1. In view of the continuing character of the obligation imposed
on the employer by the order of the National Labor Relations Board,
the subsequent expiration of the contracts in question and the
employer's entry into a collective bargaining agreement did not
render the case moot. P.
321 U. S.
334.
2. That an employer has individual contracts of employment,
covering wages, hours and working conditions, with a majority of
his employees, which contracts were valid when made and are
unexpired, does not preclude exercise by the employees of their
right under the National Labor Relations Act to choose a
representative for collective bargaining, nor warrant refusal by
the employer to bargain with such representative in respect of
terms covered by the individual contracts. P.
321 U. S.
339.
The relation in general of individual contracts to collective
bargaining is discussed.
3. The Board has no power to adjudicate the validity or effect
of the contracts here in question, except as to their effect on
matters within its jurisdiction. P.
321 U. S.
340.
4. Since the desist order literally goes beyond what the Board
intended, its language is modified accordingly. P.
321 U. S.
341.
134 F.2d 70 modified and affirmed.
Certiorari, 320 U.S. 210, to review a decree which granted
enforcement of an order of the National Labor Relations Board, 42
N.L.R.B. 85.
Page 321 U. S. 333
MR. JUSTICE JACKSON delivered the opinion of the Court.
This cause was heard by the National Labor Relations Board on
stipulated facts which, so far as concern present issues, are as
follows:
The petitioner, J. I. Case Company, at its Rock Island,
Illinois, plant, from 1937, offered each employee an individual
contract of employment. The contracts were uniform, and for a term
of one year. The Company agreed to furnish employment as steadily
as conditions permitted, to pay a specified rate, which the Company
might redetermine if the job changed, and to maintain certain
hospital facilities. The employee agreed to accept the provisions,
to serve faithfully and honestly for the term, to comply with
factory rules, and that defective work should not be paid for.
About 75% of the employees accepted and worked under these
agreements.
According to the Board's stipulation and finding, the execution
of the contracts was not a condition of employment, nor was the
status of individual employees affected by reason of signing or
failing to sign the contracts. It is not found or contended that
the agreements were coerced, obtained by any unfair labor practice,
or that they were not valid under the circumstances in which they
were made.
While the individual contracts executed August 1, 1941, were in
effect, a CIO union petitioned the Board for certification as the
exclusive bargaining representative of the production and
maintenance employees. On December 17, 1941, a hearing was held at
which the Company urged the individual contracts as a bar to
representation proceedings. The Board, however, directed an
election, which was won by the union. The union was thereupon
certified as the exclusive bargaining representative of the
employees in question in respect to wages, hours, and other
conditions of employment.
Page 321 U. S. 334
The union then asked the Company to bargain. It refused,
declaring that it could not deal with the union in any manner
affecting rights and obligations under the individual contracts
while they remained in effect. It offered to negotiate on matters
which did not affect rights under the individual contracts, and
said that, upon the expiration of the contracts, it would bargain
as to all matters. Twice the Company sent circulars to its
employees asserting the validity of the individual contracts and
stating the position that it took before the Board in reference to
them.
The Board held that the Company had refused to bargain
collectively, in violation of § 8(5) of the National Labor
Relations Act, and that the contracts had been utilized, by means
of the circulars, to impede employees in the exercise of rights
guaranteed by § 7 of the Act, with the result that the Company had
engaged in unfair labor practices within the meaning of § 8(1) of
the Act. It ordered the Company to cease and desist from giving
effect to the contracts, from extending them or entering into new
ones, from refusing to bargain and from interfering with the
employees, and it required the Company to give notice accordingly
and to bargain upon request.
The Circuit Court of Appeals, with modification not in issue
here, granted an order of enforcement. The issues are unsettled
ones important in the administration of the Act, and we granted
certiorari. In doing so, we asked counsel, in view of the
expiration of the individual contracts and the negotiation of a
collective contract, to discuss whether the case was moot. In view
of the continuing character of the obligation imposed by the order,
we think it is not, and will examine the merits.
Contract, in labor law, is a term the implications of which must
be determined from the connection in which it appears. Collective
bargaining between employer and the representatives of a unit,
usually a union, results in an
Page 321 U. S. 335
accord as to terms which will govern hiring and work and pay in
that unit. The result is not, however, a contract of employment
except in rare cases; no one has a job by reason of it, and no
obligation to any individual ordinarily comes into existence from
it alone. The negotiations between union and management result in
what often has been called a trade agreement, rather than in a
contract of employment. Without pushing the analogy too far, the
agreement may be likened to the tariffs established by a carrier,
to standard provisions prescribed by supervising authorities for
insurance policies, or to utility schedules of rates and rules for
service, which do not of themselves establish any relationships,
but which do govern the terms of the shipper or insurer or customer
relationship whenever and with whomever it may be established.
Indeed, in some European countries, contrary to American practice,
the terms of a collectively negotiated trade agreement are
submitted to a government department, and, if approved, become a
governmental regulation ruling employment in the unit. [
Footnote 1]
After the collective trade agreement is made, the individuals
who shall benefit by it are identified by individual hirings. The
employer, except as restricted by the collective agreement itself
and except that he must engage in no unfair labor practice or
discrimination, is free to select those he will employ or
discharge. But the terms of the employment already have been traded
out. There is little left to individual agreement except the act of
hiring. This hiring may be by writing or by word of mouth or may be
implied from conduct. In the sense of contracts of hiring,
individual contracts between the employer and employee
Page 321 U. S. 336
are not forbidden, but indeed are necessitated by the collective
bargaining procedure.
But, however engaged, an employee becomes entitled by virtue of
the Labor Relations Act somewhat as a third party beneficiary to
all benefits of the collective trade agreement, even if on his own
he would yield to less favorable terms. The individual hiring
contract is subsidiary to the terms of the trade agreement, and may
not waive any of its benefits, any more than a shipper can contract
away the benefit of filed tariffs, the insurer the benefit of
standard provisions, or the utility customer the benefit of legally
established rates.
Concurrent existence of these two types of agreement raises
problems as to which the National Labor Relations Act makes no
express provision. We have, however, held that individual contracts
obtained as the result of an unfair labor practice may not be the
basis of advantage to the violator of the Act nor of disadvantage
to employees.
National Licorice Co. v. Labor Board,
309 U. S. 350. But
it is urged that where, as here, the contracts were not unfairly or
unlawfully obtained, the court indicated a contrary rule in
Labor Board v. Jones & Laughlin Steel Corp.,
301 U. S. 1,
301 U. S. 44-45,
and
Virginian R. Co. v. System Federation, 300 U.
S. 515. Without reviewing those cases in detail, it may
be said that their decision called for nothing and their opinions
contain nothing which may be properly read to rule the case before
us. The Court in those cases recognized the existence of some scope
for individual contracts, but it did not undertake to define it or
to consider the relations between lawful individual and collective
agreements, which is the problem now before us.
Care has been taken in the opinions of the Court to reserve a
field for the individual contract, even in industries covered by
the National Labor Relations Act, not merely as an act or evidence
of hiring, but also in the sense of a completely individually
bargained contract setting out
Page 321 U. S. 337
terms of employment, because there are circumstances in which it
may legally be used -- in fact in which there is no alternative.
Without limiting the possibilities, instances such as the following
will occur: men may continue work after a collective agreement
expires and, despite negotiation in good faith, the negotiation may
be deadlocked or delayed; in the interim, express or implied
individual agreements may be held to govern. The conditions for
collective bargaining may not exist; thus, a majority of the
employees may refuse to join a union or to agree upon or designate
bargaining representatives, or the majority may not be demonstrable
by the means prescribed by the statute, or a previously existent
majority may have been lost without unlawful interference by the
employer and no new majority have been formed. As the employer in
these circumstances may be under no legal obligation to bargain
collectively, he may be free to enter into individual contracts.
[
Footnote 2]
Individual contracts, no matter what the circumstances that
justify their execution or what their terms, may not be availed of
to defeat or delay the procedures prescribed by the National Labor
Relations Act looking to collective bargaining, nor to exclude the
contracting employee from a duly ascertained bargaining unit; nor
may they be used to forestall bargaining or to limit or condition
the terms of the collective agreement. "The Board asserts a public
right vested in it as a public body, charged in the public interest
with the duty of preventing unfair labor practices."
National
Licorice Co. v. Labor Board, 309 U. S. 350,
309 U. S. 364.
Wherever private contracts conflict with its functions, they
obviously must yield or the Act would be reduced to a futility.
Page 321 U. S. 338
It is equally clear, since the collective trade agreement is to
serve the purpose contemplated by the Act, the individual contract
cannot be effective as a waiver of any benefit to which the
employee otherwise would be entitled under the trade agreement. The
very purpose of providing by statute for the collective agreement
is to supersede the terms of separate agreements of employees with
terms which reflect the strength and bargaining power and serve the
welfare of the group. Its benefits and advantages are open to every
employee of the represented unit, whatever the type or terms of his
preexisting contract of employment.
But it is urged that some employees may lose by the collective
agreement, that an individual workman may sometimes have, or be
capable of getting, better terms than those obtainable by the
group, and that his freedom of contract must be respected on that
account. We are not called upon to say that under no circumstances
can an individual enforce an agreement more advantageous than a
collective agreement, but we find the mere possibility that such
agreements might be made no ground for holding generally that
individual contracts may survive or surmount collective ones. The
practice and philosophy of collective bargaining looks with
suspicion on such individual advantages. Of course, where there is
great variation in circumstances of employment or capacity of
employees, it is possible for the collective bargain to prescribe
only minimum rates or maximum hours or expressly to leave certain
areas open to individual bargaining. But, except as so provided,
advantages to individuals may prove as disruptive of industrial
peace as disadvantages. They are a fruitful way of interfering with
organization and choice of representatives; increased compensation,
if individually deserved, is often earned at the cost of breaking
down some other standard thought to be for the welfare of the
group, and always creates the suspicion of being
Page 321 U. S. 339
paid at the long range expense of the group as a whole. Such
discriminations not infrequently amount to unfair labor practices.
The workman is free, if he values his own bargaining position more
than that of the group, to vote against representation, but the
majority rules, and if it collectivizes the employment bargain,
individual advantages or favors will generally in practice go in as
a contribution to the collective result. We cannot except
individual contracts generally from the operation of collective
ones because some may be more individually advantageous. Individual
contracts cannot subtract from collective ones, and whether, under
some circumstances, they may add to them in matters covered by the
collective bargain we leave to be determined by appropriate forums
under the laws of contracts applicable, and to the Labor Board if
they constitute unfair labor practices.
It also is urged that such individual contracts may embody
matters that are not necessarily included within the statutory
scope of collective bargaining, such as stock purchase, group
insurance, hospitalization, or medical attention. We know of
nothing to prevent the employee's, because he is an employee,
making any contract provided it is not inconsistent with a
collective agreement or does not amount to or result from or is not
part of an unfair labor practice. But, in so doing, the employer
may not incidentally exact or obtain any diminution of his own
obligation or any increase of those of employees in the matters
covered by collective agreement.
Hence, we find that the contentions of the Company that the
individual contracts precluded a choice of representatives and
warranted refusal to bargain during their duration were properly
overruled. It follows that representation to the employees by
circular letter that they had such legal effect was improper, and
could properly be prohibited by the Board.
Page 321 U. S. 340
One minor matter remains for consideration. The literal terms of
the Board's order require the Company to
"cease and desist from (a) giving effect to the individual
contracts of employment or any modification, continuation,
extension or renewal thereof, or entering into any similar form of
contract with its employees for any period subsequent to the date
of this decision,"
and to give written notice to each to that effect and that "such
contract will not in any manner be enforced or attempted to be
enforced," and that "such discontinuance of the contract is without
prejudice to the assertion of any legal rights the employee may
have acquired under such contract."
These provisions, it has been argued, go beyond the Board's
power, leave employees free to bring, but the Company powerless to
defend, actions on the contract, and prohibit making future
contracts even when not obnoxious to the law or to any collective
agreement.
The Board, of course, has no power to adjudicate the validity or
effect of such contracts except as to their effect on matters
within its jurisdiction.
National Licorice Co. v. Labor Board,
supra. The Board, however, would construe the order more
narrowly than its terms suggest. It says,
"The provision in question, as we have seen, is based upon the
finding that the contracts were utilized as a means of interfering
with rights guaranteed by the Act, and constituted an obstacle to
collective bargaining. Read in the context of this finding, the
requirement of the cease and desist provisions enjoins petitioner
only from continuing to derive benefits from the contracts
heretofore utilized to forestall collective bargaining and deter
self-organization, and from entering into new contracts either for
the purpose of again thus utilizing them or under circumstances in
which similar infringement of the collective bargaining process
would be a probable consequence. The paragraph does not prevent
petitioner from contracting with individual employees under
circumstances which negative any
Page 321 U. S. 341
intent to interfere with the employees' right under the Act. . .
. Thus, construed, the challenged requirement is but a reasonable
safeguard. . . ."
We agree, but the literal language of the order may well be read
in quite different meaning, especially when separated from findings
and standing alone in the Court's enforcement order. It then
becomes the language of the Court, and the Court would not be bound
to look upon the Board's construction as its own. Questions of
construction had better be ironed out before enforcement orders
issue than upon contempt proceedings. A party is entitled to a
definition as exact as the circumstances permit of the acts which
he can perform only on pain of contempt of court. Nor should he be
ordered to desist from more on the theory that he may violate the
literal language and then defend by resort to the Board's
construction of it. Courts' orders are not to be trifled with, nor
should they invite litigation as to their meaning. It will occur
often enough when every reasonable effort is made to avoid it.
Where, as here, the literal language of the order goes beyond what
the Board admits was intended, correction should be made.
Paragraphs 1(a) and 2(a) of the decree of the court below are
hereby modified, by adding the words in italics, to read as
follows:
"1. Cease and desist from:"
"(a) Giving effect to the individual contracts of employment or
any modification, continuation, extension, or renewal thereof
to forestall collective bargaining or deter
self-organization, or entering into any similar form of
contract with its employees for any period subsequent to the date
of this Decree
for such purpose or with such effect."
"2. Take the following affirmative action which the Board finds
will effectuate the policies of the Act:"
"(a) Give separate written notice to each of its employees who
signed an individual contract of employment or any modification,
continuation, extension, or renewal
Page 321 U. S. 342
thereof, or any similar form of contract for any period
subsequent to the date of this Decree, that such contract will not
in any manner be enforced or attempted to be enforced
to
forestall collective bargaining or deter self-organization,
that the employee is not required or expected by virtue of such
contract to deal with respondent individually
in respect to
rates of pay, wages, hours of employment, or other conditions
of employment, and that such discontinuance of the contract is
without prejudice to the assertion of any legal rights the employee
may have acquired under such contract
or to any defenses
thereto by the employer."
As so modified the decree is
Affirmed.
MR. JUSTICE ROBERTS is of opinion that the judgment should be
reversed.
[
Footnote 1]
See Hamburger, "The Extension of Collective Agreements
to Cover Entire Trade and Industries" (1939) 40 International Labor
Review 153; Methods of Collaboration between Public Authorities,
Workers' Organizations, and Employers' Organizations (International
Labour Conference, 1940) p. 112.
[
Footnote 2]
Cf. Labor Board v. Sands Mfg. Co., 306 U.
S. 332;
Labor Board v. Columbian Enameling &
Stamping Co., 306 U. S. 292,
306 U. S.
297-298;
Labor Board v. Brashear Freight Lines,
Inc., 119 F.2d 379; Hoeniger, "The Individual Employment
Contract and Individual Bargain," 10 Fordham L.Rev. 14, 22-25.