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Court of Appeal, First District, Division 4, California.


No. 1/Civil 41880.

Decided: April 27, 1978

Stewart Weinberg (Van Bourg, Allen, Weinberg & Roger), San Francisco, Calif., for appellant. Samuel V. McGrath, City Attorney, Eugene B. Baird, Assistant City Attorney, and Malcolm Hunter, Deputy City Attorney, Richmond, Calif., for respondents.

United Public Employees Local 390, SEIU, AFL-CIO, appeals from a judgment denying a writ of mandate to compel respondent, City of Richmond, to set aside a decision to contract out tree trimming services and related work until the city met and conferred in good faith with the union concerning the impact of that decision.

Appellant is the recognized bargaining agent for the employees of the City of Richmond. Among its members are seven persons who, prior to October 1, 1976, performed tree-trimming and related tree maintenance work for the Department of Recreation and Parks of the city. On September 8, 1976, the union was advised by a letter from Joseph Salvato, the director of the department, that he proposed to recommend to the city council that it award a contract for tree maintenance services to an outside contractor. The letter stated that the award of the contract by the city council would result in the layoff of seven employees in the department. The union informed the city manager's office that Salvato's proposal was of sufficient importance to the union that the matter should be held off the agenda of the city council pending discussions between the city and the union. The city council refused a request by a member of the union to postpone consideration of Salvato's recommendation, and voted to award a contract for tree maintenance services to Atlas Tree Service and Pest Control. Each of the seven tree maintenance employees was then advised by letter that, effective October 1, 1976, the employee's present job had been eliminated and the employee would be moved from his present position to the next lower job classification in the department. Beginning October 1, 1976, and continuing thereafter, all tree-topping, tree-trimming and related tree maintenance work have been performed by the contractor, and no city employees have performed any tree maintenance work.

The union initiated the grievance procedure which is provided for in the Memorandum of Understanding in effect between the city and the union. Obtaining no satisfaction, the union sought a writ of mandate compelling the city to set aside its decision to contract out the tree maintenance work until the city had met and conferred in good faith with the union (Gov. Code, §3500). The trial court denied the writ, and the present appeal followed.

Appellant contends that respondent city was required to meet and confer in good faith upon request with appellant concerning the decision to subcontract maintenance work formerly performed by city employees, because such a decision affected the employees' “wages, hours, and other terms and conditions of employment” and was therefore a mandatory subject of discussion under section 3505 of the Government Code.

A public employer is required by statute to meet and confer upon the request of a recognized employee organization concerning matters which affect the employees' wages, hours and other terms and conditions of employment. Section 3504.5 of the Government Code1 provides that a public entity “shall give reasonable written notice to each recognized employee organization affected [by] any ordinance, rule, resolution, or regulation directly relating to matters within the scope of representation proposed to be adopted by the governing body or such boards and commissions and shall give such recognized employee organization the opportunity to meet with the governing body or such boards and commissions.” Included within the “scope of representation” are “all matters relating to employment conditions and employer-employee relations, including, but not limited to wages, hours, and other terms and conditions of employment, ...” (§3504). The scope of representation does not include, however, “consideration of the merits, necessity, or organization of any service or activity provided by law or executive order.” (§3504.)

Under section 3505, the public agency must meet and confer in good faith upon request regarding wages, hours and other terms and conditions of employment and must consider the presentation made by the recognized employee organization “prior to arriving at a determination of policy or course of action.” The public agency and the recognized employee organization share an obligation “personally to meet and confer” upon request by either party and to exchange freely information, opinions and proposals for a reasonable period of time. (§3505.)

The question whether an employer should be required to bargain over a decision to put work out to contract involves a conflict between an employer's right to make management decisions and the employees' right to meet and confer concerning their working conditions. It involves “the specific problem of reconciling the two vague, seemingly overlapping phrases of the statute: ‘wages, hours, and working conditions,’ which, broadly read could encompass practically any conceivable bargaining proposal; and ‘merits, necessity or organization of any service’ which, expansively interpreted, could swallow the whole provision for collective negotiation and relegate determination of all labor issues to the city's discretion.” (Fire Fighters Union v. City of Vallejo (1974) 12 Cal.3d 608, 615, 87 LRRM 2453.)

The phrase “wages, hours, and other terms and conditions of employment” in the statute was taken from section 8(d) of the National Labor Relations Act (hereinafter NLRA; 29 U.S.C., §158 (d)). (Fire Fighters Union v. City of Vallejo, supra, 12 Cal. 3d at pp. 615-616.) Although the phrase “merits, necessity or organization” appearing in the California statute is not contained in the NLRA, the policy that prompted the inclusion of that language is reflected by decisions of the federal courts defining the scope of “wages, hours, and terms and conditions of employment” under the NLRA. (Fire Fighters Union v. City of Vallejo, supra, 12 Cal.3d at p. 616.) Thus, federal decisions construing section 8(d) of the NLRA are “reliable” authority in interpreting the parallel provisions of our statute “because the federal decisions effectively reflect the same interests as those that prompted the inclusion of the ‘merits, necessity or organization’ bargaining limitation in the ... state act, ...” (Fire Fighters Union v. City of Vallejo, supra, 12 Cal.3d at p. 617; see Social Workers' Union, Local 535 v. Alameda County Welfare Dept. (1974) 11 Cal.3d 382, 391, 86 LRRM 2954; see also Service Employees' Internat. Union, Local No. 22 v. Roseville Community Hosp. (1972) 24 Cal.App.3d 400, 408-409, 80 LRRM 2098.)

The federal courts have held that an employer's decision to cut back or terminate the operations of a business, based upon economic reasons, is a managerial decision and not a subject of mandatory bargaining under section 8(d) of the NLRA. (Royal Typewriter Co. v. N.L.R.B. (8th Cir. 1976) 533 F.2d 1030, 92 LRRM 2013; N.L.R.B. v. Acme Industrial Products, Inc. (6th Cir. 1971) 439 F.2d 40, 76 LRRM 2697; N.L.R.B. v. Royal Plating & Polishing Co. (3d Cir. 1965) 350 F.2d 191, 60 LRRM 2033; N.L.R.B. v. Adams Dairy, Inc. (8th Cir. 1965) 350 F.2d 108, 60 LRRM 2084.) Although there is no duty to bargain on the decision to close the business, an employer is still under an obligation to notify the union of its intentions and to give the union an opportunity to bargain over the effects of the closing on those employees whose employment status will be altered by the managerial decision. Such bargainable issues would include severance pay, seniority and pension. (N.L.R.B. v. Royal Plating & Polishing Co., supra, 350 F.2d 191, 196, 60 LRRM 2033; N.L.R.B. v. Thompson Transport Co. (10th Cir. 1969) 406 F.2d 698, 703, 70 LRRM 2481.)

The federal cases have distinguished between the decision to close or shut down a business and the decision to “contract out” work formerly performed by company employees; an employer must negotiate with the union before “contracting out” work which had previously been performed by its own employees. (Fibreboard Corp. v. Labor Board (1964) 379 U.S. 203, 57 LRRM 2609; N.L.R.B. v. Townhouse T.V. & Appliances, Inc. (7th Cir. 1976) 531 F.2d 826, 91 LRRM 2636; N.L.R.B. v. Jackson Farmers, Inc. (10th Cir. 1972) 457 F.2d 516, 79 LRRM 2909; N.L.R.B. v. C. H. Sprague & Son Co. (1st Cir. 1970) 428 F.2d 938, 74 LRRM 2641; N.L.R.B. v. American Manufacturing Company of Texas (5th Cir. 1965) 351 F.2d 74, 60 LRRM 2122.)

In Fibreboard Corp. v. Labor Board, supra, 379 U.S. 203, 57 LRRM 2609, the employer, Fibreboard Paper Products Corporation, had determined that certain maintenance work could be performed more economically by engaging an independent contractor. The company informed the union that it had decided to contract out the maintenance work to an independent contractor upon expiration of the company's collective bargaining agreements with the various labor organizations representing its maintenance employees and that, therefore, negotiation of a new contract with the union would be pointless. The independent contractor selected by the company assured the company that maintenance costs could be curtailed “by reducing the work force, decreasing fringe benefits and overtime payments, and by preplanning and scheduling the services to be performed.” (379 U.S. at p. 206.)

The United States Supreme Court held that the contracting out of plant maintenance work previously performed by employees in the bargaining unit was a matter “well within the literal meaning of the phrase ‘terms and conditions of employment.’ ” (Fibreboard Corp. v. Labor Board, supra, 379 U.S. 203, 210, 57 LRRM 2609.) The court stated that the inclusion of “contracting out” within the statutory scope of collective bargaining effectuated the purposes of the NLRA and was also consistent with industrial practices in this country. The court also pointed out that there was no change in the economic direction of the company and the same functions were to be performed by the independent contractor as were performed formerly by Fibreboard's own employees. No decision respecting commitment of capital investment was involved. The decision to subcontract was a cost-cutting decision suitable for resolution within the collective bargaining framework because economies were effected by “reducing the work force, decreasing fringe benefits and [eliminating] overtime payments.” In the present case, the decision to let out to a contractor the tree maintenance work formerly performed by the city's employees falls within the Fibreboard rule. (See dicta in Fire Fighters Union v. City of Vallejo, supra, 12 Cal.3d 608, 621-622, 87 LRRM 2453. Also see Van Buren Pub. Sch. Dist. v. Wayne Cty. Cir. J. (Ct.App.Mich. 1975) 232 N.W.2d 278, 90 LRRM 2615.)

Respondents counter that the decision to subcontract tree maintenance work was nevertheless excluded from the right to meet and confer by the terms of the Memorandum of Understanding negotiated between the parties. Under the NLRA, the right to bargain upon request on a mandatory subject of negotiation may be waived either by the terms of the contract or by actual negotiation. (See N.L.R.A., §8(d), 29 U.S.C., §158(d).)2 However, an employer is not relieved of the duty to bargain as to subjects which were neither discussed nor embodied in any of the terms and conditions of the contract. (N.L.R.B. v. Jacobs Mfg. Co. (2d Cir. 1952) 196 F.2d 680, 684, 30 LRRM 2098.) The California statute contains no language similar to the portion of section 8(d) of the NLRA construed in Jacobs Mfg. Co., supra. However, as pointed out in Glendale City Employees' Assn., Inc. v. City of Glendale (1975) 15 Cal.3d 328, 336, 90 LRRM 2603 (cert. den. 424 U.S. 943, 91 LRRM 2469), the Memorandum of Understanding, once it has been approved by the parties, is a binding and enforceable agreement: “Why negotiate an agreement if either party can disregard its provisions? What point would there be in reducing it to writing, if the terms of the contract were of no legal consequence?” (See also Crowley v. City and County of San Francisco (1976) 64 Cal.App.3d 450, 459, 94 LRRM 2527.)

In the present case, the Memorandum of Understanding between the parties, effective from July 1, 1976, until June 30, 1977 (¶55 of the MOU), provided that “The City Manager may lay off an employee from the classified service because of a shortage of work, lack of funds, material change in duties or organization, return of an employee from a leave of absence, or for other valid reasons ....” (¶20, MOU.) Under this provision, the city reserved the unilateral right to lay off an employee because of any shortage of work, lack of funds, material change in duties or organization of the department or for other valid reasons. The decision to hire an independent contractor to perform tree maintenance duties falls within the right reserved by the city, to effect a “material change in ... organization, ...” and is therefore governed by that section. Appellants argue that the language of paragraph 20 does not specifically include the decision to contract out bargaining unit work. The federal cases have stated that, under section 8(d) of the NLRA, “any waiver of the statutory right to bargain over a mandatory subject of bargaining must be in ‘clear and unmistakable language.’ ” (NL Industries, Inc. v. N.L.R.B. (8th Cir. 1976) 536 F.2d 786, 789, 92 LRRM 2937.) The trial court concluded and we agree, that contracting out is “clearly and unmistakably” included in the phrase “material change in organization.”

The judgment is affirmed.


1.  Unless otherwise designated, all statutory references hereinafter are to the Government Code.

2.  29 United States Code, §158(d):“For the purposes of this section, to bargain collectively is the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment, or the negotiation of an agreement, or any question arising thereunder, and the execution of a written contract incorporating any agreement reached if requested by either party, but such obligation does not compel either party to agree to a proposal or require the making of a concession: Provided, That where there is in effect a collective-bargaining contract covering employees in an industry affecting commerce, the duty to bargain collectively shall also mean that no party to such contract shall terminate or modify such contract....”


CALDECOTT, Justice, and WILSON,* Judge, concur.