DATE:  January 27, 2005

 

TO           :     Rik Lineback, Regional Director

     Region 25

    

FROM     :     Barry J. Kearney, Associate General Counsel

     Division of Advice

                                       

SUBJECT:     Akal Security, Inc.                530-4825-6700

                Cases 25-CA-29269, 13-CA-42030,      625-8883-1200

     13-CA-24058, 18-CA-17382, and       625-8883-2834

     30-CA-16957

 

 

These cases were submitted for advice as to whether the Employer unlawfully implemented a change in the manner in which employees received health and welfare payments, and, if so, the effect of the parties’ subsequent agreement to place the disputed monies in a 401(k) trust fund.

 

     We conclude, under the specific facts of this case, that the Union gave up any right it might have had to a Board order reinstating direct fringe benefits payments to employees when it proposed and agreed on a mechanism to resolve the dispute without regard to the outcome of this Board charge.  Accordingly, we need not determine, absent this waiver, whether the Employer is a perfectly clear successor or whether its actions constitute an unlawful unilateral change.

 

FACTS

 

Akal Security, Inc. provides security services to governmental agencies and private businesses.  On March 1, 2004,^[1] the Federal Protective Service awarded Akal the "Four-State Contract" to provide security services at secured buildings in Indiana, Wisconsin, Minnesota, and northern Illinois.  The Employer was directed that on July 1, it would take over from the predecessor employer, General Security Services Corporation. The existing employees had been represented by the Independent Security and Police Union (the predecessor union), under a collective-bargaining agreement effective through September 30, 2003, but subsequently extended. The contract provided that it would expire upon the termination of the business relationship between the predecessor employer and the federal government.

 

The predecessor’s contract also provided that "the Employer will make health and welfare payments to or on behalf of seniority employees ... at the rate of $2.30 per hour." Article XIII, section 3, of the contract specifies that:

 

In lieu of paying the aforementioned Health and Welfare Allowance amounts to the employees, the Employer may, at its discretion, make payments of those amounts to an Employer or Union sponsored health plan and/or retirement plan, or a plan(s) jointly administered by the Employer and the Union.  The provision of or participation in such a plan(s), and any balance of the Health and Welfare Allowance payments required by law, may be offered and terminated at Employer’s discretion.^[2]

 

Under this contractual provision, the predecessor employer had directly paid its employees the $2.30 hourly supplement, rather than using the funds to purchase health coverage or a retirement plan.  Akal contends (and there is no evidence to the contrary) that it was not aware of the predecessor’s practice of direct cash payments to employees until June 30.

    

On June 1, a majority of the predecessor union’s membership voted to affiliate with the Charging Party Union, the International Union, Security, Police and Fire Professionals of America (Union).  On about June 9, the Union notified Akal of its merger with the predecessor Union.  In early June, the Employer recognized the Union as the collective bargaining representative for employees working under the Four-State contract after July 1.  The Employer, however, declined to adopt the collective-bargaining agreement between its predecessor and the predecessor Union when it assumed the work on July 1.

 

On or around June 28 Akal Director of Human Resources Janet Gunn told Union Vice President Bobby Jenkins that she "presumed" that Jenkins wanted to "do the same thing" with the employees’ contractual fringe benefit monies that the parties had previously done under a different contract in El Paso, Texas (i.e., purchase health insurance and fund a 401(k) plan).  Jenkins told Gunn that he wanted the opportunity to put a plan in place but that it would take a little time because Jenkins had not spoken with members yet and did not know what they wanted.  Gunn told Jenkins that Akal needed to get a plan in place, and asserts that Jenkins informed her that the Union would implement a health plan.  However, Gunn concedes that Jenkins informed her that he wanted to speak with members first. 

 

On June 30, Jenkins received a letter from Gunn dated June 28.  The letter provided that,

 

Akal Security, Inc. plans to provide an insurance plan to all employees on this above named contract effective with the start of performance July 1, 2004. 

 

As discussed, [the Union] will provide a plan through their preferred broker.  Akal Security, Inc. is pleased to have the Union provide the plan if that would be their desire going forward.

 

Please contact me at your convenience to discuss and bargain over this issue as well as the new CBA.

 

After receiving this letter, Jenkins repeatedly called and left messages for Gunn, but was not able to speak to her until the end of July.

 

On about June 30, while pricing out payroll, Gunn discovered for the first time that the predecessor had paid its unit employees the fringe benefits payments in cash.

 

On July 1, Akal took over the operations of the Four-State contract.  The Employer hired over 95 percent of the predecessor’s approximately 500 to 600 employees who had been working under the contract. Although it is unknown when the Employer made these offers of employment, there is no evidence that employees were given unconditional offers of hire at any date prior to the point they showed up for work on July 1.^[3]  Furthermore, it is undisputed that on July 1 unit employees were unaware that the Employer intended to cease the predecessor’s practice of making direct health and welfare payments to them in cash.

 

On about July 7, Jenkins learned for the first time that the predecessor Employer had been making fringe benefit payments in cash to employees.  By that date, employees had begun to complain to the Union that, according to Akal, the Union had agreed to use this money to provide for a health and welfare plan.  Jenkins and other Union representatives contacted Akal to demand that Akal continue the predecessor’s practice of direct cash payments. Akal refused, relying instead on the parties’ asserted agreement to use the money to purchase health insurance and/or a pension plan.

 

On July 16, unit employees received their first pay check from Akal, but without the $2.30 hourly fringe benefit payment.  Rather, Akal gave each employee a copy of Gunn’s June 28 letter to Jenkins purporting to constitute an agreement to use the money to fund health and welfare plans.

 

On August 19, the parties met to negotiate a new collective-bargaining agreement. Gunn insisted that Akal could no longer legally hold onto the employees’ fringe benefit funds without investing it somewhere.  She informed the Union that unless they agreed on that date to a health insurance plan or 401(k) plan, Akal would implement an Employer-sponsored health plan the following day.  Union President David Hickey asked Gunn if she would agree to put the money into a 401(k) plan. Jenkins and Hickey assert that Hickey clearly stated that the plan would be "temporary."  Hickey and Jenkins stressed that this way employees "wouldn’t lose that money, and that [the plan] would definitely have to be temporary." Gunn agreed to Hickey’s suggestion in principle. However, Jenkins and Hickey told Gunn that they first had to discuss this concept with the Union committee.

 

Later that afternoon, Union representatives received word from their benefits representative that a "temporary" 401(k) trust could be established. Jenkins explained to the Union committee that if the Employer put the money into a health plan that unit employees clearly did not want, they would never be able to get that money back.  The Union committee voted to offer the 401(k) alternative to the Employer.

 

Hickey states that he proposed the 401(k) plan to the Employer committee, to be effective "until such time that we can get this situation straightened out."  According to Hickey, the Union made it very clear that this was a temporary measure and that "if we are able to come to terms under a new collective bargaining agreement, then the members would no longer be participating in the 401(k) plan."

 

 The Union’s benefits representative subsequently drafted a "standard" participation agreement, and offered it to the Employer for signature.  On September 1, the parties entered into the 401(k) agreement, with terms retroactive to the July 1 start-up date. Paragraph 7 of this Agreement provides in relevant part:

 

This Agreement shall continue in full force and effect until superseded by a new Participation Agreement or until revoked by mutual consent of the parties.

 

The parties continue to bargain for a new contract, and the 401(k) plan continues to be in effect.

 

ACTION

 

     We conclude, under the specific facts of this case, that the Union gave up its right to a remedial rescission of the Employer’s allegedly unlawful unilateral suspension of direct benefits payments to employees because the parties agreed on a mechanism to resolve the dispute without regard to the outcome of these Board charges.  Accordingly, we need not determine whether, absent this waiver, the Employer’s actions constitute an unlawful unilateral change.

 

A successor has the freedom to set initial terms and conditions of employment for its newly-hired work force, with the exception of "instances in which it is perfectly clear that the new employer plans to retain all of the employees in the unit and in which it will be appropriate to have him initially consult with the employees' bargaining representative before he fixes terms."^[4]  Under those circumstances, a "perfectly clear" successor may not alter the status quo ante without affording the union an opportunity to bargain.

 

In light of the parties’ interim settlement of the dispute, we need not specifically determine whether Akal was a "perfectly clear" successor with a bargaining obligation before it altered the employees’ employment conditions.^[5] This is because the parties’ subsequent interim resolution of the dispute at the bargaining table precludes issuance of complaint and a meaningful Board remedy. 

 

Thus, we conclude that the parties’ 401(k) plan – as structured and drafted by the Union – obstructs any possible Board rescission order.  During their August 19 negotiations, the Union offered to resolve this matter for the time being by placing the dispute monies in a Union-sponsored "temporary" 401(k) plan until the situation is "straightened out." Union president Hickey states that the Union made it very clear that the 401(k) plan was merely a temporary means to safeguard the employees’ money, and that participation in the plan would end "if we are able to come to terms under a new collective bargaining agreement." Thus, at bargaining, the Union specified that agreement on a new contract would provide the means with which to cease participation in the 401(k) plan.  The Union did not condition the revocability of the plan on any other event, including the successful prosecution of an unfair labor practice charge. The Union’s benefits expert subsequently drafted the 401(k) participation agreement, which he forwarded to the Employer for signature.  The agreement, like the negotiations which led to its formation, does not provide that the agreement would terminate upon a meritorious Labor Board finding.  Rather, it merely states that it will remain in full force and effect "until superseded by a new Participation Agreement or until revoked by mutual consent of the parties." 

 

Accordingly, the Union ‑‑ both at the table as well as on paper ‑‑ offered to place the disputed benefits monies into the 401(k) plan until the parties modified or revoked the plan by entering into a new collective-bargaining agreement.  Furthermore, the Employer here did not fraudulently induce the Union or misrepresent material facts during bargaining for the 401(k) agreement, factors which might prompt the Board to vitiate their bargained-for agreement.^[6] Thus, by the terms of its own proposals, we conclude that the Union gave up any right it might otherwise have had to a prospective Board rescission remedy.^[7]

 

In so concluding, we find the Board’s decision in Seascape Golf Course^[8] to be distinguishable.  There, the successor-employer discriminatorily refused to hire predecessor employees in a scheme to deprive the Union of its representative status. The Board ordered the retroactive restoration of the employees’ terms and conditions, despite the fact that the parties had subsequently bargained for an agreement on starting wage rates after the ALJ entered his decision.  The Board noted that since the parties’ agreement was not final, initial restoration of the status quo ante was necessary to restore the union to the position it would have occupied but for the employer’s unfair labor practice.^[9]  Here, however, the parties’ interim 401(k) agreement is final, until revoked by a subsequent agreement.  Since the parties have already determined a method to resolve their dispute pending negotiation of a collective-bargaining agreement, the necessity of restoring the parties to the status quo ante by Board order no longer exists.

 

In sum, the parties’ interim 401(k) agreement looks to a final resolution through the collective-bargaining process, rather than through the successful prosecution of a Board charge.  Under these circumstances, the Regions should dismiss the instant charges, absent withdrawal.

 

 

 

 

B.J.K.