Southcoast Hospitals Group, In v. NLRB

Filing

OPINION issued by Rogeriee Thompson, Appellate Judge; William J. Kayatta, Jr., Appellate Judge and Paul J. Barbadoro, U.S. District Judge. Published. [15-2146, 15-2258]

Case: 15-2146

Document: 00117108220

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Date Filed: 01/20/2017

Entry ID: 6063802

United States Court of Appeals
For the First Circuit
Nos. 15-2146, 15-2258
SOUTHCOAST HOSPITALS GROUP, INC.,
Petitioner/Cross-Respondent,
v.
NATIONAL LABOR RELATIONS BOARD,
Respondent/Cross-Petitioner.

PETITIONS FOR REVIEW OF AN ORDER OF
THE NATIONAL LABOR RELATIONS BOARD

Before
Thompson and Kayatta, Circuit Judges,
and Barbadoro,* District Judge.

Joseph D. Whelan, with whom Matthew H. Parker and Whelan,
Corrente, Flanders, Kinder & Siket LLP were on brief, for
Petitioner/Cross-Respondent.
Barbara Sheehy, Counsel, with whom Robert J. Englehart,
Supervising Attorney, Matthew Bruenig, Attorney, Richard F.
Griffin, Jr., General Counsel, Jennifer Abruzzo, Deputy General
Counsel, John H. Ferguson, Associate General Counsel, and Linda
Dreeben, Deputy Associate General Counsel, were on brief, for
Respondent/Cross-Petitioner.

January 20, 2017

*

Of the District of New Hampshire, sitting by designation.

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BARBADORO, District Judge.

Southcoast Hospitals Group,

Inc. was created through a merger of three hospitals.

One of the

hospitals has a union workforce, and the union's collectivebargaining agreement grants its members a hiring preference when
filling union positions.

In an effort to produce more even-handed

hiring practices across its three hospitals, Southcoast adopted a
policy that grants nonunion employees a similar hiring preference
for nonunion positions.

The union challenged the nonunion hiring

policy, contending that it discriminates against union members in
violation

of

section

8(a)(3)

and

(1)

of

the

National

Relations Act ("NLRA"), 29 U.S.C. § 158(a)(3), (1).

Labor

A divided

three-member panel of the National Labor Relations Board ("Board")
determined that the policy was invalid because it was not supported
by a legitimate and substantial business justification.

We vacate

the Board's order and remand the case for further proceedings
consistent with this opinion.
I.
A.

BACKGROUND

Southcoast's Hiring Policies
Southcoast was created through a 1996 merger of St.

Luke's Hospital, Charlton Hospital, and Tobey Hospital.
employees at Tobey are represented by a union.

Only

The union, 1199

Service Employees International Union United Health Care Workers
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East

("1199

SEIU"),

represents

approximately

215

technical,

clerical, service, and maintenance employees out of a total of 550
employees at Tobey.1
employees,

and

St. Luke's has approximately 2,700 nonunion

Charlton

has

approximately

2,100

nonunion

employees.
Union members have enjoyed a hiring preference when
applying for union jobs at Tobey since at least the time of the
merger.

The union's 2011 collective–bargaining agreement, which

was in effect during the relevant time period, provides in section
8.2 that "[v]acancies in bargaining unit positions [i.e., union
positions] . . . shall be filled on the basis of available
qualified applicants.

Among such qualified applicants, the most

senior qualified applicant shall be selected." Section 8.1 defines
seniority in terms of time spent in union positions.

When these

provisions are read together, they bar Southcoast from considering
any nonunion applicant for a union position unless all union
applicants are unqualified for the position.

1

Union workers at Tobey belong to one of three bargaining
units: technical workers, licensed practical nurses, and
registered nurses. 1199 SEIU represents both technical workers
and licensed practical nurses. Each bargaining unit is protected
by a separate collective-bargaining agreement. References in this
opinion to the "union" refer to 1199 SEIU. When we refer to "union
members," we mean members of 1199 SEIU's technical workers'
bargaining unit.
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Southcoast developed its current policy for filling
vacancies in nonunion positions in 1999.
divides

applicants

into

two

broad

That policy — HR 4.06 —
categories.

"Internal

Applicants" include all nonunion, regular-status employees, all
temporary and per diem employees, and union members who belong to
a union that "provides reciprocal opportunity to employees who are
not members of the union for open positions at the unionized site."
All other applicants are treated as "External Applicants."
Internal

Applicants,

HR

4.06

provides

that

Among

regular-status

employees "will be given first consideration for job postings
providing

the

regular

status

employee's

qualifications

substantially equal the qualifications of external candidates."
Temporary and per diem applicants are considered after regularstatus employees but before External Applicants.

The policy bars

Southcoast from recruiting or considering any External Applicant
for a nonunion position until all qualified Internal Applicants
have been interviewed.

Because the union's collective-bargaining

agreement includes a hiring preference for union members, they are
treated as External Applicants under HR 4.06.
Southcoast's actual practice when filling vacancies in
nonunion positions differs somewhat from the process specified in
HR 4.06. Job openings are posted and advertised for all applicants
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at

the

same

time.

Applications

are

screened

and

qualified

applicants are placed into one of three groups by the company's
human resources department.

Nonunion, regular-status applicants

are considered in the first round.
first

round,

union

applicants

If no one is selected from the
are

considered

together

temporary and per diem applicants in the second round.

with

All other

applicants are considered in the third round if no one is selected
from the first two rounds.
David DeJesus, a human resources official at Southcoast,
was responsible for creating HR 4.06.

DeJesus claims that he had

received complaints from unnamed employees about union hiring
preferences both while working at Southcoast and in a prior job at
another company where union members enjoyed a similar preference.
He asserts that the company adopted HR 4.06 as a "matter of
equity."

From his perspective, if the union excludes nonunion

employees from the first round of consideration for union positions
at

Tobey,

then

"it

should

work

the

same

way

in

the

other

direction."
B.

Enforcement of HR 4.06
Christopher Souza, a union worker employed at Tobey,

applied for a building superintendent position at St. Luke's in
May 2011. The following month, human resources coordinator Lucilia
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Darosa

notified

applicant.

Souza

that

Southcoast

had

chosen

another

When Souza inquired as to why he had not been selected

for an interview, Darosa provided a citation to HR 4.06 and
explained that "[Southcoast] would not be able to consider you for
the first round interviews as you currently work at Tobey in a
[bargaining-unit] position."

After reviewing HR 4.06, Souza made

a complaint to Lisa Lemieux, the union's organizer at Tobey from
2005 to 2012.
Union members had been complaining to Lemieux about
their inability to obtain positions at St. Luke's and Charlton
since 2005, but Souza was the first to direct Lemieux's attention
to HR 4.06.

Believing that HR 4.06 discriminated against union

workers, Lemieux contacted approximately 100 members of the union
to find any other individuals who had been denied employment at
St. Luke's or Charlton.

Three employees eventually responded.

Two relayed information about their own experiences and the third
pointed

Lemieux

to

Noelia

Nunes,

a

union

member

who

had

unsuccessfully tried to transfer to a nonunion position.
From July 2011 through December 2011, Nunes submitted
six applications for positions at St. Luke's.

For various reasons

— controverted below but not relevant here — her first five
applications

produced

no

interview
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requests.

Her

sixth

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application resulted in an interview and a job offer in January
2012.

C.

Nunes accepted the position.

Administrative Proceedings
The union commenced this action by filing an unfair labor

practice

charge

with

the

Board's

Regional

Director.

After

investigating the charge, the Regional Director filed a complaint
with the Board, claiming that HR 4.06 illegally discriminates
against union members in violation of section 8(a)(3) and (1).2
An Administrative Law Judge ("ALJ") held an evidentiary hearing
and issued a decision sustaining the charge in June 2013.

A

divided three-member panel of the Board largely affirmed the ALJ's
ruling on September 16, 2015.

Accordingly, the Board ordered

Southcoast to rescind HR 4.06 and provide affirmative relief to
Souza, Nunes, and other similarly situated members of the union.
This appeal followed.
II.

STANDARD OF REVIEW

Decisions of the Board must be based on a solid legal
foundation, they must be supported by substantial evidence, and

2

The complaint also asserted that Southcoast independently
violated section 8(a)(1) of the NLRA but the charge was not
sustained by the Board and it has no bearing on this appeal.
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they must be the product of reasoning that is neither arbitrary
nor capricious.

See Boch Imports, Inc. v. NLRB, 826 F.3d 558, 565

(1st Cir. 2016).
Substantial

evidence

exists

where

there

is

"such

relevant evidence as a reasonable mind might accept as adequate to
support a conclusion."

NLRB v. Hotel Emps. & Rest. Emps. Int'l

Union Local 26, 446 F.3d 200, 206 (1st Cir. 2006) (quoting McGaw
of P.R., Inc. v. NLRB, 135 F.3d 1, 7 (1st Cir. 1997)); see also
Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359, 366–67
(1998) ("[W]e must decide whether on this record it would have
been

possible

for

conclusion.").

a

reasonable

jury

to

reach

the

Board's

When determining whether substantial evidence

supports the Board's conclusions, "[w]e must take contradictory
evidence in the record into account."

NLRB v. Int'l Bhd. of

Teamsters, Local 251, 691 F.3d 49, 55 (1st Cir. 2012) (alteration
in original) (quoting Howard Johnson Co. v. NLRB, 702 F.2d 1, 2
(1st Cir. 1983)).

"[W]e may not 'displace the Board's choice

between two fairly conflicting views, even though [we] would
justifiably have made a different choice had the matter been before
[us] de novo.'"

NLRB v. NSTAR Elec. Co., 798 F.3d 1, 11 (1st Cir.

2015)

and

(second

Universal

Camera

third

Corp.

v.

alterations
NLRB,
- 8  

340

in
U.S.

original)
474,

488

(quoting
(1951)).

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Nevertheless, "the Board 'is not free to prescribe what inferences
from the evidence it will accept and reject, but must draw all
those inferences that the evidence fairly demands.'"

Local 251,

691 F.3d at 55 (quoting Allentown Mack, 522 U.S. at 378).
The

Board's

Administrative

reasoning

Procedure

decisionmaking.'"

must

Act's

also

"scheme

conform
of

to

the

'reasoned

Allentown Mack, 522 U.S. at 374 (quoting Motor

Vehicle Mfrs. Assn. of U.S., Inc. v. State Farm Mut. Auto. Ins.
Co., 463 U.S. 29, 52 (1983)).

Under this scheme, we must reject

the Board's reasoning where it is "arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law."

5 U.S.C.

§ 706(2)(A); see also Sig Sauer, Inc. v. Brandon, 826 F.3d 598,
601 (1st Cir. 2016).

"A decision is arbitrary and capricious 'if

the agency has relied on factors which Congress has not intended
it to consider, entirely failed to consider an important aspect of
the problem, offered an explanation for its decision that runs
counter to the evidence before the agency, or is so implausible
that it could not be ascribed to a difference in view or the
product of agency expertise.'"

Craker v. Drug Enf't Admin., 714

F.3d 17, 26 (1st Cir. 2013) (quoting State Farm, 463 U.S. at 43).
A

Board

decision

cannot

survive

review

unless

the

Board

"articulate[s] a satisfactory explanation for its action including
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a 'rational connection between the facts found and the choice
made.'"

Grosso v. Surface Transp. Bd., 804 F.3d 110, 116 (1st

Cir. 2015) (quoting State Farm, 463 U.S. at 43).

In the end,

"[r]eview under the arbitrary and capricious standard is narrow
and [we] may not substitute [our] judgment for that of the agency,
even if [we] disagree[] with the agency's conclusions."

River St.

Donuts, LLC v. Napolitano, 558 F.3d 111, 114 (1st Cir. 2009).
III.

ANALYSIS

This case is founded on a claim that HR 4.06 improperly
discriminates against union workers at Southcoast in violation of
section 8(a)(3) and (1) of the NLRA.

Southcoast argues on appeal

that the Board acted arbitrarily and without substantial evidence
when it rejected Southcoast's contention that HR 4.06 serves its
legitimate and substantial business interests.

We resolve such

disputes by using the analytical framework established by the
Supreme Court in NLRB v. Great Dane Trailers, Inc., 388 U.S. 26
(1967).

See NLRB v. Borden, Inc. (Borden I), 600 F.2d 313, 320

(1st Cir. 1979).

Accordingly, we begin by describing the Great

Dane framework and then delve into the details of the parties'
respective arguments.
The Court explained in Great Dane that "discrimination
and a resulting discouragement of union membership" are necessary
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but not sufficient conditions to support a claim under section
8(a)(3) and (1).

See id. at 32–33.

A viable discrimination claim

also ordinarily requires proof that "the discriminatory conduct
was motivated by an antiunion purpose."

Id. at 33; see also Radio

Officers' Union of Commercial Telegraphers Union v. NLRB, 347 U.S.
17, 44 (1954) ("That Congress intended the employer's purpose in
discriminating to be controlling is clear.").
however, is subject to exceptions.

The general rule,

If the employer's conduct is

"inherently destructive" of union members' rights under section 7
of the NLRA, 29 U.S.C. § 157, a violation may be proved without
evidence of improper motive if the employer fails to prove that
its actions can be justified as "something different than they
appear on their face."

Great Dane, 388 U.S. at 33 (quoting NLRB

v. Erie Resistor Corp., 373 U.S. 221, 228 (1963)).

Even if a

business justification has been proved, an inference of improper
motive may be drawn from the inherently destructive conduct itself
and the Board remains free to "strike the proper balance between
the asserted business justifications and the invasion of employee
rights in light of the Act and its policy."

Id. at 33–34.

If instead the harm to union members' interests is
"comparatively

slight,"

an

employer

must

respond

to

a

discrimination charge with evidence that the challenged conduct
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serves "legitimate and substantial" business interests.
34.

Id. at

A failure to meet this burden will result in a finding of

liability without the need for evidence of improper motive.

Id.

But if a satisfactory business justification is proved, a violation
cannot be established without proof of antiunion motivation.

Id.

Thus, when a challenged employment policy has only a comparatively
slight effect on section 7 rights, a legitimate and substantial
business justification has been proved, and no evidence of a
discriminatory motive has been presented, the Board must allow the
policy

to

stand

without

attempting

to

balance

business

justifications against employee interests.
Here, the Board does not argue that HR 4.06 is inherently
destructive of union members' section 7 rights. Nor does the Board
contend that the policy is the product of antiunion bias. Instead,
it defends its ruling solely by claiming that Southcoast failed to
prove that HR 4.06 serves a legitimate and substantial business
interest.

Accordingly, it is to this issue that we now turn.
Southcoast justifies HR 4.06 principally by claiming

that it helps level the playing field between union and nonunion
workers.3

Because a nonunion employee cannot be considered for a

3

Southcoast also asserts it enacted HR 4.06 to reduce
complaints from nonunion employees about the union's hiring
preference. In rejecting this proposed justification, the Board
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union position unless no qualified union member applies for the
position, Southcoast argues, it is only fair to grant nonunion
employees

a

similar

hiring

preference

when

filling

nonunion

positions.
The Board did not question Southcoast's contention that
HR 4.06 treats nonunion workers more like union workers than would
otherwise be the case.

Instead, it rejected Southcoast's level-

playing-field justification because it determined that the policy
goes too far and instead "does the opposite of 'level the playing
field'" by disproportionately favoring nonunion employees over
their union counterparts.

Southcoast Hosps. Grp., 363 N.L.R.B.

No. 9, 2015 WL 5451459, at *3 (Sept. 16, 2015).

The Board based

this determination on two subsidiary factual findings.

First, it

noted that the number of positions covered by HR 4.06 "pales in
comparison" to the number of positions covered by the union hiring
policy.

Id.

Second, the Board determined that HR 4.06 is unfair

because it grants nonunion workers a hiring preference for vacant

branded HR 4.06 a "solution in search of a problem" because
Southcoast was unable to identify any nonunion employee who had
complained about the union hiring policy. Southcoast Hosps. Grp.,
363 N.L.R.B. No. 9, 2015 WL 5451459, at *3 (Sept. 16, 2015). We
need not evaluate the Board's conclusion on this point because, as
we explain below, the Board improperly rejected Southcoast's
alternative justification for HR 4.06.
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jobs at two facilities whereas the union hiring preference only
covers

jobs

at

a

single

facility.

Id.

These

facts

are

significant, the Board reasoned, because they leave union members
with a more limited "universe of job opportunities."
n.5.

Id. at *3

We conclude that these findings cannot serve as substantial

evidence for the Board's decision.
HR 4.06 covers many more positions than the union hiring
policy but it is by no means clear that this difference unfairly
disadvantages union workers.

As Board Member Miscimarra correctly

noted in his dissent below, the probability that a covered employee
will obtain a successful transfer under either policy cannot be
determined by considering the number of positions covered by the
policy without also accounting for the number of employees that
the policy covers.
in part).

See id. at *8 (Miscimarra, Member, dissenting

Because the ratio of covered positions to covered

employees is substantially the same under both HR 4.06 and the
union hiring policy, one cannot say that a nonunion employee is
necessarily

more

likely

than

a

union

employee

to

obtain

a

successful transfer simply because HR 4.06 covers more positions.
The Board appeared to concede this point in responding to the
dissent when it stated that "HR 4.06 has a negative effect on
represented employees, not because it makes it more difficult to
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be selected for a transfer, but because it limits the universe of
job opportunities."

Id. at *3 n.5.

The problem with the Board's reasoning is that it failed
to further explain why union workers are disproportionately harmed
by HR 4.06 simply because it covers more positions than are covered
by the union hiring policy.

As far as the record reflects, HR

4.06 discriminates against union employees just as the union hiring
preference discriminates against nonunion employees.

If the fact

that HR 4.06 covers more positions than are covered under the union
hiring policy does not leave a nonunion worker with a higher
probability of a successful transfer than her union counterpart,
it is not apparent from the record that this aspect of HR 4.06
unfairly disfavors union workers.

Accordingly, a finding that HR

4.06 covers more positions than are covered by the union hiring
policy cannot by itself justify the Board's conclusion that the
policy tilts the playing field too far in favor of nonunion
workers.4
The Board also determined that HR 4.06 benefits nonunion
workers at the expense of union workers because it gives nonunion

4

We note here that if there were evidence in the record of a
substantial qualitative difference between the jobs available at
Tobey and the other facilities, for example, this might be a
different case — but no such evidence was presented to the Board.
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workers a hiring preference for jobs at two facilities, whereas
the union hiring preference covers only a single facility.

Here

again, the Board did not disclose its reasoning in its decision,
except

by

noting

that

HR

4.06

"limits

opportunities" for union workers.

the

universe

Id. at *3 n.5.

of

job

On appeal,

however, it attempts to fill the gap with two arguments.

First,

it suggests that the dual-facility preference unfairly penalizes
union workers because they are impeded from transferring to two
facilities,

whereas

transferring to one.

nonunion

workers

are

only

impeded

from

Second, the Board argues that a single-

facility preference would be more beneficial to union members than
the current dual-facility preference because "it would reduce the
number of applicants who receive a preference over them for vacant
positions at St. Luke's and Charlton."
On this sparse record, the Board's observation that HR
4.06 provides nonunion workers with preference at two facilities
is simply another form of its observation that HR 4.06 provides
preference for more positions.

One might equally observe that HR

4.06 provides preference for more floors.
logical

inquiry

should

be

whether

the

In each case, the
ratio

of

material

opportunities overall as compared to the number of people competing
for those opportunities (and thus the chances of a given worker to
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benefit equally from his or her respective preference) is greater
for nonunion workers than for union workers. As we have explained,
merely noting that there are more opportunities — whether expressed
in units of positions, floors, or facilities — by itself says
little of relevance where the competitors for those opportunities
are correspondingly aggregated.

Thus, while nonunion workers get

preference at two hospitals, they must also compete with workers
from two hospitals, while the union workers, with preference at
only one hospital, need compete only with workers from that
hospital.
It is also troubling that the Board concluded that HR
4.06 tipped the playing field too far in favor of nonunion workers
without making any attempt to determine how its judgment might be
affected by other aspects of the hiring policies that leave union
members at a comparative advantage.

For example, HR 4.06 entitles

Southcoast to select the best qualified candidate for a vacant
nonunion position, even though qualified nonunion employees have
also applied for the position. In contrast, Southcoast is required
under

the

union

hiring

preference

to

hire

the

most

senior,

qualified union applicant for a vacant union position even if more
qualified

nonunion

applicants

have

applied.

Southcoast

also

grants union members preferential consideration over nonemployee
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applicants when filling nonunion jobs, whereas the record contains
limited,

if

any,

evidence

that

Southcoast

affords

nonunion

employees a similar preference when filing union positions.

In

addition, HR 4.06 gives the union the right to have its members
treated

as

regular-status

Internal

Applicants

by

agreeing

to

surrender its hiring preference for union positions.5
In rejecting HR 4.06, the Board focused its analysis
solely on the greater number of employees and facilities covered
by the nonunion hiring preference without also considering aspects
of the policy that continue to leave nonunion employees less well
off than their union counterparts.

Two minor differences between

HR 4.06 and the union's hiring policy that have little, if any,
adverse

effect

on

union

members

cannot

serve

as

substantial

evidence for a determination that HR 4.06 tilts the playing field
too far in favor of nonunion employees when other unexamined
differences between the policies continue to leave union members
with a comparative advantage when they apply for vacant positions.
The Board nevertheless defends its decision by claiming
in its brief on appeal that "[w]here an employer's discriminatory
action is not necessary to achieve its stated goal, it lacks a

5

The fact that the union did not so elect may well suggest
that it sees the current playing field as still slightly tipped in
its direction.
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legitimate

and

substantial

business

justification."

It

then

argues that it was entitled to reject Southcoast's level-playingfield justification because Southcoast could have achieved its
stated goal through less restrictive means by limiting its nonunion
workers to only a single-facility hiring preference.

We reject

this argument because, as we have already explained, nothing in
the record supports the conclusion that nonunion workers are given
greater or more opportunities than union workers.
In Borden I, we reminded the Board that "it is neither
our function nor the Board's to second-guess business decisions."
Id. at 321.6

While the Board remains free to reject a proffered

business justification on the ground that it is "illogical," NLRB
v. Borden, Inc. (Borden II), 645 F.2d 87, 88 (1st Cir. 1981), or
that is not "reasonably adapted to the achievement of a legitimate
end,"

NLRB

v.

Brown,

380

U.S.

278,

289

(1965),

it

may

not

6

The Board contends that we disavowed Borden I in Statler
Indus., Inc. v. NLRB, 644 F.2d 902, 905 n.4 (1st Cir. 1981)
(subsequent history omitted).
Our criticism of Borden I in
Statler, however, was limited to a single sentence in the opinion
that purported to address how the Board should resolve the claim
on remand that the employer acted with an improper motivation if
the employer was able to demonstrate that the challenged policy
also serves a legitimate and substantial business interest. Here,
the Board does not seek to defend its decision by arguing that HR
4.06 was the product of antiunion motivation. Accordingly, our
criticism of Borden I in Statler, has no bearing on the resolution
of the present case.
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invalidate an employment policy that accomplishes a legitimate
goal in a nondiscriminatory manner merely because the Board might
see other ways to do it.
Southcoast adopted HR 4.06 in an effort to treat its
union and nonunion workers more even-handedly when filling vacant
positions.

HR 4.06 achieves this goal by treating nonunion

employees more like union members than they otherwise would be
treated.

Because

Southcoast's

chosen

method

was

reasonably

adapted to achieve its stated goal, the Board lacked the power to
reject HR 4.06 simply because it is not identical to the union
hiring policy or because Southcoast might have achieved its goal
through alternative means that were more beneficial to its union
employees.
IV.

CONCLUSION

The Board's Decision and Order requiring Southcoast to
rescind

HR

4.06

and

granting

affirmative

relief

employees is not supported by substantial evidence.

to

affected

Accordingly,

the decision is vacated and the case is remanded for further
proceedings consistent with this opinion.

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