United Rentals, Inc., 853 (2007)

United Rentals, Inc. and International Union of Operating Engineers, Local 12, AFL–CIO. Cases 21–CA–36814 and 21–CA–36930

April 27, 2007

DECISION AND ORDER

By Members Liebman, Schaumber, and Kirsanow

On January 13, 2006, Administrative Law Judge William G. Kocol issued the attached decision. The Respondent filed exceptions and a supporting brief, the General Counsel and Charging Party filed answering briefs, and the Respondent filed a reply brief. The General Counsel filed a limited exception and supporting brief, and the Respondent filed an answering brief.[1]

The National Labor Relations Board has delegated its authority in this proceeding to a three-member panel.

The Board has considered the decision and the record in light of the exceptions and briefs and has decided to affirm the judge's rulings, findings,[2] and conclusions as modified herein and to adopt the recommended Order as modified.[3]

Since at least 2001, the Respondent’s annual practice has been to evaluate employee performance and, effective April 1 of each year, to grant merit-based wage increases. On March 4, 2005, the International Union of Operating Engineers, Local 12, AFL–CIO (Union) was certified as the bargaining representative of a unit of the Respondent’s employees at its facility in Pico Rivera, California. In 2005, without providing the Union notice and an opportunity to bargain, the Respondent failed to give evaluations and wage increases to Pico Rivera’s newly represented unit employees, though it continued its established practice for the nonunit employees at Pico Rivera and employees at its other facilities. The judge found that the Respondent’s failure in this regard violated Section 8(a)(5) of the Act. For the reasons stated by the judge, as supplemented below, we affirm the judge’s finding.

The Respondent’s performance appraisal and wage-increase system is fully explained in the judge’s decision, but we highlight the most pertinent features. First, the Respondent’s performance review process involves fixed criteria and established procedures. Employees are evaluated against a set of job responsibilities and key behaviors set forth on an evaluation form; the review results in one of four ratings, ranging from “very good” to “unacceptable.” The Respondent has “forced distribution” guidelines, which managers and supervisors are strongly encouraged to follow, concerning the percentage of employees to be placed in each of the four ratings categories.[4] Second, in making its annual April 1 wage-increase decisions, the Respondent regularly uses the same tool—a “merit matrix”—to calculate a recommended wage increase based on certain criteria: the Respondent’s budgeted amount for wage increases,[5] the employee’s position, grade, and corresponding salary band, and the employee’s performance rating. Using “MeritNet,” described as a “Web-based total compensation planning tool,” the Respondent inputs the data from its evaluation process into a “merit matrix” to arrive at a recommended increase for each employee.[6] The Respondent’s branch managers have the discretion to adjust this recommended increase within their branch’s allocated pool of wage-increase funds; district managers also have the discretion to reallocate wage-increase funds between branches.

Under Sections 8(a)(5) and 8(d) of the Act, an employer that is party to a collective-bargaining relationship is obligated to bargain in good faith over “wages, hours, and other terms and conditions of employment.” As a consequence of this obligation, such an employer violates Section 8(a)(5) if it unilaterally changes a term or condition of employment without first providing the union with notice or an opportunity to bargain.[7] Thus, where a past practice of adjusting wages constitutes a term or condition of employment, the unilateral discontinuance of that practice violates Section 8(a)(5).[8] A merit wage-increase program constitutes a term or condition of employment “when it is an ‘established practice . . . regularly expected by the employees.’”[9] Factors relevant to this determination include “the number of years that the program has been in place, the regularity with which raises are granted, and whether the employer used fixed criteria to determine whether an employee will receive a raise, and the amount thereof.”[10]

There is no dispute that in 2005 the Respondent withheld evaluations and wage increases from its represented employees at Pico Rivera. It is also undisputed that the Respondent did not inform the Union that 2005 evaluations and increases had not been given until the parties’ first bargaining session on May 5, 2005. Thus, the Respondent unilaterally withheld 2005 evaluations and increases without giving the Union notice and an opportunity to bargain over the change.[11] Accordingly, the determinative issue is whether the Respondent’s system of adjusting wages was an established practice regularly expected by employees, and hence a term or condition of employment.

The Respondent has used MeritNet as part of its wage-increase program at Pico Rivera since 2002, and raises pursuant to that program were regularly granted effective April 1 of each year. In addition, the Respondent “used fixed criteria to determine whether an employee will receive a raise, and the amount thereof.”[12] As summarized above and more fully explained in the judge’s decision, the Respondent’s system of adjusting wages takes into consideration a number of fixed criteria, including the state of the overall economy, area wage surveys, and the Respondent’s financial status to determine the percentage of budget going to wage increases, as well as the employee’s position, grade, salary band, and performance rating (itself arrived at through a structured process based on objective criteria) to determine recommended merit increases. Moreover, the Respondent also regularly uses the same tool, the MeritNet “merit matrix,” throughout its wage increase planning. Thus, all three factors relevant to determining whether the Respondent’s wage-increase program was an established practice regularly expected by its employees have been met here.

In finding that the Respondent violated Section 8(a)(5) by failing to give 2005 evaluations and wage increases to unit employees at Pico Rivera, the judge relied principally on the Board’s decision in Daily News of Los Angeles, supra. Excepting, the Respondent seeks to distinguish Daily News as involving a “mechanistic” system for determining wage increases, and to characterize its own system as almost wholly discretionary. Contrary to the Respondent’s argument, its wage-increase decisions involve far less discretion than those in Daily News. In Daily News, the employer annually evaluated the performance of each employee and granted merit-based wage increases that were entirely discretionary in amount.[13] Notwithstanding that significant discretionary component, the Board found, and the D.C. Circuit agreed, that the employer’s wage increases were not completely discretionary because they were based on the fixed criterion of merit.[14] Here, the Respondent bases employees’ wage increases on a calculus from its “merit matrix,” factoring in employees’ performance ratings and salary range positions. Thus, the conclusion that the wage-increase program at issue here constituted a term or condition of employment is even more compelling than the like conclusion concerning the wage-increase program at issue in Daily News.

In support of its argument that its wage-increase program was not an established practice, the Respondent relies on Acme Die Casting v. NLRB.[15] That reliance is misplaced, as Acme is plainly distinguishable. There, the record showed a past practice of across-the-board wage increases varying in amount and granted, in the court’s view, at somewhat irregular intervals. The court found that the timing of the increases “was by no means fixed,” and more importantly, that there was no evidence that the employer “had ‘constrained’ itself by ‘established procedures’ or ‘fixed criteria’ for establishing the amount of the increases.”[16] Here, by contrast, increases had been regularly effective the same time each year (April 1) for the previous 4 years, and the amount of the increases was based on established procedures and fixed criteria.

In sum, the Respondent’s practice of conducting merit reviews and adjusting wages based on those reviews and other fixed criteria was an established practice regularly expected by its employees, and consequently a term or condition of employment. By discontinuing reviews and increases in 2005 for unit employees at its Pico Rivera facility, the Respondent violated Section 8(a)(5).[17]

ORDER

The National Labor Relations Board adopts the recommended Order of the administrative law judge as modified below and orders that the Respondent, United Rentals, Inc., Pico Rivera, California, its officers, agents, successors, and assigns, shall take the action set forth in the Order as modified.

1. Delete paragraph 1(g) and reletter the subsequent paragraph accordingly.

2. Substitute the attached notice for that of the administrative law judge.

   APPENDIX

   Notice To Employees

   Posted by Order of the

   National Labor Relations Board

   An Agency of the United States Government

   The National Labor Relations Board has found that we violated Federal labor law and has ordered us to post and obey this notice.

   FEDERAL LAW GIVES YOU THE RIGHT TO

   Form, join, or assist a union

   Choose representatives to bargain with us on your behalf

   Act together with other employees for your benefit and protection

   Choose not to engage in any of these protected activities.

   We will not fail to give unit employees evaluations and pay increases, if warranted, without first giving the International Union of Operating Engineers, Local 12, AFL–CIO, notice and an opportunity to bargain about the matter. The unit is:

   All full-time and regular part-time customers service...