National Labor Relations Board v. Ksm Industries, Inc

In the
United States Court of Appeals
For the Seventh Circuit
No. 10-3300
NATIONAL LABOR RELATIONS BOARD,
Petitioner,
and
UNITED STEEL, PAPER AND FORESTRY, RUBBER,
MANUFACTURING, ENERGY, ALLIED INDUSTRIAL &
SERVICE WORKERS INTERNATIONAL UNION,
Intervening-Petitioner,
v.
KSM INDUSTRIES, INC.,
Respondent.
Application for the Enforcement of a Supplemental Order
of the National Labor Relations Board
Nos. 30-CA-13762, 14008, 14101.
ARGUED SEPTEMBER 20, 2011—DECIDED MAY 22, 2012
Before ROVNER, WOOD, and WILLIAMS, Circuit Judges.
WOOD, Circuit Judge. The present case arose against the
backdrop of an order from the National Labor Relations

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2 No. 10-3300
Board finding that KSM Industries violated sections 8(a)(3)
and (1) of the National Labor Relations Act, 29 U.S.C.
§ 158(a)(3) and (1), when it denied or delayed the recall
of certain employees after their participation in an unfair
labor practices strike. See KSM Indus., Inc., 336 N.L.R.B. 133
(2001), motion for reconsideration granted in part on
other grounds, 337 N.L.R.B. 987 (2002). After further pro-
ceedings, the Board ordered KSM to pay specific
amounts of backpay to 42 affected employees. (See Ap-
pendix to this opinion.) It now petitions this court to
enforce that order. KSM challenges the Board’s findings
on 11 employees for lack of substantial evidence. As
KSM offers no argument with respect to the other 31
employees, we enforce the Board’s order summarily with
respect to them. The employees’ union intervened to
defend the Board’s order. We also grant the Board’s
petition for enforcement for the 11 employees for which
KSM has raised objections.
I
The Administrative Law Judge (ALJ) and the Board
wrote thorough decisions that provide extensive detail
about this saga, so we have no need to repeat every-
thing here. KSM Indus., Inc. and United Steel, Paper
and Forestry, Rubber, Mfg., Energy, Allied Indus. &
Serv. Workers Int’l Union Local 2-779, AFL-CIO, 353
N.L.R.B. No. 117 (2009). A brief account of the salient
facts will suffice.
KSM’s current liability arose out of its failure fifteen
years ago to reinstate its strikers after the employees’

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No. 10-3300 3
union made an unconditional offer to return to work on
October 5, 1997. In 2001, the Board ruled that KSM’s
conduct with respect to recalls violated the labor laws,
and it ordered backpay as a remedy. 336 N.L.R.B. 133
(2001). The parties entered into a partial settlement agree-
ment on October 3, 2006, but further progress was not
forthcoming. The ALJ attempted to wrap matters up
with a remedial order entered on September 27, 2007,
but by the time this order reached the Board, the Board
had shrunk to two sitting members, who attempted to
resolve it. At that point, the case was held up for a year
and a half by New Process Steel, L.P. v. NLRB, 130 S. Ct.
2635 (2010), which ultimately held that the Board could
not act without a minimum of three members. After the
Board once again had the necessary quorum, it issued a
Second Supplemental Decision and Order in Septem-
ber 2010 requiring KSM to compensate 42 former striking
employees with backpay totaling in the aggregate
$383,461.11. That is the order now before us.
II
Our review of the Board’s decision is subject to a defer-
ential standard. Loparex LLC v. NLRB, 591 F.3d 540, 545
(7th Cir. 2009). Our task is not to reweigh the evidence;
it is only to determine whether there is evidence in the
record supporting the Board’s outcome that could satisfy
a reasonable fact finder. NLRB v. Midwestern Pers.
Serv., 508 F.3d 418, 423 (7th Cir. 2007). We owe “particu-
lar deference to the Board’s credibility determinations,
which we will disturb only in extraordinary circum-

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4 No. 10-3300
stances.” FedEx Freight East, Inc. v. NLRB, 431 F.3d 1019,
1026 (7th Cir. 2005) (quoting Ryder Truck Rental v.
NLRB, 401 F.3d 815, 825 (7th Cir. 2005)). We similarly defer
to the Board’s interpretations of the law “unless they
are irrational or inconsistent with the Act.” Loparex, 591
F.3d at 545. In a case like this one, where the Board
adopted the majority of the ALJ’s findings, we apply
the same standards to the ALJ’s findings and opinions
to the extent that the Board has adopted them as its
own. Id.
In the face of these deferential standards, KSM has
offered a number of reasons why, in its view, we should
deny enforcement to the Board’s order. Initially it argues
that the Board denied it due process because the
Board made its decision too quickly. This may strike
the reader as odd, given the fact that the case (if it were
a child) has gone from birth to high school, but KSM’s
focus is more narrow. KSM sought review of the orig-
inal Supplemental Decision and Order issued by the two-
person panel on March 26, 2009, 353 N.L.R.B. 1124 (2009),
in the D.C. Circuit. Id. That court, however, suspended
its ruling pending the Supreme Court’s decision in
New Process Steel, which raised the question whether
the Board was empowered to act through only two mem-
bers. The Supreme Court answered this question in
the negative, holding that two Board members cannot
constitute a statutory quorum (even though a three-
person Board might act by a vote of 2-1). This had the
effect of setting aside a great number of decisions, in-
cluding the 2009 ruling in this case. The Board sought
expedited issuance of the remand from the D.C. Circuit,

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No. 10-3300 5
and that court obliged with an order dated Septem-
ber 29, 2010. The Board issued its Second Supplemental
Decision and Order the following day, on September 30.
KSM alleges that the speed with which the Board issued
its second decision after the remand proves that the
Board failed properly to review the matter.
Whatever one might think of the Board’s one-day turn-
around is, unfortunately for KSM, beside the point.
We lack authority to reach the merits of this argument
because KSM did not raise it before the Board. 29 U.S.C.
§ 160(e); 29 C.F.R. § 102.48(d)(1), (2) (moving party has
28 days after the Board issues its decision to request
reconsideration). Section 160(e) states, “No objection
that has not been urged before the Board . . . shall be
considered by the court, unless the failure or neglect to
urge such objection shall be excused because of extra-
ordinary circumstances.” KSM has not suggested any
reason why we should find the requisite extraordinary
circumstances. NLRB v. Dominick’s Finer Foods, Inc., 28
F.3d 678, 686 (7th Cir. 1994) (explaining that “extra-
ordinary circumstances” under § 160(e) exist “only if
there has been some occurrence or decision that
prevented a matter which should have been presented
to the Board from having been presented at the proper
time”).
We add that even if we thought that KSM’s forfeiture
of this point was excused, its underlying argument is
without merit. The pendency of New Process Steel was
hardly a secret, and for all we know the Board was
already busy taking another look at the cases that were

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6 No. 10-3300
potentially affected by it. KSM has offered no evidence
to show that the Board failed to fulfill its obligations.
It takes much more for us to intervene than a disap-
pointed party’s hunch that the Board gave a cursory
review to its case.
III
We now turn to KSM’s assertion that the Board improp-
erly awarded backpay to 11 employees. KSM takes issue
with the Board’s conclusion that certain employees
who quit in order to obtain access to their 401(k) funds
did not intend permanently to abandon employment
and thus are owed backpay. It also challenges the
Board’s findings that certain employees adequately
searched for and attempted to secure interim employment.
A
1
The first question presented is whether five striking
employees who resigned during the strike because
they needed to gain access to their 401(k) accounts—to
whom the parties refer as the “401(k) quits”—were prop-
erly awarded backpay by the Board. This is important
because if a striker intends permanently to abandon
his employment when he resigns during a strike, the
employer may avoid backpay liability. L.B.&B. Assoc.,
Inc., 346 N.L.R.B. 1025, 1029 (2006). KSM challenges the
Board’s finding that Anthony Bannenberg, Alan Resch,

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No. 10-3300 7
and Michael Bartelt did not intend permanently to aban-
don their employment when they resigned. KSM also
argues that Robert Graf and Douglas Wiedeman, both
of whom resigned after the strike, also intended perma-
nently to abandon their employment.
The Board announced its legal standard for 401(k)
quits who resign during a strike in Augusta Bakery Corp.,
298 N.L.R.B. 58 (1990), enforced 957 F.2d 1467 (7th Cir.
1992); since that time, it has adhered to that decision.
L.B.&B. Assoc., Inc., 346 N.L.R.B. at 1029. An employer
bears the burden of producing “unequivocal evidence” of
a striker’s intent to “permanently sever” the employment
relationship, if it wishes to establish abandonment
and thus to avoid backpay liability. Augusta Bakery,
957 F.2d at 1474-75 (quoting Harrowe Servo Controls,
250 N.L.R.B. 958, 964 (1980)). For 401(k) quits, the Board
weighs the following factors: whether (1) the striking
employees could obtain their retirement contributions
only by quitting; (2) they continued to participate in the
strike after they resigned; (3) they credibly testified to
economic stress; (4) they did not have other employment
when they resigned; and (5) they did not tell their em-
ployer that they found other employment. Id. at 1476;
see also Sever v. NLRB, 231 F.3d 1156, 1168-69 (9th Cir.
2000).
The Board uses a slightly different standard if the
workers resign after the strike and after the employer
initiates an unlawful reinstatement system. Alaska Pulp
Corp., 326 N.L.R.B. 522, 525 n.17 (1998). Under such circum-
stances, the Board is “unable to determine, under the

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8 No. 10-3300
subjective standards set forth in Augusta Bakery, whether
the strikers unequivocally intended to abandon their
prestrike or substantially equivalent positions because
the [employer’s] refusal to offer full and timely reinstate-
ment so tainted the atmosphere in which they re-
signed.” Id. The Board resolves this uncertainty against
the employer. Id.; see also Roman Iron Works, Inc., 292
N.L.R.B. 1292, 1301-02 (1989).
In this case, the ALJ did not go so far as to find
that resigning was the only way for employees to
obtain access to their 401(k) funds. The alternative to
resignation was a procedure called “hardship with-
drawal” available as part of KSM’s 401(k) program. The
ALJ found, however, that the resignation and hard-
ship-withdrawal routes were not equal because there
were harsher limits on hardship withdrawals. In
particular, the ALJ found that even though hardship
withdrawals were permitted under the program, they
were limited to distributions for four specified neces-
sities: medical expenses, the purchase of a primary resi-
dence, post-secondary tuition and fees, and prevention
of foreclosure or eviction from a primary residence.
Such hardship withdrawals were subject to a 20%
federal tax and a penalty for early withdrawal. Critically,
the ALJ made no finding supporting KSM’s position
that some or all of the strikers would have received
hardship withdrawals, even prior to the strike. To the
contrary, the ALJ mentioned at several points that Ad-
ministrative Manager Dave Oechsner told several
people that the only way to reach those funds was to
resign. KSM fails to present any evidence challenging

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No. 10-3300 9
these conclusions and, finding none ourselves, we do
not disturb the Board’s finding.
After reviewing the record as a whole, we are satisfied
that substantial evidence supports the finding that the
five employees did not intend to abandon their employ-
ment permanently. The ALJ’s findings with respect to
these people were largely based on credibility determina-
tions. We owe “particular deference to the Board’s credi-
bility determinations, which will be disturbed only in
extraordinary circumstances.” FedEx, 431 F.3d at 1026.
KSM offers no evidence from the record that would
justify such a finding.
2
KSM presents an alternative challenge to the award
of backpay to the 401(k) quits by arguing that the federal
tax code and the treasury regulations do not allow 401(k)
distributions upon resignation unless the employee, in
fact, resigns. ERISA is also implicated, as KSM sees it,
because it believes that the Board’s order would require
it to breach its fiduciary duty to permit distributions
only when authorized by plan documents. KSM claims
that the Board’s order “presents employers with a sig-
nificant legal dilemma” forcing it to choose between
violating federal tax and ERISA law, and violating the Act.
KSM’s arguments in this respect are not well taken.
Not only are the cases it cites irrelevant, Kennedy v. Plan
Adm’r for DuPont Sav. & Invest. Plan, 555 U.S. 285 (2009)
(outlining general ERISA duties), Egelhoff v. Egelhoff, 532

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10 No. 10-3300
U.S. 141 (2001) (reviewing a conflict between ERISA and
state law), but pertinent Board case law supports the
opposite conclusion. The Board has considered and
rejected similar challenges based on the federal tax code
and ERISA in the past. Nat’l Fuel Gas Distrib. Corp., 308
N.L.R.B. 841 (1992) (dismissing an employer’s concern
that the order violates the federal tax code without
concern for the potential “significant financial costs” it
may cause the employer); Truck Drivers Union Local 164,
274 N.L.R.B. 909 (1985) (ruling against the employer
because nothing in the record established that the order
would cause the relevant plan to lose tax-exempt status
or otherwise violate ERISA or the tax code). The
question whether an employee intended permanently to
abandon employment is a factual question distinct from
the question whether an employee resigned for tax or
ERISA purposes. We note in this connection that KSM’s
argument cites only general, definitional materials from
the tax code and Treasury Regulations; it points us to no
regulation, Revenue Ruling, or other authoritative state-
ment addressing the particular situation before us. With-
out further serious development of the point, we have
no reason to consider it further.
We therefore enforce the Board’s order that Bannenberg,
Bartelt, Graf, and Resch are entitled to backpay in the
amounts provided by the Board. We return to Wiedeman
in parts D and E below; at this stage, we comment only
that nothing in the arguments addressed in this section
undermine his right to relief.

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No. 10-3300 11
B
The next question is whether KSM owes backpay
to certain employees who the Board found reasonably
delayed or reasonably engaged—albeit unsuccessfully—
in searches for interim employment: Laverne Jung, Hans
Eusch, and James Malson.
An employee’s search efforts do not necessarily need
to start immediately upon the unlawful discharge, par-
ticularly when the company “engage[s] in . . . conduct
that would warrant . . . optimism about the prospect of
reinstatement.” Grovner Orlando Assoc., 350 N.L.R.B.
1197, 1200 (2007). The Board found that Jung reasonably
did not initiate a job search while waiting to be rein-
stated. The Union submitted to KSM an unconditional
offer to return on October 5, 1997. On or about October 16,
KSM distributed a letter to former strikers inquiring
about their availability for recall. The Board deemed
this letter by KSM to be “conduct that would warrant . . .
optimism about the prospect of reinstatement.” Grovner,
350 N.L.R.B. at 1200. On November 14, 1997, Jung received
a recall letter offering him reinstatement starting on
December 1 of that year. The Board’s determination was
a finding of fact that KSM fails to challenge with
contrary evidence. The reasonableness of Jung’s conduct
is confirmed by the fact that he was offered reinstate-
ment only one month after KSM’s inquiry letter.
The Board also found that Eusch and Malson
reasonably engaged in searches for interim employment.
Board precedent places on KSM “the ultimate burden
of persuasion” on the question whether the unlawfully

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12 No. 10-3300
discharged employee adequately searched for interim
employment. St. George Warehouse, 351 N.L.R.B. 961, 961
(2007), enforced 645 F.3d 666 (3d Cir. 2011). After the
employer proves that there were “comparable jobs avail-
able in the relevant geographic area,” the discriminatee
and the General Counsel must prove that the discrim-
inatee took “reasonable steps” to get those jobs. Id. The
General Counsel can satisfy its burden of production
by offering the employee’s credible testimony or other
reliable evidence that the employee made an “honest
good faith effort” to find a job. NLRB v. Midwestern Pers.
Serv., Inc., 508 F.3d 418, 423 (7th Cir. 2007).
The ALJ found that KSM failed to show that there
was comparable work available for Eusch in the
relevant geographic area for the period during which
he lacked employment: December 1, 1997, to February 8,
1999. On review, the Board tolled Eusch’s backpay
period from August 1998 to January 1999 because of his
weak efforts to search for work then. KSM argues that
Eusch should be denied backpay for the full period,
not just the omitted two quarters, because companies
similar to KSM were hiring KSM strikers. KSM misun-
derstands the “comparable work” standard. The com-
parison is not between companies, but between jobs.
KSM has not shown whether there was work available
for tape operators, Eusch’s specialty.
We are similarly unpersuaded by KSM’s challenge to
Malson’s backpay award. Malson’s backpay period runs
from October 5, 1997, to April 22, 1998. The Board found
that Malson satisfied his burden by registering with the

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No. 10-3300 13
state unemployment agency. It accepted his explanation
for his three-month delay in searching for work; he testi-
fied that he reasonably believed he would be reinstated.
Board precedent establishes that “[t]he receipt of unem-
ployment compensation pursuant to the rules regarding
eligibility constitute prima facie evidence of a reasonable
search for interim employment.” Taylor Mach. Prod., 338
N.L.R.B. 831, 832 (2003) (internal citations and quota-
tions omitted). KSM has not succeeded in undermining
the Board’s decision to credit Malson’s account. We
thus also enforce the Board’s order with respect to the
backpay obligations owed to Jung, Eusch, and Malson.
C
KSM has another theory that it believes defeats the
claims of Thomas Cooper, Lawrence Wetzel, and Allen
Curtis: these men, it argues, voluntarily quit interim
employment without reasonable justification. If an em-
ployee voluntarily quits his interim employment with-
out a good reason, the Board will limit his backpay
because of his failure to mitigate damages. NLRB v. Pepsi
Cola Bottling Co. of Fayetteville, Inc., 258 F.3d 305 (4th
Cir. 2001). When an employee quits the interim employ-
ment, “the burden shifts from the [company] to the Gov-
ernment to show that the decision to quit was reason-
able.” First Transit, Inc., 350 N.L.R.B. 825, 826 (2007). The
Board will find an employee’s decision to quit reasonable
if the job exposes him to “increased exposure to environ-
mental hazards or more onerous conditions.” Parts Depot,
Inc., 348 N.L.R.B. 152, 154 n.16 (2006).

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14 No. 10-3300
The ALJ found that Cooper quit his interim employ-
ment because of hazardous working conditions; Wetzel,
who was preparing for retirement, switched interim
employment positions to gain access to a better retire-
ment package; and Curtis switched interim employ-
ment positions to avoid harsh work conditions and to
accept a position that was more comparable to his
work at KSM. The Board found each of these reasons
reasonable and justified by the circumstances. The ALJ’s
findings with respect to these three employees were
based on substantial evidence in the record and are not
convincingly challenged by KSM.
D
KSM has also challenged the Board’s award of back-
pay to Wiedeman on the ground that Wiedeman lost
two interim employment positions for behavior that
amounted to deliberate and gross misconduct. If an em-
ployee’s interim employment is involuntarily terminated,
the Board will not find willful loss of employment
unless the employee has engaged in “deliberate and
gross misconduct, which is so outrageous that it sug-
gests deliberate courting of discharge.” Cassis Mgmt.
Corp., 336 N.L.R.B. 961, 967 (2001). For example, in Ryder
Systems the Board held that an employee did not willfully
lose employment when he was discharged for missing
“several scheduled deliveries.” 302 N.L.R.B. 608, 610
(1991). The Board explained that he did not engage in
conduct “involving moral turpitude and his conduct was
not otherwise so outrageous as to suggest deliberate

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No. 10-3300 15
courting of discharge.” Id. The Board has “repeatedly held
that a discharge based on poor work performance does not
constitute a willful loss of earnings.” Ernst & Young, 304
N.L.R.B. 178, 180 (1991).
The ALJ found that Wiedeman’s employment at Troyk
Printing was terminated for “misconduct.” Wiedeman
explained that he did not get along with a colleague. Even
though the ALJ deemed the explanation vague, he re-
minded the parties that it was KSM’s burden to show that
his conduct amounted to “deliberate and gross miscon-
duct.” The ALJ concluded that KSM had not met its
burden. The Board also found that Wiedeman’s employ-
ment as a security guard was terminated for attendance
problems. It credited Wiedeman’s explanation that his
truck repeatedly broke down. In the end, the ALJ found
that KSM did not produce any additional evidence to
establish that his conduct was bad enough to justify a
finding of “deliberate and gross misconduct.”
E
KSM finally offers a third argument for setting aside
Wiedeman’s backpay order; that it did not unlawfully
replace Wiedeman with non-unit employees. (KSM’s
persistence in this respect may have something to do
with the fact that Wiedeman was granted one of the
highest awards by the Board; see the Appendix to this
opinion.)
The Board deems it “settled” that an employer violates
the Act when it fails immediately to reinstate strikers

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16 No. 10-3300
following their unconditional offer to return to work,
“unless the employer establishes a legitimate and sub-
stantial business justification for failing to do so.” In
Zimmerman Plumbing & Heating Co., 334 N.L.R.B. 586, 588
(2001). A legitimate and substantial business justifica-
tion is a “bona fide absence of available work” for a striker
for his pre-strike position or a “substantially equivalent”
job. Id. The employer bears the burden of establishing
this affirmative defense. Radio Elec. Serv. Co., 278
N.L.R.B. 531, 532 (1986). The employer cannot make work
unavailable by transferring it to non-unit workers. Super
Glass Corp., 314 N.L.R.B. 596, 596 n.1 (1994). An employer
may, however, transfer the work to previously reinstated
strikers without triggering a vacancy. Randall, Burkett/
Randall, Div. of Textron, Inc., 257 N.L.R.B. 1, 4 (1981).
The ALJ found that Wiedeman’s stockroom duties
were performed by two supervisors and a recalled
striker. Because the majority of Wiedeman’s job was
performed by the two non-unit workers, however, this
arrangement did not undermine Wiedeman’s rights.
With respect to the recalled striker, the ALJ found that
KSM “was not privileged to recall a general factory em-
ployee after the strike was over and have him and two
supervisors perform the job that was the prestrike job
of an unrecalled and unreplaced stock and receiving
employee.” KSM argues that its stockroom work was
legitimately unavailable for Wiedeman, but once again
it has not presented enough to overcome the Board’s
findings. When all is said and done, therefore, we
enforce the Board’s order granting backpay to Wiedeman.

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No. 10-3300 17
IV
The final issue before us is whether the Board properly
found that KSM should have recalled its workers using
a seniority-based system, rather than the merit-based
system that KSM preferred. The Board’s primary
objective when choosing a reinstatement system is “to
restore, to the extent feasible, the status quo ante by
restructuring the circumstances that would have
existed had there been no unfair labor practices.” Parts
Depot, 348 N.L.R.B. at 153. Given that there may be a
variety of ways to restore the status quo, the Board
grants the General Counsel “wide discretion” in choosing
a methodology. Id. That said, if the company proposes
a different approach, the Board will choose the “most
accurate method” between the two alternatives. The
Painting Co., 351 N.L.R.B. 42, 49 (2007). The Board
will look to the company’s past practices and the
relative accuracy of each approach to assess the alterna-
tives. Alaska Pulp, 326 N.L.R.B. at 523. If the Board is not
certain which approach is more accurate, the Board will
resolve the uncertainty against the company. The Painting
Company, 351 N.L.R.B. at 49.
The Board determined that the use of seniority was
the most accurate way to restore the status quo because
KSM admitted that a seniority system was appropriate
for recalling workers immediately at the conclusion of
the strike. The Board noted, “[KSM] offers no explana-
tion as to why seniority by job classification is the ap-
propriate method of recall to vacancies at the end of
the strike, but not for vacancies that develop subse-

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18 No. 10-3300
quently.” In addition, the Board found that KSM’s
method of recall was too subjective and informal in light
of its unlawful conduct during the relevant time. Even
though KSM’s witnesses asserted that the merit system
had been used in the past, KSM did not produce any
documentary evidence to corroborate that contention.
We uphold the Board’s choice of the seniority recall
system for the reasons it gave.
V
For the foregoing reasons, we ENFORCE the Board’s
order. In the interest of clarity, we have appended to this
opinion a list of the affected workers and the amounts
of backpay to which each one is entitled.

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No. 10-3300 19

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20 No. 10-3300
5-22-12

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