North American Pipe Corp., (2006)

North American Pipe Corporation and Unite Here.1 Cases 26–CA–21773 and 26–CA–21833

July 31, 2006

DECISION AND ORDER

By Chairman Battista and Members Schaumber and Walsh

On March 29, 2005, Administrative Law Judge Margaret G. Brakebusch issued the attached decision. The General Counsel and the Charging Party each filed exceptions and a supporting brief. The Respondent filed an answering brief. The Charging Party filed a reply.

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, and conclusions,2 and to adopt the recommended Order.

i. introduction

In this case, we consider the lawfulness of the Respondent’s unilateral grant of a companywide stock award to employees in a bargaining unit represented by the Union. As explained in more detail below, the one-time grant was made to all employees at each of the Respondent’s facilities in connection with the initial public stock offering of the Respondent’s parent corporation. The complaint alleges that the Respondent violated Section 8(a)(5) and (1) of the Act by granting the stock to unit employees without first notifying and giving the Union an opportunity to bargain about the matter. The judge found that the grant of stock constituted a gift and, consequently, was not a mandatory subject of bargaining that required notice to or bargaining with the Union. For the reasons stated herein, we agree with the judge’s conclusion.3

ii. factual background

The Respondent, a subsidiary of Westlake Chemical Corporation (Westlake), operates 13 manufacturing facilities throughout the United States, including a plant in Van Buren, Arkansas, where it manufactures polyvinyl chloride piping products. The Union represents approximately 50 production and maintenance employees at the Van Buren facility.

On August 11, 2004,4 Westlake made its initial public stock offering (IPO). Although not mentioned by the judge, on or about August 14, Westlake’s vice-president of administration, David Hanson, convened a meeting among Westlake’s human resources managers, each of whom was responsible for a different Westlake business unit. The assembled group included Keith Johnson, Westlake’s human resources manager for the fabricated products group, which includes the Respondent’s Van Buren facility. At that meeting, the human resources managers were informed that Westlake would be giving 100 shares of stock to all Westlake and Westlake-related employees, and that Westlake would be sending letters to all employees notifying them about the stock giveaway.

On August 16, the Respondent posted on the bulletin board in its break room an interoffice memorandum it received from Westlake. The memorandum was from Westlake’s president and CEO, Albert Chao, and addressed to “[a]ll regular, full-time employees” at each Westlake-related facility. The memorandum announced Westlake’s IPO and stated

In recognition of this important historic company event and the significant contribution made by each of you toward the growth and success of the company, the Board of Directors has authorized an award of 100 shares of common stock to each full-time, regular employee with at least six months of service as of today. These shares will be awarded to you initially in the form of stock units, and shares will be distributed to you at the conclusion of six months, provided you remained a regular, full-time employee during that period.

Please accept our appreciation for your efforts. We are confident that as we work together we can continue to build a strong and successful Westlake Chemical Corporation for all of our shareholders, including each of you. [emphasis in original]

Identical memoranda were posted at each of the Respondent’s facilities.

Because the announcement coincided with Johnson’s regular visit to the Van Buren facility, it was decided that he would bring the employee-notification letters with him to the plant. When he arrived, Johnson gave the sealed letters to the Respondent’s local human resources representative for distribution. Thus, on August 18, the Respondent distributed to eligible employees at its Van Buren facility the two-page letter from Westlake more specifically detailing the terms and conditions to which the stock award was subject. Identical letters were delivered to eligible employees at the Respondent’s other facilities. The letter reiterated that the restricted stock units would vest, and thereafter be issued as shares of common stock, six months after the grant date. If any employee’s employment terminated other than by reason of death within that 6-month period, then the unvested restricted stock units would be forfeited. Provision was also made for any tax withholding obligations applicable to the award of stock.5

The Respondent awarded the stock units to all eligible employees at all of its facilities, including hourly employees, supervisors, and management employees. This was done without notice to or bargaining with the Union that represents the employees at the Van Buren facility. The stock was valued at approximately $1450 per employee at issuance. By the time of the hearing, it had increased in value to approximately $3000.

iii. analysis

The general principles involved here are well established. An employer and the representative of its employees are obligated to bargain with each other in good faith with respect to wages, hours, and other terms and conditions of employment. NLRB v. Borg-Warner Corp., 356 U.S. 342, 349 (1958). The mandatory duty to bargain is limited to those subjects; as to all other matters, each party is free to bargain or not to bargain. Ibid. Among those other matters not requiring bargaining are gifts given to employees by their employers. See, e.g., Benchmark Industries, 270 NLRB 22 (1984), affd. Amalgamated Clothing v. NLRB, 760 F.2d 267 (5th Cir. 1985).

The inquiry here is whether the Westlake stock award was a gift or whether it was wages or a term and condition of employment. The Board has construed the term “wages” as used in the Act to include “emoluments of value¼which may accrue to employees out of their employment relationship.” See generally Inland Steel Co., 77 NLRB 1, 4 (1948), enfd. 170 F.2d 247 (7th Cir. 1948), cert. denied 336 U.S. 960 (1949). On the other hand, it is recognized that gifts do not become wages or terms and conditions of employment simply because they are made in the context of an employment relationship. An employer can make such payments as it pleases. NLRB v. Wonder State Mfg. Co., 344 F.2d 210, 213 (8th Cir. 1965), denying enf. in pertinent part to 147 NLRB 179 (1964).

If the ostensible gifts are so tied to the remuneration which employees receive for their work that they are in fact a part of the remuneration, they are in reality wages and subject to the statute’s mandatory duty to bargain. Ibid.6 A sufficient relationship to remuneration may exist if the payment is tied to various employment-related factors. See Benchmark Indus., 270 NLRB at 22 fn. 5 (explicitly adopting the analysis used by the Eighth Circuit in NLRB v. Wonder State Mfg., supra, and by former Member Kennedy in his dissent in Nello Pistoresi & Sons, 203 NLRB 905, 907 (1973)); see also Freedom WLNE-TV, Inc., 278 NLRB 1293, 1297 (1986). These factors include work performance, wages, regularity of the payment, hours worked, seniority, and production.7

In Benchmark Industries, the Board looked to these factors in finding that the employer did not violate Section 8(a)(5) by unilaterally discontinuing the giving of Christmas hams and dinners. It concluded that these items were “merely gifts” because they “had been given to all employees regardless of their work performance, earnings, seniority, production, or other employment-related factors.” 270 NLRB at 22. Similarly, in Stone Container Corp., supra, the Board found that the employer did not violate Section 8(a)(5) by unilaterally discontinuing a company picnic, a $20 Christmas gift certificate, and a Thanksgiving dinner. The Board found that these were gifts rather than terms and conditions of employment because they “were not related to any performance or production standards.” 313 NLRB at 337.

In cases where the Board has found payments to constitute wages, there have been clear ties to employment-related factors. See Niles-Bement-Pond Co., 97 NLRB 165, 166 (1951), enfd. 199 F.2d 713 (2d Cir. 1952) (Christmas bonus constituted wages where it was calculated either as one week’s pay, a percentage of each employee’s yearly earnings, or a dollar for each year of continuous service, and was thus “directly related in amount and supplementary to [employee] wages or earnings.”); Freedom WLNE-TV, supra (Christmas bonus was a term and condition of employment because it was computed using a “perceivably objective formula” based on the employees’ weekly base salary and years of service); Phelps Dodge Mining Co., supra (“appreciation payments” in amounts of up to $1000 “constituted significant economic benefits to eligible employees based on the employment-related factors of wages and hours worked” where the amount “was a function either of the work [the employees] had recently performed, or of the regular wages they were currently earning”) (emphasis added). These factors are not present in this case.

Our finding that the stock award in this case was a gift is consistent with the analysis used in the aforementioned precedent. The award was not tied to employee remuneration. The size of the award was established without regard to any employment-related factors, including work performance, wages, hours worked, seniority, or productivity. In fact, the value of the award, when announced and when vested, was determined solely by market demand for equity shares in Westlake. Further, all eligible employees at each...