611 F.

2d 1372
104 L.R.R.M. (BNA) 2619, 87 Lab.Cas. P 11,747

BALTIMORE REBUILDERS, INC., Petitioner,

v.
The NATIONAL LABOR RELATIONS BOARD, Respondent.
No. 78-1369.

United States Court of Appeals,

Fourth Circuit.
Argued May 9, 1979.
Decided Dec. 28, 1979.

Leonard E. Cohen, Baltimore, Md. (Sandra M. Gilmore, Frank, Bernstein,

Conaway & Goldman, Baltimore, Md., on brief), for petitioner.
Christine Weiner Peterson, N. L. R. B., Washington, D. C. (John S.
Irving, Gen. Counsel, John E. Higgins, Jr., Deputy Gen. Counsel, Robert
E. Allen, Acting Associate Gen. Counsel, Elliott Moore, Deputy
Associate Gen. Counsel, Marjorie S. Gofreed, N. L. R. B., Washington,
D. C., on brief), for respondent.
Denis F. Gordon, Washington, D. C. (Virginia A. McArthur, Washington,
D. C., on brief), for intervenors.
Before FIELD, Senior Circuit Judge, and WIDENER and HALL, Circuit
Judges.

K. K. HALL, Circuit Judge,

Baltimore Rebuilders, Inc. ("Rebuilders") petitions to have set aside an order of

the National Labor Relations Board (the "Board") dismissing a complaint
issued against the International Association of Machinists and Aerospace
Workers, AFL-CIO (the "Union") and its pension fund, the I.A.M. National
Pension Fund (the "Fund"). 235 N.L.R.B. No. 209 (1978). The complaint
alleges that the maintenance and enforcement of certain pension plan
provisions have unlawfully coerced and restrained Rebuilders' employees in the

exercise of the right to vote to decertify the Union as their collective bargaining
representative. Section 8(b)(1)(A) and (b)(2) of the National Labor Relations
Act (the "Act"), 29 U.S.C.A. 158(b)(1)(A) and (b)(2).
3

We think the complaint was properly dismissed because there is no evidence of

an intention to violate the Act appearing on the record before the Board or from
the provisions themselves. The cancellation provisions, on their face and as
here applied, are not discriminatory or coercive. Their impact on employee
voting rights is indirect and they serve a legitimate business purpose of the
Fund. Accordingly, we deny Rebuilders' petition.
I. UNION PENSION PLAN
A. The Pension Fund

The Fund was created in 1960 to provide retirement benefits to employees who
are represented by the Union's locals. There are approximately 2000 employers
making contributions for 90,000 union-represented employees. The Fund is not
administered by the Union.1 It is controlled by an independent board of trustees
whose membership is made up of an equal number of union and employer
representatives.2 Pension policy is set by this board and it is generally subject to
federal statutory regulation.3
B. Work Time Credits: Earned and Unearned

At issue is the plan's scheme for work time credits which each employee must
accumulate for entitlement to pension benefits. The plan allows full-scale
pension benefits to covered employees on the basis of their total years of
service without regard to when their employer began making contributions to
the Fund. Once commenced, pension benefits are paid whether or not the
pensioner's former employer continues to make contributions.4 This scheme
poses a generous unfunded benefit to employees who retire soon after the
employer begins contributions for their unit, and it poses a significant liability
to the Fund if for any reason the employer's expected "stream of contributions"
ceases.

Two kinds of work credits may be applied toward a pension entitlement. "Past
Service Credits"5 are granted on a unit-wide basis when an employer makes its
first contribution to the Fund. The number of these credits, which are accrued
by each employee on that date, equals his months of previous employment with
the employer. When contributions cease, these credits are cancelled. "Future

Service Credits"6 are earned for each month the employee works after that date
so long as the employer continues making contributions for the unit.
7

The Administrative Law Judge hearing the complaint found that this scheme of
earned and unearned credits allowed older, long service employees to receive
full pension benefits, although their employer's payments over the years
remaining before they retired could not be expected to pay for the Fund's
liability for their pensions. For example, it was found that a twenty-five year
employee could earn a full pension although his employer had joined the plan
only one year before he retired by adding one year of Future Service Credits to
his twenty-four years of Past Service Credits.7

The liability to the Fund represented by these unearned credits is greatest when
the employer commences coverage and diminishes as contributions continue
since all credits accruing after the initial contribution date are earned Future
Service Credits.

C. Employer Participation/Unit-Wide Cancellation of Unearned Credits

10

The employer's participation in the plan continues only so long as its employees
continue to bargain through a local to include a pension contribution clause in
their collective bargaining agreement.8 The contribution clause obligates the
employer to make unit contributions, at an agreed rate, as part of the benefits
package which will be effective during the term of the contract. The agreed
rates of contribution may change from contract to contract, with the level of
benefits payable upon retirement generally set by the highest rate of
contribution not the most recent rate.9

11

The cancellation provisions10 provide that when an employer's participation in

the Fund terminates (and its contributions necessarily cease), all Past Service
Credits are cancelled for active employees.11 On the date contributions cease
these provisions take away the same benefit that was granted on the date
contributions began.

12

Cancellation is effective on a unit-wide basis and is automatic. No discretion is

allowed to the Fund to prevent cancellation for any employee or unit. Active
employees are affected regardless of union affiliation or activity. All units
suffer the same consequence, whether or not they continue to be represented by
a Union local. One exception exists for units when the employer drops out of
the Fund and does not continue operating his present or a related business.
Employees of such discontinued units are excepted from cancellation.12

13

Once cancelled, working employees may reactivate their credits by changing

employment: if the employee terminates within 30 days of the employer's
termination of unit coverage or if they work under covered status in five of the
next eight years.13 Also, if the employer recommences participation in the Fund
within a few years, the cancelled credits could be automatically reactivated for
the unit.14

14

II. CANCELLATION OF UNEARNED CREDITS FOR REBUILDERS' UNIT

15

Rebuilders is engaged in the manufacture and wholesale distribution of rebuilt

carburetors in Baltimore, Maryland. In late 1969, the Union's local, Lodge #
199, District # 12, was certified by the Board as the collective bargaining
representative of Rebuilders' production and maintenance employees. Several
months later a three-year collective bargaining agreement was executed
obligating Rebuilders to commence contributions in the last year of the
contract. Contributions were made for that year and a second three-year
contract was entered into requiring the contributions to continue during its term.
When this contract expired, Rebuilders and the local failed to reach a third
agreement. A strike ensued, and three months later the local lost a
decertification election, making renewal of the pension contribution clause an
impossibility.

16

Four months after the election, the Fund administrator sent to Rebuilders and its
employees letters15 officially notifying them that the effect of the
decertification vote was to terminate Rebuilders' participation in the plan
causing referenced provisions of the plan to apply, including the cancellation
provisions at issue. The effective date of cancellation was first stated to be the
date the last contribution was received by the Fund but a second letter on the
same form corrected this error, stating that the effective date was the expiration
date of the collective bargaining agreement.
III. DISCUSSION

17

A difficult issue is presented because we are asked to review a complex unionsponsored pension plan which serves the purpose of pension plans generally
(and unions specifically) to provide generous benefits to employees, in the
context of the Act's prohibitions against penalizing employees in the free
exercise of organizational rights.16 No issue of discriminatory representation is
present. The substance of Rebuilders' charge is that, in the context of a
decertification election, the structure of the pension plan and its automatic
cancellation rules effectively overwhelm and dictate the collective choice of

unit employees to elect continued representation by the Union's locals.

18

The Act is intended to insulate employees' rights to employment from the

exercise of their organizational rights, Radio Officers' Union v. NLRB, 347
U.S. 17, 40, 74 S.Ct. 323, 98 L.Ed. 455 (1954), and to assure that when union
membership or unit representation is elected it is done so by a process of free
choice. Illegal are actions calculated to inhibit that process. However, the mere
creation of a benefit so valuable that predictably it will be elected by a free and
rational choice does not violate the Act.

19

It has long been recognized that an employer can make reasonable business
decisions, unmotivated by an intent to discourage union membership or
protected concerted activities, although the foreseeable effect of these decisions
may be to discourage what the act protects. For example, an employer may
discharge an employee because he is not performing his work adequately,
whether or not the employee happens to be a union organizer. See National
Labor Relations Board v. Universal Camera Corp., 2 Cir., 190 F.2d 429. Yet a
court could hardly reverse a Board finding that such firing would foreseeably
tend to discourage union activity. Again, an employer can properly make the
existence or amount of a year-end bonus depend upon the productivity of a unit
of the plant, although this will foreseeably tend to discourage the protected
activity of striking. Pittsburgh-Des Moines Steel Co. v. National Labor
Relations Board, 9 Cir., 284 F.2d 74. A union, too, is privileged to make
decisions which are reasonably calculated to further the welfare of all the
employees it represents, nonunion as well as union, even though a foreseeable
result of the decision may be to encourage union membership.

20

Local 357, Teamsters v. NLRB, 365 U.S. 667, 679-80, 81 S.Ct. 835, 841-842, 6
L.Ed.2d 11 (1961) (Mr. Justice Harlan concurring).

21

To determine whether conduct falls within the statutory ban, "(i)t is the 'true
purpose' or 'real motive' . . . that constitutes the test." Local 357, Teamsters v.
NLRB, 365 U.S. at 675, 81 S.Ct. 835, quoting from Radio Officers' Union v.
NLRB, 347 U.S. at 43, 74 S.Ct. 323. Proof of subjective motive can, in limited
situations, be made out from the conduct itself, NLRB v. Erie Resistor Corp.,
373 U.S. 221, 227-28, 83 S.Ct. 1139, 10 L.Ed.2d 308 (1963); however where
the impact on protected rights is slight or indirect, or where it may be explained
by reference to other lawful considerations, " '(it) is prima facie lawful,' and an
affirmative showing of improper motivation must be made." NLRB v. Great
Dane Trailers, Inc., 388 U.S. 26, 34, 87 S.Ct. 1792, 1798, 18 L.Ed.2d 1027
(1967).

22

Here, the Board's hearing developed no evidence of an intention to violate the

Act. The Fund administrator testified that the intent of the cancellation
provisions was to increase the incentive for employees covered by the Fund to
prevent, whenever possible, withdrawal from the Fund by active employers.
(App. Ex. 62; Tr. 168-70). In regard to the Fund's enforcement of the
provisions, the letters notifying employees of cancellation, were found by the
Administrative Law Judge to be only informational. Their tone was not
threatening. We note that since the letters were mailed well after the election,
there can be no contention that the timing of their receipt by employees was
coercive.

23

Only the plan's terms are left for scrutiny. On their face they evidence no
impermissible intent. They are not discriminatory or coercive. Rosen v. NLRB,
455 F.2d 615 (3rd Cir. 1972); Local No. 167, Progressive Mine Workers v.
NLRB, 422 F.2d 538 (7th Cir.), Cert. denied 399 U.S. 905, 90 S.Ct. 2198, 26
L.Ed.2d 560 (1970). They operate evenly against all unit employees regardless
of their personal preference to keep or dismiss the union. They operate
automatically when the possibility of continuing contributions is lost.

24

Union-sponsored pension plans are well-established as important services

which unions should provide to employees as part of the benefits they bring to
the process of employee representation and collective bargaining. Congress has
expressly recognized that such pension plans can pay pensions based on a
scheme of earned and unearned work credits. 29 U.S.C.A. 1002(37)(A).
When a union is vying for certification, the scheme has the same impact on
organizational rights as when the union seeks to prevent decertification. It poses
a significant inducement to older loyal employees to vote for the union in order
to obtain the union's pension coverage. But, the scheme also advances the
liberal social purposes of any pension plan both to encourage its adoption on a
broad financial base and to pay early, full-scale benefits to all employees as
they retire not just to those who will retire after contributions can pay for the
liability of their pensions.

25

What Congress authorizes we cannot outlaw. It has authorized just such a

scheme and we do not think a reasonable limitation on the unfunded liability
represented by it can violate the Act. See 29 U.S.C.A. 1001(b). The
reasonableness of the limitation here is shown by the fact that credits are
cancelled automatically when contributions end.

26

By the requirement that unit contributions be part of the benefits package

negotiated in the collective bargaining agreement, the plan allows several

events to announce the end of unit contributions only one of which is

decertification of a local. For example, local and employer may agree to join
another pension plan (which might offer the same inducement to join which is
here cancelled), or they may agree to eliminate pension benefits from their
contract in favor of higher wages or other more immediate benefits. The
economic and social conditions playing upon such negotiations are as varied as
they are unpredictable. But, in those cases, cancellation is effective and the
local continues to represent the unit.
27

We must note that because coverage is voluntary and is tied to the term and
negotiation of each contract, if employees are willing to trade away pension
benefits, the cancellation provisions effectively "penalize" the Union
representatives, not the employer.

28

In the context of a decertification vote, the impact of cancellation is only one

factor to be considered by employees and may have little impact on the
election. If a second union vies to represent the unit, its pension fund may offer
credits similar to those subject to cancellation. Only voting employees who
were working on the initial contribution date have accrued any credits which
can be cancelled. Each year of contributions reduces the ratio of unearned to
earned credits for such employees, as well as for the unit as a whole.
Consequently, the longer the contributions have continued, lesser is the impact
of cancellation. Again, cancellation is only one of many factors involved in the
collective decision to decertify. Contrary to Rebuilders' assertion, cancellation
cannot dictate the outcome of that vote, nor can it overwhelm or intimidate an
individual employee in the free exercise of his right to vote for or against the
local's representation.

29

We think the challenged provisions evidence an intention to encourage the

voluntary continuation of pension coverage on a unit-wide basis. As such, they
serve a legitimate business purpose of the Fund to reasonably limit an unfunded
liability. Any effect cancellation may have on protected employee rights is
consequential, flowing from the nature of the pension plan to provide voluntary
and generous benefits from contract term to contract term.

30

The exceptions to cancellation when unit contributions end support this

conclusion. When an employer quits his business, all employees lose their jobs
and no voluntary decision remains. If the employer changes business
operations, the nature of the bargaining unit changes, employees may lose or
change jobs, and the attractiveness of voluntary pension coverage wanes until
stability in the unit is restored. In such cases, inducements to continue
contributions are likely to be unavailing and cancellation in fact would take on

the nature of a "penalty" to those employees.

31

Likewise, when individual employees change employment, the possibility of

cancellation of their credits cannot effect a decision to continue unit coverage.
Rebuilders contends that the exceptions for individual employees raise the
specter of rewarding "union faithful" who leave a shop, especially within 30
days of decertification. But we note that, as in Rebuilders' shop, when the
decertification vote is beyond 30 days from the end of contributions (the
contract term), any pro-union employee who may leave will suffer cancellation
along with the "employer faithful," because his termination must be within 30
days of the end of contributions rather than the date of the decertification vote.

32

In all, we think automatic cancellation of the credits when contributions cease

is a reasonable pension plan provision which operates fairly to induce the
voluntary continuation of pension coverage. As where a union's activities and
the quality of its services attract employees to membership, we think the very
existence of a union-sponsored pension plan encourages union representation.

33

The very existence of the union has the same influence. When a union engages
in collective bargaining and obtains increased wages and improved working
conditions, its prestige doubtless rises and, one may assume, more workers are
drawn to it. When a union negotiates collective bargaining agreements that
include arbitration clauses and supervises the functioning of those provisions so
as to get equitable adjustments of grievances, union membership may also be
encouraged. The truth is that the union is a service agency that probably
encourages membership whenever it does its job well.

34

Local 357, Teamsters v. NLRB, 365 U.S. at 675-76, 81 S.Ct. at 839-840.

35

Accordingly, the petition to review the Board's order is denied.

36

PETITION DENIED.

At the outset, we note the Fund has vigorously objected before the Board and
on appeal to any holding that presumes the Fund to be an agent of the Union.
Because we hold the pension plan provisions at issue do not violate the Act in
any event, we reserve decision about whether pension policies generally fall
within the strictures of the Act

The Labor Management Relations Act, Section 302, prohibits payments from

employers to employee representatives except under enumerated exceptions,

one of which is for pension payments made by written agreement to trust funds
which must be administered with equal representation of employers and
employees. Section 302(c)(5), 29 U.S.C.A. 186(c)(5)
3

See Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A.

1001 Et seq

If an employer's contributions for the unit as a whole are for less than four
years, pension benefits may be reduced. Art. IX, 3 and 4d; See Note 10,
Infra

Art. III

Art. IV

Art. IV, 1, 4 and 5

See 29 U.S.C.A. 1002(37)(A)(ii)

Art. V, 3(a) and (c)

10

Art. IX: TERMINATION OF PARTICIPATION

Section 1. General
The financing of the benefits provided by the Plan is based on the continued
contributions from Contributing Employers, as required in the Collective
Bargaining Agreements. If a Contributing Employer should fail to make the
required contributions, the Pension Plan cannot be continued for the employees
of such employer.
In addition, if a Lodge (local) and an employer should enter into a Collective
Bargaining Agreement requiring contributions to the Fund, and one or more
employees of such Contributing Employer should then retire under the
provisions of the Plan, the obligation to contribute to the Plan should continue
in effect for a sufficient period of time to enable the Plan to operate on an
actuarially sound basis. The purpose of this Article is to set forth the basis for
terminating the participation in the Plan of Contributing Employers who are
delinquent in their contributions to the Plan, and the basis for termination of
Credited Service and pension benefits for employees of delinquent employers.
In addition, this Article contains the basis for the Trustees to impose penalties
by way of denial of pension benefits and Credited Service for employees of
employers who, under certain circumstances, do not continue to be obligated to

contribute to the Fund in accordance with their Collective Bargaining

Agreement with the Lodge (local).
Section 2. Causes of Termination
The participation of a Contributing Employer shall terminate:
a. When the employer is no longer obligated by a Collective Bargaining
Agreement to make contributions to the Fund on the basis required by the
Trustees; or
b. When the Employer fails to pay an amount due the Fund, and termination is
deemed appropriate by the Trustees; or
c. When the employer fails to comply with administrative procedures adopted
by the Trustees and termination is deemed appropriate by the Trustees.
Section 3. Short Term Contributing Employers
If within 48 months of its Contribution Date the participation of a Contributing
Employer terminates and that employer goes out of business, or within 48
months of its Contribution Date the number of Covered Employees employed
by the Contributing Employer at any time is less than 50 percent of the original
number employed on the Contribution Date of the Contributing Employer, then
the following actuarial limitations shall apply:
a. Pensioners who formerly were employed by the Contributing Employer shall
have their pensions terminated or reduced, if the total amount contributed by
the said Contributing Employer, less benefit payments already made, is less
than the actuarially determined value of the pension benefits thereafter payable
with respect to such Pensioners; and
b. Covered Employees employed at any time by the Contributing Employer
shall have their benefits terminated or altered in such manner as the Trustees
consider necessary to preserve an actuarially sound relationship between the
liability for benefits anticipated for the said Covered Employees involved and
the contributions of the said Contributing Employer, after taking into account
the existing liability to Pensioners who formerly were employed by the
Contributing Employer.
This Section shall not apply to any Covered Employee who has at least five
years of Future Service credit before a break in Covered Employment occurs
under Section 3 of Article IV.

Section 4. Withdrawal by Active Employers

a. If the participation of a Contributing Employer terminates and should that
employer, or its successor, thereafter continue in the same or related business,
then all credited Service based upon employment with such employer shall be
cancelled retroactively, notwithstanding any contrary provision of this Plan.
b. Credited Service shall not be cancelled for the following persons:
(1) Covered Employees whose employment with such employer had ended at
least 24 months before the participation of the Contributing Employer
terminates; or
(2) Covered Employees whose employment with such employer ends within
thirty (30) days of the employer's termination; or
(3) Covered Employees in a bargaining unit which is transferred to the
jurisdiction of another I.A.M. Lodge (local), provided that:
i) No member of that Lodge (local) is a Covered Employee under this Plan; and
ii) The employee's rights under this Plan are vested under Article IV, Section 4;
and
iii) Pension benefits under this Plan are not duplicated under another pension
plan.
c. Covered Employees shall have their Credited Service reinstated if they earn
at least five years of Future Service credit at any time within the eight (8) year
period following the date the participation of the Contributing Employer
terminates.
d. Pensioners shall not lose their Credited Service if their benefits were
effective before the participation of the employer terminates; provided,
however, that if the participation of the employer terminates within 48 months
of its Contribution Date, then all pensions based upon Credited Service with
that employer shall be ended or reduced if the total amount contributed, less
benefit payments already made, is less than the actuarially determined value of
the pension benefits thereafter payable with respect to such Pensioners.
11

Pensioners are excepted from cancellation. Art. IX, 4d. See Notes 4 and 10,
Supra

12

Art. IX, 4a. See Note 10, Supra

13

Also, the plan allows other limited individual employee exceptions to the unitwide cancellation rule. They apply to employees who already have changed
employment at least 24 months before unit coverage ends, art. IX 4b(1), and
to those whose unit is transferred to a different Union local where no other
"Covered Employee" of the plan is a member and the transferee's rights are
vested (by his having at least attained age 50 and earned ten years credited
service, of which 5 years must be for Future Service Credits), art. IV, 4b. See
note 10, Supra

14

Art. IX, 4c. See Note 10, Supra

15

The letter form, dated August 24, 1976, is captioned, "Termination of

Participation, Article IX, Section 4" and reads, in pertinent part,
We have been advised that the I.A.M. bargaining unit employees of Baltimore
Rebuilders, Inc. have decertified I.A.M. District Lodge No. 12 as their
bargaining agent. The effect of this is to terminate participation and pension
coverage for the Covered Employees of Baltimore Rebuilders, Inc. The
effective date of termination is January 29, 1976, the expiration date of the last
collective bargaining agreement. Under Article IX, Section 4 of the Rules and
Regulations of the I.A.M. National Pension Fund, Benefit Plan A the following
shall apply:

For Covered Employees of Baltimore Rebuilders, Inc. all Past Service Credit
based on employment with the employer shall be cancelled retroactively
notwithstanding any contrary provision of the Plan

Past Service shall not be cancelled for any Covered Employee whose
employment with such employer terminates within 30 days of the employer's
termination (by February 29, 1976), OR if the Covered Employee terminated
his employment 24 months prior to the company's termination of participation
date

Covered Employees shall have their Past Service Credit reinstated if they earn
at least five (5) years of Future Service Credit at any time within the eight (8)
year period following the Termination of Participation

16

The Fund's work credit cancellation provisions have been reviewed by another
circuit court in the context of a law suit against the Fund for arbitrary denial of
pension benefits. Norton v. I.A.M. Nat. Pension Fund, 180 U.S.App.D.C. 176,
182, 553 F.2d 1352, 1358, N.8 (D.C.Cir. 1977). The issue here, on review of an
alleged violation of the Act, was not considered by that court and the facts
regarding the Fund's need to cancel unpaid credits were presumed true for the
decision in that case