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National Labor Relations Board v. CNN America, Inc.

United States Court of Appeals, District of Columbia Circuit

August 4, 2017

National Labor Relations Board, Petitioner
v.
CNN America, Inc., Respondent National Association of Broadcast Employees and Technicians - Communications Workers of America, Local Union No. 11 and National Association of Broadcast Employees and Technicians - Communications Workers of America, Local Union No. 31, Intervenors

          Argued February 23, 2017

         On Application for Enforcement and Cross-Petition For Review of an Order of the National Labor Relations Board

          Kannon K. Shanmugam argued the cause for CNN America, Inc. With him on the briefs were Kevin T. Baine, Paul Mogin, and Zachary D. Fasman.

          Maurice Baskin, Michael J. Lotito, and Elizabeth Parry were on the brief for amici curiae Chamber of Commerce of the United States of America, et al. in support of CNN America.

          Joan E. Hoyte-Hayes, Supervisory Attorney, National Labor Relations Board, argued the cause for the National Labor Relations Board. With her on the brief were Richard F. Griffin, Jr., General Counsel, John H. Ferguson, Associate General Counsel, and Linda Dreeben, Deputy Associate General Counsel. Usha Dheenan, Attorney, entered an appearance.

          Keith R. Bolek argued the cause for intervenors. With him on the brief was Patricia McConnell.

          Before: Garland, Chief Judge, and Kavanaugh and Pillard, Circuit Judges.

          OPINION

          GARLAND, CHIEF JUDGE.

         For many years, Cable News Network (CNN) used outside contractors to provide technicians to operate the electronic equipment at its Washington, D.C. and New York City bureaus. In 2003, CNN changed that longstanding arrangement, terminating its latest contracts and hiring a new in-house workforce. The National Labor Relations Board found that CNN's replacement of its unionized contractor with a nonunion, in-house workforce violated the National Labor Relations Act in several respects.

         The Board now applies for enforcement of its decision and order. CNN cross-petitions for review. For the reasons set forth below, we grant each request in part and deny each in part.

         I

         CNN is a leading television and online news provider. Its Washington, D.C. and New York City bureaus, from their inception, relied on outside contractors to operate the equipment necessary to produce and broadcast the news. Pursuant to exclusive service contracts -- known as Electronic News Gathering Service Agreements -- camera operators, sound technicians, studio technicians, and broadcast engineers (hereinafter, "technicians") employed by the contractors performed much of the technical work at both bureaus.

         Those technicians were consistently represented by a union. In 1982, the Board certified the National Association of Broadcast Employees and Technicians (hereinafter, "the union") as the collective-bargaining representative of the technicians staffing the Washington bureau. In 1985, the Board certified the same union to represent the New York bureau's technicians. Over the following years, the union and the contracting companies employing the technicians entered into successive collective-bargaining agreements. When CNN switched contracting companies -- which happened several times -- the new company would hire nearly all of its predecessor's employees and continue to recognize the union.

         In 1997, Asgard Entertainment Group successfully bid for the Washington contract and created Team Video Services (TVS) for the sole purpose of staffing the Service Agreement with CNN. In 2001, Asgard won the New York contract, which it also serviced through TVS. The Service Agreements at the two bureaus were materially identical. Broadly, they required TVS to furnish CNN with technicians, as well as supervisors for those technicians, in exchange for CNN covering TVS' labor expenses and paying a monthly management fee. The Service Agreements provided that TVS would supply full-time technicians for at least 40 hours per week, in addition to part-time technicians available 24/7 as needed by CNN. They also provided that CNN: could require changes in TVS staffing levels; could audit TVS' books without cause or notice; would fund a 4% increase in salary expenses per year; would provide all equipment used by TVS technicians; and had the sole option to renew the agreement and could terminate it for any reason upon four weeks' notice.

         On September 29, 2003, CNN announced that it was terminating its contracts with TVS and would begin directly hiring employees to perform the camera, studio, and engineering work at the Washington and New York bureaus. CNN expressed appreciation for TVS' performance and service. It said, however, that it wanted a new workforce to allow it to take advantage of technological developments in the industry, particularly computer-related technology. When the union requested recognition and bargaining, and asked to discuss future employment prospects for bargaining-unit employees, CNN denied the requests.

         CNN named the process by which it would directly hire its new workforce the "Bureau Staffing Project." According to CNN executives, the company planned to use a multistep "behavioral interviewing process" to hire over 200 skilled technicians for the two bureaus. Former TVS employees could apply for the new jobs, but they would have to go through the Staffing Project's interviewing process. In the end, more than 100 TVS bargaining-unit employees were not hired and lost their jobs.

         Three months after CNN officially terminated the Service Agreements, the union filed unfair-labor-practice charges with the National Labor Relations Board (NLRB). Three years later, in 2007, the Board's General Counsel filed his own complaint against CNN. In November 2008, after an 82-day trial, an administrative law judge (ALJ) ruled against CNN in an 83-page opinion.

         The ALJ first determined that CNN had been a joint employer of TVS' employees before the termination of the Service Agreements and was thus bound by TVS' collective-bargaining agreements with the union. He further determined that CNN became a successor employer after it terminated TVS and hired a new workforce. The ALJ found that "the reasons given by CNN for its termination of its contracts with [TVS] and its implementation of the Bureau Staffing Project [were] pretextual. A major motive in these decisions was CNN's desire to operate its Washington and New York bureaus without a union." CNN America, Inc., 361 NLRB No. 47, at 51 (2008) (ALJ Op.). The ALJ also found that "the Bureau Staffing Project was a sham process, " during which "CNN engaged in widespread and blatant discrimination against [TVS] bargaining unit members." Id. at 50. "CNN did so, " the ALJ found, "with the objective of depriving employees of [union] representation." Id. On the basis of these findings, and others discussed below, the ALJ determined that CNN committed multiple violations of the National Labor Relations Act (NLRA).

         CNN appealed to the Board, which finally issued its decision in 2014, affirming the ALJ in all relevant respects. CNN America, Inc., 361 NLRB No. 47, at 1 & n.1 (2014) (Board Op.). The Board found that, as a joint employer, CNN: violated NLRA § 8(a)(3) and (1), 29 U.S.C. § 158(a)(3), (1), by terminating the Service Agreements out of anti-union animus; and violated § 8(a)(5) and (1), id. § 158(a)(5), (1), by failing to bargain with the union about its decision to terminate those agreements. The Board further found that, as a successor employer, CNN violated § 8(a)(5) and (1) by failing to recognize and bargain with the union and unilaterally changing the employees' terms and conditions of employment. The Board also found that CNN: violated § 8(a)(3) and (1) by discriminating against union members in its hiring process; and violated § 8(a)(1) on four occasions by making coercive statements through its supervisors.

         As a remedy for those violations, the Board ordered that, among other things, CNN: (1) provide backpay and benefits to all TVS technicians who either lost their jobs or received reduced wages as a result of CNN's violations; (2) reinstate and provide necessary training to all TVS technicians who were discharged and not hired by CNN; and (3) recognize and bargain with the union.[1]

         CNN filed a motion for reconsideration, which the Board denied. CNN America, Inc., 362 NLRB No. 38 (2015). The Board now applies for enforcement of its decision and order, and CNN cross-petitions for review. The union has intervened in support of the Board.

         II

         The Board first had to decide whether CNN was a joint employer of TVS' employees. The Board's affirmative answer to that question led it to find that CNN committed two unfair labor practices: terminating the Service Agreements due to anti-union animus, in violation of § 8(a)(3) and (1); and failing to bargain with the union before terminating the Service Agreements, in violation of § 8(a)(5) and (1). If, as CNN argues, the Board wrongly concluded that CNN was a joint employer, then those two unfair-labor-practice findings must fall away. This is so because, if CNN was not a joint employer of TVS' employees, it would not have been bound by the collective-bargaining agreement between TVS and the union, and its termination of the Service Agreements would thus have been lawful. See Computer Assocs. Int'l, Inc. v. NLRB, 282 F.3d 849, 852-53 (D.C. Cir. 2002); see also Computer Assocs. Int'l, Inc., 324 NLRB 285, 286 (1997) ("[A]n employer does not violate Section 8(a)(3) by ceasing to do business with another employer because of the union or nonunion activity of the latter's employees."), enforcement denied on other grounds, 282 F.3d 849 (D.C. Cir. 2002).

         We conclude that the Board's determination that CNN and TVS were joint employers cannot stand. This is not because we find that the two companies lacked a joint-employer relationship. Rather, it is because the Board applied a standard for determining whether companies are joint employers that appears to be inconsistent with its precedents, without addressing those precedents or explaining why they do not govern. Our conclusion does not bar the Board from finding CNN to be a joint employer by applying a different standard or sufficiently explaining the one it did apply. It means only that we cannot enforce the Board's determination in this proceeding.

         A

         Citing two 1984 decisions, the Board began its joint-employer analysis by setting forth the governing standard it intended to apply: "The Board will find that two separate entities are joint employers of a single workforce if the evidence shows that they 'share or codetermine those matters governing the essential terms and conditions of employment.'" CNN America, Inc., 361 NLRB No. 47, at 3 (quoting TLI, Inc., 271 NLRB 798, 803 (1984)) (emphasis added); see id. (citing Laerco Transp., 269 NLRB 324, 325 (1984)); see also ALJ Op., 361 NLRB No. 47, at 52-53.

         In two sentences in a footnote, the Board acknowledged that its subsequent 2002 opinion in Airborne Express "stated that the test for joint-employer status requires 'direct and immediate' control by the putative joint employer over employment matters." 361 NLRB No. 47, at 3 n.7 (quoting Airborne Express, 338 NLRB 597, 597 n.1) (emphasis added). But the Board noted that the case Airborne Express cited for that proposition, TLI, Inc., had "ma[de] no mention that control over employment matters must be direct and immediate." Id. Apparently sidestepping the "direct and immediate" control requirement, which it never mentioned again, the Board concluded that CNN and TVS were joint employers.[2]

         The Board's decision was issued by a three-member panel. After the panel's decision, but before the briefing of this appeal, the full Board sat in another case to consider "its current standard for assessing joint-employer status." Browning-Ferris, 362 NLRB No. 186, at 1 (2015). In Browning-Ferris, the full Board canvassed a 30-year history of its joint-employer cases -- a period beginning with TLI and Laerco Transportation and running through Browning-Ferris itself -- and concluded that the prevailing standard during that period required an employer's exercise of "direct [and] immediate" control. Id. at 13. "Most significantly, " the Board said,

the Board's decisions have implicitly repudiated . . . reliance on reserved control and indirect control as indicia of joint-employer status. The Board has foreclosed consideration of a putative employer's right to control workers, and has instead focused exclusively on its actual exercise of that control -- and required its exercise to be direct, immediate, and not "limited and routine."

Browning-Ferris, 362 NLRB No. 186, at 13. Among other cases, the Board said, Airborne Express had "held that '[t]he essential element in [the joint-employer] analysis is whether a putative joint employer's control over employment matters is direct and immediate.'" Id. at 14 (quoting Airborne Express, 338 NLRB at 597 n.1) (emphasis added).

         Having established that the existing standard was "direct and immediate" control, Browning-Ferris then went on to criticize that standard. Following an extensive discussion, the Board concluded that "the current joint-employer standard is not mandated by the Act and . . . does not best serve the Act's policies." Id. at 15. "[W]e will no longer require, " the Board continued, "that a joint employer not only possess the authority to control employees' terms and conditions of employment, but must also exercise that authority, and do so directly, immediately, and not in a 'limited and routine' manner." Id. at 19. "Accordingly, we overrule Laerco, TLI, A&M Property, and Airborne Express, . . . and other Board decisions, to the extent that they are inconsistent with our decision today. The right to control, in the common-law sense, is probative of joint-employer status, as is the actual exercise of control, whether direct or indirect." Id. Under its revised standard, the Board said, "two or more entities are joint employers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment." Id.

         B

         The difference between the case now before us and Browning-Ferris should be apparent. In Browning-Ferris, the Board carefully examined three decades of its precedents and concluded that the joint-employer standard they reflected required "direct and immediate" control. It then criticized that standard. Thereafter, it forthrightly overruled those cases and set forth, as "a new rule" for identifying joint employment, a standard quite similar to the one the Board in the case before us claimed had been the standard all along. Id. at 3; see id. at 19. This an agency may do, as long as it provides a reasoned explanation for its change of course. See FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515 (2009). In fact, whether the Board did so in Browning-Ferris is a question at issue in a petition for review of that decision that is currently pending before another panel of this court. See Browning-Ferris Indus. of Cal. v. NLRB, No. 16-1028 (D.C. Cir. filed Jan. 20, 2016).

         In the case on review here, however, the Board did none of those things. In characterizing the prevailing joint-employer standard, it did not grapple with its precedents in the manner of Browning-Ferris. It did not explain why it thought precedents that seemed to "focus[] exclusively on [the employer's] actual exercise of . . . control -- and require[] its exercise to be direct [and] immediate, " Browning-Ferris, 362 NLRB No. 186, at 13, instead supported a more flexible "share or codetermine" standard.[3] Indeed, it did not even mention many of the important precedents at all, including those that expressly used the "direct and immediate" control formulation.[4] Nor did the Board mention the fact that, just three months earlier, its own General Counsel's amicus brief in Browning-Ferris had said: "[T]he Board [has] made clear that the essential element in its current analysis is 'whether a putative joint employer's control over employment matters is direct and immediate.'" Amicus Brief of the General Counsel at 8, Browning-Ferris Indus., Docket No. 32-RC-109684 (June 26, 2014) (quoting Airborne Express, 338 NLRB at 597 n.1) (emphasis added in brief). And because it did not acknowledge the precedent suggesting that "direct and immediate" control was the existing standard, it certainly did not forthrightly overrule it.[5]

         Such "[s]ilence in the face of inconvenient precedent is not acceptable." Jicarilla Apache Nation v. Dep't of Interior, 613 F.3d 1112, 1120 (D.C. Cir. 2010). "An agency's failure to come to grips with conflicting precedent constitutes 'an inexcusable departure from the essential requirement of reasoned decision making.'" Ramaprakash v. FAA, 346 F.3d 1121, 1125 (D.C. Cir. 2003) (quoting Columbia Broad. Sys. v. FCC, 454 F.2d 1018, 1027 (D.C. Cir. 1971)). Indeed, it is "elementary that an agency must conform to its prior decisions or explain the reason for its departure from such precedent." Gilbert v. NLRB, 56 F.3d 1438, 1445 (D.C. Cir. 1995). "[A]n agency changing its course must supply a reasoned analysis indicating that prior policies and standards are being deliberately changed, not casually ignored, and if an agency glosses over or swerves from prior precedents without discussion it may cross the line from the tolerably terse to the intolerably mute." Greater Boston Television Corp. v. FCC, 444 F.2d 841, 852 (D.C. Cir. 1970).[6]Because the Board crossed that line here, we must set aside its finding that CNN was a joint employer. See, e.g., E.I. Du Pont De Nemours & Co. v. NLRB, 682 F.3d 65, 70 (D.C. Cir. 2012). And as a consequence, we must vacate the two unfair-labor-practice findings that rested on CNN's joint-employer status. See Computer Assocs. Int'l, 282 F.3d at 853.

         We emphasize that nothing in our holding in this case precludes the Board from adopting a "share or codetermine" standard that takes into account a putative employer's indirect control of a group of workers. As we have noted, the validity of the Board's rejection of the "direct and immediate" control requirement in Browning-Ferris is at issue in the pending petition for review of that decision. Nor does anything in our holding preclude the Board, on remand, from applying the "direct and immediate" control standard and concluding that CNN satisfied that standard. But it did not do so in the proceedings in this case, and this court lacks authority to resolve the case by applying that standard itself. As the Supreme Court held over 70 years ago in SEC v. Chenery Corp., "[t]he grounds upon which an administrative order must be judged are those upon which the record discloses that its action was based." 318 U.S. 80, 87 (1943); see Michigan v. EPA, 135 S.Ct. 2699, 2710 (2015); see also Williams Gas Processing - Gulf Coast Co. v. FERC, 373 F.3d 1335, 1345 (D.C. Cir. 2004) ("It is axiomatic that we may uphold agency orders based only on reasoning that is fairly stated by the agency in the order under review . . . .").

         III

         Although we cannot affirm the NLRB's finding that CNN was a joint employer with TVS, the Board's three remaining unfair-labor-practice findings do not depend on CNN's joint-employer status. The first of the three survives if CNN was a successor employer to TVS, even if the two were not joint employers. The Board found that CNN was a successor, and on that basis found that CNN violated NLRA § 8(a)(5) and (1) by failing to bargain with the union after it completed its hiring and became the technicians' employer. "When the Board concludes that a violation of the NLRA has occurred, we must uphold that finding unless it 'has no rational basis' or is 'unsupported by substantial evidence.'" Bally's Park Place, Inc. v. NLRB, 646 F.3d 929, 935 (D.C. Cir. 2011) (quoting United Mine Workers of Am., Dist. 31 v. NLRB, 879 F.2d 939, 942 (D.C. Cir. 1989)); see 29 U.S.C. § 160(e). And because the Board largely adopted "the ALJ's findings and conclusions as its own, we apply the same deferential standard to those findings and conclusions." Weigand v. NLRB, 783 F.3d 889, 895 (D.C. Cir. 2015).

         NLRA § 8(a)(5) makes it an unfair labor practice for an employer "to refuse to bargain collectively with the representatives of [its] employees." 29 U.S.C. § 158(a)(5). A new employer, however, "generally assumes an obligation to bargain with the representative of its predecessor's employees only if the new employer is considered a 'successor' to the old." Waterbury Hotel Mgmt., LLC v. NLRB, 314 F.3d 645, 653 (D.C. Cir. 2003). An entity qualifies as a successor employer when: (1) it "does not make a 'significant change' in the 'essential nature' of the business, and (2) 'a majority of the new [employer's] employees were employed by the predecessor.'" Capital Cleaning Contractors, Inc. v. NLRB, 147 F.3d 999, 1005 (D.C. Cir. 1998) (quoting Elastic Stop Nut Div. of Harvard Indus., Inc. v. NLRB, 921 F.2d 1275, 1281 (D.C. Cir. 1990)); see Waterbury Hotel Mgmt., LLC, 314 F.3d at 653; see also Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 41-43 (1987).

         CNN does not contend that it made a significant change in the essential nature of TVS' operations. And for good reason. As the Board found, after CNN took over from TVS, "CNN continued the same business operations with employees who performed the same work, at the same locations, and using the same equipment, as the TVS technicians." Board Op., 361 NLRB No. 47, at 21; see also ALJ Op., 361 NLRB No. 47, at 108. The only question, then, is whether a majority of CNN's new employees were previously employed by TVS.

         Normally, answering this question requires an exercise in counting. But when "a successor refuses to hire predecessor employees because of anti-union animus, the Board presumes that but for such discrimination, the successor would have hired a majority of incumbent employees." Waterbury Hotel Mgmt., LLC, 314 F.3d at 655; see Capital Cleaning Contractors, Inc., 147 F.3d at 1008. "In effect, when a successor refuses to hire its predecessor's employees based upon anti-union animus, the successor loses the right unilaterally to set the initial terms and conditions of employment; it must first bargain with the union." Capital Cleaning Contractors, Inc., 147 F.3d at 1008. The Board took this tack in finding that CNN was a successor employer -- and thus violated § 8(a)(5) by refusing to bargain --because it determined that CNN discriminated against TVS employees (who were invariably union members) in its hiring process. See Board Op., 361 NLRB No. 47, at 18, 21.[7]

         To determine whether an employer engaged in discriminatory hiring, the Board employs a burden-shifting analysis known as the Wright Line test. See Wright Line, 251 NLRB 1083 (1980), enforced, 662 F.2d 899 (1st Cir. 1981).[8]First, the General Counsel must show that the employer's hiring decisions were "motivated by anti-union considerations." Waterbury Hotel Mgmt., LLC, 314 F.3d at 651 (quoting Teamsters Local Union No. 171 v. NLRB, 863 F.2d 946, 955 (D.C. Cir. 1988)). "The Board may rely on both direct and circumstantial evidence in resolving this question of fact." Id. "Once the General Counsel has established that the employer was in fact motivated by anti-union animus, the Board must find a violation of the Act unless the employer can show ...


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