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National Labor Relations Board v. Community Health Services, Inc.

United States Court of Appeals, Tenth Circuit

January 20, 2016


Page 769

Appeal from the National Labor Relations Board. (NLRB No. 28-CA-016762).

Kaitlin Kaseta, Charleston, South Carolina (Bryan T. Carmody, Carmody & Carmody LLP, Glastonbury, Connecticut, on the briefs), for Respondent.

Milakshmi V. Rajapakse, Attorney (Robert J. Englehart, Supervisory 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, with her on the briefs), National Labor Relations Board, Washington, D.C., for Petitioner.

Before TYMKOVICH, Chief Judge, GORSUCH, and McHUGH, Circuit Judges. GORSUCH, Circuit Judge, dissenting.


Page 770

McHUGH, Circuit Judge.


This challenge to the National Labor Relations Board's (the Board) petition for enforcement questions whether the Board may disregard interim earnings when calculating backpay awards for employees whose labor injury falls short of unlawful termination. Respondent Mimbres Memorial Hospital and Nursing Home (the Hospital) argues the Board failed to provide adequate support for its decision to disregard interim earnings and therefore requests that we reverse the Board's backpay calculation. We defer to the Board's policy-based rationale in support of its remedial decision and affirm and enforce its order.


A. The Unfair Labor Practice Allegations and Proceedings

The complicated procedural history of this case stems from the Hospital's 1999 decision to reduce the hours of its full-time, respiratory-department employees. Cmty. Health Servs., Inc., 342 N.L.R.B. 398, 400-02 (2004). As a result of this reduction in hours, the United Steelworkers of America, District 12, Subdistrict 2, AFL-CIO, a union representing respiratory-department employees under an exclusive collective bargaining agreement, filed charges against the Hospital on behalf of the impacted employees. Based on these allegations, the Board's General Counsel filed a complaint with the Board, asserting the Hospital had violated § 8(a)(1), (5) of the National Labor Relations Act (the Act or NLRA), 29 U.S.C. § 158. The Board ultimately agreed and ordered the Hospital to " make whole any employee for any loss of earnings and other benefits suffered as a result of its unlawful actions." Cmty. Health Servs., Inc., 342 N.L.R.B. at 404. On petition for review in this court, we enforced the Board's order in whole. NLRB v. Cmty. Health Servs., Inc., 483 F.3d 683 (10th Cir. 2007).

B. The Compliance Proceedings

The case proceeded to the compliance phase, where an administrative law judge (ALJ) determined the Hospital owed thirteen current and former employees approximately $105,000 in backpay. Cmty. Health Servs., Inc., No. 28-CA-16762, 2010 WL 3285384 (N.L.R.B. Div. of Judges July 28, 2010). In arriving at this amount, the ALJ rejected the Hospital's argument that any income an employee had earned from secondary employment during the backpay period--i.e., interim earnings--should be deducted from that employee's backpay calculation. Id.

Page 771

In reaching that conclusion, the ALJ applied a backpay formula the Board first pronounced in Ogle Protection Service, Inc., 183 N.L.R.B. 682 (1970). In Ogle, the Board determined that interim earnings should not be deducted from backpay awards when the underlying violation is something other than wrongful termination of employment. 183 N.L.R.B. at 683. The Board in Ogle apparently presumed that employees who remain employed by the wrongdoing employer will not make interim earnings. Id. Here, the ALJ determined that application of the Ogle formula was appropriate because to hold otherwise " would have the effect of imposing a duty on employee victims of an unfair labor practice to moonlight in order to minimize the impact of the unlawful conduct for the benefit of the wrongdoer." Cmty. Health Servs., 2010 WL 3285384.

The Hospital filed exceptions and supporting briefs to the Board, challenging the ALJ's decision. But in its Compliance Order, the Board affirmed the ALJ's rulings, findings, and conclusions. Cmty. Health Servs., Inc., 356 N.L.R.B. No. 103, slip op. at *18 (Feb. 28, 2011).

The Hospital next petitioned the United States Court of Appeals for the District of Columbia[1] for review of the Board's Compliance Order. Deming Hosp. Corp. v. NLRB, 665 F.3d 196, 398 U.S.App.D.C. 416 (D.C. Cir. 2011). The D.C. Circuit rejected the Board's interpretation of Ogle and the Board's concern that deducting interim earnings would impose a duty to moonlight on the victims of wrongful hour reductions. Id. at 200. The circuit court further explained that the Compliance Order conflated two distinct concepts: an employee's duty to mitigate (which is nonexistent when there is no cessation of employment) and the " rules governing when backpay should be reduced by interim earnings." Id.

The D.C. Circuit also noted that, since Ogle, the Board had been inconsistent in its approach to calculating backpay in the absence of a cessation of employment. Id. at 201. In light of this unclear precedent, the court ruled the Board had not adequately explained its rationale for refusing to consider interim earnings here. It therefore remanded the Compliance Order " for a more thorough analysis of the issue." Id.

On remand, the Board issued a Supplemental Order reaffirming its original ruling. Cmty. Health Servs., Inc., 361 N.L.R.B. No. 25, slip op. (Aug. 25, 2014). The Board identified the sole issue on remand as " whether the Board should deduct an employee's interim earnings from other employment when calculating backpay in cases where the employee suffers no cessation of employment with the wrongdoing respondent-employer and has no duty to mitigate by seeking interim employment" and concluded that " the deduction of interim earnings in this situation would not best effectuate statutory policy." Id. at *1. In reaffirming its prior conclusion, the Board provided five new policy justifications for its choice of remedy. Specifically, the Board explained that declining to deduct interim earnings where there is no cessation of employment (1) encourages employment and production, (2) is more consistent with the Board's policy of not deducting interim earnings obtained from work performed above and beyond an employee's duty to mitigate, (3)

Page 772

better accounts for the hardships that arise when taking on secondary employment, (4) discourages employers from engaging in dilatory conduct such as delaying compliance with an order to rescind unfair labor practices, and (5) prevents a windfall to the wrongdoing employer. Id. at *7--*9. Although the Board acknowledged the existence of some inconsistent precedent on this issue, it argued that the cases in which it " inadvertently" deducted interim earnings from backpay calculations " represent a tiny fraction of the hundreds of cases" in which the Board declined to deduct the interim earnings of employees whose injuries fall short of unlawful termination. Id. at *7. Based on these considerations, the Board reaffirmed its prior backpay order, concluding that " important statutory policies strongly support a practice of declining to deduct interim earnings when applying the Ogle Protection Service backpay formula for cases involving economic loss but no cessation of employment." Id. at *9.

Next, General Counsel filed an application in this court for enforcement of the Board's decision, and the Hospital responded in opposition. We exercise jurisdiction under 29 U.S.C. § 160(e), (f).


On this petition for enforcement, we are asked to determine whether the Board provided sufficient support for its decision to exclude interim earnings from backpay calculations when the employer has wrongfully reduced employee hours, but not terminated employment. The Hospital contends the Board's Supplemental Order is inadequate, arguing the Board's reliance on Ogle Protection Service, Inc., 183 N.L.R.B. 682 (1970), is flawed and its policy justifications are unfounded. General Counsel contends the Board selected a reasonable remedy that is in line with the policies underlying the NLRA.

The Board's power to award backpay arises under § 10(c) of the NLRA, which permits the Board to " take such affirmative action including reinstatement of employees with or without back pay, as will effectuate the policies of [the Act]." 29 U.S.C. § 160(c). Because a backpay award is " only an approximation," the Board " has considerable discretion in selecting a method reasonably designed to approximate the amount of pay" due to a wronged employee. NLRB v. Velocity Express, Inc., 434 F.3d 1198, 1202 (10th Cir. 2006) (internal quotation marks omitted). On review of a backpay order, our task is narrow. See id. (" The NLRB's power to order backpay is a broad, discretionary one, 'subject to limited judicial review.'" (quoting Fibreboard Corp. v. N.L.R.B., 379 U.S. 203, 216, 85 S.Ct. 398, 13 L.Ed.2d 233 (1964))). We will not disturb the Board's remedial decision unless it is " arbitrary or unreasonable," or, in other words, " is a patent attempt to achieve ends other than those which can fairly be said to effectuate the policies of the NLRA." Id. (brackets and internal quotation marks omitted).

It is through this deferential lens that we assess the Hospital's opposition to the Board's Supplemental Order. We first review the Board's interpretation of Ogle and its progeny, and we then turn to the Hospital's criticism of the Board's policy justifications.

A. The Supplemental Order Properly Interpreted Ogle

To properly assess the Board's application of its decision in Ogle, we begin by explaining the Board's historical approach to two underlying concepts: the duty to mitigate and the calculation of backpay awards.

Page 773

1. Board Precedent Regarding the Duty to Mitigate and Backpay Calculations

First, we consider the duty to mitigate. Under longstanding Board and Supreme Court precedent, employees who believe they have been unlawfully terminated have a duty to seek out substitute employment while they await a Board decision on that issue. Phelps Dodge Corp. v. NLRB, 313 U.S. 177, 199-200, 61 S.Ct. 845, 85 L.Ed. 1271 (1941) (recognizing the Board's power to " give appropriate weight to a clearly unjustifiable refusal to take desirable new employment" when calculating backpay). Although the Board and courts frequently refer to this obligation as a duty to mitigate, the term is somewhat of a misnomer because the motivation for the obligation is more " the healthy policy of promoting production and employment" than " the minimization of damages." Id.

Where unlawfully terminated employees are under an obligation to seek work, the policy holds that backpay calculations logically should include a deduction for interim earnings. Without such a deduction, employees who are willing to bet on the outcome of the claims against the former employer or whose short-term financial needs are minimal would have little incentive to comply with their mitigation obligation. Instead, they could wait for a favorable decision from the Board to make them whole. The duty to seek interim employment gives these employees an incentive to remain productive during the period the claims against the former employer are unresolved.

Conversely, employees who are not unlawfully terminated but suffer other labor injuries--e.g., reduction in hours or wage--have no duty to seek secondary employment pending a decision on their unfair labor practices claim. See 88 Transit Lines, Inc., 314 N.L.R.B. 324, 325 (1994) (explaining that employees who are not discharged are not required " as part of any mitigation obligation, to obtain additional replacement work from some other employer during the backpay period" ). But some employees who are unable to wait for the outcome of an N.L.R.B. action will make up the lost hours with supplemental work despite the lack of any legal duty to do so. The fact that employees who have no duty ...

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