Norfolk & Western Railway Company v. Nemitz/Opinion of the Court

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United States Supreme Court

404 U.S. 37

Norfolk & Western Railway Company  v.  Nemitz

 Argued: Oct. 21, 1971. --- Decided: Nov 15, 1971

In connection with a 1964 consolidation by which petitioner railway company absorbed New York, Chicago & St. Louis R. Co. (Nickel Plate), the so-called Sandusky Line, running from Columbus, Ohio, to Sandusky, Ohio, was acquired from the Pennsylvania Railroad system. Respondents were at the time employees of the Pennsylvania on the Sandusky Line. Their work was seasonal because the winter freeze barred navigation on Lake Erie. During those periods junior employees of Sandusky worked at other points on the Pennsylvania's Toledo Division.

In anticipation of the 1964 consolidation, petitioner entered into an agreement with 19 labor organizations for protection of the employees of the several railroads coming into the consolidation, including those on the Sandusky Line. Petitioner agreed to employ 'all employees of the lines involved with the guarantee that they will not be adversely affected in their employment as a result of the proposed transactions or for any reason other than furloughs due to seasonal requirements or a decline in volume of traffic or revenue.' 324 D.C.C. 1, 89 (emphasis added).

Each employee was to receive a monthly supplement to his post-consolidation monthly earnings equal to the excess, if any, of his average monthly compensation for the 12 months prior to the consolidation in which he had performed services.

Some 96 Sandusky Line employees elected to accept employment with petitioner on the terms and conditions stated. Twenty-five were junior men who had worked seasonally on the Toledo Division and they were the plaintiffs in this action.

The consolidation took place and over a year elapsed during which these trainmen were not paid the compensation promised. Arbitration pursuant to the collective agreement was agreed upon. At that point in 1965 the union and petitioner entered into a new agreement which reduced substantially the benefits of the junior trainmen who had been Sandusky Line employees. The District Court (287 F.Supp. 221; 309 F.Supp. 575) held that this new agreement was not enforceable as a matter of law as it violated the Act under which the consolidation or merger took place. The Court of Appeals affirmed, 436 F.2d 841, with a modification that the damages due respondent-employees should be determined by the District Court, not through arbitration. The case is here on a petition for a writ of certiorari which we granted, 402 U.S. 994, 91 S.Ct. 2171, 29 L.Ed.2d 159.

Section 5(2)(f) [1] of the Interstate Commerce Act as amended, 54 Stat. 906, 49 U.S.C. § 5(2)(f), provides that in mergers and consolidations 'the Commission shall require a fair and equitable arrangement to protect the interests of the railroad employees affected' for a period of four years.

The ICC in its approval of the consolidation or merger (324 I.C.C. 1, 106 (1964)) stated that the agreements respecting, inter alia, the rights of the Sandusky Line employees were 'made pursuant to and in conformity with section 5(2)(f) of the Interstate Commerce Act for the protection of covered employees.' [2]

It construed the agreements as requiring 'that job eliminations as a result of the proposed acquisition of control be accomplished only through normal attrition.' Ibid.

The mandate of § 5(2)(f) seems clear enough: the Commission 'shall require a fair and equitable arrangement to protect the interests of the railroad employees affected.' The Commission, as noted, said that the conditions protective of the employees were made pursuant to and in conformity with the provisions of § 5(2)(f) and it gave its authorization 'subject to such agreements.' 324 I.C.C., at 50. The Solicitor General and the ICC argue in their amicus curiae brief that the last sentence of § 5(2)(f) the 'notwithstanding' provision-relieved the Commission of any duty to review the adequacy of the protective provisions contained in a collective-bargaining agreement, and that they were not accorded protection by the ICC order. [3]

We disagree with that view. We reviewed the history of § 5(2)(f) in Railway Labor Executives' Assn. v. United States, 339 U.S. 142, 70 S.Ct. 530, 94 L.Ed. 721, and said that 'one of its principal purposes was to provide mandatory protection for the interests of employees affected by railroad consolidations.' [4] Id., at 148, 70 S.Ct., at 533. That 'mandatory protection' can be accorded by terms provided by the Commission, or, as is more likely, by provisions of a collective agreement which the Commission adopts or approves as adequate for a minimum of four years (as required by the second sentence) or longer (as allowed by the first sentence) if the Commission so provides. Id., at 154, 70 S.Ct., at 536. The purpose of § 5(2)(f) was not to freeze jobs but to provide compensatory conditions. Brotherhood of Maintenance of Way Employes v. United States, 366 U.S. 169, 175-176, 81 S.Ct. 913, 916-917, 6 L.Ed.2d 206. In that case we noted that the Commission has consistently followed that practice 'in over 80 cases, with the full support of the intervening brotherhoods.' Id., at 177, 81 S.Ct., at 917. And the Commission over and over again has adopted the set of labor conditions contained in collective agreements in discharge of its duty under § 5(2)(f). See Gulf, M. & O.R. Co. Purchase, 261 I.C.C. 405, 434; Erie R. Co. Trackage Rights, 295 I.C.C. 303, 305; Delaware, L. & W.R. Co. Trackage Rights, 295 I.C.C. 743, 755-756.

When there is a collective agreement and the Commission, as here, adopts or approves it, the 'notwithstanding' sentence of § 5(2)(f) is not, as suggested, read out of the Act. The collective agreement then becomes a 'condition' of the Commission's 'approval' of the consolidation under the first sentence of § 5(2) (f) and its provisions are deemed by the Commission to be 'a fair and equitable arrangement to protect the interests' of the employees within the meaning of the first sentence. Thus, the significance of the 'notwithstanding' proviso is that it provides the machinery for the terms of a pre-merger collective agreement and thus supplies the minimum measure of fairness required under the first sentence of § 5(2)(f).

In 1965 an implementing agreement, entered into after the consolidation, was made between the union and petitioner. It is petitioner's claim that it limited these junior employees to their average monthly earnings on the Sandusky Line during the 12 months before the consolidation, regardless of how many months the employees had worked during that period on other sections of the Toledo Division. That is to say, each of them would receive under the 1965 implementing agreement an average monthly compensation based only on their seasonal Sandusky Line work. Thus, respondent Nemitz had an average monthly compensation of $583.34 representing pre-consolidation work on several sections of the Toledo Division. Under the § 5(2)(f) agreement governing the consolidation, his earnings would be supplemented to the extent that his post-consolidation monthly earnings fell short of $583.34. Under the 1965 agreement his average monthly compensation, based solely on his work on the Sandusky Line, would not be paid if, as likely, he received would not be paid if, as likely, he received that much in unemployment compensation. The 1965 agreement obviously placed these junior employees 'in a worse position with respect to compensation,' as those words are used in the pre-consolidation agreement. For they no longer could work on any part of the former Toledo Division except the Sandusky Line and their prior compensation, reflecting in part work on other parts of the Toledo Division, was no longer a measure of the 'compensation' to which they were entitled under the pre-consolidation agreement. For those whose historical average monthly earnings were so slight that they were now on unemployment insurance, the result would be much more drastic than 'normal attrition,' which the Commission said was the only whay under the protective conditions by which jobs would be eliminated. The Court of Appeals said:

'An agreement made pursuant to the last sentence of Sec. 5(2)(f) may vary the protections afforded by the I.C.C. order, but it may not substantially abrogate employees' rights grounded in an I.C.C. order.' 436 F.2d at 848.

We agree with that view. We also agree that the 1965 implementing agreement [5] abrogated the standard of 'compensation' covered by the pre-consolidation agreement [6] which had come under the protective order of the Commission.

The judgment below is therefore affirmed.


Mr. Justice BLACKMUN, with whom THE CHIEF JUSTICE and Mr. Justice WHITE join, dissenting.


^1  It provides:

'As a condition of its approval, under this paragraph, of any transaction involving a carrier or carriers by railroad subject to the provisions of this chapter, the Commission shall require a fair and equitable arrangement to protect the interests of the railroad employees affected in its order of approval the Commission shall include terms and conditions providing that during the period of four years from the effective date of such order such transaction will not result in employees of the carrier or carriers by railroad affected by such order being in a worse position with respect to their employment, except that the protection afforded to any employee pursuant to this sentence shall not be required to continue for a longer period, following the effective date of such order, than the period during which such employee was in the employ of such carrier or carriers prior to the effective date of such order. Notwithstanding any other provisions of this Act, an agreement pertaining to the protection of the interests of said employees may hereafter be entered into by any carrier or carriers by railroad and the duly authorized representative or representatives of its or their employees.'

^2  The Commission stated in its Report, 324 I.C.C. 1, 50:

'As previously stated herein and in appendix A, various agreements have been reached between employee representatives and

the Norfolk & Western for the protection of employees adversely affected by these transactions. Our authorizations herein will, by reference, be made subject to such agreements. * * *

'We find that, as conditioned herein, the transactions under consideration meet the requirements prescribed by sections 5(2) and 20a of the act and conform generally with the purposes and objectives of the national transportation policy declared by Congress. We are convinced that the transactions should be approved.'

In the Appendix to its Report and Order, 324 I.C.C., at 89, the Commission continued:

'Norfolk & Western has entered into an agreement with 19 of the principal labor organizations, members of the Railway Labor Executives' Association, for the protection of employees of Norfolk & Western, Nickel Plate, and Wabash, as well as persons employed on the Sandusky Line of Pennsylvania, represented by these organizations. This agreement, which provides for the assumption by Norfolk & Western of all outstanding labor contracts, schedules and agreements of Nickel Plate and Wabash, as well as those having application of the Sandusky Line, basically requires that job eliminations as a result of the unification be accomplished only through normal attrition. Under its terms, Norfolk & Western agrees to take into its employment, upon consummation of the merger, lease, and purchase, all employees of the lines involved with the guarantee that they will not be adversely affected in their employment as a result of the proposed transactions or for any reason other than furloughs due to seasonal requirements or a decline in volume of traffic or revenue.'

^3  The result, of course, would be that there would be no basis for judicial review of the ICC order pursuant to 28 U.S.C. § 1336.

^4  A synopsis of the legislative history of § 5(2)(f) is contained in an Appendix to our opinion in St. Joe Paper Co. v. Atlantic Coast Line R. Co., 347 U.S. 298, 315, 74 S.Ct. 574, 583, 98 L.Ed. 1118.

^5  The agreement authorized by the Commission when the merger was approved was described as follows by the Commission, Appendix to Report and Order of Interstate Commerce Commission, 324 I.C.C., at 89:

'The agreement also authorized Norfolk & Western to transfer the work of employees throughout the merged system and requires the labor organizations to enter into implementing agreements permitting employees either to follow their work or be assigned to other jobs within their craft or class within the same general locality as existing jobs, following a period of retraining, if necessary, at Norfolk & Western's expense.'

^6  The union that negotiated the Implementing Agreement disagreed with that position as did the union's National Board of Appeals. Both, however, proceeded on a mistaken view of the law.

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).