Algoma Plywood Veneer Company v. Wisconsin Employment Relations Board/Dissent Black
United States Supreme Court
ALGOMA PLYWOOD VENEER COMPANY v. WISCONSIN EMPLOYMENT RELATIONS BOARD
Argued: Nov. 18, 1948. --- Decided: March 7, 1949
Mr. Justice BLACK, with whom Mr. Justice DOUGLAS joins, dissenting.
The decision just rendered holds that the State of Wisconsin can compel the petitioner to pay unearned back wages to an employee found to have been discharged by petitioner under the terms of a collective bargaining agreement which required such discharge. The petitioner had originally entered into the agreement in response to irresistible pressure by the United States Government. 252 Wis. 549, 559, 32 N.W.2d 417. The circumstances under which the contract was made were these:
From 1938 to 1943 the company and the union were in an almost constant wrangle. The chief bone of controversy throughout this five-year period was the union's demand for a 'closed shop.' Petitioner resolutely fought for an ' pen shop.' In 1938 the union took its cause to the National Labor Relations Board. After a long hearing of which the closed shop issue was a prominent phase, that Board in 1940 ordered petitioner to bargain with the union on the pending issues. Algoma Plywood Co., 26 N.L.R.B. 975, 980, 1002 (1940). The Court of Appeals, referring to the closed shop question as the 'main stumbling block' between petitioner and the union, refused to enforce the order on the ground that it was not clear that the union represented a majority of petitioner's employees. National Labor Relations Board v. Algoma Plywood & Veneer Co., 7 Cir., 121 F.2d 602, 606, 611. Thereafter, early in 1942, petitioner appealed to the Wisconsin Employment Relations Board to conduct an election. The union went to the National Board; petitioner withdrew its state board application; the National Board conducted an election; the union won, and the old closed shop controversy was renewed with increased intensity.
The union appealed to the National War Labor Board to settle the closed shop dispute. That Board, in collaboration with the United States Department of Labor, put pressure on petitioner to yield to the union's demands. Petitioner was informed that unless it agreed to a maintenance of membership clause, which was at the time forbidden by Wisconsin law, the clause 'would be put in by the War Labor Board anyhow' since inclusion of such provisions was a part of that Board's national policy. Thus fired at from one side by the state and from the other side by powerful federal agencies, petitioner had to flee to one side or the other. Neither side offered a safe sanctuary. In weighing the conflicting considerations, petitioner not unreasonably found the scales tipped on the United States' side. Had petitioner refused the demands of the federal agency, the Government could and might have seized and operated its plants.  Furthermore, petitioner's employees might have stopped work. In response to its best judgment, though contrary to its own strong desires, petitioner finally yielded to the Federal Government's demands and agreed to the union's terms. January 23, 1943, a collective bargaining agreement was executed which contained the controversial maintenance of union membership clause and an automatic extension clause. This contract was approved by the War Labor Board. The controversial clause was extended automatically from year to year and was in effect when the alleged discharge took place. The Court apparently concedes that this clause of the collective bargaining contract was valid when petitioner entered into it under federal compulsion. In my judgment it was equally valid when the employee was discharged under it. It seems at least a questionable interpretation of federal statutory policy for this Court-a federal tribunal-to hold that a state is free to impose a money penalty on this company for acting in obedience to a contract which a federal agency validly compelled it to make. 
The Court's concession that the contract was valid when made rests on the premise that the statute creating the War Labor Board stemmed from the war power of Congress and that under this power the War Labor Board could, as it did, force petitioner to make the contract. Greenebaum Tanning Co., 10 War Lab.Rep. 527. But, says the Court, when Wisconsin entered the back-pay order, the War Labor Board had ceased to exist and on its dissolution on January 4, 1946, Wisconsin became possessed of the power to order petitioner to break his contract. In other words, the holding seems to be that the discontinuance of the War Labor Board automatically and instantly empowered the states to impair and nullify all collective bargaining contracts entered into under authority of the supreme federal policy embodied in the National War Labor Board Act. For several reasons, I cannot agree.
1. The termination of the War Labor Board was accomplished by Executive Order of the President, No. 9672. 11 Fed.Reg. 221. But there is nothing in that Executive Order that indicates a purpose to authorize invalidation of contracts made under the Board's directions. A contrary purpose is indicated. The Executive Order established the National Wage Stabilization Board. As the name of that Board indicates, it was established to exercise functions in connection with wage disputes which might adversely affect the national economy. For the limited purposes enumerated in the Order the new Board was vested with all the 'powers, functions and responsibilities of the National War Labor Board * * *.' While scope for operation of these powers was within more narrow limits than had been the scope of the War Labor Board's powers, the creation of this new Board negatives any possible contention that dissolution of the War Labor Board showed an intention to permit states to invalidate previously executed legal contracts approved by the War Labor Board in the interests of industrial peace. And far from indicating a presidential belief that wage stabilization and industrial peace were no longer essential in the war emergency period, the new Executive Order, as had the old, rested on the war power and the statutes that had stemmed from it. The War Labor Board was created to implement a congressional war policy expressed in part in the War Labor Disputes Act. 57 Stat. 163, 50 U.S.C.A.Appendix, § 1501 et seq. The Board's dissolution could not detract from the force of the statute or from the congressional war power. See Kelly v. Washington, 302 U.S. 1, 14, 58 S.Ct. 87, 94, 82 L.Ed. 3. This Executive Order recognized the continued existence of conditions that called for the further exercise of war powers. It was promulgated January 4, 1946. The last automatic extension of the compelled contract was April 4, 1946. This automatically extended contract was the basis for the discharge. Under the foregoing circumstances I cannot agree that dissolution of the War Labor Board authorized Wisconsin to punish petitioner for its continued observance of the contract.
2. That the President correctly assumed the continued existence of war powers after the cessation of hostilities seems beyond question in the light of this Court's holding in Ludecke v. Watkins, 335 U.S. 160, 166-170, 68 S.Ct. 1429, 1432-1434. The holding in the Ludecke case was that the war had not at that time officially ended and that the congressional war power still existed in May, 1947 This was long after the dissolution of the War Labor Board and the employee's discharge. In light of the 1947 Ludecke holding it seems odd that dissolution of the War Labor Board should now be held an adequate reason for permitting a state in 1946 to invalidate contracts previously entered into in obedience to federal commands made under a valid federal law rooted in the war power. It seems to me that the Court's holding today can be justified if at all only by adopting the holding of the Wisconsin Supreme Court in this case. That court supported the state penalty imposed on petitioner by concluding that the National War Lanor Board's action was ultra vires. Its reasoning was that national war powers had 'ended' in 1946. 252 Wis. 549, at page 560, 32 N.W.2d 417. But in the Ludecke case this Court held those powers still existed in 1947. The result here is all the more inexplicable when it is considered that wholesale invalidation of those federally authorized contracts could result in serious industrial conflicts at a time when industrial relationships were extremely strained due to the transition from a war to a peace economy. Woods v. Cloyd W. Miller Co., 333 U.S. 138, 144, 68 S.Ct. 421, 424.
3. I suppose it cannot be denied that congressional authority to force contracts under the war power carries with it authority to provide that (at least during the existence of the war power) the obligations assumed under those contracts should be faithfully observed and that the contracts should be invulnerable to state attack. In this view after the War Labor Board ceased to exist and before peace had been officially declared, Congress under the war power doubtless could have made it possible under enumerated contingencies for states to invalidate contracts such as this one. But no suggestion has been made that any statutory language of Congress can be stretched far enough to find such congressional intent. Since no such intent has been manifested, it seems fair to assume that Congress intended that such contracts should remain immune from state attack and continue in force unless terminated under their valid provisions. I would therefore hold that petitioner was obligated to continue to observe the terms of the contract until terminated according to its provisions.
The contract had not terminated when the War Labor Board ceased to exist. It had been given continued vitality under its own original terms, terms which must be interpreted under controlling federal law authorizing the contract's creation. I may assume at this point that the contract was invulnerable to state impairment or nullification only because of congressional authority stemming from the war power. Even so and despite the dissolution of the War Labor Board, I think the state was without power to penalize petitioner for observance of the contract, at least during the period in which the war had not officially ended.
It is apparent that the Wisconsin statute as here applied deprives petitioner and his employees of a substantial federal right if § 8(3) of the National Labor Relations Act  authorized union membership maintenance agreements without regard to contrary state policies. For given that interpretation of § 8(3), the Wisconsin Act would not only impair collective bargaining rights protected by § 8(3);  it would also stand 'as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.' Hill v. State of Florida ex rel. Watson, 325 U.S. 538, 542, 65 S.Ct. 1373, 1375, 89 L.Ed. 1782; Bethlehem Steel Co. v. New York Labor Board, 330 U.S. 767, 775-776, 67 S.Ct. 1026, 1031, 91 L.Ed. 1234.
The Wisconsin Employment Relations Board began proceedings against the petitioner eleven years after passage of the National L bor Relations Act. During that entire eleven-year period it seems to have been generally assumed that § 8(3) was an unequivocal federal authorization for collective bargaining provisions of the type here made. This Court had noticed that such provisions were 'frequent subjects of negotiation between employers and employees,' and had strongly indicated that it was an unfair labor practice for an employer to refuse to bargain concerning them. National Licorice Co. v. National Labor Relations Board, 309 U.S. 350, 360, 60 S.Ct. 569, 575, 576, 84 L.Ed. 799. Both the courts and the National Labor Relations Board have held that efforts of employers to frustrate the right of unions to bargain for exclusive union employment constituted a violation of the federal Act for which employers could be held accountable. 
The action of the United States Department of Labor and the National War Labor Board in forcing this petitioner to accept a maintenance of membership provision in its collective bargaining agreement was not the result of an isolated or haphazard interpretation of § 8(3) of the National Labor Relations Act. The action forced upon petitioner was pursuant to a thoroughly considered and well-established policy of the National War Labor Board.  Both the National War Labor Board and the conciliation division of the United States Department of Labor were charged with special duties in regard to labor disputes by the War Labor Disputes Act of June 25, 1943, 57 Stat. 163, 50 U.S.C.Appendix, §§ 1501-1511, 50 U.S.C.A.Appendix, §§ 1501-1511. And the War Labor Disputes Act required both these federal agencies to conform to the provisions of the National Labor Relations Act. In order that these government agencies might be better able to carry out their statutory duty of conforming to the National Labor Relations Act, an interdepartmental committee was established. It consisted of representatives of the National Labor Relations Board, the Department of Labor, and the National War Labor Board. This committee was vested with power to discuss and consider policy questions and other problems relating to administration of the duties of the National Labor Relations Board and the National War Labor Board. This power was exercised. Rep.N.L.R.B. 74 (1943).
As early as April, 1942, the National War Labor Board in the Little Steel Companies' controversy, 1 War Lab.Rep. 325, asserted its power to require that contracts for maintenance of union membership be inserted in collective bargaining agreements. It reached the conclusion, see pp. 354-356, that such collective bargaining provisions were valid because they fell within the proviso of § 8(3) of the National Labor Relations Act. From then on until 1945, when its last decisions were made, the National War Labor Board continued to require maintenance of membership contracts. 
The most extensive discussion of the question directly involved in this case occurred in the National War Labor Board's opinion in Greenebaum Tanning Co., 10 War Lab.Rep. 527. Greenebaum Tanning Co., a Wisconsin business, was engaged in interstate commerce and therefore was covered by the National Labor Relations Act. In the Greenebaum case, the National War Labor Board had to decide whether it could enforce a maintenance of union membership contract in Wisconsin contrary to the provisions of the very Wisconsin statute relied on by the Wisconsin Board in this case. It was decided over the strenuous objection of the company that the National War Labor Board had power to enforce contracts such as petitioner made here, despite the conflicting Wisconsin statute.  The Board found its power to override the state law in the war powers of the President, the War Labor Disputes Act, and the National Labor Relations Act. The National War Labor Board pointed out in the Greenebaum decision that, at the request of the President of the United States, it had first considered with the National Labor Relations Board the questions of the power of these Boards in cases such as the Greenebaum case. In holding that § 8(3) of the National Labor Relations Act granted the employers and employees the right to make maintenance of union membership agreements, the Board at p. 543 stated: 'The Board is satisfied that, were it not for the existence of the war emergency, the employees involved in this case would have had the right to demand maintenance of membership in favor of the designated representative of a majority of employees. This right is granted to the employees under the National Labor Relations Act, and is a right which could be enforced in peacetime by strike. If the Wisconsin Employment Peace Act requires more than a majority of employees to vote for maintenance of membership under those circumstances, it must be subordinated to the provisions of the National Labor Relations Act.'
The foregoing is evidence that up to the time the Taft-Hartley Act was passed by Congress in 1947, § 8(3) of the National Labor Relations Act had been accepted by government agencies as an unequivocal authorization for maintenance of union membership contracts. The Taft-Hartley Act expressly granted the states more leeway in regard to enforcement of their own policies as to contracts of the type here involved. 61 Stat. 136, 151, 29 U.S.C. § 164, 29 U.S.C.A. § 164. And the National Labor Relations Board has now construed the new federal Act as precluding such contracts to the same extent that they are precluded by state law.  But it is significant that this interpretation rested entirely on the language and legislative history of the Taft-Hartley Act. The Board did not indicate any belief that this phase of the new Taft-Hartley Act was a mere clarification of the old Act.
Thus, up to 1943, when petitioner originally made this contract, and up to 1946 when it was automatically renewed, all indications were that § 8(3) authorized the type of contract which federal authorities practically commanded petitioner to accept. There seemed to be no reason then why petitioner or any other employer should anticipate that § 8(3) would be construed to permit states to nullify collective bargaining rights which that section was generally supposed to have recognized. It is apparent from this record that petitioner entered into the contract and permitted its automatic renewal in the belief that § 8(3) deprived the state of power to enforce its policy and that petitioner's reluctant action was due to pressure incident to the then accepted interpretation of § 8(3).
Nevertheless, the Court now, after § 8(3) is no longer the law, gives it an entirely new and apparently wholly unanticipated interpretation. hether such new interpretation will affect the past conduct of any persons other than the parties to this action we do not know. We do know that a new interpretation will impose penalties on this employer for conduct pressed upon it by federal labor authorities under authority of the federal Act.
The new interpretation given § 8(3) by the Court rests on the conclusion that the legislative history of the Act shows that Congress intended to leave states free to bar the type of contract here involved. The committee reports and legislative comments on the national Act set out in the Court's opinion do lend strong support to this contention. In the light of this legislative history, I would join in the Court's interpretation of § 8(3) if we were interpreting that section on a clean slate. But we are not. The section has a history of administrative interpretation counter to the one that the Court gives it today. The language of § 8(3)  is reasonably susceptible of the interpretation the section was given by the Conciliation Division of the United States Department of Labor and by the National War Labor Board, an interpretation to which the National Labor Relations Board appears to have assented. And, as previously pointed out, the National Labor Relations Board held this very petitioner guilty of an unfair labor practice for its refusal to bargain with its Wisconsin employees on their demand for a closed shop. Algoma Plywood Co., supra at 994, 998. This N.L.R.B. finding was in 1940, a year after the passage of the Wisconsin Act here held controlling. I think a change in the interpretation of § 8(3) should not be made at this late date, when the section is no longer the law, merely to invalidate a contract made under federal compulsion and founded on a justifiable belief that § 8(3) authorized the contract. I would not make a trap of this settled administrative interpretation by subjecting this employer to penal damages for his good faith reliance on it. See National Labor Relations Board v. Hearst Publications, 322 U.S. 111, 123, 64 S.Ct. 851, 856, 857, 88 L.Ed. 1170.
I would reverse this judgment.
^1 The dire consequences of a violation of a Board order is illustrated by United States v. Montgomery Ward & Co., 7 Cir., 150 F.2d 369. This Court granted certiorari and ordered the judgment vacated on the ground that the cause had become moot. Montgomery Ward & Co. v. United States, 326 U.S. 690, 66 S.Ct. 140, 90 L.Ed. 406. In this case Montgomery Ward refused to carry out an order of the War Labor Board. One of the subjects of the order was a maintenance of membership clause similar to the one involved in this case. The action in this Montgomery Ward case was brought by the United States to test the legality of an order of the President of the United States directing seizure of the properties of Montgomery Ward because of the refusal of that company to obey the Board' order. The Court of Appeals upheld the legality of the seizure order. See also National War Labor Board v. Montgomery Ward & Co., 79 U.S.App.D.C. 200, 144 F.2d 528; and United States v. Montgomery Ward & Co., D.C., 58 F.Supp. 408.
^2 The Wisconsin trial court refused to impose this 'penalty' on petitioner. It found the 'equities' on petitioner's side. The State Supreme Court held that the compulsion under which petitioner had acted could not relieve him from the state penalty which was imposed to 'retard the employer's inclination to yield to this compulsion in the future.' 252 Wis. 549, 561, 32 N.W.2d 417, 423. In other words the penalty was imposed as a warning to petitioner and others that continued complaince with the federal policy would subject them to penalties in Wisconsin.
^3 See note 10, 69 S.Ct. 597.
^5 National Labor Relations Board v. Reed & Prince Mfg. Co., 1 Cir., 118 F.2d 874, 883; Peninsular & Occidental S.S.C.o. v. National Labor Relations Board, 5 Cir., 98 F.2d 411, 414. In 1944 the National Labor Relations Board held that an employer was guilty of an unfair labor practice where it refused to negotiate with the union's collective bargaining representative on the subject of a contract providing that none but union members should be employed. The Board held that such a refusal was an unfair labor practice. In the Matter of Tempa Electric Co., 56 N.L.R.B. 1270, 1273. And see Algoma Plywood Co., 26 N.L.R.B. 975, 994.
^6 See for example, Little Steel Companies, 1 War Lab.Rep. 325; and Industrial Cotton Mills Co., Inc., 25 War Lab.Rep. 136.
^7 Douglas Aircraft Co., 28 War Lab.Rep. 51 (1945).
^8 In all of the cases below, the War Labor Board required insertion of the maintenance of membership clause despite local state statutes which prohibited such agreements. Vilter Mfg. Co., 11 War Lab.Rep. 332; U.S. Vanadium Corp., 13 War Lab.Rep. 527; Ingalls Iron Works Co., 21 War Lab.Rep. 27; St. Joe Paper Co., 25 War Lab.Rep. 421.
^9 Giant Food Shopping Center, Inc. (1948), 77 N.L.R.B. (No. 133). The Taft-Hartley Act cannot justify this order of the Wisconsin Board because the Act was passed after the order was issued.
^10 'Sec. 8. It shall be an unfair labor practice for an employer-
'(3) By discrimination in regard to hire to tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization: Provided, That nothing in this Act, * * * or in any code or agreement approved or prescribed thereunder, or in any other statute of the United States, shall preclude an employer from making an agreement with a labor organization * * * to require as a condition of employment membership therein, if such labor organization is the representative of the employees as provided in section 9(a), in the appropriate collective bargaining unti covered by such agreement when made.' 49 Stat. 449, 452, 29 U.S.C. § 158(3), 29 U.S.C.A. § 158(3).
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