have actually talked to the men, not naming them, and I find that they are affirmatively disclaiming any desire at this point to continue with the union.

We want the high standard because we've got this other interest that's being served.

That may be a good policy, it may be a bad policy, but isn't it a permissible policy choice?

Mr. Shawe: Yes, and as a matter of fact this Court's acknowledged it in the Fall River case.

Unknown Speaker: Yes.

Isn't--

Mr. Shawe: That industrial stability is an important policy so long as it doesn't unduly interfere with employee choice.

Unknown Speaker: --Yes, and what is unduly interfering is the problem here, what unduly means, and whether it would have been your policy choice or my policy choice, isn't it within the realm of reason for the board to have made the policy choice that it made in requiring a starchier standard than perhaps would have been necessary from the literal meaning of the words?

Mr. Shawe: Well, you know, one of the things that's... constantly crops up in the board's brief is the issue of remand, because both you and Justice Ginsburg now assume, let's assume we don't have withdrawals of recognition for the moment, without a poll, which is clearly not the rule.

It may be a wise rule, but it's not the rule, and when they apply, the board applies to the polling standard and the RM standard the same standard that they would apply to an employer without any election, to do exactly the same thing, and just litigate the case for a couple of years, is exactly the reason why the board's current standard... I don't want to suggest you set it... needs rethinking, relooking, not inconsistent with its own general counsel's approach--

Unknown Speaker: And maybe it does, but that's a step away from the kind of irrationality upon which invalidity has to be predicated, isn't it?

Mr. Shawe, may I ask you, in judging you claim that there was inadequate evidence to... that there was plenty of evidence to show good faith doubt, you relied in part on the testimony of this man Mohr.

Mr. Shawe: --Yes, sir.

Unknown Speaker: In judging the case, should we do so in view of the fact that the hearing examiner discredited him, and the board discredited him, and the... said it was not... his testimony was not reliable and not entitled to much weight, as did the court of appeals?

Mr. Shawe: No, I think... I beg to differ.

I don't think they discredited it at all.

I think they believed--

Unknown Speaker: They said it was not entitled to much weight.

Mr. Shawe: --Yes.

Unknown Speaker: Yes.

Mr. Shawe: Yes, so that the fact that he said it--

Unknown Speaker: The fact that he said it--

Mr. Shawe: --Has been credited.

Unknown Speaker: --Yes, but whether or not--

Mr. Shawe: But the weight that's to be attached to it--

Unknown Speaker: --Whether or not his recounting of what other people had said to him was entitled to weight is a matter that we should exercise our own independent judgment on, or just--

Mr. Shawe: --Absolutely.

If you're going to weigh what a good faith doubt is, I cannot imagine that you would ignore that.

Unknown Speaker: --And we should just sort of ignore the reasons why the board, the hearing examiner, and the court of appeals gave less weight to that testimony than you think it should have.

Mr. Shawe: Oh, no, I don't mind arguing with those reasons.

The reason... one reason that the board gave is that there was no way to verify what he said.

Unknown Speaker: You're not sure whether he was referring to a majority of the predecessor employer or this employer.

Mr. Shawe: Well, number 1... as for that, as to the predecessor business, this Court--

Unknown Speaker: Because he was--

Mr. Shawe: --and the board says, we presume the same degree of sentiment for the union to a successor as we do a predecessor, or lack of sentiment, I suppose.

Unknown Speaker: --Yes.

Mr. Shawe: The same rule applies.

Number 2, as I remarked on before, it is true that I didn't know... no one would know with certainty that Mr. Mohr was accurate.

Unknown Speaker: Hasn't the board held in other cases that the employer or that the board itself should rely on statements of shop stewards?

Mr. Shawe: Sure.

Absolutely.

Unknown Speaker: What are your best cases?

Mr. Shawe: J&J Drainage is the best case that I can find.

It's one cited by them, and the only distinction between--

Unknown Speaker: Why would they have treated this steward's testimony differently than they do in other cases?

Mr. Shawe: --There's no--

Unknown Speaker: Well, he only--

Mr. Shawe: --The only reason they advanced is, that shop steward was talking about the successor's employees.

Mr. Mohr had not yet come over, so they were talking about the predecessor's employees.

Unknown Speaker: --Plus the fact that he only supervised one portion of the work force.

Mr. Shawe: He was the shop steward for some, but he was on the union's negotiating committee, and again, I think what's going on is a splitting of, you know, hairs.

It's a real strain to say, when the owner of the company hears from the union committeemen and shop steward that I don't think that the employees with this new company would want a union, if we had a vote I think they'd reject it--

Unknown Speaker: But what... when you get--

Mr. Shawe: --for him to parse that out and say, that's not good enough, especially when it's accompanied by all the other individual statements and the commentaries of others that says, we don't want the union.

Unknown Speaker: --We're talking here only about a doubt.

Is it enough to raise in the employer's mind a good faith, reasonable doubt--

Mr. Shawe: In my opinion--

Unknown Speaker: --about whether there was majority support?

I don't know if we're supposed to go into the record and make this court of appeals type determination, so--

Mr. Shawe: --That's--

Unknown Speaker: --leaving that to the side, is it the case that a group of workers, a union who has been in business a long time, 10 years representing the workers, am I right that if 30 percent of the workers want to have a new election, they can go do it?

All right.

So we're only talking about a case in which 30... there's no 30 percent of the workers that asked to get rid of the union.

So if 30 percent of them want to get rid of it, they can get rid of it.

They can have their election.

So we're talking about cases, the union's been there a long time, and there isn't some group of workers who were so disaffected that they called for an election.

Now, under those circumstances, what's unreasonable about the board saying, we don't want management to try to throw out a well-established union?

Mr. Shawe: --Because--

Unknown Speaker: They have to have a very, very good reason.

Mr. Shawe: --The--

Unknown Speaker: A very good reason.

Now, if they have that very good reason, called tough reasonable doubt, they can then do it, and as far as we're concerned we don't care whether they disrupt labor relations by having a poll, by calling for an election, by refusing to bargain.

That's up to them.

We're indifferent.

Some will want to do the one, some will want to do the other.

But what we are interested in is, they don't get into the union disruption business in a situation where the workers haven't tried to do that unless they have a very good reason.

Now, I either may or may not agree with that reasoning.

What I don't want to... what I want to know is, what's unreasonable about it?

Mr. Shawe: --Well, what's unreasonable about it is that the employer is required to bargain with a majority union under section 9(a) and, as a result, a whole litany of cases have come out about how you test the union's majority status in a successor case like mine.

A reasonable good faith doubt of the union's majority status is supposedly... that's articulated by the board and this Court as the standard, and it does not require a head count if the good faith doubt is to have any common-sense meaning, or commonplace meaning of what those words are.

Unknown Speaker: It's possible that a good faith reasonable doubt is required to be the standard by law, is it not?

Mr. Shawe: Yes.

Unknown Speaker: I mean, it's possible that if the agency enunciated a more than tough doubt, probable certainty standard, that that would be unlawful under the act, isn't it?

Mr. Shawe: Yes, it's possible.

Unknown Speaker: But the board doesn't have to confront that problem because it continues to enunciate the good faith reasonable doubt standard.

Mr. Shawe: That's right, and doesn't give me the benefit of it.

Unknown Speaker: And part of your complaint is that it enunciates it so that it can't be challenged in principle, but that on the facts, it doesn't apply it.

Mr. Shawe: That's correct, and commentator Joan Flynn, who's been cited by both parties as, you know, a person who's written extensively on this subject and who was cited by the Court in the Curtin Matheson case, says exactly that, that they do not... do not apply the good faith reasonable doubt standard in any way, in any common sense way, and apply it to a head count standard.

Unknown Speaker: Though they continue to enunciate it.

Mr. Shawe: Exactly.

Exactly.

But in response to your question, what... it seems to me internally inconsistent if you continue to allow a withdrawal of recognition without a vote.

Unknown Speaker: I mean, there we have Justice Souter.

So he says, well, you know, they don't care, the board, which route of the three you take.

They don't care.

They find them all disruptive to labor relations, and some employers will want to do the one, some will want to do the other.

Mr. Shawe: But if--

Unknown Speaker: Each route has different consequences for the employer.

Some employers would think, we'll take a poll first.

We want to be very careful.

We don't want to get the union to hate us.

Others will think, I'm just going to bargain.

I don't care whether they hate us or not.

That's up to the employer.

Mr. Shawe: --Well, let me tell you what the board explains as... in its own brief, which is that many employers, as you said, acting in good faith, and wishing to convey that good faith to their employees, would not wish to withdraw recognition from a union unless they could first confirm whether or not the union in fact lacks majority support, and... right, and polling is one method of making that determination.

That's exactly what I did here.

It's exactly what I did.

Unknown Speaker: So your real complaint is, you had the good faith reasonable doubt, and they found that you didn't.

Mr. Shawe: They didn't--

Unknown Speaker: That's your complaint.

Mr. Shawe: --They didn't find I didn't have good faith doubt.

They found that I didn't have... I found six people that said individually I don't want the union, or seven.

Unknown Speaker: All right.

Mr. Shawe: And ignored... crediting but ignoring any weight--

Unknown Speaker: But are we supposed to in this Court, even assuming the lower courts were all wrong and so forth, simply conduct a review of the record to decide whether that finding is or is not justified on the basis of the record?

I thought in Universal Camera Justice Frankfurter said two cases on something, two lower courts on cases like that, that's enough, even if they're wrong.

Mr. Shawe: --I think... I think this Court has the right and the obligation to say that good faith doubt articulated by the board must be applied--

Unknown Speaker: Would we then have--

Mr. Shawe: --fairly.

Unknown Speaker: --we have to overturn Justice Frankfurter in Universal Camera, who says on substantial doubt questions you get two... you get the court of appeals, they're going to forever make these kinds of determinations, we're not?

Mr. Shawe: No, of course not.

Unknown Speaker: Mr. Shawe, maybe I don't remember the record right, but I thought that the ALJ had said, but even if it's that lower standard that the other courts--

Mr. Shawe: You wouldn't find enough.

Unknown Speaker: --That... I don't even find that low threshold.

Mr. Shawe: Correct, and the reason that he didn't find a low threshold, and the board articulated the same thing, is that they only considered it in conjunction with the six or seven that were specific articulations of union disaffection, and in either case, the high threshold or the low threshold, no one is contending that six or seven is enough for anything, and what they've done in the high threshold and the low threshold, the board and the ALJ, is to ignore completely what weight to attach to Mr. Mohr or to the other statements to--

Unknown Speaker: Thank you, Mr. Nuechterlein.

I think you've answered the question.

Mr. Shawe: --Thank you.

Unknown Speaker: Not Mr. Nuechterlein, Mr. Shawe.

Mr. Nuechterlein, we'll hear from you.

Argument of Jonathan Nuechterlein

Mr. Nuechterlein: Mr. Chief Justice, and may it please the Court:

As Justice Breyer has suggested, once employers have decided to engage in collective bargaining and have settled on a union to represent them, the National Labor Relations Act prescribes only two ways of testing whether that union continues to command majority support.

First, the employees themselves whose interests are most directly at stake here may, upon a showing of interest by 30 percent of the bargaining unit, petition the board to hold a decertification election.

Alternatively, the employer may itself petition the board to hold an election if it can present a reasonable, solid basis for believing that the union has lost--

Unknown Speaker: Yes, but the board also allows an employer to call an election, call a... take a poll if the employer has a reasonable doubt--

Mr. Nuechterlein: --That is correct.

Unknown Speaker: --about the employee support.

I think that's what we're talking about.

The board seems to articulate as its standard here, and maybe it doesn't have to set that standard, but it purports to say a reasonable doubt will suffice.

Mr. Nuechterlein: I--

Unknown Speaker: But in fact it is in practice asking for something more than that.

That's what troubles me, and there is an unbroken line of cases where the board, although mouthing some reasonable doubt standard is, in fact, calling for something more.

Mr. Nuechterlein: --Justice--

Unknown Speaker: They have to know the answer by a head count before they say it will justify polling the employees, and it's just such a bizarre case here, where, in fact, the poll shows of course there was a reasonable doubt.

There was more than that.

There wasn't any support.

So I mean, it's just a very strange posture.

Mr. Nuechterlein: --Justice O'Connor, I have a couple of answers to your question.

First, I think it's important to recognize that the term, reasonable doubt, does not mean here what it would mean in the criminal law context.

The board develops its policies and process--

Unknown Speaker: The board is using it like beyond a reasonable doubt.

[Laughter]

I thought the standard was, a reasonable doubt.

Mr. Nuechterlein: --To the contrary, Justice O'Connor.

The board's standard means the employer must have a solid, reasonable basis for believing that the union has lost majority support.

The board is not using the term doubt here to mean uncertainty.

It is using that term to mean disbelief.

Unknown Speaker: I see.

The words mean whatever the board chooses them to mean.

Mr. Nuechterlein: I... I'd be... the board--

Unknown Speaker: I mean, a reasonable doubt means he is doubtful for good reason whether the board... whether the union has majority status.

What else could it possibly mean?

Mr. Nuechterlein: --Justice Scalia, the board has to develop its policies in the course of adjudication, and in the course of adjudication I think the board has been quite candid that this is a tough standard and is difficult to meet.

Unknown Speaker: So it is not a reasonable doubt standard, then.

The board speaks English, doesn't it?

[Laughter]

Mr. Nuechterlein: Justice... Mr. Chief Justice, the term doubt does have two different meanings.

One of them means vague uncertainty, and that is the way in which we use it in the criminal law context.

I think the board has been quite clear that that's not what it means when it uses the term.

Here, doubt means disbelief, and what the employer has to show is a solid basis for believing--

Unknown Speaker: Doubt... I simply don't understand the... your statement that doubt means disbelief.

Doubt may lead to a state of mind that further investigation would produce disbelief, but doubt I don't think anywhere is equated with disbelief.

Mr. Nuechterlein: --I... I... this is how the board uses the term--

Unknown Speaker: Well--

Mr. Nuechterlein: --and, to the extent it's become a term of art, it's not confusing to anyone because the board is quite candid about the rigor of the standard that it applies here.

Unknown Speaker: --All right, well, even if we accepted that, that doubt means disbelief, good faith, reasonable disbelief, is the only way you can have good faith, reasonable disbelief to conduct a head count?

Mr. Nuechterlein: Justice Scalia--

Unknown Speaker: Good faith and reasonable.

You have the shop steward who comes in and says, jeez, you know, I don't think there's majority support for you.

I disbelieve whether this union has majority support.

It seems to me it is in good faith.

It seems to me it is entirely reasonable, and yet the board says, no, that's no good, you have to do a head count.

Mr. Nuechterlein: --What the board requires--

Unknown Speaker: Disbelief doesn't get you to that, it seems to me.

Mr. Nuechterlein: --It does in the following sense.

What the board requires is the employer to show good, hard evidence, whether through a head count or through probative circumstantial evidence that the union has, in fact, lost majority support.

Unknown Speaker: Then you're talking about something other than good faith, reasonable disbelief.

I think the employer in this case surely... surely must have had good faith reasonable disbelief on the basis of the evidence that was introduced here, but you say no, we cannot use this evidence, because the only evidence we'll use is a head count.

Well, maybe we've got to do a different standard.

Stop calling it good faith reasonable disbelief, and maybe... or, even worse, good faith reasonable doubt, and maybe that new standard you come up with will be litigated in court to see whether the policies of the National Labor Relations Act allow a union to continue in place on the basis of your new standard.

Mr. Nuechterlein: I've two responses, Justice Scalia.

First, the board does not require a head count.

We've enumerated a number of cases in our brief in which the board has relied upon probative--

Unknown Speaker: Well, give me any case since 1984 where the evidence, other than express repudiations by a majority of the employees, supported a reasonable doubt standard in the board's view.

Any case since '84.

Mr. Nuechterlein: --Well, in 1993 the board again reaffirmed its prior precedent and continues to reaffirm those pre-1985 cases.

I'm not personally aware of any cases since 1984 in which that has happened, but the--

Unknown Speaker: In fact, it just applies some other standard.

It... that's not... that's not reasonable.

Mr. Nuechterlein: --I--

Unknown Speaker: The board has to be up front about what it's doing, and it's not.

It adheres to this reasonable doubt standard but applies a different standard.

What purpose at all would employer have to try to conduct an employee poll if the standard is exactly the same in practice as for unilateral withdrawal of recognition by the employer?

That in fact is what's going on.

Mr. Nuechterlein: --The... there are two answers to that.

One is, first, acknowledging that this is a term of art, just as actual malice is a term of art.

The board I think has been quite candid over time about how tough the standard is to meet, but remember that the important question here is whether the board's standard is rational, and all that it takes for the standard to be rational is that there be circumstances in which some employers might profit from taking a poll even if they did meet the evidence for a standard for withdrawal.

Unknown Speaker: But the board--

--Well, why... what is it that gives the board the authority to prevent an employer from taking a poll unless it meets his conditions?

I mean, aren't there First Amendment problems there?

Mr. Nuechterlein: Well, the board has determined that polling is sufficiently disruptive that it is--

Unknown Speaker: So the employer cannot... is forbidden from asking his employees whether they want to continue to support a union?

Mr. Nuechterlein: --That is something that the National Labor Relations Act places principally on the employees.

It is their principal role to look after their own interests, and if they want to throw off the union, they themselves have--

Unknown Speaker: Well, does the National Labor Relations Act supersede the First Amendment?

Mr. Nuechterlein: --I don't understand there, first of all, to be a First Amendment issue in this case, because petitioners have never raised it at any point in these proceedings.

Unknown Speaker: Well--

Mr. Nuechterlein: But beyond that, in Gissel Packing this Court pointed out there are special concerns that exist in the workplace that forbid--

Unknown Speaker: --Well, the free... the commercial free speech doctrine was a good deal different in 1968, or whenever it was that Gissel Packing came down, and the way it is today.

Mr. Nuechterlein: --Well, I think that the basic premise of Gissel continues to be true.

In the workplace certain forms of speech may be subject to Government regulation that could not be subject to such regulation in the outside world.

Unknown Speaker: Sure, and maybe... maybe a court would hold that it is reasonable, given the need for industrial peace and so forth, not to let an employe conduct a poll, although normally you would think people can ask people questions and get answers.

That's the way this society works, by virtue of the First Amendment.

But it's reasonable to prevent the employer from disrupting industrial peace unless he has a good faith reasonable doubt about the union's majority status.

That's quite possible, and perhaps for that reason the board has gone along with this, but in fact it is not using a good faith reasonable doubt.

If it is using another standard, it ought to enunciate that standard so we can see whether that standard complies with the necessity for industrial peace and with the First Amendment.

Mr. Nuechterlein: Again, Justice Scalia, the substance of the standard has to be understood in the context of how it's applied, and I don't think the board has--

Unknown Speaker: Can you give us the board, in the board's own words, something more than this formula, good faith reasonable disbelief, some place, some statement by the board where it spells out what it means?

Mr. Nuechterlein: --The board has in past cases described its standard as rigorous, as stringent.

Unknown Speaker: Just by using those words, not telling us in any more detail, what exactly those words mean.

Mr. Nuechterlein: Well, to be sure, I mean, in this context no matter what the standard the board picks, that standard is going to be fact-specific in its application, and it's not possible to give a global explanation for how it's applied in every case.

Sometimes a head count is enough, sometimes it's required because the employer has no especially probative circumstantial evidence in order to make its case, but the board has also reaffirmed circumstantial evidence is available as a basis for establishing this evidentiary predicate in some cases.

Unknown Speaker: Why was--

--The board has recognized the utility of informal polls, has it not?

Mr. Nuechterlein: It has.

Unknown Speaker: Well, it seems to me somewhat inconsistent to say that you can't conduct a poll until you know the answer.

Mr. Nuechterlein: First--

Unknown Speaker: And then it seems to me that's the way that you've been applying it.

Mr. Nuechterlein: --I want to address the premise of your question, because I think it's very important here.

Even if the board's standard is quite high, it is nonetheless the case that often an employer, even if he thinks he has a head count, will nonetheless want to take a poll to confirm what he believes he knows.

Remember that... this case is a good illustration of that.

Unknown Speaker: Well, just as an evidentiary matter to protect himself against the board?

Mr. Nuechterlein: Not just that.

I think the board is entitled to believe that many employers act in good faith and want to know truly what their employees believe, and also want to give those employees a sense of involvement in that employer's unilateral decision whether or not to withdraw recommendation later.

Unknown Speaker: So this is kind of a purging exercise.

It's not an informative exercise.

Mr. Nuechterlein: No, I think it's--

Unknown Speaker: It's just a way for the employer to objectively demonstrate that it has goodwill toward the employees.

Is that the point?

Mr. Nuechterlein: --I think--

Unknown Speaker: I thought the point was that it is a truly informative one so that the employer is not subjected to unfair labor practice when it takes the further step of withdrawing recognition, which--

Mr. Nuechterlein: --Justice--

Unknown Speaker: --it ought to do if, in fact, the union does not represent a majority of employees.

Mr. Nuechterlein: --Justice Kennedy, I think polling serves both of those purposes when it's cabined to the narrow circumstances in which it's particularly likely to reveal a loss of majority support for the union.

It is... it both gives employees a sense of involvement in the employer's later decision, but also it serves an informational purpose.

Think of this case.

The information that this employer got about the views of his employees came in over time through weeks and months through disparate sources, sometimes second or third hand.

Also, employers realize that employee support for a union is not static, and employee support for a union may fluctuate over time.

That employer, if he's acting in good faith and wants to know what his employees really believe, will want to schedule polls so that they can think about the issue with cooler heads and then get together on one day and decide whether or not they want to keep the union.

That is so even if the board's requirement requires a head count, which is something that we claim it does not do.

Unknown Speaker: Well, I suppose I am troubled by the idea that the standard is the same for a poll and withdrawal of recognition.

Petitioner's counsel doesn't seem to give me much help there.

It does seem to me that, from the standpoint of a sensible interpretation of the act, when we're concerned with having the least disruption of the employee-union relation, that the polls are not treated differently.

Mr. Nuechterlein: Well, remember the act says nothing about either polling or unilateral withdrawals of recognition.

Unknown Speaker: Well, but we've established that the board has found... I think you've indicated that there is a utility to that device.

Mr. Nuechterlein: There is utility to the device, but the employer also if he wants to avoid litigation is free on the same showing to request what's called an RM election, which is a board-sponsored election that the employer requests, but the backdrop of all of this is that the act places on the employees and not on the employer the primary responsibility to take the initiative to decide whether they still support the union that they themselves have chosen.

That is what industrial stability requires.

It's the employees who picked this union and, over time, it's the employees who have the primary responsibility for determining whether or not they should stick with it.

It is--

Unknown Speaker: Well, that may be, but the board has nonetheless articulated this policy, and we have to determine whether it's being applied rationally or not.

Mr. Nuechterlein: --That is correct, and my--

Unknown Speaker: Now, what is the status of the Chelsea Industries case that's pending before the board?

Mr. Nuechterlein: --It's my understanding that that's still pending.

Unknown Speaker: How many months--

--And we were hearing quotes read from the general counsel's--

Mr. Nuechterlein: That is correct.

Unknown Speaker: --representations to the board in that case, which do seem somewhat contrary to what you're telling us here.

Mr. Nuechterlein: Well, the general counsel has asked the board to abolish the policy permitting employers to unilaterally withdraw recognition from the union, and so what's he's proposing is an altogether different scheme.

What petitioners are proposing is that the board keep its current standard and also be subject to a different substantive standard for polling, but our submission is that so long as the board permits both unilateral withdrawals of recognition and polling, the only requirement is that there be some marginal utility to polling.

It is true that the board could altogether abolish polling if it wanted to do that, but I acknowledge that--

Unknown Speaker: Which is what has been recommended, and how long has this Chelsea case been pending before the board, where this rethinking in this area has been proposed?

Mr. Nuechterlein: --I'm not sure of the answer to that question.

Unknown Speaker: It's over a year.

Mr. Nuechterlein: I know that it's been pending since last spring when we filed for opposition.

I don't know how long before then.

Unknown Speaker: And you have no indication of when it would be decided.

Mr. Nuechterlein: I do not, Justice--

Unknown Speaker: You said in your brief that if the Court disagrees with your position that this is all right just to approve what the board has ruled, that we should remand to let the board do what?

What would happen in this case?

That's what... I didn't follow your argument.

Mr. Nuechterlein: --Well, ordinarily when a court determines that an agency's administrative scheme is irrational, the proper course is to remand to the agency to determine what would be a rational scheme in the first instance.

Unknown Speaker: But if... but as far as this particular employer is concerned, if that employer was subjected to an irrational scheme, then there is no unfair labor practice.

Am I missing something?

Mr. Nuechterlein: I'm not sure that's true in the context of adjudication, as this Court pointed out in Bell Aerospace.

It is permissible for the board to adopt its policies through the vehicle-specific cases, and it would be the board's role in the first instance, as this Court pointed out in Food Store Employees, to determine whether any new policy could fairly be applied retrospectively to these petitioners.

Unknown Speaker: May I just go back to something specific for a second?

I... now, the petitioner's Exhibit A is the treatment of Mohr's testimony here.

I meant to ask this question to your colleague.

At the time Mohr made his statement, which the board discounted, was there a question as to whether Mohr would be hired, whether he would be among the 32, or whether he would be let go?

Mr. Nuechterlein: The record is unclear on that.

I think that the answer is yes, there is a question about that.

As I understand the sequence of events there were two different conversations that the ALJ relied on when discussing Mohr's statements.

The first was his conversation with petitioner's president, Mr. Dwyer.

The second was a conversation Mr. Mohr had with the supervisor in the course of an interview.

I think that is the correct order.

It was in the course of that first conversation that Mr. Mohr gave what petitioners claim was the evidentiary showing that reached the standard.

Unknown Speaker: Yes.

Of course, the board didn't discount it on that basis though, did it?

Mr. Nuechterlein: It did not, although I think it is fair to say that the board pointed out that with respect to Mohr's statements in the second interview it was important to consider both that this was, in fact, a successorship situation where employees may in fact feel insecure about their future state, status in the company, and also in the job interview that Mohr had he was told by the supervisor that the company would be nonunion.

That is in the ALJ's opinion.

Unknown Speaker: Yes.

Can an employer... in this period of time after the contract bar is over and so forth, can an employer ask an employee whether he favors the union or not?

Mr. Nuechterlein: The... as a general matter the board's policy would prohibit an employer from walking up to employees point blank and asking them directly whether they still support the union.

There is a case law on this, and in some circumstances the board will not find that to be an unfair labor practice if there are particular reasons to think that, for example, it's just a casual remark and no harm is done.

Unknown Speaker: So the only way in which the employer can, in fact, take any action is if he has objective evidence, objective evidence that what, that a majority of employees no longer support the union, but they haven't asked the board anything about it.

Is that what the test is?

Mr. Nuechterlein: The--

Unknown Speaker: What is the test, actually?

I'm a little worried.

What is the test?

Mr. Nuechterlein: --Well, again, the test--

Unknown Speaker: Good faith reasonable doubt.

[Laughter]

Thank you.

Mr. Nuechterlein: --What the employer must have is a solid basis for believing the union has lost majority support.

They can establish that either through a head count or through--

Unknown Speaker: I thought the board said they had to have a good faith reasonable doubt.

You keep articulating the standard as something else.

Mr. Nuechterlein: --Well, like actual malice--

Unknown Speaker: I really thought, and I want you to answer whether I'm correct, that the board's standard is a good faith reasonable doubt.

Now, are those the words that we use?

Mr. Nuechterlein: --Those are the words that the board uses.

Unknown Speaker: Yes.

Mr. Nuechterlein: And it is the board's shorthand--

Unknown Speaker: So why do you keep answering as though it's something else?

Mr. Nuechterlein: --Because what the standard is is determined by how the board applies that standard through the process of adjudication--

Unknown Speaker: And, in fact, the board is in practice applying a different standard.

That's what you're telling us.

Mr. Nuechterlein: --No.

The... I... in other words, the board is not making any pretense of using a liberal standard when, in fact, it has confirmed that this is a rigorous standard and difficult to meet.

Just like actual malice, the term that the board uses for this test is a shorthand, and people in the industry know what the shorthand means and know how to satisfy it.

Unknown Speaker: Actual malice came from, you know, 3 or 400 years of common law judges, and it's been cleared up now by a lot of revised statutes, but the board surely can't depend on that sort of an accretion for simply changing the meaning of something.

Mr. Nuechterlein: I agree with that, but these are not statutory words.

They are the board's own words and, like other shorthands, they have to be understood through the lens of the board's application of the standard.

Unknown Speaker: I think--

--What were you going to say?

Are... you were going to say about... assuming... or, it's like predatory intent or something.

The... it's a fiction.

And then they say that this fiction means doubt, reasonable doubt, but based on... with certainty on objective evidence, so I got that far.

It sounds a little difficult, but--

Mr. Nuechterlein: No, I don't believe I said certainty.

Unknown Speaker: --Well, but there's some word, certainty in one of their cases, too, but I'm not picking at the standard for a moment.

I'm trying to figure out how they go about meeting the standard, and you kept talking about a head count.

What is a head count if it's not a poll?

Mr. Nuechterlein: A head count as petitioners describe it would be evidence that comes in through... perhaps for a long period of time through many disparate sources, sometimes second or third hand, that suggest that particular employees were, at the particular moment that they said something about the union, inclined not to support the union.

Unknown Speaker: So you have to... if you have 18 employees, 10 of them would have to have said, without the employer asking them, we don't want a union any more, but nonetheless there were not even seven of them, or six, that were willing to go to the board to say that.

Mr. Nuechterlein: That is correct, and I think that--

Unknown Speaker: That's basically the standards.

That's a very, very tough standard.

Mr. Nuechterlein: --It is a tough standard.

It's not the same as--

Unknown Speaker: All right.

Now, then the question would be, if it's that tough a standard, what sense does it make to say you have to know that your majority of your employees really have terrific reason for not wanting the union, but you can't ask them for a poll until after you already know it.

That's the question I think that some people are asking.

Mr. Nuechterlein: --Here's why it makes sense.

If there's one principle that this Court has observed continuously over the years, it is that we should rely on the employees themselves rather than on their employers to take the initiative in second-guessing whether or not the union that the employees have chosen should continue to exist in the workplace, and it is true that--

Unknown Speaker: Excuse me.

We've said that?

Mr. Nuechterlein: --Yes, you have.

You... in Auciello and Fall River, in Brooks, this Court has pointed out that the people that we principally rely on to rebut the presumption of continuing majority status are the employees who have chosen this union.

In some circumstances the employer may have evidence that would give him the right either of withdrawal recognition, take a poll or conduct an RM election, but there is nothing in the National Labor Relations Act that confers on the employers an additional collateral right to go out and seek more evidence to try to withdraw recognition from a union.

Unknown Speaker: Can you--

--Assuming--

--in order to retain that option of the unilateral withdrawal and treat it the same way as a poll.

Mr. Nuechterlein: I... what... the primary question, as I understand your question, is why does the board still permits unilateral withdrawals of recognition, given that you have the RM election device, or is your question something else?

Unknown Speaker: And... why does it permit it, and under the same standard as the poll?

Number 1, why does it permit it at all, and second, if it permits it, why doesn't it have a much tighter standard for that?

Mr. Nuechterlein: Well, the answer to your first question is, it's largely a question of historical evolution of the labor laws.

It was not until the Taft-Hartley Act of 1948 that there were RM elections and/or that there were decertification elections.

Those were added by that.

Before then, effectively the only way that a union could ever get decertified was if an employer withdrew recognition, and because of that, the board--

Unknown Speaker: Gee, I thought it was an unfair labor practice for an employer to continue to bargain with a union that he knows no longer represents the majority.

Can he continue to deal with a union that he knows is not supported by a majority of the--

Mr. Nuechterlein: --I'm not aware of a single case in which any employer has been found guilty of a violation of section 882 by virtue of that, because in fact what he has to have is incontrovertible evidence.

If he has a doubt about that, though, the important thing is that he can go to the board and seek an RM election if he wants to preserve his rights.

He doesn't have to have unilateral action.

Congress has provided the specific remedy for him.

The fact that the board hasn't foreclosed altogether alternative unilateral remedies that the employer might also take doesn't require the board to give a wide birth to those unilateral remedies.

Unknown Speaker: --But he... but the employer could not have done this on this record.

Mr. Nuechterlein: That is correct.

On this record, the proper--

Unknown Speaker: He couldn't have... the employer couldn't do anything.

Mr. Nuechterlein: --That is correct.

On this record the proper people to challenge--

Unknown Speaker: Well, you seem to take the position that what's required for unilateral nonrecognition of the union and calling for a poll of the employees is virtually the same thing, and yet in the Auciello case from this Court, which isn't that old, this Court said that the evidence required to demonstrate that a union has lost majority support is greater than that required to assert good faith doubt.

We purported to Auciello to lay out what this tripartite framework is and, in fact, it's being applied as a two-part framework.

Mr. Nuechterlein: --Justice O'Connor, the... this Court in Auciello didn't address the difference between the standards required in the withdrawal context and the polling context.

What it addressed are the two standards that permit an employer to take any action, any unilateral action at all, and those are a demonstration of actual loss of majority support, and what the board has called reasonable doubt.

No one's arguing about the first of those in this case.

What we're arguing about is whether it's rational for the board to apply the same reasonable doubt standard in the polling context as it is in the withdrawal context, and the reason it's rational is because there are some contexts in which a good faith employer might benefit from taking a poll even if he thinks he has some sketchy information suggesting the majority of employees no longer support the union.

In that context, it makes a lot of sense for him just to maintain workplace goodwill to take the poll before going the extra yard and withdrawing recognition.

Unknown Speaker: Are there restrictions on the holding of elections that are more severe or more onerous than on taking of polls?

There's a contract bar rule, for instance.

Aren't... can you take a poll more often than you can have an election?

Mr. Nuechterlein: There are not the same formal restrictions on repeated polls, but, of course, if the employer takes a poll and it turns out that the union wins, it will require some new development in the workplace for an employer to develop a new reasonable basis--

Unknown Speaker: What are the formal restrictions on elections that do not apply to the informal polls?

Mr. Nuechterlein: --The primary one is the one that you just identified, which is that--

Unknown Speaker: Contract--

Mr. Nuechterlein: --as a statutory matter you may not take a... you may not conduct a new election within 1 year of the prior election.

Unknown Speaker: --What would the board's result have been if in this case Mohr had said, I have personally and specifically talked to 12 employees.

They all say that they would vote against the union today, and I've been around long enough so that I am satisfied that if an election were held today, the majority support for the union would be gone.

Would that have been enough for the board... would have have been enough for reasonable doubt--

Mr. Nuechterlein: It's hard for me to speak for the board.

Unknown Speaker: --good faith reason?

Mr. Nuechterlein: That would be a different case.

Unknown Speaker: Based on what it has said, could you answer my question with assurance one way or the other?

Mr. Nuechterlein: I'm not sure that I could answer your question with assurance one way or the other.

I do know that the board requires a particularly strong showing of nonsupport for a union, and the board is naturally skeptical to rely on certain kinds of evidence, and reports of colleagues' views in the workplace, and the reason it is is that often when these views trickle up to the employer they are the result of a concerted effort by some of the employees to throw out the union.

Remember that--

Unknown Speaker: Well, if the employer can't go out and ask himself, and if the board is skeptical of views retailed by third parties, then what kind of evidence can the employer use?

Mr. Nuechterlein: --Well, again, there will often be the case... there will often be circumstances in which the employer will not have a sufficient evidentiary basis, and that that's the circumstance in which the board has put the burden on the employees to look after their own rights in filing a decertification--

Unknown Speaker: Yes, but the board has said we will allow a poll if there's a... the reasonable doubt showing, but certainly there's got to be some counter to it.

That can't just be an empty thing, and yet it seems that the board... if it won't allow the employer to go out and ask, and it doesn't accept the kind of evidence that you just referred to, it's almost a fiction to say the employer can ever meet that standard.

Mr. Nuechterlein: --No, I think it reflects the board's empirical understanding that no union will ever have majority support.

In an initial organizing context elections are held and sometimes a sizeable minority of employees don't support the union.

Those may, in fact, be the very same employees who are... who 1 year later, 2 years later, give reports to the employer that the union has lost majority support, and the board is naturally quite skeptical about the--

Unknown Speaker: Well, skepticism can go so far, but I doubt, frankly, whether the board could totally say, union cannot be eliminated unless you get 30 percent of the employees to come in and throw it out.

I think there is at least doubt whether, under the National Labor Relations Act the employer does not have a right to the assurance that at least there's a reasonable probability that the union represents the majority of his employees.

Don't... is that not a consideration?

Mr. Nuechterlein: --I think, as this Court has pointed out, that it is appropriate to be skeptical about employer efforts to act as a worker's champion, and that is the board's position.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. Nuechterlein.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until Monday next at ten o'clock.

Attribution:

The OYEZ Project

Featured:

Auer v. Robbins - Oral Argument

Fri, 09 Jan 2009 14:50:07 +0000

Case:

Auer v. Robbins

Media File:

95-897_19961210-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Michael T. Leibig

Chief Justice Rehnquist: We'll hear argument next in Number 95-897, Francis Bernard Auer v. David Robbins.

Mr. Leibig, you may proceed whenever you're ready.

Mr. Leibig: Mr. Chief Justice, and may it please the Court:

This case involves the application of a rule in the Fair Labor Standards Act dealing with the salary basis test.

The rule is contained in 29 C.F.R. 541.5d and 541.118.

The rule basically provides that for persons to be considered white collar exempt... that is, professional exempt adminis... professionals, administrators, exempt administrators or exempt executives, their salary must be fixed and not contingent.

The specifics of the rule provide that they must receive a predetermined amount not subject to deduction because of the variations in quality or quantity of work.

Unknown Speaker: I've noticed with interest that the Federal Government does not follow the salary basis test for employees that are under the jurisdiction of the Office of Personnel Management.

It chooses not to go along with that at all.

Mr. Leibig: Well, it attempted to choose not to go along with that at all.

In 1975, I believe, when the Federal Government first came under the act, Congress provided that the Fair Labor Standard Act would be enforced by the Office of Personnel Management, but that the rule... but the definitions would still be defined and delinated by the Department of Labor, and when the Office of Personnel Management initially issued regulations for the Federal sector, they defined exempt status for salaried persons based on salary classifications.

But that definition was challenged in court in a specific case involving the Uniform Division of the Secret Service, Police Sergeants and Lieutenants, and the court of claims in that case specifically found that the enforcement by the Office of Personnel Management has to be undertaken consistently, consistent with the Department of Labor regulations, because it's the Department of Labor that defines and limits exemptions--

Unknown Speaker: And now are all Federal employees applying this salary basis test?

Mr. Leibig: --Well, first of all the court of claims found that to be the case.

They found it... and they also found it in some other cases involving the AFG case, which is cited in the briefs, and currently the position in the Department of Labor... I'm sorry.

The position in the Federal Government is that the Office of Personnel Management often treats people as exempt even though they're not salaried, but the Court of Claims and the United States District... the United States Court of Appeals for the District of Columbia have held that they should apply the salary test.

And when that has been a challenge... and the one place it's been challenged specifically is in the Uniform Division of the Secret Service and for employees that are exactly... do the exact work of the employees in this case, that is, sergeants and lieutenants in the Uniform Division, and the court ruled that the Department of Labor pay classification things have to be applied consistent with the salary basis.

Unknown Speaker: But Justice O'Connor was not asking about court decisions, she was asking about the position being taken by the executive branch--

Mr. Leibig: I believe the--

Unknown Speaker: --and in fact... and OPM takes a different--

Mr. Leibig: --Right.

Unknown Speaker: --view from Labor, doesn't it?

Mr. Leibig: The Office of Personnel Management takes the position that Federal employees can be exempted based on pay classification alone.

I do not think that, and I think that the courts have found that to be the case, and I don't think it's consistent with the statute.

For example, when Congress passed the statute applying the Fair Labor Standards Act to themselves, they did make... apply the salary basis test to themselves, and under the Professional Accountability Act, the regulations under that act specifically say that the salary basis test does apply to congressional employees.

And it specifically includes the regulation including, there was some discussion in the comments on the regulation of whether 541.5d, which is a special rule limiting part of it... I'll talk about in a minute... how that should be dealt with by the Congressional Accountability Office, and after considering the comments they included the regulation and specifically made reference to the applicability of the salary basis test to congressional employees.

So... and in addition to that, in the record there's a history of the Department of Labor's current consideration of the regulations and as part of that history the Director of OMB has had a series of reports and considerations with the Department of Labor about this problem and what to deal... how to deal with it in the future.

So the answer is, the Office of Personnel Management, just like a lot of employers in a lot of places, claim that they can exempt people based on classifications alone, but when the Federal Government and when the Congress have looked at it they've said they have to--

Unknown Speaker: Well, they also have a regulation saying the Federal Government can dismiss or suspend employees for 14 days or less.

Mr. Leibig: --Right.

Unknown Speaker: By way of discipline.

Mr. Leibig: They have a regulation to... yes, that's true, they do, and in the... and the... that raises the question of whether that would make all Federal employees subject to that rule, which doesn't cover all Federal employees, but I think it covers all Federal employees in the Classified Service, nonexempt, and I think that is part of the struggle the Department of Labor has had, and that is why the Department of Labor has had the practical rule to the longstanding salary basis test, and I think I can explain how the practical rule I think works.

But if you look at, and we attach the Department of Labor briefs going back from 1981 and their positions, there has been some development in how you deal with the problem where there's a rule on the books that seems counterintuitive.

How can an employer apply that rule?

And I think the rule that I would argue is that the first rule of the regulation, and after all, the Department of Labor that issued this regulation issued it under a direct rule of Congress, is that the employee's salary must be fixed, and it cannot be contingent.

An exempt employee cannot have contingent income, and that, however... that is the test, and then, however, there can be a situation where there are rules on the books, where people have a rule that says you're... you can be subject to discipline by... for 14 days, which would be longer than a work period, so that would be okay.

But if under that rule they discipline somebody for 1 day, which, by the way, the statute... the Federal regulation doesn't say they can do, but if they did do it, that would raise the question of whether the people were practically subject to deductions for less than a full work period, and I think in that case you'd have to prove... if all you had was a rule and the employer claimed that the people were exempt and that they were not doing deductions, I think the burden's on the employer to come forward with some evidence.

They at least have to assert that we wouldn't exempt... we would not punish anybody for less than a pay period, which the Federal Government could do in a--

Unknown Speaker: Well, of course, here you're asserting, I guess, that because of one instance involving one sergeant that all the other people who have never been disciplined fall under some nonexempt status.

Mr. Leibig: --I am... I am--

Unknown Speaker: Just on the basis of some possibly broader State rule applicab... or a county rule, or police department rule here.

Mr. Leibig: --I'm asserting that all sergeants and lieutenants in the St. Louis Police Department whose pay is contingent and who all the witnesses, including the chief of police, including all... everyone who testified, no one ever testified that any sergeant or lieutenant's pay was not subject to discipline.

No one not only didn't testify, but nobody ever even asserted that.

I did not rely on Mr. Guzy... it isn't because Mr. Guzy received one 2-day suspension that that transferred all of the employees who had a contingent pay--

Unknown Speaker: Well, that's what it looks like, because it didn't happen to anybody else in the numerous plaintiffs here, did it?

Mr. Leibig: --It... I'm sorry, it didn't... there is evidence in the record that it did happen to other sergeants, in fact, and in fact it did happen to other sergeants.

What's not in the record is an example of a specific sergeant who testified that he was suspended, but the reason for that is, if you look at the whole record, the case was bifurcated, and it was tried on the basis of representative witnesses.

For example, there was only one witness that testified that he was a homicide detective--

Unknown Speaker: Well, the--

Mr. Leibig: --and yet all the homicide detectives--

Unknown Speaker: --The Eighth Circuit, as I read its opinion, said that a one-time suspension without pay for violating the city's residence requirement doesn't mean that the whole thing is over.

Now, do you disagree with that ruling?

Mr. Leibig: --I agree that a one-time suspension, standing in isolation, if the employer took the position that the pay was guaranteed and that was a mistake, it was inadvertent, that it wouldn't automatically mean, so a one-time suspension all by itself would not settle the case, and one reason for that is the burden's on the employer in the first in to establish... in the first instance to establish the employees are guaranteed a predetermined amount of pay.

One instance of a... somebody losing a guaranteed amount of pay would certainly raise a lot of suspicion, but if the employer were in some case... in a given case, for instance, to claim that was a mistake, it wasn't under the rules, that's different.

But in our case the chief of police, the 30(b)(6) designees of the employer for exempt status and for application to the regulations, and everyone else testified that in fact all sergeants were subject to being disciplined, and there is repeated evidence in the record which... which is cited in the brief.

Unknown Speaker: What evidence in the record of actual discipline, other than this one sergeant?

Mr. Leibig: In... there is... at page... the chief of police testified that all sergeants were subject to suspension.

Unknown Speaker: Yes, I... but that wasn't my question.

I asked you what evidence is there in the record of actual discipline, not whether someone was subject to discipline.

Mr. Leibig: Well, for instance, Sergeant Michael Fredericks testified that he knew of sergeants that were suspended for less than a day.

There's no... there is no... in the record there is no other name of a specific sergeant who was suspended, but there is a great deal of evidence that in fact other sergeants, other than Mr. Guzy, were suspended.

Unknown Speaker: Yes, but the Eighth Circuit didn't find the... didn't find for you as a fact on that point--

Mr. Leibig: No.

Unknown Speaker: --did it?

Mr. Leibig: Because the Eighth Circuit did not agree with the base rule... a) they didn't agree that the burden was on the employer to establish that pay was fixed rather than contingent, and b) they put the burden on the plaintiffs to establish actual instances of deduction, which I don't think they should have done, but looking at all the evidence of the record, no one could conclude from the evidence of that record that the regulation which says pay is not subject to deduction was followed in this case.

I mean, it would be different if the... and there are cases that are reported--

Unknown Speaker: You're just asking for a factual revision, then, from this Court.

Mr. Leibig: --No.

Unknown Speaker: The Eighth Circuit saw it one way, and you're asking us--

Mr. Leibig: No.

Unknown Speaker: --to see it a different way.

Mr. Leibig: No.

The Eighth Circuit... the Eighth Circuit said that Mr. Guzy was suspended.

The Eighth Circuit did not say that the Department did not have a rule that made everybody subject to suspension.

They don't think that's required.

For instance, if you compare the Eighth Circuit decisions to the decisions in, now, seven of the eight circuits, in the Second Circuit the Yourman case, in the Third Circuit the Balgowan case, in the Fourth Circuit the Shockley case, in the Sixth Circuit the two Michigan court cases, and in the Seventh Circuit Mueller and Bankston, and in the Ninth Circuit Abshire and six or seven other cases, in the Tenth Circuit Carpenter and Spradling, all of those cases heard said that the test is not whether or not there were actual individual instances of deductions.

The question is whether the person working there is subject is fixed... pay is fixed or contingent.

If you have contingent pay, then you cannot be exempt, and there's a reason for that.

If you only say the people who are disciplined lose the exemption, then you say only rule-breakers would be exempt.

For example, in--

Unknown Speaker: Well, but you have a letter, a couple of letters from the Secretary here--

Mr. Leibig: --Mm-hmm.

Unknown Speaker: --saying that the exemption... the exemption is lost as to all employees only if the employer engages in a regular and recurrent practice of making impermissible deductions, and the opinion we have before us does not find that the police department had a regular and recurring practice.

It dealt only with the one sergeant.

Mr. Leibig: The... there aren't a series of letters from the Department.

The Department of Labor has written one letter in one other place where they said that they will look for regularly recurring exemptions, but they've always done that in the context of whether... and the regulation itself, the plain wording of the regulation itself says the key is whether you're subject to deduction, not whether actual deductions occur.

There's also some confusion because--

Unknown Speaker: It would be an important factor in deciding whether you were subject to deduction to know whether actual deductions occurred, would it not?

Mr. Leibig: --Absolutely.

Unknown Speaker: May I ask one question--

Mr. Leibig: Could I make one other... yes.

Unknown Speaker: --Go ahead and finish... you had--

Mr. Leibig: Just one other point.

That Department of Labor letter also, there's another thing in the regulation.

There's a difference... there's two parts of the regulation.

One talks about deductions for part of a day for being absent.

Another part talks about disciplinary deductions, and I think the enact... the part about being absent for part of a day doesn't apply in the public sector any more anyway, and I can explain more about that why... why, if you need to.

But the point is, disciplinary deductions are different than deductions for part of a day.

An employer that allows employees to leave for part of a day means to adopt a flexible work schedule, and intends people to be able to come and go as they please.

It would be unusual if people didn't leave for part of a day, so you'd want to find... you'd expect to find a lot of people who did.

However, disciplinary rules are exactly the opposite.

The reason the employer imposes disciplinary rules is so people will obey them and anticipates that they will not disobey them.

Unknown Speaker: --May I ask a question about these disciplinary rules?

Is this manual applicable to all employees, including people who are undoubtedly covered by the Fair Labor Standards Act?

This is not a discrete code for--

Mr. Leibig: It's covered by... excuse me.

Unknown Speaker: --Just for professional, administrative, and executive?

Mr. Leibig: The manual, in this case the police manual is covered by all commissioned police officers, which in St. Louis includes... probably doesn't include the chief, but there's two deputy chiefs.

Unknown Speaker: But it would include people who are covered by the FLSA.

Mr. Leibig: Yes.

Unknown Speaker: All right.

Mr. Leibig: Regular line officers.

Unknown Speaker: Now, why couldn't somebody look at this code and say, gee, it's got a range of sanctions, from reprimand to dismissal, and we'll assume that a law-abiding employer is going to apply to the people who are subject to the act, the sanctions, the full range of sanctions, but to the people who are exempt, only... only those sanctions that would fit with exempt status.

Mr. Leibig: Hypothetically you could have this manual in some police department where you ask the people in charge of discipline do you apply this manual to sergeants and lieutenants, and they could say no, we don't, but in the facts of this case, the chief of police, the person in charge of discipline, the person in charge of record-keeping, and the 30(b)(6) designee in terms of exemptions, all testified that sergeants and lieutenants were subject to the manual, and those--

Unknown Speaker: Yes, but may I ask the question--

Mr. Leibig: --so it's not the manual alone.

It's the manual plus.

Unknown Speaker: --But it's... but one could say yes, the manual, but only those sanctions in it that are compatible with exempt status.

Mr. Leibig: No, but they testified that they were subject to 2-day suspensions and suspensions less than a day under the manual.

The chief testified to that, the 30(b)(6)... I mean, an employer could have that manual--

Unknown Speaker: What is the testimony in this record that says people who are in this category in fact got such sanctions, that there was a pattern and practice of applying the sanctions that would ordinarily be disqualifying?

Mr. Leibig: --The last part of your question... there is evidence, the evidence in the record that any police sergeant or lieutenant in the St. Louis Police Department who violates a rule that provides... has one of the potential penalties of a suspension of, say, 2 days, is subject to them, is that the... the chief testified to that at joint appendix page 60, and joint appendix page 62.

When he was asked did he recall any specific person... this is at page 62... who had ever been disciplined he said he didn't remember any names, but yes, there would be people that had done that.

Ms. Cortelyou, who was the recordkeeper that keeps track of exemptions testified in the joint appendix from page 49 through 57 that people were not subject for absenting themselves for part of a day under a flexible work week rule, but if they broke the rules, they were subject to being suspended for a day or two, and she specifically said that they could be disciplined and that they could lose pay for a day or two.

Larry Patterson--

Unknown Speaker: Could, but where--

Mr. Leibig: --If they broke the rules they would be, and they said that.

Unknown Speaker: --Where is this testimony?

Mr. Leibig: Well, that... let me get the joint appendix.

Why don't I, ma'am... at page 60... let's do one at a time.

That's the chief.

This is the joint appendix at page 60.

Unknown Speaker: And which is the testimony from there?

Mr. Leibig: This is the testimony of the chief of police at the time, Robert Sheetz, and at the top of the page... well, first he was asked, as a result of charges, could they be docked pay, and there's a question right before that.

And at the top of the page he says... this is if someone was... broke a rule, could they... and he said, I would say that he probably would be.

He could be.

He would be suspended in lieu of, say, maybe 1-day suspension or 2-days suspension.

I don't recall that we've ever docked anybody, you know, like you're docked $10 or something like that.

I don't know.

I don't recall any time the department has ever... that has ever happened.

But I--

Unknown Speaker: Well, that seems to me the answer is, as long as I've been in this Department, it hasn't happened.

Mr. Leibig: --No.

It could be, except he says more, because he's... that... there's a follow-up on that, and then on page 62--

Unknown Speaker: Where is the followup?

Mr. Leibig: --Well, it goes along... there's a series of questions about that--

Unknown Speaker: Well, I see the last statement he made is, I don't recall in my time in the Department that that ever happened.

Now, what qualifies that?

Mr. Leibig: --This... what he... let me get you the... it's on page 62.

On page 62 he says--

Unknown Speaker: Down at the bottom of the page.

Mr. Leibig: --He says at the bottom of where... 40... it says, Okay.

Do you know if a sergeant has ever been disciplined for AWOL, say in the recent past, in the last 3 or 4 years?

I don't recall any specifics, but I would say yes.

I don't take the chief's testimony, by the way, in isolation.

In our brief on page 42, on page 42 and then page 9 through 17, we go through... a whole bunch of witnesses testified that people--

Unknown Speaker: May I ask the question I've been trying to ask for a little while?

Mr. Leibig: --I'm sorry.

Unknown Speaker: The manual... you rely heavily on the manual, and you rely on this testimony they might be disciplined.

Mr. Leibig: Right.

Unknown Speaker: But would you not agree that there are forms of discipline other than docking for a day's pay, or 2 days' pay?

Mr. Leibig: Right.

There are.

Unknown Speaker: So this... the general... the text of the manual doesn't make out your case.

It's only if you can get enough--

Mr. Leibig: Well, there are some provisions in the manual that the penalty, the only penalty listed there is less than a full week's--

Unknown Speaker: --Well, do you take the position that the only form of discipline is docking?

Mr. Leibig: --No.

Unknown Speaker: All right.

So the manual itself doesn't get you home, at least, nor does the testimony at page 62, because he just says there's been some discipline, and I think that we must assume that there are possibly forms of discipline other than docking.

Mr. Leibig: There are, and there's a chart in the manual that says when it's docking and when it's not docking, and in some of the penalties, the only penalty... for instance, in the second... in the second non... in the preventable accident, the only penalty is a 1 or 2-day suspension.

And by the way, it's not just chief... the chief's not the only one who testified.

All of the designees testified that people were suspension and their pay... were subject to being suspended.

Unknown Speaker: Yes, but in actual cases, and what I tried to ask you before about this manual, which has a range of sanctions... and discipline doesn't show docking.

Discipline can be many things, from a reprimand to termination.

Mr. Leibig: No... I'm sorry.

It shows... the manual at page... in the manual from page 43a... this is in the appendix to the petition, and from page 43a through 50... 49a there are charts that have the list of all the violations and then it has a list of all the penalties, and it says what the penalty is for a first offense and a second offense, and many of those penalties include suspensions, from a letter of reprimand to a 5-day suspension, and for a first or second day, and for example, one of the penalties provides a 1-day suspension.

That's on page 147.

And so it's clear that the sergeants are subject to being suspended for periods of less than a full week.

Unknown Speaker: Well, I don't see even on that reasoning that it's clear, because I come back to a question that's been asked before.

In the absence of evidence to the contrary, why shouldn't we assume that an employer who knows that he cannot apply a particular disciplinary form consistent with the status, with the salaried status for the Fair Labor Standards Act, will not apply it?

You've got a manual that applies across the board to everybody.

Why shouldn't we assume, in the absence of evidence to the contrary, that the employer will not apply what is in that manual in such a way as to destroy the salaried status?

Mr. Leibig: First... for two reasons.

One is, under the statute the requirement to establish exemptions, the burden is on the employer, not on the employee, so you shouldn't assume anything.

The second thing, however, is, suppose the employer... the employer should at least be put to a standard of proof to assert that sergeants and lieutenants... have some witnesses or have somebody assert on the record that sergeants and lieutenants are not subject to being suspended for a 2-day suspension, for example, and in this case the employer simply never did that.

The reason they simply never did that is, people had been suspended, and it... there are--

Unknown Speaker: Well, we know of only one instance, right?

Mr. Leibig: --Well, for instance, Sergeant Frederick testified that there were other instances, but he didn't name--

Unknown Speaker: Yes, but he couldn't come up with any.

The only specific instance that is in fact shown on the record is this one--

Mr. Leibig: --Right.

Unknown Speaker: --instance, Guzy, or Guzy.

Mr. Leibig: The first reason you shouldn't assume that the employer, just because they claim exemptions, that they automatically are going to apply all the rules not to do exemptions, is because that would put the burden on the employees to prove exempt status.

The second reason which you should not approve it is because it's contrary to the whole idea of having... of the plain wording of the statute itself, which says it's not the act of making exemptions, but it's the fact of putting employees and making their pay subject to deductions, that's been the--

Unknown Speaker: But on that point, it seemed to me that the regulation, which says, subject to... not subject to reduction because of variations in the quality or quantity of work might not apply to discipline at all.

It might be just the operational needs of the employer.

On one day you have to unload the dustbin, and on the other day you get to perform a skilled job.

It seems to me that that is a plausible reading and that that's all that it means.

Is there any authority to support my reading at all?

Mr. Leibig: --Sure.

The Department... The regulations go on, if you read the whole regulations, and down at a later point it talks about discipline for safety reasons but not discipline for other reasons.

Plus, the Department of Labor has interpreted the regulations for 40 years to require disciplinary docking, and there's a lot of cites in the record, plus--

Unknown Speaker: Thank you--

Mr. Leibig: --the last 20 seconds--

Unknown Speaker: --Mr. Liebig.

Mr. Leibig: --the quality of work--

Unknown Speaker: I think you've answered the question.

Your time has expired.

Mr. Leibig: --Thank you.

Unknown Speaker: We'll hear from you, Mr. Gornstein.

Argument of Irving L. Gornstein

Mr. Gornstein: Mr. Chief Justice, and may it please the Court:

Our position is that the existence of the respondent's police manual cannot by itself show that petitioners as a class are subject to disciplinary deductions of less than 1 week's pay within the meaning of the Secretary's salary basis test, and we reach that conclusion for three reasons.

The first is that the Secretary interprets the phrase subject to reduction to mean that there must be more than a theoretical possibility that a violation of a work rule will result in a partial week disciplinary deduction.

Unknown Speaker: Would that more than theoretical possibility be satisfied in an instance in which the employer had promulgated the manual solely to salaried employees, and yet nonetheless provided as to them that there would be these impermissible dockings.

Would you say that was enough that--

Mr. Gornstein: I would say that if you just had that you could reach that conclusion, Justice Souter, subject to whatever the employer might show in response to that.

Unknown Speaker: --I've lost you here.

If you just had that you could reach what conclusion?

If you just--

Mr. Gornstein: That you are... that if the only possible sanctions are... if I took the--

Unknown Speaker: --Only possible sanctions and the only possible class--

Mr. Gornstein: --Class--

Unknown Speaker: --was a salaried class.

Mr. Gornstein: --It's a book for sergeants, and the only possible sanctions are partial week disciplinary sanctions.

I think you could infer from that that sergeants as a class are subject to reductions, subject to the employer coming back and say, look, we don't really... I know we said this, but this is out of date, or it's ineffective for some reason.

Unknown Speaker: But that's the part I don't understand... see, you're all knowledgeable, and I just don't understand this.

I don't know which way it cuts.

But there's a statute here, and the statute uses the words, executive, professional, or administrative employees, and it says they're not subject to overtime.

Mr. Gornstein: Correct.

Unknown Speaker: And then there's a reg that I can't fit with the statute.

That is, suppose Microsoft says, Bill Gates has to dock a day's pay every time he wrongly uses the corporate jet, okay.

Does that make Bill Gates an hourly employee, subject to overtime?

Mr. Gornstein: It does for purposes of the regulation, Justice--

Unknown Speaker: Well, if it does, how do you reconcile that with the statute, because I would think there's no one in history who's less an hourly worker than Bill Gates--

Mr. Gornstein: --And I doubt very much that--

Unknown Speaker: --and so if you have a reg--

Mr. Gornstein: --That's right, and I--

Unknown Speaker: --that seems to make him an hourly worker, that seems to me to be a problem.

Mr. Gornstein: --I think, Justice... I--

Unknown Speaker: And that's what I want to understand, how that fits within this case.

Mr. Gornstein: --I think what the Secretary did when he originally formulated the regulations was to try to draw a line that would not necessarily make a 100-percent case in every single case, but would be a reasonable line for the vast amount of cases.

And what the Secretary concluded, based on hearings that were held after, in the wake of the Fair Labor Standards Act being enacted, is that one of the hallmarks of having the exempt status, the exempt... that exempt employees, one of the hallmarks of the importance and status that those employees had is that they were paid on a weekly basis, that for any week in which they worked they would receive a full week's pay.

Unknown Speaker: But he makes it the hallmark.

He doesn't make it one of the characteristics.

He says, this is the criterion, and is it adequate to say, you know, that will handle maybe 90 percent of the cases.

It won't get Gates, but, you know, close enough for Government work.

Is that what you--

Mr. Gornstein: I think it is wrong to--

Unknown Speaker: --The statute doesn't say that.

The fact is, Gates shouldn't be within it.

Mr. Gornstein: --Justice Scalia, what the statute says is that they are executive, administrative, and professional, as defined by the Secretary.

That's what the statute says, and it gives the Secretary wide leeway to give content to the meaning of those terms.

And what the Secretary has done is set out an administrable statute, not to leave to a district court or an employer in every case to figure out whether under the totality of circumstances we are going to regard this person as executive, administrative, or professional.

Unknown Speaker: So your response is, if Microsoft doesn't like it, it can just rescind the rule that... you know, punish Gates some other way.

Mr. Gornstein: Some other way, or if it was a one-time deduction, then the window of correction could be used to retroactively restore his exempt status.

Unknown Speaker: And that's good, and so that's why you say the effect of making a deduction which is not permitted under the rule as a practical matter depends on the case.

Mr. Gornstein: It does, but I would--

Unknown Speaker: That's what the reg says, and are you saying that then here you look at practically what happens in this case.

You're saying as a practical matter the facts of this case show the deductions that they made didn't transmute them into hourly employees.

Mr. Gornstein: --That is correct, that that--

Unknown Speaker: And that's a--

Mr. Gornstein: --That as a practical matter in this case, I don't think you have to get to the window of correction to decide that, though.

I think you can look at just the text of the 541.118 and here we interpret the term, subject to reduction, to mean that as a practical matter the employees in the class have to face a significant possibility of having their pay reduced.

If there is no such practice, there is no such policy, and nonetheless there is a deduction taken, for whatever reason, then you look to the window of correction to restore retroactive status.

Now, the second point--

Unknown Speaker: --But the burden is on the employer--

Mr. Gornstein: --The burden--

Unknown Speaker: --to show that there is no such possibility, is that right?

Mr. Gornstein: --That there's not a significant possibility.

Unknown Speaker: Right.

Mr. Gornstein: That's correct, that there's not a significant possibility that employees in this class will face partial week disciplinary suspensions.

Unknown Speaker: And in this case the employer bears not just that initial burden, but also the burden of overcoming a manual which on its face is applicable to all employees, and on its face seems to say that these people are subject to it.

Mr. Gornstein: Well, let me talk about the manual on its face, because the manual is broadly applicable to all employees, both those who clearly perform exempt duties, like captains on up, and clearly perform nonexempt duties, like patrol officers who patrol the beat, and those rules can all be enforced in ways that are completely consistent with retaining exempt status for those employees who perform clearly exempt duties, so I think if you just look at the manual--

Unknown Speaker: Well, what do you do with the... what do you do with the point that your brother was making about the record, that the chief and the others who came in and testified didn't testify that these particular sanctions would be applied only to the nonsalaried.

They said something like, well, gee, yeah, I guess it could, but I can't think of any instance.

They didn't take the position that's consistent with your argument, did they?

Mr. Gornstein: --I think that as the case came to the court of appeals that the petitioner in this case really put the case to the court of appeals, you can just look at the manual and you can add in the Guzy incident, and we should win this case.

None of this was brought to the attention of the court of appeals.

None of this was part of the question that was framed for review by this Court.

Again, I think the question that was framed for review by this Court was, can you just look at this manual and conclude that these people are subject to disciplinary deductions.

The burden of proof issue was not raised in the court of appeals, and I don't think it was raised here.

I think there is a problem.

When you look at all the testimony there's a lot of ambiguous statements about what could or could not happen.

But I think as the case went to the court of appeals, and to this Court at the certiorari stage, the understanding was there was not a single incident of actual deductions having ever occurred with the exception of the one case of Sergeant Guzy, and that took place under such highly unusual circumstances that I don't think it was indicative that sergeants as a class face a significant possibility of having their pay reduced.

Unknown Speaker: The Government's position is that the judgment of the court of appeals should be affirmed.

Mr. Gornstein: It is that it should be affirmed.

Unknown Speaker: And that we don't need to get to the window of correction, or--

Mr. Gornstein: With respect to Sergeant Guzy, that in our view the only... the window of correction is only implicated with respect to Sergeant Guzy.

That incident doesn't show that the class is subject--

Unknown Speaker: --But isn't it probative of--

Mr. Gornstein: --but Sergeant--

Unknown Speaker: --Isn't it probative of the treatment of the whole class when they said, well, we'll correct it if we have to?

Mr. Gornstein: --I don't think that that is... I think that the position of the employer here is, we don't think we owed Sergeant Guzy money, but if we do, we want to be able to restore his retroactive status, and under the--

Unknown Speaker: If they don't think they owe him money, they must interpret the fact that they ever... they are agreeing with your opponent.

Mr. Gornstein: --I think that in fact what they did is, they took a view similar to the one that Justice Kennedy was raising in his question about what it means to be subject to reduction for quality and quantity of work, and they said, we don't think Guzy was reduced for that reason, but if he was, we want to restore his status retroactively.

In our view, the window of correction--

Unknown Speaker: And the court has to tell him why he was reduced.

I don't quite understand that.

Mr. Gornstein: --Well, there is nothing in the window of correction rule that precludes an employee from correcting after litigation.

I... we don't think that there is a prelitigation correction rule in the window.

Unknown Speaker: Maybe the employer... as I understand the Guzy case there was a kind of a plea bargain for this lesser sanction when the sanction that eventually was made, the single sanction termination, would not have affected FLS--

Mr. Gornstein: That's correct.

He was originally filed, or that was the original imposition of a penalty, was a firing, which would not implicate the rule at all.

Unknown Speaker: --Thank you, Mr. Gornstein.

Mr. Renick, we'll hear from you.

Argument of John B. Renick

Mr. Renick: Mr. Chief Justice, and may it please the Court:

Let me address this... at least partially this question about the chief of police's testimony.

First of all, I think it's important for the Court to understand that the chief of police does not impose discipline.

That is the role of the police board, which is the defendant in this case.

Secondly, if you examine the testimony that Mr. Leibig was referring to, the chief consistently says, you know, maybe that could happen, it's possible, but he can't recall it ever happening, and I think that's important, and I think that points out the problem with petitioner's position here as to someone who's subject to a deduction.

And it goes to Justice Breyer's point.

Logically, you could file one of these lawsuits and take the deposition of the chief executive officer and simply ask the question, is it possible that you could discipline one of your vice presidents who is found to have engaged in some kind of misconduct for a period of less than a week.

And if the answer to that is yes, it's possible, because that is part of the inherent right of management, then the logical extension of petitioner's argument is that everyone in that organization, because they are conceivably subject to an improper deduction, would be nonexempt.

Therefore, no one, whether you're a vice president, or Bill Gates, whatever it would be, under that theory would be exempt.

Unknown Speaker: Well, he could say that's not my fault, that's the Secretary's fault.

He wrote this regulation.

Mr. Renick: Well--

Unknown Speaker: I mean, we'll blame it on him.

Mr. Renick: --We think that that shows that that interpretation really doesn't make sense.

Unknown Speaker: Well, would you agree that if you had a manual that applied only to salaried employees, and specifically provided for discipline that would be inconsistent with salaried status, that that would be enough to preclude salaried status?

Mr. Renick: If the discipline... if the manual was worded in such a way that discipline was mandatory, I would agree with you, Justice Souter.

Unknown Speaker: Well, I... wouldn't... wouldn't we be entitled to act on the assumption that the manual was not a totally nugatory exercise and that, in at least some instances, consistently with the manual, discipline would be applied?

Wouldn't that be a reasonable basis for a decision?

Mr. Renick: Yes, but I still--

Unknown Speaker: I mean, your argument has to say... it seems to me seems to be, even when they specifically say they will do and are entitled to do what is inconsistent with salaried status, we won't take them at their word.

We'll wait and see.

That surely is--

Mr. Renick: --What I'm saying is, and I think the Secretary of Labor has agreed with our position, is that... is that as... you have to look at what actual experience... the best evidence is what is the actual experience in the application of whatever manual... if you have a manual or not, what has actually happened, and the evidence in this case is very clear.

In 1979, which was 6 years before the Garcia case was decided by this Court, the legislature of the State of Missouri amended the governing statute which controls the operations of the St. Louis Police Department to convert all commissioned officers at the rank of sergeant or above to a salary basis of payment.

It specifically amended the statute to disallow payment of overtime and to compensate for that they gave everyone an across-the-board 8 percent increase, and none of the individuals in this case have come forward... contrary to any other representations, the record is devoid of any evidence... we had 288 sergeants by the time we go to trial.

Not a single one of those sergeants took the witness stand and testified that he or she had actually suffered an improper deduction.

Unknown Speaker: --Oh, I quite agree, but that's not the case that I put to you in the question.

Mr. Renick: Well, I think I'm agreeing with you if you have a manual that says this is specifically applicable to exempt employees, or functionally exempt, and it provides that penalties will be imposed for certain forms of misconduct that would be periods of less than a week, if you accept the Secretary's interpretation of the salary basis test, then I would agree with you.

Unknown Speaker: But the Secre... but penalties may be imposed.

If it says penalties may be imposed, your position is that would not be enough.

Mr. Renick: Well, I think then you have to look at the practice, because I think as one of the justices earlier pointed out, I think you... where there are a range of penalties, as there are in this case, there's no reason to assume that the employer is going to choose a new proper penalty and thereby convert all of his or her salaried employees to nonexempt employees.

Unknown Speaker: Well, you know, all the text of the regulation says is not which amount must be reduced because of variations in the quality or... it says which amount is not subject to reduction, and you know, subject to reduction doesn't mean will certainly be reduced.

Mr. Renick: Well--

Unknown Speaker: It just means it's subject to reduction, and as I understood the exception is, if that thing is just a paper tiger, that in fact it is never used, that's one thing, but if it's even used in one case, it seems to me that's enough to show that it's for real.

Mr. Renick: --Well, but the state of the record here, Justice Scalia, is that in the period between 1979, when the statute was amended, and the time we went to trial in 1993, not one witness came forth to testify that he or she had been subjected to a disciplinary proceeding initiated by the department, by the police department, based on a variation, which is the word in the interpretation, on a variation in the quality or quantity of work.

There's--

Unknown Speaker: Of course, the burden's on the employer.

Mr. Renick: --Not one appears.

Unknown Speaker: The burden's on the employer here to show that nobody had.

Mr. Renick: The employer--

Unknown Speaker: Did anyone come in on behalf of the employer and say, nobody has?

Mr. Renick: --The employer prevailed on the salary test on partial summary judgment prior to the trial, and the record shows that I queried the trial judge both at the beginning and at the end of my presentation to ensure that that issue was no longer in the case.

Unknown Speaker: Do you claim to have established at trial that nobody had, that nobody had been subjected to this disqualifying kind of discipline?

Mr. Renick: At the trial there was no evidence to that effect because we had prevailed on partial summary judgment prior to trial.

Unknown Speaker: Okay, but it seems to me that's your burden.

Mr. Renick: The trial judge found that we met that burden when he ruled in a pretrial ruling which granted partial summary judgment on the salary basis issue and took that out of the case.

Unknown Speaker: May I ask you to just address the one thing that I find a little puzzling?

Why, if you're correct that the... Sergeant Guzy was not subject to the particular discipline he got, why hasn't he been repaid?

Mr. Renick: Well, I think there are a couple of reasons for that.

First of all, we believe, and I think it's clear, that the basis for the discipline in that case was the fact that he had violated a city residency requirement.

Unknown Speaker: Right.

Mr. Renick: Which was a requirement of employment.

That had absolutely nothing to do with the quality or quantity of his work, so it would be my position that he was never subjected to a reduction in his salary based on anything that had to do with the quality or quantity of his work, which is the phrase that the Secretary uses.

Secondly, our position has been consistently in this litigation that if we are wrong... and the Eighth Circuit's opinion actually only says arguably that this deduction made Sergeant Guzy nonexempt, and we think it's just as reasonable that it may not be, but our position has been all along that if at the outcome of this litigation it is determined that that was an impermissible deduction, the salary test basis is validly applied to the Board of Police Commissioners, then we will comply by reimbursing Sergeant Guzy, and we will continue our existing practice of not allowing deductions of less than a week for exempt officers.

Unknown Speaker: So you construe the disciplinary manual really as saying that although you may have some of the deductions, we won't have them if they're based on defects in quality or quantity of work.

Mr. Renick: That's correct.

Unknown Speaker: Now, you raise a lot of other issues, I think, in your response, an Eleventh Amendment issue, a claim that the FSLA does not apply at all to public employees of State and local government, and so forth.

Mr. Renick: Yes, Your Honor.

Unknown Speaker: Respondents never filed a cross-petition here, did they?

Mr. Renick: No, we did not.

Unknown Speaker: And the court below assumed without deciding that the Fair Labor Standards Act applied to the public employees here.

Mr. Renick: That's correct.

Unknown Speaker: And you went forward under that assumption the court--

Mr. Renick: Well, the first question presented in the petition for the writ of certiorari, as I recall, is does the salary basis test validly apply to public employees, and we would say on the facts of this case, just demonstrates that taking this disciplinary deduction rule and trying to apply it to a law enforcement agency is arbitrary and capricious.

Unknown Speaker: --Well, we really didn't grant, as I see it, on a question of applicability of the Federal Fair Labor Standards Act.

There was no request made by you in any event, by a cross-petition, that we consider Garcia... reconsider Garcia.

Mr. Renick: I agree with you, Justice--

Unknown Speaker: Some amici have made that point, but you did not raise that.

Mr. Renick: --That's correct, Justice.

We--

Unknown Speaker: And I assume that the respondents waived the Eleventh Amendment immunity below.

Mr. Renick: --I don't believe that we did.

We don't believe that we have ever waived that.

They pointed out that we consented to the judgment, but I believe the... our Eleventh Amendment argument is based on this Court's decision on Seminole Tribe v. Florida, which only came out, I believe, March of this year, but at the time this litigation was taking place, my recollection is that Pennsylvania v. Union Gas was still good law, and there was really no basis for me to make that claim until this Court decided the Seminole Tribe.

Unknown Speaker: I would have thought there might be some cross-petition to get into these things.

Mr. Renick: Well, we raised it simply at the point in time that the Court's Seminole Tribe decision had come out, and the timing of the sequence of events, we raised it basically as a jurisdictional issue, which, as I read the Court's cases, can be raised under these circumstances.

Unknown Speaker: Is there any authority in the circuits to support the argument that the subject to clause doesn't apply to disciplinary actions at all, it simply applies when the work changes, for the operational needs of the employer?

That is what I thought was the common sense reading of it when I read the regulation, but I don't know if there's any support for that.

Mr. Renick: I think that is the common sense reading.

When you read 541.118(a) in the general sense, what the Secretary of Labor--

Unknown Speaker: It's such a common sense reading that none of the circuits seem to have adopted it.

Mr. Renick: --The circuits--

[Laughter]

The circuits have all picked up the point of what we're dealing with here, that a disciplinary suspension fits under 541.118(a)(5), which says penalties... it's actually worded in the affirmative, that an employer may impose penalties which... for violations of major safety rules.

That has since been interpreted to mean a penalty can be a suspension without pay, and the courts have then read and said the converse of that, then, is that you can't impose a penalty for something that's not a violation of a major safety rule, and I think that's how we get where we are here.

Unknown Speaker: Has the agency ever expressly rejected the interpretation I suggest?

Mr. Renick: Not to my knowledge, although it is a matter of record at pages 43 through 46 of the joint appendix that the Secretary of Labor went on record this May and indicated that there was still confusion among litigants, particularly in the public sector, as to what all this means, and it appears that the Secretary intends to undertake some kind of a rulemaking procedure to review this disciplinary aspect of the salary test.

Unknown Speaker: In any number--

Mr. Renick: It has never been done to date.

Unknown Speaker: --Any number of the specific rulings, the letters that the Secretary has given seems to be inconsistent with the reading I suggest.

Or is that correct?

Mr. Renick: I can't cite you to one, Justice Kennedy.

Unknown Speaker: In any event, your main argument, as I understand it, is you... accepting the Government's current interpretation of the regulation, that you properly prevailed in the Eighth Circuit, but didn't you... you made... one of your border attacks was on the Government's position as irrational in distinguishing between suspension for a full week versus a couple of days.

Mr. Renick: That's correct.

We believe that, particularly on the facts of this case, we are dealing with a law enforcement agency where you have a recognized exception that... and you... and again, you have to go back to the premise that all of these sections of the salary basis test are based on studies that were conducted in the 1940's and fifties, when public employers were not subject to the law, and that's part of the problem, is now trying to take what seemed to make sense back in the 1940's and fifties, when these studies were done, and then there was never any contemplation that the law would apply to public employers.

Unknown Speaker: But if we were to get into that, we would be going considerably beyond where the Eighth Circuit was in this case.

Mr. Renick: That would be true, yes, but we believe that, as I said, on the facts of this case this demonstrates that... and the Secretary has specifically recognized that you don't treat law enforcement agencies the same as even other public employees, let alone private employees.

There are differences in the standards for hours worked, there are differences in the fact that they get compensatory time, and our point here is that this disciplinary deduction prohibition doesn't make sense when you try to fit it into this kind of a situation.

This is a... as the trial judge found, this is a quasimilitary organization, it would be my position, where the sole or primary function of the St. Louis Police Department is to ensure the public safety, that by limiting our ability to impose discipline on the members of that police department, that the Secretary of Labor, in application, that that application is improper, it's arbitrary, it's capricious, and should be invalid.

Unknown Speaker: That might be your dispute with the Secretary of Labor, but it doesn't... this case, your victory in this case doesn't turn on--

Mr. Renick: It doesn't depend on that.

Our position is that if you assume that the regulations and the Secretary's interpretations are entirely valid in their application to the St. Louis Police Board, that the actions in this case demonstrate first of all the... we tried the case.

We had 21 different categories of sergeants, all of whom were found to perform exempt functions as either executive or administrative employees.

They were functionally exempt, and they've come to this Court and claimed that solely because they were subject to a disciplinary action which might possibly include a suspension of less than a week, for that sole reason, without demonstrating that it ever actually happened, that they are thus nonexempt, and we think--

Unknown Speaker: --Why does the distinction between suspension for less than a week and suspension for a week make sense for non-Government employees, or nonpolice employees, rather?

Mr. Renick: --Why does it make sense?

Unknown Speaker: Yes.

Mr. Renick: I don't know that it does.

It just... that has been in the Secretary's interpretation of 541.118(a) I think since 1954.

Unknown Speaker: What's the theory of it?

Why does--

Mr. Renick: The Secretary--

Unknown Speaker: --suspended for a whole week, not--

Mr. Renick: --It's just included, a proviso that says in a week in which an employee performs no work at all, that the employer is under no obligation to pay the salary.

There are some distinctions as to when you have to pay the full salary.

The Secretary's interpretation is that generally, if you perform any work at all within a week, if you're a salaried employee, you shouldn't lok at the number of hours.

It shouldn't matter.

You're entitled to your full salary.

Then they draw the distinction and say, in a week in which no work is performed, that the employer need not pay the salary.

Unknown Speaker: --Yes, but they also... the docking rule also applies.

A docking for a whole week is okay, even though you work.

Mr. Renick: Docking for a whole week of work is okay, according to the Secretary of Labor.

Unknown Speaker: I don't understand that.

Mr. Renick: Well, we think that's even more so demonstrated by the fact that in 1992 the Secretary of Labor amended the regulation 541.5d that applies to public employees, so that the salary basis test, if you read it, doesn't even mean what it says for public employees, because the salary basis test says you're supposed to receive a predetermined amount of compensation every pay period that is not subject to reduction based on quality or quantity of work.

The Secretary of Labor, through a rulemaking procedure in '91, looked at the outcry that this caused in the public area, that there are many people who are exempt, but because of principles of public accountability are... under State laws are not able to be paid for time they don't work, so the Secretary amended the regulation to specifically allow a public employer to make deductions on an hour-by-hour basis from an otherwise exempt employee's salary and still allow them to claim that they're paid on a salary basis, which in and of itself is inconsistent.

So the salary basis test as applied to public employers no longer means what it says, and we say, why should there be this disciplinary deduction aspect maintained when the Secretary has already recognized that the variation in quantity of work does not destroy the salary basis.

I would also point out that, in the petition that was filed by the petitioners in this case, they took the position very clearly that this Court was required to defer to the interpretations of the Secretary of Labor, and this Court invited the views of the Government, asking the Solicitor General to file a brief prior to deciding whether or not to accept this case.

In that case, the Secretary of Labor's views were specifically expressed, and it was described in that brief as for the sole... for the very specific purpose of clarifying what the Secretary's position was on these interpretations, and the Secretary has specifically disagreed with the position taken by the petitioners.

But the petitioners continue nonetheless to have had... apparently have had a change of heart as to the deference owed to the Secretary of Labor under the circumstances, and we would submit that the... whether or not the Secretary's interpretations are agreeable to the petitioner should not determine whether or not they are entitled to deference in this case, and we believe, under the circumstances, that they clearly are, and as I said earlier, if you accept the Secretary's current clarification of what the interpretations mean, this case fits squarely within it, whether or not you get to the window of correction.

If there are no other questions, thank you.

Chief Justice Rehnquist: Thank you, Mr. Renick.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until tomorrow at ten o'clock.

Attribution:

The Oyez Project

Featured:

Auciello Iron Works Inc. v. National Labor Relations Board - Oral Argument

Fri, 09 Jan 2009 14:49:45 +0000

Case:

Auciello Iron Works Inc. v. National Labor Relations Board

Media File:

95-668_19960422-argument.mp3

Related Transcript:

1995_95_668_argument.xml

Transcript:

Argument of John D. O'Reilly, III

Chief Justice Rehnquist: We'll hear argument next in Number 95-668, Auciello Iron Works, Inc. v. National Labor Relations Board.

Mr. O'Reilly, you may proceed.

Mr. O'Reilly: Mr. Chief Justice, and may it please the Court:

Some 8 years ago we started what I thought was a run-of-the-mill, garden-variety type labor dispute which has grown and grown, and here we are.

In the course of a collective bargaining dispute, the... a strike arose; picketing took place.

Immediately during the course of this garden-variety dispute, 40 percent of the employees, the bargaining unit, crossed the line, the same 40 percent which, it's a small unit, that 40 percent is only 9 employees, were badmouthing the union.

The employer, during the course of this 5 or 6-week strike, obtained the belief that because of the 40 percent the union did not have the tremendously strong percentage of support, and it shot across the bow of the union bargaining position a rather extreme shot.

It beefed up its contract proposal.

However, the significant point, when it beefed it up, it did not have, then, reason to believe that the union was not a majority representative.

It had every reason... in fact, the... it would... to believe that the union still maintained its majority status, but it shot this across the bow of the union, this beefed-up union proposal, and at that time the negotiations are broken off.

The very next day, the union abandoned the picket line, the pickets went down, and a number of extraordinary events took place over the next 3 business days.

Everyone... almost everyone came back to work.

Of those who came back to work, a number of them did the same as their predecessors, the 40 percent who had come back earlier, had crossed the picket line, were knocking the union, being very critical of the union.

In fact, four additional employees resigned from the union after they came back, spoke to company representatives and said, we don't need the union, I don't know why we wanted a union in the first place.

Three of these individuals who were thus bad-mouthing the union had been picketing that Friday morning.

Friday afternoon they were in saying to the company, ah, we never needed a union here in the first place.

Unknown Speaker: Mr.... Krischer, is it?

Excuse me, Mr. O'Reilly--

Mr. O'Reilly: O'Reilly.

Unknown Speaker: --Are you making any claim here that the union in fact lacked majority support at the time the union accepted the offer?

Mr. O'Reilly: Justice O'Connor, I have been making that claim not only today but for the last 8 years.

I know the issue has been raised in respondent's--

Unknown Speaker: Is that issue in front of us, do you think, properly?

Mr. O'Reilly: --I believe it is, Your Honor, particularly, I--

Unknown Speaker: Did the board deal with the case in that posture, or not?

I somehow thought that we had before us a... the issue of whether there was a good faith doubt, not whether there was in fact lack of support.

Mr. O'Reilly: --Justice O'Connor, I believe you have both issues before you.

The facts clearly indicate... for instance, the company's telegram that it sent eventually, in response to the union's Sunday evening telegram said we have reason to believe that the union no longer represents a majority.

Unknown Speaker: There may be any number of facts in the case that are not before us.

Your question presented is whether an employer is bound by a union's acceptance of an earlier proposal for a collective... when at the time of the union's... the employer had a reasonable basis for a good-faith doubt of the union's continued majority status.

Mr. O'Reilly: That is correct, Mr. Chief Justice.

Unknown Speaker: I don't see that as raising the question in fact as to whether the union had lost its majority status.

Mr. O'Reilly: Well, of course, in fact that was... Mr. Chief Justice, that was raised in our original answer to the complaint 8 years ago at the labor board.

We also used the phrase, good faith doubt, and the reason we did is because it's easier for an employer to defend and to prove its defense by... through circumstantial evidence of creating a good faith doubt, but we did--

Unknown Speaker: Well, the issues are quite different, possibly, and I wonder if we aren't bound by how the question is presented in your petition for certiorari.

Mr. O'Reilly: --I think the issues may vary, but I... in this particular case I think they're so closely intertwined that they can be treated as one and the same.

For instance, the court of appeals, who heard... of the First Circuit heard this case twice, and both in their first decision, as well as in their second decision, they treated it, notwithstanding the original issue having been framed as a good faith doubt case, they treated it in both decisions as a question of the employer attempting to prove before the administrative law judge and before the National Labor Relations Board that in fact the union had lost its majority status.

Unknown Speaker: And is that the board rule, that even if you were to show unquestionably, never mind good faith doubt, that the union no longer had majority status, that the same result would ensue?

Mr. O'Reilly: No, I think the only difference, Justice Scalia, would be if we, the employer, had raised and proved... established at the trial level that we had a good faith doubt, it would then be incumbent upon general counsel to establish that in fact the union had maintained a majority--

Unknown Speaker: But I'm asking you what the board rule is.

Is the board rule that neither the establishment of a good faith doubt, nor even the establishment of actual nonmajority status will suffice to get you out of the contract here?

Mr. O'Reilly: --No, as I understand the board decision, they would... decisions, they would take the position that if we had established under the facts of this case actual loss of majority, or at least my friends at the--

Unknown Speaker: Right.

Mr. O'Reilly: --AFL-CIO in their amicus brief said that would be enough.

The board has reserved in this case--

Unknown Speaker: Okay.

Mr. O'Reilly: --its position with regard to whether or not the actual loss of majority would have entitled us, under the facts of this case, to send... fire back that reply telegram disavowing any further obligations--

Unknown Speaker: So it is a separate question, then, and--

Mr. O'Reilly: --I suspect it is, but we feel the result would be the same under both scenarios.

Unknown Speaker: --Mr. O'Reilly, would you... my understanding was that your friends at the AFL-CIO took the position, but there's only one way to establish that the union has lost its majority, and that is through a secret ballot.

Mr. O'Reilly: They... Justice Ginsburg, they took the same position, of course, and filed an almost identical brief in the Curtin Matheson case, saying that the board rule that this Court has implicitly affirmed over the years, the board rule that a good faith doubt entitles you to withdraw your recognition of the union, they took the position in that case and in the amicus in this case that that is no longer a good rule, and that the only way an employer can contest the majority status of an incumbent union is to file a decertification petition, and I--

Unknown Speaker: And they also said in their brief that general counsel had recommended such a position to the board.

Mr. O'Reilly: --Well--

Unknown Speaker: Where does that stand, do you know?

Mr. O'Reilly: --My understanding, I've had an opportunity to look into that.

I contacted... and I can only reflect was I was told by the employer's counsel in that case, that the... and there is a board decision some 3 years ago in that case.

It was on appeal to the District of Columbia court of appeals, and the board then requested that it be referred back to the board.

Counsel for the employer indicated that all argument in that case was conducted a year and a half ago, and no decision has come out of it.

Unknown Speaker: So we may be talking about something that really doesn't matter anymore.

I mean, if they deep-six the whole good faith doubt rule, it doesn't matter.

You would have to have a--

Mr. O'Reilly: Well, I would just suggest if you look at the... if my--

Unknown Speaker: --I mean, it matters to your client.

I don't want to say it doesn't matter to you.

Mr. O'Reilly: --But I'm not sure what the likelihood is of the board adopting that particular view of the scenario I just described.

This case was decided within the last year.

Oral argument in the Lee Lumber case was a year-and-a-half ago.

The board certainly would have had an opportunity to adopt the general counsel's position in the meantime and at least, certainly in this case, deny it.

Unknown Speaker: But if you... we... you are going in this case on the proposition that there's a reasonable doubt rule, so that the question is, at what point can the employer... it's really a timing question.

I think the reasonable doubt... I think you're agreed, are you not, that if you had withdrawn the offer on the 18th or 19th on the basis of your good faith doubt, there would be no contract that they could accept.

Mr. O'Reilly: There would be nothing out there for them to accept, is correct.

Unknown Speaker: So why can't the board say, we have to draw the line some place, we're going to draw it at the union's acceptance of the contract?

Mr. O'Reilly: Well, of course, the board is apparently adopting this bright line theory that it's a lot easier to administer the act if we have a specific date, and obviously, I don't have a problem with that concept, but what I'm just saying is the specific date that they have picked, the bright line rule in this case, there is no logical basis for it.

The logical basis apparently is that sending a Sunday evening telegram somehow transforms a union that the employer had every reason to then believe had a good faith doubt as to its majority status, somehow this telegram, Sunday evening telegram, transforms that apparently minority union into a majority union.

Unknown Speaker: I take it that their basis is not a telegram, their basis is a contract, all right.

Mr. O'Reilly: Created--

Unknown Speaker: So once the contract is created--

Mr. O'Reilly: --Created by--

Unknown Speaker: --you can't question it for the period of the contract bar.

Mr. O'Reilly: --Yes.

Unknown Speaker: And it doesn't... I mean, what is illogical about saying there's a contract bar, it starts when the contract was created?

Mr. O'Reilly: If--

Unknown Speaker: If you have a complaint about the union, make it before the contract is... after, you're barred.

That's the contract bar, right.

Mr. O'Reilly: --And that's--

Unknown Speaker: And that, as I understand it, is the rule, and why is that illogical?

Mr. O'Reilly: --And that's their bright line theory.

I think the illogical argument comes into play this way, Justice Breyer.

We have an obligation, as an employer dealing with any union, at all times to see to it to investigate, to analyze what is the status of this union?

Is it a majority union, or is it a minority union?

Obviously, if it's a minority union, does not represent a majority of employees, it's illegal under the statute for us to--

Unknown Speaker: Is that right, even though it's been certified?

Can you be subjected to liability for dealing with a properly certified union?

Mr. O'Reilly: --Yes, Your Honor, at least beyond the... this is... the certification in this case, and of course, none of the employees who were involved in that certification process are still employed by the company, but the certification in that case was in the 1970's, as I recall, so you have... you could deal with... the board principle is that once it's certified there is an irrebuttable presumption no matter what happens to the majority status for a 1-year period.

Unknown Speaker: For 1 year.

Mr. O'Reilly: So even though you know, as a matter of moral certainty, that the union has lost its majority status during that year, not only is it not illegal to deal with them, you have to deal with them.

Unknown Speaker: But that gets us back to Justice Breyer's question that I don't think you fully answered.

The point was, why not make the contract bar rule become effective upon the acceptance of a contract?

We know when contracts are accepted, we know when they're not.

Why not make that the bright line rule?

Mr. O'Reilly: We suggest, Justice Kennedy, that the employer should have an opportunity, when it is going across a crescende of events that happened in this case during this 3-day period, should have an opportunity to analyze, review those events, to see whether in fact it is dealing with a majority or a minority union, and in this case we suggest that it didn't have.

Unknown Speaker: But you could have done that by withdrawing your offer.

You could have sent them a telegram just as readily as they sent you one.

Mr. O'Reilly: In view of the board's decision in this case, Your Honor--

Unknown Speaker: You wish you had done it.

Mr. O'Reilly: --I would... I certainly wish I had done it--

Unknown Speaker: No, but I mean, you could--

Mr. O'Reilly: --and now the world knows that that's probably the best way to do it, but unfortunately that does not advance productive negotiations, where any time you have a question in your own mind--

Unknown Speaker: --Well, when the point comes that you're questioning the union's continuing capacity as a representative, there's going to be a certain chill upon the proceedings anyway.

Mr. O'Reilly: --Absolutely.

Unknown Speaker: You've got to accept that, and I don't see that the chill is going to be any greater by withdrawing the offer on that ground than it is by doing what you want to do.

Mr. O'Reilly: Well, I'll just take two of the major events, if I may, Your Honor, that led to the employees eventually creating in its own mind the good faith doubt.

Seven union supporters, including the union steward, the employer received that information on Friday afternoon, that hearsay information that these seven are employed elsewhere, and aren't coming back.

Now, they should have an opportunity to review that.

Have... was that decision made out of anger?

Are they going to be back next Wednesday, maybe, the next week?

They should have some time to look into that.

The other information was that--

Unknown Speaker: May I just interrupt with one question to be sure I understand correctly?

If you did review it thoroughly and concluded... and assume the facts are that, even though you had your doubts, that there still was majority support for the union, why is it all unfair?

If the other had happened, if you had been able to prove there was not, your doubt was correct, even though they'd accepted the offer you could get out of it, couldn't you?

Mr. O'Reilly: --That's correct, Your Honor, as long as we move quicker than they do.

If--

Unknown Speaker: Yes, but even if you didn't move quickly enough, if your doubts had been substantiated by your thorough investigation on Monday and Tuesday, you still would have been protected.

Mr. O'Reilly: --If... we would have been protected only if we had withdrawn the offer or withdrawn recognition.

Unknown Speaker: Or if you could prove they did not have a majority.

Mr. O'Reilly: Our position is, we would be... if at the time of that telegram, and we had the opportunity to conduct this investigation, even though we had not won that race to the telegraph office, we would be protected, and that's our position in this case, Justice Stevens, that the mere fact that they send a telegram before we have an opportunity to fire off our withdrawal... and I'd ask the Court to bear in mind that this was Thanksgiving week, it was a 3-day week, and Sunday of week... we couldn't fire it back, obviously, that evening.

Who are we going to send--

Unknown Speaker: I'm not sure--

--We don't know, Mr. O'Reilly, do we, whether the board takes the position that if, in fact, there was not majority support at the time that you tried to withdraw your offer the contract bar rule would apply.

We don't... do we know the board's position on that?

Mr. O'Reilly: --We know the board is not taking a position on that, Justice Scalia.

They have expressly reserved--

Unknown Speaker: Right, so--

Mr. O'Reilly: --on that issue, even though the court of appeals said--

Unknown Speaker: --I think your answer to Justice Stevens' question has to be, we really don't know, the board's going to tell us some day.

But in this case, just so I have it clear in my own mind, did they make a factual determination one way or another as to whether there really was a majority or not?

Mr. O'Reilly: --They did not, Justice Stevens.

Unknown Speaker: They did not.

Mr. O'Reilly: There was no evidence submitted--

Unknown Speaker: There was no finding one way or the other.

Mr. O'Reilly: --That is correct.

In fact, there was no evidence at all submitted by the general counsel to--

Unknown Speaker: Or by you.

Mr. O'Reilly: --to attempt to support that there was no... that there was a majority status.

Our evidence was that we had--

Unknown Speaker: You had a good faith doubt, I understand that, but did you also try to prove that there was on fact no majority.

Mr. O'Reilly: --Yes, and we explained that.

Unknown Speaker: And was there a finding on that point?

Mr. O'Reilly: No.

Unknown Speaker: I see.

Mr. O'Reilly: No, there was no finding.

The administrative law judge as well as the board said, it's immaterial, we don't have to get into that because at the time the company had an acceptance, therefore the rest of the evidence that was... and this was a 3-day hearing, most of which dealt with our evidence that we had the basis for a good faith doubt, but the administrative law judge and the board said all of that is immaterial because there was an offer-acceptance and Sunday evening you had a contract, so it's too late to--

Unknown Speaker: Well, the way you describe it, it sounds as though at least the administrative law judge's ruling was that even though you had been able to prove that there was no majority support, it was irrelevant, and yet I understood you to say the board took no position if you could prove that fact.

Mr. O'Reilly: --The board in its petition, in its brief to this Court has expressly reserved and said that that might be a different consideration but we're not going to get into that, because we feel a good faith doubt case, which they claim this is, is different from a actual loss of majority case, so they are hypothesizing saying it might be different, but they are not expressly taking that position.

Unknown Speaker: Well, what's the effect of that case from this Court in '61, the International Ladies' Garment Workers Union case, where presumably we held it was an unfair labor practice for an employer to enter a collective bargaining agreement with a union that in fact lacks majority support?

Is that good law as far as you know?

Mr. O'Reilly: I think it's excellent law, Justice O'Connor.

Unknown Speaker: So do you think it's open to the board to alter that rule or not?

Mr. O'Reilly: We would suggest it is not, and I would remind the Court, as I am sure we do not have to, that in that case there was an unknowing violation.

The employer was under the false impression at the time of entering the agreement it felt the union in fact was a majority union.

When it was established that... after the fact that it was not, the court said, that contract that you thought was a contract with a majority union is illegal.

Unknown Speaker: Mr.--

--Well, they felt it was an unfair labor practice.

Mr. O'Reilly: That's correct, and the ironic aspect of this case is, I find it difficult to reconcile the logic of the ILG which says it's an unfair labor practice even unknowingly to enter into a contract with a minority union, but the--

Unknown Speaker: Mr. O'Reilly, is there something different in a union that has never been certified by the board, which I take it was the ILGWU case, where there's a concern that maybe it's a sweetheart union, and here, where the board was... the union was certified and had a long-term bargaining relationship with the company?

Mr. O'Reilly: --There is a possible, or a definite argument, certainly during the 1 year after the certification, that there was a legitimate recognition, but the certification in this case goes back at least a generation, so I think the mere fact that they were certified--

Unknown Speaker: But the employer at any point could have asked for a new election.

Mr. O'Reilly: --That's correct, Your Honor.

Unknown Speaker: Instead of renewing the contract.

Mr. O'Reilly: That's... that's--

Unknown Speaker: Well then, why... is... are you saying the contract bar rule is unlawful?

Mr. O'Reilly: --No, Your Honor.

No.

Unknown Speaker: Well, the contract bar rule has to start somewhere.

Mr. O'Reilly: It's... has--

Unknown Speaker: So... and I take it it's up to the board, basically, to say where it starts.

Mr. O'Reilly: --But a contract bar rule would never be based upon an agreement that in turn is an unfair labor practice.

When an employer enters into an agreement with a union not maintaining majority status, that contract would not legitimately serve as the basis for a contract bar, so we're saying that if you adopt a contract bar rule by analogy in this case, we are saying that when that telegram was fired off, the union more than likely knew, and we definitely knew, that they didn't maintain a majority status.

Unknown Speaker: But even if they've lost their majority status during the time of the contract, and different people, people come in and say, look, we represent the workers now, junk that, you can't do anything about it.

Mr. O'Reilly: That's correct.

Unknown Speaker: So that principle has to start some place, so I want to see what's wrong, what's illogical about starting it?

Mr. O'Reilly: I think you have to focus on when was the collective bargaining agreement that serves as the basis for the... what was the basis of the offer and acceptance?

What was the status of the parties as of that offer and acceptance that created that contract?

We're saying in this case if the status of the union as of the date of that purported acceptance was that the union did not maintain a majority status, there cannot be a contract, and the implications of a legitimate contract do not flow.

A legitimate contract, of course, creates for the... if it's a 3-year or less contract, for the balance of that collective bargaining there is an irrebuttable presumption that the union, notwithstanding its actual status over the 3 years, there is an irrebuttable presumption that it is maintaining its majority status so as to encourage the parties to deal with each other.

We do not have that premise, namely a legitimate majority status, at the time of the inception of this, or conception, I guess, of this agreement.

Unknown Speaker: Have employers ever appended to their offer clause that says, if you accept this offer, execution of the contract will be subject to our determining within 7 days that you continue to have a majority status?

Mr. O'Reilly: I have not encountered that type of situation, but this decision, if it is upheld, might encourage the type of appendage to an offer.

Again--

Unknown Speaker: There would be no bar in labor law from appending such a clause to an offer.

Mr. O'Reilly: --I think the labor board might have a problem with that.

It's one thing to append something such as this contract is only valid for X days, or sundown tonight the offer is withdrawn, but to put something like that onto it might cause some problems at the labor board.

Unknown Speaker: With respect to the board, they did this twice because the First Circuit said the first time it wasn't good enough.

What deference, if any, do we owe to the board's drawing this line where it did and explaining it?

Mr. O'Reilly: I think the deference that this Court traditionally gives to labor board decisions is not applicable here.

You always... the Court has always conditioned it, we will defer to the board as long as the board's ruling is rational and consistent with the act.

Our position, of course, is, here it's not rational because it's--

Unknown Speaker: And there, you're taking on the First Circuit, too, which decided it was rational.

Mr. O'Reilly: --The... well, not in the presence of some people in this Court that we are going to call the First Circuit irrational, but they--

Unknown Speaker: From time to time.

[Laughter]

Mr. O'Reilly: --They did determine, without saying why, really... of course, they sent it back, you will recall, in the first instance saying that the board's decision really didn't say anything, that cited a few cases having nothing to do with this factual situation, and then after the board finally... and the Court did create a rather impossible task for the board.

It said, all right, take this irrational result and give us a rational basis for it, and I don't blame the board for taking... and even though the court said do this expeditiously, I don't blame the board for taking 2-1/2 years to come up with an attempt to rationalize what I think is an irrational result.

Unknown Speaker: Did the board give you an opportunity to prove that in fact there was no majority status?

Mr. O'Reilly: Yes, Your Honor, we had a 3-day hearing before the administrative law judge.

Unknown Speaker: And did they make a finding that you couldn't... that you hadn't proved it?

Mr. O'Reilly: No.

Their finding was that all of the evidence we presented... this is both the administrative law judge as well as the board itself.

All of the evidence we had presented over this 3-day period was immaterial in view of the fact that there was a contract and therefore... we could have all of the evidence, people swearing on Bibles that they didn't want this union there, that's immaterial because there was a contract.

Unknown Speaker: I find it difficult to understand how it can possibly be said that the question of whether actual nonmajority status would suffice to avoid the contract bar rule is not in this case.

How could it possibly be said that it's not in this case?

Mr. O'Reilly: Well, my position, of course, it is in this case, notwithstanding perhaps inartful phrasing of mine in the petition for certiorari.

Unknown Speaker: Apart from the question presented, may I ask you where in the papers before us is there either a pleading or an argument by you or your client that there was, in fact, no majority status?

Do the papers anywhere show that you made that argument and preserved it in a pleading?

Mr. O'Reilly: Yes, Your Honor.

Unknown Speaker: And where?

Mr. O'Reilly: In the two decisions of the court of appeals.

If I may, on page 3a, this is the second decision of the court of appeals, appendix 3a, where the court described the scenario as follows.

Unknown Speaker: 3a, you say?

Mr. O'Reilly: 3a of the--

Unknown Speaker: The white brief?

Mr. O'Reilly: --No, of the... I'm sorry, yes, of the petition.

Unknown Speaker: Petition, okay.

Mr. O'Reilly: And the court of appeals said the board thus refused to allow the company to present evidence--

Unknown Speaker: Where on page 3a are you reading from, Mr. O'Reilly?

The middle of the page.

I think I see--

Mr. O'Reilly: --Yes.

Unknown Speaker: --The middle of the page.

Go ahead.

Mr. O'Reilly: Thank you, Mr. Chief... the board thus refused to allow the company to present evidence that the union in fact lacked majority support at the time it accepted the company's outstanding offer.

Almost identical comments are made by the court of appeals in the earlier decision--

Unknown Speaker: Yes, but the preceding sentence says that the board affirmed the ALJ's refusal to consider the company's defense that at the time the union accepted the company's contract proposal, the company entertained a good faith doubt.

Mr. O'Reilly: --Yes.

Unknown Speaker: So it describes your defense as one that they... that you entertained a good faith doubt.

Mr. O'Reilly: That's correct, Your Honor.

Unknown Speaker: And you're saying there was an additional defense.

Mr. O'Reilly: It was... we used the same evidence to--

Unknown Speaker: I know.

I realize you have the same evidence, but is there some pleading that you filed in which you said one of your defenses is they in fact did not have majority status?

Mr. O'Reilly: --I would have to ask leave of the Court to stray from the record.

I had... in view of the... when I saw in the respondent's brief the question being raised that we had not raised this below, I pointed out to brother counsel there were seven separate provisions in our brief to the administrative law judge, same separate seven provisions in our brief to the board--

Unknown Speaker: Forgetting the briefs for a minute, how about your pleading?

Mr. O'Reilly: --No, in the pleading, Your Honor, our response said only we had a good faith doubt.

This was filed at the time of the original complaint, but in our briefs to the board, in our briefs to the First Circuit, as well as the First Circuit's opinion, they refer to the loss of majority status.

Unknown Speaker: So you say you raised it to the board, then.

Mr. O'Reilly: In our briefs, Your Honor, but not in our answer, expressly.

Unknown Speaker: And did the board refuse to consider it because you hadn't raised it in your answer?

Mr. O'Reilly: The board's position was that the evidence, whether it purported to go to a good faith doubt or to a lack of majority status was immaterial in view of the contract having been formed.

If I may reserve the balance of my time, Mr. Chief Justice.

Unknown Speaker: Very well, Mr. O'Reilly.

Mr. Seamon, we'll hear from you.

Argument of Richard H. Seamon

Mr. Seamon: Mr. Chief Justice, and may it please the Court.

The narrow issue before this Court is the reasonableness of a rule of the National Labor Relations Board that concerns the timing of an employer's assertion of a good faith doubt a union's majority status.

Unknown Speaker: Well, what would the situation be, Mr. Seamon, if, in fact, there were no majority support at the time the union tried to accept the offer?

Mr. Seamon: Justice O'Connor, the board has not addressed that issue, and it reserves it in this case.

It would obviously present very different considerations in light of decisions such as Ladies' Garment Workers, but we emphasize that at issue in this case is only a claim of a good faith doubt of majority status.

Unknown Speaker: Well, is it possible that if in fact there was no majority support that it would be an unfair labor practice for the employer to enter the contract?

Mr. Seamon: It is possible but I would emphasize that one important difference to which Justice Ginsburg alluded between the present context and Garment Workers is that Garment Workers involved a voluntarily recognized union, whereas the present case involves a union that was certified by the board.

Unknown Speaker: Was there anything in the opinion that made it turn on that, do you know?

Mr. Seamon: The board framed its rule in terms of a previously certified union, and its prior decision in the same context called Belcon also dealt with a previously certified union.

Unknown Speaker: And is it your position that the pleadings in this case did not raise the in fact lack of support issue?

Mr. Seamon: Emphatically so.

In fact, at every stage of the proceeding where petitioner had an opportunity to make a claim of an actual loss of majority support, it failed to do so.

In its answer to the general counsel's complaint of an unfair labor charge, it specifically asserted a good faith doubt, but did not assert a loss of--

Unknown Speaker: But in its briefs below, it tried to present that issue?

Mr. Seamon: --No, that is also inaccurate, in our view.

In the objections to the ALJ's decision, the petitioner only complained about the ALJ's finding regarding its failure to establish a good faith doubt, and I would refer the Court to the petition appendix, the white brief, at page 85a, in which the board, in delivering its first decision in this case, stated, we agree with the ALJ that under established board precedent, once--

Unknown Speaker: Where on the page are you reading from, Mr. Seamon?

Mr. Seamon: --I'm reading from the beginning of footnote 85, on page 85a.

Unknown Speaker: Okay.

Mr. Seamon: We agree with the judge that, under established board precedent, once the board finds that the parties have reached a binding collective bargaining agreement, it is unnecessary to consider the issue of a respondent's alleged good faith doubt of the union's majority status.

I would also refer the Court to page 54a of this same filing, which is from the board's second supplemental opinion in this case.

On page 55a, the very last sentence in the footnote states, we further emphasize that the case before us does not involve allegations of an actual loss of majority status.

Unknown Speaker: And this is the board's opinion, 65a.

Mr. Seamon: This is the board's supplemental decision in this case.

Unknown Speaker: Well, I suppose the only way we really know that the... correct me if I'm wrong, that we know in a legal sense that the board... that the union doesn't have majority status is that there's been a certification, or decertification petition and an election, and it seems to me the employer is being put in a very difficult position here where it makes the quite careful, measured statement that it has good faith doubt, which is a term of art in the labor law, and then you fault him for not saying that he knew.

It really amounts to a very trivial difference, it seems to me.

Mr. Seamon: Well, one of the reasons that the board has developed the good faith doubt rule is the recognition that it can be difficult, in the absence of a decertification, to prove an actual loss of majority status.

Unknown Speaker: And it seems to me that the employer acted quite consistently with the dictates of the labor board and the dictates of the labor law in that regard.

Mr. Seamon: The labor law permitted it to assert a good faith doubt, but it also required it to take other steps to either withdraw its offer and then assert the good faith doubt to petition for an election before the new agreement was entered into by the union's acceptance of its offer.

And it shouldn't be lost sight of that the employees themselves had an opportunity to file a petition for decertification during the window period from 60 to 90 days before the collective bargaining agreement expired and again after the agreement expired and before a new one was entered into.

Unknown Speaker: But isn't the force of your argument somewhat undercut by the fact that the board is reserving the question of what the result should be if, in fact, the claim was and was proven that there had been a loss of majority support?

Because one of your arguments is there is need to have a bright line rule for the sake of stability and industrial peace once a contract has been formed, but now I understand the board is saying, well, we reserve the question whether there is such a need if it can be shown that the union actually had lost majority support.

So if... it seems to me that the practical effect of that is going to be that so long as that question is reserved, that any employer with a good faith doubt is going to make in good faith a claim that in fact majority support was withdrawn--

Mr. Seamon: I--

Unknown Speaker: --and there goes the whole need for the bright line... or the whole justification based on a bright line argument.

Mr. Seamon: --I acknowledge, Justice Souter, that one of the difficulties that would arise from creating a different rule for claims of actual loss of majority status from the rule that applies to good faith doubt claims is that employers would be tempted to circumvent it by a mere point of pleading, to say not only did I have a good faith doubt, but I also believe that the union in fact lost majority status, and that may, in fact, be a consideration that the board could validly take into account if and when in the future it addresses the question of whether the rule should be different.

Unknown Speaker: But it is--

--But that's a question for the board, because isn't there some doubt as to what extent the Government can bind an employee to be represented by a union that in fact does not occupy majority status?

Mr. Seamon: It is a very serious question for the reasons elaborated in the Ladies' Garment Workers decision.

Again, there are differences between that decision and this one, but obviously--

Unknown Speaker: So you're saying that the need for the bright line is still there, but there just may be a circumstance in which, need or no need, we simply cannot have the benefit of it?

Mr. Seamon: --That is right, and again, quite apart from the employer's temptation to plead an actual loss of majority status, it is perfectly logical for the board's rule to operate upon the acceptance of the petitioner's outstanding contract offer.

In this case--

Unknown Speaker: No, but... may I interrupt you, though?

That would not be the case... the board is reserving the question, as I understand it, whether any bright line rule would operate upon acceptance if it can be shown that at the time of acceptance majority status had been lost, isn't that correct?

Mr. Seamon: --Yes, that's correct.

Unknown Speaker: Yes, okay.

Mr. Seamon: That's correct.

Unknown Speaker: But that reservation also would be overtaken if the general counsel's Lee Lumber proposal is adopted.

Mr. Seamon: Yes, that's also correct.

Unknown Speaker: And do you... can you give us any representation of where that proceeding stands?

Mr. Seamon: Yes.

My brother at the bar correctly stated the posture of the case right now.

It is under submission before the board following oral argument, which occurred about a year ago, but I would say it's far from clear whether the board is going to address the general counsel's argument that the good faith doubt rule should be abandoned.

That is not the primary argument in that particular case, and the general counsel emphasizes that the board doesn't need to address it at all.

Unknown Speaker: What is the gestation period for a proceeding like this?

Mr. Seamon: I'm uncertain of the answer to that.

Unknown Speaker: Maybe they should think about rulemaking down there at the NL--

[Laughter]

Mr. Seamon: Of course, they do from time to time.

I recognize that the AFL--

Unknown Speaker: Think about it from time to time, are you saying?

[Laughter]

Mr. Seamon: --I recognize the AFL-CIO takes the position that the pendency of Lee Lumber renders the grant of cert improvident.

We... in our judgment, again, it is so unclear whether the... how the board is going to rule and whether it's going to rule that that alone doesn't weigh against the grant, but by the same token, of course, we wouldn't oppose dismissal on those grounds.

Unknown Speaker: The acceptance was a logical point for cutting off consideration of claims of good faith doubt, because it was that point in this case that ended the strike and restored productivity at the plant, and from the point of view of the National Labor Relations Act, that is an event of central importance.

More generally, when unions accept contract offers from employers, that marks a fundamental alteration in the relationship between the parties.

After that point, it is reasonable for the board to require the parties to accept the results of the process and get back to the productive enterprise in which they both have such an important interest.

I would also suggest that in any event it is not necessary for the Court in this case to decide whether, in lieu of a bright line, the board should have adopted a rule that would require it to determine in every case whether the employer had a reasonable opportunity to investigate and to voice its good faith doubt, because petitioner did have such an opportunity.

Most or all of the evidence on which it premised its good faith doubt was received 6 days before the union accepted petitioner's contract offer, and has arisen earlier in the argument.

At any time, petitioner had the option of withdrawing its offer.

It also could have petitioned for an election.

It didn't take any of these options, nor did it break off negotiations and take its offer off the table.

It may ultimately be for the board to balance, but the rule that it's adopted almost encourages employers to continue making allegations as to good faith doubts and disrupting the bargaining process.

It seems to me much more sensible to do it post hoc.

Mr. Seamon: Well, in many ways the most sensible approach, and the approach that is preferred for purposes of the statute, is for the employer to file a petition for an election, assuming that the employees themselves have not availed themselves of that right.

This Court recognized that in Brooks, and it also recognized that the reason for that is that we can justifiably be concerned about employer's attempts to vindicate the rights of employees, especially when the employees themselves have ample opportunity to assert those rights.

The Court in Brooks said, in fact, that allowing employees to assert the rights of employees was not conducive to industrial peace, it is inimical to it.

Unknown Speaker: But Mr. Seamon, wouldn't that be a burden for a small company like this?

There's only 23 employees.

Wouldn't it be an expense?

They've got to hire a lawyer to petition the board for an election.

Mr. Seamon: It is not necessarily a particularly elaborate procedure, and in this case, of course, the litigation that ensued was quite as extraordinary as it would have been had... as it might have been had the employer taken the preferred route and filed the petition for an election in the first place.

And it also bears emphasizing that the board's rule does not permanently foreclose an employer from asserting its good faith doubt.

Instead, if the employer fails to raise the doubt before an employer has accepted the offer, the employer simply has to bid his time during the contract term.

When the contract expires, it again has an opportunity to assert its good faith doubt.

Unknown Speaker: Do the board rules permit this particular employer to go back and raise the other half of the claim, or has it lost... have they lost that?

I mean, I take it initially they thought there was just going to be one rule, actual good faith the same, and then they found out there wasn't.

There's a division... good faith, they lose, actual, we haven't decided.

Mr. Seamon: Well--

Unknown Speaker: Do the board rules permit them to go back now, or not?

Mr. Seamon: --I'm not certain of the answer to that question, but I would suggest that there's a very good argument that they've waived the argument to the extent that the board made it quite clear in both of its decisions that it considered this case as presenting only a good faith doubt, and petitioner could have sought reconsideration of the board's decision on the grounds that the board had overlooked one of its claims, but it failed to do so.

Unknown Speaker: These avents took place in 1988, so it may be a little late to go back and argue about the thing, I suppose.

Mr. Seamon: That's right, and I believe the petitioner in this case had ample opportunity.

It was quite clear... it's been clear since the Celanese Corporation decision in 1951... that there are two separate claims that can be used to justify refusal to bargain.

One is a good faith doubt, the other is an actual loss of majority status, so petitioner... the clarity of the board's precedent can't be blamed for petitioner's failure to raise both claims if it thought both were grounded in the facts.

Unknown Speaker: The board's rule serves the interest in repose for the most part by drawing a bright line after which the parties are required to accept the results of the negotiation process, and it also prevents sand-bagging, which can occur where an employer decides that it is going to keep its doubts regarding the union's majority status to itself during the negotiation process and raise them after an agreement has been concluded if it decides in hindsight that the agreement is not to its liking.

We're not suggesting that that was operative here, and that it is a very real concern in the general run of cases.

Do we have... refer to Judge Campbell's opinion on page 2a of the petition.

The second time around he says, several years ago the National Labor Relations Board petitioned this court for enforcement of an order and we retain jurisdiction.

The board has now at long last responded.

Did the board ever offer any explanation for the years it took in this case to reply to the Second... the First Circuit's request?

Mr. Seamon: It did not.

However, the second board decision was a decision by the full board, and obviously, in general those take longer to issue than decisions--

Unknown Speaker: Years longer?

Mr. Seamon: --of the four panels, and I would suggest the other consideration may well have been that the First Circuit outlined a number of very specific concerns that it wanted the board to address in full on remand, but there's no specific explanation--

Unknown Speaker: What's at stake here as of this point?

What does the enforcement order provide?

Mr. Seamon: --The enforcement order is... includes a usual cease and desist provision, and it also requires petitioner to enter into a contract based on the agreement that was formed when the union accepted petitioner's contract.

Unknown Speaker: But will that mean back pay, or what?

Mr. Seamon: That will mean that the employees should be entitled to the benefits of all of the wage and conditions provisions of the original contract.

If the Court has no further questions, that concludes my--

Unknown Speaker: Let me just ask one other.

Mr. Seamon: --Yes.

Unknown Speaker: What was the term of the original contract?

Mr. Seamon: Three years.

Unknown Speaker: And that 3 years, of course, has long expired.

Mr. Seamon: That's right, and I suppose since the employer has never honored the agreement it is still open for it to be required to do so.

Unknown Speaker: Thank you, Mr. Seamon.

Mr. O'Reilly, you have 2 minutes remaining.

Rebuttal of John D. O'Reilly, III

Mr. O'Reilly: Thank you, Mr. Chief Justice.

I do want to emphasize the manner in which the First Circuit dealt with this case, and it dealt with it on the basis of being a loss of majority case.

If I may just briefly, in addition to the reference at page 3a, the Court makes identical references on pages 80a, 82a, and in the specific order of remand to the board at page 83a it continuously refers to the issue as being a loss of majority, and it is easy to somehow distinguish, or sometimes confuse the distinguishing factors.

In fact, in this case there is a reference to the Chicago Tribune, the Seventh Circuit case.

That was a clear loss of majority case.

In the board's brief before this Court it says that has nothing to do with that, that was a loss of majority case, and this is a good faith doubt case.

Yet if... I direct the Court's attention to the board's own decision in this Auciello case.

How does it refer to... on seven different pages of the board's decision in this case, it refers to the Chicago Tribune case as being a good faith doubt.

It continuously says the employer raised its good faith doubt.

So sometimes the distinction between the two is not as clear as we would like it to be, so I think we have adequately raised the actual loss of majority in this case.

Notwithstanding the fact it was not expressly raised in the answer to the board, it was raised a number of times in the briefs, and that's how the court of appeals addressed it.

It remanded it to the board to deal with an actual loss of majority scenario, and the board can't pick and choose, I would submit.

While... even though the First Circuit told us to do it, number 1, quickly, we are not going to do that.

It had told us to deal with the actual loss of majority case.

It can't dictate that.

That's up to the court of appeals, and I think the issue is a live one before this Court.

Certainly... thank you.

Chief Justice Rehnquist: Thank you, Mr. O'Reilly.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Holly Farms Corp. v. National Labor Relations Board - Oral Argument

Fri, 09 Jan 2009 14:49:46 +0000

Case:

Holly Farms Corp. v. National Labor Relations Board

Media File:

95-210_19960221-argument.mp3

Related Transcript:

1995_95_210_argument.xml

Transcript:

Argument of Charles P. Roberts, III

Chief Justice Rehnquist: We'll hear argument next in Number 95-210, Holly Farms Corporation v. National Labor Relations Board.

Mr. Roberts.

Mr. Roberts: Mr. Chief Justice, and may it please the Court:

During the 200-plus years of our country's history, agriculture has undoubtedly changed dramatically.

Over the years, it has become more mechanized, more specialized, and a much larger business.

Yet, as I stand here today in 1996 before this Court, the process of catching chickens remains one of the most rudimentary agricultural processes that one can visualize.

Workers using nothing but their two hands manually catch chickens and place them into cages in order that these chickens can be delivered to market.

One would not think that it would take much analysis to conclude that these workers are agricultural laborers, yet the parties, including us, spend pages and pages of our briefs discussing whether Holly Farms is a farmer when it sends its chicken... sends its live haul crews to the farms of the independent growers.

We spend pages discussing whether catching chickens is... or whether chickens can be harvested.

We spend pages discussing whether the live haul crews are acting in some way in a relationship with the processing plant, perhaps proving that lawyers and sometimes judges can make issues that are quite simple seem complex.

Fortunately, I don't have to rely on common sense here today, because we have a statute that Congress carefully considered that specifically defines with some precision what is agriculture.

Unknown Speaker: Suggesting that common sense and Congress' statutes are mutually exclusive?

[Laughter]

Mr. Roberts: No, Your Honor.

I think in this case we see that common sense does equate with what Congress has done.

I just wouldn't want to be making only a common sense argument.

However, what we have is a statute... and if nothing else from my argument becomes clear today, I hope it will be clear that the chicken catchers and the forklift operators are at a minimum engaged in secondary agriculture within the meaning of section 3(f).

Unknown Speaker: How about the truck driver?

That doesn't sound particularly agricultural to me.

Mr. Roberts: Well, I think the truck drivers are a much more difficult question.

I think that the issue there turns on whether Holly is a farmer, because their activities do not take place on a farm.

I think logically it makes more sense to address the chicken catchers and the forklift operators first, because the issue in our opinion is much clearer on those, and if we prevail on the chicken catchers and the forklift operators then, even if we lose on the live haul drivers, that undermines the board's bargaining unit.

Unknown Speaker: But can we see them... can we solve this case by just thinking of chicken catchers without knowing the employer involved?

Now, suppose Holly Farms didn't ever hatch any chickens.

It was only in the slaughtering and processing business.

So it goes to the farms, it sends its trucks and teams to the farms, they pick up the chickens, they haul them to the slaughterhouse or the processing plant, and they don't... they're not even in the farming business at all.

They just pick up the chicks for slaughter and processing.

Mr. Roberts: And if those were the facts, the chicken catchers and forklift operators would still be agricultural laborers, but the live haul drivers would not be agricultural laborers in our opinion, under the facts that you have posed.

How do we know that?

We can look at the statute itself, which is found at page 3 of the blue brief.

Unknown Speaker: Well, you rely on the fact that the chicken catchers and the people who put them in cages are doing the work on the farm.

Mr. Roberts: That's correct, Your Honor.

We think--

Unknown Speaker: And therefore under the secondary agriculture prong of that statute.

Mr. Roberts: --That's our position, is that at a minimum, while we contend--

Unknown Speaker: And you take the position that Bayside, that Bayside case did not deal with that aspect of the statute, where the work was done on the farm.

Mr. Roberts: --That's absolutely correct, Your Honor.

Bayside dealt with feed haul drivers, and there was no contention in that case that their work was performed on a farm, so the sole issue was whether Bayside was a farmer, which also applies to our... we concede that that applies to our live haul drivers, but not to the chicken catchers.

Unknown Speaker: Okay, and so as far as the driver is concerned, we would have to conclude that Holly Farms has regained its status as a farmer for you to prevail as to them.

Mr. Roberts: We believe that that's the correct analysis, Your Honor, but if we take the chicken catchers and the forklift operators and we look at the statute, which is on page 3 of the blue brief, it says agriculture includes, among other things, the raising of poultry, and any practices performed by a farmer or on a farm as an incident to or in conjunction with such farming operations, including preparation for market.

Now, we know that the chicken catchers and forklift operators work on a farm, because that is conceded.

We also know that catching, caging, and loading live chickens constitutes preparation for market because the board really does not dispute that, and the Secretary of Labor has specifically defined those tasks as being preparation for market.

We also know that the activities of the chicken catchers and the forklift operators are incidental to farming because section 3(f) specifically states that preparation for market is an activity that is, per se, incidental to farming.

The only remaining question is, is it related, incidental to or in conjunction with such farming, and we know that the answer to that question is yes, because the chickens that are caught, caged, and loaded onto the trucks are the same chickens that are raised on the farms on which the truck drivers work, so under the plain language of section 3(f), it is clear that the chicken catchers and forklift operators at a minimum meet the secondary definition of agriculture.

Unknown Speaker: Mr. Roberts, one could accept that that's a perfectly reasonable reading of the statute, but isn't there some respect that we owe to the contrary interpretation of the NLRB and its ruling in this case?

Mr. Roberts: We don't believe that in this case the board's opinion is entitled to any deference on the chicken catchers and forklift operators, because the issue in our view is that that's the only reasonable interpretation of section 3(f).

We also contend that the board's interpretation of phrases such as incidental to farming operations is contrary to this Court's prior decisions in Maneja and Farmers Reservoir, so we think that there's a principle of stare decisis that applies here, too.

We also take the position that their interpretation is contrary to the Secretary of Labor's, so for a variety of reasons we think that the board's interpretation in this case is contrary to the plain language of the statute and not reasonable.

I'm referring right now to the chicken catchers and the forklift operators.

I must emphasize that analytically they are separate from the live haul drivers, and that the two groups do not necessarily rise or fall together.

Unknown Speaker: Yes, and would you be able to say the same thing with respect to the line haul drivers, that that is your interpretation is the only reasonable one?

Mr. Roberts: We don't--

Unknown Speaker: It's hard to say that, isn't it?

Mr. Roberts: --Our position on the live haul drivers is that the statute is not specifically ambiguous but it does require interpretation and, had the board made a choice in this case between Holly and the independent grower, that choice might have been entitled to reference... I mean, to deference.

But what's happened in this case is, unlike Bayside, where the board took the position that the independent grower was the relevant farmer, the board denies in this case that the independent grower is the farmer.

It takes the... and it also denies that Holly Farms is the farmer, so what we have is the inescapable conclusion that these chickens, which are still on the farm, have no farmer, and that's the basis for our argument, is that--

Unknown Speaker: But of course you... but they want to have it both ways, but so do you.

If we agree with you on the chicken catchers, then that disparity which you have just described would no longer exist.

You would have a relevant farmer, right?

Mr. Roberts: --Well, we think that their--

Unknown Speaker: And therefore your argument on the line haul--

Mr. Roberts: --Not necessarily, because Holly, even with the chicken catchers and the forklift operators, they can be covered in one of two ways.

They can be acting incidentally to the farming operations of the farm, or they can be acting incidentally to Holly's farming operations.

It's our position that they're doing both.

Unknown Speaker: --Or they can be acting incidentally to Holly's slaughtering operations.

Mr. Roberts: That is the position that the board takes, and we think that--

Unknown Speaker: No, but I mean, that is a logical possibility here, isn't it?

Mr. Roberts: --Not... the chicken catchers, we think that that's not a logical--

Unknown Speaker: No, no, I'm just talking about the... I thought you were talking about--

Mr. Roberts: --The drivers?

Unknown Speaker: --The drivers.

Mr. Roberts: We think that that is one possibility that, you know, could be argued, but the problem is--

Unknown Speaker: Well, why isn't that same possibility open to the chicken catchers?

Mr. Roberts: --Because the statute, Your Honor, specifically defines preparation for market of agricultural commodities raised on that farm as being incidental.

Congress specifically--

Unknown Speaker: No question about that, but this... doesn't this go to the point of incidental to such farming?

Mr. Roberts: --It--

Unknown Speaker: And I mean, there is at least a reasonable position, isn't there, to the effect that if the chicken catcher is hired by a slaughterer as opposed to being hired by the farmer, the one who literally owns the henhouse with the chickens in it, that that would be a reason for saying it is not incidental to such farming, it is incidental to slaughtering?

I mean, that's a possible position, isn't it?

Mr. Roberts: --We don't think that under any reasonable interpretation, because what that... if you adopt that interpretation, then it leads to the conclusion that there is no farmer in this case, that it's not incidental to anyone's farming operation--

Unknown Speaker: Well, it may lead to the conclusion that at the precise mathematical moment in question the chickens are owned by somebody who is neither a farmer nor a nonfarmer.

The chickens are owned by the slaughterer at that point.

Mr. Roberts: --But if they're--

Unknown Speaker: Slaughterers can own chickens.

Mr. Roberts: --But the Congress is--

Unknown Speaker: I mean, can't they, and--

Mr. Roberts: --Certainly.

Certainly, and we would agree that if the slaughterers own the chickens and the slaughterer had no raising hatcheries or anything of that nature, then the live haul drivers would be... would be... would not be covered, but what we're dealing here is with work on a farm.

Congress specifically added the "on a farm" language to cover people who were not farmers, who did tasks on the farm.

Unknown Speaker: --And that leaves... that certainly leaves open the possibility, and I suppose the certainty, that if the farmer hired an independent chicken catcher, like the thresher of the wheat in the example from the 1930's, that that person would be an agricultural worker so long as the work was done on the farm.

But when you've got the condition that refers to... is it such farm, or such farming?

I forget which... such farming operations, then you have yet another possibility in play, and that is the possibility that when the person who hires and sends the chicken catcher is neither the farmer, nor an independent, but a slaughterer, and the work is being done as a preparation for the slaughterer's slaughtering, that in fact the incidental character goes to slaughtering and not to farming.

Mr. Roberts: We don't think that that's a reasonable interpretation, Your Honor, that Congress... we don't think that was Congress' intent.

Unknown Speaker: Because what?

Mr. Roberts: Well, because the language specifically was added to exempt somebody who was not a farmer, and if you accept--

Unknown Speaker: Well, it was added to exempt the independent thresher, and people in the thresher's position, but these chicken catchers are not like the independent threshers who were referred to in the Senate back in the thirties.

They are, in fact, owned by yet a third entity, that is to say, the slaughterer.

If the threshers, for example, in the 1930's examples had been employees of, what, the grain wholesalers or silo owners, they would have been in the same position, I suppose, as the chicken catchers who are employed by the slaughterers.

Mr. Roberts: --Well, the interpretation that you pose is one posed in the board's brief, but it was not posed by the board in its decision, and it's directly contrary to the board's decision in Produce Magic, where the board held that an independent harvester who went from farm to farm providing services for lettuce growers was not an agricultural laborer, even though the work was performed on a farm, because he wasn't a farmer.

So the board has read the statute in a manner which prevents anybody other than a farmer from ever performing secondary activities.

Unknown Speaker: But the point is, the statute can be read in a way that does not have that effect and still lead to the board's conclusion here.

Mr. Roberts: Only by adopting a logic that is specifically contrary to what the board has held in another case, and we don't think that that would be a reasonable method for doing it.

Unknown Speaker: Well, and you also have to accept the proposition that a particular activity can only be incidental to one.

It has to be either incidental to the slaughtering operation or incidental to farming.

I don't know why it can't be incidental to both.

Mr. Roberts: That's--

Unknown Speaker: All the statute requires is that it be incidental to the farming operation.

Mr. Roberts: --The board has effectively imposed a solely or exclusively requirement into section 3(f) which is not warranted by the act.

If you look at the court's decision in the sugar cane case in Hawaii, Maneja, where they specifically dealt with railroad workers who transported sugar cane from the fields to the processing mill, the court clearly viewed that activity as being incidental to farming even though the purpose and the ultimate destination of the sugar cane was the employer's processing mill where the sugar cane was going to be processed into sugar and molasses.

So it seems clear from that decision that the question of whether something is related to farming is not a question of whether it has any relationship to processing but how is it, and is it the kind of activity that we would view as being reasonably related to the farming operation.

Unknown Speaker: And I suppose that you'd have a real problem with any farmer who has an integrated operation, not only farms but slaughters, and then if these people who catch his chickens are doing things that are incidental to both operations, they presumably would not be entitled to the exemption.

Mr. Roberts: Well, that's correct, Your Honor.

Unknown Speaker: Which is just like the case you describe.

Mr. Roberts: Well, I think that one problem with the board's interpretation is it leads to a detailed analysis of the business relationships between the different employers, and we read section 3(f) as focusing primarily on the nature of the work, and under the board--

Unknown Speaker: Suppose that you had... suppose I go into the business of supplying water to people who are threshing and they get thirsty, and each day I drive from my town, in the middle of the city, and I put water in my truck, and I go out there and I give them cups of water while they're threshing, or whatever they're doing.

Now, couldn't you say that such a person, me, who goes out and gives them water, or my employees hands them cups and so forth, that that's not incidental to farming.

Rather, I have a separate business.

I'm a water company.

I live in the city, I get my water from the city water, I go out and give them water.

But in your analysis, that becomes a farm worker, is that right?

Mr. Roberts: --No, I don't think so, Justice Breyer.

Unknown Speaker: Why not?

Mr. Roberts: The... there's two--

Unknown Speaker: Why isn't it incidental to the farm?

Mr. Roberts: --Well, there's two problems with that.

It may be incidental to farming--

Unknown Speaker: Yes, that's what I thought it was in the analysis--

Mr. Roberts: --But... but it still, to be covered, has to either be performed on a farm--

Unknown Speaker: --Yes, it is.

Mr. Roberts: --or by a farmer.

Unknown Speaker: What they do is, they go out there and they hand them the cups.

They walk around from corn sheaf to corn sheaf and help them drink.

Mr. Roberts: Well, I mean, obviously that is a question that I think the court would have to--

Unknown Speaker: What I'm trying to suggest is, it makes a difference who you're working for, that if, in fact, the water person was working for the farmer, you'd say, hey, this is incidental to the farming, but if the water person is working for a city water company, it seems more incidental to that.

You could call it either way, and how, in fact, the person... who is his employer would be relevant.

Mr. Roberts: --Well, that same argument would apply to the independent wheat thresher.

He's acting as an incident to his own business operations, yet Congress clearly intended--

Unknown Speaker: But he's a farmer.

Mr. Roberts: --No.

No, the Congress specifically took the position that the independent wheat thresher was not a farmer.

He was... in fact, that same argument was advanced that he was nothing more than a huckster who went from farm to farm selling his tinware, and that... and Congress took the position that even though he was an independent businessman, because his activities occurred on a farm and were related incidentally to or in conjunction with farming, they were covered.

So the argument that you pose... I agree the water, providing the water is a more difficult question, because the question becomes whether it has any relationship whatsoever to agricultural... you know, even though it's an activity, it may not be incident... the issue may be that it just has no relationship, really, to the farming operations themselves.

In this case, there's no question that the activities of the drivers as well as the chicken catchers and forklift operators are secondary activity.

The board is not contending that there's something about the activities that are not agricultural.

Their argument focuses on the relationship--

Unknown Speaker: Mr. Roberts, can I ask you a question about the fact, does a particular crew go out and catch the chickens on one farm, deliver them, and go back to the same farm, or does it cover a lot of farms on one--

Mr. Roberts: --Your Honor, it covers a lot of farms, but what happens is, the live haul drivers deliver the chicken catchers and the forklift operators to the farms.

Unknown Speaker: --Right.

Mr. Roberts: So we have the chicken catchers and the forklift operators perform their tasks.

Once the truck--

Unknown Speaker: Will one truck load take all the chickens they're going to get from that farm?

Mr. Roberts: --No.

It may involve going to several different farms.

At some point in time--

Unknown Speaker: No, that's not quite my question.

Will... are the various farms about the same capacity?

All right.

Are the number of chickens that they catch more or less than they can get in one load?

Mr. Roberts: --I think the... from one farm would probably be less than what they get in one load.

In other words, the--

Unknown Speaker: So they have to go back to the same farm a second time?

Mr. Roberts: --No.

They go to a different farm, and once you've cleaned out one farm, then, you know--

Unknown Speaker: But I thought you said that one load would not clean out the farm.

Mr. Roberts: --They have to go to other farms, Your Honor.

There's hundreds of farms--

Unknown Speaker: No, I understand, but I'm trying to get... one crew goes to farm A.

It picks up some chickens there.

Does it pick up all the available chickens?

Mr. Roberts: --It picks up all the available chickens.

Unknown Speaker: In the same load?

Mr. Roberts: Yes, and then it goes to farm B.

Unknown Speaker: I got the impression that it went to the farm, loaded up the truck, went back to the processing plant, and then came back to the farm.

Mr. Roberts: No, Your Honor.

Unknown Speaker: That's not right.

Mr. Roberts: It goes to farm B.

At some point the truck becomes full and the live haul truck driver takes the truck back to the plant, drops the trailer, and then returns--

Unknown Speaker: To a farm it's already been to.

Mr. Roberts: --to a farm.

The chicken catchers and forklift operators don't go back with the live haul driver while he's dropping off a load unless it's the end of their... you know, the end of their day.

Unknown Speaker: It would just be a coincidence, then, that if at some point you didn't have to go back to the same farm, because what you... what regulates when they go back is when they've got a full truck, not when they've cleaned out one farm.

Mr. Roberts: Well, obviously, yes.

If they reach a farm, and then the truck gets loaded, it has to go back, and then at some point either that truck or another truck... they have more live haul drivers than they do crews, so there can be, you know, several drivers out there, and then another truck would have to come in order to complete the loading process at that particular farm.

But the chicken... my point is, is the chicken catchers and the forklift dri... I mean, the forklift operators stay on the farms until the end of their shift and then they go home.

Unknown Speaker: A different truck will come and pick them up, then?

Mr. Roberts: It may be the same, or it may be a different truck.

Unknown Speaker: I see.

I see.

Are you going to spend any time at all arguing about whether Holly Farms is a farmer?

Mr. Roberts: Yes, Your Honor.

In this particular case, as I said, the live haul drivers turn on whether Holly is a farmer.

Now, the board concedes that Holly is a farmer in its hatcheries when it breeds and hatches the chicks.

It takes the position, however, that neither the grower nor Holly is the farmer of the chickens at the time that the live haul crews arrive at the farm, and our position is, is that the board might have been able to choose the farmer over Holly, but it had to choose one of them.

The chickens had to have a farmer.

They're still on the farm.

They haven't been reduced to possession.

Either Holly or the grower has to be the farmer.

Now, the board in its brief specifically rejects, and in the case specifically rejects the position that the grower is the farmer, and the reasons that it gives establishes that Holly resumes its status.

Thus, the reasons that the board tells us in its brief why the grower is not the farmer is that Holly bred and hatched--

Unknown Speaker: But you deny that, so you're another.

I mean, you're doing the same thing that they do.

Why is it bad for them but okay for you?

Mr. Roberts: --I'm sorry, Your Honor, I didn't--

Unknown Speaker: Just as they are saying that he is not the farmer, you are saying that he is.

Mr. Roberts: --We're saying that both are.

We're saying that you can be... in this particular case, the activities of all these workers can be incidental to both Holly's farming operations and to the grower's farm... it's... remember, the statute speaks of the farms.

The operation, the farming operations that take place on the farm, those operations were the grower's operations in raising the chickens.

Well, when you catch chickens that have been raised on a farm, we contend that by definition, that's related to the farm's farming activities.

Unknown Speaker: That's the other issue.

We're talking about the--

Mr. Roberts: Our position, though, is, is that in addition to that, Holly has resumed its status as a farmer because it holds title to the chicks, it actually performs the delivery, or the catching, the caging and the delivery, and as the board points out in its brief, the grower provides a service for Holly.

Unknown Speaker: --Well, wait a minute.

If it was an independent contractor who did the catching-caging, you wouldn't say that he became a farmer, would you?

You'd just say, he performed activity incidentally... incidental to farming on the farm.

Mr. Roberts: Because that--

Unknown Speaker: So the mere fact that Holly did the catching-caging doesn't reconvert Holly to a farmer.

It just means that Holly is doing work incidental to farming.

Mr. Roberts: --Well, Your Honor, and the case you pose would be one where the entity had no previous farming status with regard to those chickens.

In this particular case--

Unknown Speaker: Okay.

That is exactly... that's the only distinction that you can rely on.

Mr. Roberts: --That--

Unknown Speaker: That Holly used to be a farmer.

Mr. Roberts: --Well--

Unknown Speaker: Unlike the independent contractor, before Holly dropped off the little chicks, Holly was a farmer.

Mr. Roberts: --That's the major distinction, but we think it's an important distinction.

The other--

Unknown Speaker: It is, maybe it isn't.

Mr. Roberts: --Well--

Unknown Speaker: I'd sort of leave it to the agency to figure out.

Mr. Roberts: --There's a second distinction, Your Honor, is that Holly owns the chickens.

The example you pose would be one where the chickens were not owned by the independent contractor, so they would have no relationship whatsoever to these particular chickens.

So we think it is a material distinction that they own the chickens, that the grower... you see, as the board points out--

Unknown Speaker: Well, why is that material?

I can own a chicken, and I'm not a farmer.

Mr. Roberts: --Well, in this particular case--

Unknown Speaker: He can even eat it and not be a farmer.

[Laughter]

Mr. Roberts: --I would agree with that, Your Honor.

But the title to the chicken runs hand-in-hand with the fact that we bred and hatched these chickens.

I don't think you can separate the two.

The fact remains is that we do have a very close tie.

We remain, if you look at--

Unknown Speaker: Yes, but I can raise some chickens and then rent them out to someone else, and at that point I'm saying, the farming's over for me, but I still own the chickens, so I don't see the materiality for the classification of the fact that I have title.

Mr. Roberts: --Well, I think the title of it bears on the fact that it shows that the relationship that Holly has to the chickens... by itself, I would agree with you that that would--

Unknown Speaker: It shows it's a chicken owner.

Mr. Roberts: --But it also has to show that in conjunction with that it is engaged in the breeding and hatching of chicks.

It then--

Unknown Speaker: It used to be, and it's finished.

Mr. Roberts: --And it performs... and another argument that I've not really had time to address is that the activities of the chicken catchers and forklift operators are actually primary agriculture, and they're actually harvesting the chickens within the regulations of the Secretary of Labor.

Unknown Speaker: You're not going to spend a lot of time on that argument--

Mr. Roberts: No, I'm not, because I don't have a lot of time.

[Laughter]

But to answer your question--

Unknown Speaker: --Mr. Roberts, as I understood your answer to my question in the very beginning you're saying this business about whether Holly is the farmer is only relevant to whether you can catch the live haul driver, because under any scenario, as you see this case, the chicken catchers and the forklift person have to be agricultural laborers.

Mr. Roberts: --Obviously, that is our position, and it's our... I would agree it's our strongest argument, and that's why I keep emphasizing you have to separate the two.

Analytically they are distinct, and if... if the Court is inclined to show deference to the board on the live haul drivers, we would strenuously argue that such deference would not be owed on the chicken catchers because of the nature of the language and the intent of Congress.

I'd like to reserve a couple of minutes for rebuttal.

Unknown Speaker: Very well, Mr. Roberts.

Mr. Seamon, we'll hear from you.

Argument of Richard H. Seamon

Mr. Seamon: Mr. Chief Justice, and may it please the Court:

The workers at issue here go from petitioner's processing plants to the farms of independent growers to pick up mature broiler chickens and take them back to the processing plant to be slaughtered and dressed.

Petitioner's own witness testified that this work is the first step of the processing operation, and that the work is coordinated to meet the needs of the processing plant.

It is undisputed that chicken processing is not an agricultural activity.

The question is whether the National Labor Relations Board reasonably concluded that these workers, called live haul workers, are not within the agricultural exemption of the National Labor Relations Act.

We think--

Unknown Speaker: But as to the chicken catchers and the people who... the forklift operators, it is being done on a farm.

Mr. Seamon: --That's right.

Unknown Speaker: And it certainly is incidental to the farm operation.

You have to get rid of the chickens.

I mean, the whole farm operation is devoted to raising them for a certain period of time and then moving them on to the next stage, and it's incidental to that.

It can't occur without removing them.

Mr. Seamon: That's correct.

Unknown Speaker: It just seems to me that the position of the board is not reasonable in light of the language of the statute as to those two categories of workers.

Mr. Seamon: We believe that the work of the chicken catchers and forklift operators isn't incidental to the primary farming operations that go on on the farms where they do their activity, and one of the difficulties of petitioner's argument is that they avoid the statutory term, such.

That word requires you to look at the connection between the activity to be classified and what's going on on the farm, and the farm--

Unknown Speaker: Well now, what's going on on the farm is growing the chickens for a certain period of time, isn't it?

Mr. Seamon: --That's right, and that process--

Unknown Speaker: And that process requires getting rid of them after they're 49 days old, doesn't it?

You have to move them on out.

Mr. Seamon: --Absolutely.

Unknown Speaker: And that's incidental to the operation they have.

Mr. Seamon: And--

Unknown Speaker: It may also be incidental to processing, but it certainly, at a minimum, is incidental to the farming operation.

Mr. Seamon: --But in that sense of the term, incidental, the processing operation itself is also incidental to the farm.

There has to be a market for the farmers or else, you know, the growing, they're grown for no purpose.

Unknown Speaker: Does the statute use the term, processing?

Mr. Seamon: No, the statute does not.

The statute raised... basically imposes three requirements, and we think one of them, it is not met here with respect to the chicken catchers and the forklift operators.

First, the work has to be done by a farmer or on a farm.

Second, it has to be done incidentally to or in connection with primary farming operations, and the third and, we think, the most important requirement that's not met here is that it has to be incidental to the operations that go on on that farm.

The operations in this case are defined by the contract between the independent growers and Holly Farms.

Unknown Speaker: Why is that?

I mean, you say it is incidental to the activities that go on on the farm.

It is incidental when an independent contractor comes in and does it, somebody who runs the business of catching and cooping chickens.

If he sends somebody in, it is incidental to the farming business.

But if, instead of contracting with this independent contractor the farmer contracts with the buyer and says, look, of course I'm going to have to get these things caught and cooped before you can process them.

I could hire an independent contractor, but what say I sell you the chickens for a little bit less, and you coop them and... you catch them and coop them when you send your truck to take them.

He says, okay, that's a good deal.

Why should that have anything to do with whether the catching and cooping is incidental to the farming operation, whether you choose to pay an independent contractor or deduct it from the price that you're selling the chickens for?

It doesn't seem to me to have anything to do with whether it's his.

Mr. Seamon: The answer to that I believe was suggested by Justice Breyer.

It does make a difference who you work for as to whether you fall within the agricultural exemption or not.

Congress intended the agricultural exemption to extend to farmers but not to processors.

Unknown Speaker: In neither case are they working for farmers.

In one case they're working for somebody who's in a business of providing independent contracting employees.

Mr. Seamon: That's right.

Unknown Speaker: He's not a farmer.

Mr. Seamon: And the independent contractor example came up as a result of concerns on the part of some Senators with a situation that fell somewhere between farming and processing, and they were concerned with a firm that carved out a niche for itself by traveling from farm to farm performing a service on the farm for the farmer with regard to his or her commodities, and those firms were described as doing nothing but threshing wheat, or some other similar service.

Unknown Speaker: Well, they're not described that way in the statute.

I mean, it may be one thing that led to this particular statutory exemption, but it may... the exemption is in broader terms than the examples which might have led to it.

It's the statutory language that governs and not the thought that might have been behind it.

Mr. Seamon: That's correct, and we... but we believe that in terms of determining whether an activity is incidental to the primary farming operations that are going on on a farm, it's important to determine whether it's connected with some broader process.

In this case, the chicken-catching operations are connected with the broader process of slaughtering and dressing the chickens for market.

To that extent, they're no longer incidental.

You can't say that that's true in the case of an independent contractor whose work is limited to going from farm to farm and catching chickens.

Unknown Speaker: Your assumption, Mr. Seamon, is, and I'm sure you'll agree with this, but I'm not sure it's a correct assumption, is that you can only be incidental to one thing.

You are either incidental to the farming, or you are incidental to the processing.

You can't be incidental to both.

I'm just--

Mr. Seamon: No, we don't agree with that.

Unknown Speaker: --I'm not sure I agree with that.

Mr. Seamon: That's not a necessary premise of our argument.

The statute really asks only one question, and that is whether the activity is incidental to the primary farming operation, and that's the only question that has to be answered.

We're saying the chicken catching and the forklift operations are really part of the processing operation, and we're relying on a number of--

Unknown Speaker: Well, Mr. Seamon, any farmer would tell you it's incidental to the farm operation to get those chickens out of there when they've reached the right age.

I mean, that has to be part and parcel of it.

Anybody who's ever worked on a farm knows that.

I think your argument, or the argument of the board is just a real stretch here.

Mr. Seamon: --It's only incidental in the same sense that it's necessary for the farmer to find someone to sell the farmer's... the chickens to once they're grown, and that's... and whatever operations the purchaser performs on those chickens are part of the process that if there were no market for the chickens they wouldn't be grown at all in the first place, so in that sense, processing is--

Unknown Speaker: Yes, but the statute itself refers to preparation for market, delivery, storage, et cetera.

I mean, clearly the statute contemplated this very kind of thing with regard to farming.

Mr. Seamon: --We are not saying... the board is not saying that chicken catching operations can never be incidental to primary farming.

It's highly relevant the way in which the operations are performed and for whose benefit they're performed.

In the case of an independent contractor hired by a farmer, then the chicken catching is performed for the benefit of the farmer.

But when they're performed by a set of employees who are dispatched from the processing plant and whose work is really scheduled to meet its needs, that work no longer is incidental to--

Unknown Speaker: I don't want to belabor the point too much, but it certainly benefits the farmer to have the mature chickens moved out so the farmer can get more money by raising chicks again.

It helps the farmer.

It's part of his operation, or hers.

Mr. Seamon: --Yes, but again I would go back to the term "such" in the statute, because I believe that word is key here in the sense that it requires you to focus on the particular farming operations that we're talking about, and those operations are defined by contract as being limited to raising the chickens to a certain age and then making them available for processing.

Unknown Speaker: Suppose that Holly contracted out in the manner in this case only half of its chickens, and the other half it raises on its own, it has its own farms, and the chicken catchers spend half their time on Holly's own farms and half their time doing what they're doing in this case.

What result in this case?

Mr. Seamon: The answer would be the same with respect to both phases of the operation.

They... those workers would be involved in processing under the circumstances of this--

Unknown Speaker: They would be processing even when they are on Holly's own farms?

Mr. Seamon: --Yes, that's right, and again for the same reasons that exist on this case.

They're sent out of the processing plant.

They are employees of the processor.

Unknown Speaker: No, no, my hypothetical is that they spent half their time on the farms where the chickens are raised from the very beginning to 49 days, and half the day they go out and work on Holly's farms engaging in this operation, and the other half the time they spend going out to these other farms as in this case.

Mr. Seamon: We would say that the time spent on both farms, on both kinds of farms would not be incidental to the farming operations there, if the facts were otherwise the same as they are in this case.

Unknown Speaker: And so then if 90 percent of their time was spent on Holly's own farms, and then 10 percent of their time doing this, the result would be that they would be farm workers then, or not?

Mr. Seamon: That they would not be farm workers there, and again, it is because of the way in which this work is organized.

I mean, it's no accident that the petitioner's own industry has organized the work of the chicken processing to separate it very distinctly from the work of the independent growers.

All of the growing operations--

Unknown Speaker: Well then, in my hypothetical, half of their time is spent where they're doing the growing themselves.

Mr. Seamon: --Yes.

Unknown Speaker: And the workers aren't engaging in farm work at that time either?

Mr. Seamon: No, that's right.

The board's position is that, again, if the facts were otherwise the same as they are in this case, except for the fact that Holly Farms owns some of these farms, their work would still be part of the processing operation.

Again, we're simply relying in part on petitioner's own characterization and the way in which they organize the work.

Unknown Speaker: May I just make sure I understand what you're saying?

Assuming Justice Kennedy's example that the farms owned by Holly Farms did not have any kind of contractual situation just as this, it's just that they happen to pick an appropriate time to go pick up their chickens, you'd say they were still not agricultural workers then?

Mr. Seamon: That's correct.

That's correct, because their work would still be part of the processing operation under the way in which the work has been organized in this fashion.

Unknown Speaker: But if it were a totally independent chicken catcher who didn't... then what's the result?

Mr. Seamon: In that case the work would be secondary to farming, and again, it is--

Unknown Speaker: Which means what you're saying is that it can only be incidental to one thing.

You acknowledge it's incidental to farming.

However, it becomes not incidental to farming when it's connected with a processing operation.

It seems to me the premise of your argument is you can only be incidental to one thing, and therefore you must make the choice of whether you're incidental to farming or incidental to processing, and I don't see that that follows.

Mr. Seamon: --I'm sorry if I'm not making it clear.

It is not a premise of the board's position in this case.

Instead, the idea is that chicken catching can be secondary farming under certain circumstances, for example, if the work is done by an independent contractor also, if the farmer's... if the farmer--

Unknown Speaker: The certain circumstances you're saying is the circumstance that it is not incidental to something else, namely incidental to processing.

Mr. Seamon: --Well, in a colloquial sense it's certainly true that things can be incidental to both one operation and another operation, and that's why part of the inquiry that's important under this Court's own decisions regarding the agricultural exemption is the way in which the work is organized.

Unknown Speaker: Let's assume the case in which you consider all the factors and you're on the fence, and you say, in this particular case there are good reasons to say it's incidental to such farming, and there are good reasons to say that it's incidental to slaughtering.

Do you have a tie-breaker?

Mr. Seamon: I think one of the most important determinants in that case is who are the employees employed by?

Unknown Speaker: Well, but no, I was assuming that was one of the good reasons.

I mean, that is a reason under the regs.

Why don't you say in the case... and I'm going to assume for the sake of argument this is such a case.

You could say that it's incidental to such farming, and you could say that it's incidental to slaughtering.

Maybe one argument is stronger than the other, but maybe not, but there are arguments each way.

Why don't we simply say, the presumption of the statute is that you're an employee unless it is demonstrated that you're not, and therefore the tie-breaker is the inclusiveness of the general definition of employee, like the inclusiveness of the general definition of income.

Mr. Seamon: That's right.

An appropriate tie-breaker in that situation may be the canon of construction that's been specifically applied with reference to the agricultural exemption that exemptions are to be narrowly construed.

Unknown Speaker: Well, that comes from a couple of old cases.

I don't think we're repeated it recently.

Mr. Seamon: Nonetheless... and we don't think that a tie-breaker needs to be applied in this case.

The problem--

Unknown Speaker: Mr. Seamon, are you saying that even if Holly Farms never has this contracting-out operation, so they did everything from hatching the chicks to raising them to bringing them to slaughter, even so, these employees would be typed by the board nonagricultural employees?

Mr. Seamon: --Not necessarily.

It would depend on the particular circumstances of the case.

For example, if the employees who did the catching and loading of the chickens were the same employees who were actually involved in the raising of the chickens--

Unknown Speaker: No.

They are teams, and that's what they do.

They catch chickens, and they bring them to the slaughterhouse, but they are operating under the aegis of one integrated operation that does everything and farm's nothing out.

Mr. Seamon: --Yes, then the answer to that would be that they would be involved in processing rather than agriculture.

Unknown Speaker: Okay, can I go back for a second... were you finished?

Yes.

The... as I... I'm not positive I have this chicken thing sorted out correctly, but let's start with the farm, and the farm is under contract to Holly Hill, is that right?

Okay, so now we call him contracting Farmer Brown.

Now, if, in fact, Smith, who picks the chickens up and puts them on the truck and takes them into the processing plant, I take it if Smith was an employee of Farmer Brown, he would be covered... exempt.

I mean, he'd be an agricultural laborer.

Mr. Seamon: That's correct.

Unknown Speaker: Okay, and I take it that if Smith were either himself an independent contractor or worked for an independent contractor like the independent thresher, he would be an exempt agricultural laborer.

Mr. Seamon: That's correct.

Unknown Speaker: And if, in fact, he happens to work for a firm which is in the business of grabbing chickens, transporting them, and turning them into sort of delicious packaged chicken, he does not become an agricultural laborer, he's not exempt.

Mr. Seamon: That's right, or in that--

Unknown Speaker: All right.

Now... now, that is a little counterintuitive, because you'd think he's going out there and picking up the chickens out of the thing the same way each time, and you can't quite turn to the contract on that, I don't think, because you can write the contracts, or that same contract with any of the three and you'd come to different results, and therefore it must turn on something, and I take it you'd think it turns on the deference that we owe somebody.

And so that's my question.

Who do we owe that deference to, and exactly what?

Is there a DOL regulation that solves this under the FLSA, because I take it that the board is trying to copy the FLSA.

Mr. Seamon: --That's right.

Unknown Speaker: All right, and so what we should look to, I guess, is what do the FLSA administrators think about this, and I have some regulations, and they talk about transporting plant employees, they talk about delivery to market, and they seem in talking about the transporting of plant employees that they're not exempt unless they're the employees of the farmer, i.e., of Brown.

Mr. Seamon: That's correct.

Unknown Speaker: But they aren't too clear on that, and that's what I'd like you to address yourself to.

And also, they talk about marketing, i.e., transporting chickens, in this case.

They don't talk about going into the coop and picking them out, or going to a place where they're running around and picking them out, so what... to what extent... I mean, I'm prepared to give quite a lot of weight to the experts on this over in the FA, but what has the FLSA said about this?

How clear have they made it?

Mr. Seamon: There are a series of regulations of the Department of Labor that address this situation.

The basic regulation has specifically addressed the contract arrangements for the raising of poultry, and that was first adopted in 1961, recognizing the fact that this contracting out of the raising function goes back sometime, and what it says is that the employees of a processor who perform work on a farm as an incident to in conjunction with the raising of the poultry on that farm are employed in secondary agriculture.

So it--

Unknown Speaker: So we've now got against you that it's secondary agriculture.

Mr. Seamon: --Well--

Unknown Speaker: So it's against you--

Mr. Seamon: --No, I'm--

Unknown Speaker: --if they're employed by Farmer Brown.

Mr. Seamon: --Respectfully, I disagree.

Unknown Speaker: No.

Mr. Seamon: What the regulation says is, it makes it conditional on whether the work is done as an incident to or in conjunction with the primary farming operations on that farm, so--

Unknown Speaker: Well, the chicken-picking normally would be, wouldn't it?

Okay... oh, ahead.

Mr. Seamon: --That basic regulation requires an inquiry into, is this work incidental to primary farming operations?

The regulation that addresses that point state that an activity is incidental to primary farming if it constitutes an established part of agriculture, is subordinate to the farming operations involved, and does not amount to an independent business.

Now, we think all three of those factors support the board's conclusion in this case.

The chicken-catching and loading operations isn't an established part of agriculture because it's not ordinarily done by farmers.

On the contrary, the facts of this case represent the overwhelming practice of the industry to separate the functions of raising and catching so that the raising is done by the independent contractors and the catching and loading and transportation is done by the employees of the processor.

Unknown Speaker: I see, and if farming should develop so that farmers no longer feed their own hogs but there are hog-feeding companies, then the feeding of hogs would no longer be farming, is that right?

Mr. Seamon: That's quite possible, and this Court anticipated that very situation in the Farmers Reservoir Company, when it said, agriculture as an occupation includes more than the elemental processes of planting, growing, and harvesting.

There are a host of incidental activities that are also necessary to the process.

Whether a particular type of activity is agricultural depends in large measure on the way in which that activity is organized in a particular society, and the Court goes on to describe the example of the manufacture of farming tools.

Unknown Speaker: Read the last sentence again.

I think that the import of that is that there are core agricultural activities, among which I would include the feeding of hogs, and then the last sentence you read goes to other things that are at the margins, which may or may not be.

Mr. Seamon: That's right, and--

Unknown Speaker: Isn't that right?

Mr. Seamon: --Yes, that's right.

Unknown Speaker: So the question is whether catching a chicken and putting him in a coop so he can be taken to market is the equivalent of feeding hogs or not.

Mr. Seamon: And I think it's clearly not, because if a firm were engaged simply in the work of going from farm to farm catching chickens, it wouldn't be ordinary to call the person who owns that business a farmer.

Unknown Speaker: All right, so if in fact the... I mean, you have to draw the line somewhere, and I guess people would think that transporting the chicken, coming and just taking the chicken and bringing it to the processing factory, that's fair enough to call not agriculture, but you've gone a little bit in the direction of feeding the hogs, because he's actually picking the chicken up, and that's not quite feeding the hog, but it's a step in that direction.

Mr. Seamon: Well, I--

Unknown Speaker: That's one problem.

But now go back to the regs.

That is, are there other regs that help you, or have we listed them all?

Mr. Seamon: --Well, let me say a couple of more words about the regulation that specifically addresses the incidental-to requirement, because that is really the requirement on which we contend that petitioner's argument founders.

The chicken catching is not an established part of agriculture because of the way in which it is organized.

It is carried out by and large by employees of processors.

Also, it is not subordinate to primary farming because it's not carried out under the direction of the independent growers.

Their contractual obligations end at the point that the chickens reach maturity and are made available for processing.

Unknown Speaker: Could you just... what I was trying to do is, I'm just trying to list on my piece of paper all the regs that I want to be certain that I read, so I want to be sure that I have them all on that list, so just be sure you mentioned them all.

Don't you have a reg on the ownership of the chicken... I thought I read it in the brief somewhere... that would be relevant to look to, to the person who holds title to the chicken?

Mr. Seamon: Yes, that's correct.

One of the board's--

Unknown Speaker: Is that the same reg that Justice Breyer just referred to, or is that somewhere else?

Mr. Seamon: --It is not the same regulation as the one in which I'm talking about.

It is--

Unknown Speaker: But it's in the brief.

I thought it was in your brief.

Mr. Seamon: --It is on page 27 of our gray brief on the merits.

Unknown Speaker: Okay.

Mr. Seamon: And it is quoted towards the bottom of the page of our gray brief on the merits, page 27.

It's 29 C.F.R. 780.143, and it's block-quoted.

The fact that a practice performed on a farm is not performed by or for a farmer is a strong indication that it is not performed in connection with the farming operations there conducted, and in order to decide whether the work was done for a farmer... as Justice O'Connor was suggesting, in a sense, of course, the removal of chickens is done for the farmer, but in certain cases it's more accurate to say that it's done for the benefit of the processor.

At least that's true when the crew works out of the processing plant, the testimony of petitioner's own witness calls the process--

Unknown Speaker: But again, it's probably done for both.

The farmer needs to get rid of the mature pullets in order to continue his business of growing more, and the processor needs to get them in order to process them, and they both benefit, and it's incidental to both.

Mr. Seamon: --Whether the... we would say that you have to look at some additional factors in that, however, and one of them would include the fact that there is a good reason why these chicken catching operations are employees of the processor rather than employees of the farmer.

The chicken processing operation--

Unknown Speaker: But under the statute, if it's on the farm, it doesn't matter who the employer is if it's on the farm and incidental to or in conjunction with such farming operation.

That's all that's important.

It's not who is the employer.

Mr. Seamon: --But the incidental-to requirement requires you to look at the relationship between the activity to be classified and the primary farming operation that goes on on that farm, and in looking at the relationship between those two activities, I would submit you also have to look at the relationship between the parties.

Are the same employees who are actually doing the raising of the chickens also doing the catching of the chickens?

In that case, there's a very close correlation between the two types of work, and it may very well be relevant, because it is the farmer's employees who are doing the catching, to say that is incidental to the farming.

Unknown Speaker: Well, it's crystal clear that the language of the statute was included to bring in, for instance, the independent thresher and so forth.

It was never contemplated that it had to be an employee of the farmer.

Mr. Seamon: And that independent contractor is described in the legislative history as limited to doing nothing but going from farm to farm threshing wheat for the farmer.

In that situation, the firm is working under the direction of the farmer.

Since by hypothesis it weren't involved in processing, you couldn't say that it's activities were part of--

Unknown Speaker: But don't you suppose the farmer here has to tell the chicken catchers the chickens that are 49 years old are in that particular area--

--Days old.

--or 49 days old--

[Laughter]

--are in that particular area, those are the ones you have to go catch, and you go in there and get those?

Mr. Seamon: --The record doesn't make that clear.

In fact, the record doesn't indicate any interaction whatsoever between the independent growers and the chicken-catching crews, and that is one of the factors that we believe is relevant.

Unknown Speaker: But Mr. Seamon, we assume they're not going to show up at the farm and have the farmer just stand mute.

The farmer is going to say, yes, go into that chicken house, get those chickens.

Watch out for the red one.

Yes.

[Laughter]

Why... it seems to me that this brings us back to a question that Justice Scalia has posed a couple of times.

Going to the reg on page 27, here are good reasons to say, in the abstract, or just looking to common language usage, that the chicken catcher in this case is doing it for the farmer, and there are good reasons to say that he's doing it for the processor, but what we've got is a regulation here that says, if you want to know how to make the choice between those two possibilities, one of the things you look at is who holds title to the chicken.

Mr. Seamon: That's right.

Unknown Speaker: And why don't you... I mean, why... don't you have a fair argument saying, look, we've got to have tie-breakers somewhere, somebody's got to figure out what they are, and this Department of Labor regulation has said, let's look to title, and therefore defer to the regulation, admitting that as a matter of language it could go either way?

Mr. Seamon: And certainly title is relevant, and the Court could decide to make title a tie-breaker, and the board--

Unknown Speaker: And we ought to defer to it.

And you always assume that the tie has to be broken.

It seems to me that your acknowledgement that independent contractor's employees when they engage in this business are engaging in agriculture.

It seems to me that acknowledgement admits that you don't have to be incidental to one or the other, you can be incidental to both.

Surely those people, when they do that work, are doing it incidentally to the independent contractor's business of catching and cooping chickens.

There's no doubt that it's incidental to his business, and there's also no doubt that it is incidental to the farmer's business.

You acknowledge that.

The Government acknowledges it.

So, you know, just taking that one example, it's clear that you can be incidental to both, so all of your pains to demonstrate that it is incidental to the processing business lead you nowhere.

One can say yes, I admit it's incidental to processing, but it's also incidental to farming.

Is the purpose of the statute relevant in respect to that, if it's all right... I mean--

--Yes.

That the... nobody... is there some authority that... I mean, the purpose of this statute is to let employees organize, and you don't want to let them organize where they just work for farmers because the farmers didn't have the... they were poorer.

They were poorer, and that's why they didn't have to pay the labor act wages either, or the FLSA wages.

They were poorer, and when somebody works for a big company, they're not under any assumption they're poorer.

I mean, that would be a... does that come into play anywhere in this... I mean, is there some authority that says we can't take into account the purpose of the statute?

Mr. Seamon: --May I answer?

Unknown Speaker: Yes.

Mr. Seamon: The purpose of the statute is highly relevant.

This is a management-labor relations statute that Congress intended to limit to the employees of farmers and not processors.

Unknown Speaker: Thank you, Mr. Seamon.

Mr. Roberts, you have 3 minutes remaining.

Rebuttal of Charles P. Roberts, III

Mr. Roberts: Just a couple of quick responses on some of these regs which have been referred to.

He's ignored several that I think have to be interpreted in conjunction with the ones that he cited.

In particular, section 780.150(k)... excuse me, 151(k), the Secretary of Labor defines the poultry, hauling, grading, cooping and loading poultry are operations that are incidental or that constitute preparation for market.

Also, 780.126, which is cited by this Court in Bayside, specifically says that the activities of a processor when performed on the farm, it envisions this very situation we have here, where the processor has title and is dealing with an independent grower, because this is a very common arrangement.

It says that the processor's employees can be engaged in secondary agriculture to the extent that they are working on a farm.

So if that statute, if that regulation has any meaning, then the board's position that it's incidental, I mean, the processing argument could be made there, too.

it's always incidental to processing in some way if it's a processor, yet this regulation clearly envisions that a processor's employees who work on a farm can be engaged in secondary agriculture.

Plus the case--

Unknown Speaker: What was the number of that again?

Mr. Roberts: --Excuse me?

It's 780.126, plus the case that's cited in there by the Secretary of Labor is Johnston v. Cotton Producers, which is a Fifth Circuit case, but it's cited with approval, and in that case, it dealt with a retail store, which... the reg speaks of retail stores and processors in the same language.

At one time retail stores would hold title to the chickens and then basically perform services for the farmer, and they say in that case that, specifically that chicken, a guy who caught chickens and loaded them on the trucks was engaged in secondary agriculture to the extent that his activities occurred on the farm, so the board's position boils down to the fact that it simply... that it's going to Holly's processing operation, which is inconsistent with this regulation, it's inconsistent with Johnston, it's inconsistent with Maneja, in which the destination of the sugar cane was the processing plant, but that didn't deter the Court from saying that the activities were incidental to farming.

So the board has just gone way beyond interpret... you know, reasonable interpretation of a statute in saying that it can only be incidental to processing in light of all these prior decisions and interpretations.

Unknown Speaker: Mr. Roberts, why do they debeak chickens?

I didn't know they did that.

Why do they do that?

Mr. Roberts: I think it's to actually... they don't take the whole beaks off.

They actually trim them back, and I think the purpose is... and I don't know this for certain, but I think the purpose is to prevent them from harming themselves or each other in some way, that... you know, with the beaks pecking each other, or attacking each other, or something of that nature.

I don't have anything further.

Chief Justice Rehnquist: On that note, the case is submitted.

[Laughter]

Unknown Speaker: The honorable court is now adjurned until Monday next at ten o'clock.

Attribution:

The OYEZ Project

Featured:

Brotherhood Of Locomotive Engineers v. Atchison, Topeka & Santa Fe Railroad Co. - Oral Argument

Fri, 09 Jan 2009 14:49:48 +0000

Case:

Brotherhood Of Locomotive Engineers v. Atchison, Topeka & Santa Fe Railroad Co.

Media File:

94-1592_19951030-argument.mp3

Related Transcript:

1995_94_1592_argument.xml

Transcript:

Argument of Lawrence M. Mann

Chief Justice Rehnquist: We'll hear argument next in Number 94-1592, Brother... spectators are admonished to be quiet until you get outside the courtroom.

The Court is still in session.

We're going to hear argument next in Number 94-1592, Brotherhood of Locomotive Engineers v. The Atchison, Topeka, and the Santa Fe.

Mr. Mann, you may proceed whenever you're ready.

Mr. Mann: Mr. Chief Justice, and may it please the Court:

The obvious question for you to ask me this morning is, if Congress intended for waiting time for deadhead transportation to be time on duty, why didn't it say so specifically?

Well, the answer to that, at least in my mind, is very simple.

We're dealing with a statute that first of all encompasses many train operations.

Even the petitioners acknowledge that there are thousands of train operations daily.

At the time of the '69 statute, there were 36,000 train operations each day, so--

Unknown Speaker: What do you mean when you say train operations?

Mr. Mann: --Meaning, a crew goes on duty and performs service for the railroad.

That would be one train operation, Your Honor.

And the other answer to that is, and I think it's the real guts of the case is, there was no need to specifically state that waiting time was time on duty because Congress treated that issue in several sections of the statute, and I refer the Court to section 21103(b), and I will talk about (1), (2), (3), (4), (5), and (6) subsections.

And in each one of those subsections it's very clear that Congress was attempting... and I submit to you they did close the loopholes, and one basic problem is that railroad workers at that period of time were sitting on trains for hours on end waiting for a pickup crew or another train to come along and take them to their final release period, and it's... throughout the entire amendments the sole purpose was to close those loopholes, and they did it in several ways.

First of all, you don't have to be working at all to be covered as time on duty under the act, because it's very clear... you know, I'm just a country boy, Your Honors, but English is English.

It says, interim periods available for rest at a place--

Unknown Speaker: Where are you reading from, Mr. Mann?

Mr. Mann: --Excuse me, Your Honor.

Unknown Speaker: And where will we find it?

Mr. Mann: This is section 21103--

Unknown Speaker: Page 2 of the petition?

Mr. Mann: --In my brief, Your Honor, it is... yes, page 2 of the petition.

Page 3, number (5), subsection (5), Your Honor, an interim period available for rest.

Now, what the carriers and the Government is telling you is that this period of time should not be considered here.

They want to write out and put conditions on each section, not giving it its broad and plain meaning.

They--

Unknown Speaker: Well, are you reading out the word, interim?

Mr. Mann: --The interim, Justice Souter, means interim between the time you go on duty and the time that you're finally released from duty.

Unknown Speaker: It doesn't mean interim as between two periods of active duty?

Mr. Mann: It does not, Your Honor.

Unknown Speaker: Do we have a definition in the statute?

Mr. Mann: Well, we have some legislative history.

In the hearings, as well as in the Senate report, it talks about final release of all... finally released from all responsibilities.

The proof of the pudding there is--

Unknown Speaker: I'm sorry, I'm just not getting it.

I'm sure somewhere they use that phrase, but how are you connecting that with the meaning of the word?

Mr. Mann: --Well, interim--

Unknown Speaker: Interim.

Mr. Mann: --Interim means, as discussed in the House hearings and the industry spokesman, the Association of American Railroads, made that point clear, Your Honor, if I--

Unknown Speaker: Well, he may have done it, but is there a House or a Senate report that defines the term, or indicates--

Mr. Mann: --It does not define the term.

Congress--

Unknown Speaker: --If I understand your argument correctly, your meaning would have been conveyed better if the word interim were left out, just a period available for rest.

Mr. Mann: --Well--

Unknown Speaker: What does interim add that helps rather than hurts your position?

Mr. Mann: --It... I submit it doesn't hurt my position.

It includes periods for operations.

Unknown Speaker: But you would be stronger, your argument would be stronger, would it not, if the statute didn't say, interim?

Mr. Mann: Somewhat, but I don't think it's definitive, because as the railroad... the chief railroad witness, and I think it's very critical, testified, and I refer to the House hearings at page 135, where Mr. Manion... Mr. Manion was the vice president of the Association of American Railroads, and he was talking about the problems of deadheading transportation and what would happen if the bill as was introduced were adopted, and after he discussed that part, he said, however, under another provision of H.R. 8449, which is the section dealing with interim periods for rest, section 1(b)(3)... now, that is exactly the same as what was passed, subsection (5), and I quote:

Periods available for rest at other than a designated terminal will be included as time on duty.

Consequently, if a crew reaches the hours-of-service limit in the country and is relieved there, it will still be on duty for purposes of hours-of-service purposes because it is not relieved at a designated terminal.

Unknown Speaker: Who says this?

Well, Mr. Mann, even for people devoted to legislative history, that's a fairly low level, isn't it, what a witness testified?

Mr. Mann: Except, Your Honors, this was an industry spokesman, the Association of American Railroads, on a bill that only affected them, and what Congress was attempting to do is to close all these loopholes, and I submit to you, this statement as far as I am concerned--

Unknown Speaker: Well, how do we know that Congress intended to "close all these loopholes"?

Mr. Mann: --Well, the act solely--

Unknown Speaker: It's not called the loopholes-closing act.

[Laughter]

Mr. Mann: --No, Your Honor.

The act solely deals with placing in the act periods of time that not... that previously were not time on duty as being time on duty, with one exception, deadhead transportation to the final release point.

Everything else that they did, the Congress made it time on duty to eliminate every abuse that was testified to in these hearings, and this is the industry spokesman.

Now, you can look at the hearings, and I spent some time doing that, to see what all the rest of the witnesses stated from the industry.

Unknown Speaker: But is there something in there that talks about the definition of deadhead transportation?

Mr. Mann: Yes, there is.

Unknown Speaker: Deadhead transportation, I would think sometimes when people are transported they include the time that they're sitting around in the station waiting room--

Mr. Mann: Well, that's--

Unknown Speaker: --or the airport--

Mr. Mann: --That's one of the issues.

Unknown Speaker: --and sometimes they don't, so it all seems quite ambiguous to me, anyway, and if it's ambiguous, shouldn't you leave this kind of interpretation to the agency?

Mr. Mann: Well, two things, Justice Breyer.

One is, of course, the industry, how they dealt with deadhead transportation, and here's how they define it... Mr. Manion again.

Deadheading may be defined as travel performed by railroad employees at the direction of a railroad.

Now, he was not the only railroad witness.

Unknown Speaker: But that doesn't do it, does it?

Mr. Mann: Well--

Unknown Speaker: I say I'm traveling to Boston.

I might or might not include in my travel time the time spent at the airport.

Mr. Mann: --That's correct.

Unknown Speaker: All right.

So is there something there that says, by the way, we don't mean time spent at the station, or spent at the airport, or sitting around waiting for the train to show up?

Is there anything like that?

I--

Mr. Mann: There are three things.

One is commingled service, which is defined in the statute as any other service for the carrier.

You are part of the crew.

You're not free to leave the premises except being under the control and subject to being called, and you're not finally released from duty until you get back at the terminal and do other ministerial duties.

Unknown Speaker: --Mr. Mann, is it your position that if you are deadheaded back to your final point of release, while you're waiting to get the first train, let's say to Omaha, that is on-duty time?

What about... suppose you have to wait again in Omaha to get another train to New York City, where you're going to be released?

What about that wait?

Is that part of deadhead--

Mr. Mann: All time... all time--

Unknown Speaker: --So you're not on duty while you go from Omaha to... where did... from wherever you're... wherever you end your work to Omaha, you're not on duty--

Mr. Mann: --You are on duty.

Unknown Speaker: --While you're being transported?

Mr. Mann: You're on duty.

That's specifically in the statute.

From the time you mark on duty, and that's subsection (4) of the--

Unknown Speaker: I thought deadheaded transportation back is not counted.

Mr. Mann: --Deadheaded transportation back, at the end of your tour of duty, at the end of your tour--

Unknown Speaker: Okay--

Mr. Mann: --of operations--

Unknown Speaker: --My tour has ended in San Francisco.

Mr. Mann: --Okay.

Unknown Speaker: And I... they've arranged to get me back by putting me on a train to Omaha, all right.

Now, you say while I'm waiting in San Francisco, I'm still on duty, all right.

What about while I'm waiting in Omaha?

Mr. Mann: It's all commingled service, and it's also time that is free for rest, and under the statute, that's on-duty time.

Unknown Speaker: And what about the transportation while I'm on the train between San Francisco and Omaha?

Mr. Mann: That is not, because of the statutory provision.

That's why Congress carved out this one exception.

The only exception is that it will not be counted as time on duty, nor time off duty.

That one period of actual movement, traveling in... traveling in is the key.

Unknown Speaker: Why is that magic?

I don't understand that.

Mr. Mann: Well, because--

Unknown Speaker: I mean, if... it makes no sense at all.

Mr. Mann: --Well, maybe... maybe free at rest makes no sense at all, either, but it would create an anomaly.

The anomaly would be this--

Unknown Speaker: You don't think it's an anomaly that I'm on duty while I'm at rest and back on duty whenever I start moving again?

Mr. Mann: --Congress said so.

Unknown Speaker: And if I have eight stops along the way, I'm on-off, on-off.

Mr. Mann: If Congress had not said that rest time was time on duty, I would agree with you, but Congress didn't say that.

Unknown Speaker: Mr. Mann, what happens if I'm being transported back in a van and there's a breakdown, and it takes 3 hours to get that van fixed so it can move again to the place where I'll be released?

We know that the time that you're in the van is deadhead time, and it's not on-duty time.

What about when the car breaks down and I'm waiting to have it fixed?

Mr. Mann: It's a good question, but I would submit to you that the way Congress envisioned this, I would argue to you that any time that you're not traveling, and it's very clear if you look at the statute and the meaning of the terms, if you're not traveling in the deadhead transportation, then it's either commingled service, you're performing other service--

Unknown Speaker: No service.

I'm waiting--

Mr. Mann: --When you're waiting--

Unknown Speaker: --for the van to be fixed.

Mr. Mann: --that's rest time.

Unknown Speaker: Well, why isn't it on duty time, as it is in Justice Scalia's Omaha wait.

Why is he on duty in Omaha but not on duty sitting on the side of the road?

Mr. Mann: Congress said that an interim period available for rest is time on duty.

You can be at rest completely--

Unknown Speaker: He's at rest on the side of the road.

Mr. Mann: --Mm-hmm.

Unknown Speaker: So he's on duty, so the answer to Justice Ginsburg's question is, he's on duty.

Mr. Mann: He doesn't have to be performing any duty.

He can simply be doing nothing, just sitting there waiting, doing absolutely nothing--

Unknown Speaker: But it's treated as on-duty time.

Mr. Mann: --Specifically.

Unknown Speaker: Yes.

Yes.

I assume you don't take the position that when the van stops for a red light he's back on duty, do you?

[Laughter]

Is it a... it's not an in-motion theory, not completely that, huh?

Mr. Mann: Typically, the problem... we wouldn't be here if there hasn't been tremendous abuses.

What we have as a typical situation, at the end of the 12 hours a crew is waiting and waiting and waiting.

We have evidence in the record that up to 10 hours, sometimes, they have to wait for someone to come and get them--

Unknown Speaker: Can I go back... I'm... I--

Mr. Mann: --Yes, Your Honor.

Unknown Speaker: --My question... and you just didn't have a chance to get out the other two things--

Mr. Mann: Oh--

Unknown Speaker: --and what I was curious, remember, that this word deadhead transportation struck me, at least in the statute, as ambiguous, that of course deadhead transportation is limbo time, yes--

Mr. Mann: --Yes.

Unknown Speaker: --but what is deadhead transportation, and my question was, what evidence is there that you could not... not that you... but you could not read those words, deadhead transportation, to include time in the station, time waiting to go on the train itself, as we do with airplanes and trains normally.

Mr. Mann: If you're--

Unknown Speaker: And what is it in... and you listed three things.

The first thing was, you said I should look at the commingled, the definition of commingled--

Mr. Mann: --Commingling--

Unknown Speaker: --and you were going to mention two others.

Mr. Mann: --That's correct.

One is the rest period, interim period for rest--

Unknown Speaker: Where would I... where do I find--

Mr. Mann: --That is--

Unknown Speaker: --You mean just in the statute here, or in--

Mr. Mann: --In the statute.

Unknown Speaker: --All right.

I've looked at that.

It didn't seem--

Mr. Mann: Oh... oh, I--

Unknown Speaker: --to me that it was clear.

Mr. Mann: --Well, let me--

Unknown Speaker: One is the definition of commingled in the statute, the other is the definition of rest period, and what was the third?

Mr. Mann: --The third is, what was Congress trying to do here?

Unknown Speaker: Okay, what?

Mr. Mann: Congress was trying to eliminate the abuses, and this was one of the greatest abuses that the industry was accomplishing.

They were leaving these crews out there an inordinate amount of time, and they're still doing it today.

Unknown Speaker: Well, if, in fact, it is an abuse, and if, in fact, the agency has significant delegated power to define deadhead transportation either way or partial ways, then couldn't you deal with that problem through the agency dealing with it?

Mr. Mann: I don't think the agency, Justice Breyer, has the authority here.

This is the one statute, the only safety statute on the books, in which the Federal Railroad Administration does not have regulatory authority.

They enforce, but they have no regulatory authority.

In fact, Congress took away the authority.

In the old statute in 1908, the old statute, the Interstate Commerce Commission did have that jurisdiction.

Unknown Speaker: But they can interpret.

Mr. Mann: They can interpret, yes.

Unknown Speaker: They can interpret, and they did.

Mr. Mann: They did.

Unknown Speaker: And they said, we think that two things go together.

When you're going to the job, then the waiting time, everything, is on-duty time.

Mr. Mann: Yes.

Unknown Speaker: And when you're going from the job, then everything is this limbo thing.

Why doesn't that just make entire sense as an interpretation?

Mr. Mann: It does in one respect, but the other respect I can just say, the very opposite is true.

Going to deadhead trans... deadhead to-duty assignment obviously includes the time you report to duty, and the time you are actually traveling, because the first subsection states very clearly that time on duty begins when you report for duty, so obviously, and I could argue that if that is time on duty from the point of reporting to duty and actually moving in transit, then the opposite situation coming back is the same.

Unknown Speaker: But one thing is not the same.

You can't get very far with your release point, because the statute tells us that the deadhead transportation time back, before the point at which you're released, that that time is limbo time.

Mr. Mann: That's correct, but the statute also tells you that, unlike what the respondents are saying, it tells you that you are not... there's... the position of the respondents, simply put, is that the employee is off-duty, no further obligations, after the 12 hours is reached.

That's just not the fact.

Unknown Speaker: Well, that's a factual question.

We didn't take this case to figure out the fact of whether there are duties, and I at least am going to decide it on the assumption that there aren't.

Now, if you can prove that there are duties in a particular case, it's a different case.

But let's assume there are no duties, that the railroad worker is simply waiting to go back to where his rest time begins.

Now, I can see why Congress would want deadhead time, including the time waiting for the deadhead transportation to arrive, I can understand why they would want that to count at the beginning of the work period, because by the end of the work period, the worker's going to be very tired.

You should count that time against him, right?

But at the end of the work period, what difference does it make?

Mr. Mann: Well--

Unknown Speaker: He's not doing any more work for the railroad, his rest time for the mandatory period of rest he has to take doesn't begin... this is limbo time, right, it's not rest time.

Mr. Mann: --Correct.

Unknown Speaker: So what... why would Congress want it to count towards work time?

Mr. Mann: There are several--

Unknown Speaker: I can't understand it.

Mr. Mann: --answers to that.

Number 1, why would they want just rest time to be time on duty?

Because there were abuses at that time, and there are still abuses.

That's one reason.

Unknown Speaker: Yes, but that's going back to your claim that in fact they're really being required to do something.

It seems to me that that answer is inconsistent with the--

Mr. Mann: They're not required... Justice Souter, they're not required to do anything, and they're off... I mean, and they're on duty, specifically by the statute, and that was what the industry spokesmen were telling Congress at the time.

Congress, if you adopt this, we can never let anyone off at an interim point.

Unknown Speaker: --Yes, but--

--When they have more duties later.

That was addressing--

Mr. Mann: They do.

They still do.

Unknown Speaker: --the situation when they have more duties later, so that their total on the job, their total time on the job will be stretched, and by the end of the job, they'll be very tired.

Mr. Mann: Justice Scalia--

Unknown Speaker: Here we're talking, by definition, about a situation where their job is done, and it's not going to be counted toward their rest time, and it's not going to make them more tired for any duties that they perform.

Mr. Mann: --I respectfully differ with you because, as I've pointed out in my reply brief, the duties don't end.

When you get at the end--

Unknown Speaker: You're going to win in front of the Seventh Circuit.

Mr. Mann: --Sir.

Unknown Speaker: If that's true, then under the Seventh Circuit's opinion, you're going to win, ultimately.

Mr. Mann: The Seventh Circuit did not consider anything but that one section of subsection (4), time spent in deadhead transportation.

Unknown Speaker: Yes.

Mr. Mann: They did not look--

Unknown Speaker: If you can go back to the Seventh Circuit, or the district court under the Seventh Circuit opinion and say, aha, they have responsibilities, then you're going to win.

Mr. Mann: --Well, I can only suggest--

Unknown Speaker: I mean, the whole point of our taking this case is not to decide whether you win or not--

Mr. Mann: --Correct.

Unknown Speaker: --on that hypothesis.

Mr. Mann: Correct, but I think it is significant in that it counters the argument of the respondents that all duties end at that 12-hours time, and it doesn't.

I--

Unknown Speaker: But your case... in answer to my question, you were candid, and I appreciated it.

You said if the van breaks down so that they're not moving, that's limbo time, and it's clear that in that situation they have no trains to watch--

Mr. Mann: --Correct.

Unknown Speaker: --no safety hazards to report, they have nothing to do--

Mr. Mann: Correct.

Unknown Speaker: --except wait.

Mr. Mann: And they are not free to go.

They are part of the crew, still, until they finally mark off at the away-from-home terminal.

Unknown Speaker: May I ask you a question about the 1969 hearings, and you quoted Mr. Manion's statement, which I guess is the same one, at page 20 of your brief.

Mr. Mann: Yes.

Unknown Speaker: And his references to 1(b)(3)(A) in the bill that was then pending, that's what finally was enacted as subsection (5), is that correct?

Mr. Mann: That's correct.

Unknown Speaker: And am I correct in understanding that at that time the subsection (4) with the second clause in, at least, was not in the bill?

Mr. Mann: The deadhead transportation?

Unknown Speaker: Yes.

That was not yet in the bill, is that correct?

Mr. Mann: Not in the... not as it was finally passed.

Unknown Speaker: And so it is fair to infer as part of your argument, I gather, that in paragraph (4) everything after the word, but, was enacted in response to the concern expressed by Mr. Manion on page 20 of your brief.

Mr. Mann: It was... well, deadhead transportation in the originally drafted bill stated that all of the deadhead time was time on duty, so he was referring to both provisions, except when I read to you on page 135 of the House hearings, that only related to the subsection (5).

Unknown Speaker: Which was then subsection (3).

Mr. Mann: Yes.

Unknown Speaker: And (4) was amended in response to this testimony, is your position.

Mr. Mann: That's correct.

Unknown Speaker: And my question is, if you... and the question, then, is, what does the word deadhead transportation mean in that amendment, under your analysis?

The question, does it include the time waiting for the transportation to begin?

Mr. Mann: And let me address--

Unknown Speaker: Let me finish my question, please.

Mr. Mann: --Oh, I'm sorry.

Unknown Speaker: And so that's what we're trying to decide, as I understand it.

Now, if your view is correct that it does not include the period before they get on the bus, or whatever it is, how did that solve the problem he described on page 20 of the brief?

Mr. Mann: It didn't solve that problem.

They are still--

Unknown Speaker: Unless you construe it the way the Government does.

Mr. Mann: --They're still on duty.

Now, I want to point out, Justice Stevens, that another industry spokesman, a Mr. Hilt, who was the chairman of the National Railway Conference... this is the negotiating arm for the railroad industry.

He was asked, what does deadhead mean?

He said, on page 220 of the House hearing, deadheading is being transported from one point to another at carrier's orders without performing any service, and then, later in his testimony--

Unknown Speaker: But again, he's describing something before that's in the bill.

Mr. Mann: --Yes, but later he was asked by Congressman Tiernan, in regards to defining deadhead, would you say to the committee that the definition covers the complete description of deadheading, and his answer was... he didn't fully answer.

He said, deadheading is a widely used term, except management relationships is more or less the complete definition, and then Congressman Tiernan again pressed him.

He said, you don't want to add anything to the definition you gave with regards to what deadheading is, and he said, I don't think so.

So he is saying to Congress, it is only transportation in, and that's all it is, the transportation.

Unknown Speaker: Maybe he was wrong.

Mr. Mann: But that's what Congress relied on.

Unknown Speaker: No, but you still haven't answered--

--You think... how do you know that?

Mr. Mann: Well--

Unknown Speaker: You really think--

Mr. Mann: --I really think--

Unknown Speaker: --Who do you think heard that testimony?

Mr. Mann: --Who did?

Unknown Speaker: Do you think Congress heard that testimony?

Mr. Mann: Well, it was their hearings.

Unknown Speaker: How many people do you think were present there?

Mr. Mann: There were 30-some on that committee.

Unknown Speaker: Okay, so you think because 30 Members of Congress, if they were all present at the hearing, heard him say those words.

You want us to assume that therefore the statute means what he said.

Mr. Mann: It's what Congress--

Unknown Speaker: Does that seem reasonable to you?

Mr. Mann: --I do, because this committee is the one that drafted the provisions, and they relied on what the witnesses told them, and it was part of that testimony--

Unknown Speaker: They didn't pass the statute.

There are how many, 432 Members of Congress, 530, 532, something like that.

Mr. Mann: --Yes.

Unknown Speaker: They passed the statute, not the 30--

Mr. Mann: They passed it based on the representations of the chairman of the committee.

Unknown Speaker: --They did.

Mr. Mann: Unanimously, I might add.

Unknown Speaker: But counsel, even if you confine yourself to the committee members... I understand what you're trying to say.

You're not going to convince Justice Scalia on this, but you might convince me, so give it a try.

[Laughter]

How does the amendment... what I don't understand under your view, assume that all the committee members meant the amendment to solve the problem described there, as I read it, it does not solve the problem--

Mr. Mann: It only--

Unknown Speaker: --because the time between they get off the crew and they wait for the bus could run out to several hours and still cause the very violation he's concerned about.

Mr. Mann: --That's correct.

Congress didn't buy that.

That's the whole point I'm making.

The only thing they bought from the railroad industry was, we're going to give you a break on deadheading--

Unknown Speaker: I see--

Mr. Mann: --not time on duty.

Unknown Speaker: --Why would they buy that little piece of the problem?

Mr. Mann: Because--

Unknown Speaker: Why would they say, we're going to fix this part but you're in trouble for the rest?

Mr. Mann: --Because it's the abuses, Justice Souter.

They had crews sitting out there hours on end, and they still do, and the problem is, maybe there's no immediate danger to safety because they're not... the crew's not going to operate this particular train any more, but it gets cumulative.

Day-in, day-out, you're not knowing when you're going on duty, 8 hours later today, 6 hours earlier tomorrow, and it cumulates, and as I quoted--

Unknown Speaker: They have guaranteed rest period whenever they get back, and that is not shortened whether this limbo time... I mean, this limbo time doesn't go toward that.

Mr. Mann: --It doesn't, but you have... and I submit that cumulative fatigue is a cause of serious safety problems, as stated by the National Transportation Safety Board, which I've quoted, as stated by the General Accounting Office as well--

Unknown Speaker: Do they get paid for the limbo time?

Mr. Mann: --They do.

Unknown Speaker: So why do they mind?

Mr. Mann: It's a safety problem.

We're not talking about wages.

We're talking about safety.

Unknown Speaker: They still have to have the off duty.

They have to have the off-duty hours after the limbo time plus the transportation is over.

They have to have the 10 off-duty hours anyway.

Mr. Mann: That's correct.

Unknown Speaker: So why does it become... I mean--

Mr. Mann: It's not an economic problem.

That's the whole point.

Unknown Speaker: --No, no, but I mean, why is it a safety problem if when they get back they still have to have the 10 hours?

Mr. Mann: Because day in and day out, that time is not regular, and it cumulates this fatigue, and I... when you have an opportunity to look at the... and even the reports of the Federal Railroad Administration point out to the... this problem in the railroad industry, and it is definitely a cause of accidents.

Employee error causes about 30 percent of the rail accidents in this country, and a significant portion of those that were addressed by the National Transportation Safety Board involve fatigue, and both chairman of the board, as well as the vice chairman, going to Congress several times trying to get attention to this problem, and this is what Congress was trying to do, and that's why they didn't buy the amendment sought by the railroads.

Unknown Speaker: I guess the only difficulty I have with your response is, I mean, you're relying on legislative history for part of the answer, but when we get to drawing the distinction between the waiting time and the transportation time, and you're saying well, Congress bought that distinction, there's nothing in the legislative history which you were previously relying on that supports you.

Mr. Mann: They didn't change the bill.

The bill is exactly the same as what was complained of.

Unknown Speaker: But it seems... it just strikes me as odd that when they adopted, in effect, the compromise which are the... when they adopted the language following but, in what is now (4), it just strikes me as odd, if we're going to rely on legislative history, to find that there is no explanation of what you're telling us.

Why might they not have said, well, we're going to add these words following but, and we're going to put them in (4), but that does not affect the question of how we're going to treat waiting time, because waiting time is subject to abuse.

There's nothing in the legislative history record that addresses this.

Mr. Mann: Maybe not specific words, waiting time, but they addressed it clearly in two ways.

One is, which I've just mentioned, they did not change the wording at all from the introduced bill and that which was complained about by the industry.

They didn't change it at all.

Unknown Speaker: But they added that part of subsection (4).

Yes.

Mr. Mann: That's correct.

Unknown Speaker: That's a change in response to... arguably is a change in response to the concern you've identified.

Mr. Mann: Not on waiting time.

Unknown Speaker: Well, you think it isn't because it doesn't expressly say that.

It's a question of, what did they mean by deadhead transportation?

Mr. Mann: That's what--

Unknown Speaker: Did they intend to include waiting time, which would have solved the problem--

Mr. Mann: --But that's--

Unknown Speaker: --if you read it that way.

Mr. Mann: --They solved it by saying you can't get that relief that you want.

Unknown Speaker: Thank you, Mr. Mann.

Mr. Mann: Thank you, Your Honor.

Unknown Speaker: Your time has expired.

Mr. Stewart, we'll hear from you.

Argument of Malcolm L. Stewart

Mr. Stewart: Mr. Chief Justice, and may it please the Court:

In the view of the Federal respondents, time spent waiting for the arrival of a deadhead vehicle at the conclusion of an employee's duty assignment is neither on nor off-duty time.

That construction is consistent with the text of the pertinent statutory provision, and with the policies underlying the Hours of Service Act.

As Justice Breyer was saying in one of his questions, if a person is asked, how much time did it take you to travel from Washington and Boston, the question is ambiguous.

If the import of the question is, how big a chunk out of your day did the process of travel take, a person would normally answer it in a way that included associated waiting time.

If the person were known to find air travel particularly uncomfortable or unpleasant, the person might naturally infer that the point of the question was, how much time were you placed in this uncomfortable position, and might answer it in a way that included only the time actually in the air.

So to see whether waiting time should be counted as part of time spent in deadhead transportation, I think the inquiry should focus on, why did Congress define this as limbo time in the first place, and do the same concerns that caused Congress to define a category of limbo time apply with equal force to the waiting time at issue here, and for all purposes relevant to the Hours of Service Act, the time spent waiting for the deadhead vehicle is functionally indistinguishable from time actually riding in that vehicle.

Unknown Speaker: Well, what about the abuse argument?

There's no... the railroads weren't engaging in abuses while they were transporting.

They were engaging in abuses by being very unsystematic and uncaring about getting the... doing the transportation.

I think that's his argument.

What is your response to that?

Mr. Stewart: Well, a couple of responses.

I think first, as to what complaints of abuse were brought before the congressional committee that held the hearings, the union's complaints focused both on the waiting time and on the length of transportation itself.

That is, there were statements to the effect that--

Unknown Speaker: They didn't draw any distinction, you're saying.

Mr. Stewart: --No, and--

Unknown Speaker: So that the problem Congress had was a unified problem.

Mr. Stewart: --That's correct, and the Senate committee report stated that part of the problem was that an employee... several hours of an employee's off-duty time might be time deadheading back from his duty assignment, so clearly... there's no evidence in the legislative history that Congress believed that the ride in the deadhead vehicle itself was typically short, but that the waiting periods were typically lengthy, so I don't believe that the legislative history provides a basis for distinguishing between the two.

The reason that time spent in deadhead transportation is limbo time is that it shares some of the characteristics of both on and off-duty time.

That is, the employee is not free to come and go as he pleases.

The employee is unlikely to have a meaningful opportunity for rest, and therefore it would be inappropriate to count this as off-duty time and count it towards the minimum number of consecutive hours of rest that he has to--

Unknown Speaker: May I just get your view on one, kind of fundamental thing for me?

Is it... do you agree that the second clause in subparagraph (4) was inserted in response to the concern expressed by the testimony of Mr. Manion?

Mr. Stewart: --I don't know if I would say that Mr. Manion specifically, but yes, I think--

Unknown Speaker: Just generally.

Mr. Stewart: --Yes.

The original bill, the bill as originally introduced provided that time deadheading either to or from a duty assignment would be considered on-duty time, and this appears to reflect a... to define the deadheading from a duty assignment as limbo time appears to reflect a compromise that allayed the concerns of the railroads while ensuring that this would not be treated as off-duty time, thereby depriving the employee of an adequate opportunity for rest.

So because the employee is not free to come and go as he pleases, and is unlikely to have a meaningful opportunity for rest, it would be inappropriate to consider this off-duty time.

On the other hand, so long as the employee has no duties to perform, his fatigue can pose no danger to himself and others, or others, and therefore it would be inappropriate to treat this as on-duty time, and I think it's instructive to contrast this with the interim periods available for rest that Mr. Mann referred to.

That is, the reason that the interim periods are defined as on-duty time is not that the employee poses a danger during those periods himself.

That clearly wouldn't be the case if the employee is performing no services.

Rather, the reason is that if these periods are not provided at a place where an employee actually has an adequate opportunity for rest, the employee is likely to be tireder at the end of that period than at the beginning, and therefore they need to be counted as on-duty time in order to ensure that he's not performing safety-sensitive tasks more than 12 hours after he initially reported for duty.

Unknown Speaker: Do you know how many designated terminals an employee usually has?

Mr. Stewart: Well, typically, I think my understanding is that typically there would be a home terminal and an away-from-home terminal.

This is generally a subject of collective bargaining, and Mr. Johnson may have a more precise answer than I do, so that what is a designated terminal insofar as a particular employee is concerned is defined not by the act, but by the collective bargaining agreement.

Unknown Speaker: But under your view, if the employee waits for deadhead transportation after his duty, when he's off duty, and then goes to a designated terminal which is available for rest under (5), but then he's also waiting for further transportation, I take it that this is on duty, because he has a place to rest, even though he's also waiting for further deadhead transportation.

Mr. Stewart: I'm not sure if I understand the question, but our position is that after the employee has been released of the obligation to perform any duties, all of the waiting and the actual riding would be considered limbo time, and the statute speaks of--

Unknown Speaker: No, but it's on-duty time once he gets to a place other than a designated terminal and it's available for rest, pursuant to (5), or is that not an interim period?

Mr. Stewart: --That's not an interim period.

The interim periods would be those that are preceded and followed by periods of service, and again, the reason for treating those periods differently is, if you're going to have to perform services when the period is over, we're concerned about whether you're going to be tired and pose a safety hazard at that time, but if your tour of duty is up, if you're simply in the process of getting from your duty assignment to the place that you'll get your 8 or 10 hours consecutive rest, that concern is not present.

Unknown Speaker: I see.

So interim is followed and preceded by on duty.

Mr. Stewart: That's correct.

Unknown Speaker: Mr. Stewart, does the Government assert any entitlement to deference of its views in this case?

Mr. Stewart: Yes, we do.

This is... obviously, this litigation has taken a strange path in the sense that the Government is asserting a different reading of the statute than we asserted in the court of appeals, but the concerns that caused the FRA to shift its position, briefly, essentially are inapposite once the case comes before the Court.

That is, in the Seventh Circuit the Government was asserting that the interest in Nation-wide uniformity was so great as to outweigh the interest in choosing the better of the two readings as between two that the FRA considered within the realm of reasonableness.

Given that we're in this Court, and that whatever ruling this Court hands down obviously will have Nation-wide application, there's no need to balance any concern for uniformity against competing interests.

Unknown Speaker: What that would mean, of course, if we agree with you on the deference point, is that although we... if we were to find your interpretation reasonable, you could change the interpretation later.

Even if we thought yours was the more reasonable you would still be able to go to the other one.

Mr. Stewart: I think that's correct.

It would depend to a certain degree on how the Court wrote the opinion.

if the Court went out of its way to say not only is this a reasonable construction but it's in our view the only one that could plausibly be asserted--

Unknown Speaker: Now, the FRA does not have rule-making authority explicitly conferred, does it?

Mr. Stewart: --No, that's correct, as to the Hours of Service Act.

Unknown Speaker: And there is a circuit conflict, is there not, on whether agencies that do not have rule-making authority are entitled to deference?

Mr. Stewart: I think there is... there are... this Court has accorded--

Unknown Speaker: We've reserved the question, haven't we?

Mr. Stewart: --Right.

Unknown Speaker: You don't want us to decide that in this case, do you?

Mr. Stewart: I think because our... clearly, we believe our reading of the statute is the better of the two, and if the Court--

Unknown Speaker: I think... do I understand you right to be saying that you're not talking about the Chevron kind of deference, because there's no delegated rule-making authority here, right?

Mr. Stewart: --That's correct.

The FRA is entrusted with the responsibility for assessing civil penalties, but it is not given substantive rule-making authority.

Unknown Speaker: So you're talking about the Skidmore kind of deference where the agency, because it's been in the business, where the Court would look to the persuasiveness of its reasons that's kind of a--

--Is that what you were talking about?

I was talking about Chevron deference.

I would have to rephrase my question.

Mr. Stewart: I under--

Unknown Speaker: You understood me to mean Chevron deference, didn't you?

Mr. Stewart: --Yes, I did.

Unknown Speaker: Let me just throw this into the discussion.

Which opinion, Judge Bauer's or Judge Easterbrook's, do you think better explains your position on deference?

Mr. Stewart: Well, part of the problem with that is that in the--

Unknown Speaker: If you have an answer.

Mr. Stewart: --I don't have an answer, because I think neither really goes to the question.

That is, at this point, in the court of appeals the question of deference arose in the context of the FRA's argument that it's concern for Nation-wide uniformity was so great as to trump its view as to what was the better reading of the statute, and we... the FRA in the court of appeals asked that court to defer to the FRA's view regarding the importance of Nation-wide uniformity as opposed to the importance of getting the better of the two answers, so the two opinions were addressed to that sort of deference.

Here, what we're talking about is deference regarding the FRA's view as to what is the more persuasive meaning of the statutory language, so the types of things that Judge Bauer and Judge Easterbrook were debating really are not particularly germane to this Court's resolution of the question.

Unknown Speaker: They're like ships passing in the night, I guess.

Mr. Stewart is there anything in the record that indicates why the Government didn't appeal the Ninth Circuit and try to reconcile its views of the better interpretation with national uniformity that way?

Mr. Stewart: There is nothing in the record.

I think--

Unknown Speaker: I don't wish to go outside it.

I just wondered whether there was anything in it.

Mr. Stewart: --I would only remark that it was the first court of appeals ruling that had addressed the question, and it would be... there would be nothing in this Court's rules, obviously, that would preclude us from filing a cert petition or the Court from granting it, but it would not be consistent with the Court's normal practice.

Unknown Speaker: Well, why didn't you then... I mean, if you still persisted, I mean, why isn't the answer, that is, if you still persisted in thinking the other view the better one, why wouldn't it have been worth the Government's while at least to persist in one other circuit to get a conflict and get the thing up here?

Mr. Stewart: Again, these go to questions of both litigation strategy and also the FRA's view as to the importance of uniformity as of a particular moment.

Certainly a reasonable person could believe that that would have been the better course.

Obviously, the reasonableness of that decision is not before the Court at this stage.

Unknown Speaker: You do agree that, if there's any duty assigned, like watch the train to see that there's no vandalism, that that's full on-duty time.

Mr. Stewart: That's correct.

With respect to the vandalism point, I would like to distinguish between two types of instructions that an employee could be given.

If the employee were told, watch for vandalism, be alert, be vigilant, that is clearly on-duty time.

If the employee were told, you can do whatever you want, read, play cards, sleep, but if you happen to see vandalism you have an obligation to report it, we wouldn't regard the reading, sleeping, et cetera time as on-duty time, but if vandalism happened to catch the employee's eye, and he reported it pursuant to instructions, that act would be on duty.

Unknown Speaker: He could be given those instructions for rest time, too, I assume.

Mr. Stewart: That's correct, and even if there were no identified contingency that would call the employee back into duty, these people are always in radio contact with supervisors.

The possibility would always exist that a supervisor would give an instruction to the employee to do a particular thing, so whenever the employee is in this waiting period, there always exists the possibility of being recalled to duty whatever the instructions he was given at the outset of that period.

The only other point I'd like to make is that I think our reading of the statute is buttressed by the other point at which time spent in deadhead transportation is used in the same section of the Hours of Service Act.

That is, the act provides that time spent in deadhead transportation to a duty assignment is considered time on duty, and I feel quite certain that the union would state that time spent in deadhead transportation to a duty assignment includes any waiting period between the time that the employee reports and the time that the deadhead vehicle is actually ready to go.

That's buttressed by the structure of the statute and by the legislative history, which the Senate report states that time spent in deadhead transportation to a duty assignment is to be calculated from the time an employee reports for duty, so this gives further confirmation of the fact that the waiting period is properly included within the phrase, time spent in deadhead transportation.

Thank you.

Unknown Speaker: Thank you, Mr. Stewart.

Mr. Johnson, we'll hear from you.

Argument of Ronald M. Johnson

Mr. Johnson: Mr. Chief Justice, may it please the Court:

Before the Ninth Circuit ruling, there was... the statutory scheme was administered in a very straightforward, simple manner, predictable and certainty for the railroad in how to schedule crews and operate their trains.

The very simple rule that the Hours of Service Act provided was that you could operate the crew up to 12 hours, but if you realized, if you saw that the train was not going to make its intended terminal, all you had to do to avoid a violation of the act was notify the crew to identify a place where they could pull over, park the train, and then they were relieved from all other duty.

At that point, all they had to do was wait for transportation to arrive, which typically also brought the relief crew as well.

The relief crew got on the train, took the train on to its terminal, then the expired or outlawed crew would be transported to its place of final release.

Now, one thing I'd like to make clear right here is--

Unknown Speaker: What do you call them?

You call them an outlawed crew?

Is that the industry terminology?

Mr. Johnson: --There's a lot of industry jargon, Your Honor, and the crew is outlawed at that point in time.

The crew sometimes sent out to pick it up was called the dog-catcher, to pick up the outlawed train.

[Laughter]

Now, one thing I'd like to point out here is a difference between us and the unions, one among many differences, is that they try and argue that under the statute the crew is on duty until it reaches its place of final release, which is the terminal that it didn't make, but that's not the way the statute works.

The language is quite clear that on duty runs from the time you report for duty until you're finally released from duty, and you're finally released from duty under the statute when the railroad dispatcher advises the crew you're relieved from duty, don't do anything else.

Now, I believe in response to a question from Justice Breyer was asked, are these crews paid while they're in limbo time, and the answer is yes, they are paid all throughout this time.

They're paid while they're waiting for deadhead transportation.

They're paid while they're in the deadhead transportation vehicle.

They're paid until they get to their final terminal.

Unknown Speaker: What about the period of time when the employee reports to go on duty, and is waiting for transportation to the duty station?

Mr. Johnson: Well, they're paid at that point in time, too, Justice O'Connor.

Unknown Speaker: For the waiting period?

Mr. Johnson: Yes, and actually they're paid a little extra amount, because--

Unknown Speaker: And are they considered on duty during the waiting period?

Mr. Johnson: --Yes, Your Honor.

From the time they report to duty... I mean, typically there's a train... they try and schedule it so the train is there ready for them to get on board and go on, but if the train hasn't come in yet, that time period they're waiting to assume duty and that's counted as on-duty time.

But to come back to the point I was going to make about the pay, all that happens at the place of final release, they don't have any more duties because they've been relieved from duty on the train, they have no duties while they're waiting for deadhead transportation, they have no duties while they're in the taxicab or the van, or another train, perhaps, but they're being paid, and when they get to the place of final release, all that is, is they clock out.

That's all final release means.

When they get to their terminal, they clock out.

That stops the pay, and it starts their rest period, because the railroad has to know when the rest period begins so they can be called again.

Now, there aren't any abuses here.

I know the union attorney talks about abuses in the record, but there really is no record here other than what was put before the agency by the railroads, because the union did not put anything in the record other than the stuff they've attached to their briefs.

But even if there were abuses here, the abuses were whatever they were related to deadhead transportation, and they've all been addressed by the fact that waiting for deadhead transportation and the deadhead transportation itself is not counted towards the rest period, and therefore, when they get to the end, when they get to the place of final release, they get their full rest period.

Now, it's been very hard for the railroads to try and comply with this new interpretation, and that is why the railroads went to court.

It is impossible to always predict, now... before, you could simply predict that when the train would be outlawed, you could just tell the crew to stop.

You wouldn't violate the law.

The only variable you had to have was to pick a place where they could pull the train aside off the main line onto a siding.

Now, you have to try and predict not only where they're going to reach the 12-hour maximum, you have to also work in other variables.

You have to call transportation, try to get transportation to meet a place before the 12 hours... it just can't be done.

Unknown Speaker: What penalties are there for violating... I mean, I can imagine you might have a snowstorm or something, and you can just stop the train, but if that unforeseen delay causes your crew to be on duty longer than you had expected, what would the penalties be?

Mr. Johnson: Well, the penalties, the minimum penalty to be imposed is $500 per violation.

The maximum penalty is $20,000 per violation.

The violation, each crew member is a violation, so if you have three members on the crew, that's three violations.

That would be three times whatever the amount is.

Now, the agency has discretion above $500 how much to impose.

Currently, what they've been imposing is $1,000 per violation, so each of these crews typically has a crew of two or three people, it's $2,000 or $3,000 per violation.

Now, the problem here is, it's impossible--

Unknown Speaker: Of course, they might make an exception for snowstorms.

You know, even if we adopted the union's view of the matter, there... couldn't we count on the agency's discretion not to impose the penalty when indeed the reason the excessive time occurred was simply some unforeseen event such as a snowstorm?

Mr. Johnson: --Yes, Your Honor.

They have that... I think it's a matter of prosecutorial discretion, and also there's a specific exception in the statute for emergency situation acts of God.

But what's happening right now in the Ninth Circuit, because they still feel compelled to apply this interpretation of the Ninth Circuit, in the States within the Ninth Circuit, the railroads are continuing to be assessed violations for this waiting time.

Even though the waiting time periods are as little as 5 minutes, we're still being faced with penalties right now.

Now, I'd like to talk briefly about interim rest periods.

It's clear that interim means you're between points of duty, and all that Congress was trying to get at when they put interim... when they defined what interim periods of rest were in the statute is, the case law before 1969 was all over the place.

You know, some courts would say 2 hours works, some courts would say 3 hours works.

All Congress did was codified that it has to be at least 4 hours, and it has to be at a certain place where accomodations are available for rest.

Now--

Unknown Speaker: May I ask to whom the penalties are paid for violations?

Mr. Johnson: --The penalties are paid to the United States Government.

I assume they go into the Treasury, Your Honor.

Now, the current interpretation that the union wants just makes no sense, because the crew has been relieve from all duties, has no duties, but yet they would have that crew continue to be counted as on duty even though they're not physically on the train, even though they have no further duties.

It just doesn't make any sense.

There's no safety problem here because the crew is not going to be allowed to operate a train again until after they've received their full rest period, and--

Unknown Speaker: Well, of course, I mean, you know, an argument can be made for the other side.

The argument is... what is the rest period that's... what's the minimum rest period?

Mr. Johnson: --The minimum rest period is 8 hours.

If they work right up to the maximum of 12 hours, it is 10 hours under the statute.

Unknown Speaker: Okay.

Mr. Johnson: Now, that rest period doesn't begin... what happens when they reach... you know, there's all this railroad industry jargon in the statute, but again, the place of final release simply means the building that they walk into when they clock out.

That means they're going to begin their rest period, and what they do then is, if they're... I believe one of the justices asked how many terminals they have.

They have the home terminal... the home terminal, of course, they live at their home, but when they get to their away-from-home terminal, the railroad has made arrangements... it's in the collective bargaining agreement.

This is all treated in the collective bargaining agreements... has made arrangements for a hotel to go to and stuff, and that's where they get their rest.

Unknown Speaker: Okay, but doesn't this scheme of the statute show that Congress thought that an 8-hour rest period is needed for a... what, 10-hour normal work period?

Mr. Johnson: Yes, Your Honor.

Unknown Speaker: But a 10-hour rest period is needed for a 12-hour work period, is that right?

Mr. Johnson: Yes.

Unknown Speaker: So the law... you can't say there's just an absolute rest period which is going to be a balm for all ills, no matter how long you've been on... you know, working before then, and what the union is saying is look, realistically, traveling, deadheading back is... it takes it out of you, and if I should get 10 hours' rest for 12 hours' duty, I should also get 10 hours' rest for 10 hours of duty plus 2 hours of deadheading back, including the waiting time for the deadheading.

I don't know that that's an unreasonable argument.

I mean, the minimum time is a minimum time that has been calculated on the basis of what the maximum duty time was, and if that duty time is stretched out, maybe... you know, maybe the minimum time should be more.

Mr. Johnson: Your Honor, they have a way to get that, and the way they get that is expressly addressed in the statute, and that is through collective bargaining.

Congress specifically says in section 2107 of the Hours of Service Act that these are minimums, and nothing is to stop the parties from sitting down and collectively bargaining longer rest periods, and--

Unknown Speaker: This is a safety issue, they say, and Congress... you know, Congress was concerned with safety.

Mr. Johnson: --That's true, Your Honor, and Congress, though, has made the judgment that safety is satisfied here.

If we limit the crews to 12 hours on duty, if we make transportation time limbo time, and if we mandate a minimum rest period of 8 hours, Congress has made a judgment that that satisfies the safety concern, and if the parties want to go beyond that minimum they can and, in fact, they have, and some collective bargaining agreements provide that the minimum rest period is, in all instances is 10 hours rather than 8 hours.

And the safety issue, though, here that the unions are complaining about is not the safety issue of waiting time, it's not the safety issue of how long the day is.

You read their brief, and over and over and over again, the safety problem they're worried about is fatigue from irregular work hours, upsetting Circadian rhythms because crews are being called at all hours of the day and night to man trains, and that's true.

That's the way the railroad business works.

But that is not a safety issue that's addressed by this statute, because even if you counted waiting time as limbo time, that doesn't affect the fact that the crew, when it gets back and after it's had its rest, could be called again at any hour of the day or night to man that train.

Unknown Speaker: Indeed, it's purely fortuitous whether it helps that problem or hurts that problem.

It could help it.

Mr. Johnson: That's correct, Your Honor, and again, the parties are meeting together in task force to address the safety issues that may result from these irregular work schedules, and Congress last year did add an amendment to the Hours of Service Act that encouraged the parties to work together to develop a solution, if there is a problem here, on irregular work hours.

But there's not a safety problem here with treating waiting time as limbo time, and the Government made a reasonable choice in a somewhat ambiguous term whether to treat it... that's one difference we have with the Government.

We believe there are only two options on how to treat this waiting time.

It can either be treated as off-duty time or limbo time, and the Government made a reasonable choice to treat it as limbo time.

That's the way this statute has operated for more than 20 years, and we believe that's the correct application of the statute.

Unknown Speaker: May I ask one very important question?

The term dog-catcher refers to the crew that picks up the outlawed crew, or to the crew that substitutes for it?

Mr. Johnson: That picks... that refers to the crew that comes out from the terminal to pick up the train that got outlawed because it fell short of its final destination because the first crew outlawed--

Unknown Speaker: So they're the substitute crew.

Mr. Johnson: --They're the substitute crew, Your Honor.

Unknown Speaker: Thank you.

Mr. Johnson: I thank the Court.

Chief Justice Rehnquist: Thank you, Mr. Johnson.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

National Labor Relations Board v. Town & Country Electric, Inc. - Oral Argument

Fri, 09 Jan 2009 14:49:47 +0000

Case:

National Labor Relations Board v. Town & Country Electric, Inc.

Media File:

94-947_19951010-argument.mp3

Related Transcript:

1995_94_947_argument.xml

Transcript:

Argument of Lawrence G. Wallace

Chief Justice Rehnquist: We'll hear argument next in Number 94-947, National Labor Relations Board v. Town & Country Electric.

Mr. Wallace, you may proceed.

Mr. Wallace: Mr. Chief Justice, and may it please the Court:

For almost 30 years, the National Labor Relations Board consistently and repeatedly has held that a person who applies for or holds a job with an employer that he intends to try to organize, and who will be compensated by a union for his organizational activity, is an employee within the meaning of section 2(3) of the National Labor Relations Act.

That section is set forth on page 2 of our brief, and was last interpreted and applied by this Court in its 1984 decision in Sure-Tan Incorporated against the NLRB, and we are content to use the words of this Court in Sure-Tan in describing this provision, and I'm quoting now from page 891 of Volume 467 U.S., the breadth of section 2(3)'s definition is striking.

the act squarely implies to "any employee".

The only limitations are specific exemptions for agricultural laborers, domestic workers, individuals employed by their spouses or parents, individuals employed as independent contractors or supervisors, and individuals employed by a person who is not an employer under the National Labor Relations Act.

The Court then concluded that undocumented aliens are not among the few groups of workers expressly exempted by Congress, and they therefore plainly come within the broad statutory definition.

Unknown Speaker: Is it your position, Mr. Wallace, that if a person does not come within any of those exemptions and is "hired" he is therefore an employee?

Mr. Wallace: Well, that is the conclusion that the Court reached, and it is our--

Unknown Speaker: I asked what your position--

Mr. Wallace: --Our position is that he is therefore an employee unless there are reasons, in interpreting the National Labor Relations Act, why an implied exemption should be found, a question for the board to address initially, and the only example in which this Court found an implied exemption was the case of NLRB v. Bell Aerospace which involved managerial employees, and the Court in reliance upon the legislative history of the Taft-Hartley Act and its overruling of this Court's decision in the Packard case by adding to this list of exemptions supervisors has... that Congress had relied on the notion that managerial employees would be excluded sort of a fortiori from supervisors, and that the board had always, while not holding them not to be employees, had always placed them in separate bargaining units from other employees.

Unknown Speaker: --What about an employee who fills out a job application, is hired, and yet his only purpose is to get into the plant so that he can blow it up?

He's a terrorist.

Is that person an employee for purposes of the National Labor Relations Act?

Mr. Wallace: If he applied for a job that he was seeking where he would be working for wages under the supervision of the employers--

Unknown Speaker: Yes.

Mr. Wallace: --he would be within the statutory definition of employee.

What the board has--

Unknown Speaker: So he... that person is an employee.

Mr. Wallace: --That doesn't mean that he has to be hired.

Unknown Speaker: Well, suppose he... the company, not knowing this, goes ahead and hires him.

Mr. Wallace: Then he's subject to all of the company's work rules and duties of loyalty.

Of course if the company hires him, he's even more so an employee.

The Court resolved in the 1941 decision in Phelps Dodge that applicants are within the statutory coverage because section 8(a)(3)--

Unknown Speaker: But isn't that a--

Mr. Wallace: --protects applicants from discrimination in hiring.

Unknown Speaker: --Isn't that Exhibit A, what I'm talking about, of inconsistent loyalties?

I mean, the person is simply going on the payroll in order to get into the factory.

He'll perform the work for a day, but then he intends to blow the place up that night.

Mr. Wallace: This is... of course it would be a breach of duty, whether it would be because he wanted to do it of his own volition or whether because of loyalty to some other group.

It would be a breach of duty.

What the board... the board has pointed the way to the proper analysis of these issues in the companion case of this very case.

There were two cases decided together, this case and Sunland Construction Company, which is cited in all of the briefs, and there the board held, after writing an opinion identical to the opinion in this one until the last few paragraphs... reaching the conclusion that applications of this kind are employees within the meaning of the act, the board held that nonetheless it would not be a violation, an unjustified discrimination under 8(a)(1) or 8(a)(3) for an employer to refuse to hire a paid union organizer in the discrete context of an ongoing strike situation in which the paid union organizer would have a duty to support the work stoppage in an attempt to coerce the employer, a legitimate attempt under the law to coerce the employer to accede to the union's demands.

And the employer would have an equally legitimate right to want to hire replacement workers who might be nonunion members, might be outside the bargaining unit, might be outside strike-breakers--

Unknown Speaker: Mr. Wallace, why--

Mr. Wallace: --of other kinds to try--

Unknown Speaker: --Mr. Wallace--

Mr. Wallace: --to carry on their operations.

Unknown Speaker: --why wouldn't the same reasoning that you've just explained to us for the strike exception apply to the person who is under an agreement with the union to walk out when the union blows the whistle?

Why isn't there that same inconsistency?

Mr. Wallace: Because while that is a rule of the voluntary organization, section 7 of the act protects the right of workers to have voluntary organizations, including their right to make reasonable rules of conduct for their members, but you're talking about a future contingency, and when the time comes, under this Court's decision in Pattern Makers and the rationale of this decision, each individual can decide for himself whether he will in fact adhere to the union rule--

Unknown Speaker: But that's different, Mr. Wallace.

Different... the worker can decide for himself.

The worker who is under an agreement that the worker will walk when told to by a third party... let's say the third party were not the union, but a competitor.

The applicant has an agreement with the competitor that he will, if he gets this job he'll stay on it till the competitor says, walk out.

Can such a person qualify as an employee when, going in, he has that agreement with a competitor?

Mr. Wallace: --He would definitely qualify as an employee, although the rationale of Sunland might apply.

This is not an uncommon hypothetical.

There can be employees who have been suspended from their job who have an agreement with the employer that they will return when recalled and retain their seniority and retain their advanced pay scale status, so they have an economic incentive to return to this competing employer.

In the meantime, they've been laid off, they need a job, they go to another competitor, and take the job.

They're... of course they're an employee.

They're covered by the Fair Labor Standards Act.

The employer must withhold taxes for them.

Unknown Speaker: But one can be an employee for one purpose and not the other, isn't that--

Mr. Wallace: It's possible, but they are an employee--

Unknown Speaker: --For example, let's take these employees, and there's an election.

They go in, and they try to organize.

There are a number of workers who are in favor of the union.

There's an election.

Can the paid organizer... does a paid organizer count as an employee for that purpose?

Mr. Wallace: --He's an employee, but that doesn't mean that he's entitled to vote.

That is a question about which employees have a community of interest with a purpose--

Unknown Speaker: What is the provision in the statute that entitles someone to vote in a union election?

Mr. Wallace: --I don't recall.

It's not directly before us, but it's--

Unknown Speaker: If it uses the word employee, someone might not be an employee for that purpose, although would be an employee for another purpose.

Well, isn't the answer--

Mr. Wallace: --Well, the board has always held--

Unknown Speaker: --he may not be in the bargaining unit?

Mr. Wallace: --these people are employees.

They just... they don't have a community of interest with other employees in the bargaining unit.

That has always been the inquiry about whether someone can vote in a particular election, whether he is a member of the bargaining unit because of the community of interest standards--

Unknown Speaker: Tell me--

Mr. Wallace: --that the board looks to.

Unknown Speaker: --what you're saying about someone who has an inconsistent obligation, whether that coincides with the approach that Judge Williams took in the Willmar case, or is it different?

Mr. Wallace: Well, I think the board's approach and the approach that Judge Williams took on behalf of the D.C. Circuit in the Willmar case are substantially identical.

There may be some differences in articulation, but in Willmar, the D.C. Circuit said that yes, these are employees, and we leave for another day whether the employer would be justified in treating them differently under 8(a)(1) or 8(a)(3), in other words in not hiring them.

It was shortly thereafter that the board decided Town & Country and Sunland, and it reached opposite conclusions on the question left for another day, depending on whether there was an ongoing strike or not, because the board did not regard it as an irreconcilable conflict of interest under the National Labor Relations Act for an employee to have a loyalty to his union and to the voluntary right of self-organization and to the employer.

That's what the--

Unknown Speaker: Mr. Wallace, did the board rule expressly on the provision of the salting resolution that the employee would walk when told to by the union?

I wasn't aware that the board had ruled specifically on that, as distinguished from being paid by the union.

Mr. Wallace: --The focus before the board was on the compensation question.

It was the court of appeals that relied more strongly and responded, and their amici are relying more strongly on the salting resolution itself.

So the board did not address a contention specifically based on the salting resolution, but it did discuss the question of control, which is what that argument is based on, and pointed out that any paid union organizer, as the board calls anyone getting any form of compensation from the union with a duty to organize, would still be subject to the employer's direction and control, to his work rules, to the obligations to perform his duties in an acceptable manner for the employer and, indeed, what the board found is that someone in this situation has an added incentive not to perform in a substandard manner or to do any act that would warrant discharge, because that would defeat his opportunity to be on the premises and to engage in his organizing campaign during off-work hours.

So far from finding any conflicting duties... because after all he's subject to the same rules of no solicitation during work time or in work areas.

It's done at lunch break or after work is over.

You don't really have acts simultaneously being performed--

Unknown Speaker: Mr. Wallace--

Mr. Wallace: --in the classic sense for two different masters under the Restatement.

Unknown Speaker: --Mr. Wallace, can an employer legitimately adopt a hiring policy to the effect that we will not hire anyone who moonlights for another employer, or who has another job, including a job for the union, it's just our policy not to hire people who do have, or may have a second job?

Mr. Wallace: So long as it's a neutral policy that is not directed at antiunion animus.

It could be in a particular factual setting a pretext for the denial of rights under the act.

Unknown Speaker: Yes, but if... presumably there could be such an employer policy, and it could include even employment by the union, as in this context.

Mr. Wallace: Absolutely.

Any neutral across-the-board policy requiring a commitment to work for a certain duration of time, asking whether there are obligations to any third party that might interfere with future duties in any way, certainly asking whether there was an obligation to anyone--

Unknown Speaker: Would you say this... this would be answered no, that last question.

You say that that question, put to a union organizer, would be answered no, whether there's any conflicting obligation to someone else that would interfere with duties in any way.

Mr. Wallace: --Well, I--

Unknown Speaker: You say the union organizer can stand up and say no.

Mr. Wallace: --Well, that depends on what the neutral policy of the employer is.

If the employer says that they want everyone to swear that they have no obligation to--

Unknown Speaker: Well, no, I'm just talking about the question that you put.

You said that the employer may ask applicants whether he has any commitment to a third party that would interfere with duties in any way, and as I understand your presentation to us, you think that the union organizer can answer that question honestly, no.

Mr. Wallace: --That is true in the context of this case, where you have employment at will, where either the employer or the employee has a right to leave at any time.

That's the only possible--

Unknown Speaker: Now, what if it were a term contract.

I mean... but that... would people who are... sure.

You... suppose it's a term contract for 3 years, and he has the same arrangement with the union that he'll quit when the union tells him to.

Mr. Wallace: --The employer could definitely ask whether there are any conflicting obligations that would result in premature departure and failure to observe the term.

Unknown Speaker: But suppose he doesn't ask?

Would that, the existence of that conflict not be a sufficient reason for dismissal?

That's not this case--

Mr. Wallace: That's not this case--

Unknown Speaker: --I understand, but--

Mr. Wallace: --and I can't really precommit the board to it.

This is not an employer who asked for any term--

Unknown Speaker: --Okay.

--on behalf of these people.

Do you acknowledge that would be different, though, because there his obligation to the union might indeed require him to break a duty, a commitment to the employer.

Mr. Wallace, it would be different in terms of whether the employer has a right to discharge him, but would it be different with respect to the question of whether he was nevertheless an employee during the period of the service.

Mr. Wallace: --Precisely what I was about to say.

He would still be an employee as an applicant for the job, but it would raise the Sunland question.

The Sunland contention that this was justified discrimination was never raised before the board in this case, and it would have been hard to raise it in this case because at the time the adverse action was taken, the employer here did not know of the salting resolution, did not know of the union compensation.

Unknown Speaker: I'm not sure, Mr. Wallace, that I fully understand your example, or your statement, or your concession that an employer with a neutral purpose, let's say, can ask, do you have any conflicting obligations to any other employer or organization?

Now, suppose the answer to that is yes, I'm a member of the union, and I'll strike if they tell me to do that.

I suppose he's mandatorily entitled to employment.

Mr. Wallace: That is not a conflicting obligation, because the union--

Unknown Speaker: Well, suppose an employer interprets it that way.

It isn't because of the labor laws, the National Labor Relations Act.

Mr. Wallace: --That is correct, and--

Unknown Speaker: So I think you have to amend your statement to say that if the reason for an affirmative answer to the question, do you have a conflicting obligation, is a primary loyalty to the union that that is a supervening reason that entitles the employee to be hired, I should think.

Mr. Wallace: --That is a question for the board, and it reached the opposite conclusion in Sunland Construction, which is the only case in which it has reached the opposite conclusion in the discrete context of an ongoing strike.

Unknown Speaker: Oh, that would be an ongoing strike.

Mr. Wallace: Yes.

Yes, so--

Unknown Speaker: Surely you don't mean that union membership, which imposes certain duties which can be enforced, I take it, by a cause of action for damages, et cetera, is grounds for nonemployment?

Mr. Wallace: --I would not anticipate that the board would readily expand Sunland Construction.

Unknown Speaker: Well, I would not anticipate the board could do that consistently with the National Labor Relations Act.

Mr. Wallace: Well, of course, that question would be subject to judicial review if the board attempted to do it.

What I'm trying to point out is that that is the proper analytical approach to questions of whether refusal to hire a particular person would be justified, but instead, this case has been litigated on a theory that these people are sort of outlaws ab initio, they're not even employees within the meaning of the act, even though the employer did not know of the salting resolution or the compensation at the time it took the adverse action.

This is a way to get around the McKennon v. National Banner analysis for after-acquired knowledge.

You just say, well, they're outlaws ab initio, now that we know this knowledge, and of course the knowledge itself has to be something disqualifying in order for the after-acquired knowledge to affect the remedy under McKennon v. National Banner, which the board said is not the case here anyway.

Unknown Speaker: In deciding the definition of employee, should we defer to the board?

That is, I know Hearst did defer, and then in United Insurance, it said Congress amended the statute, but it amended the statute only in respect to an independent contractor, and the particular aspect of the employee definition here doesn't involve that, and United Insurance talks about that, and so I was wondering, do you think maybe we should... maybe that deference notion is still alive, and I don't know why it wouldn't be in respect to other aspects of the definition.

Mr. Wallace: We argue that deference is appropriate here, as the Court stated quite explicitly in Sure-Tan.

We are dealing here with a situation in which both the board and the court of appeals looked toward various provisions of the Restatement of Agency to say what common law principles would shed light here.

The difference between them was not so much about what the common law principles are.

It was a difference about how those principles should be applied to a question of labor management relations in the context of the National Labor Relations Act.

Unknown Speaker: Yes, but that's exactly what's bothering me.

I don't want to say, if it's not right, that the Restatement automatically governs in these nonindependent contractor-related areas.

If the board were to choose to go beyond it, I mean, a holding of this court that they couldn't might be a problem, and that's why I asked the question.

Mr. Wallace: Well, the common law of agency really does not answer the question of how do you apply these principles in the context of a labor management question under the National Labor Relations Act with its section 7 rights and its rights under section 8.

That is a question that implicates the board's expertise.

There wasn't a dispute about what are those principles.

They were both getting them out of the Restatement of Agency.

Unknown Speaker: Mr. Wallace, I thought your first argument, though, was that this statute has a plain meaning that everything that isn't excluded is included.

If that's the case, then you don't have any question of deference, right?

Mr. Wallace: Well, I did point out one implied exception that the Court found in the Bell Aerospace case, and what I was about to say at that point in my argument was that the Court's opinion in Sure-Tan, after saying that the undocumented aliens fall within the plain meaning, then went on to analyze whether the board's interpretation that they should therefore be covered was consistent with the purposes of the act and entitled to deference, and agreed, after some discussion, that it was consistent with the purposes of the act.

Unknown Speaker: Is it Chevron deference, or some other kind of deference?

Mr. Wallace: Well, we like to think of it as equivalent to Chevron deference.

It is--

Unknown Speaker: But what is equivalent... you seem to be not wanting to put the Chevron label on it.

Mr. Wallace: --I'm very happy with what the Court said in Sure-Tan.

The task of defining the term employee... and I'm looking at page 891 of that opinion... is one that

"has been assigned primarily to the agency created by Congress to administer the act. "

and the Court went on to say, and I'm quoting from the Court's opinion,

"the board's construction of that term is entitled to considerable deference and we will uphold any interpretation that is reasonably defensible. "

Unknown Speaker: Did Sure-Tan come down before or after Chevron?

Mr. Wallace: That was before Chevron.

Unknown Speaker: Well, do you think Chevron has changed that principle at all?

Mr. Wallace: Well, only in it's emphasis--

Unknown Speaker: And if so, in what direction?

Mr. Wallace: --on the step 1 analysis that a statute may definitively answer the question on its face, which if that applies here would apply in our favor.

If I may reserve the balance of my time--

Unknown Speaker: Very well, Mr. Wallace.

Mr. Pease, we'll hear from you.

Argument of James K. Pease, Jr.

Mr. Pease: Mr. Chief Justice, and may it please the Court:

This case involves a question of whether the board, instead of protecting the freedom of employees to choose to be unionized or not to be unionized, departed from its role as impartial referee in the contest or conflict between employers and unions for the votes of employees, and interpreted section 2(3) of the act to give protected status to... of employee to union agents whose job was to be the arms, the eyes, the ears, and the voice of the union on the employer's crew, and who were prohibited by contract from exercising--

Unknown Speaker: Why is that inconsistent with the duty of the employer?

I mean, I thought that the whole theory of the National Labor Relations Act is that you can be a good employee and a loyal union member at the same time.

Mr. Pease: --That's correct.

Unknown Speaker: I can understand if you have a duty to two employers with respect to the same act, you have a problem, but his duty to the employer related to one act, his duty to the union related to other acts, namely, his off-duty time in which he would be hire... be recruiting people to the union.

What's bad about that?

Mr. Pease: Your Honor, the... in the first place, the conduct was not limited to off duty.

Secondly--

Unknown Speaker: Well, wait.

Doesn't it have to be, under the Labor Relations Act?

I mean, you can fire them for that, can't you?

Can he--

Mr. Pease: --No.

Unknown Speaker: --use his--

Mr. Pease: In the first place, that distinction is only material if that person is an employee within the meaning of the act.

If a supervisor does it at any time, that person can be fired.

If someone is not... does not have the status of employee--

Unknown Speaker: --Right.

Mr. Pease: --they are not entitled to the protection of the act at any--

Unknown Speaker: I understand.

I understand that.

Okay.

Well, go on.

Mr. Pease: --The--

Unknown Speaker: Are you saying, then, if the identical arrangement were made between someone who was already hired by the employer, somebody who's on the job, then becomes a paid organizer for the union in addition, that that person at that point would lose employee status?

Mr. Pease: --I believe it would be a question of whether or not that person had agreed to subject themselves to the control of the union just like--

Unknown Speaker: Same thing... same thing, except it's someone who is already on the payroll.

Mr. Pease: --Yes, ma'am.

Unknown Speaker: In every other respect it's the same.

Mr. Pease: Yes, Your Honor.

I believe that the... it's very similar to the issue of a worker who accepts the responsibilities of a foreman.

The question then becomes, have they taken on a different status, and it depends upon whether the control... whether the... this person who had been working as an employee agreed to change their job, to take as their primary function--

Unknown Speaker: Let's not talk in the abstract.

The worker is doing the job, becomes a convert to the union, takes money from the union to organize during lunch time and work breaks, and that's it, compensated for attempting to organize the shop.

Is that person no longer an employee?

Mr. Pease: --I would submit that if that person had subjected themselves to the control of the union and had similar... had obligations similar to those that were imposed by the salting resolution in this case that would give the union primary control over what the person did--

Unknown Speaker: Let's take the salting resolution out of it, and just have the compensation for organizing the shop, using... within the rules of shop using free time and lunch breaks.

Mr. Pease: --I think that would be very much like the conflict of interest that a lawyer would have if they were trying to suspend their representation of one client to represent the opponent for a meeting or for a hearing.

I don't--

Unknown Speaker: Well, you're basically saying that even under those circumstances, the person could no longer be an employee within the meaning of the act.

I mean, that's what it sounds like in your response.

Mr. Pease: --If they accepted the... submitted--

Unknown Speaker: Well, what about a striking worker who accepts union... follows the union order to strike, accepts benefits from the union, and so forth, not an employee under your theory.

Mr. Pease: --I disagree, Your Honor.

I believe that because that person was... had withdrawn his services from the employer, that there's nothing... there is not a conflicting obligation on the employee.

Unknown Speaker: Well, how about the rank and file employee who is a union member, and who has already agreed in advance by being a union member that if the union requires him to strike, he will, and furthermore, if the union provides benefits during a strike, he'll take them.

Mr. Pease: I don't... I believe that that's an entirely different situation.

I don't think that has anything to do with the type of situation that we have in here, where you have someone who is to be working for the union while working for the... actually on the job for the employer.

Unknown Speaker: Well, in any case, I take it your answer, earlier answer that it's the failure to limit his activities to off-duty time, I take it you withdraw that answer.

That hasn't anything to do with your position--

Mr. Pease: Your Honor, I didn't mean--

Unknown Speaker: --because... well, if I understood... I thought your answered Justice Ginsburg by saying, what if the employee comes... is already hired, the union says, we'll pay you money to organize during the lunch breaks and the off time.

I understood you to say that that, in fact, would remove the person from employee status.

Mr. Pease: --That's correct.

Unknown Speaker: Okay.

So there's nothing about off-time or on-time which is essential to your position.

Your position is, no matter when he exercises these responsibilities to the union, the fact that he has them precludes his employee status.

Mr. Pease: As long as that agency relationship and control exists, yes.

Unknown Speaker: Right, so it's got nothing to do, then, with on-time or off-time.

Mr. Pease: Correct.

Unknown Speaker: Why is that so?

All those shop stewards who have obligations to the union, do they remain employees, or not?

Mr. Pease: If they are acting within the consensual relationship of the collective bargaining relationship, that's--

Unknown Speaker: But they're doing work for the union, aren't they?

Mr. Pease: --That's true, but that is normally covered by the collective bargaining relationship.

I believe there's a Sixth Circuit case in Bechtel that said that where, in fact, the union controlled the steward, that it was a violation of 302 for the employer--

Unknown Speaker: It seems to me that the theory of the act is that there's no inherent incompatibility between obligations to the union and obligation to the employer, and I don't know how to make the act work without adopting that--

Mr. Pease: --I think that the distinction is based on, going back to the definition of employee.

The statute starts, the foundation of it is the word employee.

The circular definition incorporates the concept of the employment relationship, the agency relationship, and I believe that's the distinction that Congress is making, is where there is this agency relationship that's inconsistent--

Unknown Speaker: --Why is it inconsistent?

I mean, that's the problem.

It's not inconsistent as to the work he's doing for the employer.

Mr. Pease: --It is, because--

Unknown Speaker: If the union's telling him to sabotage, you know, the machinery he's working on, yes, that's inconsistent, but the union's not directing his work as to what he's doing for the employer.

Mr. Pease: --In the first instance, Your Honor, I believe that the motivation of the employee differs from the motivation of this... these union agents.

Union agents have no concern whatsoever about whether or not the employer likes them, or whether they're doing good work for that employer, because they're not dependent upon that employer's compensation.

Unknown Speaker: Well, so all employees of General Motors are really concerned whether the employer likes them or not?

Mr. Pease: No, Your Honor.

Unknown Speaker: That's not an ordinary attribute of industrial employment, is it, is concern that the employer like you?

Mr. Pease: No.

I... I don't mean to say that.

What I was... meant to say was that the employee is amenable to discipline because they want to keep their job, and they're concerned about getting a reference in the future, so they're concerned about what the employer thinks about them, and they are amenable to--

Unknown Speaker: But you could say that about anybody who has a second job, whether it's with the union or not.

Indeed, you could say it about people who are independently wealthy and are working at GM just for the fun of it.

That doesn't make them nonemployees, does it?

Mr. Pease: --But I think that because you're having them focus on simultaneously doing and serving conflicting interests, I think it's that simultaneous conflict--

Unknown Speaker: But why is it necessarily--

--And that's true even if they work full-time and perform all the duties the employers want them to perform, and earn their money.

Mr. Pease: --Yes, sir.

Unknown Speaker: Even if the employer never... it's true if the employer doesn't know about it, too?

Mr. Pease: Yes.

Unknown Speaker: If the guy never was an employee.

He worked there 5 years, he got paid every day, and build all the things he was supposed to build, he never was an employee because he had this secret loyalty to some other person.

Mr. Pease: He never had been employed under the National Labor Relations Act because of that conflict, and that also points out the fact that he could very well--

Unknown Speaker: Is it essential to your position that the conflict be with the union, or... say it was a competitor.

Mr. Pease: --It's the same conflict.

Unknown Speaker: And what if he promised his wife he'd quit as soon as she told him to.

[Laughter]

It's a dangerous job.

It could happen.

he's a pilot.

Mr. Pease: I don't have a good answer for that, Your Honor.

[Laughter]

Unknown Speaker: It seems to me it would be the same.

He's not an employee.

Wouldn't it be a rather bad organizer... if the organizer came there and didn't do a good job, isn't there... matching your incentive, I don't care because I'm being paid by somebody else, in fact, isn't there a harmony of these interests, because in order to organize, the union person has got to keep that job, and if he gives cause to be discharged, he's not going to be a very effective organizer?

Mr. Pease: I would submit that frequently it is the purpose of the union to have the organizer fired, so that they can file unfair labor practices, because if they can get the National Labor Relations Board to find that the employer is a violator and that there is substantial monetary damages, they can much more effectively and much more quickly get what their goal is, which is a labor agreement, than they can if they go through the democratic processes of the act.

Unknown Speaker: They're not going to do that very effectively if he is plausibly fired for bad work.

Mr. Pease: Well... well, that may be true, that's what happened in this case.

Unknown Speaker: They want him to do good work but be obnoxious, isn't that--

[Laughter]

I mean, isn't that the way it works?

Mr. Pease: I don't think so.

Unknown Speaker: No?

Mr. Pease: I think that in this case there was substantial evidence that he did work poorly.

The administrative law judge discredited that--

Unknown Speaker: And that would have been cause for discharge--

Mr. Pease: --Well--

Unknown Speaker: --and that's a question of fact.

Mr. Pease: --And the... the NLRB ruled against the employer, as they generally would in this sort of a case where there's an overt organizer, because they would say that the employer is discriminating on the basis of known union activity.

Unknown Speaker: Well, Mr. Pease, presumably the employer could make a broad policy in hiring people that the employer won't hire anyone who has a second job.

Mr. Pease: That's true, Your Honor, but--

Unknown Speaker: This employer didn't have that rule.

Mr. Pease: --That's correct.

That is, in this day of limited skilled and technical people, that's a very difficult policy to maintain, because there are many people who have no conflict of interest who would work, and be willing to work, and would perform a valuable service to the employer, and the employer is unable to utilize them if they have this broad, sweeping rule.

There's also the problem of temporary employment agencies that frequently provide employees, or people to work, supplement the crews.

You'd be precluded from using them.

Unknown Speaker: I'd like to clear up just one small point.

Did I understand you to say that there is no such thing as a shop steward unless there's a collective bargaining agreement?

Mr. Pease: No, Your Honor, I didn't.

Unknown Speaker: Suppose you had somebody who was a zealous union person, didn't take a penny because he was just so devoted to the union, doesn't want to take anything from the union treasury, doing the same thing that this person did, undertakes the job, said union, I'm going to use all my free time to proselytize for you, does that person lose employee status?

Mr. Pease: No, Your Honor, I don't believe so.

I think Congress made that distinction by incorporating the law of agency into the definition of employee.

That zealot, as I understand your fact situation, would not be acting as an agent of another party, and therefore would not be outside the definition of employee.

Unknown Speaker: Why can't you be an unpaid agent?

Mr. Pease: You could be.

Unknown Speaker: Well, then the answer to Justice Ginsburg's question would be different, wouldn't it?

Mr. Pease: But I think there has to be the--

Unknown Speaker: This is a zealot.

If the unpaid zealot doesn't--

--Okay, it has to be a zealot with a contract, right?

[Laughter]

Mr. Pease: --It has to be a contract.

Unknown Speaker: Even if the contract is a peppercorn or nothing at all... a zealot with a contract.

Mr. Pease: I believe--

Unknown Speaker: Then you'd change your answer.

Mr. Pease: --Yes.

Unknown Speaker: Okay.

Are you going to stand on that?

Mr. Pease: Yes.

Unknown Speaker: Okay.

[Laughter]

You better be careful.

[Laughter]

Mr. Pease: I believe that the... under the Darden case, that this Court has held that when Congress uses a circular definition of employee, they intend to incorporate the law of agency into that definition, and I think that's what they did in this case.

Unknown Speaker: What do you find in the law of agency that contradicts... I mean, the Restatement?

I have the Restatement here somewhere.

I don't find it inconsistent.

It says, a person may be the servant of two masters not joint employers at one time as to one act, if the service to one does not involve abandonment of the service to the other.

Mr. Pease: That's correct.

Unknown Speaker: And you say here the one does involve... but you leave out the fact that it says, as to one act.

You can easily be the servant of two masters as to different acts.

Mr. Pease: I believe that the concept there, though, is if that is a pervasive... if it is a general control that is being exercised by the union--

Unknown Speaker: So long as it's not a control over the act that he's doing from the employer, for the employer... what control does the union exercise over the act that he is doing for the employer?

Mr. Pease: --Okay, there are several areas of control.

First of all... and these, I think, illustrate the conflict.

One has already been mentioned... leaving.

It's a critical time.

The salt must leave, the zealous union organizer at least may be amenable to a plea by the employer to stay, at least during the critical time, so they don't get a bad reputation and have--

Unknown Speaker: He has no obligation to the employer to stay.

I mean, if it were a term contract, yes.

Then he'd have a duty to the employer.

But all... by definition, the person who's in an at-will contract has no duty to the employer to stay.

Mr. Pease: --That's correct, but they're exercising their free will in making the change.

Here, it's an order from the union.

I think that's the basic distinction that Congress is making by their use of the circular definition.

Unknown Speaker: So long as it's not an order from the union that causes him to violate a duty to the employer, I don't see how that changes his employee status.

Mr. Pease: I don't... I believe that it's because it's contrary to the interests of the employer.

It's to the interests of the employer to have that employee continue to work during a concrete pour, or some other critical stage of the work.

If this is just a voluntary union organizer, that person may be amenable to persuasion from the employer about how critical that work is.

If it's an agent of the union, they have no choice.

They have to leave immediately, and I believe that's... I think that's the distinction.

The board argues that the statute includes the entire class of workers.

I don't believe that's the case.

I think that the board routinely makes distinctions between employees and nonemployees in enforcing, or interpreting this Court's decision in Lechmere, and I think the Hearst case, referred to by the board, holds that Congress didn't intend to have a sweeping inclusion of a class of employees, and I think that the Sunland exceptions that was discussed earlier is really insupportable.

I don't think that there's a valid distinction between what the union agent can do in a nonstrike setting as compared to what they would do in a strike setting.

I think that the analysis is the same, and I think that that illustrates the invalidity of the board's position in this case, and indeed--

Unknown Speaker: Would you tell me about the Sunland case?

Did the Sunland case hold that the people involved were not employees, or that it was not an unfair labor practice to discriminate against--

Mr. Pease: --It was that the employer had no duty, they did not specifically say that they were not employees, but I believe that the analysis is the same analysis that I'm urging.

It's essentially an agency relationship.

Unknown Speaker: --Let me also clarify one thing in my own mind.

In this case, there was one person who actually went to work for the employer, and there are seven or eight who never got hired, as I remember it.

You don't draw a distinction between those two.

You don't challenge the Phelps Dodge case, in other words.

Mr. Pease: No, I... the Phelps Dodge case, I think that if they would have been a bona fide employee as--

Unknown Speaker: If they'd been hired.

Mr. Pease: --If they were employed, they would be bona fide applicants.

If they're not... they wouldn't be, then they wouldn't be bona fide.

Unknown Speaker: So it's the same rule as to both groups.

Mr. Pease: Yes.

Unknown Speaker: Yes.

Mr. Pease: Yes, Your Honor.

Unknown Speaker: But it is the Government's position that you not only... well, you cannot refuse to hire these salts.

Isn't that the Government's position?

Mr. Pease: Yes, Your Honor.

Unknown Speaker: That going in you shouldn't... you can't turn down the other seven just because you know that they're union salts.

Mr. Pease: That is my understanding of their position.

Unknown Speaker: Well, what is your position on whether any deference is owed to the NLRB in defining a term used in the NLRA?

In this case, the term is employee.

Mr. Pease: I believe that the board is due deference when their interpretation is reasonable and consistent with the policies of the act.

I do not believe that it's reasonable for the board to exclude the definition... from the definition of employee the law of agency.

I believe if you read the definition of the law of agency, the Congress intended to retain the core of the employment relationship as the basis for protection under the act, and I think that the analysis that they have used in effect would even exclude the managerial employee, and I don't see that as being--

Unknown Speaker: But you said that employee is not self-defining.

Have you said that?

The word, employee.

Mr. Pease: --I believe that by including a circular definition, they did intend to include the law of agency into the definition of employee, and I--

Unknown Speaker: Is there room for... any room for interpretation, or does the word employee have a plain meaning?

Mr. Pease: --I do believe there is room for interpretation, and I believe that Congress did intend to expand on the law... on the law of agency by adding the language that it's not limited to an employee of any particular employer, because I think they wanted to include employees in several different... with several different employers in an industry.

Unknown Speaker: So your position is, there's room for interpretation, but this particular interpretation is unreasonable.

Mr. Pease: That's correct, and I believe... one of the reasons that I think it is is that when Congress went on to explain in the definition of employee, they said that it included individuals who were out of work, or whose work ceased because of a current labor dispute, or an unfair labor practice, and who had not obtained regular and substantially equivalent employment, which implies that there are other situations which would not be included, and it seems to me that what it does is, it shows that they were trying to take... retain the core.

Plus I believe that I think that the board's decision in this case is inconsistent with the policies of the act.

I believe that the act says that the purpose... its purpose is to protect the right to organize, and the board at page 8 of its brief says that they interpret it as, that it's to promote organization, and I would submit that what the board is doing in that situation is it is saying that there is a preferred choice, and that they are going to go out and support that, and to give the status of employee to a person who's contractually prohibited from exercising the rights of an employee under section 7 of the act, and I think that that's inconsistent with the 1947 amendments to the act that said that employees had the right to refrain from any of those activities.

I think that that set up two equally acceptable choices, and the board was supposed to be an impartial referee, and I believe in this case, they have moved from that position, and for that reason I don't think that they have due deference.

Unknown Speaker: How again do you think the board is partial here, as opposed to being neutral between organizing and nonorganizing?

Mr. Pease: Well, I think that what they're doing is, they're giving their stamp of approval in requiring the employer to put the union on the employer's crew.

This person is an agent of the union, and they're requiring to put him on the crew, which could mean that if he's not detected, he could pack the unit, or they could... the union in effect is buying votes, or the employees are deceived into believing that this is someone who is sincerely expressing their own personal convictions and in fact they're doing it for pay, or this person may even engage in--

Unknown Speaker: What if some person who seeks employment wants to try to decertify the union?

He's not a member of the union.

He's just trying to decertify it, if the board applied the same standard to them as they do to the salted organizer, they would be impartial, would they not?

Granted there may not be too many of the former species.

[Laughter]

Mr. Pease: --Well, I think the issue would only come up if this person was acting on behalf of some third party and there was an agency relationship--

Unknown Speaker: A rival union, perhaps.

Mr. Pease: --I'm sorry?

Unknown Speaker: A rival union, perhaps.

Mr. Pease: That's true, very possible, and that is a point I would like to make.

This is something that doesn't just apply, or the holding in this case will not just apply in the construction industry, if I'm understanding the board's position.

This could apply in all industries, and it could apply in a situation where the fact... the employer was already unionized by one union and it could be another union that's coming in to try to take it away.

I think that the point that has been made... it's made in Willmar, and it's a point that I would like to address.

I touched on it earlier.

I believe that the board is assuming that the union agents are entitled to the protection of the act, and that their analysis begins with the premise that these people are employees and entitled to the protection of the act, and then the question becomes, have they done something to lose that protection?

I would submit to you that it is inappropriate to assume that they are employees and to make this status determination as we make it in other instances of supervisors, independent contractors, make that independent of the presumptions of protected activity, independent of the motive of the employer for engaging in activity that raises the question.

It's a status question, and therefore we would submit that it's inappropriate.

Oh, just one more comment.

I think that the control that the union exercised over the union agent in this case is illustrated by the supernatural persistence he displayed in soliciting Town & Country employees in the face of repeated rejection.

These employees were so upset by the pressure that the union agent was putting on them that they were on the verge of quitting, and this is another way that the union can be effective without going the high road, because they can focus on those employees who are opposed to unionization and in effect force them off the work force, which means either that they will be replaced by someone who might be more favorable, or that they may make it impossible for the employer to perform, and that nonunion employer is off the job.

Unknown Speaker: That requires a thoroughly obnoxious organizer, I guess--

[Laughter]

--who is apt not to have much success, I would think, in organizing for the union.

Mr. Pease: But the problem is, Your Honor, that frequently the objective is not to organize in the classical sense.

I think that is another fallacy.

It is not appropriate to assume that the objective may be to organize.

The objective may be, as suggested by Joel Harmatz in the Sunland case, to inflict economic pain, so that they can get leverage on the employer to force them to sign a contract or keep them out of the area, and that unfortunately is what we find frequently happens throughout the case.

I do want to emphasize that I believe the Sunland case, the board's analysis in that case is insupportable, and I believe that using a similar analysis, an analysis that we espouse, that the law of agency should be used to interpret the status of people and determine whether they're entitled to the protection of the employees, and that the board should abandon this position and should return to a position of impartiality that was intended by Congress.

Thank you.

Unknown Speaker: Thank you, Mr. Pease.

Mr. Wallace, you have 4 minutes remaining.

Rebuttal of Lawrence G. Wallace

Mr. Wallace: Thank you.

Unknown Speaker: Mr. Wallace, before you even start, I have... the one thing that sticks in my craw a little bit about this case is not the necessity of treating this person as an employee, that's fine, but the inability not only not to fire the person knowing that he's on the union payroll, but even the inability to refuse to hire the person knowing that he's on the union payroll.

Why must they be the same question?

Is there any way that I can agree with you on the employee question but not necessarily believe that the salt has to be hired if the employer knows going in that this person who wants to be his employee is on the union payroll?

Mr. Wallace: Well--

Unknown Speaker: What would make it unlawful to refuse to hire him, or to fire him, for that matter?

Mr. Wallace: --8(a)(1) and 8(a)(3) protect against coercion or intimidation in the exercise of the rights--

Unknown Speaker: --the rights guaranteed in section 157.

Mr. Wallace: --Right.

Right.

Unknown Speaker: Does that include the right to be employed by a labor union?

Mr. Wallace: Well, it includes the right to participate in the union and to comply with its voluntary rules, so--

Unknown Speaker: He has no problem with that.

Mr. Wallace: --long as the member wants to do that.

Unknown Speaker: He has no problem with all that.

The employer says, you know, I have no problem with all that.

I just don't want you to be on the union payroll.

Mr. Wallace: Organizational activity is an important part of a union's functions.

Unknown Speaker: I have no problem with that.

I just don't want you to be on the union payroll.

Mr. Wallace: Well, that is--

Unknown Speaker: You want to conduct organizational activity, you know, God bless you, but I do not want a worker who is on the union payroll.

Mr. Wallace: --That--

Unknown Speaker: It seems to me a perfectly reasonable position for an employer to take.

Mr. Wallace: --It may be a reasonable position, but it is a position that interferes with the union's ability to conduct its protected activities.

In any event, that question wasn't even put to the board by the respondent in this case.

Unknown Speaker: That's a separate question, though, from whether he's an employee.

Mr. Wallace: That's correct--

Unknown Speaker: Once he's hired.

Mr. Wallace: --it is a separate question, as the Sunland decision illustrates, but the board made its views on that question quite clear in this case.

I do want to mention that there is one paragraph in the board's opinion, and this is not the ALJ's opinion, it's the board's own opinion on page 37a of the appendix to our petition, that responds very succinctly to the contentions made by the respondent and its amici which were made before the board that paid union organizers will engage in activities to the detriment of work assigned by the employer or will embark on acts inimical to the employer's legitimate interests, and the board said, we do not agree, and then there are several more sentences that specifically reflect the judgment of the board in response to this, and the complete lack of evidentiary support for the speculations in this case.

And one is left with the question in this case that first occurred to me when the case came to our office, if a journeyman electrician working under the direction and control and according to the work rules and on the payroll of an employer covered by the act is not an employee, what in the world is he?

He's not in domestic service or an independent contractor or supervisor.

Chief Justice Rehnquist: Thank you, Mr. Wallace.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until tomorrow at ten o'clock.

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National Labor Relations Board v. Health Care & Retirement Corporation Of America - Oral Argument

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National Labor Relations Board v. Health Care & Retirement Corporation Of America

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Transcript:

IN THE SUPREME COURT OF THE UNITED STATES

NATIONAL LABOR RELATIONS BOARD, Petitioner v. HEALTH CARE & RETIREMENT CORPORATION OF AMERICA

No. 92-1964

February 22, 1994

The above-entitled matter came on for oral argument before the Supreme Court of the United States at 10:59 a.m.

APPEARANCES:

MICHAEL R. DREEBEN, ESQ., Assistant to the Solicitor General, Department of Justice, Washington, D.C.; on behalf of the Petitioner.

MAUREEN E. MAHONEY, ESQ., Washington, D.C.; on behalf of the Respondent.

PROCEEDINGS

10:59 a.m.

CHIEF JUSTICE REHNQUIST: We'll hear argument next in No. 92-1964, the National Labor Relations Board v. Health Care & Retirement Corporation of America.

Mr. Dreeben.

ORAL ARGUMENT OF MICHAEL R. DREEBEN ON BEHALF OF THE PETITIONER

MR. DREEBEN: Thank you, Mr. Chief Justice, and may it please the Court:

This case involves the rule adopted by the National Labor Relations Board for determining when nurses are supervisors within the meaning of the National Labor Relations Act. Now, the Board's rule is that a nurse's direction of less-skilled employees, as a matter of professional judgment incidental to the treatment of patients, does not make the nurse into a statutory supervisor.

In this case, the Board applied that rule to the nurses employed in respondent's nursing home. The Board found that the nurses employed by respondent in that facility engaged in direct patient care, making rounds, administering medicines, talking to physicians, and maintaining records. As an incidental function of taking care of patients, the nurses give some direction to the nurse's aides who work with the nurses to bathe, dress, and feed the residents in the home. The Board concluded that the nurses' use of the aides in that fashion to carry out their nursing responsibilities did not make the nurses statutory supervisors.

QUESTION: Mr. Dreeben, does the Board's rule or decisions in this area of nurses and who is a supervisor and who isn't, are there analogous rules or principles in other areas of employment?

MR. DREEBEN: Yes, Justice O'Connor. The Board's rule in this case is really a particularized application of a general principle that has found expression in two different areas under the statute. The first is that the Board has crafted a rule to deal with the problem of minor supervisory personnel; those persons who are characterized by Congress as being below the level of foreman and not exercising the kind of supervision that aligns them with management.

And in cases of that character, the Board has found that when direction is given by leaders of groups that work together or by journeymen to apprentice, that when that direction is a function of superior skill or greater experience and not the sort of supervision that aligns the employee with management, that kind of employee is not treated as a supervisor.

QUESTION: Well, in looking at the language of the statute, it appears that the Board relies, primarily at least in this context, on the language that it is -- that the nurses are not acting in the interests of the employer, but rather in the interests of the patient.

MR. DREEBEN: That is one of the three means by which the Board reaches the route that it does under the statute.

QUESTION: But that seems to be the primary reliance.

MR. DREEBEN: I think, Justice O'Connor, it's -- it is equally important with two other provisions of the statute. The one that is most relevant here is the requirement that a supervisor exercise one of the functions listed in the statute, and the relevant one here, the most important one here, is -- are the words "responsibly to direct."

QUESTION: I read the opinions below the same way Justice O'Connor did, that the Board seemed to be principally relying on the idea that the claimed supervisors acted in the patient's interest and not in management's interest, which I frankly find quite a weak read.

MR. DREEBEN: Chief Justice Rehnquist, that is one of the ways that the Board has used to articulate the point that it's trying to get across. The point that it's trying to accomplish here is to distinguish and draw lines between the kind of supervision that Congress intended would disqualify a person from the protection of the Act from the sort of direction that goes on a day-to-day basis in a variety of workplace settings when minor supervisors, who have greater skill or familiarity with the working situation, are -- give some direction to people who work on a team with them.

QUESTION: But, yes --

QUESTION: How does that, in any way, relate to the distinction between acting in the client's interest or the patient's interest and acting in the employer's interest?

MR. DREEBEN: The Board is not taking the position that the nurses are working contrary to the employer's interest, but the words "in the interest of the employer" have to have some meaning, because all employees, as the Board has recognized, from the board of directors right down to the maintenance staff, the lowest levels, all work to further the employer's business interests.

Those words were not put into the statute to be a superfluous reiteration of that principle. They were put in, as the original draftsman of the language explained, to express the view that these are the type of employees who are really expressing managerial authority in their work. And the Board is not, in this case, attempting to say that these nurses are somehow working contrary to the employer's interest. It is simply defining and interpreting the language "in the interest of the employer" to give it the kind of meaning that Congress had originally intended.

QUESTION: Are you saying that the nurses fall into the same category as what your adversary calls the straw boss?

MR. DREEBEN: Yes, the Board has said that. And, in fact, in this very case at page 40a of the petition appendix, the ALJ explicitly drew the analogy between the kind of work direction that these nurses do and the kind that is done in this minor supervisor line of case that the Board has had under the statute for many, many years.

QUESTION: Mr. Dreeben, I always envisioned the so-called lead man or straw boss as someone who supervises a single team. I mean, you may send five men out to chop wood and you say one of them, you know, you take charge and all he does is say, well, you chop this tree, I'll chop the other tree.

But these nurses are doing much more. And if nothing more were at issue here than a nurse directing the nurse's aide with respect to the particular patient that that nurse is working with at that moment, I would say yes, the nurse -- you know, when she tells the nurse's aide, you know, bring this, bring that, bring the other, that's acting as a straw boss, that's acting as a lead man. But not when she shifts, it seems to me, nurse's aides from one patient to another, from perhaps one wing of the hospital to another; when she authorizes overtime; when she does all sorts of things that relate not to the particular team that is working on a particular patient, isn't -- I don't know any other way to distinguish the straw boss or the lead man.

MR. DREEBEN: Well, first of all, the straw boss cases do involve kinds -- the kinds of cases that you've described, Justice Scalia, but they also involve cases where you have the most skilled person, say, at a print shop supervising a variety of lesser-skilled employees and telling them what to do, telling them where to go, what -- when to do their various assignments in order to make sure that the whole puzzle fits together.

But I think it's very important to focus on what these nurses did at the nursing home in question, because the ALJ made fact findings on it and the record supports those fact findings. I don't think there's any question here of substantial evidence.

The ALJ found that to the extent that the nurses had any function at all to assign the aides, that was purely a matter of routine that involved no independent judgment. I believe that the assistant director of nursing described it as being "pretty well cut and dried"; that's in the transcript at 1106. The floor was simply split into sections and the aides were rotated from one section to another. And as she put it, it was just a sort of formula to be followed.

And the ALJ found, again at page 40a of the appendix, that the assignment that these nurses did during the relevant period in time was purely --

QUESTION: Whereabouts on -- whereabouts on page 40a are you referring to, Mr. Dreeben?

MR. DREEBEN: On page 40a of the petition appendix, Chief Justice, that's at the top of the page. It's a carry-over from the prior paragraph.

QUESTION: Thank you.

MR. DREEBEN: The ALJ says: "The eight assignment duties of the nurses seem to me to fall well short of requiring the use of independent judgment." And that is an independent requirement for being a supervisor under Section 2(11) of the Act. Without a showing of independent judgment in the tasks that are described, there is no supervisory status.

QUESTION: Is that a factual determination or a legal determination?

MR. DREEBEN: I think it's a factual determination which is subject to review under the substantial evidence standard.

QUESTION: He surely doesn't put it that way, does he?

MR. DREEBEN: And -- well, the ALJ referred to Board cases and to a court of appeals case that make that clear. The Board certainly has latitude under Chevron to interpret what independent judgment and what routine is within the context of reviewing the application of the act to specific circumstances.

And in this case that's what these nurses did. They did it as a matter of routine. The assignment functions were not nearly as sophisticated as Your Honor has implied. Now, there may be a change that's reflected in the record where the director of nursing decided I want things done in a different way, I want them -- I want you to use much more judgment in the way you do it. If so, nurses who do those sorts of things might be exercising independent judgment, but these nurses with respect to assignment were not doing that.

QUESTION: What about authorizing overtime? I mean you --

MR. DREEBEN: They did not authorize overtime. The ALJ again explicitly found that they did not have authority to authorize overtime.

QUESTION: Where is that, Mr. Dreeben?

MR. DREEBEN: That's in the petition appendix. I do not have the exact page at this moment. But the ALJ, again, specifically found they do not have the authority to authorize overtime. They initialed time cards.

QUESTION: Look at page 41a of the petitioner's appendix where the opinion says: "The second way the duty nurse may attempt to deal with an aide's failure to show up for work is to ask the aides who are scheduled to go off duty if one of them is willing to remain at the facility on overtime."

MR. DREEBEN: That's correct. But the nurse herself did not make any decision about whether the aide would be authorized to obtain overtime. That was a decision that was reserved by the director of nursing.

QUESTION: Oh, really? She -- you mean she can ask the nurse's aide if she's willing to serve on overtime -- and I assume this means at a time when there's no one else around. During 75 percent of the day at the time this case came up, as I understand it, if these nurses were not supervisors, there was no supervisor --

MR. DREEBEN: Well --

QUESTION: -- Present at the hospital or at the nursing home, isn't that right?

MR. DREEBEN: The director of nursing was always available on call, as was the administrator. Most of the hours --

QUESTION: Sure. Well, so are we. But I'm saying that there were --

(Laughter.)

QUESTION: -- There was nobody at the nursing home who was a supervisor during 75 percent of the working day. That's the position that the Board is taking, right?

MR. DREEBEN: Well, yes, that is the position that we're taking, and a large component of that time consists of the night shift at which there is very little staff at the hospital other than what is necessary and nurses on duty at each --

QUESTION: Where was this, in Alaska, you have a 75 percent night?

MR. DREEBEN: No, I said a large component of that. Obviously, Justice Scalia, there were times when the director of nursing or the administrator were not there. But there is testimony in the record, and the ALJ again found that the director of nursing is available on call at all times. And this is at page 47a of the appendix. Since the administrator and the DON are always on call and since the nurses do, in fact, call the administrator and the DON at their homes when nonroutine matters arise, that was an indication that, indeed, this nursing home had a mechanism of supervising its aides.

QUESTION: Well, Mr. Dreeben, looking at the language of this statute today, and in an attempt to justify the Board's rule, what do you think the strongest point is?

MR. DREEBEN: I think that --

QUESTION: Under the language of the statute?

MR. DREEBEN: Well, we do rely on the "interest of the employer" language. We also rely on the language "responsibly to direct," which the Board has interpreted --

QUESTION: But that's just an alternative. The statute also says if the nurse can assign or do other things or responsibly direct.

MR. DREEBEN: That's correct. And in this case the assignment --

QUESTION: And they did have some assignment functions.

MR. DREEBEN: And those assignment functions were found to be purely a matter of routine not requiring the exercise of independent judgment. Now, if this were a case in which the assignment functions did require some judgment, then there would a supplemental inquiry for the Board to make about whether those --

QUESTION: Well, then, is your strongest point no independent judgment? Is that what your --

MR. DREEBEN: As to the assignment, that's what the record in this case shows. There's no basis for arguing that they're supervisors, since they fail that threshold requirement, and there's never been a challenge to that requirement.

There's another very important consideration in the Board's interpretation of the statute, Justice O'Connor. You asked me earlier what categories of employees are treated analogously.

QUESTION: Uh-hum.

MR. DREEBEN: Another major category of employees treated analogously are professional employees. Now, the Act in Section 2(11) excludes supervisors from coverage.

QUESTION: Well, do you -- do you take the position that these nurses are professional employees within the definition of the statute?

MR. DREEBEN: No, in this case they are not. But the point of my reference to the professional inclusion is that Congress specifically did want people who exercise judgment and do so on the basis of superior skill and knowledge to be covered by the Act, and that creates some tension between Sections 2(11), which exclude supervisors, and Sections 2(12) which includes professionals, because --

QUESTION: Why are they not -- why are they not professional employees?

MR. DREEBEN: They are considered technical employees. These are licensed practical nurses. Licensed practical nurses have a lesser educational requirement and the Board is --

QUESTION: So a registered nurse would be considered professional?

MR. DREEBEN: No question, a registered nurse would be considered a professional. And the major significance of that distinction I think would simply be that the nurses who are registered nurses would have the right to a unit that did not include nonprofessionals. But for purpose of interpreting the Act and looking at the interplay between the professional exemption and the exclusion for supervisors, the important point is that the Board has to make an accommodation.

Because virtually all professionals will supervise some lesser-skilled employees in the course of their duties. They do so as a matter of simply getting the job done, and Congress could not have been ignorant of the fact that architects have draftsmen, engineers have machine operators, and the like. Lawyers have paralegals and secretaries, and doctors have nurses.

And if Congress had not intended to accord protection to the Act to these people because they engage in such minor supervisory activities, the entire coverage of professionals would have made very little sense. And so the Board takes into account that structural aspect of the statute in arriving at its construction of when nurses should be deemed to fall on the supervisor side of the line.

QUESTION: Can you tell us an opinion in which the Board has done just that, has shown that it is playing off the tension between these two sections?

MR. DREEBEN: Well, first of all, the Board issued a decision in Northcrest Nursing Home which we cite in our reply brief, which occurred after we filed our opening brief in this case, that represents a comprehensive review of the legal principles in this area and explicitly draws the connections both to the straw boss/lead man line of cases that I referred to earlier, as well as the tension to the professional line of work.

QUESTION: Any case before this decision?

MR. DREEBEN: Well, there are also a series of cases that this Court considered and discussed in its Yeshiva University opinion at page 690 in footnote 30.

QUESTION: The footnote 30 cites Board opinions.

MR. DREEBEN: Yes, footnote 30 cites Board opinions in which the Board had considered cases where professionals were functioning as project captains or group leaders, and in the words of the Court describing the Board's cases, "they were deemed to be employees despite substantial planning responsibility and authority to direct and evaluate team members."

And if you read those cases, the Board is quite conscious of the fact that this is the way professionals operate, and it's necessary that they be given the protection of the Act, notwithstanding this minor form of direction. Otherwise it would have been pointless to cover them. The court --

QUESTION: Is that Doctors' Hospital against -- of Modesto, is that the one?

MR. DREEBEN: And Doctors' Hospital of Modesto was cited as one of the cases in that series, which is really the case in which the Board gave its most complete articulation of its current theory before 1974. That was a case in which the Board examined the role of nurses who worked at a hospital and gave some -- they were called charge nurses. They had some responsibilities over a wing of a hospital with respect to nurse's aides and other nurses there to make sure that patient care was done properly, and the Board did not consider that to disqualify them from protection under the Act. It did not view them as being made supervisors.

This Court explicitly took note of that when it described Board cases favorably, saying that the Board has not eliminated employees whose decision-making is limited to the routine discharge of professional duties in projects to which they assign them. That's -- the Court characterized those decisions as accurately capturing the intent of Congress. That is the line of decisions that really supports the Board's analysis of the nurses in this case.

And when you look at the sort of direction that the nurses gave to aides in this case, it clearly is well within the routine discharge of their professional or technical duties. Many patients at a nursing home have strict regimens of having to be turned every 2 hours. A nurse might remind an aide that that needs to be done, or ensure that it is done. Other patients need to have cushions placed in particular ways to support them. A nurse may correct an aide if the aide hasn't put the pillow in the proper place, hasn't followed the doctor's instructions with respect to the way the patient should be treated.

QUESTION: A nurse can tell an aide to go work with another nurse too, can't she?

MR. DREEBEN: Again, that relates to the assignment function.

QUESTION: Right.

MR. DREEBEN: It's what happened in this case when there was a shortage of aides, is that one of the aides might be rotated from one --

QUESTION: By a nurse. A nurse would say don't work with me, go and work with someone else, right?

MR. DREEBEN: Correct.

QUESTION: And a nurse could also say too few people have reported for work today; we would like someone, or two or three people, to work overtime. And the nurse could say that and authorize that overtime, isn't that right?

MR. DREEBEN: Well, I don't agree, Justice Scalia, that she could authorize the overtime. I think the findings are inconsistent with that.

QUESTION: The findings say that -- and, again, it's page 40 -- 41a and 42a. What the opinion says is, "the nurses otherwise" -- at the top of 42a, "the nurses otherwise have no authority to grant overtime." And the preceding paragraph makes clear that they do have authority to grant overtime when it's necessary because of absences.

MR. DREEBEN: Well, I think that the sentence that follows that is equally important, Justice Scalia. It says: "The nurses are not authorized to deal with an unusually heavy workload by asking aides to work on an overtime basis."

QUESTION: That's right.

MR. DREEBEN: So --

QUESTION: An unusually heavy workload is no justification, but the failure of some people to report to work does enable them to authorize overtime.

MR. DREEBEN: Well, I think the record says what it says on this subject, Justice Scalia.

QUESTION: Well, you're not arguing with that point, are you? You're not challenging the statement in the opinion?

MR. DREEBEN: No, no, no. We are not state -- challenging the statement in the opinion.

QUESTION: So they can authorize overtime then.

QUESTION: Yes.

MR. DREEBEN: Well, to the extent reflected in the opinion, yes.

QUESTION: Well, why don't you -- why don't you admit it rather than fight it?

MR. DREEBEN: I think that whatever the finding -- those findings on overtime are not inconsistent with -- any way with the Board's ultimate conclusion that these nurses are not supervisors. The nurses did not have the kind of authority, in the Board's view, that aligned them with management, and there were ample mechanisms in place for the nursing home to conduct the supervision at issue.

Now, again, we think that the Court's opinion in Yeshiva University very strongly supports the Board's approach in this case, its general legal approach, regardless of how any particular fact situation may be applied, whether correctly or incorrectly, under that approach.

QUESTION: Mr. Dreeben, I don't read that finding as saying a nurse is authorized to -- has the authority to authorize overtime. But what I understand it to say is that hospital policy is if somebody doesn't show up for work and if you have to divide it up, the other -- the aides can decide among themselves which one shall work overtime, and the nurse can let them do that.

MR. DREEBEN: Well --

QUESTION: It's this hospital policy that says that somebody has to work overtime when somebody doesn't show up, they'll ask them to do that.

MR. DREEBEN: Certainly all of this flows from the hospital policies. And we're -- I don't think that really, one way or the other, this point is dispositive of the validity of the Board's legal role, which is the issue that we're presenting for decision to this Court. The Board's rule is a mechanism for attempting to distinguish between those employees who are high enough up on the chain of command to require them to be treated as supervisors, and employees who are lower down and who exercise some amount of direction, but not enough to align them with management for purpose of collective bargaining.

QUESTION: And in this particular facility you say there are four nurses that fit that category, the director of nursing, assistant director, patient assessment. There were four that you put in the supervisory category?

MR. DREEBEN: I don't think findings were made about whether the patient assessment and treatment nurse qualified as supervisors, and that really isn't an issue here. The director of nursing, the assistant director of nursing, and the administrator were all found to -- I think there is no dispute that they are supervisors in this case.

And the director of nursing was actively involved in supervising on the floor. She testified that she was out of the floor an average of 50 percent of the time. That's at page 913 of the transcript. That's an average. There were ample mechanisms in place for the supervisors to accomplish their goal. And, in fact, an administrator at one point said to a nurse, don't ever make a decision on this floor without my consent first. I think the record amply bears up what the ALJ ultimately found in this case, which is that respondent --

QUESTION: Well, what happens in that instance if the supervisor isn't there, which is a substantial part of the time.

MR. DREEBEN: That's when the telephone comes in handily, Justice Kennedy. The director of nursing, the assistant director of nursing, and the administrator are available by phone --

QUESTION: Are these the kind of decisions that the statute characterizes as decisions made which require the use of independent judgment?

MR. DREEBEN: Well as to the assignment functions, the ALJ found that they are not. As to the question of whether to consult a supervisor, there was no finding made about whether that required independent judgment. I'd suggest that --

QUESTION: Well, let me put it this way; is your understanding of the record that whenever independent judgment is required, that the nurse must talk with the supervisor?

MR. DREEBEN: We -- I don't think we would disagree that independent judgment might have been required in seeking the authority of a true supervisor in this case, whether it is or not --

QUESTION: Can independent judgment ever be exercised under the policy of this hospital without consulting the supervisor?

MR. DREEBEN: Yes, I think that there are some instances in which the nurse is exercising independent judgment.

QUESTION: So that it's more than just arranging a pillow and so forth.

MR. DREEBEN: Well, no, I think that itself is a matter of independent judgment. The nurses there are providing their medical judgment. They are -- they are the ones who hear from the doctors what is required for the patient's care. They read the materials that describe it, and they are ultimately responsible for making sure that the care is done in a professional manner.

QUESTION: Well, I take it they have to monitor the condition of the patient.

MR. DREEBEN: That's correct. And, again, they have to use judgment in whether to require that some aide look in on a patient more often than not to make sure that the patient doesn't suddenly spike a temperature. And those are the kinds of independent judgment that the nurses used in this case, but that's totally coextensive with the sort of independent judgment that a professional routinely uses in the kinds of projects that a professional carries out. And Congress did not view that sort of expression of professional judgment as inconsistent with the treatment of the employee as a protected employee under the statute.

Now, I wanted to mention again the case of Yeshiva University, because we do think that the Court's general approach in that case is precisely the same that is at issue today. The Court said that if the faculty had been simply exercising routine professional judgments in the matter of their teaching work, that would not have been a problem for coverage under the Act. The problem in that case is the faculty were really managers and they were really determining what the school would do, what teach -- what courses it would teach, what students would be admitted, and making all the decisions which would be characterized as managerial in any other setting.

In this case the nurses are not doing what would be characterized as managerial or supervisory in any other setting. They are much more analogous to the type of project captains that supervise other professionals and other less-skilled employees, and they also fit within the line of cases that dealt with lead men and straw bosses, and for that reason the Board properly placed them on the side of the line where they are protected rather than the side where they are not protected.

I'd like to reserve the balance of my time.

QUESTION: Thank you, Mr. Dreeben.

Ms. Mahoney, we'll hear from you.

ORAL ARGUMENT OF MAUREEN E. MAHONEY ON BEHALF OF THE RESPONDENT

MS. MAHONEY: Mr. Chief Justice and may it please the Court:

I'd like to start out by saying that I really did think that the issue in this case was not whether the court of appeals had erred in its application of the substantial evidence test under the traditional statutory criteria for finding supervisory status, but rather that the question that was presented in the petition was whether the court of appeals had erred by rejecting the Board's interpretation of the statute, not the application of the evidence.

And, in fact, there is -- under Universal Camera this Court has said, and repeatedly held, that the application of substantial evidence to a settled statutory meaning is something that's placed in the charge of the court of appeals and it would rarely be disturbed by this Court absent some indication that it was grossly misapplied or misapprehended. So for the Government to now come in today and suddenly start citing all these transcript cites about how these people really didn't -- these nurses really didn't have any independent judgment or meet the traditional statutory criteria seems not to be, to me, the issue in this case.

And in fact, as the court of appeals found, if you evaluate the activity that these nurses performed on behalf of the nursing home under the traditional criteria, look at the structure of the operations, look at what the higher levels of management were expecting them to do, you would find that they were, in fact, charged with the overall direction, assignment, with the use of independent judgment for the operation of the facility.

In fact, the findings of the ALJ specifically say that these nurses were in charge of a wing of the nursing home for much of the time. I think it's important to emphasize here that there's only one floor nurse on the floor on the wing of a hospital overseeing the care that's being given to 50 residents at any time, and that the director of nursing and the assistant director of nursing are absent from the facility 75 percent of the time.

Similarly, to say that the ALJ found that they didn't exercise independent judgment in connection with the exercise of their responsibilities is not supported by the -- either the findings of the judge or what he said at page 40a. He finds -- he does not say they do not exercise independent judgment in connection with the direction of the work of the aides. He says he finds that what they do doesn't equate to responsibly directing the aides in the interests of the employer.

He never goes on to make some separate finding that they didn't use independent judgment, and the question, the way it's posed, seems to presume that they did, by saying whether the Board reasonably determined that employees, in the exercise of professional judgment, were properly denied supervisory status. So --

QUESTION: Ms. Mahoney, may I just ask you a question about the assumption you're making about the statute, and I think I'll understand your argument better. Do you agree that in each of the three categories covered by the statute, the sort of assignment responsibility, the direction responsibility when they're working, and the grievance responsibility, that the statute seems to make a distinction between levels of responsibility?

It seems to assume that a given professional, for example, could do any of these three things conceivably, but there are different levels of responsibility. For example -- and just as an example, it doesn't speak merely of directing other employee, it speaks of responsibly directing them. Now, those may be sort of opaque adjectives, but they seem to be -- at least to be getting to the -- to make the point that there are two different levels, and only if you meet the sort of whatever the standards are for the highest level do you fall into the supervisory category.

Do you accept that basic view of the statute?

MS. MAHONEY: That there is a?

QUESTION: That there's kind of a two -- there's an assumption that there's a two-tier possibility for each of these three categories?

MS. MAHONEY: I think so. Let me see if I understand your question correctly. We would acknowledge and agree that in order to be found to have engaged in activity that could be called responsibly to direct the activities of other employees on the site that, yes, you'd need to do something more than just exercise independent judgment. And that they are talking --

QUESTION: In other words, there can be some direction which is not responsible direction?

MS. MAHONEY: There could be --

QUESTION: So the mere fact that a nurse says, you know, go to bed one rather than bed two, that may not get you to the point where you want to get.

MS. MAHONEY: Absolutely, Your Honor. In fact, what the courts and the Board has traditionally done outside of the health care area and some other professional contexts, is they have looked at the structure of the employer's operation and tried to locate where that -- the person who's alleged to be a supervisor falls on the hierarchy, and whether that person has overall day-to-day responsibility for overseeing the activities of other subordinate employees.

That's precisely the analysis that the court of appeals said should apply in this case. In the Beverly decision it said we're going to look at the structure of the operations. We're not going to just exclude nurses wholesale, because they might give some direction to an aide in the course of performing their duties, but rather we'll see what role they were play.

QUESTION: Do you see a disagreement between the court of appeals and the Board on that general proposition?

MS. MAHONEY: No, I do not.

QUESTION: Okay.

MS. MAHONEY: No, I think if you go back to the Beverly opinion, which was the predicate for the court of appeals analysis in this case, it very specifically said our disagreement with the Board is that they are wholesale denying protection -- or granting protection to persons who under the traditional criteria would be engaged in supervisory activity, and that's not just a nurse who is giving some direction to a patient. In this case, for instance --

QUESTION: And supervisory activity of the higher rather than the lower degree.

MS. MAHONEY: Well, not a straw boss, not a straw boss.

QUESTION: That's right, yeah.

MS. MAHONEY: Right. And not someone who just directs someone on a team with independent judgment, you know, in an occasional kind of way for a particular patient.

QUESTION: How does it differ from a lawyer giving instructions to a paralegal --

MS. MAHONEY: Well --

QUESTION: -- That would involve independent judgment? Are there situations where a lawyer giving instructions to a paralegal, the lawyer could still not be a supervisor?

MS. MAHONEY: Yes, I think there could be, Your Honor. I think you have to look at what the courts have done and what the Board has done, is look to see what the responsibility of the lawyer is for the overall management of that paralegal's activities. If, in fact, the lawyer's --

QUESTION: Suppose the paralegal is assigned to an associate, first-year associate got this paralegal who will do whatever the lawyer tells the paralegal to do. Does that mean that the lawyer is a supervisor so you could not have -- suppose we had a legal aid unit that was operating that way; the lawyers would not be protected under the Act?

MS. MAHONEY: Well, Your Honor, if the lawyer in that assignment process also had the authority to effectively recommend, for instance, whether that paralegal would get a raise, then I think even under the Board's rule they acknowledge that that person, in fact, would be a supervisor.

QUESTION: Let's take out controlling pay.

MS. MAHONEY: Okay. And does the lawyer also determine precisely what activities that paralegal is going to perform on a day-to-day basis and assign that paralegal to other lawyers when the workload is different and essentially tell that paralegal when they can come, when they can go, and that they really are the only supervisor for that paralegal?

QUESTION: If this -- this description in this record seems not unusual for a setup where you have practical nurses, a relatively small staff, and a large staff of nurse's aides. So is there anything in this record that makes this an atypical setup? In other words, you seem to be saying we have to look and see what these nurses are doing, but I get the picture that anytime you have a staff of practical nurses and a large staff of nurse's aides, it's going to be roughly the same as this setup.

MS. MAHONEY: No, Your Honor, I don't think so. First of all, one of the important points here is that this is structured in a very different way from a hospital. You wouldn't see, ordinarily, the same kind of ratios of lesser-skilled employees to higher-skilled employees. And what you have here is --

QUESTION: Is typical of nursing homes.

MS. MAHONEY: It may be more typical of nursing homes, but nursing homes also, for instance, may have another level of supervision inbetween the licensed practical nurses and may have some other RN's, for instance, who are in fact the person in charge on the floor at any given time.

QUESTION: The Board has had a number of nurses' cases now. Is there something that shows whether this is typical, not typical, or, as you say, are most of the Board's decisions coming out the same way and the record's more or less the same?

MS. MAHONEY: Well, Your Honor, the -- in the Avon Convalescent Center case, which was decided after the Doctors' Hospital case, they looked at a fact situation that's almost identical to this, where the licensed practical nurses were found to be supervisors because they were exercising --

QUESTION: What year was that?

MS. MAHONEY: It was in 1972, I believe.

QUESTION: Since 1974, has there been any deviation in the Board's rulings in this area?

MS. MAHONEY: I think that -- you mean have they found some nurses to be supervisors?

QUESTION: In the -- since 1974 -- you pointed out, quite correctly, that the Board seemed to be shifting here and there before 1974, but for the last 20 years I haven't noticed that they have, and correct me if I'm wrong.

MS. MAHONEY: Well, the shift, Your Honor, that's occurred is they've been finding more and more and more nurses to be supervise -- not to be supervisors even if they disciplined -- for instance, in the Riverchase case -- even if they disciplined a nurse's aide in connection with patient care. Because the Board took its rationale to sort of its logical conclusion, which is that anything done incidental to patient care is going to disqualify them from supervisory status.

And, again, if we just look at the structure of this nursing home and compare it to the structure of many of the industries and facilities that the Board has traditionally looked at, the Dale Operating case; Ohio Power; Maine, Vermont and Yankee; what they do is they say if the person who's in charge of the floor or the facility -- even if they don't have the power to decide whether to give someone a raise or whether to fire them or hire them, if they really are responsible for the safety of the operations and for ensuring that those people do their work and keep to it and do it in a safe manner, that an employer has got to be able to demand the undivided loyalty of its representative on the floor of the plant or on -- in this case, on the floor of the nursing home.

That's really what these cases are designed to find, is whether the employer has a legitimate need in order to rely upon the undivided loyalty. Because if we back up and look at what Taft-Hartley was all about to begin with, it was a reaction to the fact that the Board has interpreted its authority to permit foreman to unionize.

QUESTION: Are you saying --

QUESTION: So it's the need to ensure the loyalty of the employee that is the touchstone for determining whether they're acting in the interest of the employer.

MS. MAHONEY: No, Your Honor, absolutely not. I don't think that the phrase "the interest of the employer" has anything to do with assessing the loyalty of the employee, but that rather simply the fact that that's how Congress sought to identify the categories of activity that would require or -- or an employer to want to have undivided loyalty. In other words, the people who do the assignment, who do the responsible direction, the employer's got to be able to count on them to report infractions of rules to make sure that the operations are run in a safe manner, because --

QUESTION: Well, you began your argument by telling us that we were focusing too much on the facts in the transcript, that this was a legal argument.

MS. MAHONEY: Yes, Your Honor, it is.

QUESTION: And I take it your principal legal argument is that the Board is incorrect in the way it's interpreted the phrase "interest of the employer."

MS. MAHONEY: Absolutely. And the reason is that that phrase, looking at the statute, is used for -- as this Court found in Packard, for common law notions of respondeat superior. Without it, the statute doesn't make any sense. The Board suggests that our interpretation of it is superfluous, and it's not. It --

QUESTION: But all -- almost all employees or supervisors are both covered by respondeat superior. I don't see how that helps us.

MS. MAHONEY: But, Your Honor, it doesn't. That's not the way that this particular statutory provision is written. And if I could just turn to the language, the reason I think it's necessary is because it doesn't define supervisor in terms of any employee that works for a particular employer. If it said that, then there -- they might have an argument that the additional phrase "in the interest of the employer" was superfluous. Instead it says the term "supervisor" means, "any individual having authority."

And, of course, the term "employee" extends to employees throughout industries, regardless of what particular employer they work for. So unless you put in this phrase, "in the interest of the employer," you don't have any attribution to the particular employer who is alleged to be denying the Section 7 rights.

And that's important in several circumstances. First of all, it's important because if you take it out, quite literally a union steward who is employed by an employer and engages in, for instance -- effectively recommends discipline of other employees, also adjusts grievances, they would be found to be a supervisor under the literal definition.

QUESTION: So you're saying that "interest of the employer" is inserted to make sure that we're covering employees?

MS. MAHONEY: Excuse me? I'm sorry.

QUESTION: You're saying that the function of including the phrase "interest of the employer" in the statute is to ensure that what we are dealing with are employees, as opposed to independent contractors?

MS. MAHONEY: No. I'm saying that it draws a number of lines. It makes sure that the supervisory activities are being performed on behalf of the employer, as opposed to on behalf of the employee in his personal interests or in the collective interests of the union. Second, it also makes sure that, for instance, with respect to third parties who may be supervising the employees of the employer, that they -- because it says "any individual," that they also could be a supervisor as long as their activity was done in the interest of the employer.

QUESTION: Well, that is a very sweeping interpretation of that phrase, and it seems to me to contradict the rather common sense observation that all employees to some extent are working for the interest of the employer.

MS. MAHONEY: Well, Your Honor, in the -- if I could just mention also the third place where it's significant, is that if an employer -- I mean if an employee works for two different employers and is a supervisor for one and not a supervisor for the other, if you don't have that phrase in there they actually would be deemed a supervisor for all employers. Because this is what -- the language that brings it back to the particular employer who is alleged to have engaged in the wrongful activity or denying the Section 7 right.

QUESTION: So, are you saying that the phrase, then, has rather little to do with this case, or that it has everything to do with this case?

MS. MAHONEY: It has all -- it has little to do with this case in that it is -- it's -- in the situation where you're dealing with employees, this phrase, prior to the 1970's in the health care context, was never a dispositive factor in the cases. We can go all the way back to 1947, and the Board never used this phrase as an additional prerequisite for an employee to be found to be a supervisor, because it really is just a common law agency kind of test. It serves a purpose, but it's not -- it's not important to most of the cases that are adjudicated under this section. It's certainly not superfluous, though.

QUESTION: Ms. Mahoney, if we find that this language is not entirely clear, is there a role for deference to the Board and in taking -- and answering that question, what credit, if any, should we give to the Board's consistent rulings for the last 20 years in cases of this nature?

MS. MAHONEY: Your Honor, first of all it is unambiguous because Packard said it was unambiguous. It interpreted precisely the same phrase prior to the adoption of Taft-Hartley, said it was unambiguous, and there's absolutely nothing in the legislate --

QUESTION: So that would mean for the last 20 years the Board has been essentially wrong, which I think is --

MS. MAHONEY: Absolutely, Your Honor.

QUESTION: -- Your position, yes.

MS. MAHONEY: Absolutely.

QUESTION: But if we don't agree with that, then we would owe some deference to the Board, is that not so?

MS. MAHONEY: Well, no, Your Honor, I -- well, I mean if you found that it was a long term, long standing, consistent interpretation that had a basis in the language --

QUESTION: Yes.

MS. MAHONEY: -- Then I would have to say some deference. But I'd like to emphasize that what the Board is really trying to do here is to regain, reclaim authority that Congress took away from it in 1947. That what the whole purpose of Taft-Hartley was to do was to say to the Board we don't want you out there just deciding who's got conflicting interests and who doesn't, because we don't like the way you've balanced those policies.

Instead what we're going to do, unlike Section 7 and Section 8 where we've given you sort of broad delegations to come up with rules that make sense for industry, here what we're going to do is we're going to spell out the criteria, we're going to tell you what categories of activity entitle an employer to demand undivided loyalty. Because we find that the balance of power has totally shifted under your interpretation of the Act, and that it's of critical importance that employers be allowed to have representatives with undivided loyalty who will not fail to report disciplinary problems because they're siding with the organized -- organizational interests of the employees that they supervise.

That's what Taft-Hartley was about. They took away the Board's authority to engage in some sort of broad rulemaking as they have done in the health care area. And I think --

QUESTION: Ms. Mahoney, isn't it arguable that in 1947 Congress adopted the position of the dissenting justice in the Packard case?

MS. MAHONEY: No, Your Honor, I don't think so. First of all, as this Court recently said in Betts, that unless Congress -- when this Court has interpreted a phrase in a statute and said that it's unambiguous, the fact that Congress changes the result in the case doesn't mean that it disavowed the interpretation of the plain language. This is identical to that situation.

Moreover, if you look at --

QUESTION: Of course, it did reject the holding in the case.

MS. MAHONEY: It -- well it, what it -- no, it actually didn't even reject the holding. It didn't -- what it said was the Court has found that the -- are you talking in Packard?

QUESTION: Right.

MS. MAHONEY: What it said is that the Court has found that the definition of employee, which essentially has no limitations, allows the Board to decide that foreman can unionize, even though we, the Supreme Court, question that policy.

Congress didn't say the Court got it wrong. Congress said we understand that we need to come forward and we need to establish a definition that will take that authority away from the Board. We don't want them to decide who's an employee and who's not in accordance with their own assessment of the policies of the Act. That's what they did.

There's nothing in the legislative history of that amendment, after Packard was decided, that suggests that they were interpreting the "interest of the employer" to be the dividing line between those who were super -- those who were minor supervisory employees and those who were not. The only reference to the phrase "the interest of the employer" is contained in a different section where Congress was changing the definition of employer to -- from those who act in the interest of the employer to those who act as an agent of the employer, saying that they thought it was too loose a test.

And that is essentially what this Court found that phrase meant in Carbon Fuel. It's hard to believe that Congress would have known about the Packard interpretation, changed it in one section because it was a little loose, and then intended a totally different meaning in this section of the Act without saying so somewhere. That just does not conform with statutory principles.

Even if it means something more than common law agency, what does it mean? Maybe it means in the interests of management. Well, we win under that test too, because the whole point here is that what these individuals were doing had to be in our interests. I mean when they attended a disciplinary conference or when they wrote up warning notices, whose interests were they acting in? They were acting in the interests of management, they weren't acting in the interests of -- the collective interests of the employees.

QUESTION: Ms. Mahoney, suppose we were to agree that maybe the Board's heavy reliance on the language "in the interest of the employer" is not justified, what do we do in this case? Are there other findings below that would justify the result reached by the Board?

MS. MAHONEY: No, absolutely not, Your Honor. If we look at what the court of appeals said, it said "the interest of the employer" cannot be interpreted in the way the Board has said because -- and I need to emphasize this -- the Board has said that the only way that a nurse is going to act in the interest -- that we're going to find that they're acting in the interest of the employer is if they take action or have the authority to affect job status or pay.

And, of course, that's the key point here because that's not the test for supervisors in any other industry. Congress, in fact, made it clear that you didn't have to have that authority. So the Court rejected that definition of "the interest of the employer" because it was inconsistent with the other provisions of the Act.

They then, under the Beverly analysis, looked at how would these people be supervisors in other industries? Do they meet the statutory criteria? Is the employer vesting them with the type of authority to responsibly direct its operations, oversee its work force, that they would be found to be a supervisor in any other industry? And they found that it was clear that they would be.

And, in fact, if you go through the Board's cases from 1947 forward outside the health care area, on analogous facts there are many cases without any reference to "the interest of the employer," of course, where they have found that precisely this kind of activity is supervisory in character and that an employer is entitled to demand the undivided loyalty of those people.

And one of the things, too, that the Board referred now to say that its test is not whether they have the authority to affect pay or job status. They claim that now, although if we look back, for instance, at the petition reply at page 4, it says: "The Board will find nurses to be supervisors where in addition to performing professional duties, they also possess the authority to affect the job status or pay of employees." They have never suggested what authority these nurses could have had that would have made them eligible for supervisory status under Section 2(11) that was not covered by one of the other statutory criteria. They've rendered it superfluous.

I should add in the reply there is one thing they said, was well perhaps if the nurses had responsibility to establish the job description of these nurse's aides, that that might mean that they were engaged in responsible direction. But no Board case has ever said that that was a prerequisite for a finding of "responsibly to direct," and, in fact, that's the kind of managerial authority that ordinarily is exercised by a much higher management level and not by the lower level that is the supervisory level.

QUESTION: Ms. Mahoney, am I correct in thinking that the Board's opinion in this particular case dealt with the supervisor-employee issue only in a footnote, and then simply discussed who had the burden of proof?

MS. MAHONEY: That's correct, Your Honor. There's no indication of precisely what the Board was doing. But I think that essentially if this Court rejects the Board's rule, as the court of appeals does. If you find that there's adequate room here to accommodate the -- you know, not excluding all professionals under the statutory criteria the way that the court of appeals found, that the court of appeals decision has got to be affirmed because it really is just a question of whether there was substantial evidence to support the judgment under the statutory criteria.

And there the Board's decision -- the Board's decision in the Avon Convalescent Center case and the University Health Care case fully support, because the facts are essentially indistinguishable with the court of appeals' application of the law to the facts. The problem here is that the Board stopped applying that test after 1974, and then went off on this -- this different kind of analysis where everything that a nurse did that furthered the interest of the patient was no longer supervisory.

I mean, the bottom line here is that the Board's rule gives greater organizational rights to nurses than it does to employees in any other industry. The lead person -- not the lead man, but the senior personnel, for instance, in the power plant example is entitled to supervisory -- is not entitled to organizational rights when they perform exactly the same job functions as the licensed practical nurses in this case. And that's the real irony in the way that the Board has interpreted the statute to give --

QUESTION: Who was that, Ms. Mahoney? Give me -- what is the example you're giving?

MS. MAHONEY: In the power plant cases, for instance, what they will have is a lead control operator who is the senior person that's responsible for overseeing the work of others in the operation or in the control room of the power plant. And they also perform work themselves, but they have the responsibility -- they're the one who's in charge. They have the responsibility to decide, you know, what's going to be done in the event of an emergency, whether they need to get additional staffing, or whatever.

And even in the absence of the authority to effectively recommend pay raises or, you know, personnel authority under the other sections, they are found to be the people who are in charge, they are found to be those who are engaged in responsible direction. It doesn't make any sense to say that those exact same activities are now somehow not supervisory because they occur in the context of a nursing home and the employer chooses to use a nurse to perform those functions. That's really what is going on here.

There's also no problem here with --

QUESTION: So you're saying there should be no industry-by-industry distinction in when people are working or not working for the interest of the employer --

MS. MAHONEY: No, Your Honor.

QUESTION: -- Despite the fact that in the power company the people are not engaged in helping other people, whereas in the nursing company they are?

MS. MAHONEY: Well, they're engaged in helping the customers. They're acting pursuant to regulatory standards, a lot of skill and training, and they're acting in the interest of the power plant's customers. The patients in this case are no different than the customers of any other industry.

There's simply no rational distinction, I don't believe, for that analysis. That instead you really have to look at what are the functions they are performing; where are they in the hierarchical structure; what is the employer relying upon them to do? And here the ALJ acknowledged they were the senior personnel, they were in charge of the facility, but because of the Board's patient care rule they could not go ahead and find that they were supervisors.

Yeshiva is really exactly analysis -- exactly analogous because what the Board did in Yeshiva, and, in fact, what it did in Bell Aerospace, was it came to this Court saying we want to find that managerial employees, employees who meet the traditional criteria for managerial status, are not managers. And they're entitled to the protections of the Act because we don't think there's a potential for conflicting loyalties, because in Yeshiva they exercise professional judgment so it's our informed discretion, looking at this industry, that really there's no need to deny them the protection of the Act. They said the same about buyers --

QUESTION: What do you make of footnote 30 in Yeshiva which seems to say that nurses fall in this group that are deemed employees despite substantial planning responsibility and authority to direct and evaluate others?

MS. MAHONEY: I think what Yeshiva is talking about is they were asking the question that the court -- is consistent with the court of appeals, and that is to say do these -- do the university professors only do those things that all university professors do, or do they do something beyond that.

And I think that what the Court was really saying is that when they exercise decisionmaking authority that goes beyond that which sort of every nurse or every university professor inherently must have, that you go ahead and you apply the criteria. Because if you didn't do that, if you said, for instance, that the mere direction, any direction of an aide or -- was automatically supervisory activity, then you'd have a wholesale exclusion. And Yeshiva --

QUESTION: What would you have to take away from these nurses to make them nonsupervisors?

MS. MAHONEY: I'm sorry, Your Honor.

QUESTION: What would you have to take away?

MS. MAHONEY: What would you have to take away from them?

QUESTION: In other words, you said --

MS. MAHONEY: You'd have to take away the responsibility to be the senior personnel who's got the oversight of all of the performance of their functions. If you've got another hierarchical structure, I think that that's the main distinction among the cases.

QUESTION: Thank you.

MS. MAHONEY: I'm sorry, my time is up.

QUESTION: Thank you, Ms. Mahoney.

Mr. Dreeben, you have 4 minutes remaining.

REBUTTAL ARGUMENT OF MICHAEL R. DREEBEN ON BEHALF OF THE PETITIONER

MR. DREEBEN: The burden of respondent is to show that the Board's construction violates the statute, that it is inconsistent with the statute. The terms that appear in Section 2(11) of the Act are terms that are open to more than one interpretation.

This is a Chevron case. The Board has examined the facts of various industries in light of its power to apply the Act to particular situations, and it has arrived at an interpretation designed to draw the very distinction that Congress intended between those with supervisory authority that aligns them with management and those with minor supervisory duties.

QUESTION: Has the Board found that any other character of individual, in attending to the needs of the customer of the employer, is not acting in the interest of the employer but rather in the interest of the customer? It is uniquely nurses that when they take care of nursing-home customers, are not acting in the interest of the employer?

MR. DREEBEN: No, it is not uniquely nurses.

QUESTION: What other fields has the Board applied that theory to?

MR. DREEBEN: The Board has not applied a theory that's phrased in the same terms to other categories of professionals, but --

QUESTION: Why would that be if it's the central feature of this section of --

MR. DREEBEN: What the Board has done is draw an analogy between the -- what nurses do and what other minor supervisory employees do. Our reply brief at page 5, note 7, collects cases that do, in fact, show that the Board's rule in this case is fully consistent with the traditional rule that it has applied. There are many factual distinctions that get drawn between the various cases. The Board tries to draw consistent distinctions. Occasional cases are going to wander on one side of the line or another, but the Board has done what it can to generate a general category.

It does not mean that all nurses are supervisors or are not supervisors. That depends on what they, in fact, do. But the Board's principal rule here is designed to test out what a nurse does as a professional doing what professionals typically do, from what persons do who do exercise genuine supervisory authority.

I thank the Court.

CHIEF JUSTICE REHNQUIST: Thank you, Mr. Dreeben.

The case is submitted.

(Whereupon, at 11:58 a.m., the case in the above-entitled matter was submitted.)

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Featured:

Moreau v. Klevenhagen, Sheriff, Harris County, Texas - Oral Argument

Fri, 09 Jan 2009 14:49:28 +0000

Case:

Moreau v. Klevenhagen, Sheriff, Harris County, Texas

Media File:

92-1_19930301-argument.mp3

Related Transcript:

1992_92_1_argument.xml

Transcript:

Argument of Michael T. Leibig

Chief Justice Rehnquist: We'll hear argument now in No. 92-1, Lynwood Moreau v. Johnny Klevenhagen.

Mr. Leibig.

Mr. Leibig: Mr. Chief Justice, and may it please the Court:

The concern before the Court today involves the precise rules under which a state or local employer may reach agreements to substitute time off for cash overtime with their employees.

It involves the interpretation of section 207(o) of the Fair Labor Standards Act and regulations issued under that section.

It is important that, under the usual rules, to realize that the Fair Labor Standards Act makes non-cash payment for overtime work illegal completely.

It always has, and there is a reason for this.

In 1937 when President Roosevelt first sent a message to Congress about the Fair Labor Standards Act he emphasized that one of the main purposes was to protect the unorganized and to establish an hours of work rule.

It might seem that the comp time rule, or the cash overtime rule, isn't directly related to the overtime rules, but it is.

The reason cash overtime is required is because other schemes that were in existence widely in the United States before 1937, for instance paying for overtime in script or paying for overtime in time off or comp time are easily manipulated to avoid the 40-hour-a-week work rule.

And that's the reason that the Fair Labor Standards Act itself, prior to the 1985 amendments which adjusted the act to the public sector, always outlawed compensatory time as a means of paying for overtime work.

In the 1985 amendments, after this Court's decision in Garcia, Congress responded a request from state and local governments to lighten the burdens that the Fair Labor Standards Act without a special statute would place on state and local government, and made a number of changes in the acts in specific response to pleas by state and local governments and their employees that special adjustments be made to recognize the special status of the states.

The states were effective in those pleas, and section 2 of the 1985 amendments allowed the use of comp time and also changed the rules with regard to volunteers and a number of other rules with regard to joint employment.

Part of the amendments, section 6, expressly directed the Secretary of Labor to issue regulations interpreting and implementing the 1985 amendments.

It is our argument that section 207(o) that deals with compensatory time and the conditions under which a public employer may use compensatory time that is not otherwise available, and are laid out in 207(o)(2)(A), require an agreement.

And the issue that the Court needs to address today are the precise conditions under which an agreement needs to be reached.

There are a couple--

Unknown Speaker: Speaking of the Secretary of Labor, Mr. Leibig, why isn't he here?

Do we know that or do you know that?

Mr. Leibig: --Why isn't the Secretary of Labor?

Unknown Speaker: Yes.

I mean, why hasn't the Government expressed any view in this case?

Mr. Leibig: Your Honor, I'm not sure completely.

I'm not... I wouldn't be surprised if it had something to do with the fact that the briefs in this case were due almost immediately after the election in which the administration changed.

Unknown Speaker: I see.

Mr. Leibig: And I think that relates directly to one of the arguments I want to make which has to do with why regulations, when there's a statute... the way the Fair Labor Standards Act works generally is that it's an administrative act which is very dependent on the regulations not only for the use of comp time but across the board.

And one of the flexibilities in the act, the portions of the act that are in regulations are in the Executive Branch, given to the Executive Branch by Congress, I think, partly specifically because of the increased flexibility that that allows over if they were in the statute themselves.

And I think the increased flexibility has been demonstrated particularly under the 1985 amendments.

Not only did Congress make new amendments, but since then on issues in which the states have been particularly concerned they have gone to the Department of Labor and got adjustments to the regulations.

In the Abshire case, which is a Ninth Circuit case dealing with who is exempt and who is not, that case was appealed to the Court and the Court denied cert. But at the same time state and local governments went to the Department of Labor and the Department of Labor changed the rules with regard to exemption specifically to recognize the special needs of state and local government.

And that shows one of the reasons that it's wise under the Fair Labor Standards Act to have regulations dealing with this kind of an issue.

I want to emphasize that Congress was unmistakably clear that states, as states, are covered by the Fair Labor Standards Act.

Both section 203 of the act itself, subsections (d) and (x), and section 207(o), part 1, expressly and clearly leave no doubt that state and local employees are covered.

Secondly, the 1985 amendments make it absolutely clear that the state function, that is personnel functions and the relationship between personnel functions and the payment of overtime, is also specifically and clearly regulated by the statute.

The question that I think the statute is ambiguous about is whether or not... it is also clear that the statute requires an agreement prior to an employer using compensatory time.

Where the ambiguity lies is, in the situation where the employees designate a representative to deal with the employer, must an agreement be reached with the representative prior to the implementation of compensatory time system.

And I think the--

Unknown Speaker: Is that ambiguity solved by the Department of Labor's reg, the one that, well, it's set out on page 28 of the red brief, that the question of whether employees have a representative for purposes of 7(o) shall be determined in accordance with state or local law?

I mean, does that, is that the source of resolving the ambiguity?

Mr. Leibig: --The regulation is, but what is quoted on page... the reference to state law that is quoted in the red brief is not a reference to the regulations, it's a reference to the preamble to the regulation.

And that sentence in the preamble is put in the middle of sentences before it and after it which address one of the direct questions in this case.

The question asked in which the reference to state law was made was in a state that has... do you mean that you on need an agreement in states which have collective bargaining.

And the preamble says no, we didn't mean that, our regulations don't say that, but we do believe that to determine who the representative is in a given state there may be a reference to state law.

Unknown Speaker: But isn't it also to be read by saying to determine whether there is a representative the purposes of subsection 1 you look to state law?

In other words does this in a way take the same position the, I think it was the Senate version of the legislat history took?

Mr. Leibig: I think there are two questions there, Your Honor.

The first is the difference between the Senate and the House report.

If I could hold that a minute I will comment on that.

The other question a whether you look for state law, I do think you look to state law to determine whether or not there's a representative, but when you look to state law you do not look merely to state collective bargaining law.

In other words you're not just looking to state law to see whether or not there's a collective bargaining statute or not.

If you were, the wording in the statute would be much simpler than it is now.

It would not refer to all the things other than collective bargaining, which even little (i)(1) refers to.

So that you do look to state law, but you look for such things as if there is state law providing for collective bargaining, then state law requires exclusive representation and requires that unilateral changes can't be made on any wage-hour working condition without dealing with that representative.

That model, the National Labor Relations model, exists in less than 25 states, and even in those states there are all sorts of other models in place for different types of employees.

Most states have different types of models ranging from a meet and confer model, where you have to meet but you don't have to agree, to having a situation in Texas where there's a Texas state statute that says employees can have a representative, but the representatives don't have the rights to collective bargaining agreements.

So that I think--

But what the preamble to the regulation says, and I want to make clear this is the preamble to the regulation, so you've got to go to, it's a long drive from the statute to the preamble, but the preamble to the regulations I think are trying to say if two people show up or three people show up and say they're the representative, you look to state law, it might be agency law, it might be all sorts of law in the state.

Unknown Speaker: Why don't you just as readily look to state law to determine what the significance of the designation of the representative is in states which do not allow collective bargaining agreements?

Mr. Leibig: Because under the preamble, under that set reference in the preamble, which is the only reference to state law in this area anyway, if you read the whole paragraph it starts off by somebody asking exactly that question, do you look to state law to find out whether a collective bargaining representative can enter in full agreements.

And the answer that the Department of Labor in the preamble gave is no.

It's also the clear answer in the... the plain meaning of the regulations themselves contain a clear statement that the representative... what matters is the designation of the employees, not the recognition of the employer.

Unknown Speaker: Mr. Leibig, where is the preamble set forth?

Mr. Leibig: It's easier for... he, Justice Souter referred to the red brief, but I think it's easier if you have the Petition to Cert Appendix.

It is set forth in pages 30a and 32... I'm sorry, that's the actual regulation.

The preamble is set forth in 33a through 35a.

Unknown Speaker: Thank you.

Mr. Leibig: The actual regulations are in the pages just before that.

If I could also mention the Senate and the House report that Justice Souter asked about.

The House report refers to designated representatives, and the regulation, that is the regulation on 30a through 32a, adopt pretty much the House report.

The argument is made by the petitioners that the House report may support that, but what about the Senate report.

And I think the answer to that is if you look with rigor at the House and Senate report you will find that the actual language of section 207(o) is the direct language of the House report, not the Senate report.

During the conference committee this section, it was the language of the House report that became 207(o) precisely, and if you compare it you will see what I mean.

I don't think there were differences in the wording for this point in the statutory language, but the structure of the House report became... therefore you look to the legislative history of the House report and not the Senate report because the language that was enacted is the House language.

Unknown Speaker: Mr. Leibig, you argue basically that the statute is ambiguous and we ought to refer to a regulation?

Mr. Leibig: That's right.

Unknown Speaker: Do you think we have to take into account the case of Gregory against Ashcroft in interpreting this statute?

Certainly it is a traditional state function to determine whether the state is going to negotiate over overtime and whether the state must pay it.

And true, the statute does contemplate that states will be subject to it, but perhaps it doesn't contemplate it in the fashion you suggest.

And if we look to Gregory against Ashcroft we might come to a different conclusion, do you suppose?

Mr. Leibig: No, Your Honor, I don't think if you look to Gregory v. Ashcroft you would come to a different conclusion, for this reason.

First of all, I think on its face Gregory speaks of interfering with the usual state and local functions, and it does not, it seems to refer to the question of coverage.

The conference Congress has to be clear about coverage.

I grant it, not just coverage of the states as states, but also coverage of the function of the state that is being regulated.

Everybody agrees that this statute regulates the use of comp time by state and local employees.

The question that the statute is ambiguous about is how do you arrange comp time agreements.

In the statute, if you look to Gregory, Congress expressly says in the statute, there is an express delegation to regulations, and the regulations do this.

Now, the reason I think... it's really the interchange between Chevron and Gregory, and how do you read those together.

And I don't think the Court, I don't think that there are precedent I can cite to say how you read the two together.

I think that's a real challenging situation.

I do think, though, if Gregory meant to abandon Chevron we are launched on a very dangerous course because, for example in the Report on Intergovernmental Relations that was submitted by the amici it lists a great number of statutes, 32 statutes, I believe, passed before 1981 that regulate state and local functions, and most of those statutes rely on regulations.

The Fair Labor Standards Act will not work without its regulations, not just on the comp time issue, but it wouldn't work on many issues, and Congress knew that.

So I think that's the first point.

The second point is I do think, and there has been a number of law review commentary on the importance of increased rigor for Chevron, at least when it interacts with Gregory, but some would say generally.

To the degree that you are a literalist or a strict constructionist in a general sense, that's strictly looking at the words and meanings of the statutes, then you should also be quite rigorous about Chevron, and I recognize that.

Therefore--

Unknown Speaker: Well, if you just look at the terms of the statute in the absence of the regulation, doesn't it appear to say that if employees aren't covered by subclause (i) then an agreement between the agency and the employee will govern, in effect?

Mr. Leibig: --Subclause (i) in the first--

Unknown Speaker: I mean, that's what it says.

Mr. Leibig: --Subclause (ii) in the first prepositional phrase says in the case of employees not covered by subclause 1, granted.

Unknown Speaker: Yes.

Mr. Leibig: The problem is subclause 1 has a list of types of agreements, not types of employees.

Subclause 1... and that's where the ambiguity lies.

I don't think you can get to where I want to get by reading the statute alone, but you cannot also get to where the other side wants to get by reading the statute.

That's why it's ambiguous.

Unknown Speaker: Well, it seems to me you can get pretty far by just looking at the terms of the statute.

Perhaps the regulation simply isn't permitted.

Mr. Leibig: Let's do that for a minute.

If you just read the terms of the statute you get a situation, as read by Harris County, you get a situation where the statute would then say if you want an agreement you need a collective bargaining agreement, a memorandum of understanding, any other form of agreement, an agreement with individuals, or an agreement with individual employees.

That basically covers every possible type of agreement you have.

If that's what this means, you didn't need section 2(A) at all because you could have just said the employer can have comp time whenever they want to because all they have to do is refuse every agreement and they are automatically in a place where they can impose, as Harris County did as a condition of employment, comp time.

So if that's what Congress meant, first of all they didn't need any of these words.

Unknown Speaker: Well, but realistically the employer is not in a position to refuse every collective bargaining agreement that's pressed upon it.

I mean, you're quite right that they could get there by simply refusing every agreement, but realistically that's not an available option.

Mr. Leibig: It's isn't an available option in a limited number of states in the United States, and if Congress wanted to say that they could have.

But it is an available option in more than, for police employees, for example, well over 50 percent of total police employees in the United States it is an available option.

It's an option in fact in this case Harris County took.

They claim their agreement is based on an auditor's report.

It's a form that you file when you're hired.

It has your name, a bunch of boxes filled in how much money you're going to get paid, and then in little print at the bottom of the box it says I accept this employment and the conditions and regulations.

And that's what you sign.

Unknown Speaker: But that would still not be a vain act by Congress to set it up this way because it would preserve for those states that did have collective bargaining with public employees under 2(A) little (i), it would preserve the power and the position of the union in those states.

You should be the last person, you know, to criticize it.

Mr. Leibig: In that case, though, 2 little (i) would just say collective bargaining agreements, it wouldn't say... first of all it wouldn't say memorandum of understanding in the normal sense, but you could argue about that, but it wouldn't say any other agreement between the public agency and representatives.

Obviously this statute is not meant to provide only, that you only need agreement in states with collective bargaining.

I think you do need an agreement in states with collective bargaining, and that's why the preamble to the regulations makes the reference to looking at state law to find out how state law sets up rights of representation.

I would emphasize in Texas there isn't a collective bargaining statute, but there is a statute that says public employees can deal with their employer through a representative, not to reach contracts but to deal with them on all sorts of other things.

And the actual representative in this case regularly represents its members in grievances and before the city council in all sorts of ways, and has other agreements with Harris County that are enforced regularly.

It has a dues check off agreement.

It deals with Harris County all the time.

So that you're right, if Congress wanted to say there is only two situations, states with collective bargaining, and they have certain special rights, and states without collective bargaining, and in those states you can impose this as a term and condition of employment, they wouldn't have used these words.

More than that, what this... these words are ambiguous is you look at them rigorously, and therefore what these words meant Congress vested in the Department of Labor, appropriately I would say even under a rigorous application of Chevron, to decide, not in the courts to decide, in the Department of Labor.

Unknown Speaker: Well, I mean, words can be ambiguous but there is, you know, there is a scope of ambiguity.

Red can mean, you know, read or red, but it can't mean donkey.

Is what you're urging upon us within the scope of the ambiguity here?

Mr. Leibig: I think so, and I think the way you judge that is you look at the words and see if they are unclear, not... one definition of ambiguity is two meanings, but other... the word ambiguity I think is also used to mean when a, in this context, the context of using regulations, when a statute is unclear.

But to decide that--

Unknown Speaker: The critical phrase is employees not covered by subclause (i), and as you point out, subclause (i) does not describe employees but it describes agreements.

Why wouldn't it therefore be logical to say, you know, that it means employees not covered by agreements under subpart (i)?

Mr. Leibig: --That wouldn't be logical for a number... the first reason it wouldn't be logical is because if you play that out what that would mean, Congress wouldn't have needed all these words to say that.

That's one of them.

The second reason is if you look at the overall structure of the 1985 amendments that doesn't make sense, as we explain in the brief.

But more importantly, if you look at the structure of the Fair Labor Standards Act as a whole it wouldn't make sense because it would vest employers with the possibility of doing, it was exactly happened in Texas, that is completely abrogate the need for any agreement at all because comp time can be imposed as a condition of employment.

Unknown Speaker: Well, those are all good policy reasons, but what you urge upon us instead is that it means employees who do not have a representative?

Mr. Leibig: No.

What I urge on you is the statute is ambiguous.

It could mean, and it would be reasonable for it to mean what you described earlier.

It also could mean that the people covered by 1 are those people that have a representative and therefore could xx various forms of agreement.

The question before the Court is who decides which it means.

Unknown Speaker: But I don't see how yours is one of the available options.

I'm not sure that yours is within the scope of the ambiguity.

Mr. Leibig: If you... you mean because it could only--

Unknown Speaker: Because you're not covered by little (i).

You are not an employee covered by little (i) simply because you have a representative.

Mr. Leibig: --Whether you're an employee covered by little... first of all there are a couple reasons why I think you are.

One is from the regulations.

But let me make another point.

If you look... first of all, if you read it there is doubt about it.

Enough doubt at least, I would argue, to look at the legislative history.

Both the Senate and the House report don't agree... do agree about one thing, that (i) is meant to apply only where, in every case where there's a representative, and (ii) only applies where there is not a representative.

And both the Senate and the House reports are very clear about that, and specifically indicate at, in the Senate report in the petitioner's Appendix at 101A and in the House report at 36A.

So they both say the meaning that I said is what it means, that whether there's an agreement or not.

Another reason is the logical course of it.

If you do not have... if (i) only applies to where there are actually agreements, then even in states where there is collective bargaining, if there was a collective bargaining agreement between a designated representative and the state and it didn't deal with comp time, petitioner would argue they can use comp time, even though under state law they would not ordinarily be able to use comp time because they would be changing wage-hour working conditions unilaterally.

Therefore if that's what it meant you would raise the same problems that petitioners complain about, that is Congress imposing on states that chose to have collective bargaining a requirement other than their law would require.

So that the lack of logic... one of the reasons that you look beyond the statute is the lack of logic of the other interpretation.

Now, I must admit to get to the full brunt of the lack of logic you have to look at what is this all about.

This whole thing is to keep states from using comp time in a way that would undermine the basic 40-hour standard in the statute, which it can easily do.

Let me give you an example what happens in Harris County.

What actually happens in Harris County is an individual deputy sheriff, it's 4 o'clock in the afternoon and the county needs somebody to work until midnight, the individual deputy is supposed to get off at 6, the county can, and this is legitimate, nobody has disputed this, can order them to stay until midnight, work 6 extra hours.

Without these amendments they would have to pay for that in cash, but Congress, in order to lift burdens from the state, said you can pay for that time in comp time.

So they pay them in comp time.

He then has 9 hours on the books because he gets 6 hours at time and a half, he has 9 hours comp time.

The problem, and what happens in Harris County now is and then that week ends.

The next week, when you have unilaterally imposed comp time, every day the sheriff can come to that deputy at 5 o'clock, when he's supposed to work until 6, and say go home today because I've got to eat up your comp time bank.

And therefore they devalue the comp time.

And there are other ways that that could be done.

Unknown Speaker: How do you mean devalue it?

Don't give him enough notice to make any use of it?

Mr. Leibig: Right.

If, for example if he were paid in money he could take the money and put in a bank.

He would have the money there.

When you're paid in comp time, as Senator Black, as Hubert Black who was the sponsor of the 1980... 38 amendment said, if an employer pays you in time off, then you can put the comp time in a bank, and they call it a comp time bank.

But unless you have an agreement that works out how this is going to work, and what actually happened in Harris County, the employer can come to you and say withdraw the money from the bank today, go home, right inside your regular schedule.

And that happens.

That's what my clients are after.

Unknown Speaker: But is there any reason to think that that practice by an employer was condemned by Congress in this statute?

Mr. Leibig: First of all, that practice was condemned by Congress in the Fair Labor Standards Act xx they outlawed comp time.

What happened in this statute--

Unknown Speaker: But here they have reintroduced comp time.

Mr. Leibig: --Right.

They have reintroduced it.

That's my point.

They have reintroduced it, but reintroduced it by putting certain restrictions on it.

The reason for the restrictions is to open the window for state and local governments by lightening the burden a little bit, or half way.

And as we cited in our brief, the article by Easterbrook where he points out is once Congress... the state and local government went to Congress and said we want some relief from this statute.

Congress said get together with your employees, and this is in the legislative history, figure out what kind of relief you want, and come and tell us.

They did.

Both people said, both House and Senate said little (i) is what controls.

Then, after the rules were passed, now state and local government wants to say if you opened up the window a little bit, you've got to lift it all the way.

If that happens, that will undermine federalism because in the future Congress will not leave these areas where they can regulate to leave flexibility, which I think they have done under the act.

If I could reserve the rest of my time.

Unknown Speaker: Very well, Mr. Leibig.

Mr. Streicher.

Argument of Harold M. Streicher

Mr. Streicher: Mr. Chief Justice, and may it please the Court:

Petitioners here have created confusion where there is none.

The plain language of subsection (o) of 207 is clear and it does not require going to extrinsic sources at all, and this is where the petitioners have created their confusion.

The word agreement is the subject of both subpart 1 and subpart 2 of section 207, subsection (o)(2)(A).

And with that understood the meaning of the statute is clear, and no part of subsection (o) is rendered superfluous.

The plain meaning of paragraph 2 is that a public agency may provide compensatory time only pursuant to, one, an agreement between the public agency and representative of the employees, or, two, pursuant to an agreement between the employer and the employee.

And I note that in Harris County this is exactly what has occurred, as each Harris County employee, as each one of the petitioners has stepped up to accept employment they have signed this individual form that Mr. Leibig mentioned and have agreed to the terms.

Unknown Speaker: Well, Mr. Streicher, do you take the position that if there, in a state where there is a collective bargaining agreement but the agreement does not allow, it just doesn't cover comp time, now, do you think in such a state that the county would be able to enter an agreement with employees such as you have in this case?

An individual employee to cover it?

Mr. Streicher: Justice O'Connor, I don't know the answer to your question, and that is one of my points, that one would need to go to that particular state's law to determine under which section one can meet.

Unknown Speaker: Well, doesn't that indicate the statute is ambiguous?

I don't know what the answer to Justice O'Connor's question is, and to me that makes the statute ambiguous.

That is to say if there is a collective bargaining agreement but it's silent with respect to comp time, I'm not quite sure how to read the statute.

Perhaps you think it's clear.

Does little (i), or number 2, (ii) control?

Mr. Streicher: Yes, Justice Kennedy, I believe it would, there being no agreement in Justice O'Connor's scenario, then under subpart (i), then one would go, one would be authorized to go to subpart 2.

Unknown Speaker: Then why don't you know the answer?

Mr. Streicher: I believe then, Justice Scalia--

Unknown Speaker: That is the answer.

Mr. Streicher: --that I, if I understood Mrs. O'Connor's question correctly then, if there is no agreement under subpart (i), then one would be authorized to go to subpart 2.

Unknown Speaker: Well, but that's the question.

Is there an agreement if there is a collective bargaining agreement that is silent?

That doesn't seem to me that the answer to that is self evident.

Mr. Streicher: If one focuses on the words of this particular statute and focuses on the subject of subpart 1, that being is there an agreement reached between a representative and the employer, there be... if there is no such agreement then one would go to subpart 2.

Unknown Speaker: But it's not clear that there's such agreement, because it doesn't talk about agreement, it talks about agreement with reference to compensatory time.

Mr. Streicher: I perhaps don't understand your question, Justice Kennedy.

But if there is no agreement reached between the representative in those states that recognize a representative, and that one can meet and confer with that representative, then one would go to subpart 2.

Unknown Speaker: Well, I certainly think some employers could argue that single (i) controls, that there is an applicable provision, it just says nothing about it.

I think that's a plausible construction.

Mr. Streicher: One would have to go to the state law to determine the result of that answer, and in Texas, as we have stated in our Reply Brief and our Appendix, in Texas we cannot recognize a representative.

It is against public policy.

Unknown Speaker: Well, we're talking about two different things.

We're talking about the meaning of the statute in the context of the hypothetical agreement we have outlined, and then there's also the question of whether or not an employee is authorized to conclude it.

But those are two separate questions.

I suppose you would look at... if you're going to look at Texas law for little (i) as to whether you have a union agreement under little (i), suppose you look at Texas law for little (ii) as well, right?

I mean, if state law prohibits individual agreements apart from the collective bargaining agreement with the authorized union, then you cannot have an agreement or understanding arrived at between the employer and employee under little (ii), right?

Is that your position?

Mr. Streicher: No.

Unknown Speaker: No?

Mr. Streicher: No.

If in Texas, as we are, prohibited from entering into an agreement with the representative of employees, then we would be authorized, as we are, to enter into individual agreement with the employee.

Unknown Speaker: I understand, but I'm talking about another state that has public employee unions and that prohibits employees from dealing with the public employer apart from their union.

In such a state the employees would be disabled from making agreements under little (ii), wouldn't they?

Mr. Streicher: Yes.

Unknown Speaker: There would be no agreement or understanding, so you would preserve, you would preserve the exclusive bargaining power of the authorized union.

Mr. Streicher: If that was the effect of that state's law, yes, that was the exclusive bargaining agent.

I'd like to continue then on that particular point that the plain meaning of the statute, that being the subject of both part 1 and 2 is agreement, it allows the state laws to be preserved.

And with all the various state laws out there I ask how one can override this plain meaning of the statute.

I want to now turn your attention to the background in which subsection 207 arose in order to gain a correct understanding of subsection 207.

This Court had just decided the Garcia case in February of 197... 1985, which extended provisions of the FLSA to state and local governments.

However, a great variety of compensatory time arrangements had developed between public employers and their employees, and long-standing practices existed concerning the use of compensatory time which were of mutual benefit to both the public employee and the public employer.

This background of mutually beneficial compensatory time arrangements was the background in which Congress passed section 207(o).

Already by November of 1985 Congress had passed section (o) to help public employees and public employers preserve their mutually beneficial compensatory time practices.

Congress was not for a minute going to allow the full weight of the Garcia decision to descend upon the public employers, be they state governments or local government entities.

And for that proposition I point you to the Appendix for the Petition for Writ of Cert, page 65a, page 72a, 89a, 114a, and also the Garcia decision itself talks about this background in which existed when the Garcia decision was handed down.

Properly understood in light of this congressional purpose to preserve existing compensatory time practices, it's hard to imagine how Congress could have improved upon the statutory language that was actually chosen in section 207(o).

Unknown Speaker: Is it your position that the employer may on his own substitute comp time for overtime even if he doesn't deal with individual employees?

Mr. Streicher: No.

The employer can't, in those states that provide for dealing with the employees, as they do in Texas, in Harris County.

Unknown Speaker: So, does Harris County forbid dealing with individual employees?

Mr. Streicher: No.

In this particular case all of the petitioners have signed individual compensation forms whereby they accept the--

Unknown Speaker: Comp time.

Mr. Streicher: --comp time arrangement which exists in the personnel regs of Harris County.

And, by the way, those regulations provide, or the individual agreements provide that the first 240 hours of compensatory time shall be placed in a bank for the employee, so-called comp time bank.

After 240 hours... by the way, those hours are time and a half hours, after that time the employees receive cash for each hour worked at the rate of time and one-half.

Unknown Speaker: Mr. Streicher, you say it's hard to imagine how they could have put it better?

I can imagine how they could have put it better.

If it means what you say it means they could have said in little (ii), absent such applicable provisions, comma, an agreement or understanding arrived at between the employer and employee.

That's the meaning you want to give it, right?

Mr. Streicher: Yes.

Unknown Speaker: That would be a much clearer way to put it, don't you think, instead of in the case of employees not covered by subclause (i)?

Mr. Streicher: I believe they stated that, Justice Scalia, when they said those employees not covered by subsection 1.

Unknown Speaker: Well, it would have made sense to me to say pursuant to little (i), applicable provisions of the collective bargaining agreement, blah, blah, blah, blah, or other agreement, little 2, absent such applicable provisions--

--That's very clear.

Isn't that clear?

[Laughter]

But they didn't say that.

Do you take the provision the statute refers to agreements or to groups, or to types of employees?

Does it refer to types of agreements?

Mr. Streicher: Agreements.

The subject of both subpart 1 and subpart 2 is agreement.

It just cannot be any clearer than that.

The statement of the statute, if we could reread paragraph 2 to gain this understanding, a public agency may provide compensatory time only pursuant to subpart 1, there it talks about an agreement between the public employer and a representative, and 2, also the subject matter is pursuant to an agreement.

There it happens to be talking about an agreement entered into by the employer and the individual employee.

But it just cannot be any clearer that the subject matter is agreement in both subparts.

Unknown Speaker: May I ask you, what if there were an agreement, collective bargaining agreement in existence which prohibited the use of comp time, would subparagraph 2 apply, because those employees would not be permitted to do it by a collective bargaining agreement, they were forbidden to do it?

Mr. Streicher: I don't believe, Justice Stevens, that subpart 2 could apply because in section, subsection (o), subpart (B) it talks about existing collective bargaining agreements, and if the existing collective bargaining agreement were one wherein no compensatory time was allowed, then that collective bargaining agreement would have been entered into pursuant to subpart 1, and that would be the relationship between that employer and those employees.

Unknown Speaker: Haven't Labor Department regulations been against you?

Mr. Streicher: Justice White, I believe there is ammunition for both sides, but several of the Justices this afternoon pointed out the recognition by the Secretary of Labor himself that whether or not an employee has a representative shall be determined by state law.

One just cannot overcome that in this case, and it's extremely important in this case to remember that because under Texas state law one cannot have--

Unknown Speaker: I would think you would argue that it wouldn't make any difference whether they had a representative or not.

They might have a representative, but they would have no agreement.

Mr. Streicher: --That's correct.

I'm sorry, perhaps I misunderstood.

But again, the end result is there must be an agreement necessarily because we cannot recognize--

Unknown Speaker: There must be a collective bargaining agreement with their representative.

Mr. Streicher: --That's correct.

Unknown Speaker: What do you do with the language in the Statement of Basis and Purpose for the rule, which says that the Department believes that the proposed rule accurately reflects the statutory requirement, according to the agency, that a CBA memorandum of understanding or other agreement be reached between the public agency and the representative of the employees where the employees have designated a representative?

If they have designated a representative, says this, the agreement must be reached with that representative.

Preemption?

Mr. Streicher: Preemption, or I think then we have come into the Gregory, the Ashcroft area where there must be a plain statement by Congress to upset the balance, the traditional balance between Federal and state rights.

There is no such plain statement made by Congress in this subsection (o).

Unknown Speaker: Well, I mean, my goodness... it has to be in every detail of the scheme?

They have made the decision to apply the Fair Labor Standards Act to the states.

That's the decision.

It's clear that the states are going to be bound by the Fair Labor Standards Act.

Mr. Streicher: I agree with you.

Unknown Speaker: And you're saying that every detail of the Fair Labor Standards Act must moreover be particularly clear as applied to the states, otherwise in every little section of the act you're going to have one rule for the states and one rule for the private employer?

That doesn't strike me as very sensible.

Mr. Streicher: I agree with you, Justice Scalia, certainly that it was the intent of Congress to apply, or of this Court to apply the FLSA to the state and local governments, but it is not the intent of this Court without a plain statement by Congress to upset the traditional relationship between the rights of the states and the Federal rights.

Unknown Speaker: Well, isn't it your argument that the requirement for plain statement in effect arises because otherwise the Secretary or Congress, depending on whether you zero in on the reg or the statute, would be foisting or mandating a collective bargaining obligation onto the states that they did not have.

Isn't that your point?

Mr. Streicher: Correct, Justice Souter.

Although the Chevron case talks about the Secretary or the administrator of regulations, but the Gregory case talks about what Congress can do.

And to allow the regulations to have greater... to have the Chevron case take precedent over the Gregory case would allow the regulations to do what Congress itself cannot do.

Unknown Speaker: Is it your view in Texas that a public employer can use subclause 1 if it wants to, or that it must always use subclause 2?

Mr. Streicher: In Texas if the, pursuant to the statute, the Police and Firemen's Act, a election were held authorizing the collective bargaining arrangement, then one could get into subsection 1.

And that of course is page 3a in our Brief in Opposition to the Petition for Writ of Cert. Specifically page 7a of that act, section 5, upon the adoption of the provisions of this act by any city, town, or political subdivision in this state to which this act applies as herein in this section provided, fire fighters and/or policemen shall have the right to organize and bargain collectively with their public employer as to wages, hours, working conditions, and all other terms and conditions of employment.

Upon the passage of that statute and upon an election whereby the local voters adopt specifically this act, then only, Justice Kennedy, could a local governmental entity in Texas come under subsection 1.

Unknown Speaker: Mr. Streicher, there has been some colloquy between the bench and you and your opponent about the provisions of a regulation and there has been reference made to something on page 34a of the Appendix that apparently is the reaction of the Department of Labor to requests for comment on a rule.

And at the last paragraph on page 34a that carries over to 35a it says the Department believes that the proposed rule accurately reflects the statutory requirement that a collective bargaining agreement, memorandum of understanding, or other agreement be reached between the public agency and the representative of the employees where the employees have designated.

Now, what rule is that comment referring to?

Do you know?

It seems by its context it must be referring to a previously promulgated rule or regulation.

Is there a regulation to that effect?

Mr. Streicher: I believe there is, Your Honor.

Unknown Speaker: Where is it, do you know?

Well, if you don't know, just proceed, but it would--

--On page 30a of the Appendix, isn't it, section 553.23, as--

Mr. Streicher: I believe... I'm sorry.

Unknown Speaker: --as is set forth at the top of page 33a.

This is the Statement of Basis and Purpose.

It's not just a response to comments either, it's the Statement of Basis and Purpose that must be adopted with the rules.

And it's as authoritative as the rules themselves.

It's a part of the adoption of the rules, isn't it?

Mr. Streicher: I believe you're right, Justice Scalia.

It on page 30a talks about if the employees do not have a representative compensatory time may be used in lieu of cash only if there is such an agreement or understanding.

But I wish to note, Justice Rehnquist, that the comment on page 34a by the Secretary does not mean that he refused the point that this particular governmental entity was making, and I would submit that it can be read congruently with my interpretation that if the subject matter of subclause 1 is agreement, there being no agreement reached, then therefore--

Unknown Speaker: Yes, but what if the regulation says if there's a representative, if there is a representative been designated there has to be an agreement, regardless of what state law says.

Mr. Streicher: --This statute, Your Honor, does not say that, though.

And--

Unknown Speaker: But the regulation does, on page 31a, subpart (c), where employees of a public agency do not have a recognized or otherwise designated representative the agreement or understanding concerning compensatory time off must be between the public agency and the individual employee.

But that's only the case where employees do not have a recognized or otherwise designated, or otherwise designated representative.

And that language at the bottom of 34a is, as I understand it, an explanation of that same provision.

Well, is there some case or some law that says that a state may forbid or may not forbid collective agreements between their employees and a union?

I take it you think Texas is statutorily and constitutionally capable of forbidding such agreements?

Mr. Streicher: --I believe, Your Honor, that is the case, Justice White.

The states have been free to regulate labor relations.

And if I could also make one point in regard to the prior question--

Unknown Speaker: Well, if that's the law certainly the... if that's the controlling law the regulation, to the extent it says that if there's a representative been named there must be an agreement, that just doesn't hold up.

Mr. Streicher: --And that is not what this particular subpart (i) speaks of.

If I could take a brief moment to spend on page 31a, that the regulation states where employees of a public agency do not have a recognized or otherwise designated representative.

Harris County, nor any local governmental entity in Texas, can recognize a designated representative.

It is not possible to enter into an agreement in Texas with a representative unless the election that we previously discussed has been held.

Unknown Speaker: You said they can have a representative, they just can't enter into an agreement with them?

Mr. Streicher: That's right.

Unknown Speaker: So literally they have a representative.

Mr. Streicher: But not for the purposes of subsection (o), to enter into a compensatory time agreement.

The representative in Texas, as was previously discussed, can present grievances and other concerns, employee concerns, but because of 5451c and c-1, we cannot meet and confer with a union representative of a public employee to enter into--

Unknown Speaker: Of course if you read the Secretary's regulation literally that just would mean that's kind of tough luck.

You cannot make the agreement that you need to make to provide for comp time.

And that's one way to read it.

It's unfortunate, but state law just disables you from taking advantage of this exception in the statute.

Mr. Streicher: --Justice Stevens, if it were to stop there that may be true, but we have not stopped there.

We do have individual agreements with the employees.

Unknown Speaker: Yes, but if the regulations mean what they say literally, and they may or may not, you weren't entitled to do that because the subparagraph (i) prohibition kicked in and said you can't have it, as interpreted by the Secretary.

Well, I'm just covering the same ground that has been covered.

I gather that your answer in your brief, or in somebody's brief, to the language at the bottom of 34a was the language at the top of 35a, wasn't it, namely the sentence that says it is the Department's intention that the question of whether employees have a representative for purposes of FLSA section 7(o) shall be determined in accordance with state or local law and practices.

That and the preceding sentence, I gather, could be interpreted to mean that you cannot have an agreement with a designated representative if the state law does not permit that agreement.

Mr. Streicher: That's exactly correct.

Unknown Speaker: Yes, but what it says is they shall have a representative, not whether they shall have an agreement with a representative.

I mean, it's really not very clear.

Mr. Streicher: If I could take a moment with the impact of the Court's decision, it could have a substantial impact not only on the respondents but on all state and local governmental entitles.

It would have an impact in regard to their ability to provide essential services to the citizens of those entities, and I don't, can't think of a more quintessential service to the people of a local government entity than the police services.

The current value of Harris County's--

Thank you.

Unknown Speaker: Thank you, Mr. Streicher.

Mr. Leibig, you have 4 minutes remaining.

Rebuttal of Michael T. Leibig

Mr. Leibig: I would just like to make three points.

The first one deals with Texas law.

I'd like to point out that the statute referred to by Mr. Streicher also says in section 6 that employees may have representatives and the representatives may deal with issues arising in the work place including wages, hours, and working conditions.

I admit it doesn't, it prohibits having a collective bargaining agreement but it does allow representation.

It's very important, and we have emphasized in our brief that we are not claiming, and the Fair Labor Standards Act does not require that there be a collective bargaining contract covering comp time.

The only... it requires a special new entity directed by Congress which is a comp time agreement under the Fair Labor Standards Act.

The only consequences of having an agreement is that you can use comp time.

The only consequences of violating the agreement is that if you are sued for cash overtime you do not have that defense which Congress granted you.

Unknown Speaker: Yes, but to that extent you would have a collective bargaining agreement.

Mr. Leibig: Well, it's not a collective--

Unknown Speaker: I mean, you can call it anything you want to, but it's a collective bargaining agreement on that subject.

Mr. Leibig: --It's not a collective bargaining agreement in the sense that collective bargaining agreements are ordinarily agreements between, one, between exclusive representatives and their employees.

They normally... the situation in which collective bargaining agreements of the kind we're talking about are created normally prohibit unilateral dealings between employees and that.

This is different than that.

As the Fifth Circuit pointed out, a deputy sheriff in Texas could designate his minister to be his representative, or a lawyer, or anybody to be the representative.

It's only if they want a representative you have to deal with the representative.

And the reason for that is to encourage voluntariness of the agreements.

Unknown Speaker: Do you contend as a matter of Texas law that the collective bargaining agent can enter into comp time agreements?

Mr. Leibig: As a matter of Texas law employees can designate a representative--

Unknown Speaker: Right.

Mr. Leibig: --Even Texas law gives them the right to do that and recognizes the right of the representative to act for the employees as an agent would act for the employees.

Then they can enter into an agreement.

Once the agreement is entered--

Unknown Speaker: I wish you would tell me yes or no.

Mr. Leibig: --Yes.

Yes, I do.

Once an agreement is entered, though, it's very important... the only way to enforce the agreement is as a defense against statutory claims under the Fair Labor Standards Act for cash.

It's not enforceable anywhere else, and that's the only consequence of the agreement.

The state's courts can refuse to recognize it as a contract, a collective bargaining contract.

Another difference is it's not an exclusive representative situation.

Each employee can designate or not designate whoever they want.

Unknown Speaker: It's still a collective bargaining agreement, whether it's enforceable or not in this case.

Mr. Leibig: Right.

And the second thing I would like to point out--

Unknown Speaker: And so are employees covered by little (i)?

Mr. Leibig: --I think employees are covered by, the employees in this case would be covered by, they are employees who do not have an agreement and therefore you cannot use 2(i).

One other thing I just want to make clear while I have time is that the agreement that the employer is referring to is just a form that has a little place at the bottom that you sign.

It doesn't mention comp time, it doesn't mention anything.

It says as a condition of employment you're accepting whatever regulations we have now or ever have, and we can change them whenever we want, and you sign that to get your pay check.

It's not a negotiated agreement.

Unknown Speaker: I never doubted it, Mr. Streicher.

Mr. Leibig: And the point of all this is the reason to require the designation of a representative is the traditional way to guarantee that agreements are voluntary.

If you have a representative... as long as employees have a right to have a representative, which is what we're talking about here, if they don't choose to have a representative then you can presume when they sign this form and are paid in that way they were volunteers.

If they do designate the representative then you should have to deal with the representative.

And if the representative on an individual basis works out an agreement, then that agreement is only useful for one purpose, as a defense against claims for cash by the state under the Fair Labor Standards Act.

The state can ignore it.

Unknown Speaker: Does that position take you beyond the Secretary's position in the regs?

Mr. Leibig: No, I think that is the Secretary's position.

Unknown Speaker: Well, the Secretary took the position that if you have got a collective bargaining agreement this is the way you must agree on this subject.

Did he take the position that if you don't have a collective bargaining agreement then they be the kind of agreement that you speak of for defensive purposes and it must be done in that way?

Mr. Leibig: I think the Secretary's position is you either have to have one of the kinds of agreements talked about in little (i) 1--

Unknown Speaker: Which is not necessarily a CBA.

Mr. Leibig: --Right.

But the reason they say we look to state law... states can say public employees can only choose exclusive representatives, and if they do they are regulating the choice of a representative not the arrival at an agreement.

And states can, and Texas has.

Texas has a statute--

Unknown Speaker: Thank you, Mr. Leibig.

Your time has expired.

Mr. Leibig: --Thank you.

Chief Justice Rehnquist: The case is submitted.

Attribution:

The OYEZ Project

Featured:

Local 144 Nursing Home Pension Fund v. Demisay - Oral Argument

Fri, 09 Jan 2009 14:49:25 +0000

Case:

Local 144 Nursing Home Pension Fund v. Demisay

Media File:

91-610_19930111-argument.mp3

Related Transcript:

1992_91_610_argument.xml

Transcript:

Argument of Henry Rose

Chief Justice Rehnquist: We'll hear argument first this morning in Number 91-610, Local 144 Nursing Home Pension Fund v. Nicholas Demisay.

Mr. Rose.

Mr. Rose: Mr. Chief Justice, and may it please the Court:

The genesis of this action occurred when the respondent employers withdrew from the petitioner multiemployer pension and welfare benefit plans.

In this action, those withdrawing employers seek to require the petitioner benefit funds to transfer a portion of their plan assets to new benefit plans which are not parties to this action which were established after the withdrawal of those withdrawing employers.

The district court granted petitioners' motion for summary judgment.

However, the Second Circuit reversed and held that a fair portion of the reserves reflecting contributions made to the Greater Funds on behalf of the Southern Employees should be reallocated to the Southern Funds.

What is extraordinary and erroneous is that the court below held that section 302(c)(5) of the Labor Management Relations Act, 1947, was the controlling law and that it required the transfer of assets.

302(c)(5) says nothing about transfers of assets, nor does its legislative history even mention such transfers.

The court below has not only misread section 302(c)(5) but has misread and misapplied... failed to apply... this Court's decision in United Mineworkers v. Robinson.

The focus of 302(c)(5) is specific.

In the words of this Court in Robinson, 302(c)(5) was meant to protect employees from the risk that funds contributed by their employers for the benefit of the employees and their families might be diverted to union purposes, or even to the private benefit of faithless union leaders.

There's no such allegation in this case.

With particular reference to the requirement in 302(c)(5) that a benefit plan be maintained for the sole and exclusive benefit of employees, this Court stated that its plain meaning is simply that employer contributions to employee benefit trust funds must accrue to the benefit of employees and their families and dependents to the exclusion of all others, and especially pertinent for the instant action, this Court specifically concluded in Robinson that nothing in 302(c)(5), quote, places any restriction on the allocation of the funds among the persons protected by 302(c)(5).

Even the narrow holding in Robinson is applicable here.

That is, that the Federal courts have no authority under section 302 to review for reasonableness a collectively bargained term of an employee benefit plan.

That describes the present case.

The collective bargaining agreements to which the respondent employers were parties are clear that the terms of the trust agreements are incorporated by reference, and those trust agreements prohibit the payments that the Second Circuit has ordered.

It is submitted that the trustees in this case certainly breached no fiduciary duties in administering the trust in accordance with their trust agreements.

Unknown Speaker: Mr. Rose, if they had done so, would there have been a remedy against them under 302... under 302(e)?

Mr. Rose: If the trustees had transferred assets?

Unknown Speaker: Yes.

If they had transferred... not just transferred it, but had transferred assets to a union official.

Mr. Rose: To a union official--

Unknown Speaker: Right.

Mr. Rose: --Yes.

Unknown Speaker: So you... it's your--

Mr. Rose: To a union official, that would have--

Unknown Speaker: --You see, I'm not sure what your theory of the operation of 302(c) and 302(e)... what you theory is.

Does it not operate at all, once the trust is established... so long as you establish a trust which on its face meets the requirements, that's the end of the application of 302, or does it continue to have some application, at least if you violate the term of the trust by turning over the money to union officials?

What's your theory?

Mr. Rose: --Justice Scalia, our position is that section 302(c)(5) does not regulate the transfer of plan assets whatsoever.

Unknown Speaker: Whatsoever, so long as the trust is... complies with the statute on its face.

I mean, on its face the trust has to comply with the statute.

Mr. Rose: That is correct.

Unknown Speaker: But so long as it does on its face, if the officer... if the trustee violates the trust, and surreptitiously conveys money to union officials, you think you can only get at that under ERISA.

Mr. Rose: There... it might constitute criminal activity, also.

It might constitute a criminal violation either under State law or under Federal law independently, but you're right, I would relegate that to a regulation under ERISA, clearly.

Unknown Speaker: So the subsection 302 regulates solely the conduct of the employer in making the payment in the first place.

Mr. Rose: That is its focus, absolutely.

As we've noted, the section 302(c)(5) requires employer contributions to be for the sole and exclusive benefit of employees, but those are for the employees of all of the contributing employers, and that is precisely what the petitioner funds have done.

Unknown Speaker: I don't understand why it wouldn't violate subsection... Justice Scalia's hypothetical wouldn't violate 302(c)(5).

Because the funds were not held in trust for the purposes specified in the statute, but were given to the union official as a bribe, they wouldn't comply with the statute.

Mr. Rose: Oh, I think that... I'm sorry, I think that would violate it.

The money would have to be used for the benefits of contributing employers.

Unknown Speaker: The statutory restrictions, and if it goes beyond that and it's a payoff to the union leader, why then, it would violate the statute.

Mr. Rose: Yes, I think that is correct.

That would be a criminal violation under 302, yes.

Unknown Speaker: Mr. Rose, there is a mechanism, is there not, whereby plan assets and corresponding liabilities could be transferred to a new plan, is there not?

Mr. Rose: There is under ERISA, yes, Your Honor.

Yes.

Unknown Speaker: But the procedures for that were not followed here, I take it.

Mr. Rose: They clearly were not followed.

With regard to the pension plan here, the ERISA provisions are very clear.

The ERISA provisions bar a transfer unless certain statutory conditions are met.

One of them is review by the Pension Benefit Guarantee Corporation.

This was not done.

Furthermore, such a transfer is at the discretion of the transferor plan, and clearly the petitioners did not initiate the proposed transfer, and third, the... any such transfer would have to be a transfer not only of benefits or of assets, but of liabilities, and there is and there was proposed no transfer of liabilities.

There is no contention in this case that the contributions were used for purposes other than benefits or employees of contributing employers.

The Second Circuit--

Unknown Speaker: Are you done answering that question?

Mr. Rose: --Yes.

Unknown Speaker: Can I jump in there?

Mr. Rose: Yes.

Unknown Speaker: I'm back to the same problem that you gave one answer to and then took it back.

Are you sure you want to stick with your second answer?

I don't see how the statute requires anything except that the money be placed by the employer in trust for that purpose.

Mr. Rose: Well--

Unknown Speaker: If there's a violation by the trustee later, does that necessarily violate the statute?

Mr. Rose: --Well, Your Honor, I think a strict reading of the statute would come to the conclusion that you are implying.

However, this Court has stated in Arroyo and in Robinson that the specific provisions in section 302(c)(5) are enforceable under 302(e).

Unknown Speaker: Enforceable against the trustee.

Mr. Rose: Yes, and although I think there's some difficulty, logically, coming to it, I don't think that's a difficulty that needs to be reached in this case.

Unknown Speaker: Well, except it makes a nice division between this provision of the Labor Relations Act and ERISA a little less neat.

Mr. Rose: Yes.

Yes, I think that is right.

Unknown Speaker: Are they... criminally, or simply in equity, to enforce the trust?

Mr. Rose: Well, section 302 is a criminal statute.

However, section 302(e) allows injunctive relief to enjoin a violation of section 302.

Unknown Speaker: So it's just equitable enforcement.

Mr. Rose: Yes.

The Second Circuit has interpreted the solely exclusive language so expansively as to judicially legislate that there must be a reallocation of money in the petitioner funds.

Neither the Second Circuit nor the respondents explained how such a mandated reallocation is to be reconciled with this Court's conclusion in Robinson that nothing in section 302(c)(5) places any restriction on the allocation of the funds among the persons protected by section 302(c)(5).

Unknown Speaker: Under ERISA, would the trustees... if they had wanted to, could they have consistently with ERISA transferred some funds and liabilities in this case, this particular case?

Mr. Rose: If they had decided that they want to do it, and there was a transfer of liabilities together with the transfer of assets, yes, it may have been possible.

Unknown Speaker: You say may.

Would it have been consistent with ERISA?

Mr. Rose: It would have been clearly consistent with ERISA had they wanted to do it with regard to the pension plan.

There's some doubt as to whether that is true with regard to the welfare plan.

In the Multiemployer Pension Plan Amendments Act, there is a specific procedure for doing so, and so it clearly could have been done if in their discretion they had wanted to make the transfer of both liabilities and assets.

There... it's not so clear that they can do it in... without violating the prohibited transactions of section 406 of ERISA with regard to the welfare plan.

Unknown Speaker: Thank you.

Mr. Rose: There is a specific exception, you see, to 40... to the prohibited transaction with regard to the pension plan, but there is none with regard to the welfare plan.

It is submitted that attributing to the Congress an intention in 302(c)(5) to regulate the use of benefit plan assets among plan participants is without basis.

The best evidence, of course is the language of the statute.

As we've noted already in answer to Judge Scalia... Justice Scalia's question, 302(c)(5) is an exception to a criminal statute.

It is not a regulatory statute.

It says nothing about the transferring of plan assets, and as we've noted, the legislative history doesn't even mention it.

Strongly mitigating against the Second Circuit's expansive interpretation of 302(c)(5) are the dire consequences that would follow.

The uncontroverted expert testimony in this record is that the construction of the Second Circuit would undermine the viability of multiemployer plans generally.

Contrast such a result with the congressional intention to preserve the financial integrity of multiemployer plans not only by the enactment of 302 but of ERISA and the Multiemployer Pension Plans Amendments Act of 1980.

Congress was well aware of the importance of multiemployer plans as a delivery system of employee benefits to some 9 million workers and their families.

Further indicating that 302 is not a regulatory act is the fact that from the mid-fifties to the early seventies the Congress and the executive branch became increasingly concerned about the lack of regulation of employee benefit plans, and this concern culminated in the enactment of ERISA in 1974.

In the words of this Court in Teamsters v. Daniel, quote, Congress believed that it was filling a regulatory void when it enacted ERISA.

ERISA extensively regulates the use of plan assets, including transfers of assets.

This is to be expected from a statute which this Court has described as comprehensive and reticulated.

ERISA includes at least five provisions that bear on the transfer of assets ordered by the Second Circuit, and each one of them would prohibit the transfer.

Thus, we have the anomaly of the court below ordering the trustees of the petitioner funds to violate ERISA and the Court's order would not be a defense to the violation of the prohibited transaction.

It is submitted that this result cannot be attributed to congressional intent.

The judgment below calls into question basic principles underpinning multiemployer benefit plans.

The essence of multiemployer plans is the pooling of risks among many employers and employees.

In typical multiemployer plans, employer contributions do not reflect the differences in work force demographics of contributing employers.

For example, one employer may have a work force with an average age of 50, and another contributing employer may have a work force with an average age of 30, yet they pay contributions at the same rate.

Contributions may be based on hours of service, or ton of coal produced, or percentage of payroll, as in the case of the petitioner funds.

Therefore, for example, in a multiemployer health benefit plan, it is inevitable that the value of the health benefits needed by the employees of some contributing employers will exceed the contributions made by their employers.

This is made possible because other contributing employers will pay contributions in excess of the value of the benefits received by their employees.

But the court below says that when an employer withdraws from the plan, section 302(c)(5) requires that if the assets of the plan have increased during the period of the withdrawal... withdrawing employer contributing... contributed to the plan, a proportionate share of that increase in assets must be transferred to the plan... by the plan.

According to the court below, the proportion to be paid is the ratio of the contributions of the withdrawing employer to the total contributions.

The Second Circuit's mandate could, if taken literally, require that the petitioner funds pay out substantial moneys even if the benefits received by the employees of the withdrawing employers exceeded their contributions.

As a plan's obligations grow, normally its assets also grow.

Thus, the proportionate share of the plan's assets which the court below would require the plan to pay upon the withdrawal of the withdrawing employer would also grow, and thereby encourage withdrawals and the ultimate demise of the plan.

The court below thereby would impose a new obligation which the actuaries and trustees did not and could not take into account when they were projecting the cost of benefits to be provided and other costs in determining the level of contributions needed to cover those benefits.

If the plan's assets can be invaded in such a major way as the court below has mandated, where will the money come from to pay for the benefits the plan is obligated to pay in the future?

It is to be noted that the Second Circuit's holding is a one-way street.

If the plan's assets rise during the participation of the group of withdrawing employers, the petitioner funds must pay out plan assets, but if the plan's assets diminish, apparently no payment to the petitioner funds would be required.

No insurance arrangement can survive under a system which requires paying out of gains and absorbing all the losses.

It is instructive that the single circumstance where Congress has mandated a transfer of assets from one multiemployer plan to another, that Congress does not define the appropriate amount of assets to be transferred with reference to contributions or reserves.

The only situation where Congress has mandated transfer of assets is where employees move from one multiemployer plan to another multiemployer plan as a result of a certified change of collective bargaining representative.

In that instance, ERISA requires a transfer of an appropriate amount of assets, and that term is statutorily defined in section 4235(g) of ERISA, which appears in the appendix to the petition at page 48(a) to mean the value of the nonforfeitable benefits to be transferred minus any employer withdrawal liability to the transferor plan.

I might add that when it is the transfer of nonforfeitable benefits, which is the same as vested benefits, it is the transfer of the obligation to pay those benefits and therefore it's the same as the transfer of liabilities.

In the present case, no vested benefits have been transferred to the respondent's new benefit plans, therefore, even if there had been a certified change of collective bargaining representative in this case, which there was not, since it's the same union representing both... in both plans, the amount of assets required to be transferred would be zero.

The expansive interpretation of 302(c)(5) and the failure of some lower Federal courts to apply this Court's Robinson decision has resulted in unnecessary litigation and uncertainty among plan sponsors.

Some Federal courts even assert authority to rewrite the terms of benefit plans when they deem them to be unreasonable.

In effect, the Second Circuit has stricken the provisions of the trust agreements barring transfers of assets in this case.

In Mahoney v. Board of Trustees, just less than 6 months ago, the First Circuit held that a decision by a plan sponsor to increase retirement benefits of retired participants in a lesser amount than the increase for active participants was subject to review by the Federal courts as to whether the decision was arbitrary and capricious.

The Robinson decision was not discussed, or even cited.

Unknown Speaker: Would that sort of decision be reviewable somewhere under the law of trusts?

Would it be reviewable in State court?

Mr. Rose: Your Honor, no, I don't believe it would be.

Under ERISA, the State law is preempted, and so it would be under ERISA if there was any remedy whatsoever.

Unknown Speaker: Well then, you're saying that Congress intended that these trusts be not subject to any of the sort of supervision that other trusts are in court... you know, the usual arbitrary and capricious standard for trustees.

Mr. Rose: Well, Your Honor, I think they are subject to the ordinary trust law, and more.

In fact, ERISA is much stricter than traditional trust law.

Even under traditional trust law, the courts did not take it upon them... did not assert the authority to rewrite the basic terms of trust instruments on the basis of a reasonableness test.

Unknown Speaker: What entity is it that applies ERISA in reviewing these decisions?

Mr. Rose: Well, lawsuits are brought by either the Department of Labor for a fiduciary breach or by private parties.

Unknown Speaker: And they're adjudicated in court, but you say pursuant to the provisions of ERISA.

Mr. Rose: Under ERISA, absolutely, yes, in the Federal courts.

Unknown Speaker: In your view, then, ERISA has superseded traditional common law trusts.

Mr. Rose: Yes, Your Honor, it has.

Unknown Speaker: Mr. Rose, if we were to decide that section 302(c)(5) did not mandate the transfer of assets, is there any reason why we have to go ahead and decide the ERISA issues or the breach of fiduciary duty question?

Mr. Rose: Well, I would suggest, Your Honor, that the... it would expedite not only the conclusion of this case, because it is so clear that ERISA--

Unknown Speaker: Oh, but the courts below didn't grapple with that at all.

I mean, it seems to me if you're correct on the interpretation of 302(c)(5), that's enough up here.

Mr. Rose: --I think technically that is correct.

I would hope that the Court would give some guidance beyond that.

In... in Phillips v. Alaska Hotel & Restaurant Employees Pension Fund, the Ninth Circuit recently asserted that even if a pension plan complies with ERISA's minimum vesting standards, the Federal courts have the power to rewrite the terms of the benefit plan to require the plan to adopt a shorter period.

I... Mr. Chief Justice, I would like to reserve the remainder of my time for rebuttal.

Unknown Speaker: Very well, Mr. Rose.

Mr. Richman, we'll hear now from you.

Argument of Ronald E. Richman

Mr. Richman: Mr. Chief Justice, may it please the Court:

Our position is that the plain language of section 302(c)(5) of the LMRA requires that contributions made by an employer benefit that employer's employees either alone or jointly with, in a pool, as most multiemployer plans are set up, with contributions of other contributing employers.

In the language of the syllogism that we used in our brief, A must benefit, or A and B must benefit.

Each of the Greater Funds, both the pension and the welfare fund, will violate 302(c)(5) unless there is a transfer because some of the contributions paid by the Southern Employers helped create a pool surplus in each of the Greater Funds.

A surplus existed in each of the funds at the time all of the employees of the Southern Employers withdrew from each fund.

Unknown Speaker: But all of the Southern Employees didn't in one sense.

Those whose pensions had vested and were receiving payments I take it remained with the plan, did they not?

Mr. Richman: Yes, they did.

They--

Unknown Speaker: So I don't see how, in light of that, your syllogism works.

Mr. Richman: --Those employees have withdrawn from the plans, but they are entitled to benefit payments that have been earned by them prior to the date of their withdrawal.

In other words, they have vested in pension benefits.

They have a nonforfeitable right to receive pensions prior to the time that the withdrawal occurred.

They will not accrue any additional benefits subsequent to the withdrawal.

They will not have the opportunity to receive any benefit from the surplus that has been created by the employer's contributions.

Instead, what will happen is they will have their benefits paid out of the liabilities of the plan, those liabilities being calculated as of the date of the withdrawal.

Unknown Speaker: But the point is, is that under the statute... under the statute as you read it, these are still employees of the withdrawing employer.

Mr. Richman: They are employees of the withdrawing employer, but as we read the statute, all of the contributions that go into these funds must be used for the benefit of the contributing employer either alone or jointly with.

Some of these--

Unknown Speaker: Well, if that's the way you interpret it, then it seems to me that the extension of your argument is that even if some employees of a particular employer leave, the result would still be to transfer the assets.

Mr. Richman: --No, I... we think that's a different case, because if some of the employees remain in the fund, they will be earning on the pension side benefit credit.

On the welfare side, they will have an opportunity to receive medical and other coverage.

The difference is, in our situation, there is no one left who is available to earn a benefit beyond the benefits that are already calculated in the liabilities of the Greater Funds.

When only half of the employees leave, the half of the employees that remain in the fund, for example, are still entitled to medical coverage, and they may have many catastrophic events that occur which create significant liabilities for the plan.

They are still in the pool, and therefore from our syllogism some of the employees of A are benefiting in the pool with the other contributing employers.

We believe that to be distinctly different from our situation, where all the liabilities are fixed, and there is no opportunity at all for the Southern Employees to receive any benefit from the contributions that made up... that went to make up this surplus.

Unknown Speaker: Mr. Richman, doesn't your theory overlook the fact that subsection (5) is couched in terms of money or other thing of value paid to a trust fund established for these purposes?

Isn't the reference to paid, as opposed, for example, to money or things of value held... doesn't that indicate that a violation or not is to be judged with respect to the terms of the fund at the time the money is paid over?

Mr. Richman: If... no, we don't believe so.

If that were the case, the entire protective value of section 302(c)(5) would be essentially eliminated, because once the money went in on Friday, if on Monday a union official ran away with the money, 302(c)(5) would not apply its protective value, which is reflected in the legislative history.

Unknown Speaker: Well, how does 302(c)(5) help you if the union official runs away with the money in any case?

Aren't we talking about contests about the enforcement of certain terms of trusts, or the enforcement of certain benefits as against trustees and employers, and so long as the terms of the trust and the payments to the trust are made in accordance with trust terms that satisfy the requirements of subsection (5), isn't that all subsection (5) is really trying to get at?

Mr. Richman: We don't believe so, and this Court has recognized differently.

As Mr. Rose pointed out in Robinson, this Court said, it is, of course, clear that compliance with specific standards in the administration of these funds are enforceable under--

Unknown Speaker: In other words, it will enforce the terms of the trust--

Mr. Richman: --No, I think the--

Unknown Speaker: --But you want to do something other than enforce the terms of the trust.

Mr. Richman: --That's correct.

We want to enforce compliance with the specific standards in 302(c)(5).

One of those--

Unknown Speaker: But those standards simply refer to money paid in trust, meeting certain requirements set out in subsection (5), and if the money is in fact paid in accordance with those terms, how does subsection (5) provide any other standard by which a court is supposed to do anything?

Mr. Richman: --If that is the interpretation given to subsection (5), then at least a couple of the structural safeguards don't make any sense, because one of the structural safeguards is that the money be held in trust.

It doesn't say it must be received by the trust or paid to a trust, it says that it must be held in trust.

In addition--

Unknown Speaker: Well, I mean, I'm not seeing your point.

Let's assume it's being held in trust and you can enforce as against the trustees their obligation to hold it in accordance with the terms of the trust.

How is my suggestion subversive of that safeguard?

Mr. Richman: --Because, as I understand your suggestion, once the money is paid in, the trustees no longer have an obligation to follow any of the safeguards of 302(c)(5).

Unknown Speaker: Well, the trustees have got an obligation to honor the terms of the trust.

I'm not suggesting otherwise.

Mr. Richman: But they could change the terms of the trust immediately after receipt--

Unknown Speaker: How could they do... I mean, how am I suggesting that the trustees can change the terms of the trust?

Mr. Richman: --Well, the trustees in multiemployer plans generally have the right to, and do, change the terms of the trust all the time.

Unknown Speaker: In calculating benefits and so on.

Mr. Richman: Well, no, that would be the terms of a plan.

They change the terms of the trust in terms of governance of these plans, in some cases in terms of objectives, the use of benefits for certain purposes.

That happens--

Unknown Speaker: Do they have any authority to change the terms with respect to the identification of beneficiaries?

Mr. Richman: --Yes.

Not only--

Unknown Speaker: They could say... are you suggesting that they could say well, the employees of the X Corporation will no longer get benefits, even though we received funds expressly for that purpose?

Mr. Richman: --No.

Unknown Speaker: They couldn't do that.

Mr. Richman: No, they couldn't do that, but they--

Unknown Speaker: That's the kind of change that's at issue here, isn't it?

Mr. Richman: --But they could, for example, add a category of employees to receive benefits as long as that is done within the jointly with language.

Our proposed rule here is really based on the statement in Robinson and statements that appear in Amax and also that appear in the legislative history that the purpose of 302(c)(5), while certainly to fight against the possibility of union corruption, but really the overriding goal is to ensure that the money gets used for the participants and beneficiaries for whom it is contributed.

Unknown Speaker: But Mr. Richman, (a) and (b) establish... of 302 establish the criminal violations.

(a) makes it a violation for the employer to pay over, or to agree to pay over, lend or deliver the money, for the benefit of anyone other than his employees, okay.

That's (a).

(b) does not make it a violation for the recipient to use it for the benefit of anyone except the employees.

It doesn't say that at all.

It says, it shall be unlawful for any person to request, demand, receive, or accept or agree to receive or accept for any other purpose than the employees.

In other words, it is the agreement that it's directed at.

It does not make it criminal to go back on what was originally a valid agreement.

Isn't that at all significant, that it explicitly criminalizes the agreement but says nothing about violation of the agreement?

Mr. Richman: It is significant, except that when we get to subsection (c), and particularly (c)(5), which is an exception to the general rule, the statute does more than just say that the contributions need to be paid in.

Unknown Speaker: But (c) is an exception from what has been criminalized in (a) and (b).

If it hasn't already been criminalized in (a) or (b), you don't have to come within the exception.

So if it's not criminal under (b) to go back on what was originally a valid agreement, and although you told the employer you were going to use it for his employees, in fact you use it for something else, you haven't violated (b).

You don't need the exception of (c).

Mr. Richman: If that were the case, then the protective value of all of the provisions in (c), really, they would be eliminated completely.

Unknown Speaker: No.

Your criticism is not with the protective value of (c).

Your criticism is with (b).

You're just saying (b) wasn't drawn broadly enough, but Congress drew it as broadly as it wanted to.

It made the crime accepting it for a purpose other than the benefit of the employees, or agreeing to accept it for such a purpose.

It did not make it a crime to go back on a trust agreement and use it for your own benefit, or for some benefit other than the employees.

Mr. Richman: No, it... the... 302(e), however--

Unknown Speaker: (e).

Mr. Richman: --Enables the district courts... it provides the district courts with jurisdiction to, in the parlance that's been used by at least five or six of the circuit courts, correct structural defects.

Unknown Speaker: Well, it says to restrain violations, but it's no violation of this section to break a trust agreement.

It's a violation to make a bad trust agreement, but not to break a good one.

Mr. Richman: Well, in coming back to this Court's statement in Robinson, when the Court said that compliance with the specific standards in administration... and we believe that that statement was about the specific structural standards in 302(c)(5)... is enforceable under 302(e), and in fact the Robinson case itself, a unanimous decision by this Court, in that case, if the interpretation of the statute had been that the limitations apply only upon receipt of contributions, the Court, instead of being concerned about whether 302(c)(5) created a reasonableness standard to judge whether certain benefits violated 302(c)(5) or not, would have easily said, we don't have to do that because 302(c)(5) only replies to the receipt of money.

Unknown Speaker: Once again, (c)(5) is... (c) is entitled, Exceptions.

It is an exception to the criminal provisions of (a) and (b).

Now, if anything here is criminal, it is criminal under (b), and there is no language in (b) which makes it criminal to do anything except to accept the money, or to request the money, or to receive the money, on terms that do not require its use for the employees.

That's all that (b) criminalizes, so you don't even have to look to (c), until you first establish that there's been a violation of (b), and I'm asking how you can establish that.

Mr. Richman: If that were the case, this law was passed more than 25 years prior to ERISA, and we believe that Congress thought that it was creating some safeguards not only with the receipt of money, but that the money would go into these funds, and then it also would be used for the benefit of the employees for whom those contributions were made.

And there are a number of statements, which appear in our brief, in the legislative history from the sponsor of this provision which indicate that Congress really thought that it was creating structural safeguards not only for the receipt of the contributions but for the actual use of the contributions and for the actual administration of the plan, and I understand the concern with the language, but to read the language not to apply beyond--

Unknown Speaker: Criminal statutes... I mean, normally we interpret criminal statutes strictly, don't we?

Mr. Richman: --Yes, you do, but this is not being applied in a criminal context, this is applied in a civil context under 302(e).

Unknown Speaker: Is it one way for civil purposes and another way for criminal purposes?

We don't do that.

Mr. Richman: No, I... we believe that under 302(e), the Second Circuit correctly remedied this structural defect by ordering a transfer of the fair surplus in the Greater Funds.

Unknown Speaker: What, again, is the precise language in (c) that confers the authority on the courts to remedy a structural defect?

Mr. Richman: That appears in 302(e).

Unknown Speaker: Well, all it says is jurisdiction of courts--

Mr. Richman: To restrain--

Unknown Speaker: --To restrain violations--

Mr. Richman: --Violations.

Unknown Speaker: --Of this section.

How does that confer any authority to remedy structural defects?

Mr. Richman: A structural defect that is a violation of one of the specific standards in 302(c)(5), in our case the standard requiring--

Unknown Speaker: But I would think a violation of this section would mean something contrary to (a) or (b).

I mean, something that doesn't conform to an exception would not necessarily be a violation of the exception... be a violation of the statute unless it was... as I think Justice Scalia said, unless it was already illegal under (a) or (b), there would be no violation.

Mr. Richman: --Except that, and again getting back to, really, the same issue that I was talking about a moment ago, if that is the case, then these structural safeguards which we believe that Congress thought it was adopting not only for the receipt of contributions but for the actual administration of the plan and the distribution benefits would be eliminated completely.

Unknown Speaker: Well, but really, it would be... it's quite extraordinary, isn't it, to say that Congress put all of the things that you want to see, or you say should be put to this use, not in a more general statute regulating these sort of agreements, but in an exception to a criminal provision, a rather narrow criminal provision?

Mr. Richman: I don't understand the concern with the language.

Unknown Speaker: That is what we're mostly concerned about here.

[Laughter]

Mr. Richman: This Court, however, did, in the Robinson case, both in... by statement and terms of the analysis done by the Court, indicate that it had really adopted what we had been referring to as the structural defect analysis, again because if the Court was not concerned with the actual enforcement of section 302(c)(5), then the Court in Robinson would have simply said, we don't need to worry about how benefits are distributed and whether coal miners' wives receive some type of benefit or a different type or a lesser benefit.

All we're concerned about is the actual application of this statute to the receipt of the contributions.

Another... if, in fact, the statute is read the way that you're saying it should be read, then a question arises as to the Greater Funds have received contributions subsequent to the withdrawal of the Southern Employees from the Greater Funds.

They have received those contributions from 1985 right up to the future, and continue to receive those contributions.

The receipt of those contributions would be a violation because they are receiving those contributions without actually using contributions, albeit contributions received earlier for the protective purposes of 302(c)(5).

Unknown Speaker: I don't really follow your example, are you saying that after the transfer and after withdrawal that the withdrawing employers continue to contribute to the earlier fund?

Mr. Richman: No.

What we're saying--

Unknown Speaker: Then I don't know what you were saying.

Mr. Richman: --Okay.

The... after the Southern Employers withdrew from the Greater Fund, their contributions stopped to the Greater Funds.

The contributions continued by Greater Employers to the Greater Funds, and those contributions continued from 1985 to the present date.

Those contributions are going into a fund in which contributions which were made previously are not being used for the sole and exclusive benefit of the contributing employees who made those contributions previously... in other words, prior to 1985... and to read the statute strictly, we'd end up in a situation where the funds continued to receive contributions, have done so for a long period of time, when contributions that were received prior were not being used for the sole and exclusive benefit of the employers who contributed those contributions at that time.

Unknown Speaker: I have to confess I have trouble following your example.

You'd helped me if you used A and B--

Mr. Richman: Okay.

Unknown Speaker: --As you did in your original... assume A is the employees of the withdrawing employers and B is everybody else in the original fund.

Mr. Richman: Contributions by A stopped.

Contributions by B continues to the fund.

Unknown Speaker: Right.

Mr. Richman: If the statute is read to say that contributions can't come into these funds unless the contributions are used in accordance with... or the receipt of payment cannot occur unless the--

Unknown Speaker: Are you saying that B's contributions are bad because they are used for... pay some benefits for A's employees even though A is no longer contributing to the same fund, is that what you're saying?

Mr. Richman: --No, almost... no.

Unknown Speaker: Just the opposite.

Mr. Richman: What we're saying is that contributions by B goes in and they benefit B's employees at a time that contributions by A going in, previous contributions by A, were not used for the benefit of the employees of A, and therefore contributions are coming into a fund, but--

Unknown Speaker: Yes, but isn't it true that at the time any one employer made a contribution to either fund, there were employees of that employer who were potential beneficiaries of that fund?

Mr. Richman: --That's correct.

We don't believe that ERISA requires a different result here.

A transfer pursuant to 302(c)(5) can be accomplished without violating a single rule under ERISA.

We can meet the requirements of the transfer rules under 1411(b), for example, and that would be an issue that the district court would be able to deal with.

Our interpretation does not make section 1415, which is the section that requires mandatory transfer, superfluous.

Section 1415 does not say that assets or liabilities, or assets and liabilities will be transferred only if there's a change in collective bargaining representative.

In fact, that would violate the position of the Government that these transfers are, in fact, regulated by fiduciary duty obligations pursuant to ERISA.

In addition, transfers can occur under 1415 that would not occur under the rule that we're requesting that this Court adopt.

They would occur if there is an underfunded plan, for example.

Under the LMRA... under the rule that we're proposing, no transfer would be required if the plan does not have excess or surplus reserves.

Unknown Speaker: Mr. Richman, why don't you argue... you are arguing that this transfer is in breach of the trust... of the valid trust agreement, right?

Mr. Richman: No.

We are arguing that this transfer is in breach of 302(c)(5).

Unknown Speaker: Yes, which means that the trust... the trust agreement was valid under 302(c)(5), and this was in breach of it.

Is that right?

Mr. Richman: That's correct.

Unknown Speaker: Why don't you argue the opposite... that it is not in violation of the trust agreement, but to the contrary, it is fully in accord with the trust agreement?

That means that the trust agreement is invalid under (b), and therefore you would have to apply the (c) exception.

Mr. Richman: I'm not sure I understand the--

Unknown Speaker: In order to get 302 to apply, you have to show that the trust agreement is invalid, so your case ought to be that this payment was perfectly okay under the trust agreement, but that renders the trust agreement invalid under (b), unless the (c) exception applies, which you say it doesn't.

Never mind.

That's all right.

[Laughter]

Well, on the interrelation between (a), (b), and (c), I take it the structure of the statute is that any payment to the trust would be invalid under (a), and that's why (c) is necessary to save it, isn't that correct?

Mr. Richman: --That's correct.

Unknown Speaker: So (c) then does control those payments that are valid, and those which are invalid.

Mr. Richman: That's correct.

Unknown Speaker: Thank you.

Mr. Richman: Thank you.

Unknown Speaker: Thank you, Mr. Richman.

Mr. Rose, you have 4 minutes remaining.

Rebuttal of Henry Rose

Mr. Rose: Mr. Chief Justice, may it please the Court:

My adversary stated to the Court that there was a surplus at the time of the withdrawal of the respondent employers.

There is nothing in the record whatsoever to indicate that.

Unknown Speaker: What if there was?

Mr. Rose: I don't think it would make any difference, Justice White.

The--

Unknown Speaker: He's not your adversary, Mr. Rose He's your friend.

Your clients are adversaries, you and Mr.--

[Laughter]

Mr. Rose: --Not these clients.

The... in answer... in the dialogue just preceding, Justice Scalia suggested that the argument that might be made that the trust might be invalid and thereby bring it within 302.

I would suggest that if, indeed, this trust is invalid, then virtually all multiemployer plan trust agreements are invalid, because the key provisions that we're talking about are virtually universal, and we have in this case filed the trust agreements not only of the petitioner funds, but of the respondent new funds, and you'll find similar provisions in there, and you also have in the amicus briefs the trust agreement for the Central States.

Unknown Speaker: I didn't say there was no answer to the argument, Mr. Rose.

I just said it was an argument that would get you over the (b) problem, anyway... the subsection (b) problem, which really sticks in my craw.

Mr. Rose: It's a difficult hurdle to get over, but that won't do it.

Unknown Speaker: Mr. Rose, in response to questions by Justice O'Connor earlier today, she suggested that maybe all we have to do is decide there's... 302(c)(5) doesn't justify the result below.

You said you wanted us to go on to cite something under ERISA.

Just exactly what are you asking us to decide, perhaps unnecessarily.

[Laughter]

Mr. Rose: Clearly, that ERISA does not require a transfer of assets such as being sought in this case.

That is clear from--

Unknown Speaker: Because it's the same union.

Mr. Rose: --For... there are a number of provisions.

It's a prohibited transaction, to transfer assets to a party in interest.

The respondent employers are parties--

Unknown Speaker: Well, we don't have to say it's a prohibited transaction.

You're just saying it's not a mandated transaction under ERISA.

Mr. Rose: --That is correct.

It certainly is not... there's absolutely clear that it's not a mandated transaction, but it... in fact, I am arguing that it is a prohibited transaction.

Unknown Speaker: We surely don't have to decide that, because if we say 302(c)(5) doesn't justify it, and it's not prohibited by ERISA, why do we have to go on and say what might or might not be mandated?

Mr. Rose: You're quite right, you don't have to.

I would hope you would.

[Laughter]

There was a suggestion by my friend that--

[Laughter]

That the--

Unknown Speaker: Mr. Rose, excellent.

[Laughter]

Mr. Rose: --That the legislative history somehow did talk about the use of the money in the plan, and I would question that that is so.

I looked at it very carefully, and I recall none.

With regard to the prohibited transaction, though, I would add one point, and that is that this Court has stated in Central States v. Central Transport that the use of plan assets by employers, even temporarily, is a prohibited transaction, and that was in the context of the possibility of a plan not seeking collection of contributions with sufficient expedition, that letting it ride might in fact be a prohibited transaction simply because it is an extension of credit.

Chief Justice Rehnquist: Thank you, Mr. Rose.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Lechmere Inc. v. NLRB - Oral Argument

Fri, 09 Jan 2009 14:49:31 +0000

Case:

Lechmere Inc. v. NLRB

Media File:

90-970_19911112-argument.mp3

Related Transcript:

transcript.xml

Transcript:

ORAL ARGUMENT OF ROBERT P. JOY ON BEHALF OF THE PETITIONER

Chief Justice Rehnquist: We'll hear argument next in No. 90-970, Lechmere, Inc., v. National Labor Relations Board.

Mr. Joy, you may proceed whenever you're ready.

Mr. Joy: Mr. Chief Justice, and may it please the Court:

This case comes to the Court on writ of certiorari from the First Circuit Court of Appeals.

The question presented is whether an employer may legitimately bar nonunion... nonemployee union organizers from trespassing on its private property to seek to organize its employees when reasonable alternative means of reaching them are available.

This Court, in NLRB v. Babcock & Wilcox, a unanimous opinion in 1956, held that an employer may, in those circumstances, preserve his private property rights and exclude the union.

In this case, a divided panel of the First Circuit with a strong dissent endorsing a ruling of the National Labor Relations Board held to the contrary.

We submit, Your Honors, that the First Circuit should be reversed, and in so doing this Court should reaffirm its holding in NLRB v. Babcock & Wilcox.

Petitioner submits these principal arguments where Lechmere v. The National Labor Relations Board should be reversed.

First, the First Circuit endorsed the board's decisional model enunciated in Jean Country, which rests upon an erroneous legal foundation.

By taking the threshold inquiry into whether reasonable alternative means of reaching employees through the usual channels of communication exist before trespass will be authorized and denoting that inquiry in the analysis to one of three factors of seemingly equal standing, the analytical regime fashioned by this Court in Babcock & Wilcox is dismantled and the private property rights of the employer are substantially diminished and oftentimes destroyed.

A second principal argument that we submit to the Court why the First Circuit should be reversed is that the First Circuit and the board, while paying lip service to the holding of Babcock & Wilcox that so long as there are reasonable alternative means available to the union to reach the employees, no trespass should be authorized, nonetheless allowed the union's effectiveness in persuading employees as opposed to reaching employees to become a factor in judging whether trespass is warranted.

Third, the First Circuit endorsed the board's creation of an impermissibly low standard for establishing that the use of alternative communications methods is not reasonable.

In Sears & Roebuck v. San Diego Council of Carpenters, this Court stated that the burden of proving that trespass is necessary is a heavy one.

In Lechmere, the First Circuit and the board, we submit, in addition to allowing unfounded inferences, conjecture, and partial facts to satisfy this heavy burden, has given strong indications that a new and impermissibly easy standard for unreasonableness of a communication method has emerged by describing accessibility to the work force in terms of whether a union can obtain the names and addresses of employees through an employer-furnished list or otherwise.

Briefly, the facts in this case are as follows, Your Honors.

The petitioner Lechmere, a retailer, opened a store in Newington, Connecticut, employing 200 employees.

It established a no-solicitation, no-access rule, and consistently and unfailingly enforced that rule by prohibiting all efforts at solicitation, including the Salvation Army bell-ringer during the holiday season, the Girl Scouts of America, Burger King, the American Automobile Association, and so on.

On June 16, 198--

Unidentified Justice: Big hard-hearted employer, isn't it?

[Laughter]

Mr. Joy: --Your Honor, I would respond by saying that it's an indication of just how strongly this employer has asserted its private property interest.

On June 16, 1987, the United Food and Commercial Workers began a campaign to organize the employees at Lechmere by first putting a full-page ad in the Hartford Courant newspaper, which is the largest newspaper in the area of daily circulation.

The ad, by the way, was aimed directly at the employees.

A copy of one is attached to the joint appendix.

It was aimed directly at Lechmere employees, and it contained a clip-out authorization card with a self-addressed card for return.

Two days later, on June 18th, the union began a series of trespassory forays into the store and the parking lot of Lechmere, stuffing union literature inside merchandise and in the restrooms and handbilling in the parking lot, including the employee section of the parking lot, which was closest to a 46-foot-wide public grass strip that separated the parking lot from the Berlin Turnpike.

Forty-two feet of that grass strip is public land, meaning that the union organizers were able to come within 4 feet of where the employees parked in that section of the parking lot.

The employees arrived one-half hour before the store opened, and they left one-half hour after the store closed.

Unidentified Justice: Is that true of all of them?

Mr. Joy: It was true of most of them, Your Honor.

The testimony in the record indicates that the union was aware that the employees generally parked in that section of the parking lot.

In fact, may I quote the testimony of union organizer Lisa Meucci, who was asked this question by counsel for the general counsel of the National Labor Relations Board.

What steps did you take to ensure or attempt to ensure that leaflets reached the particular audience?

Answer: Arriving at the store between 9:15 and 9:30, making sure that people who parked their cars were employees.

The stores opened at 10:00, so most people that arrived at the store between 9:30 and 10:00 were employees.

The testimony of the union itself.

There's no question but that the union was aware that the majority of the employees parked in that section, which was accessible within 4 feet by public land.

On June 20th, the organizers again made three intrusions into the parking lot and handbilled.

The company's invocation of its no-solicitation rule against the union led to the--

Unidentified Justice: Excuse me.

So they knew that they parked there.

Mr. Joy: --Yes, Your Honor.

Unidentified Justice: But they still couldn't reach them there, right, unless... unless they went onto the land?

Mr. Joy: They... they could not walk up and touch them, Your Honor, but they certainly, within 4 feet, a distance greater than separates you and I, could beckon them to come over, all the while saying, I have a piece of literature here that you should be interested in.

Please come over and talk with me further about it.

I suggest to you that that short 4 feet distance should not rise to the level of making them inaccessible.

Indeed, Your Honor, there were other--

Unidentified Justice: Every car was 4 feet from this--

Mr. Joy: --No, Your Honor, but the... the length of property that bordered on Berlin Turnpike was several hundred feet in length, and the employees, while they all didn't, in one single line, up against that section of public land, park, nonetheless, I think that the testimony indicates that there may have been only two or three rows of cars, but certainly that first row of cars was within 4 feet.

And by the way, Your Honor, that's not the only method of reaching the employees that was available to the employees in this case.

Unidentified Justice: --I do hope you will expound the alternatives that were available.

Mr. Joy: Yes, Your Honor, and I will do that now.

The employees, for the next month and a half after the organizational campaign began, gathered the names and addresses of license plates of... gathered the names and addresses of employees through the taking down of license plate numbers, and going down the street a few miles to the Connecticut Division of Motor Vehicles, which... it would give them the names and addresses of those to whom the car was registered.

That was public information in the State of Connecticut.

The union employed that method to obtain the names of 49 employees.

It determined after speaking with an employee, with the help of an employee of Lechmere, that 8 of those 49 employees were supervisors.

Thus, they plugged the names of 41 of the 200 Lechmere employees into their computer, and then generated four pieces of mailing to each of those homes.

Those mailings included a stamped self-addressed envelope.

Each of those mailings exhorted the Lechmere employees, if they had an interest in improving their wages and benefits in terms of conditions of employment, to return that clip-out.

In addition, there was testimony in the record that none of those mailings were returned to the union addressee unknown.

There was no indication that these four mailings did not get through to these employees.

In addition to the mailings, the union made roughly 10 telephone calls to employees, and they made only two home visits.

The union doesn't explain why they only attempted two home visits.

They placed five more ads in the newspaper, four of them full-page ads and one half-page ad, one in the New Britain Herald and the other in the Hartford Courant.

In addition, for a month straight, this union picketed again on that grass strip, which allowed them to come within 4 feet of the employees' section of the parking lot, picketed for a month straight, and then for the next 6 months intermittently... now, that picketing switched its target from the organization of the employees to an area standards kind of a picket, but nonetheless, the employees every day when they came saw those pickets for a month and then intermittently for 6 months.

Justice O'Connor: Mr. Joy--

Mr. Joy: Yes, Your Honor?

Unidentified Justice: --The... the board found, I gather, that there were no feasible and effective alternatives to going on the property.

Mr. Joy: That's correct, the board so found, Your Honor, and I would submit to you that they applied an erroneous legal standard in defining what reasonable alternative means were.

We submit that what the board was saying and... and applying here was a standard under which the... the union must be effective, must have reasonable alternative means which are effective in persuading the employees, as opposed to effective in merely reaching them, and the Babcock command, the command that this Court gave in NLRB v. Babcock & Wilcox in 1956 was that the available methods need only be effective in reaching employees, not persuading employees.

Indeed, Your Honor, the Court in Babcock denied enforcement of a board order, and the underlying board decision found that there were no reasonable alternative means of communication because the methods of communication in the board's Babcock case were not... were in... were not as effective as placing the employees... the union organizers, I should say, on the employer's property.

The Court, while stating that the trespass that was authorized in Babcock was minimal and not unreasonable, nonetheless rejected the board's interpretation of that rule of law and said that more effective means isn't the issue.

The issue is whether or not reasonable alternative means are available by the usual methods of communication, and the Court cited as the usual methods of communication telephone calls, home visits, advertised meetings, and the like, and it appears in footnote 1, I believe, of the Babcock Supreme Court decision.

It... it also referred in Babcock not just to the usual methods of communication but the usual ways of imparting information.

In this case, the board and the First Circuit endorsing the board, I believe, has misunderstood that rule of law that was enunciated respecting reasonable alternative means.

It... indeed, in the board's own brief to this Court on page 11, it talks about the paraphrasing... or, I should say it paraphrased Babcock & Wilcox by talking about the effectively engaging in organizational activity.

That connotes to me that the definition, the interpretation, is one where they are convinced that the effectiveness means effectiveness in persuading and not reaching.

The summary dismissal of mass media by the board in Jean Country, endorsed by the First Circuit, where the board says, only in the exceptional case will we consider mass media to be an appropriate available method of communication.

And as Judge Torruella said in his dissent, in one clean swoop the board and the First Circuit have eliminated the very tools used by the entire advertising and political industry to reach its targeted audience, and without any evidence on the record in this case that the employees were not reached by these mass media attempts, the board summarily dismisses the very same method of communication that the union began its campaign with, and--

Unidentified Justice: Did the board explain, Mr. Joy, why it dismissed the mass media as a possible means of communication?

Mr. Joy: --It said, Your Honor, that in most cases it will be considered expensive or ineffective, and I believe that's further indication that they misconstrue the word effective to mean, effective in persuading as opposed to effective in reaching.

They also placed an expense component on it, and I submit to you that in this case the union certainly did not apparently consider that method of communication expensive.

Indeed, as I said, it utilized that method six times.

Your Honor, I would like to speak to the first argument that I mentioned, and that is that by relying on the Jean Country test the... the Supreme... the First Circuit relied on a legal erroneous foundation which fails to follow the applicable law.

As I mentioned, this was a unanimous opinion by eight Justices in 1956, and it construed the act and fashioned the legal rule that governs nonemployees seeking to trespass on an employer's property as distinguished from employees, and that rule prohibited trespassing except where the target employees were inaccessible and beyond the reach of less intrusive nontrespassory means.

We... I submit to you, Your Honor, that the Babcock Court placed a sentinel at the boundary of the private property, and that sentinel was a threshold inquiry... prove to me you have no reasonable available other means before I must let you by onto my property.

By reducing that inquiry to a relative contest among three of coequal status, the board and the First Circuit endorsing the board has taken that sentinel off his post guarding the property.

I... perhaps, if I may mix my metaphors, a little historical context of this most recent test enunciated by the board is helpful.

Two years prior to Jean Country... and by the way, Jean Country was decided in 1988... 2 years before that, in Fairmont Hotels, the board enunciated a test for access by nonemployees onto employers' private property, and in that test in Fairmont the board said, we're going to... going to balance the property rights on the one hand against the section 7 right on the other hand, and only if they are in equipoise will we then look to reasonable alternative available means.

Jean Country came along 2 years later, and the board apparently recognized its error and resurrected the threshold inquiry in Babcock from its obscurity and brought it up to a factor to be considered equally with the other two.

In essence, then, what the board did was it took the horse from behind the cart and put it into the cart, and that's what the First Circuit adopted by endorsing the board's order in this case.

Now, the... the Supreme Court decisions since Babcock have bolstered rather than diminished the vitality of the rule of law enunciated in Babcock.

Unidentified Justice: And what rule of law do you say has been violated by the board?

Mr. Joy: The... the board has taken the... mandated the required threshold inquiry into whether reasonable alternative means are available to reach the intended audience before we have to consider when and how much trespass is necessary.

The board has removed that threshold inquiry, that protection against unnecessary trespass, and that threshold inquiry, that decisional regime, was dictated by this Court in Babcock & Wilcox, I submit, Justice White.

Justice Souter: Would... would you agree that because the word reasonable is in there, it's perfectly appropriate for them to consider the strength of the property right and consider the particularity of the section 7 right acquired?

You just think they're giving it an undue prominence, and in effect promoting those two inquiries to the level of a test as opposed merely to being factors to be considered, is that true?

Mr. Joy: Our proposition, Justice Souter, is that before any analysis of the strength of the property right versus the strength of the section 7 right in question is to be engaged in, the threshold inquiry must first be asked and answered.

Unidentified Justice: Yeah, but the word reasonable is in there, and what are they supposed to consider when they... when they... when they inquire about reasonableness?

It seems to me that what you're saying is that... that they're really... that you're reading the word reasonable out of there, and it seems to me that you're saying as long as there is any other means of communication, any other means of reaching, that that's the end of the inquiry, but you've got to do something with the word reasonable.

Mr. Joy: Your Honor, allow me to respond by saying that we read the word reasonable in that context to mean reasonable in light and in the context of the remainder of the opinion... excuse me.

And the language in the remainder of the opinion says, but when the plant and the living quarters are isolated and rendered inaccessible, then reasonable alternative means may not be available.

So in that context of looking at the isolation of the plant and the living quarters, such as your lumber camps, your S&H Grossinger's Hotel, where the employees live on the premises, your Husky Oil, where employees of Husky Oil were up in Camp Lonely, 600 miles on the North Slope, north of Anchorage, in those contexts... contexts is... is reasonable alternative means intended to be read, and the word reasonable intended to be read?

So that I'm not suggesting to you that no... in no case would there be a situation where access would be required.

I'm using the language in the context of Babcock to define what is reasonable and what is not.

Justice Scalia: And you'd... you'd say expense has some bearing as to reasonable.

I mean, if the only way to get to them is to hire private detectives to find out where they live and one by one approach them in that fashion, that might not be reasonable.

Mr. Joy: I'm not submitting to the Court, Justice Scalia, that as an absolute rule expense is prohibited from consideration, but using an objective reasonable standard as applied to facts such as you present, certainly cost may be one factor.

But again--

Justice O'Connor: Mr. Joy, in... in Textile Workers v. Darlington Company, a case decided here after Babcock, I don't find a recitation of the structure that you say Babcock established, that you have to determine initially whether there are reasonable alternatives before you can weigh the business justification against the section 7 rights.

Darlington spoke of just going right ahead and... and weighing the section 7 rights against the employer's business justification.

Mr. Joy: --I don't believe, Your Honor, that Darlington involved the situation where nonemployees were part of the factual scenario of the case, but let me cite you to Sears & Roebuck, and the quotation appears on page 18, and this follows up to your comment on my earlier comment that subsequent decisions have tended to bolster rather than diminish the vitality of Babcock & Wilcox.

On page 18 of our brief, we cite the language in Sears which states as follows, if I may.

While there are unquestionably examples of trespassory union activity that might be protected under section 7, experience under the act teaches that such situations are rare, and that a trespass is far more likely to be unprotected than protected.

Experience with trespassory organizational solicitation by nonemployees is instructive in this regard.

While Babcock indicates that an employer may not always bar nonemployee union organizers from his property, his right to do so remains the general rule.

To gain access, the union has the burden of showing that no other reasonable means of communicating its organizational message to employees exists, or that the employer's access rules discriminate.

The burden is a heavy one, and has rarely been in favor of trespassing organizational--

Justice O'Connor: Do you think the board has changed the test from whether there are reasonable alternatives to whether there are reasonable and effective alternatives?

Mr. Joy: --Effective in persuading, Your Honor, and I would cite to you the board's own language in Jean Country, which says that, most significantly, in determining the factors that we will look at in assessing reasonable alternative means, most significantly, Your Honor, is the extent to which exclusive use of the nontrespassory alternatives would dilute the effectiveness of the message.

The--

Unidentified Justice: Well, the whole purpose of the communication is... is to... is to persuade--

Mr. Joy: --Correct, your Honor.

Unidentified Justice: --and it... it seems to me not a stretch at all to say that reasonableness and an evaluation of reasonableness includes an assessment of how effective the communication is going to be.

If you have a voice shouting in the wilderness, it just is... is not what this whole... the whole purpose of the organizers.

Mr. Joy: Your Honor, I would in response to your question say that the Babcock command which struck this construction of the act and erected this analytical regime required that only reaching... only whether the alternative means was effective in reaching the audience.

Now, someone who is using your hypothetical, crying in the wilderness, is not likely to be reaching the audience, and no consideration of persuasion should fall into that calculus.

Finally, let me say, Your Honors, that the board and the First Circuit rely on language from Hudgens v. the NLRB as its essential cornerstone in justifying the Jean Country analytical model, and that language states that the locus of that accommodation between property rights and section 7 rights may fall at differing points along the spectrum depending on the nature and strength of the respective section 7 right and the private property rights asserted in any given context.

We submit that this dictum may not be lifted out of context and used as a springboard for circumventing the Babcock analytical model.

As I've earlier stated, Hudgens falls in the middle of the line of Supreme Court cases reaffirming the Babcock formula.

It comes before Sears and the language I read.

The plain language in the Sears opinion informs that language in Hudgens.

The Hudgens language speaking of accommodation between property rights and section 7 rights and placing the locus on the spectrum is to be read as the board's function after the threshold inquiry commanded by Babcock has been answered in the negative, and that's what that language is intended to mean, and if it's interpreted that way, it fits.

If it's interpreted the way the board asserts, it circumvents the intention of Babcock & Wilcox and does not fit neatly into the line of cases I have identified.

Your Honors, we in conclusion request that the Court reaffirm the holding of Babcock & Wilcox.

Restore the sentinel of reasonable alternative means to its post, protecting private property against unnecessary trespass by nonemployee union organizers, and reverse the First Circuit's endorsement of the order of the board.

Mr. Chief Justice, I would like to reserve the remainder of my time for rebuttal.

Chief Justice Rehnquist: Very well, Mr. Joy.

Mr. Dreeben, we'll hear from you.

ORAL ARGUMENT BY MICHAEL R. DREEBEN ON BEHALF OF THE RESPONDENT

Mr. Dreeben: Thank you, Mr. Chief Justice, and may it please the Court:

The issue in this case is whether the National Labor Relations Board has reasonably accommodated competing section 7 rights and property rights.

The board found in this case that petitioner's denial of access to its parking lot for organizational handbilling violated section 8(a)(1) of the act, which makes it an unfair labor practice for an employer to interfere with, restrain, or coerce employees in their section 7 rights.

The board's interpretation of this general language is a reasonable one, and it should be upheld.

The petitioner's argument here today makes clear that its entire reliance is placed on the Babcock & Wilcox decision and inferences that petitioner draws from that decision.

But the board's rule that's under review today, however, is consistent with Babcock & Wilcox.

First, the central principle of Babcock & Wilcox is that the board must make an accommodation between private property rights and section 7 rights when the two conflict, and that accommodation must be obtained with as little destruction of one as is consistent with the maintenance of the other.

I would suggest that that formulation itself implies that the board should consider weighing the impact on respective rights before reaching the appropriate accommodation.

Chief Justice Rehnquist: Well, Mr. Dreeben, you're talking about an abstract proposition, which of course you have to talk about in a case like this, but there is a remarkable similarity to the layout, it seems to me, of Babcock & Wilcox and to the layout of this particular organization, yet in Babcock & Wilcox this Court said the board could not require nonemployee access, and in this case the board says yes, we can require nonemployee access.

Mr. Dreeben: Well, Chief Justice Rehnquist, the facts in Babcock were quite different than the facts in this case, despite the fact that both cases involve parking lots and both cases involve organizational activity.

From there, the cases fairly significantly diverge.

First of all, the property in Babcock was fenced property that was surrounding an employer's industrial plant, and it was entirely closed to the public.

There were no means of getting into... for any members of the public.

In this case, in contrast, the property is a parking lot that is essentially open to the public for anyone to come in and park and--

Unidentified Justice: I think the Court in Babcock emphasized that condition of the property.

They emphasize the availability of alternative means of communicating.

Mr. Dreeben: --No, the Babcock decision itself does not discuss the weight to be accorded to the property interest because of its characteristics--

Unidentified Justice: Yes.

Mr. Dreeben: --But I think that would be a mistake for this Court to read Babcock as having decided every possible case that could come before the board in the future without regard to significant factual distinctions.

This Court in Hudgins v. NLRB recognized that there are going to be--

Unidentified Justice: Well, do you think the board would be making a mistake under Babcock if they said it doesn't make any difference whether the media are available, or whether the telephone is available, or anything like that?

Mr. Dreeben: --Yes.

I think that the board does not have the freedom to say what it said in Babcock, which is that it doesn't matter whether nonemployees have alternative means.

What the board--

Unidentified Justice: Well, they... even, even if going on the property would be more effective?

Mr. Dreeben: --That's right.

The board... the board cannot simply make that judgment.

That's what the Court rejected in Babcock.

I think it's important to look at what Babcock actually decided.

The board in Babcock had equated the right of nonemployees to enter for purposes of engaging in organizational communications with the right of employees to engage in that form of communication, and this Court reversed that determination, and the central principle that the Court articulated was that the balance is different when you have nonemployees.

The employer has a right to maintain the privacy of the property if there are not reasonably effective... if there are reasonably effective alternatives available to the nonemployees.

Unidentified Justice: Well, is the board's position that the instruments of the mass media are less effective means of communication today than they were when Babcock was decided in 1956?

Mr. Dreeben: Well... well, in Babcock this Court never adverted to the availability of mass media as an alternative means.

The Court was... was looking at a small-town setting in which it spoke of meetings with employees on the streets of the community, visits at their home which were easily arranged, telephone calls... they were speaking of the kinds of personal contact that I think is not uncommon to be able to arrange in a small-town setting, particularly in that era in that part of the country.

The Court was not speaking of... of the kinds of suburban/urban setting that was present in this case, where the employees are widely dispersed and one newspaper is available that has a circulation that's perhaps 10 percent of the entire population.

It would be, I think, extremely different, and this Court never confronted the problem of whether mass media is effective in this setting.

Justice Souter: No, but in this... in this setting, Mr. Dreeben, the... on the... the people who are standing on the grassy strip could have held up a big sign saying there's going to be an organizational meeting at the legion hall on a given night at a given time.

They could have communicated that message certainly effectively as communication, and they could then have had just as much opportunity to meet with people on a person-to-person basis as they would have on the streets of the small town, except for one thing, and that is the people who went to the meeting would have to go to it because they wanted to go to it and not because they got buttonholed on the street.

Now, if that is an effective means of communication, then the only distinction between the two situations is that it may be a less effective means of persuasion, because it is a less effective means of getting less than willing employees before you.

Isn't that the only distinction?

Mr. Dreeben: No, I don't think that it is, Justice Souter, but from the outset, the point here is that the section 7 rights that are being protected are the rights of the employees.

The Court has recognized that employees are not going to be capable of... of exercising those rights in a meaningful way unless they are provided with the information that enables them to make a choice.

Justice Souter: Yes, but you're not talking, though, about information, you're talking about effectiveness in persuading them to get to a place where the information can be given if they want to receive it, isn't that fair to say?

Mr. Dreeben: Well, I... I don't think that it's fair to say that the board looks at whether the... the information that the employees receive is persuasive to them.

A sign that's held up that merely announces a meeting doesn't really provide the employees with any information, doesn't provide them with... with much more than the knowledge that a union exists and would like to talk with them.

The--

Justice Souter: And will talk with them at a specific time and place if they are willing to go there.

Mr. Dreeben: --Well--

Justice Souter: That's more than just the picketing did.

I... you may feel they characterize the picketing, but that would be a fair characterization of my organizational meeting hypo.

Mr. Dreeben: --Well, I don't think that this Court had in mind, even in Babcock, that the only thing the union had to be able to do was announce its existence.

There's a recognition that the employees need to have a more sustained opportunity to hear from the union organizers before they're even going to want to come.

Justice Scalia: Even if they don't want to, you say that they must be given this information, even if they don't want the information?

Mr. Dreeben: Well, with the--

Justice Scalia: Even though it's only employees' rights... as you say, section 7 is only rights of employees.

It does not give rights to nonemployees, it does not give rights to organizers.

The only thing we're talking about here are rights of employees to receive information.

Mr. Dreeben: --That's correct, Justice Scalia.

Justice Scalia: And you say that they have a right... a right to receive information, even information they don't want to receive, and we're going to sort of force-feed them.

I... that's a very strange right to me.

Mr. Dreeben: Well, it's not clear that they don't want to receive the information.

Justice Scalia: Well, yes, it is.

They see the sign.

It says, there's a meeting for this information.

They say, I don't want to go to the meeting.

I don't want to go to the meeting.

You say that's not adequate.

Mr. Dreeben: No, I don't think that it is adequate, because it doesn't allow them to have any opportunity, it doesn't allow them to be confronted with the facts that may influence--

Justice Scalia: Which they don't want to hear.

Mr. Dreeben: --Well, they may ultimately not want to hear it, even if the employees simply get the opportunity to receive the information from the union.

They can reject it at that point, and there's no... the board is not saying here that... that nothing is effective short of persuading the employees that they ought to join a union, but what the board is saying is that the employees should be given the information so that they have the opportunity to make a decision.

Unidentified Justice: It seems to me if we're talking about employee's rights... and that's how the statute reads.

It talks about the right of employees.

Why isn't that adequately satisfied so long as the employer is not keeping employees from obtaining information that they want to receive, and it seems to me that's adequately done when he allow... you know, he's not blocking off the pickets so that they couldn't see those signs on the... on the grassy strip.

Mr. Dreeben: Well, this Court has recognized that it is a literal interference with the employees' ability to get information if the employer prevents someone from handing them a handbill.

I mean, Babcock & Wilcox itself recognizes that there is a violation of section 8(a)(1) by the employer's denial of access, so I don't think that there's any question that the language of the act read literally applies to an employer's attempt to keep the employees from getting the information.

In this case, the employer's representatives actually pulled a handbill out of the hands of the employees, and I would suggest that is a literal interference with the right to get information.

Unidentified Justice: Because it... because it had been delivered through... through trespass, because the people who passed it out had no right to be on the... on the property.

Mr. Dreeben: Well, that... that's the issue in this case, whether they had a right to--

Unidentified Justice: Of course it is.

Mr. Dreeben: --Federal law does give the employees the right to organize, and this Court has recognized that in order meaningfully to exercise that right there's a need for the employees to be addressed by organizers.

They are not likely to have the information on their--

Unidentified Justice: Well, Mr. Dreeben... Mr. Dreeben, I take it if the... let's assume the employer said, I will distribute to every single one of my employees this notice of the union meeting and the purpose of the meeting.

I take it that you would say that that's wholly inadequate.

Mr. Dreeben: --Well, I don't think that--

Unidentified Justice: Yes or no.

Mr. Dreeben: --Well, I'm not sure what the board would say about that question.

Unidentified Justice: You don't?

Well, what do you think the board would... should say?

Mr. Dreeben: I think that the board should look at the actual facts of the situation, but I don't think--

Unidentified Justice: Well, the fact is, the employer makes sure every single employee knows what... that there's a meeting and that the union wants to give them some information about how valuable it is to belong to a union.

Mr. Dreeben: --Well, I don't think that the act contemplates that the employer should be the vehicle for this--

Unidentified Justice: I know, but it just so happens the employer is willing to do that just to avoid a lot of hassle.

Mr. Dreeben: --Well, that is not likely to be a way that the employees are going to receive the undiluted message of what the union has to say.

Unidentified Justice: So you say that would not be enough, the board would be entitled to say that that is not a reasonably effective alternative way of communicating.

Mr. Dreeben: I... I'm not sure what the board would say about that.

I do not think that if--

Unidentified Justice: Well, what would you say if the employer went a little step farther and said look, I'm going to... I'm going to distribute to every single employee a notice of this meeting, and then I'm going to add to it a little paragraph that the union will write for me about how great it is to be a member of the union.

He hands... that's all out, now.

Do you think the... do you think there has to be some reasonable way of the union contacting the employees in person?

Mr. Dreeben: --I think that that's a very significant component of what the board is looking at.

I don't think it's--

Unidentified Justice: Well, your answer is yes, I guess.

Your answer is just plain yes.

There has to be some reasonably effective way of actually communicating in person.

Mr. Dreeben: --In an organizing setting, either in person or by the... over the telephone would likely be a necessity.

The employer would always have the option of giving the union a list of the employees and allowing the contact--

Unidentified Justice: No, not if the employees said, don't do it.

Mr. Dreeben: --Well, there's... there's certainly... this is not... this doesn't raise the case in which the employee said, don't do it.

There have been cases in which the employer has distributed a list of the employees and the board has found that to be a satisfactory alternative under these particular circumstances, so there are alternative ways for the employer to deal with this.

Unidentified Justice: And calling to them from a grass strip is not in person?

Hello, I want to talk to you about the union, and the person says, I don't want to hear it, that is not in person?

Mr. Dreeben: Well, that is... there's nothing in the record to show that that actually happened in this case.

What the employer did was attempt to eject the union from the public property itself and called a policeman to do that.

The policeman then informed the union that they had a 10-foot strip of public property that they could stand on.

Justice Scalia: That might... right, but I mean that might have been an unfair labor practice.

We're not talking about that, to try to eject them from public property.

But assuming that they're on public property and can... we know the distances here... could shout at the people getting out of the cars, we want to talk to you about the union.

That would not constitute a personal contact?

I mean, what does it take to constitute a personal contact?

Mr. Dreeben: Well, I... I think a personal conversation does constitute one.

I think, Justice Scalia, that what your question goes to essentially is whether there was substantial evidence to support the board's finding in this case.

Justice Scalia: I... I think what it goes to is... I do think you're saying what the board desires, and that is that there be more than just an opportunity afforded to the employee either in person or by advertisement to get information that the employee wants.

I think, as you say, the... the information must be given to the employee, whether the employee wants to hear it or not, and unless there's some opportunity for that, you just simply don't think it's adequate access.

Is that... is that an unfair characterization?

Mr. Dreeben: I think that... that whether there is or isn't adequate access is something that depends on particular facts, and... and it could well be that in a particular case the board would find that access from public property to the employees was certainly good enough.

Unidentified Justice: Well, that isn't the point, whether it's access from public property.

The point is whether it is enough access to give the employee the clear notice that the information is available and let him say that he wants to receive it or doesn't want to receive it.

Is that enough access?

Mr. Dreeben: I don't think that's what this Court said was enough access, even in the Babcock case.

In the Babcock case, the Court talked about the union communicating directly with the employees through visual methods such as telephone calls, visits on streets, home visits, and those... those were part... that was part of what the Court thought would constitute a reasonable way for the union to be able to get in touch with the employees.

Unidentified Justice: But communicating what?

Communicating, I'd like to talk to you about the union, and if the employee said, you know, to the person at the door or on the street, I don't want to hear it--

Mr. Dreeben: Sure.

That... that is certainly all that's required by the act.

The employees are not required to accept the message.

As the board--

Unidentified Justice: --So that presumably would work from the parking lot as well.

I want to talk to you about the union, and the person says, I don't want to hear it.

You say that... that would be enough.

Mr. Dreeben: --If the... if the union actually has the opportunity to talk to the employees.

Unidentified Justice: Holding up a sign, though, I want to talk to you about the union, and the person says, I don't want to hear it, that... that's... that doesn't work.

Mr. Dreeben: Well, I think the board has the right to make the judgment that that's not going to be a reasonably effective way for the employees to even understand what the union wants to talk to them about, and that is, after all, what the board's mission is in this case, and when the Court spoke of the accommodation of interests in the Hudgens case, it had in mind that the board would take into account the character of the property and the kind of section 7 right and question in deciding whether there was adequate protection of the section 7 right in question.

Justice O'Connor: Mr. Dreeben, do you think that Babcock & Wilson stands for the proposition that it is a two-tier inquiry, that you first have to determine whether there are reasonable alternatives to the trespass in order to contact the employees, and only if the answer to that is no would you go on?

Mr. Dreeben: I don't think, Justice O'Connor, that Babcock structures the inquiry so that the board is precluded from doing what it does here, which is considering the reasonableness of alternatives in conjunction--

Justice O'Connor: As part of the overall balance.

Mr. Dreeben: --That... that's correct.

Justice O'Connor: That is what the board does.

Mr. Dreeben: That is what the board does.

The board will not order access if there are reasonable alternatives available.

Justice O'Connor: But it doesn't consider that first or separately.

Mr. Dreeben: It does consider it separately in the sense that if there are reasonable alternatives available, that's the end of the case, but the board does not view that as a factor in isolation from other factors, and I would suggest that's exactly what this Court recognized that the board might do in Hudgens v. NLRB, where it spoke of the accommodation as falling as... on points along a spectrum.

There's nothing to suggest in that case that the Court's language should be read as... as saying that the board can only look at the section 7 right and property right after it looks at alternative means, and Babcock should not be read so as to restrict the board's latitude in interpreting the act in that fashion.

Unidentified Justice: Well, I... under Jean I would think that it may be that alternatives would be reasonable, considered reasonable in one case and unreasonable in another, depending on the degree of intrusion on the property?

Mr. Dreeben: That's correct.

The... the purpose of that inquiry is to fulfill what the board spoke of in Babcock.

Unidentified Justice: So you are balancing the reasonableness against the degree of intrusion.

Mr. Dreeben: What the board is balancing is how much section 7 rights will suffer against how much property rights will suffer.

Unidentified Justice: Mr. Dreeben, in the... the board's order here required, as I understand it, the employer to allow access to the parking lot for the purpose of distributing handbills and leaflets to the employees.

Is it possible to tell from the board proceedings whether they had in mind personal contact when the material was distributed, or whether it was thought it was just going to be left on the windshields of cars or stuck in the seats?

Mr. Dreeben: Well, I think that there's... there's aspects of both.

Unidentified Justice: Because one... one would think that if... if your requirement that it be a personal contact is uppermost in the board's mind, that putting it on the windshield or sticking it in somebody's seat is not certainly most people's definition of that sort of personal contact.

Mr. Dreeben: Well, what the board is doing is deciding whether there was an unfair labor practice with respect to the employer's conduct in this case.

What the union did in this case was attempt to place handbills on the windshields of cars.

They handed them to the employees who they saw.

The employer's unfair labor practice was in barring the union from doing that.

The board is not insisting that there be a particular kind of contact or interaction between employees--

Unidentified Justice: Or even a personal contact, as you earlier spoke of.

Mr. Dreeben: --It's not insisting that that be the case at all.

What it is requiring is that the union be permitted to do that which the act entitles it to do, measured against the union's actual conduct in... in this case.

Justice Kennedy: Well, it... it seems to me that if... if we affirm the board here, in effect there will be a general rule that absent some special circumstances union organizers always have access to an employer's parking lot.

Mr. Dreeben: No, I don't think that... that the rule, Justice Kennedy, would be absent special circumstances.

The question would be, are there reasonable alternatives to access under the--

Unidentified Justice: Well, in most cases it's going to advertising, telephone, and I don't see how the run-of-the-mill case would really be much different than what we have here.

Isn't that a fair assumption?

Mr. Dreeben: --No it isn't, because many kinds of facilities will have public property where the employees enter, and there will be an opportunity for the union to make contact with the employees before they get on the employer's property.

Unidentified Justice: But it seems to me that in almost any conventional suburban shopping mall or shopping center context that the general rule would have to be that there's access to the parking lot, even if the employer owns it and controls it.

Mr. Dreeben: Well, I--

Unidentified Justice: I just don't see how to... I'm not saying that's an unreasonable rule, but it seems to me that that's the necessary thrust of this decision.

Mr. Dreeben: --I think the thrust of this decision is that the board is entitled to take into account the fact that a parking lot is essentially open to the public and that the infringement on the employer's property interest in allowing a small amount of peaceful, quiet organizational activity is not a substantial infringement.

Unidentified Justice: I... I agree that that's a fair assessment of what the board has done here.

Mr. Dreeben: And... and what the board--

Justice Scalia: Mr. Dreeben, may I... Justice Kennedy may not think it's not... it's not an unreasonable rule, but hasn't the Court suggested that it would be an unreasonable rule in the... in the language from Sears that your colleague referred us to, where... where we did seem to establish... it's dictum, to be sure, but it reflects our understanding of Babcock & Wilcox.

We did seem to say that you don't weigh the reasonableness of access together with the degree of infringement on property rights.

It seemed to be a preliminary inquiry.

We said, to gain access the union has the burden of showing that no other reasonable means of communicating its organizational methods exists.

The burden is a heavy one and has rarely been in favor of trespassory organizational activity.

That statement could certainly not be made if we accept the board's action in the present case.

You could certainly--

Mr. Dreeben: --No, Justice Scalia, I don't--

Unidentified Justice: --not say that the burden is rarely in favor of trespassory activity.

Mr. Dreeben: --Well, I don't think that what the Court was doing in Sears was attempting to foreordain how the board might apply the act in future cases.

What the Court was doing in Sears was summarizing certain language from Babcock and stating what it had understood the board's practice to be, and that's what the Court meant when it said the balance has rarely been struck in favor of access.

Justice Blackmun pointed out in his concurrence in that case, I believe, that the board's experience had been comparatively limited in applying Babcock, because for several years there had been First Amendment holdings of this Court that recognized shopping centers as essentially forums protected by the First Amendment, and the board had not gained as much experience in developing and applying the law, so what the Court did in Sears was look to the existing state of the law and summarize it.

I don't believe that it purported to change it.

I certainly don't believe that it purported to overrule the statement in Hudgens, which was an access case, where the Court said that there are a spectrum of various accommodations that depend upon the character and strength of the property interest and the section 7 interest in any given case.

That is what the board is attempting to implement in this case.

What the board is doing is not inconsistent with Babcock, because the board does look to reasonable alternatives in every case.

Whether or not every decision is supported by substantial evidence is not a question that goes to the merits of the board's general approach, and the board's approach is fully consistent with the statutory language.

I think on that basis it is entitled to be upheld.

The... the question of mass media was raised by petitioner as being a panacea, as a form of access in all cases.

I think the board's answer to that is a quite reasonable one.

If you're attempting to reach 200 employees who live in a fairly large metropolitan area, the expense and the unlikeliness that the newspapers will actually convey the organizational message is a powerful reason for rejecting mass media as an alternative in every case.

Similarly, in this case the board looked at... at what the union had available for contacts with the employees at their homes through tracing license plates and concluded that that was not effective either.

The reason is that the union attempted to trace license plates over several months, and it obtained less than a fifth of the names of petitioner's employees.

That is not going to get the message about the union's existence and the programs that it supports to four-fifths of the work force, and I think the board was fully entitled to reject that.

Justice Stevens: May I ask you, on the newspapers, does the record show whether these were home-delivered papers, or were they suburban papers that are delivered in large blocks to different places like stores?

Mr. Dreeben: The record doesn't show that.

I think that the Hartford Courant is a general circulation daily newspaper, so that it would be delivered to homes and subscribers.

Of course, some of the newspapers actually--

Justice Stevens: What were the other two papers?

Are they the same character, do you know?

Mr. Dreeben: --I don't know, and I'm not sure that the record shows that.

Justice Stevens: You don't know whether they're even... they're throw-aways, or there was a... you know, they had to pay for them.

Does the record show that?

In other words, I notice there were bunches of newspapers at the stores, and the store took out the advertisements by the union from the ones they had at the store.

Mr. Dreeben: Yes.

That's precisely my point, Justice Stevens.

The... to the extent that we knew that there were newspapers that the employees might be exposed to, the employer did everything it could to prevent the employees from seeing it, so this is a far cry from any case where the employer was cooperating in communicating information to the employees for that purpose.

Justice Scalia: Mr. Dreeben, make sure I... is this an unfair characterization of what I think the board is saying?

Let's assume that through various means union organizers can reach 60 percent of the people in the shop they're trying to organize.

As I understand the board, the board is saying that that can be reasonably effective access to those employees in some cases, namely where the employer does not have a building open to the public, but that is not reasonably effective access to the employees in another case... 60 percent is good in one case and not good in the other.

Mr. Dreeben: In essence, Justice Scalia, that is correct.

The board does balance the impairment of the interests at stake, so the question is, how much have the section 7 rights suffered in a particular case by the denial of access versus how much have the property rights been injured in a particular case by access, and so it does matter what kind of property is at issue.

Unidentified Justice: This is hardly the way Babcock reads, is it?

Mr. Dreeben: Well, I--

Unidentified Justice: You would think under Babcock there was just some concept of reasonable alternative ways of communicating, which you talk about, and it's a constant.

Mr. Dreeben: --I don't think that Babcock can be read as answering all of the questions that the board--

Unidentified Justice: Well, I agree with that, but I take it you disagree with my characterization of Babcock in this respect.

Mr. Dreeben: --Yes, I do.

I think that Babcock was a specific application of... of the Labor Act to a particular set of facts, and it cannot and should not be read as foreordaining what the board has to do in future cases.

It's a widely shared consensus in the law that open property is of a different character than closed property.

This Court's Fourth Amendment cases treat the home and its curtilage far differently than open fields are treated.

California affords a right of access to shopping centers as essentially public places where it's appropriate to engage in expressive activity, and this Court upheld that against constitutional challenges.

Thank you, Mr. Chief Justice.

Chief Justice Rehnquist: Thank you, Mr. Dreeben.

Mr. Joy, you have 2 minutes remaining.

REBUTTAL ARGUMENT OF ROBERT P. JOY ON BEHALF OF THE PETITIONER

Mr. Joy: Thank you, Mr. Chief Justice.

With regard to the last point made by my colleague, let me simply state that the... the Court did not intend, it seems to me, that by exercising its right to invite, that a commercial retailer suffers a self-inflicted wound to the most essential property right in the bundle of property rights, the right to exclude, and by relying on this openness of property argument and trying to establish that a retailer, particularly, by inviting people to shop somehow has given away his right to exclude, I believe is misplaced.

Unidentified Justice: And he excluded every other kind of a--

Mr. Joy: Indeed he did, Your Honor.

Unidentified Justice: --Of a--

Mr. Joy: He excluded every other trespasser who came on to his property to engage in activity inconsistent with its commercial use.

Let me finally, if I may, refer you to the administrative law judge in this case, who found that reasonable alternative means did exist in this case.

He said, I would state that the facts herein convince me that reasonable alternative means were available.

The employees were easily recognizable here.

They parked in specific areas and arrived at predictable times.

Then he went on to state a distinction between availability and reaching an availability and persuading by saying, even if union representatives were unable to converse with them prior to entering the store, the union could and did utilize the procedure of writing down license plates, and went on to say that Fairmont does not require the union to be successful in its contacts with employees, only that it have reasonable means of communicating with them.

Unidentified Justice: --Do you have any courts of appeals that agree with you?

Mr. Joy: Your Honor, I can distinguish the courts of appeals cases that--

Unidentified Justice: But the answer is no.

Mr. Joy: --The answer is no, Your Honor, but Jean Country, if I may, has never been squarely challenged as has been done in the Lechmere case.

In all of the courts of appeals decisions up till now, Jean Country... there's been no challenge launched against Jean Country.

Thank you, Your Honors.

Chief Justice Rehnquist: Thank you, Mr. Joy.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Litton Financial Printing Div. v. NLRB - Oral Argument

Fri, 09 Jan 2009 14:49:44 +0000

Case:

Litton Financial Printing Div. v. NLRB

Media File:

90-285_19910320-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of Mathias J. Diederich

Chief Justice Rehnquist: We'll hear argument next in No. 90-285, Litton Financial Printing Division v. National Labor Relations Board.

Mr. Diederich, you may proceed whenever you are ready.

Mr. Diederich: Mr. Chief Justice, and may it please the Court:

In this case the National Labor Relations Board found that the employer in this case had violated section 8(a)(5) of the National Labor Relations Act by refusing to arbitrate 10 identical grievances filed by the union when the grievance events took place some 11 months after the expiration of the collective bargaining agreement.

Even though the Board found a violation of section 8(a)(5) because of the repudiation, it declined to order the parties to arbitrate because in its view it did not feel that the particular... the particular grievances, which involved a layoff and a provision in the contract dealing with layoffs, arose under the contract.

And just briefly, the reasoning of the Board was that because aptitude and ability controlled the layoffs, or order of layoffs before seniority became a factor, that the grievances did not arise under the collective bargaining agreement.

Unknown Speaker: But wasn't it the case, isn't it the case that to the extent that seniority is claimed to be a factor, it does arise under the contract?

Mr. Diederich: In the Board's view, which I think is correct, seniority does not become a factor until ability and aptitude are determined.

And ability and aptitude certainly do not arise under a contract because under the Board's view, relying on Nolde, it doesn't... a grievance does not arise under a contract unless it is some right which can be accrued or is a vested right, such as wages, pension benefits, or severance pay.

Unknown Speaker: Well, were the grievances in this case expressed solely in terms of aptitude and ability as opposed to terms of seniority on the assumption that aptitude and ability were equal?

Mr. Diederich: The grievances were expressed in terms of seniority.

Unknown Speaker: Well, then why doesn't that arise under the contract?

Mr. Diederich: Because the contract provides that aptitude and ability are the controlling factors, and seniority never becomes a factor until you prove that, or you are able to demonstrate--

Unknown Speaker: Excuse me, maybe I don't, still don't understand the grievance.

I thought you were saying or indicating in effect that the grievances claimed, that there were instances in which ability and aptitude were equal, and that therefore seniority ought to be determinative.

Is that correct?

Mr. Diederich: --No, I don't think the grievances mentioned aptitude and ability at all.

Unknown Speaker: Okay, that's maybe where we... so they were simply saying... the grievances were simply claiming that seniority and seniority alone entitled them to some consideration they didn't get?

Mr. Diederich: The exact words were "out of seniority".

Unknown Speaker: Okay.

Mr. Diederich: The court of appeals upheld the Board's determination that there was a violation of section 8(a)(5) because of the repudiation, the refusal to arbitrate, but the court reversed the Board's decision on the... arising under theory that the Board had adopted and said that was unreasonable, and directed the parties to arbitrate.

Now there is in collective bargaining a constant theme that the parties are supposed to determine what goes into a collective bargaining agreement and not the Government.

And in a case like this where we have a contract that we have to look at and interpret and there is no collective bargaining history, I think it's especially important to look at the particular contract provisions that are involved and try to determine what the intent of the parties was, if it can be determined from that language.

Unknown Speaker: Well, Mr. Diederich, had this grievance arisen during the life of the collective bargaining agreement would arbitration have been required?

Mr. Diederich: Yes.

Unknown Speaker: And there certainly is a good deal of language in this Court's decision in Nolde that suggests that, similarly, arbitration would be required if it occurs after the expiration of the agreement, as here.

Mr. Diederich: Yes, that's true, Your Honor, but Nolde was a civil action under section 301, which is a statute, I am sure as you know, which gives unions the right to sue employees and vice-versa.

And one of the reasons they can sue is to enforce a collective bargaining agreement.

That is precisely the question that I am presenting here.

Is a section 301 lawsuit properly applicable to a section 8(a)(5) unfair labor practice case, because Congress has specifically defined what is involved in a refusal to bargain.

As a matter of fact it is the only unfair labor practice of which I am aware where Congress has specifically defined what the violation is.

And I simply don't believe that if you read the statute, section 8(a)(5) and its definition in section 8(d), that you can say that the employer's conduct in this case fits within the definition of that statute.

You would have to shoehorn that conduct into that statute.

Unknown Speaker: Well, I guess the Board takes the position that some of these grievances might have to be arbitrated and some not, and in this case this one should.

I mean, Solicitor General will argue a position that differs from your own.

Isn't that right?

Mr. Diederich: No, I think the Board's position was that there was a violation in the blanket repudiation of the arbitration provision.

But the Board determined that the parties were not required to arbitrate.

So--

Unknown Speaker: This specific--

Mr. Diederich: --This specific reason... grievance.

And on that point the Board and myself are on the same side, although from my standpoint that is kind of a fall-back argument.

I have made more of a frontal attack on the applicability of section 8(a)(5) and section 8(d), whether they apply at all to this employer's conduct.

Unknown Speaker: --Well, suppose--

--Or more precisely that you don't carry Nolde over, which is a 301 case, to section 8(b)(5).

Mr. Diederich: I didn't hear the first part of the question.

Unknown Speaker: Your position also is that you don't carry over any doctrine from Nolde, which was a section 301 case, to 8(b)(5) when you have defined the refusal to bargain.

Mr. Diederich: Absolutely, because Congress has specifically defined in section 8(d) what a refusal to bar... what the obligation to bargain entails.

And if you don't meet that obligation then you have refused to bargain.

So Congress, having spoken very specifically in terms of what a section 8(a)(5) violation is, I don't... I don't believe that language in a section 301 suit, which is a suit really where you are just determining arbitrability.

Now, there's a great deal of significance and there's stigma attached to being found to have committed an unfair labor practice.

Unknown Speaker: Mr. Diederich, there is a long, long line of authority.

I mean, I thought, I had thought it was fairly well established Federal labor law that if you make a unilateral change in the provisions that you're obliged to abide by under a contract, you are not only in breach of contract, but you are also guilty of an unfair labor practice.

And your... the principle you have just espoused attacks that whole line of jurisprudence, doesn't it?

Why would you limit it to the arbitration agreement?

Mr. Diederich: I don't think it does, Your Honor, because the, the landmark case for the proposition that you cite on unilateral change of working conditions is Katz, and in Katz the theory was that while there are ongoing negotiations it is destructive of the collective bargaining process for the, for an employer to make unilateral changes.

In other words, you can't be negotiating about sick leave, and the next day institute unilaterally a brand new sick leave policy, because that disrupts... excuse me... disrupts the collective bargaining process.

In this case there were no ongoing negotiations.

11 months had elapsed without any negotiations.

Unknown Speaker: There were none, but there should have been some.

Isn't it true that under the Board's theory there should have been, because you had refused to bargain?

Mr. Diederich: Well--

Unknown Speaker: Had you obeyed the law there would have been on-going negotiations.

Mr. Diederich: --Not entirely correct.

For the first 10 months of that 11 month hiatus, the status... the representative status of the union was in doubt, because there was a Board proceeding.

Unknown Speaker: Right.

Mr. Diederich: At the end of the... around the end of the 10 month period, the Board certified the union.

At that point the company--

Unknown Speaker: But your initial refusal to bargain was for the purpose of getting that determination, wasn't it?

Mr. Diederich: --No.

Unknown Speaker: Wasn't it?

Mr. Diederich: No, no, no, no, no.

There was a petition filed by an employee seeking to decertify the union--

Unknown Speaker: Right.

Mr. Diederich: --shortly before the contract expired.

That entire proceeding, from the time that petition was filed until the Board ultimately certified the union, was 10 months after contract expiration.

At the end of that 10-month period when the union was certified, the company exercised its right to then challenge the validity of that Board certification in the Ninth Circuit court of appeals.

And that is how... 1 month of the entire 11-month period was devoted to a technical refusal to bargain, which is the only method, Your Honor, by which an employer can test the validity of a Board certification.

Unknown Speaker: Did the Board purport to rest its decision in part on Katz?

Mr. Diederich: No.

Oh, I'm sorry.

I don't think the Board did.

The union argued Katz, but I don't believe the Board argued Katz, and I don't believe the Board relied on Katz.

Unknown Speaker: But why shouldn't the Katz prohibition on unilateral changes prior to bargaining to impasse apply to arbitration?

Mr. Diederich: Because we have a long history saying that arbitration is consensual, and we have many Supreme Court cases saying that arbitration is consensual, and we have a statute which says that a part... basically it says the parties should determine what goes into an agreement and not the Government.

Unknown Speaker: Well, Katz was also during the course of bargaining.

Mr. Diederich: Yes.

Unknown Speaker: It didn't cover the situation where the contract had expired.

Mr. Diederich: Absolutely not.

There is no... this is a case of first impression in terms of whether--

Unknown Speaker: Do you think, then, even though there's a... say after a contract has expired, the employer is under a duty to bargain about wages, hours, and working conditions, but he may unilaterally change the... say, the hours of work without bargaining?

He can change it, but he has to bargain--

Mr. Diederich: --He has to bargain, yes.

Unknown Speaker: --But meanwhile he can change?

Mr. Diederich: He can bargain, and when, I think--

Unknown Speaker: Well, may he, while he's bargaining may be say well, I know what... the contract required 8 hours of work or 6 hours of work, I am going to change to 7.

I know I have to bargain about it, but until we bargain the impasse, it's going to be 8 now?

Mr. Diederich: --I don't think it's clear, Your Honor, that you have to bargain to impasse.

It's clear that you, if you're going to make a change you have to bargain.

Unknown Speaker: You agree with that?

Mr. Diederich: Yes.

Unknown Speaker: Before you make the change?

Mr. Diederich: Yes.

Unknown Speaker: Was that done here?

Mr. Diederich: Well, you asked me about wages.

You have to bargain about wages.

I don't think you have to bargain about arbitration because--

Unknown Speaker: Oh, I agree, I... that's a different thing because your obligation to bargain to the union isn't based on the contract.

Mr. Diederich: --No.

Unknown Speaker: It's based on labor law.

Mr. Diederich: Right.

Unknown Speaker: And so... and certainly the duty to arbitrate isn't based on labor law.

It's based on contract.

Mr. Diederich: True.

Unknown Speaker: Well, wages are based on contract too, aren't they?

Mr. Diederich: Not after the contract expires.

After the contract expires they exist by the obligation to maintain the wages that exist by operation of law.

Unknown Speaker: On what basis?

On the theory that the pre-existing contract continues unless you bargain to change it, no?

Mr. Diederich: No.

Not on the basis that the contract continues.

On the basis that they were working conditions, and as working conditions they cannot be unilaterally altered without giving the union an opportunity to bargain.

Unknown Speaker: What's the authority for that?

Mr. Diederich: The authority for that?

Unknown Speaker: Yes.

Mr. Diederich: Is the Board's decision in this case.

Unknown Speaker: Well, but you're... I mean, surely we deserve to be cited something better than that, don't we?

Well, that's what Katz holds, isn't it?

Mr. Diederich: That's what Katz holds.

Unknown Speaker: Katz holds in the course of bargaining the employer can't do it.

It doesn't say anything about the situation when the contract has expired.

Mr. Diederich: Absolutely not.

No case has ever come before--

Unknown Speaker: So why do you agree that an employer can't change the conditions of bargaining... can't change the conditions of employment after the contract has expired even though he continues to bargain about them?

Why is he bound to keep them the way they were?

Mr. Diederich: --I didn't say he couldn't change them.

Unknown Speaker: Well, in answer to Justice White's question, I thought you did.

Mr. Diederich: I misspoke.

He has to give the union an opportunity to bargain over the changes.

I don't think you have--

Unknown Speaker: Before he changes them?

Is that it?

Mr. Diederich: --That's my understanding of the law.

Unknown Speaker: Yes.

Mr. Diederich: But not with respect to arbitration.

Unknown Speaker: Oh, I understand that.

Mr. Diederich: Because the Board has made an exception with respect to arbitration.

Unknown Speaker: Of course it did.

But if... but the duty to maintain the existing working conditions, wages, hours, working conditions, doesn't rest on contract.

It rests on the law?

Mr. Diederich: That's my understanding, yes.

Unknown Speaker: Otherwise you could sue the employer for... under 301 for breaching the contract.

Mr. Diederich: You could sue for breach of contract.

That's right.

Unknown Speaker: And you can't?

Mr. Diederich: Pardon?

Unknown Speaker: And you can't?

Mr. Diederich: Not under the contract theory.

I think at that point when the contract has expired, the collective bargaining scheme leaves resolutions of disputes that arise to the parties and their economic power in their bargaining.

I think that's the theory of the collective bargaining scheme.

Unknown Speaker: Unless the dispute actually had its roots in the contract.

Mr. Diederich: No.

No.

Unknown Speaker: Well, what about vacation pay?

Mr. Diederich: Vacation pay is a vested right, and I have no quarrel with vacation pay.

Unknown Speaker: What you're saying is the dispute has its roots in a contract.

Mr. Diederich: Well, yes.

Yes.

But not a layoff provision such as this one.

Unknown Speaker: Thank you, Mr. Diederich.

Mr. Wallace, we'll hear from you.

Argument of Lawrence G. Wallace

Mr. Wallace: To address preliminarily a question that has arisen, the period after contract expiration is a period of bargaining prior to agreement on a new contract or the reaching of impasse.

And that is why the Board has applied Katz to the post-expiration period, but on the rationale that the employer cannot make unilateral changes during the period of bargaining.

It's only coincidental that the wages had been prescribed by the expired contract.

They happened to be the prevailing wages--

Unknown Speaker: So you say there's a duty to bargain when the contract expires, even though the employer is no longer bound by the condition, and that Katz holds that during a period of bargaining you cannot make unilateral changes?

Mr. Wallace: --Precisely so.

We explain that on page 10 of our reply brief and cite this Court's decision in Laborers Health and Welfare against Advanced Lightweight.

Unknown Speaker: But if it were not during a period of bargaining, then, the employer could make unilateral changes?

Mr. Wallace: After impasse, for example.

Unknown Speaker: And why is Katz not dispositive here?

Because the bargaining had ceased, or there had been bargaining to impasse?

Mr. Wallace: No.

Because Katz is an interpretation of how to interpret and apply the National Labor Relations Act, and it upheld the Board's view that the act ordinarily bars changes in the terms and conditions of employment during the bargaining period.

But the Board has also adopted the view that it would be inappropriate to apply Katz to certain terms because it would be contrary to other policies of the act, such as dues check-off, or union shop, and arbitration, because it would be very hard to reconcile with the strong statutory determination by Congress that compulsory arbitration is not to be required, that arbitration is solely a creature of contracts.

Unknown Speaker: Well, so are the wages.

Is there no strong feeling of contract that an employer shouldn't have to pay anymore than he agrees to pay, and that a worker shouldn't have to accept any less than he agrees to accept?

Mr. Wallace: It's only coincidental that the change would be a change in a contractually prescribed term.

It is not a matter of carrying forward the expired contract.

It is a matter of changing the existing terms and conditions of employment.

That's what we try to explain on page 10 of our Reply Brief.

Unknown Speaker: Well, I understand why an arbitration agreement isn't one of the terms and conditions of employment.

If you have a dispute you have to--

Mr. Wallace: It is, it is--

Unknown Speaker: --But you just arbitrarily say we'll change some of them and we won't change other ones.

Mr. Wallace: --It's not arbitrary, Mr. Justice, it... the point is the rationale of Katz is not based on carrying the contract obligations forward.

And arbitration cannot be compelled by law.

Arbitration is solely a creature of contract.

If the contract obligation is not being carried forward, it's inappropriate to require adherence to arbitration.

Unknown Speaker: I hear you, but I don't understand.

Everything you say could be said about wages.

Mr. Wallace: The wages are being paid.

I can't really explain it more clearly than that.

In its 1987 decision in Indiana & Michigan Electric, the Board definitively set forth the principles it would follow in implementing this Court's decision in Nolde.

Nolde's rationale readily led the Board to carry forward to the hiatus period, a period of bargaining between expiration of the contract and before renewal or impasse, the Board's longstanding rule that a wholesale refusal to arbitrate grievances under a contract to arbitrate would be an unfair labor practice.

Unknown Speaker: What is the... what did the Board base its reason for doing that on?

Mr. Wallace: Well, the rule is based on the notion that a wholesale refusal to submit grievances to arbitration is a repudiation of the bargain that was reached, and therefore an unfair labor practice.

Unknown Speaker: What bargain, if it's expired?

Mr. Wallace: Well, that is the point of trying to apply Nolde.

Nolde said that the parties are presumed to have carried... to have an intent to have carried forward the obligation to arbitrate during this hiatus period to disputes arising under the contract.

And therefore if the employer categorically repudiated its arbitration obligation during this period, taking into account the rationale of Nolde, the ordinary rule that that would be an unfair labor practice carries forward.

The more difficult question for the Board was the remedial one of how to identify whether the particular grievances asserted in the case are within the category that there is a duty to arbitrate during hiatus.

Unknown Speaker: Namely those... did the dispute arise under the contract.

Mr. Wallace: That's correct.

And in addressing this, the Board took note that in Nolde itself, before holding that contract expiration does not necessarily extinguish the duty to arbitrate, this Court very carefully described the nature of the grievances and of the union's contentions that it was addressing in that case.

And I refer the Court specifically to page 248 of volume 430 U.S. in which the Court took pains to say that the union maintained here that the severance wages at issue were accrued or vested rights earned by employees during the term of the contract, although payable only upon termination of employment, and that the union's claim was that the parties considered the severance pay as part of the employee's compensation for services performed during the life of the agreement.

And the question--

Unknown Speaker: Mr. Wallace, can I interrupt right there?

Isn't that precisely what the union claims here?

That the discharges on seniority grounds violated the contract?

And the defense to that is the contract had expired and the don't.

But in terms of the request for arbitration, if they are right that the contract did prohibit these discharges, why doesn't the language you read from Nolde apply squarely to this case?

Mr. Wallace: --Because Nolde was talking about rights that accrued during the pre-expiration period.

Unknown Speaker: Well, when did their seniority accrue here?

Mr. Wallace: Well, that gets to a question of the application of the Board's rule, whether what was involved in this case was a claim based on seniority, and the Board reasonably determined in applying its rule here to the contract provision, which is set forth at the top of page 9 of our brief, the contract provision says in case of layoffs, length of continuous service will be the determining factor if other things, such as aptitude and ability, are equal.

And in construing this, the Board reasonably determined that seniority is only a fall back criterion here and that what would have to be submitted to the arbitrator necessarily as the first question is whether aptitude and ability are equal between the more senior and the less senior person.

And that is a question to be determined with respect to aptitudes and abilities during the post-expiration period, at the time of the layoff, and with respect to the conditions at the time of the layoff, which have in this case quite dramatically changed because the employer has changed his operations.

And that would mean submitting to the arbitrator the determination of a post-expiration question as the primary question.

Unknown Speaker: Well, just generally, Mr. Wallace, wouldn't you think that if the question is whether a dispute arises under the contract, isn't that itself a issue for the arbitrator?

Mr. Wallace: The question of arbitrability under this Court's decision in AT&T Technologies against Communication Workers is a matter for the court, or in this case the Board, the decision-making tribunal to determine.

The question of arbitrability under that decision is not to be relegated to the arbitrator.

Unknown Speaker: But, suppose the argument is that the parties intended by this language in the contract to have a certain clause in the contract carry over past the normal expiration date?

Now, isn't that a question for the arbitrator as to the meaning and application of that provision?

Mr. Wallace: If there were a provision capable of being interpreted that way under the Board's rule, the case... the question would be arbitrable.

But the Board's rule is one based on whether the contract rights are rights capable of accruing or vesting to some degree during the life of the contract.

Unknown Speaker: The Board's rule purports to be an application of our decision in Nolde, and we said in Nolde specifically quoting an earlier case, the question of interpretation of the collecting bargaining agreement is a question for the arbitrator.

And all you have here is a question of interpreting the collective bargaining agreement.

Is it intended to apply post-agreement in this respect or not?

Why isn't that a question for the--

Mr. Wallace: As we explain in our reply brief, there is overlap in some cases between questions on the merits in interpreting a collective agreement and the question of arbitrability which a court, or in this case the Board, nonetheless has a duty to determine even if that involves construing relevant terms of the collective bargaining agreement.

Unknown Speaker: --But Mr. Wallace, isn't the critical term of the collective bargaining agreement the term that describes the duty to arbitrate, which says there shall be arbitration if there is an allegation the contract has been breached?

Mr. Wallace: That depends on--

Unknown Speaker: And if you say in this case they have made such an allegation, then the arbitrator could say well, they have alleged it but the contract had expired, so there is no remedy in arbitration.

Mr. Wallace: --That--

Unknown Speaker: But isn't that where we start, with the arbitration clause?

Mr. Wallace: --That is dependent on whether the Board's view of how to reconcile Nolde with the act's no compulsory arbitration provision by taking the narrower reading of the category of claims that Nolde makes it appropriate to submit to arbitration during the post-expiration period, whether that view is proper.

And the Board concluded that that view more properly reconciles the pertinent labor law considerations.

I'd like to reserve the balance of my time, if I may.

Unknown Speaker: Very well, Mr. Wallace.

Mr. Rosenfeld, we'll hear from you.

Argument of David A. Rosenfeld

Mr. Rosenfeld: Mr. Chief Justice, and may it please the Court:

Justice Stevens, you were correct.

The provision in this contract is an extremely broad one.

It's not limited solely to questions of interpretation or application of the contract, but includes, quote,

"differences that may arise between the parties hereto regarding this agreement. "

And surely between the union and Litton there is a very vigorous dispute or difference between them regarding this agreement.

And so that surely our dispute, which is were these layoffs in violation of the agreement, a matter that is a difference between us regarding the agreement, and surely it was arbitrable during the life of the agreement and remains a difference.

But our case is far stronger because I think I can demonstrate unequivocally that the parties, even based on the language of the contract in the Board's cases, intended that seniority would continue.

And that can be seen from the following.

The Board in Uppco says that one of the things you can look at, and the Board applies a sort of an any indication test, is there any indication in the contract that the parties intended that provision would continue?

Is there any indication, in the words that Justice White used, of any intent that that language would continue?

Unknown Speaker: Well, as I understand the position of the other side, it's that that's not really the issue in this case.

That they... they conceded your clients have their seniority.

The issue is not whether the seniority continues.

They acknowledge it does.

The question is what's the effect of the seniority upon this particular dismissal.

Mr. Rosenfeld: That's right.

Unknown Speaker: And that isn't covered.

Mr. Rosenfeld: That's right.

But the issue in this case that we would present to the arbitrator is whether there was any effect in the contract to be intended by the parties at some point after the contract was expired.

Unknown Speaker: Well, it may be, but you can't answer the question before us by simply saying it's clear that seniority was meant to continue after the agreement ended.

We can give you that, and you still are left with the question of whether this is an issue that under the Board's cases must be decided by the arbitrator or not.

Mr. Rosenfeld: We know under Nolde, once we make the contention that that language continues, that is the language governing the dispute continues, that whether in fact it has some effect or whether the contract has been breached is a matter for the arbitrator to determine.

Unknown Speaker: But that was a section 301 case.

Mr. Rosenfeld: That's correct.

And what the Board has done in this case and in Indiana & Michigan is it has purported to apply the same--

Unknown Speaker: It has purported to apply it.

Mr. Rosenfeld: --And more importantly, I think it's, it is in fact compelled to do so.

Unknown Speaker: Why?

Mr. Rosenfeld: Because in Lincoln Mills this Court 35 years ago said that interpretation of collective bargaining agreements is to be left to the usual processes of the law... court, and it later--

Unknown Speaker: It didn't, it didn't say it was to be left to unfair labor practice proceedings, which is what you're in here.

Mr. Rosenfeld: --That's right.

And 20 years later in C&C Plywood, when the question was before this Court could the Board even interpret a collective bargaining agreement in the course of adjudicating an unfair labor practice, what this Court said was yes, the Board could interpret it, not because it's interpreting the agreement and resolving those questions, but in adjudicating the unfair labor practice.

So what the Board has purported to do in this case is recognizing that it is subservient to this Court's interpretations of contracts under section 301, it has said we will apply the Nolde standards.

The Board has an obligation under this Court's rules to apply, in interpreting contracts, the Nolde standards or to apply this Court's standards in interpreting Section 301.

This Court also said that in Strong Roofing where it said that... that was a Board case once again where the issue was the interpretation of the contract, and this Court said that the usual manner in which contracts are interpreted is not by the Board, but by arbitration of the courts.

Unknown Speaker: And not by the Board in unfair labor practice proceedings.

Mr. Rosenfeld: That's correct.

And all that the Board--

Unknown Speaker: Which is what you have here.

Mr. Rosenfeld: --And that's what we're trying to resist.

We don't want... when this case arose the union did not go to court to compel arbitration, because we were before the Board in other unfair labor practices.

We did not ask the Board to interpret the layoff provision of the contract.

We did not ask the Board to determine whether these layoffs violated--

Unknown Speaker: Well, why didn't you?

You would have... you could have gone to court under Nolde, certainly.

Mr. Rosenfeld: --We could have.

We could have at that time gone to court to compel arbitration.

Unknown Speaker: Why didn't you?

Mr. Rosenfeld: Because at the same time that this was occurring this employer was committing a number of other unfair labor practices in refusing to arbitrate, and we saw it as an efficient method of getting the whole problem resolved of this employer's refusal to bargain by filing an 8(a)(5) charge, which was sustained.

And part of the 8(a)(5) refusal to bargain was the employer's repudiation of its obligation to arbitrate.

So that we saw that as an alternative means.

And the Board agreed with us.

The Board ultimately agreed that the employer had repudiated the arbitration provision.

And then the Board said, contrary to Nolde, looking at the seniority clause, we don't find this specific dispute to be arbitrable.

Let me explain how the Board... how the courts tell us we're supposed to do that.

What this Court said in AT&T Tech.

You look at the arbitration provision.

That's the first thing.

How broad is it?

Does it cover the dispute?

And surely the arbitration provision, that is differences between the parties regarding this agreement, is broad enough to cover the dispute.

What is the next step then under this Court's Warrior & Gulf, Nolde, and AT&T Tech cases?

The next step is to search within the agreement for some expressed exclusion or other forceful evidence that that particular dispute is not to be arbitrated.

In AT&T Tech there was an express exclusion.

The contract had an exclusion for certain management rights which the parties agreed were not subject to arbitration.

Warrior & Gulf had an ambiguous exclusion clause.

But you can find no such exclusion clause in this case.

There is nothing that Litton ever sought to exclude from arbitration.

Absent an exclusion clause, the only thing left for Litton to assert or the Board to assert would prevent arbitration is some forceful expression.

The words from AT&T Tech are an express exclusion or other forceful expression of the parties' intent to exclude a particular dispute.

And there the irony of the case is that the Board concedes that had the contract simply talked about seniority without aptitude and ability, it would be arbitrable.

What the Board is trying to convince you is that the words "aptitude" and "ability" are tantamount to an express exclusion from arbitration.

Their argument amounts to a contention that because the parties included those words, somehow they did not intend to arbitrate this dispute, because the Board concedes that absent those words it would be arbitrable.

And that's not either an express exclusion or any forceful expression on the part of the parties to exclude this dispute.

Unknown Speaker: Well, you don't... you certainly don't, aren't arguing, you don't need to argue that every, an arbitration clause always survives the termination of the contract?

Mr. Rosenfeld: No.

And in fact, part of the... one of the concerns that I think that is inherent in this case is when does the employer's obligation to arbitrate end.

Justice White, had Litton been concerned about it when this contract was initially written, he could have come to the union, as some employers do, and say we don't want to have to arbitrate grievances after the contract, so let's put an express exclusion that says any grievance which arises after the contract or which is filed after the contract shall not be arbitrable.

Which of course then leaves the union free to go to court.

And that's what Groves v. Ring Screw tells us.

Another--

Unknown Speaker: If it's, if it's suit was based on the contract.

Mr. Rosenfeld: --That's right.

Unknown Speaker: Even though the contract formally had expired you would still, to bring a 301 suit you would have to say what we're suing about is nevertheless governed by the expired contract.

Mr. Rosenfeld: That's right.

And what... for example, we could go... this is what... in Nolde Brothers, the dissent, in which Chief Justice Rehnquist joined, said explicitly that it was clear that in Nolde the union could have gone to court or the individuals could have gone to court to bring a suit to collect their severance pay.

Now I think we probably... we could not have gone to court in this case directly to sue over the seniority because we were barred because we had agreed to arbitrate those disputes.

That was our exclusive remedy.

Unknown Speaker: Could you have gone to court to compel arbitration?

Mr. Rosenfeld: Yes.

I think clearly we could have gone to court and claimed--

Unknown Speaker: You probably, certainly could have stated a cause of action in your complaint, but you might not have won.

Mr. Rosenfeld: --We could have stated a claim, and I think I could have convinced a district court, had we chosen that route, an alternative route, that the arbitration clause was broad enough, there was no expressed exclusion, and that under Nolde we had at least an entitlement to get to the arbitrator.

Unknown Speaker: But you would have to nevertheless convince the court that your cause of action really goes back to the contract, even though it's expired.

Mr. Rosenfeld: That's right.

And--

Unknown Speaker: I guess in that respect, Mr. Rosenfeld, you are in a different situation with respect to the arbitration clause than you are with respect to the other continuing terms and conditions.

That is to say if the employer didn't pay the wages that he had previously been paying and was obliged to pay under the contract, you couldn't sue him for breach of contract once the contract had expired.

Your only remedy for the wages would be an unfair labor practice proceeding, wouldn't it?

Mr. Rosenfeld: --No, for the following reason.

Unknown Speaker: No?

Why not?

Mr. Rosenfeld: That in order for us to prevail in court we have to allege that there is some understanding or agreement between the parties that that provision over which we're suing continues.

For example--

Unknown Speaker: Are you answering my question about the wages?

Mr. Rosenfeld: --Yes.

Unknown Speaker: Suppose the... all right.

Mr. Rosenfeld: For example, if I were to go to court on that theory, and wages is perhaps the most difficult because it doesn't sound like wages accrues.

Wages do to some extent accrue.

For example, this contract has a wage progression, and says if you work 3 months you get a certain wage, 6 months it increases.

And I can argue, I think, that the parties intended as part of their agreement that once you have accrued a certain level of competence--

Unknown Speaker: Well, you're changing the facts now.

Just throw that out.

Here's a contract that expired.

The wages were $100 a day.

And 6 months from then the employer unilaterally changes it to $90.

Mr. Rosenfeld: --We could not sue over the unilateral change there.

Unknown Speaker: Of course not, you couldn't.

But you could... well, next week he does.

You can... you could certainly complain, make an unfair labor practice charge that he unilaterally changed the... without bargaining.

Mr. Rosenfeld: That's right.

Unknown Speaker: But you couldn't sue on the contract?

Mr. Rosenfeld: If we could prove that the--

Unknown Speaker: Well, I know, but you don't have to prove something besides the fact that he unilaterally changed it.

Mr. Rosenfeld: --Absolutely.

We have to prove that there was some agreement between the parties--

Unknown Speaker: Exactly.

Mr. Rosenfeld: --that that wage rate... some agreement that that wage rate would continue in--

Unknown Speaker: But you have to prove that for the arbitration clause, too, don't you?

Mr. Rosenfeld: --That's right.

And that, for example--

Unknown Speaker: I mean, you have to show the arbitration clause would intend to continue.

So you're saying if you can show that the wages were intended to continue, just as you can show that the arbitration clause was, you'd be in the same boat with respect to wages as you are with respect to arbitration.

Mr. Rosenfeld: --And it's our preference, of course, to make those arguments to the arbitrator rather than the district court.

And what we would, for example--

Unknown Speaker: Yes, but it is true, isn't it, let me just get sort of a simple point out of the back of my head.

You can allege that the discharge 10 months later violated the agreement, and then presumably the court can hold yes, you're entitled to have that arbitrated because you have alleged that it violates the agreement.

But it would still remain possible for the arbitrator to say well, yes, they're claiming it arises out of the agreement, therefore I have jurisdiction to arbitrate, but I don't see how in the world something that happened 10 months later arose out of the agreement.

Therefore you lose on the merits.

That could happen, couldn't it?

Mr. Rosenfeld: --It could happen.

Surely in many cases where unions would bring grievances after the contract has expired an arbitrator would more than likely deny those grievances and say that in some cases the union is correct that that concept of that clause continues, and, Justice Stevens, in other cases we would lose.

In this particular case I think I can demonstrate in a moment that I think we'd have a strong contention before the arbitrator that this layoff provision, this seniority provision would continue.

Unknown Speaker: Of course we don't have to decide that, I don't think, do we?

Mr. Rosenfeld: Well, not only do you have to not only decide it, I in some sense should not be pressing the argument because I'd be rather making that argument to the arbitrator and letting him hear the bargaining history, letting the arbitrator hear the law of the shop, letting him hear and look at the language of the contract, and apply his special expertise or her special expertise to those questions.

But my opponent, sitting across the arbitration table, may well convince the arbitrator that the union is incorrect and that that seniority provision did not continue.

Unknown Speaker: So what do you do about the notion that courts are to decide the, whether an issue is arbitrable?

Mr. Rosenfeld: What you do is the process that this Court set in Warrior & Gulf, what this Court said in Nolde and AT&T Tech.

You look at the breadth of the arbitration clause.

You do nothing different in the Nolde situation, Justice White, than you do in--

Unknown Speaker: I know, but the court still has to come down and say we looked at this arbitration clause and we... the court has to say either it reaches this dispute or it doesn't.

Mr. Rosenfeld: --That's right.

And that's what, what Your Honor said in AT&T.

Unknown Speaker: And did the Board do any more than that in this case?

It looked at the arbitration clause, it looked at everything in sight, and said this particular issue isn't arbitrable.

Mr. Rosenfeld: What the Board said--

Unknown Speaker: Isn't that what it said?

Mr. Rosenfeld: --Yes.

Unknown Speaker: Yes.

Well, so we have to review that and decide whether the Board was wrong or right in saying it was not arbitrable.

Mr. Rosenfeld: That's right.

What you have to apply in making that decision, I submit, is what this Court has done since 1960 in Warrior & Gulf, which is to say not look at the merits--

Unknown Speaker: So there's nothing wrong with what, with the kind of decision the Board made.

You just say they were wrong?

Mr. Rosenfeld: --No.

We say they are wrong because the way they went about the analysis, the way they came to the process of making that determination, is directly contrary to--

Unknown Speaker: You ought to be satisfied if we just said they were wrong.

[Laughter]

Mr. Rosenfeld: --I'd be satisfied, but... but that's what the Ninth Circuit did.

The Ninth Circuit said they're wrong because seniority, they say the Board has already told us in Uppco and United Chrome, survives, and the Ninth Circuit said that they saw no difference between seniority in this case and in the other two cases and therefore it was arbitrable.

Unknown Speaker: Do we owe any deference to the Board?

Mr. Rosenfeld: We don't in this case because we're dealing with a question of contract interpretation of the right to arbitrate, and those doctrines come from section 301.

And even the Board concedes that, because the Board bases its decision on Indiana & Michigan, and in this case upon the question of the contract.

Unknown Speaker: Those are not questions then even that are primarily for the arbitrator?

They're for a court?

Mr. Rosenfeld: In determining arbitrability they are for the court.

Unknown Speaker: The Board works with these contracts all the time.

We give deference to the interpretation, or at least the D.C. Circuit does, I know, and it may be based on our cases, to the interpretation of power contracts, for example, by the Federal Energy Regulatory Commission.

And you don't think we should give any deference to the Board's interpretation of it?

Mr. Rosenfeld: No.

For another reason--

Unknown Speaker: No... not even respect, you wouldn't say?

Mr. Rosenfeld: --Well, actually I think what the D.C.... I suppose some respect.

But what the D.C. Circuit actually does in the IBEW case that we have cited is that--

Unknown Speaker: Well, we shouldn't presume they're wrong, anyway.

Mr. Rosenfeld: --No.

Unknown Speaker: Will you answer me this.

Suppose you have a contract that has a wage system that's just like the Federal salary level.

You're entitled to a step increase every year.

Do you know... what would the Board do if, if the contract comes to an end and the employer continues to pay everybody what they were getting before the contract ended, but stops giving them the step increases?

Mr. Rosenfeld: Yes.

Unknown Speaker: Would the Board consider that to be an unfair labor practice?

Mr. Rosenfeld: Yes.

The Board... if--

Unknown Speaker: It would?

Mr. Rosenfeld: --Yes.

The Board has traditionally taken the position that if the employer regularly gives wage increases, and Mr. Chief Justice, this arises both in the Katz situation where the employer has a regular system of giving wage increases prior to the completion of negotiations, the employer has to continue that same system in effect.

And then when the parties reach an--

Unknown Speaker: Even though it... even though there is no contractual requirement at that point that would be enforced?

Mr. Rosenfeld: --Right.

Because for example for the employers to say that during negotiations I will give no regular wage increases, although I had historically done it, is to undermine the bargaining process.

Unknown Speaker: So it is treated like arbitration.

The theory is that that was what was anticipated in the contract.

Is that the theory of it?

Mr. Rosenfeld: That... not anticipated, no.

It's that for the employer to change conditions before the contract has expired... I'm sorry, to change conditions unilaterally before the parties have reached an agreement is to undermine the bargaining process because, for example, if the employer stops giving regularly scheduled wage increases, then the union has to bargain it back in.

Unknown Speaker: So it follows from Katz, but not Nolde?

Mr. Rosenfeld: The unilateral change doctrine follows from Katz, but it is reinforced by Nolde, because what this Court said in Nolde is that once you have arbitration in the contract there is a presumption that it continues in effect after the contract expired.

And that presumption of continuation of arbitration is... it reinforces the Board's position that all terms and conditions which are mandatory subjects of bargaining continue after the contract has expired until certain things happen, primarily an impasse in negotiations is reached, at which point the employer is free to change conditions consistent with its bargaining posture.

In this case Litton comes to this Court in a very bad position, because there was in fact an election among the employees who voted in favor of the union.

It was a close vote, but that vote occurred 3 months before the contract was terminated.

And Litton had a legal choice at that point.

It could have said litigate or it could have said negotiate.

It chose to litigate and it lost 8 or 9 months later.

When it lost and the Board said that the union had won the election finally, Litton had another choice.

It could litigate or it could violate the law.

It chose to refuse to bargain.

The Board found that refusal to bargain unlawful.

And while it was breaking the law, refusing to bargain, it then laid these people off.

Unknown Speaker: You don't say that under Katz you treat the promise to arbitrate as part of the conditions of employment, do you?

Mr. Rosenfeld: Yes, I do.

Unknown Speaker: You do?

You mean that just because, automatically then you can't, the employer can't get out of arbitrating any dispute prior to impasse?

He can't get out of arbitrating any dispute that arises?

Mr. Rosenfeld: That's right.

That's our theory.

Unknown Speaker: Well, that isn't the Board's theory.

Mr. Rosenfeld: The Board, the Board comes--

Unknown Speaker: That isn't... I thought the, I thought that the labor law says after the contract expires you don't make a unilateral change--

Mr. Rosenfeld: --That's right.

Unknown Speaker: --in wages, hours, and working conditions.

Mr. Rosenfeld: And the Board said--

Unknown Speaker: But labor also... the labor law also says that you don't imply promise to arbitrate.

Once the contract is over there's no longer a promise to arbitrate.

Mr. Rosenfeld: --The Board doesn't take that position.

The Board takes the position--

Unknown Speaker: I'm talking about Katz now.

Mr. Rosenfeld: --But Katz says that all mandatory subjects of bargaining remain in effect but cannot be unilaterally reputed by the employer or unilaterally changed by the employer.

The question is whether--

Unknown Speaker: Well, on that basis the case... this case is over, isn't it?

Mr. Rosenfeld: --Yes.

That's my theory, Your Honor.

Unknown Speaker: Katz covers arbitration in that language?

Mr. Rosenfeld: Katz was not a case involving arbitration.

Unknown Speaker: I know it wasn't.

Mr. Rosenfeld: No.

Katz was a case involving changes in other... in other conditions of employment.

This Court has not yet decided the question, the precise question of whether Katz encompasses arbitration.

But Katz encompasses all conditions, and the Board's theory in Indiana & Michigan was that arbitration also could not be unilaterally changed as long as there was a consensual basis--

Unknown Speaker: But there are other forces in the labor law besides the idea of no unilateral changes during bargaining, and one of them is no compulsory arbitration.

Mr. Rosenfeld: --That's right.

But when Congress said there would be no compulsory arbitration, what Congress said was that the law does not compel Litton or any other employer to agree to arbitration.

But what the Board... what we think that Katz now says is that once you have agreed to some kind of arbitration, however expansive it is or however limited it is, once you agreed to it in the contract you cannot simply walk away from it at the expiration of the agreement.

Unknown Speaker: Well, the... it seems to me the Board in deciding this case has squarely rejected your notion about Katz.

Mr. Rosenfeld: I don't believe they have.

But I think the Board--

Unknown Speaker: Well, it must have.

Under your theory of Katz, until there has been bargaining to the impasse you have to arbitrate every dispute that arises.

Period.

And the Board has just now said that's not so.

Mr. Rosenfeld: --But the Board has said surely that some disputes are arbitrable once the contract has expired under Katz.

Unknown Speaker: I know, but you say all of them are.

Mr. Rosenfeld: That's right.

Unknown Speaker: You say that we should hold either all or none are?

Mr. Rosenfeld: What we say is that you should hold that the obligation to arbitrate, once the contract has expired, is congruent with the obligation to arbitrate during the life of the agreement, unless the parties have agreed to some other system, which the parties under our system of collective bargaining agreement, they're... entitled to do.

The parties could well agree that certain things would not be arbitrated during the life of the agreement.

For example, parties can agree that jurisdiction is not arbitrable or that wages are not arbitrable.

Unknown Speaker: And for what period of time does this obligation last?

Mr. Rosenfeld: It lasts either for the time that the parties have said in their own bargaining process--

Unknown Speaker: Well, absent... suppose they have said nothing about it, as here?

Mr. Rosenfeld: --Or it lasts until the employer takes action, and this is almost exclusively in the employer's control, until the employer takes action to propose that there be no further arbitration, bargains to an impasse, at which point there is no further obligation.

For example in this case--

Unknown Speaker: Mr. Rosenfeld, can an employer do the same for wages?

Can he bargain that these step increases that you're entitled to under this contract only continue as long as the contract is in effect, and once the contract is over no more step increases?

Mr. Rosenfeld: --Yes.

Unknown Speaker: And then, and then he wouldn't be guilty of an unfair labor practice, if he--

Mr. Rosenfeld: That's right.

What the Board says is that the parties are free in their collective bargaining, and this is our system of bargaining.

They're free to negotiate virtually anything they want.

For example, there are Board cases where the contract provides for a certain level of pension contribution, and then the employer simply stops those pension contributions at the end of the contract.

And the Board has said the employer is free to do so provided the contract clearly and unmistakably provides the employer that right.

Unknown Speaker: --What if it says clearly and unmistakably I can give any wages I want once the contract ends?

Once the contract ends all bets are off and I can reduce wages from $100 to $90.

Mr. Rosenfeld: The Board says that if that waiver is clear and unmistakable, that if--

Unknown Speaker: No unfair labor practice?

Mr. Rosenfeld: --Your Honor?

Unknown Speaker: No unfair labor practice?

Mr. Rosenfeld: No unfair labor practice.

Because the Board respects the bargaining process and the language of the contract.

Now the Board is wary of finding those clear and explicit waivers, but there are some few cases where unions and employers have agreed that once the contract has expired the employer can make certain unilateral changes.

For example, the common area where it occurs is in cost of living increases.

The union recognizes that COLA's may not be applicable after the contract.

There are cases where... for example this contract illustrates it.

There is an explicit provision that provides that the health and welfare... I'm sorry, the pension contribution... the health and welfare contribution amount lasts until 9 months after the contract expires.

It says that the level of contribution will be $55 until July of 1988, which was some 9 months after the initial contract had expired.

So the parties dealt with that problem of defining what their obligation would be.

And then they later changed the amount of pension contribution and increased it just a month before the contract had expired, obviously I think anticipating that when the contract had expired they would bargain from that level.

Now the parties could well have said that with the expiration of the contract the employer will cease contributing to the union's trust fund, because the parties had contemplated that with the next agreement they would substitute a new health and welfare or pension program.

Unknown Speaker: Mr. Rosenfeld, can you argue in this case, does it help your case to say that the Board is inconsistent in ordering steps one and two of the grievance process, but not the arbitration process?

Mr. Rosenfeld: It's not only inconsistent, Your Honor, it puts the union at a severe disadvantage because presumably during that period when we have to go through steps 1 and 2, we can't take economic action, while the Board says theoretically we can at some other point, and that process could be dragged out for some period of time.

But more importantly, going through steps 1 and 2 in this case is a useless exercise because all we do is go to the employer and if he rejects it, that's the end of it.

And even Chairman Dotson in his dissent in Indiana & Michigan said that it's like truncating this well-crafted grievance and arbitration procedure to say that there is some obligation to go through the first part of it but not the last part.

Unknown Speaker: I can't see how the Board or the Government can defend the order to go through grievance steps 1 and 2, and not arbitration.

Mr. Rosenfeld: It also creates another severe anomaly, which is that there are many grievance procedures which provide for joint adjustment boards.

The Gateway Coal case gives a very good example where there are five intermediate... five initial steps, and then a joint adjustment board composed of union officials from another union and mine officials from another mine.

And we don't know whether the Board is telling us that that step, which is like arbitration for some purposes and unlike arbitration for other purposes, is governed by this doctrine.

And yet that... and then that mineworker contract provides that there's finally a step, which is at that joint board, which is very common to contracts but not here, the final step is arbitration before a neutral party who renders a binding decision.

Unknown Speaker: I take it you would then say that the no-strike clause continues all the way?

Mr. Rosenfeld: Yes, and the Board has said that in 1978 in Goya Foods.

And once again, Chief Justice Rehnquist, when you dissented in Nolde you did for one strong... there were two reasons, but the primary reason was because of this note of the strike problem.

And a year later the Board in Goya Foods said that we will imply the continued obligation not to strike over arbitrable grievances, and we accept that.

We recognize that we can't.

And in this case this is what the union did.

The union filed a grievance asserting that the layoffs were unjust.

We asked for the benefit of our bargain, which was to go to the arbitrator and have the arbitrator make the determination whether those grievances violated the agreement.

The employer refused.

We didn't want to make the arguments about the language of the contract to the Board, and I surely don't want to make those arguments to this Court.

Because what the Board tells us and what this Court has told us since Warrior & Gulf is that those arguments as to the meaning of the layoff clause, the meaning of seniority, and whether the parties intended that language to continue, those are arguments to be made to the arbitrator and not to the court and not to the Board.

Thank you.

Unknown Speaker: Thank you, Mr. Rosenfeld.

Mr. Wallace, do you have rebuttal?

You have 2 minutes remaining.

Rebuttal of Lawrence G. Wallace

Mr. Wallace: On page 58 in Indiana & Michigan the Board specifically said that it has concluded that Katz should not apply to post-expiration withdrawal from arbitration.

And that is a matter that goes to the Board's core expertise in interpreting and applying the act itself that the union is taking issue with.

We have mentioned in our reply brief some of the pitfalls of extending Katz to this area, and we think the Board's determination there is entitled to deference.

In... we disagree also that if the Board, in reading the arbitration provisions, concludes that a matter would have been arbitrable before expiration, that necessarily means the Board has to conclude that it would be arbitrable after expiration.

If any claim invoking a provision of the contract were arbitrable, that would mean if an employee was hired after the contract expired and then discharged several months later, still during the hiatus period, his discharge would be arbitrable, even though he never worked under the contract while it was in effect.

Unknown Speaker: Well, what's the rationale for implied... for requiring the grievance process then?

How could the Board require half and not all?

Mr. Wallace: Because the Board concluded that the requirement... carrying forward the requirement of submitting decision-making authority to an outsider goes beyond a process of bargaining by the employer under the preliminary grievance procedures, and goes to the point of inconsistency with the congressional prohibition of compulsory arbitration, when the arbitration can no longer be called a creature of contract.

The earlier steps--

Chief Justice Rehnquist: Thank you.

I think you have answered the question, Mr. Wallace.

The case is submitted.

Unknown Speaker: The honorable court is now adjourned until Monday next at ten o'clock.

Attribution:

The OYEZ Project

Featured:

American Hospital Assn v. NLRB - Oral Argument

Fri, 09 Jan 2009 14:49:38 +0000

Case:

American Hospital Assn v. NLRB

Media File:

90-97_19910225-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of James D. Holzhauer

Chief Justice Rehnquist: We'll hear argument first this morning in No. 90-97, American Hospital Association v. National Labor Relations Board.

Mr. Holzhauer.

Mr. Holzhauer: Mr. Chief Justice, and may it please the Court:

This case presents the narrow statutory question of whether the National Labor Relations Act permits the Board to establish a rule determining that eight specific bargaining units, and only those units, are appropriate for every acute care hospital in the United States.

We believe that the language and legislative history of Section 9(b) of the act, as well as the contemporaneous interpretation of the act by the Board, make it clear that the rule is not permitted.

Section 9(b) requires that the Board determine the appropriate unit in each case.

The Board and the unions argue that those words refer solely to the proceeding in which the Board is to issue unit determinations.

In their view, as long as the Board goes through the formality of the hearing the requirements of the statute are met, even if that formality is an empty one leading in every case to the same preordained result.

Of course Section 9(c) already requires hearings in contested representation cases, so in the Board's view the "in each case" language, which was added deliberately by amendment to the Wagner bill, adds nothing to the statute.

Well, those words do mean something, and their meaning is demonstrated not only by the words themselves, but by both the legislative history of Section 9(b) and the Board's contemporaneous and longstanding interpretation of that section.

The statutory language and its history were clear enough in 1980 and again in 1982 for the Board itself to hold that the adoption of a rule that a unit of registered nurses would be appropriate in every case would be, quote, 9(b) responsibility to decide in each case whether the requested unit is appropriate.

Unknown Speaker: Mr. Holzhauer, we have to determine what the meaning of the "in each case" language is in this context, and it occurs to me that this Court, for example, has an obligation to consider each case on its plenary docket, and yet we search for rules of general applicability to be applied to these cases.

Mr. Holzhauer: That's right.

Unknown Speaker: Now, isn't the Board doing essentially a similar thing in searching for some kind of rule of general applicability for most cases, leaving, of course, its extraordinary circumstances out if necessary?

Mr. Holzhauer: Sure.

Well, the Board is making that argument.

They're arguing that the extraordinary circumstances exception allows it to consider in each case whether there are exceptions allowing a different result from the rule.

But the extraordinary circumstances exception, which the Board did not say in its rulemaking allowed case-by-case determination of the... of each case, in fact it did not rely on the extraordinary circumstances exception for the purpose now asserted by the Board, that exception is so narrow as to be illusory.

The Board has made it clear in the rulemaking that it will no longer consider the individual facts and circumstances of each hospital, and it will disregard all of the factors it regards as critical in every other industry, and that it always regarded as critical in this industry.

Unknown Speaker: Counsel, suppose the Board... is this, what, is this the second rule that the NLRB has ever adopted?

It's not much more than the second, anyway.

Mr. Holzhauer: I believe that this is the first substantive rule they have adopted.

Unknown Speaker: The first substantive one.

I think they have--

Mr. Holzhauer: Right.

It's not the procedural rules.

Unknown Speaker: --Now, but there's a lot of law that the NLRB has made.

Mr. Holzhauer: That's right.

Unknown Speaker: I mean, all sorts of rules about what constitutes an unfair labor practice, and so forth.

Mr. Holzhauer: That's right.

Unknown Speaker: Now, I assume they have been adopted on a case-by-case basis in adjudication.

Mr. Holzhauer: That's correct.

Unknown Speaker: And you have no problem with that?

Mr. Holzhauer: I have no problem with that because--

Unknown Speaker: So the NLRB could say in its next adjudication it seems to us these eight units are appropriate bargaining units with respect to hospitals, and if it said that in adjudication it would be all right.

Is that all you're arguing?

Mr. Holzhauer: --No.

There are two distinctions that we're making here.

First of all, we're not arguing that the Board erred by engaging in rulemaking rather than adjudication.

In fact we think the rule would suffer from exactly the same defect and we would be making exactly the same arguments if it had been announced in adjudication.

Unknown Speaker: Well, not exactly the same.

You might say it's arbitrary, you'd make the same arbitrary and capricious argument that you make here, but you couldn't say that they're ignoring the case by case--

Mr. Holzhauer: I would make the same statutory argument if they established a rule saying that these eight units are appropriate in every case, and that we will not consider the facts and circumstances of hospitals in subsequent cases.

Unknown Speaker: --But why is that an inappropriate rule, although it is appropriate to say what constitutes an unfair labor practice, to say that every time you do this, every time you do it it's an unfair labor practice.

Mr. Holzhauer: Well, there are two differences.

First of all, the 9(b) does not apply to labor, to unfair labor practices.

Section 9(b) says, and only says, that the Board shall determine the appropriate unit in each case.

It doesn't say that it shall determine unfair labor practices in each case.

Now the Board has established bargaining unit rules in adjudication, and the Board is now arguing that the rule that it has established in this industry is much the same as those rules.

But that's not correct.

In no other industry has the Board established a rule that particular units and only those units will be appropriate in each and every case.

And that's what violates the "in each case" requirement.

Unknown Speaker: I thought that your brief said that the Board used to approve only four units because of a test it used to apply, the disparity of interest test or something of that sort.

Mr. Holzhauer: No, the Board never said that it, that it would approve or would not approve any particular number of units.

It has changed the test at times.

At times it followed the community of interest tests that it follows in all other industries.

At times it switched to a disparity of interests test, but that test did not result in a set number of units being appropriate in each and every case.

In each and every case the Board applied that test, looked at the facts and circumstances of each individual hospital, and decided whether under those facts and circumstances the particular unit that was before the Board was appropriate or not appropriate.

Unknown Speaker: But applying a general rule to all of them.

Mr. Holzhauer: That's right, a rule--

Unknown Speaker: The disparity of interest test, or whatever other test it--

Mr. Holzhauer: --That's right.

And the Board could establish a disparity of interest test and say we will decide in each case whether under the disparities of interest test this unit, the unit that's being sought in this particular proceeding, is appropriate.

Unknown Speaker: --And even though it knows that the outcome of that test will always be that there are eight appropriate bargaining units, it must not say that?

Mr. Holzhauer: I don't think it would ever know that the outcome of that test would only be eight appropriate units or four appropriate units.

The test would establish a standard, and each hospital would be free to introduce the facts and circumstances of that particular hospital to try to convince the Board that under those facts and circumstances the particular unit before it was inappropriate.

Unknown Speaker: But suppose the agency does believe that applying that test faithfully will always lead to these eight.

I mean, it has studied all the types of employees at hospitals and it's confident that these eight are... that'll be the situation in every case?

Mr. Holzhauer: If the Board believes that, I think it's free to say we think that... we will presume that these eight units might, will be correct in each and every case.

Unknown Speaker: It can do that in adjudication, but not in rulemaking?

Mr. Holzhauer: No.

It can't do it... it can do it in adjudication or in rulemaking, provided that it allow each employer in each case to introduce the facts and circumstances of that particular employer to convince the Board that in that case that rule should not apply.

The "in each case" language requires case-by-case evaluation of the appropriateness of the particular bargaining unit.

That's what we're arguing.

Unknown Speaker: Without any general principles at all?

Mr. Holzhauer: Oh yes, it can establish general principles.

In fact it can establish the same kinds of principles that it has established in other industries.

Unknown Speaker: But it can't... it can't establish a rule that is conclusive, regardless of the facts of a particular case?

Mr. Holzhauer: That's right.

That's right.

What the Board has done here is it has said that, first of all it said in its rulemaking that all of the... that as to all of these factors it lists in its extraordinary exceptions exception... extraordinary circumstances exception, hospitals don't vary in these respects.

But to the extent they do, we find that we're better off ignoring those variations, because the value of having a uniform rule outweighs the value of considering in each case whether that bargaining unit is appropriate.

We don't think that's proper.

We think the Board has to look at the facts and circumstances of each case to decide whether its rule is properly applied to that case.

Unknown Speaker: Does that mean simply that the Board can't have a conclusive presumption in the interest of administrative efficiency?

Mr. Holzhauer: That's correct.

It cannot have a--

Unknown Speaker: Does it mean anything more than that?

Mr. Holzhauer: --It can't have an exclusive presumption, period, no matter what the interest is.

The Board has... the Congress has determined by putting in this "in each case" language, which otherwise would be completely redundant and meaningless, that the Board must consider the facts and circumstances of each case, as long as they do that.

Now, the Board has, has argued or has written over the years that that's exactly what, what this rule requires.

It said so in adjudications in 1980 and 1982, and in 1935, when the act was first being considered, Congress explained that the question of what bargaining unit is appropriate is, quote,

"obviously one for determination in each individual case. "

Unknown Speaker: Is your argument helped, Counsel, by the provision in the statute that a majority of professional employees can vote to be included in another unit?

Mr. Holzhauer: Sure.

And in each case you would think that they would be allowed to make that presumption... to make that election.

Unknown Speaker: So the language of the statute itself helps you in that respect?

Mr. Holzhauer: I think that's correct.

It also is helped by the fact that the extent of organization is not supposed to be conclusive.

In each case the Board is supposed to consider the facts and circumstances of the particular hospital to decide whether the unit at issue is or is not an appropriate unit.

Unknown Speaker: I... as I recall, the regulations, though, did acknowledge that there could be this cross-over if a majority of the employees in the unit, in each unit accept the cross-over.

Is that the way it works?

Mr. Holzhauer: Well, as far as professionals go, yes.

There would have to be... the professional employees would have to, would have to accept that.

There is one meaningful exception to this entire rule.

That exception provides that if unions request that one or more of these units be combined, one or more of these eight units be combined, that will ordinarily be considered appropriate.

But if an employer requests that, that will be inappropriate in every case.

So I would assume that if a union came in and says we want a combined professional and nonprofessional unit in this case, the election procedures, the consent procedures would still apply, and such a combined unit, if appropriate, would be allowed.

Of course, if an employer sought that it would not be allowed in any case.

Unknown Speaker: Why isn't that enough to establish that they are considering it case by case?

Given two different hospitals, one hospital the employees want to organize in a particular fashion that has less than... less than all eight of these separate bargaining units, and the other... in the other, with respect to the other employer they don't want to.

They want to have only four or five.

Mr. Holzhauer: They are not considering on a case-by-case basis.

Unknown Speaker: Well, yes they are.

Mr. Holzhauer: The only situation in which they will consider that is when the unions come in and request a combined unit.

Unknown Speaker: That's all you need.

Mr. Holzhauer: I don't think that's all you need.

I think 9(b), and what Congress--

Unknown Speaker: Aren't those two cases treated differently?

Mr. Holzhauer: --Excuse me?

Unknown Speaker: Aren't those two cases treated differently?

You don't impose eight separate unions on each of those two employers.

You wait to see what the unions want, or what the employees want.

Mr. Holzhauer: Well, if the unions request an addition, a combination of units, that can be allowed.

But I don't think that that comports with the "in each case" requirement.

Unknown Speaker: Why?

Mr. Holzhauer: I think the "in each case" requirement requires the Board, not the unions but the Board, to look at the facts and circumstances of each case, including the employer's argument that because of the staffing patterns, supervision, contacts between employees, and so forth, that this particular unit is inappropriate or appropriate.

And that can't be done under this rule.

The employer could never offer that evidence.

Unknown Speaker: If, if the Board in 50 separate cases had heard employers' evidence to this effect, and in every single case it had said well, this evidence just doesn't change our minds, it couldn't at the end of those 50 cases adopt some general principle?

Mr. Holzhauer: It could adopt a general principle saying that we might presume that all of these units will be appropriate units, but the Board... the employer or other parties before the Board would still have to have the opportunity in each case to convince the Board that that unit is appropriate.

And that's exactly what the Board does in every other industry.

Unknown Speaker: Well, would the Board have standards of relevancy that it could impose?

It could say we're not going to hear these kinds of evidence from the employer because in these other 50 cases we have decided it didn't make any difference.

Mr. Holzhauer: Well, I think there would be some problem if the Board were saying that this is just the standard of relevance.

I think it's important to point out first that that's not what the Board has done here.

It didn't find that these factors are irrelevant.

It found instead that for the most part hospitals don't vary in the various respects that the Board talked about, and that to the extent they do vary, which they acknowledged, the value of having a uniform rule outweighed the value of considering those factors.

If the Board had determined that all of the factors that it always considers in every other industry were irrelevant and didn't change its mind, I don't think that determination, frankly, could survive scrutiny.

These are the factors that the Board considers relevant in every other industry, and that it has considered relevant in hospital cases for the last 17 years.

In case after case applying these factors, the Board has found that one or another of the units that are now before it and that are now deemed to be appropriate in every case, were in fact inappropriate, and have held that those units would not be allowed.

Now, for them to suddenly, after making all these decisions over the years under both the disparity of interest standard and the community of interest standard, for them to suddenly decide no, these are no longer relevant, I don't think that could survive scrutiny.

But that's not what they have done in this case.

What they have done in this case is say they don't vary in these respects, mostly, but to the extent they do vary in these respects we're not going to consider that.

We no longer think that that variation is something we have to think about.

We think, instead, that the value of a uniform rule outweighs that.

Well, that might be so, and I think that that might be an interest that is recognized in most rulemaking, but it's an interest that Congress foreclosed by requiring the Board to decide in each case that the particular bargaining unit is appropriate.

Unknown Speaker: You're really saying that the rule ends up in... the Board just-refuses to decide what an appropriate unit is?

Mr. Holzhauer: It does.

Exactly.

It refuses to decide... well, to consider the facts and circumstances of a particular hospital in deciding whether one of the eight units is appropriate.

Unknown Speaker: Well, I know, but I suppose the Board would say well, if we... if we really didn't care about administrative efficiency or saving time or a lot of things like that we would decide this particular case differently, but we value whatever it is we're valuing so much that we will disregard that otherwise we would find this unit to be inappropriate.

Mr. Holzhauer: That's correct.

That's correct.

The Board has decided that the value of uniformity, the value, the efficiency that comes from uniformity, and that's what it says in its rulemaking, outweighs the desire to engage in case-by-case determination in those cases.

Unknown Speaker: Regardless of what... of what they would decide if they weren't so much interested in uniformity.

Mr. Holzhauer: That's right.

Exactly.

And in fact, the extraordinary circumstances--

Unknown Speaker: Why are they interested in uniformity?

Mr. Holzhauer: --I think that they have found--

Unknown Speaker: Just administrative efficiency?

Mr. Holzhauer: --I think it's administrative efficiency.

As we know, and we can understand the Board's frustration in this case, over 13 years the Board lost case after case in this area.

The courts of appeals kept refusing to enforce case after case involving unit determinations.

Unknown Speaker: Now you just want them to lose another one, I guess.

Mr. Holzhauer: That's right.

I would hope so.

[Laughter]

The Board in its extraordinary exceptions rationale... explanation includes a long list of factors that it will no longer consider as appropriate, and then it goes on to say not only are these factors inappropriate, but everything we have ever seen in 13 years of adjudicating these cases are inappropriate, even though in many of those adjudications the Board found that a unit or more than one unit that it now designates as appropriate was inappropriate.

We won't even think about these factors anymore.

Unknown Speaker: Yeah, but not because they're not really inappropriate.

It's because they want to save some time.

Mr. Holzhauer: They want the value of a rule, right.

They want to save time.

They want administrative efficiency.

And I'm not saying that administrative efficiency might not be a suitable value.

What I'm saying is that administrative efficiency and that kind of exercise of administrative efficiency is foreclosed by Section 9(b) and by the requirement that the Board has acknowledged over the years, that Congress has acknowledged over the years, that Section 9(b) requires case-by-case determinations.

Unknown Speaker: Would you be here, would you be here if the rule had said that we're going to treat every hospital the same, namely we're going to have only one unit in every hospital?

Mr. Holzhauer: I suspect that if they made that thing I would be here, but I would be on the other side of the table.

[Laughter]

I strongly suspect the AFL-CIO would be here saying that this rule violates the "in each case" requirement.

Unknown Speaker: But you would say... but you would be supporting the rule.

Mr. Holzhauer: Well, in that case certainly the interests of--

Unknown Speaker: xxx possibly do it.

Mr. Holzhauer: --the interests of the AHA might favor such rule, but on the other hand I would have to submit that the "in each case" language prohibits that kind of uniform rule as well.

Unknown Speaker: Exactly.

Mr. Holzhauer: Even if it had one unit or two units or the statutory minimum of three units, professional, nonprofessional, and guard.

Unknown Speaker: In labor cases generally other than in the health care area, if employees agree upon a unit, is that generally accepted by the Board?

Mr. Holzhauer: The employees cannot agree upon a unit, no.

There is a procedure where if the employer and the union seeking the unit agree, that the Board will ordinarily agree to that unit, provided it's not clearly inappropriate or violates the statute.

Unknown Speaker: Suppose all of the employees make a submission as to what they want the unit to be.

Does the Board accept that, or does it... it just doesn't work that way, is that what you're telling--

Mr. Holzhauer: It generally doesn't work that way, although if, if a union and an employer says we want it, that would be one thing.

Although still there are some standards, like the professional/nonprofessional standard, that the Board has to work from, and it has to determine whether the unit is appropriate.

If the employer and the union, and the unions agree that this is an appropriate union... unit, we'll have an election, the Board ordinarily will go ahead with that.

But it can determine that that's inappropriate.

Unknown Speaker: --Mr. Holzhauer, is it correct, as is charged in respondents' brief, that the, your client, the American Hospital Association once upon a time took just the opposite position, that the... it was necessary for the NLRB to develop a, quote,

"uniform national approach to appropriate units in the health care industry? "

Mr. Holzhauer: I believe that was correct.

In fact most, much of that explanation occurred during the rulemaking proceeding when the Board was, when the American Hospital Association, once the Board decided to engage in rulemaking, decided it was going to get the best rule it possibly could.

But the fact of the matter is--

Unknown Speaker: No, this was before the rulemaking, I think.

This was much earlier when the Board was still proceeding case by case.

You were knocking down these cases in the courts of appeals because you were saying it's necessary to have a uniform national approach.

So they now go through a rulemaking and adopt a uniform national approach, and you change the tune.

Mr. Holzhauer: --Well, let me respond in two different ways.

First of all, the "in each case" requirement requires case-by-case consideration of bargaining units, and if the American Hospital Association took a contrary position and made an argument that is contrary to what the statute means, the American Hospital Association was wrong.

Secondly, a uniform rule or a uniform... that's right, a uniform rule or a uniform policy does not have to be a conclusive presumption.

It doesn't have to say we will regard these units as appropriate in each and every case, regardless of the facts and circumstances of each case.

A uniform rule can allow for meaningful exceptions, which is not what this rule does.

In fact a uniform rule can be like the rules that the Board has established in other industries.

In no other industry has the Board established a rule that particular units and only those particular units will be appropriate in every case.

In those few industries where the Board has established presumptions, employers are given the full opportunity to rebut those presumptions and to show that the facts and circumstances of a particular workplace warrant a different result.

Unknown Speaker: Has any other industry litigated as assiduously as yours?

Mr. Holzhauer: I don't know.

I don't know that.

I assume that there has been litigation in some industries, but there has never been a rulemaking like this.

And also, our industry had a much different history than other industries.

Our industry was not covered by and large by the National Labor Relations Act, at least the dominant nonproprietary sector was not covered by the National Labor Relations Act until 1974, at least between 1947 and 1974.

And the announcement that it would suddenly cover did give rise to an increased amount of litigation.

There is no question about that.

But other industries have litigation over units and appropriate units over the years.

But in all those other cases the employer is allowed to offer evidence to rebut the presumption and to show that the facts and circumstances of the particular workplace warrant a different result.

There is no such possibility under the Board's rule, and the Board emphasized in its rulemaking that it was not merely establishing rebuttable presumptions that the eight units were correct.

I think it's important to realize that acceptance of our argument would not mean that those other vastly different rules would be invalid.

When those other rules are applied, the Board continues to give case-by-case consideration to the facts and circumstances of each employer and to comply with the "in each case" requirement.

We're not engaging in any broad attack on presumptions or upon the Board's rulemaking authority.

We're merely making the argument that in this one area, where the statute requires case-by-case consideration, the Board must take into account the circumstances of each employer and cannot adopt rules that eliminate that consideration.

Now, our argument, in addition to the original language and history of the National Labor Relations Act--

Unknown Speaker: If the Board had just made it a rebuttable presumption, how often do you think you would ever win a case?

Mr. Holzhauer: --Well, in other industries the cases are won quite often, and I think we would win cases quite often if the facts and circumstances showed that a different unit was appropriate--

Unknown Speaker: I know, but you would have to convince the Board that the facts or circumstances really showed it though.

Mr. Holzhauer: --That's right.

That's right.

And I think we would be able to that.

And I think we would be able to do that in numerous cases.

Now I'm not sure whether it makes sense to say that in those circumstances the Board--

Unknown Speaker: More often than you would by showing... what do they call it under this rule... exceptional circumstances?

Mr. Holzhauer: --Extraordinary circumstances.

Yes.

Extraordinary circumstances is an empty exception.

Here the Board says that all of the factors--

Unknown Speaker: How do you know it is?

Mr. Holzhauer: --Because the Board says it is.

Unknown Speaker: What, it's empty?

We've got it in there, but it means nothing.

Mr. Holzhauer: Well, the Board has said, the Board, first of all, has not said at any time in its rulemaking proceeding that the extraordinary circumstances exception is designed to allow case-by-case determination of bargaining units.

It basically said that it was an escape valve--

Unknown Speaker: Well, it says in any case, and in any case there may be extraordinary exceptions.

Mr. Holzhauer: --But those extraordinary circumstances that could exist exclude all of the factors, all of the facts and circumstances that are most relevant in every other industry.

Unknown Speaker: Is that what the rule says?

Mr. Holzhauer: That's what the rule says.

That's what the Board has explained the rule as saying in its notice of proposed rulemaking.

Unknown Speaker: Does extraordinary circumstance mean something other than a bargaining unit that would have five or less members?

Mr. Holzhauer: It's hard to believe, under the circumstances that the Board has said, that it could possibly mean anything more than that.

The extraordinary circumstances exception says that every kind of issue, every kind of factor that we have seen in the past 13 years of adjudicating hospital cases and all of these other factors that we have seen in other cases cannot be considered extraordinary circumstances.

Things like the size of the institution, the services provided, functional integration of employees, which is a critical factor in every other industry, contact among employees, different kinds of concepts that are important in the hospital industry, multi-competent workers, people who are cross-trained, team care, none of these things can be considered--

Unknown Speaker: Maybe it thinks these factors never... that's why it had the rulemaking.

Maybe it found that these factors never exist, that there isn't any functional integration between... between nurses and doctors, or between nurses and guards, or between nurses and maintenance workers.

Maybe it has found that as a result of its rulemaking.

It hasn't conducted rulemakings for other industries.

Mr. Holzhauer: --Well, what has happened, what has happened in this rulemaking is two things.

First of all, it said that we don't think these differences exist in significant extent in this industry.

I think that's arbitrary and capricious, and we have made that argument.

Secondly though, it says that to the extent it does exist, and they acknowledge these variations do exist to a certain extent, we will disregard them because we think the value of a uniform rule exceeds the value of going through this case-by-case consideration.

Well, I think that's a determination that Congress said the Board can't engage in.

I would like to reserve the remainder of my time.

Unknown Speaker: Very well, Mr. Holzhauer.

Mr. Shapiro.

Argument of David L. Shapiro

Mr. Shapiro: Thank you, Mr. Chief Justice, and may it please the Court:

After 13 years of extensive controversy, uncertainty, delay, and expense, the Labor Board decided to initiate a rulemaking proceeding on the vexing question of unit determinations in the health care industry.

After some 2 years, which included two very extensive notices of proposed rulemaking, a number of significant modifications in the proposed rule, consideration of some 3,500 pages of testimony from over 140 witnesses, and 1,800 written submissions, the Board formulated its final rule, specifying the types of bargaining units that in the absence of extraordinary circumstances would be considered appropriate on the filing of a proper petition for most acute care hospitals.

I sure doubt, parenthetically, as Mr. Holzhauer has mentioned, that the rule specifically contemplates the possibility of a union petition for a combination of units, and in that sense the regulation is significant in imposing a ceiling rather than a floor.

This regulation is fully consistent with the Board's authority under the Labor... under the Labor laws, it is firmly rooted in an exhaustive investigation and analysis of the record--

Unknown Speaker: Mr. Shapiro, would you say the rule would be valid even if there were no extraordinary circumstances--

Mr. Shapiro: --I believe that it would, Your Honor.

Unknown Speaker: --exception?

Mr. Shapiro: Yes, I believe that it would.

I think the Board was very wise in including an extraordinary circumstances exception in the record... in the rule, but I do not believe that anything in the act or the legislative history of the 1974 act requires such an exception, or indeed analogous precedents of this Court in other areas.

The rule is in fact, we submit, a model of how the administrative process should work.

Now it has been challenged by the petitioner--

Unknown Speaker: Even though it's the first time in history they have ever tried to do it?

Mr. Shapiro: --It's unfortunate that it has taken so long, Your Honor.

Unknown Speaker: They did pretty well on the first try, is that it?

[Laughter]

Mr. Shapiro: I think they did magnificently, because they knew how important this process was.

Unknown Speaker: A lot of courts and commentators have criticized the Labor Board in the past, haven't they--

Mr. Shapiro: Yes, Indeed.

Unknown Speaker: --for not conducting rulemaking?

Mr. Shapiro: Yes, indeed, and I think the Board has been responsive to those criticisms in an area where there was a singular need for that kind of response.

Unknown Speaker: 13 years of litigation, though.

Mr. Shapiro: Well, it... that was a factor, no question about it.

[Laughter]

Unknown Speaker: Your comment that this is a ceiling on the number of groups, because there can be fewer groups if the employees so elect, that excludes any participation by the employer in that determination, and that, I take it, and I take it also that that is inconsistent with the Board's rule in all other areas, where the employer has a voice.

Mr. Shapiro: Well, the employer... I think it's important to establish at the outset that the employer's role in the petitioning process is a very limited one.

It is the union as the representative of the employees that chooses the bargaining unit to be sought through petition.

The only time that an employer is authorized to petition under the act is when confronted with a union demand for recognition.

And if the employer files a petition, my understanding is that by withdrawing the demand the union can effectively boot that petition.

The petition route is a route that allows the union, as the representative of the employees, to seem an appropriate unit.

Now, when a petition is filed it is not open to the employer to argue that another unit is also appropriate or even much more appropriate.

The employer's burden would be to show that this unit is not appropriate.

And of course the whole purpose of this regulation was to establish rules under which we acknowledge indeed we are very--

Unknown Speaker: Well, that's just, that's what exactly the employer wants to do in this case, is to show that it's inappropriate.

Mr. Shapiro: --Well, the employer--

Unknown Speaker: And the Board won't let him.

Mr. Shapiro: --You mean in this rulemaking proceeding?

They want to attack the rule as arbitrary and capricious because they, they claim that this rule cannot properly establish appropriate units in the industry.

In a particular proceeding, of course, the operation of the rule would effectively preclude the employer from trying to show that a given unit within the rule is not appropriate unless in the very limited case, and we acknowledge it is very limited, extraordinary circumstances--

Unknown Speaker: Did the employers participate... did the association participate in this rulemaking and oppose this rule?

Mr. Shapiro: --Yes they did, Your Honor.

There was suggestion from the industry--

Unknown Speaker: And they had their full say in the hearing?

Mr. Shapiro: --Oh, yes.

Unknown Speaker: Too much?

[Laughter]

Mr. Shapiro: At least enough.

[Laughter]

The rule is challenged here by petitioner on three grounds, although Mr. Holzhauer really concentrated only on one of them in his oral argument.

First, that the rule is inconsistent with the language of Section 9(b) and particularly the "in each case" language.

Second, that the rule is inconsistent with an admonition that appears in certain committee reports accompanying the 1974 amendment to the act which removed the exemption for nonprofit hospitals.

And finally, that the rule is arbitrary and capricious.

The court of appeals, we submit, properly rejected each of those three grounds.

It properly rejected the reliance on Section 9(b) because the "in each case" requirement does not preclude the Board from formulating rules of decision that govern in each case, that effectively supply rules of relevance, and that help to assure that like cases will be treated alike.

Unknown Speaker: What do the Mr. Shapiro?

Mr. Shapiro: Your Honor, we think the obligation of the "in each case" requirement is an obligation to apply whatever standards and rules may exist in the context of a particular proceeding to determine the appropriate unit.

If you go back to the history of the 1935 legislation, the "in each case" language was one of a number of amendments proposed by Secretary of Labor Bergens as she described it for the sake of clarity.

That clarification may not have been essential, but it was helpful because the very specific petition requirement of Section 9(c), which the Board later developed and which now appears in Section 9(c), was not a part of the original act.

The original Section 9(c) was a good deal vaguer about how the process worked, and in that context we believe the "in each case" provision was a useful one.

We do not believe that that clarifying language should be given the radical and very destructive definition that petitioner would give it here.

It does not preclude the Board from formulating rules of decision that facilitate a determination that in a particular case there is no genuine issue of material fact.

It does not require the Board to... to reinvent the wheel in each case.

Now, this argument, we believe, has two very strong supports.

One is that very similar arguments have over the past 35 years been rejected by this Court in a series of decisions beginning with Storer Broadcasting back in the 1950's.

The argument has been repeatedly made that particular regulations cannot survive challenge, not because they clash with some substantive provision of law, but because they are at odds with the statutory requirement of an opportunity for a hearing or a statutory requirement of a individualized determination.

This Court has repeatedly rejected those challenges on the grounds they do not undermine the fundamental administrative authority to formulate rules of decision.

It did so in the Storer case in the 1950's, in the Texaco case in the 1960's--

Unknown Speaker: Was there similar language in the Communications Act to the "in each case" language in the Labor Act?

Mr. Shapiro: --In a way it seems to me, Your Honor, that there was stronger language, because in the Communications Act the statute said that if the agency cannot decide that a particular application, a particular license, would be in the public interest, then it was required to set the case for hearing.

Now what the communications decision... commission did was to say that if a station owner already owned five stations, he could not get a sixth.

That was a flat rule.

There was a waiver procedure provided, but the rule in a sense facilitated, permitted summary judgment.

If a station owner already had five stations, there was no genuine issue of material fact that required a hearing.

This language, "in each case", says nothing about a requirement of a hearing, and does not address the sources of law to be applied in each case.

Now the, the precedent of the Storer case has been repeatedly applied by this Court, in Texaco in the 1960's, more recently in WNCN, in Heckler and Campbell, and just last month in the Mobile case.

So not only is there a long line of precedent in this Court, there is also, we believe, a consistent view of the Labor Board that squares with its position in this proceeding.

Unknown Speaker: What were the circumstances, or what was the reason that the Board undertook this rulemaking and arrived at this result, rather than doing what it did for 13 years?

Mr. Shapiro: Well, I think there were a number of reasons, Your Honor.

I think one was that the Board had had a good deal of difficulty both understanding the industry, acquiring enough information, and in persuading the courts of appeals that it was acting consistently with its legal obligations.

The courts of appeals were widely divided on what those obligations were, very widely divided, but they all did seem to agree on one thing, and that is that the Board had to address the problem as a distinctive problem in a distinctive way.

And I think the Board was both responding to that and to its very acute need for more information by undertaking this proceeding.

I also believe that part of what the Board was doing was an echo of what it tried to do in the first St. Francis case, that is the Board was mindful of the admonition in the 1974 committee reports that there should not be too many bargaining units, and one thing it tried to do in its first St. Francis case was to set a ceiling on the number of bargaining units that would be authorized in the industry to prevent the kind of balkanization that had occurred in the construction industry, which is an industry that had a very large number of different skills and crafts, very much like a hospital industry.

And so one of the objectives of this rule, we believe, and a very significant one, was to establish a cap on the number of units which would apply in each case.

Unknown Speaker: You don't think they had any reason just to administrative efficiency or just some abstract value of uniformity--

Mr. Shapiro: I think administrative--

Unknown Speaker: --without which they might have found some of these units to be inappropriate?

Mr. Shapiro: --I think administrative efficiency was a factor.

I think it has been vastly overrated in the argument that Mr. Holzhauer just made.

I think that what was motivating the Board... the Board here, and what it made very clear in its lengthy opinions, was a desire to determine whether despite the variations among hospitals they had enough in common so that as a matter of law they should be treated alike.

That their goal ultimately was to focus on the issue whether a certain class of acute care hospitals had enough in common to warrant this kind of treatment.

They recognize that no two hospitals are alike, just as no two fingerprints are alike, no two people are alike.

The question remains whether a valid legal generalization can be made about fingerprints, people, or hospitals.

The Board concluded that it could.

Now, I think it's probably true, Your Honor, that as a result of the rule individual cases might be decided differently.

Indeed, if that were not so there seems to be little point in having the rule.

And the Board has made a conscious and we believe wise decision that the tradeoff is worth it.

Indeed, there is some indications that deciding of accordance with the rule--

Unknown Speaker: There's a tradeoff, and what's traded off against what?

Mr. Shapiro: --What is traded off is perhaps certain marginal cases where a particular proceeding might be decided differently in the sense that a given unit was inappropriate, and yet it doesn't qualify for the extraordinary circumstances exception and is governed by the rule.

Unknown Speaker: Well, in that kind of a case is the Board really acting consistent with the direction to decide in that particular case what unit is appropriate?

Mr. Shapiro: Yes, I believe it is, Your Honor, because I... I believe that the "in each case" requirement does not stand in the way of the Board's articulating rules that are to be applied in each case.

Unknown Speaker: But you just said that except for this general rule that they have now made, that they would decide the case differently.

If they really got down to brass tacks and decided, and looked at the case, they... you just said they would... might decide it differently.

Mr. Shapiro: Well, yes, they might decide it differently for a wide variety of reasons.

One might turn simply on--

Unknown Speaker: One of them is that the hospitals are different.

Mr. Shapiro: --Hospitals are different.

The question is are they so different that the Board is precluded from this kind of generalization about when units are appropriate.

There are problems involved in leaving decision to the discretion of the adjudicator every time, and in our view 9(b) does not require that.

Those problems include the possibility that the result may turn on the particular three-member panel that is sitting... out of the five members of the Board in that case... might turn on the particular skills of the adversaries.

One of the great virtues of the administrative rulemaking process is to allow agencies to narrow their discretion, not just to avoid costly and expensive litigation, although of course--

Unknown Speaker: But it has been done only in the area of hospitals by the Board, has it not?

Mr. Shapiro: --Your Honor, this kind of regulation is novel.

But I think--

Unknown Speaker: I didn't quite get your--

Mr. Shapiro: --This regulation is novel.

There is no other industry that has a comparable regulation.

But the Board has in fact in the past formulated rules of decision that are not simply presumptions, as petitioner would suggest.

The Board has in the past formulated conclusive presumptions in the area of unit determination.

For example, in the tenth annual report which petitioner relies on where the Board said that under 9(b) they are required to make a decision on the facts of each case, the Board articulated a number of rules that it had developed.

Some of those rules were conclusive rules.

For example, this was before Taft-Hartley, the Board had a conclusive rule that supervisors would never be put into the unit with the people they supervise unless there was a long history of bargaining in that very unit.

The Board had a conclusive rule that confidential employees would not be put in any unit.

The Board had a conclusive rule that people who monitor other people would not be put in a unit with the people they monitor.

In the postal industry, after the enactment of the Postal Reform Act, the Board announced what was essentially a conclusive rule that a petition would be dismissed unless it sought to represent all the employees in a region or section unless it submitted on a nationwide basis.

These were... had it been crafted--

Unknown Speaker: --That was a rule established by adjudication.

Mr. Shapiro: --Yes, Your Honor, but it was conclusive in character.

Unknown Speaker: But it was a very... with a result very similar to this rule that has been adopted.

Mr. Shapiro: Yes.

Yes, Your Honor.

The Board in a wide variety of areas has done its job well in adjudication in establishing a range of rules that vary from mild preferences to very strong presumptions.

For example, in the single facility area the Board has said that units will be restricted to a single facility unless a very strong showing that more than one facility operates on an integrated basis can be made, to rules that are truly conclusive.

We submit it is not a defect of this rule that it increases certainty and predictability.

It's a virtue.

I would like, if I may, to address the admonition in the 1974 reports, because it has been such a large part of the litigation over the years, and because petitioner places so much emphasis on that in its brief.

The Board's view, as articulated in its decision in this case, is that the admonition in those committee reports, which neither accompanies nor explains any relevant statutory language, it does not have any binding legal effect.

The admonition is a request to the committee, to the Board by the relevant committees.

We submit that it is a matter essentially between the Board and the committees of Congress that wrote those admonitions.

Now, we also contend that even if the admonitions were incorporated in the statute itself that the Board has fully complied with their letter and their spirit.

The admonition, to begin with, does not, despite petitioner's heroic efforts, does not speak at all to the choice between rulemaking and adjudication.

And indeed there is nothing in the legislative history of this legislative history that suggests that the admonition is concerned with the choice between rulemaking and adjudication.

The Board... the admonition asks the Board to give due consideration to preventing proliferation.

The Board has done that in this rule in two very significant ways.

First of all, it has paid very close attention to the problem of the number of units.

It has determined on the basis of the record and its experience that there is no domino effect in the hospital industry, that the authorization of a particular unit, and most of the units that have been authorized look like the units that are specified in this regulation, that the authorization of a particular unit--

Unknown Speaker: Are you suggesting that over all these years of litigation about hospitals, that their case-by-case adjudication sort of pointed towards eight units?

Mr. Shapiro: --By and large, Your Honor, yes.

And the units that are specified are the units that in general have been traditionally recognized.

Now, physicians rarely seek units.

Guards rarely seek units.

But the history shows, most of the time by consent and sometimes by litigation, that when registered nurses seek a unit a registered nurses' unit will be authorized.

In fact the two main controversies that have led to litigation are rather limited ones.

One involves registered nurses and whether they should be combined with other professionals, and the other involves separate maintenance workers.

But a report by the Federal Mediation and Conciliation Service shows that of all hospitals that have bargaining units today, 55 percent have only one bargaining unit, 80 percent have two or less, and 90 percent have three or less.

And the Board was conscious of that.

The Board also, as I have suggested, was very conscious of the need to put a cap on the number of units to prevent the kind of balkanization that occurred in the construction industry.

So the Board has ruled that all other professionals are confined to one unit, that all technical workers, despite the very substantial difference in their skills and their functions, are combined in one unit, that all skilled maintenance workers, despite the balkanization od... of workers in other industries, are confined to one unit.

So the Board has been concerned about the numbers problem.

The Board has also investigated exhaustively the question whether the evils thought to come with proliferation are associated with these bargaining units, and the Board has determined that they are not.

The statistics indicate that the strike rate in the hospital industry is quite low, lower than in other industries, and indeed there is empirical evidence to suggest that the size of units, or... I'm sorry, the number of units is inversely related to the likelihood of a strike.

Beyond that there is evidence, and indeed it doesn't take a lot of evidence to know that the larger the bargaining unit, the more disruptive a strike is like to be, especially in the absence of a sympathy strike.

Unknown Speaker: Mr. Shapiro, to what extent... this is to show my ignorance about this area, but to what extent is there room under the regulation for there to be debate and divergence over whether a particular employee is, for example, a professional or a technical employee?

Mr. Shapiro: That question is effectively left open in most areas.

Unknown Speaker: That has to be resolved in each case, does it?

Mr. Shapiro: There are many questions that have to be resolved in each case.

Some questions go to unit determination itself, for example single facility or multi-facility, and many questions go to closely related issues, employee placement, for example, the question that you raise, dual-capacity employees, a wide variety.

In fact, the, in our brief, I think it was at note 14, we indicated a whole raft of questions that remains for determination in each case.

Unknown Speaker: Mr. Shapiro, did I understand you to say that it's very likely that an awful lot of hospitals will, as a matter of fact will not have the eight bargaining units?

Mr. Shapiro: That's correct, Your Honor.

That's correct.

Unknown Speaker: How many... what percentage?

Mr. Shapiro: Oh, I can't give you a percentage, except that I don't think there are many hospitals out there that have been operating under the 1974 act that have any where approximating those... that number of units.

Unknown Speaker: So this... you're saying this is just a ceiling?

Mr. Shapiro: This is a... for all practical purposes--

Unknown Speaker: Just a ceiling, and... so in each case it's going to have to be decided which of the eight units are going to be--

Mr. Shapiro: --Depending on what is sought.

Now, we acknowledge--

Unknown Speaker: --Depending on what?

Mr. Shapiro: --On what is sought.

Unknown Speaker: So it... and, I take it that the Board just isn't automatically going to agree with... every time with what is sought?

Mr. Shapiro: Well, I think the Board has indicated, Your Honor, that if a... let's take a hypothetical.

If a union seeks a unit of registered nurses... that's one of the most controversial areas... and the employer comes back and says I want an opportunity to show that in this hospital a unit of registered nurses is appropriate, let's say because we operate in teams here--

Unknown Speaker: Will they listen to that?

Mr. Shapiro: --Not if that's all that the employer says, unless there is some, as the Board has said, very extraordinary circumstance.

The Board has in fact not only dealt with these cases over many years, but has dealt very exhaustively in the rulemaking proceeding with that kind of argument.

Unknown Speaker: Wouldn't it be the case that sometimes there will be more than one union involved in the case?

Mr. Shapiro: Well, if they're, if they're competing unions which are seeking different formulations, I must say one important question I'm not sure of the answer of, if you have one union that comes into--

Unknown Speaker: Well, at least in each case they're going to have to decide, aren't they?

Mr. Shapiro: --Cases involving rival claims where one union wants a broader unit than another union, my reaction to that is that would be a case that the Board would necessarily have to resolve.

The regulation may be helpful, but I don't quite see how the regulation could determine it if one union were seeking a unit that included what another union was seeking.

But it is true that in the main--

Unknown Speaker: Why wouldn't it?

I thought the rule was that if any of these sub-units is sought, it is granted.

Mr. Shapiro: --That may be.

I'm trying to work this through because I just hadn't thought of it.

If one unit of a union seeks a unit of skilled maintenance workers, and another unit of the union wants a combination, I guess that's right, that the union that seeks the unit of skilled maintenance workers would prevail.

Unknown Speaker: Wouldn't it be pretty unlikely that they would both have a majority--

Mr. Shapiro: It's not inconceivable, particularly if the skilled maintenance workers are a very small number of the larger unit.

Unknown Speaker: --I see.

Mr. Shapiro: But in cases, of course, where combined units are sought, the Board would determine whether that was appropriate in that case.

I would like, if I may, just--

Unknown Speaker: But the Board would take a union's suggestion that, that all technical employees, all skilled maintenance employees, and all business office clerical employees should be included in one unit?

Mr. Shapiro: --If the union sought that?

Unknown Speaker: Um.

Mr. Shapiro: That would... that would be consistent with the regulation.

The Board might not necessarily approve it.

The Board would have to find that that was an appropriate unit.

Unknown Speaker: Yes.

Mr. Shapiro: But the regulation would not preclude that finding.

Unknown Speaker: It would not what?

Mr. Shapiro: Preclude that finding, because the regulation allows a union to seek a combination.

Unknown Speaker: So that in each case there might be different units than what is, are specified in the eight, in the list of eight?

Mr. Shapiro: If the union sought it, yes, Your Honor.

Thank you.

My time is up.

Thank you.

Unknown Speaker: Thank you, Mr. Shapiro.

Mr. Holzhauer, do you have rebuttal?

You have 3 minutes.

Rebuttal of James D. Holzhauer

Mr. Holzhauer: Yes.

Thank you.

It's interesting that the Board refers here to the first St. Francis case, and says that it is basically trying to reestablish the first St. Francis approach.

In that first St. Francis case the Board held that the in each case language of Section 9(b) precludes the kind of presumption that it had in the past that a nurses unit, an R.N. unit, would be appropriate in each and every case.

What this rule does is it says if a union comes and asks for any one of these eight units, that unit is appropriate.

Period.

The employer cannot offer facts and circumstances of a particular employer, or a particular workplace, or a grouping of employees to rebut that presumption.

Unknown Speaker: Will the Board inevitably accept the union's choice?

Mr. Holzhauer: The Board will accept the union's choice.

Yes.

Unknown Speaker: Inevitably?

Mr. Holzhauer: The only time when the Board will not accept the union's choice is if it's inconsistent with these eight units.

Frankly, I think that's as wrong--

Unknown Speaker: What if they... what if the union... what about the question I just asked Mr. Shapiro?

The union comes in and says we want a unit made up of numbers 4, 5, and 6?

Mr. Holzhauer: --The second notice of proposed rulemaking, and the second rule said that we will assume that these are always appropriate.

Now it says in the final rule that no, we're going to look at it because we don't want to have inappropriate groupings together, such as perhaps a physicians and guards unit.

But ordinarily the Board will consider those to be appropriate.

But it will look--

Unknown Speaker: Even though they group these, what would otherwise be separate units?

Mr. Holzhauer: --Right.

Combined units will be regarded as ordinarily appropriate, but not always appropriate, when requested by the union.

They will never be regarded as appropriate when the employer makes that kind of request.

Unknown Speaker: So at least to this extent it has to be case-by-case adjudication?

Mr. Holzhauer: That one issue, where they decide to combine units, yes.

But when, let's say, there's a petition for a unit of registered nurses and the employer goes up, as it can in every other industry and as it has always done in this industry, and says this unit is inappropriate because of the way we staff, or where they say we're going to have a service and technical unit that is separate, as it said for example in the Vicksburg Hospital case, the Jewish Hospital Association case, and all three cases mentioned in the admonition, we're going to say that these units are not appropriate.

The Board is going to say we will not listen to that argument.

We will not consider the facts and circumstances of this employer if the union is asking for one of the eight units that's in the rule.

The argument here from the Board is basically that the 9(b) language adds nothing to the statute.

Section 9(c) requires a hearing in each case.

All the factors that the Board is still going to consider, the issues that they are going to consider, don't go really to which units are appropriate, but go to the kinds of things that are appropriate under Section 9(c) and that have to be decided.

9(b), where it says the Board shall determine the appropriate unit in each case, will be completely ignored.

I think it's useful to look at page 186 and 187 of the Joint Appendix where the Board describes the extraordinary circumstances exception, and where it sets out all of the things it will no longer consider, and I think to compare that with other cases.

Thank you, Your Honor.

Chief Justice Rehnquist: Thank you, Mr. Holzhauer.

The case is submitted.

Attribution:

The OYEZ Project

Featured:

Gilmer v. Interstate/Johnson Lane Corp. - Oral Argument

Fri, 09 Jan 2009 14:49:39 +0000

Case:

Gilmer v. Interstate/Johnson Lane Corp.

Media File:

90-18_19910114-argument.mp3

Related Transcript:

transcript.xml

Transcript:

Argument of John T. Allred

Chief Justice Rehnquist: We'll hear argument now in No. 90-18, Robert D. Gilmer v. Interstate/Johnson Lane Corporation.

Mr. Allred.

Mr. Allred: Mr. Chief Justice, and may it please the Court:

Cert. was granted in this case on whether a claim for violation in Age Discrimination in Employment Act is subject to compulsory arbitration.

The Fourth Circuit held that arbitration agreement in an application for employment was enforceable and denied Mr. Gilmer access to the United States district court for alleged age act violation.

This case focuses on a conflict between two national policies.

On the one hand there is the policy of favoring arbitration that has been announced in Mitsubishi and its trilogy, and then on the other hand is the national policy of eradicating employment discrimination in the work place.

Unknown Speaker: Mr. Allred, don't you have a preceding question, which is whether the Federal Arbitration Act even applies--

Mr. Allred: Yes--

Unknown Speaker: --in this case?

Now, I take it you didn't argue that below?

That was not relied upon by you below?

Mr. Allred: --That is correct.

That is correct.

Unknown Speaker: Why not?

Mr. Allred: Well, because in the... first off, we thought that the Mitsubishi... I mean, that the Gardner-Denver line of cases were dispositive of the Federal arbitration issue, and in fact... and we... we looked at Tenney, the circuit court case, and the cases that followed that, and we did not appreciate the importance of that argument.

In looking at the briefs from the AFL-CIO and the AARP and the other amicus we are convinced that it is indeed a compelling argument.

Unknown Speaker: Well, do you think we should address it here in this Court, and are you prepared to have us do so?

Mr. Allred: We think--

Unknown Speaker: And to argue the issue?

Mr. Allred: --Justice O'Connor, we think that the enforceability of the agreement under the FAA... if you're going to look at the Federal Arbitration Act, you of necessity have to look at section 1.

And so it seems to me that that issue is subsumed within the entire question that is before this Court.

And... and as, and as you look at that particular issue it seems to me that the plain language of section 1 that says that workers... that all classes of workers engaged in interstate commerce are excluded from the act is dispositive of the question on the basis of the plain language of the statute.

But furthermore, when you look at the... at the legislative history of that act, which when... was gone into in great detail in the brief of the AFL-CIO, it was... it showed to me beyond all question that it was intended that employment contracts or employment disputes were to be excluded, and that the sole purpose in 1925 of the FAA was that business people who wanted to get together and agree to arbitrate their disputes, that that would be enforceable.

Unknown Speaker: Why do you suppose the Congress referred expressly to seamen and railroad workers if the last phrase dealing with those engaged in interstate commerce would have covered all of those categories?

Mr. Allred: Well, I think... I think, Your Honor, that they referred to seamen and railroads because those were basically the two union groups that were lobbying for the exclusion, but the language went on further and said... it mentioned those two groups but then went further and said all classes of workers engaged in interstate commerce.

And the Tenney case, which limited that to transportation, is really just, was... at least in retrospect it appears that that court did not have the benefit of the legislative history that this Court has.

Unknown Speaker: Do you think your client was engaged in interstate commerce the way a railroad worker or seaman is engaged in interstate commerce?

Part of the--

Mr. Allred: Well... well, to the extent that money is engaged in interstate commerce.

A seaman or a transportation worker is not carrying goods, so to speak, but money is indeed a part of interstate commerce.

And so I don't... I would not believe that that statute is to be that strictly interpreted.

Unknown Speaker: --Well, I think he's effecting interstate commerce.

I'm not sure he's engaged in interstate commerce.

Mr. Allred: Well, I'm not... I'm not sure that... if you look at the first... at the second part of the statute, it didn't... it didn't really use the word engage, as I recall.

Engage was in the second part.

And it seems to me that what--

Unknown Speaker: But the first part is the part we're talking about, right?

Section 1?

Mr. Allred: --Section 1, yes.

Unknown Speaker: And that does say engaged in.

Mr. Allred: That is correct.

Unknown Speaker: Seamen or railroad workers or any other person engaged in interstate commerce.

Mr. Allred: Well, it seems like to me that if you are working in interstate commerce, you are indeed engaged in it.

Perhaps that may be too simplistic, but at least... at least that's the way it strikes me.

If--

Unknown Speaker: This was enacted, of course, in when?

When was... 1925, is that when it was passed?

Mr. Allred: --That is correct, Your Honor.

Unknown Speaker: And the country had, or the Congress had a quite different view of what interstate commerce was in those days.

I guess we did, too.

Mr. Allred: That may well be.

And the truth of the matter is, is that the Federal Arbitration Act hasn't really come into any real prominence until just recently.

In fact, many of the cases that have dealt with whether... with whether or not a compulsory arbitration agreement is enforceable has not even addressed the Federal Arbitration Act, just as the Gardner-Denver and the line of cases did.

Unknown Speaker: Gardner-Denver was a collective bargaining contract, wasn't it?

Mr. Allred: That is correct, Your Honor.

But it seems to me that that was only the substance in which the issue arose in that case, because... because there the... what Justice Powell said in there related to Title VII and employment discrimination.

The fact that it arose in a collective bargaining context I don't think is any disparity here.

It seems to me that that arbitration agreement that was involved in Gardner-Denver came about through equal bargaining power of the negotiation between the union on the one hand and management on the other to reach that.

When Mr. Gilmer and the likes of Mr. Gilmer go to work for the securities industry, there is no equal bargaining power there.

They have no choice.

They either... they either agree to that arbitration--

Unknown Speaker: Was the exclusion of employment contracts argued in Gardner-Denver?

Mr. Allred: --I do not believe so, Your Honor.

Unknown Speaker: And... or in any other of the cases that we have dealt with in the employment context?

Mr. Allred: No, that... that is true.

But what was addressed--

Unknown Speaker: Everybody has missed it up until this very case.

Mr. Allred: --What was addressed in Gardner-Denver was the fact that when Congress passed the Civil Rights Act of 1964, Title VII, that Congress was acting to correct an enormous national wrong that had gone on for many years.

Age was not included in Title VII, but it was mentioned in a good bit of the legislative history, and for whatever reason it was not picked up until 1967 when the ADEA was adopted.

And... but when the ADEA was adopted, it picked up, basically as this Court has said, Title VII in hoc verba, and this Court has said that when you look at precedents in... for cases involving age discrimination, you should look at Title VII because you're dealing with the same sort of insidious discrimination.

We think that from the Gardner-Denver line of cases that you have... that... there were two things that really prompted the court to operate there, was, one, was the special characteristic of employment relationship that existed, that... that... and only... and Congress felt that only the courts and the procedure that... or the adoption of the EEOC were the way in which that you could address that.

When--

Unknown Speaker: How is your client engaged in interstate commerce?

Mr. Allred: --How would I define engaged--

Unknown Speaker: No.

How is your client engaged in interstate commerce?

Mr. Allred: --Oh, well... well, he was manager of, he was hired as manager of financial services for interstate securities.

Unknown Speaker: Well, how was he himself engaged in interstate commerce?

Mr. Allred: Well, the record... there's nothing in the record on that, but he was involved in the sale of mutual funds.

Unknown Speaker: Well how would we ever decide in this case whether that's a good answer to your claim or not?

Mr. Allred: Well, what happened before Judge McMillan was that they moved to dismiss.

And we looked at Gardner-Denver, and Gardner-Denver said, and the cases that followed that said, that whenever Title VII or whenever civil rights, or whenever some... any form of employment--

Unknown Speaker: What would be your submission as to why your client was engaged in interstate commerce?

Mr. Allred: --What would be my submission?

Well, that he was managing a group of people that bought and... that sold mutual funds.

And mutual funds, the--

Unknown Speaker: In 1925 do you think that he would have been held to have been involved in interstate commerce?

Mr. Allred: --I don't know the answer to that, Your Honor.

Unknown Speaker: Maybe his actions would have... might effect interstate commerce, but... maybe Congress these days has the power to regulate what he's doing.

But does that mean that in 1925 he was engaged in--

Mr. Allred: Well, now, if you looked at it from a narrow standpoint that engaged meant that you had to be physically engaged, you had to be driving a bus or a truck or in the transportation industry, I would agree with you.

But I don't... but it seems like to me that if you were in the New York Stock Exchange and you were selling General Motors stock that emanated from Detroit, that that broker, that the people in the investment banking industry were engaged in interstate commerce.

Unknown Speaker: --But there was no evidence taken in the trial court on this point?

Mr. Allred: That is correct.

Unknown Speaker: Because you hadn't raised it?

Mr. Allred: That is correct, Your Honor.

We just... we read the Gardner-Denver line of cases and saw that this Court has held that whenever employment discrimination is at issue, that arbitration is inappropriate, and that the courts and the EEOC are the... is the way to go.

Unknown Speaker: Mr. Allred, one thing that sort of suggests that your expansive notion of engaged in interstate concept may be wrong is that, although section 1 uses the term engaged in interstate commerce, section 2, the operative provision here, says it applies to a written provision in any maritime transaction or a contract evidencing a transaction involving commerce.

Now, why would Congress say involving commerce in section 2, and say engaged in commerce in section 1, without intending a distinction between the two?

Mr. Allred: Well, Your Honor, there's a good answer to that--

Unknown Speaker: I hope so.

Mr. Allred: --in one of the briefs.

The... but I think that you can't, on the one hand, have the situation that says that you are going to allow transactions in commerce to be subjected to compulsory arbitration, and then eliminate those that are engaged in that same activity.

It seems to me that the... that you have to read both of those together.

That if... that if transactions in commerce involve that, then engaged in commerce was... that you have to read both sections equally.

But maybe Your Honor, the transactions were engaged in interstate commerce.

See, we submit that from the Gardner-Denver line, that that's dispositive.

We think that Federal Arbitration Act is dispositive of section 1.

But we also think that when you look at the Mitsubishi test and its cases, it said that you reached the same result.

There they say... Mitsubishi said that you will enforce the Federal Arbitration agreement unless Congress has manifested a contrary intent.

And then, I think it was the McMahon case, said that you can look at the manifest intent of Congress wherein something is inherently contradictory to the act itself.

I think that was McMahon.

And here Congress, in Title VII and in the age act, manifested its intent that the Federal court is an integral part of the... of instrument in the enforcement of the laws designed to eradicate discrimination based on age, race, sex, and religion.

And there is an irreconcilable conflict, we see, in the arbitration process and the enforcement of these civil rights laws.

Unknown Speaker: Mr. Allred, could I go back to the question Justice Scalia asked you about reconciling... involving... contract evidencing a transaction involving commerce in section 2 and engaged in commerce in section 1.

You said one of the amicus briefs provides a good answer to that question.

Do you which amicus brief?

We've got a lot of them.

Mr. Allred: I think that that was the AFL-CIO addressed that.

I believe it was also addressed in the Lawyers' Committee.

And... maybe I'll have an answer for you before I sit down.

At page 13 of the AFL-CIO brief the... it is said,

"We note at the outset that the different syntactical contexts of the two references to "commerce" mean that use of precisely the same connective in the two circumstances would have created a grammatical problem: a "transaction" could not be said to be "engaged in" commerce, nor would a reference to a "class of workers" as "involving commerce" make sense. "

"Thus, there is no necessary inference to be drawn from the simple fact that a different connective was used in the two contexts. "

Unknown Speaker: You can have a transaction between people engaged in commerce, or a transaction among people engaged in commerce, or a transaction concerning people engaged in commerce.

Don't you think?

Mr. Allred: Indeed.

I think that you could probably have a transaction between two people engaged in interstate commerce, and that transaction was not a commerce in interstate commerce.

Unknown Speaker: On the contrary [inaudible] in section 1 if they meant the same thing they could have referred to employees engaged in any business affecting commerce or in any business involving commerce.

Mr. Allred: I--

Unknown Speaker: It's a very strange way to say it if they meant the same thing.

Mr. Allred: --But when you look at the legislative history, though, of the Federal Arbitration Act, it is abundantly clear that it was designed only for the business entities, where, when they got together and made their contracts there to buy, sell, or what have you, they agreed to arbitrate their dispute.

And we are involved in arbitration a great deal.

And they work extraordinarily well--

Unknown Speaker: You mean only corporations, it applied... it was meant to imply only to corporations or partnerships, is that it?

Mr. Allred: --No, no, no.

I can apply... it applies to individuals.

But we're talking about a knowing, a knowing agreement to decide that if you have a dispute over your given... your given contract, that you decided at the outset that you would arbitrate rather than go to court.

Unknown Speaker: Is it your contention that your client did not knowingly agree to arbitrate?

Mr. Allred: That is correct.

Unknown Speaker: You... that was a contention you made in the district court, that he did not, he did not knowingly agree to arbitrate?

Mr. Allred: I did not... I did not say that he... we were relying on fraud in the district court.

I am saying that he had no choice--

Unknown Speaker: Well, but that's quite different than saying he didn't knowingly do it.

Mr. Allred: --Well, he knew he signed a clause that said under the New York Stock Exchange he would agree to arbitrate his disputes, but he had no idea that it would rely to any sort of civil rights that he had, when Congress has passed a law, and under the age act, that says he's entitled to a jury trial, that says that the EEOC has all of this... all of this process there to investigate, to conciliate.

And then under the age act, may be because age is so paramount, if the EEOC has not acted within 60 days, then he may go ahead and elect to bring suit.

Unknown Speaker: I still don't understand your contention, Mr. Allred.

You say that your client of course signed the agreement and that he didn't really know what its full effect would be?

Is that your contention?

Mr. Allred: It's my contention that he had no idea that it would waive his right if he were discriminated against by... on--

Unknown Speaker: And how did the lower courts resolve... we didn't grant certiorari on that question, did we?

Mr. Allred: --You granted certiorari on the question of whether or not compulsory arbitration is... will... is available here, can be enforceable here.

Unknown Speaker: Yeah.

And so don't, don't we assume for the sake of the question before this Court that your client did knowingly sign the agreement?

Mr. Allred: I have a hard time... yeah, you can certainly make that assumption, but our position is that as relates to the securities industry, that this... the entire security industry has... if you go to work for them, then you have to sign this agreement.

Unknown Speaker: That was true in the McMahon case, too.

Anyone making a deal with the brokers had to sign the same sort of agreement.

Mr. Allred: But the difference there, Mr. Chief Justice, is that that person dealing with the broker could walk away, and that was a business relationship and not an employment relationship.

And... it is true that Mr. Gilmer could walk away, but if he wanted to go to work in the securities industry he had no choice but to sign that agreement.

Unknown Speaker: Well... does the Federal Arbitration Act make the sort of distinction you're talking about, do you think?

Is that what section 1 means?

Mr. Allred: Well, I think, the way in which I read section 1 is that... is that any employment dispute, whether it's contract or not, is excluded from the Federal Arbitration Act.

Unknown Speaker: Well, is that all there is to it here, an employment agreement between your client and his employer?

Didn't he want to... what was his job?

Mr. Allred: His... he was hired as manager--

Unknown Speaker: But just anybody can't do that... walk in off the street and do it.

Don't they have to register with the Exchange and pass some... aren't they subject to some rules of the Exchange?

Mr. Allred: --That is correct, Your Honor.

Unknown Speaker: Well, isn't this an agreement, sort of a commercial agreement between someone who wants to engage in that industry and the... and the private regulatory regime?

Mr. Allred: Well, it may be a commercial agreement to the extent as it relates to the buying and selling of securities, and that's what the SEC and the SRR was all about.

Unknown Speaker: Was he required, because he registered, to sign this sort of an agreement about arbitration?

Mr. Allred: I missed... I did not get your question, Your Honor.

Unknown Speaker: Was he required by the Exchange to sign this sort of agreement?

Mr. Allred: That is correct, Your Honor.

Unknown Speaker: And so he agreed to that when he wanted into the business.

Mr. Allred: That is correct, Your Honor.

But that relates to the regulation of the buying and selling of securities.

Unknown Speaker: I know, but he agreed when he... if they were going to... he agreed, in order to be permitted to do it, to get into this business, he registered with the Exchange, didn't he?

Mr. Allred: Indeed he did.

Indeed he did, Your Honor.

But the... but the Securities and Exchange Commission and the New York Stock Exchange is not that body of law that's designed to look after civil rights for people who are discriminated against in age.

Unknown Speaker: Well, that may be.

That may be.

But you say that the arbitration... Federal Arbitration Act was just, just limited to just commercial agreements.

Mr. Allred: That's what the legislative history--

Unknown Speaker: Isn't this a pretty commercial agreement, if somebody wants to get in the securities business and he has to register and live up to their rules?

Mr. Allred: --Well, discrimination by age, Your Honor, or discrimination by sex or religion or race, it seems to me is not commercial.

And that's--

Unknown Speaker: Well on that basis, on that basis you would say, you would say the Federal Arbitration Act would never apply to these sort of things.

Mr. Allred: --I think that that's the way section 1 reads, literally, and I think that's the way the legislative history of section 1 reads.

In McDonald v. City of West Branch, a case decided in 1984, just 1 year before Mitsubishi, this Court said although arbitration is well suited to resolving contractual disputes, it cannot provide an adequate substitute for judicial proceeding in protecting the Federal statutory and constitutional rights that section 1983 of the civil rights was designed to safeguard.

And I would add to that, and the other civil rights.

And in the McMahon case they said that if the... if the enforcement scheme is inherently in conflict... if the statutory right is inherently in conflict with the arbitration agreement, then you're not required to do it.

And Mitsubishi said if you look at congressional intent, whether it's legislative history or whether it's the whole scheme of enforcement, I want... this Court well knows the entire scheme of the EEOC, that of filing a charge, and of its duty to investigate and to conciliate.

And even... and Congress did not do... make what the EEOC did binding.

That even if they found that there was no probable cause, the individual was still entitled to have access to the court.

Unknown Speaker: Are you familiar with that Signal-Stat agreement, or case, in the Second Circuit?

Mr. Allred: Mitsubishi was the case that involved--

Unknown Speaker: No.

Signal-Stat Corporation against Local 475 in 1956, a decision by the Second Circuit.

Mr. Allred: --I'm--

Unknown Speaker: Were you familiar with it?

Mr. Allred: --No.

No, I'm not familiar with it, Your Honor.

Unknown Speaker: Well, that case held that employees of an automobile [inaudible] weren't engaged in interstate commerce within the meaning of section 1.

And so that was the law of the Second Circuit.

Everybody knew it, I suppose.

Mr. Allred: Well, Tenney held--

Unknown Speaker: So it isn't the first time this issue has ever been raised.

Mr. Allred: --No, but it's... there was a case before this Court, I believe in 1988, in which neither side briefed it.

That involved a California statute.

And the question was whether or not--

Unknown Speaker: Of course, we denied cert. in that case.

Maybe unfortunately.

Mr. Allred: --The one that I was referring to, I think it was Potter, was that it held that the Federal Arbitration Act preempted a State law.

But the question of whether or not section 1 was involved was not briefed by the parties in that case.

The... the... one... arbitration just clearly is not the sort of vehicle by which employment discrimination rights can be vindicated.

There... I can go through a whole litany of--

Unknown Speaker: What about other kinds of rights?

Is it all statutory rights that are not covered by the Arbitration Act, or what?

What is your position?

Mr. Allred: --Well, as I read... as I read... as I read the cases, Your Honor, it's those cases in which the... when the Congress has passed laws protecting employees with minimum statutory standards, minimum rights, like--

Unknown Speaker: But just employees?

Nobody else?

What about the Sherman Act, for example, a dispute about whether there has been a violation of the Sherman Act?

Two businessmen--

Mr. Allred: --Well, that's covered precisely by the... by the FAA.

If the two businessmen have agreed to arbitrate, then it's therefore enforceable.

Unknown Speaker: --But that's a public policy, just as employment discrimination is a public policy.

People shouldn't be able to get out of that any easier than they get out of employment discrimination, I guess.

Should they?

Mr. Allred: Well, what the... they agreed to arbitrate those cases.

Unknown Speaker: Your client agreed here.

Mr. Allred: Well, I don't think he made... he agreed to arbitrate any... he agreed, in my judgment, to arbitrate disputes with respect to New York Stock Exchange rules, with respect to things of that nature, but not his civil rights.

And I just don't think that that... that that was a knowing waiver.

Unknown Speaker: What do you mean by civil rights?

I mean, it's not a right of his against the Government?

Mr. Allred: What I mean by civil rights is to be free from discrimination because of your age, because of your race--

Unknown Speaker: I see.

Mr. Allred: --because of your sex.

Unknown Speaker: I see, but not--

Mr. Allred: Religion.

Unknown Speaker: --Now, what do you rest that principle on?

I mean, what I don't understand... see, I can understand a principle that if it's a public policy you can't arbitrate out of it.

But you're not... you're not willing to say that.

You just... you're just going to say certain public policies, but what's the basis for distinguishing this kind of public policy from other kinds of public policies?

Mr. Allred: Well, because Congress passed the law doing it, and then passed this intricate scheme for the enforcement of it.

And as Congress recognized in the Norris-LaGuardia Act, and I think this is important here, and this is in the act itself, it said the individual unorganized worker is commonly helpless to exercise actual liberty of contract and to protect his freedom of labor, and thereby obtain acceptable terms and conditions of employment.

If this Court affirms the Fourth Circuit, then the securities industry has foreclosed the courthouse door to any person who contends that they have been discriminated against by virtue of any civil rights act, Title VII, age.

And other industries will indeed then have as a condition of employment that you will agree to arbitrate.

And I think that it will basically be the death knell of civil rights as started with the Civil Rights Act of 1964.

It's just inconceivable to me that this Court will do that, because arbitration is suitable for handling business disputes, and handling business disputes between people knowingly made the decision to opt at the outset to--

Unknown Speaker: Well, isn't the allegation here that this individual knowingly agreed to arbitration?

I mean, that's how we take the case, as the Chief Justice inquired about earlier.

Don't we have... don't we have to accept the case on that premise and go from there?

Mr. Allred: --I don't... I don't think so, Your Honor.

I think that it was... it was just as the Norris LaGuardia Act.

It was not knowing as relates to being discriminated against because of age.

It was... in the context in which you referred to it, it was knowing as relates to being employed in the securities industry, and agreeing to arbitrate any disputes that he might have with his employer over the employment, but not with respect to Title VII or with respect to the age act.

Unknown Speaker: Thank you, Mr. Allred.

Mr. Spears, we'll hear from you.

Argument of James B. Spears

Mr. Spears: Mr. Chief Justice, and may it please the Court:

There's no dispute in this case that the text and the legislative history of the act, the age act, are silent as to any congressional intent to prohibit arbitration.

The FAA in that circumstance mandates arbitration unless there exists an inherent and irreconcilable conflict between arbitration and the purposes of that age act.

That's the issue for this Court to decide.

Such a conflict cannot be shown here.

Indeed, enforcement of the arbitration agreement here complements the ADEA's purposes.

A comparison of the act's purposes with arbitration eliminates a concern about any conflict existing.

The act's purposes are contained in section 2(b) of the act.

They are threefold.

Number one, to promote the employment of older workers; number two, prohibit arbitrary age discrimination; and number three, to help employers and employees find ways of meeting the problems impacted with regard to age.

The choice of arbitration clearly does not conflict with any of these purposes.

To the contrary, the enforcement of the provisions... the enforcement provisions chosen by Congress shows that it preferred that multiple methods be available to employers and employees in meeting problems under that act.

As one alternative, Congress provided for court enforcement.

Noteworthy they provided for court enforcement in any court or competent jurisdiction.

It is not restricted to the Federal courts.

It is very similar to the '33 Securities Act which this Court addressed in the Rodriguez case.

This Court commented that the wider choice of court provision in that statute indicated a congressional intent of allowing wider choice of alternatives for resolving claims under that act.

Before any litigation, what does Congress provide?

Congress expressly favors in the statute... resolution of disputes through voluntary means.

The conciliation, conference, and persuasion mandated in the statute by Congress are certainly more akin to arbitration than they are to litigation.

In fact, Congress provides for resolution of disputes in multiple administrative and judicial forum.

It's not just limited to the courts.

Congress never said if you've got an age claim you have to go immediately to the court.

An individual, of course, is required to file an EEOC charge, but beyond that requirement, he is allowed to leave it with the EEOC for them to attempt conciliation.

The individual can file a claim with the State or local agencies.

And as noted previously, he can also file a State or Federal lawsuit.

Unknown Speaker: Mr. Spears, I gather you're arguing that the contract would be enforceable even if there were no Federal Arbitration Act?

Mr. Spears: The Federal Arbitration Act mandates enforcement of it unless there's a contrary indication in the statute, Justice Stevens.

Unknown Speaker: It mandates enforcement of a contract evidencing a transaction involving commerce.

Mr. Spears: And this clearly is.

Unknown Speaker: What is... it evident... the contract evidence the hiring agreement between the employer and the employee.

Now, how does that... that's the transaction the contract evidences, isn't it?

Mr. Spears: It's not limited to that, Your Honor.

As Justice Stevens pointed out, there's a requirement here.

This is a... one... I'm sorry, Justice White, excuse me.

Unknown Speaker: No, that's Justice Stevens.

[Laughter]

Mr. Spears: I apologize, Your Honor, but I was trying to refer to your comments earlier today--

That the registration agreement here is at the minimum and probably more than a three-party agreement.

Unknown Speaker: But are... are you suing for enforcement of that?

Mr. Spears: Yes, Your Honor.

Unknown Speaker: I thought you were suing for enforcement of the provision in the employment contract.

Mr. Spears: It's enforceable either way.

It doesn't matter--

Unknown Speaker: If he had not signed an employment contract would you still have the same claim?

Mr. Spears: --Yes, Your Honor, because--

Unknown Speaker: So you're not relying on the arbitration clause in the employment contract?

Mr. Spears: --No.

The arbitration clause is part of the rules.

The arbitration clause is imposed by the... by the... by the New York Stock Exchange.

Unknown Speaker: I understand that.

So that what you're saying is that even had he not voluntarily signed this contract, the result would be the same?

Mr. Spears: I'm not sure I understand that question, Your Honor.

Unknown Speaker: Well, I thought you were relying on the arbitration clause in the employment agreement.

And I think now you're telling me you're not.

Mr. Spears: The arbitration clause is in his registration agreement.

There is no separate written employment agreement.

The arbitration clause... agreement, is in the registration agreement with the New York Stock Exchange, which, by the way, the company is required to get him to agree to.

To allow him to engage in a transaction involving the buying and selling of securities, Congress mandates... I'm sorry, the securities, New York Stock Exchange requires that anyone that is allowed that privilege has to become registered with them, and has... and by becoming registering agrees to abide by the constitution and rules as... which includes the requirement of arbitrating any dispute.

Rule 345, with regard to the concern about any voluntariness here, rule 345 says, it is quoted at page 1 of our appendix, that any controversy between a representative and any member or member organization arising out of the employment or termination of employment, as such registered representative shall be settled by arbitration at the instance of either party.

Either party could enforce this.

It's not limited to the company.

He himself has a right to enforce this.

But aside from the employment relationship, this is a business contract that relates between at least the three party and even outside parties.

Unknown Speaker: So your answer is that the transaction involving commerce was his agreement to abide by the rules of the Exchange?

His application for... his registration is the transaction--

Mr. Spears: Is the contract evidencing the transaction involving commerce.

Yes.

Unknown Speaker: --And the involving commerce... I see.

What did the Exchange agree to do in exchange for his promise?

Mr. Spears: Agreed to allow him to buy and sell securities, or have any involvement with that.

Unknown Speaker: Does it sign the--

Mr. Spears: And they also allowed him to take advantage of the arbitration benefits here also.

Unknown Speaker: --Does he sign the agreement... does the Exchange sign the agreement, too, and he keeps a copy and they keep a copy?

Is that what happens?

Mr. Spears: It comes down from the Exchange as the rules.

They are the superior or proven authority here.

It is signed, coincidentally, Justice Scalia, by a representative from the company.

It is called a U-4 form.

It appears at page 13 of our appendix.

It is signed by--

Unknown Speaker: The thing that's running through my mind, while you're looking for it, if the transaction involving commerce is his entitlement to engage in buying and selling over the Exchange, why isn't he then a person engaged in commerce?

Mr. Spears: --He is, by virtue of this agreement.

Unknown Speaker: He is a person engaged in commerce?

Mr. Spears: He is not only... he... his contract, his agreement to be bound by arbitration and all the other rules of the Exchange is the contract involved in the transaction involving commerce.

Unknown Speaker: And it involves commerce because he then becomes a person engaged in commerce, as I understand it.

Mr. Spears: If he relates to a transaction involving commerce.

Unknown Speaker: Which then brings him squarely within the language of section 1.

Mr. Spears: Well, section 2.

Unknown Speaker: And section 1.

Mr. Spears: Well, with regard to that, I think the difference in the language that was noted intends a broad application of section 2 and a narrow, restrictive application of section 1 exclusion.

I think that difference there means something--

Unknown Speaker: Yeah, but not the way you just described it and explained it to me.

Mr. Spears: --Well, I--

Unknown Speaker: You want to change your explanation, I guess.

Mr. Spears: --Well, I guess I'll have to, Your Honor, because I... I'm more convinced that the difference in the language gives an expansive reading, and indeed the courts have applied an expansive, have given the FAA an expansive reach, not a constricted reach.

This Court in Perry v. Thomas enforced the very form, the U-4 application form involved in this case.

By the way, I found now that--

Unknown Speaker: It's not in your appendix.

It must be somewhere else.

Is it in the joint appendix?

Mr. Spears: --I'm sorry, Your Honor.

I apologize.

It is the joint appendix at page 14.

It's signed by Harry M. Boyd, the Executive Vice President of the company, which agrees not to employ him unless he, unless he becomes registered as required by the law.

So the company, above signing this, but it is signed by the company, is also bound by the rules and the restrictions included in the arbitration agreement under the New York Stock Exchange.

Now, returning to the issue that I believe is before the Court, the... section 7 of the age act provides than an aggrieved citizen may bring a civil action in a court of competent jurisdiction.

It's not mandatory.

This is permissible language.

Indeed, as Judge--

Unknown Speaker: Mr. Spears, I mean, I don't think there has ever been a statute passed that says someone has to sue.

They're all couched in that language.

Mr. Spears: --Exactly.

Well... Your Honor, and in... in the Mitsubishi case this Court noted the fact that the statute, I think it was the Sherman Act, did not require an individual to bring a lawsuit as indicative of the choices that were available.

I think it's at 473 U.S. at page 637.

It was noted in Mitsubishi that the fact that... for example, there are some administrative procedures required by Congress where the individual has no control over that, under the National Labor Relations Act, for example.

That is solely up to the NLRB.

And section 10(a) of the NLRA says that there are no agreement between any parties can divest or affect the jurisdiction of the NLRB.

That is a special situation, and therefore the FAA could not enforce any agreement to arbitrate under that act.

But the contrast is important there.

The difference between the Sherman Act, the Rico statutes, the two securities acts, that allows any individual... that allows an aggrieved individual to go not only into Federal court but to any court--

Unknown Speaker: Your point then is that the act puts it in the hands of the aggrieved individual, rather than of some agency or board?

Mr. Spears: --Yes, Your Honor, and gives them a choice to go to court or not go to court.

I guess that more precisely makes my point.

To choose other fora that are available.

This includes, of course, private settlements.

They are allowed under the age act.

Another example is, of course, arbitration.

They are encouraged by the FAA.

And arbitration is not mentioned in the statute.

Under McMahon it is not necessary to mention it in the statute.

Significantly, Congress has not eliminated arbitration as an alternative under the age act.

The silence of the age act we think is significant.

Indeed, the need for more alternatives to litigation is ever increasing in this country.

Even as far back as 1967 when Congress passed the law, they noted in section 2 of the act that the numbers of auto workers are "great and growing".

More recently, according to a U.S. Census Bureau report quoted in one of our amicus briefs, by the year 2000, 20 percent of our population will be 55 or older.

By the year 2030, almost 33 percent will be 55 or older.

Now, the Equal Employment Opportunity Commission is having difficulties... in fact they're having difficulties managing the... their work load now of EEOC charges involving age claims.

Imagine how much more difficult it's going to be.

Noted in one of our amicus briefs, in the Harvard Law Review report... article, 104 of Harvard Law Review, a startling fact where the former chairman of the Commission, Clarence Thomas, in 1988, where the Commission reported that it may have mishandled as many as over 7,500 complaints of age discrimination over the previous 5 years by failing to act on them before the 2-year statute of limitation ran.

Congress' silence says something.

It says there ought to be these alternatives available for individuals to resolve these claims.

They shouldn't be restricted to only going to court.

Arbitration can clearly help mitigate these problems.

Older workers don't have as much time to wait for a remedy.

Extended litigation deprives them of an earlier remedy.

Alternatively, quicker resolution through arbitration complements Congress' goals.

It doesn't conflict with them.

If reinstatement is found to be an appropriate remedy in arbitration, it can be quicker, cheaper, and certainly less adversarial than litigation.

Isn't that better for everyone?

It's much easier for an employer to reinstate someone within a matter of months than it is when the time, litigation cost, and yes, even the emotional involvement of litigation, have made that prohibitive.

Unknown Speaker: Well, Mr. Spears, wouldn't the arbitration award be subject to some minimum form of judicial review after it were made?

Mr. Spears: Yes.

Yes, Mr. Chief Justice, but it would be reviewed much quicker, because it would be resolved more quickly, as a general proposition.

And I'm focusing now on the time, whatever the review might be allowed.

Whether it's affirmed or overturned or sent back for a reevaluation, all the parties are better off to have that resolved sooner than it is now in litigation.

Unknown Speaker: Yes, but I'm wondering whether your analysis is accurate.

You point to the delay... are you just talking about administrative delays before a case goes to the court where you are simply suing?

Mr. Spears: No, Your Honor.

I was really comparing that with the litigation itself.

Unknown Speaker: Well, but you're going to have... litigation itself would certainly describe what you have when an arbitration award is reviewed, wouldn't you?

I mean, you have an action, the district court to review the award.

If the people are dissatisfied they could appeal to the court of appeals.

Mr. Spears: But it's not a de novo review.

It would be a far--

Unknown Speaker: A more limited inquiry?

Mr. Spears: --A more limited review, as authorized and only as authorized by section, I think it's 10 and 11 of the Federal Arbitration Act.

And the deterrence of the act, another goal of the act, another goal of encouraging people to file charges, would also be enhanced by resolution through arbitration.

Where a coworker sees that another co-worker had his age claim rights vindicated through arbitration quickly, or certainly more quickly than might be available in litigation, that co-worker, if he or she is indeed a victim of age discrimination, is going to be more likely to pursue her rights under the statute.

This is particularly important where you're talking about victims that don't have the economic wherewithal to take on expensive and time consuming litigation.

Unknown Speaker: What if the co-worker is denied relief in arbitration?

Mr. Spears: I think... I would assume the individual would understand that was based on the merits and the resolution of that particular claim.

Knowing that a co-worker... anyone can get to arbitration quicker, Justice Blackmun, is my point there, that whatever the ultimate resolution, as long as the rights can be vindicated, as this Court has said, then deterrence is also being fulfilled.

Unknown Speaker: Mr. Spears, do the arbitrators have the power to award the kind of systemic relief that might be available in court under the ADEA?

Mr. Spears: Justice O'Connor, I'm not aware of anything in these rules that would prohibit them from doing that if the facts in a particular arbitration were to justify that.

There has been a recent amendment to one of the rules... I'm sorry I can't quote you the particular rule... which does allow for multiple parties to participate in an arbitration--

Unknown Speaker: How about a class action?

Mr. Spears: --Your Honor, I think it's very similar to a class action.

In an age case, of course class members have to opt in.

They have to exercise that option to opt in.

That is very analogous to the, to this New York Exchange rule that allows multiple parties to participate.

And Your Honor, with regard to... excuse me, Mr.... Justice O'Connor, I think there... I know there are no restrictions in these rules on the power to remedy that the arbitrator has.

My view is that the arbitrator has all of the same power that to remedy that is available under the statute.

Arbitration, of course, finally, also helps reduce the overburden work load of the Commission, State, and local agencies, and hopefully the Federal courts.

The Court has found that other statutes reflecting equally important public interest to be entirely appropriate for arbitration.

The reasons are clear.

The public interest in those statutes were not diminished by arbitration.

The liberal policy favored in arbitration under the age act... I'm sorry, under the FAA, must be applied absent affirmative congressional intent to prohibit.

I would like to turn next to the argument, as I understand it, of the petitioner that somehow the age act is different.

The plaintiff, in my view, attempts to create a conflict between the purposes of the age act and the purposes of the line of cases of... the FAA cases of this Court.

Indeed, he seems to argue that unless Gardner-Denver is allowed to control the circumstances here, then Gardner-Denver must be reversed.

Well, those are two poles apart, and there's a lot of ground in between.

Our position is very clear.

There is no need to even consider reversing Gardner-Denver or any progeny of that decision.

The factual differences, the legal issue differences, and the analysis differences under the different lines of cases are so stark that there's no conflict at all, and therefore both purposes, both statutes' purposes can be satisfied.

Unknown Speaker: What would you say is the principal distinguishing feature between Gardner-Denver and this case?

Mr. Spears: Your Honor, I think at bottom it's the collective bargaining context of Gardner-Denver.

That dominated the Court's consideration, and I would submit the ultimate resolution of that claim.

The Court focus in that case upon... which by the way was an already-completed arbitration.

It was not an issue of enforcing an arbitration agreement.

The arbitration had already been done under a union's collective bargaining arbitration mechanism.

And the Court said in Gardner-Denver that only the contractual claim had been resolved.

Now, here comes the company saying well, we won the discrimination issue in arbitration, that forecloses the statutory claim.

That's what was rejected, because what you had there was a conflict between two public policies, one encouraging collective bargaining, and the salutary benefits of collective bargaining including resolution of claims through arbitration.

But that sort of arbitration has nothing in common with the arbitration under the New York Exchange rules.

Mr. Gilmer was never a member of a union.

He remains in full control of selecting the arbitrator, deciding what evidence to submit.

There is no one between him and the resolution of his claim.

Unknown Speaker: Did the arbitration in Gardner-Denver purport to determine the statutory issue?

I thought it was purely an arbitration about the contract dispute and not about any statutory violation?

Mr. Spears: That's what I meant to say, Justice Scalia, is that--

Unknown Speaker: Is that what you've been saying?

I didn't--

Mr. Spears: --No, the Supreme Court said that the arbitration only resolved the contractual claim under the collective bargaining contract.

And the company apparently was trying to take that contract resolution and saying well, then, that controls, through preclusion, that controls the results under the statute.

And that's at bottom what made the difference in that case, because you... the Court was clearly concerned about the fox in the hen house problem.

Because clearly... and it said so in that decision, that letting the two entities that are the... I'm not talking about the specific ones in that case, but the employer and the union, both of which have been accused, not in that case but in other cases, of discrimination.

And the act was passed to address that sort of stuff.

So they clearly... the Court clearly did not feel comfortable with the union being in charge of even the ultimate decision of whether it went to arbitration.

Unknown Speaker: --What about the McDonald case?

That was a statutory right issue.

Mr. Spears: Yes, Your Honor, under 1983, as I recall the facts of that case.

And it's no different than Gardner-Denver.

It also was a collective bargaining--

Unknown Speaker: I thought you said the difference in Gardner-Denver was they didn't resolve the statutory issue?

And then I asked you about a statutory case and you say they're exactly the same.

Mr. Spears: --Well, there was a collective bargaining arbitration in McDonald also, an already-completed arbitration.

And the issue there was, again, preclusion, whether or not the resolution of the contract issue controlled the statutory issue under 1983.

So the case as, I see them as just being identical to one another.

Unknown Speaker: I thought... wasn't the statutory issue submitted to the arbitrator in McDonald?

I thought it was.

Mr. Spears: Your Honor, I don't recall.

I'm sorry.

Unknown Speaker: I thought it was.

But at least it's similar to Alexander in that it involved a collective bargaining agreement, so that the person who had agreed to the arbitration was not the individual who was... whose statutory right had allegedly been taken away.

Mr. Spears: That's right.

Unknown Speaker: But rather somebody else purporting to act on that individual's behalf.

Mr. Spears: And that probably controlled whether or not the issue even went to arbitration.

That is, that is the fundamental difference, and that's of course not present here.

There is no conflict like that here.

There is not even the potential for the conflict here.

The... in closing, I want to point out certain unique facts about this case that I think fully support the compliance with the FAA's mandate for arbitration here.

The facts are peculiarly appropriate for arbitration.

Mr. Gilmer is an experienced executive.

He's not a worker moving goods in commerce.

For 20 years he has been registered with this very stock exchange that he registered with with this respondent.

He has worked in the industry for the 28 years.

The registration agreement is a customary requirement of stock brokers buying and selling securities in this highly regulated industry.

Indeed, the agreement is no different than the very type of agreement this Court has found enforceable against customers, far less sophisticated, in McMahon and the Rodriguez case.

This arbitration agreement is an integral part of the Exchange's self-regulatory--

Unknown Speaker: Mr. Spears, can I ask you this?

Would your position not be precisely the same if a nonunion employer just required all his employees to agree to arbitrate any dispute?

Statutory, civil rights, or anything else?

Mr. Spears: --If they are under... if they comply... if they come under the FAA, yes.

Unknown Speaker: Right, if they're engaged in commerce, yeah.

So you don't really need... I mean, I understand it strengthens your case, but I think your basic position is that, absent a collective bargaining agreement, an employer-employee agreement to arbitrate all disputes, including statutory disputes, is enforceable?

I think that's really what it comes down to, isn't it?

And I'm not saying you're wrong, but--

Mr. Spears: Yes.

Unknown Speaker: --I think that's what you're arguing.

Mr. Spears: Yes.

It's enforceable particularly in light of the FAA--

Unknown Speaker: Right.

Mr. Spears: --because that mandates enforcement of that.

Your Honor, one final point I would like to point out.

In their argument that the purpose of the age act is so paramount or so important that it ought to be treated differently, and I assume they feel the same way about Title VII, in our view that was rejected in Mitsubishi.

That argument was made in Mitsubishi that the importance of the act there was so paramount that, that the Court should not allow enforcement under the FAA.

In that decision Justice Blackmun pointed out that a concern for statutorily protected classes provides no reason to color the lens through which the arbitration clause is read, provides no reason.

You don't look at is the class age victims, or is the class black employees, or is the class securities customers.

That has been rejected in Mitsubishi.

Indeed, in October 1989 this Court rejected, in my view, a very analogous case, the Second Circuit case in Bird v. Shearson Lehman.

It vacated and remanded that in light of the Rodriguez decision.

While I certainly don't know the precise reasons, it seems to me that the strong language in McMahon, Rodriguez, based on Mitsubishi, has eliminated this sort of public policy, this sort of value judgment that somehow this statute is different, or this statute is so important that arbitration just should not be allowed to touch it.

I think it's implicit in the vacation and remand of that that that argument is long gone.

That, of course, is what this Court said was the primary underpinning of the Wilko v. Swan.

In fact, in Mitsubishi the Court also rejected the Second Circuit's standard known as the American Safety Equipment Standard, which was, again, a case that focused on... the Sherman Act in that case was viewed to be so different and so important that it could not be arbitrated.

In... I think it was the McMahon case or Mitsubishi, this Court took those and point by point rejected the underpinnings.

Unknown Speaker: Mr. Sherman, was that... was the Bird case an employment case?

Mr. Spears: It was an ERISA case, Your Honor.

It involved employment benefits under ERISA.

And it... the Second Circuit Bird decision, reading that is exactly... indeed it relies upon Gardner-Denver, Barrentine, and McDonald, the same way the plaintiff does here.

Unknown Speaker: Has the Second Circuit regularly had cases dealing with employees of securities companies?

Mr. Spears: Your Honor, maybe more often because of New York.

Unknown Speaker: Have they ever adjudicated one?

Mr. Spears: Not out of New York, Your Honor.

Chief Justice Rehnquist: Thank you, Mr. Spears.

The case is submitted.

Attribution:

The OYEZ Project

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