OXY USA, Inc.

National Labor Relations Board - Board Decisions

Sep 23, 1999

329 N.L.R.B. 208 (N.L.R.B. 1999)

DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 208
OXY USA, Inc. and Oil, Chemical and Atomic Work-
ers International Union. Case 17–CA–17689
September 23, 1999
DECISION AND ORDER
BY CHAIRMAN TRUESDALE AND MEMBERS FOX
AND HURTGEN
Upon a charge filed by the Union on November 2,
1994, and an amended charge filed on December 19,
1994, the General Counsel of the National Labor Rela-
tions Board issued a complaint and notice of hearing on
May 23, 1995, alleging that the Respondent violated Sec-
tion 8(a)(1) and (5) of the Act by insisting to impasse,
and as a condition to reaching any collective-bargaining
agreement, that the Union agree to serve as the sponsor
and administrator of the health care plan of bargaining
unit employees.
On March 18, 1996, the General Counsel, the Respon-
dent, the Charging Party, and the Party in Interest filed
with the Board a stipulation of facts and motion to trans-
fer the case to the Board. The parties stated that the
charge, amended charge, complaint, answer, and the
stipulation of facts constitute the entire record in this
case and that they waive a hearing before an administra-
tive law judge. On May 28, 1996, the Board approved
the stipulation and transferred the proceeding to itself for
issuance of a Decision and Order. The General Counsel
and the Respondent filed briefs, and the Respondent filed
a reply brief.
On January 8, 1997, the Board solicited the views of
the U.S. Department of Labor and the Criminal Division
of the U.S. Department of Justice on the issues raised in
this case.1 Both agencies submitted comments. The
Charging Party filed a reply brief to the comments sub-
mitted by the U.S. Department of Justice.
The National Labor Relations Board has delegated its
authority in this proceeding to a three-member panel.
On the entire record, briefs, and comments, the Board
makes the following
FINDINGS OF FACT
I. JURISDICTION
The Respondent, a Delaware corporation, is engaged
in the exploration and production of petroleum from
various sites throughout Kansas and other locations in
the United States. The Respondent annually receives
gross revenues in excess of $500,000 and performs ser-
vices valued in excess of $50,000 directly from points
located outside the state of Kansas.
We find that the Respondent is an employer engaged
in commerce within the meaning of Section 2(6) and (7)
of the Act and that the Union is a labor organization
within the meaning of Section 2(5) of the Act.

1 Copies of the solicitation were also sent to the Internal Revenue
Service and the Pension Benefit Guarantee Corporation for any addi-
tional comments they chose to submit based on their specific expertise.
These agencies did not submit comments.
II. ALLEGED UNFAIR LABOR PRACTICES
A. Facts
1. Bargaining history regarding health care coverage
The Respondent (OXY) has been the sponsor and ad-
ministrator of the health insurance plans covering its rep-
resented employees under past collective-bargaining
agreements with the Union. Until 1992, OXY main-
tained a self-funded group health care plan (the Group
Plan) that provided medical and dental coverage for the
Respondent’s Union-represented hourly employees. This
plan was funded by contributions made by the Respon-
dent and by represented employees to a tax-exempt trust
(the Trust) created under Internal Revenue Service Code
501(c)(9). In 1992, the Group Plan provided medical
and dental benefits for all of the Respondent’s repre-
sented hourly employees in Longview, Texas, the State
of Oklahoma, and the State of Kansas. The Trust ap-
proached underfunding in 1992, which situation
prompted OXY and the Union to discuss various health
care alternatives.
In those discussions, the Union requested that the Re-
spondent seek bids for alternative health care coverage.
Consistent with this request and its role as plan sponsor,
the Respondent compiled claims data and sought quota-
tions from a number of insurers. The Respondent ulti-
mately selected a fully insured health care plan provided
by Aetna Insurance Company in August 1992. The Re-
spondent agreed to serve as sponsor of the Aetna health
care plan, but informed the Union that it would prefer not
to serve as plan sponsor in the future.
Following the adoption of the Aetna plan, a number of
hourly employees, and later the Union, complained about
the level and cost of health care insurance under that
plan. To address the employees’ complaints, the Union
sought to find coverage that was more favorable than the
existing Aetna coverage. To that end, the Union re-
viewed the Respondent’s claims data and sought quota-
tions from several other insurance carriers. The Union
failed to locate a viable alternative health care provider
by the time negotiations for a new collective-bargaining
agreement began in January 1994.
2. The parties’ 1994 contract negotiations
The most recent collective-bargaining agreement be-
tween the Respondent and the Union covering the Re-
spondent’s Kansas employees expired on January 31,
1994. Negotiations for a new contract began about Janu-
ary 11 and 12, 1994. During the negotiations, the parties
agreed to adopt almost all of the terms and conditions
contained in the expired contract, but failed to reach
agreement on a few core issues, including the issue of
who would serve as sponsor of the health insurance plan
covering the Respondent’s Kansas represented hourly
329 NLRB No. 26
OXY USA, INC. 209
employees. The Union requested that the Respondent
continue to serve as sponsor of the health care plan. The
Respondent reiterated that it would prefer not to continue
in that role given the time, expense, and administrative
burden involved.
At the parties’ June 10, 1994 bargaining session, the
Union informed the Respondent that it had located an
alternative health care plan provided by Blue Cross/Blue
Shield of Kansas (Blue Cross), and suggested that the
Respondent substitute that plan for the Aetna plan that
was in place. The Union was unable to find an inde-
pendent sponsor and administrator for the Blue Cross
insurance plan, however, and proposed that the Respon-
dent serve as the plan sponsor. The Respondent agreed
to continue contributing to the employees’ health care
plan, but rejected the Union’s proposal that the Respon-
dent itself serve as the plan sponsor and suggested that
the Union assume that role. The Union said that it would
consider serving as the plan sponsor.
At the bargaining sessions between the parties held on
about June 23 and 24, 1994, the Union proposed that the
Respondent establish a joint trust fund with the Union to
provide medical benefits to the covered employees. The
Respondent informed the Union that it did not wish to
create another trust fund and reiterated its position that it
did not want to continue serving as the plan sponsor.
The Respondent again proposed that the Union serve as
the sponsor. The Union rejected the Respondent’s pro-
posal and indicated that it did not sponsor health care
plans for represented employees.
During the course of bargaining, the Respondent
learned that the Union had served for more than 20 years
as the sole sponsor of an employer-funded health insur-
ance plan for certain represented employees employed by
one of the Respondent’s competitors, the Phillips Petro-
leum Company in Kansas. The health care plan covering
Phillips employees and sponsored by the Union was pro-
vided by Blue Cross/Blue Shield of Kansas. The Re-
spondent also learned that the Union was serving as the
health care plan sponsor for certain employees of Shell
Oil Company in California represented by the Union.
On July 19, 1994, the Union informed the Respondent
that it had been unable to find an independent sponsor
and administrator for the Blue Cross insurance plan, and
again proposed that the Respondent serve as the plan
sponsor. The Respondent rejected the Union’s proposal
that it serve as the plan sponsor and once again suggested
that the Union assume that role. The Union ultimately
accepted the Respondent’s proposal concerning plan
sponsorship during the bargaining session held about
July 19, 1994, and agreed to serve as the sponsor for the
Blue Cross health insurance plan that it had located. The
Blue Cross health insurance plan was to be funded by
both employer and employee contributions.
3. Breakdown of negotiations
At the parties’ August 8, 1994 bargaining session, the
Union withdrew its offer to serve as the sponsor and ad-
ministrator of the Blue Cross plan, claiming for the first
time that unions are prohibited by Section 302 of the Act
from serving as sponsors of health insurance plans
funded by employer contributions. In support of its posi-
tion, the Union provided the Respondent with a letter that
it had obtained from its counsel regarding the plan spon-
sorship issue. During the bargaining session held the
next day, August 9, 1994, the Respondent reiterated its
position that it would not serve as sponsor and informed
the Union that its legal counsel had reviewed the letter
prepared by the Union’s counsel and disagreed with the
conclusions set forth in the letter.
At the parties’ next bargaining session on September 7,
1994, the Union again claimed that it could not legally
serve as the health care sponsor and administrator. The
Union provided the Respondent with a second letter from
its counsel in support of its position. The bargaining
session ended with no agreement on the issue concerning
health care plan provider sponsorship. Notwithstanding
its position that it could not legally serve as sponsor of
health care plans, the Union at no time provided the Re-
spondent with any information suggesting that it had
discontinued its practice of serving in that role for em-
ployees represented by the Respondent’s competitors,
Phillips Petroleum Company and Shell Oil Company.
4. Substantive terms of the Respondent’s proposal
Under its proposal, the Respondent would disburse its
contributions and the contributions of its represented
employees directly to Blue Cross. The Respondent’s
proposal strictly prohibits: (1) the Union from receiving
or gaining control over any of the moneys used to pay
the insurance premiums for the Respondent’s employees’
health care coverage; and (2) the transfer of any funds to
the Union. The Union would have no authority to
unilaterally change the amount or type of health care
coverage provided under the plan. The proposal
expressly requires that the Respondent consent to any
change in coverage under the plan. The Union’s duties
as “plan sponsor” under the Respondent’s proposal
would be to make all ERISA-mandated filings, to field
employee complaints about health care, to compile
claims data, and to present bids for alternative coverage
to the Respondent as necessary.
During the relevant period, the Union had already been
actively reviewing the Respondent’s claims data and
seeking bids from insurance carriers in an effort to find a
health care plan more favorable than the Aetna plan.
During their negotiations, the parties discussed the
concept of the Union’s becoming the plan sponsor, but
did not discuss the specific duties that the Union would
assume in that role.
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 210
5. The parties’ declaration of impasse
On October 21, 1994, the parties agreed that they were
at impasse on several issues, including plan sponsorship.
About October 26, 1994, the Respondent implemented
certain terms of its final offer. Specifically, the
Respondent granted employees a 4-percent base pay
increase effective September 1, 1994, and gave an $800
lump-sum bonus to all hourly represented employees
who were on the payroll as of September 1, 1994, and
were still working in Kansas as of September 30, 1994.
The Respondent also dissolved the Trust and distributed
its remaining assets in single-sum payments to all
employees who participated in and contributed to the
Group Plan as of July 31, 1992, and who were currently
employed by the Respondent or who were currently
covered by the represented employee health care plan.
The amount of the distribution that each employee
received varied, depending on the employee’s plan
participation and level of coverage as of July 31, 1992.
The items implemented by the Respondent were
described in an October 26, 1994 letter from the
Respondent to the Kansas represented hourly employees.
The Respondent did not implement any change with
respect to employee health care and has remained the
sponsor of the existing health care plan provided by
Aetna.
B. Contentions of the Parties
The General Counsel contends that, under the
Respondent’s final health care offer, the authority that
would be conferred on the Union by virtue of the
Employee Retirement Income Security Act would
constitute a transfer of a “thing of value” and would
contravene the language and spirit of Section 302 of the
Act. The General Counsel defines that “thing of value”
as the “ability to control how funds are spent and how a
fund is administered,” “the legal power to bargain a
benefit plan with the provider,” and the “legal power to
involve itself in disputes as to whether the provider paid
what it was expected to pay.” Thus, the proposal is
unlawful under Section 302, the General Counsel argues,
and the Respondent insisted to impasse on an illegal
bargaining subject and thereby violated Section 8(a)(5).
In support of his position that the bargaining proposal
is unlawful, the General Counsel advances a “third party
beneficiary” theory. He cites Carpenters Local 626 v.
Delaware Contractors Assn., 344 F.Supp. 1281 (D. Del.
1972), affd. per curiam 477 F.2d 564 (3d Cir. 1973), in
which a Federal district court held that a contractual
employee-funded vacation benefit plan was unlawful
under Section 302. In that case, by virtue of the control
the union exercised over disposition of the benefit plan
funds, payments to the union-selected bank that managed
the funds were held to be in fact payments to the Union.
The General Counsel also relies on U.S. v. DeBrouse,
652 F.2d 383 (4th Cir. 1981), in which the Fourth Circuit
upheld a union official’s convictions for receipt of a
“thing of value,” in violation of Section 302(b)(1). This
conclusion was based partly on the official’s requests
that the employer award a contract to an extermination
company in which the official had a secret financial
interest and that the employer hire a “ghost employee.”
Finally, the General Counsel cites U.S. v. Carlock, 806
F.2d 535 (5th Cir. 1986), in which the Fifth Circuit
upheld the racketeering conviction of a union official
based in part on his demand, in violation of Section 302,
that the employer lease equipment from a firm that was
owned by the former daughter-in-law of the union
official. The court noted that the government need not
prove that the union defendant benefited from the
payments to the third party.
The Respondent argues that nothing would flow from
the Respondent’s proposal other than an “intangible”
benefit, and that Section 302 does not prohibit such
benefits. The Respondent relies principally on U.S. v.
Cervone, 907 F.2d 332 (2d Cir. 1990), cert. denied sub
nom. Bernesser v. U.S., 498 U.S. 1028 (1991), in which a
union official assisted construction industry employers in
paying the leader of a minority group, which had tried to
secure employment for minority employees, in order to
have the minority leader leave the job site. The Second
Circuit found that the transaction did not violate Section
302 because “the union official’s continuing ability to
influence corrupt union practices” was, not a thing of
value, but a benefit that “seem[ed] not only intangible
but also unidentifiable.” 907 F.2d at 347.
C. Comments of the U.S. Department of Justice
In its comments, the U.S. Department of Justice (DOJ)
finds that the Respondent’s proposal for an employee
health care plan was not one for the delivery or receipt of
a thing of value, in the form of a tangible or intangible
benefit, to the Union or other employee representative in
violation of Section 302(a) or (b).2
First, DOJ notes that, under the Respondent’s
proposal, the Respondent’s remittances to the health care
benefit fund are made directly to a third-party insurance
provider whose final selection is made by the employer.
The proposal also forbids those moneys to be tranferred
to the Union’s control. In this respect, according to DOJ,
precedent relied on by the General Counsel is
distinguishable. Thus, unlike the employee-funded
vacation plan administered by the union in Delaware
Contractors Assn., supra, the Union here is unable to
unilaterally select the manager of the plan’s funds or the
party to which the Respondent will remit health care
benefit contributions. Rather, the employer is the

2 In separate comments, the U.S. Department of Labor has deferred
to the Department of Justice’s interpretation of Sec. 302 (a) and (b).
At the request of the Department of Justice, we note that its com-
ments were provided as advice to the NLRB to assist the Board in its
decision, and not as an advisory opinion to the public.
OXY USA, INC. 211
ultimate decision maker as to which benefit provider will
be selected and to whom contributions will be remitted.
Likewise, according to DOJ, the third-party
beneficiary rationale set forth in DeBrouse and Carlock,
supra, is inapposite in this case. In DeBrouse, with
respect to the intangible benefit which the union official
was found to have received in the “ghost employee”
transaction, the court concluded that “[h]aving shown the
employer’s acquiescence in DeBrouse’s demand, the
government was not required to prove that DeBrouse
received the money.” 652 F.2d at 388. In effect, the
court held that the potential for corruption of labor-
management relations and of the official’s honest
representation of employees was as apparent as if the
union official himself had been paid directly. No 302(c)
exception would apply if the latter transaction had
occurred.
Similarly, DOJ continues, the court concluded in
Carlock that a violation of Section 302 could be
sustained without a showing that the union official
received a financial benefit from the transaction. In the
court’s view, by demanding that the employer execute a
lease from a company owned by his relative, the union
official in Carlock received an intangible benefit in the
form of the employer’s compliance with the union’s
demand in the face of the “power exacted by the official
to direct payments to others.” 806 F.2d at 555.
On the other hand, DOJ points out that in Cervone,
supra, relied on by the Respondent, the union official’s
demand that the employer pay off the minority leader, a
potential rival of the union official, did not differ in any
material respect from the payments requested by the
union officials in DeBrouse and Carlock. In each
transaction, the union official benefitted from the
employer’s compliance with his request, and the union
official’s loyalty to employees he represented was
potentially compromised by the resulting conflict of
interest. Nonetheless, unlike DeBrouse and Carlock, the
Cervone court rejected the government’s contention that
the union official had received a thing of value in that
transaction.
Thus, although two courts of appeals have approved
the “third party beneficiary” theory advanced by the
General Counsel, DOJ notes that the theory has not been
universally accepted, and there are limitations to its
application. At least in some circumstances, a union
representative cannot be convicted of receiving an
intangible benefit proscribed by Section 302 by
requesting that an employer make financial or other
tangible payments to a third party if those third-party
payments themselves could be made lawfully. For
example, had the union official in DeBrouse demanded
that wages and benefits be paid not to a “ghost
employee,” but to an employee of the employer’s choice
and for services to be performed that are commensurate
with those wages and benefits, no violation of Section
302 would obtain because the payments would fall
within the 302(c)(1) exception for “compensation for, or
by reason of . . . service as an employee”
Similarly in this case, in DOJ’s view, the Respondent’s
proposal seeks to insulate the Union from Section 302
liability by depriving it of any control over the health
care benefit contributions. The Union has not requested,
nor has the Respondent in its proposal agreed to deliver
to it or any other entity, employee benefit contributions
that can be unilaterally invaded by the Union. The
transfer of the tangible monetary contributions directly to
a third-party insurance provider is in itself lawful; thus,
any intangible benefit that the Union enjoys by virtue
solely of its legal relationship to the insurance provider
may likewise be deemed lawful.
At least one court has limited the application of the
third party beneficiary theory to situations in which there
is a request or demand by a union representative for a
third-party benefit, rather than, as here, where the
proposal is initiated by the employer. In Levin-
Richmond Terminal Corp. v. Local 10, 751 F.Supp. 1373
(N.D. Cal. 1990), the court denied a summary judgment
motion to strike down an employer-initiated “wage”
payment proposal. In settlement of a work-assignment
dispute with the union, the employer had offered to pay
wages to employees, even though no services had been
performed to earn those wages. The court rejected the
third party beneficiary doctrine, distinguishing DeBrouse
and Carlock on the ground that the union had not
requested the wage payments to third-party employees,
and therefore derived no intangible benefit as it would if
it had demanded these payments from the employer.
Implicit in the court’s holding is that Section 302 “value”
is “usually set by the desire to have the ‘thing’ and
depends upon the individual and the circumstances.”
U.S. v. Roth, 333 F.2d 450, 453 (2d Cir. 1964), cert.
denied 380 U.S. 942 (1965).
Finally, DOJ notes that the General Counsel’s claim of
illegality is focused not on the terms of the proposal on
its face, but on the potential for improper side
arrangements between the Union and the insurer if this
proposal were sanctioned. DOJ cites Local 144 Nursing
Home Pension Fund v. Demisay, 508 U.S. 581 (1993),
for the proposition that Section 302 is concerned with the
manner in which a benefit plan is established, rather than
how it is administered after it has been established.
D. Discussion
Section 8(d) of the Act provides that an employer and
an employee representative are obligated to bargain
“with respect to wages, hours, and other terms and
conditions of employment.” Such items, including terms
of health care plans, are mandatory subjects of
bargaining. However, the Act does not require parties to
bargain over illegal subjects, and an employer that insists
upon inclusion of such a provision as a condition of
DECISIONS OF THE NATIONAL LABOR RELATIONS BOARD 212
reaching an agreement violates Section 8(a)(5) of the
Act. NLRB v. BASF Wyandotte Corp., 789 F.2d 849, 853
(5th Cir. 1986).
Authority to restrain violations of Section 302 is
vested in the United States district courts by Section
302(d) and (e). The Board has no authority to enforce
Section 302. Nevertheless, the Board has held that it
would, if necessary, decide whether contract provisions
violated Section 302 in deciding whether an unfair labor
practice has been committed. National Fuel Corp., 308
NLRB 841, 843 (1992). It is therefore appropriate here
to decide the merits of the General Counsel’s claim that
the Respondent’s proposals are unlawful under Section
302 in determining whether it insistence to impasse on its
bargaining proposal violated Section 8(a)(5).3 For the
reasons discussed below, we find that the Respondent’s
proposal that the Union sponsor and administer the
employee health plan is not unlawful under Section 302.
Section 302(a) and (b) of the Act make it unlawful for
the employer to “pay, lend or deliver, or offer to pay,
lend, or deliver” or for a labor organization to “request,
demand, receive, or accept”

any money or other thing of value—(1) to any
representatives of any of his employees . . . or; (2) to
any labor organization, or any officer or employee
thereof.

By way of exception, Section 302(c) states that

[t]he provisions of this section shall not be applicable
. . . (5) with respect to any money or other thing of
value paid to a trust fund established by such
representative.
Provided, That (A) such payments are held in trust for
the purpose of paying . . . for the benefit of employees,
their families and dependents, for medical or hospital
care . . . (b) the detailed basis on which such payments
are to be made is specified in a written agreement with
the employer, and employees and employers are

3 We note that in several prior cases in which the Board considered
Sec. 302, the Board decided whether certain unilateral action on the
part of employers in repudiating contract provisions was justified by the
employer’s claim that such provisions were unlawful under Sec. 302.
National Fuel, supra; BASF Wyandotte, supra. Here, by contrast, it is
the General Counsel who is alleging that the provision at issue is illegal
under Sec. 302. Thus, it is the General Counsel’s burden to establish
the illegality of the Respondent’s plan.
equally represented in the administration of such fund,
together with such neutral persons as the
representatives of the employers and the representatives
of the employees may agree on.

When it enacted Section 302, Congress was
“concerned with corruption of collective bargaining
through bribery of employee representatives by
employers, with extortion by employee representatives,
and with the possible abuse by union officiers of the
power which they might achieve if welfare funds were
left to their sole control.” Arroyo v. U.S., 359 U.S. 419,
426 (1959) (footnotes and citations omitted).
As set forth above, DOJ has concluded that
Respondent’s proposal does not violate the provisions of
Section 302. As a matter of comity, we shall defer to the
opinion of the Department of Justice, which has the
responsibility of enforcing that Section of the Act.4 We
can discern no basis for disregarding DOJ’s authorative
analysis of the substantive terms of the relevant language
here.
As we have found that the Respondent’s bargaining
proposal is not unlawful under Section 302, we find no
merit in the complaint allegation that the Respondent
insisted to impasse, in violation of Section 8(a)(5), on an
illegal bargaining proposal.5
ORDER
The complaint is dismissed.

4 Cf. William Wolf Bakery, Inc., 122 NLRB 630, 631 (1958).
5 The General Counsel’s complaint specifically alleges the follow-
ing: “The condition described above [that the Union agree to serve as
the employee health insurance plan sponsor and administrator] . . . is
prohibited by Section 302 of the Act and is an unlawful subject of
bargaining.” As the complaint does not base the claim of illegality
concerning the Respondent’s bargaining proposal on Title 1 of ERISA,
we do not pass, nor have the U.S. Departments of Justice or Labor in
their comments passed, on the implications of ERISA to the facts pre-
sented in this case.
We note that the complaint allegations are grounded solely on the
legality, and on no other aspect of, the bargaining proposal.