Bosses Shouldn’t Be Able to Close Factories Whenever They Feel Like It

US labor law is so stacked against workers it allows companies to pack up and leave just to avoid dealing with a unionized workforce. We shouldn’t give employers this nuclear option — it completely undercuts working-class power.

International Ladies Garment Workers Union Local 149 on a picket, c. 1960. (Universal History Archive / Universal Images Group via Getty Images)

There is no more high-stakes situation in federal labor law than the “runaway shop” case. Traditionally, this is where an employer closes an organized facility and opens at a new location with nonunion employees, whether in retaliation for a union’s win in an election, consistent strike activity, aggressive posturing at the bargaining table, or any number of protected activities. It is the nuclear bomb of unlawful employer actions; the result is a destruction of union jobs and the upending of the very purpose of the National Labor Relations Act (NLRA), which was created to bring “industrial democracy” to the American workplace.

Suffice it to say, how the National Labor Relations Board (NLRB) treats these cases is of paramount importance. And even the most casual observer of labor law knows that the approach has been completely inadequate. As professor Cynthia Estlund once pointed out, the vast majority of anti-union activity in these “capital allocation” matters can be easily cloaked in the neutral language of rational economic decision-making, and the penalties for the rare employer that fails to hide its anti-union intent are largely toothless. Much of this dilemma can be traced back to the Labor Board’s saga in Garwin Corp., 153 NLRB 664 (1965), in which the agency briefly tried to tackle this issue head-on before acquiescing to judicial opposition.

The facts of the case are not complicated. Garwin was a small clothing manufacturer in Queens, New York, that specialized in printing swimsuit designs. The company’s fifty-some employees were represented by a particularly militant local of the International Ladies Garment Workers Union beginning in 1961. After two years of contentious relations with the union at the bargaining table and on the shop floor, the two men who ran Garwin sought to move their business to Miami and leave their labor troubles behind them. During the annual summer downtime when the shop usually remained closed for weeks, management snuck the machinery out of the Queens shop and shipped it to Florida, where an alter-ego outfit by the name of S’Agaro, Inc. immediately put it to use with nonunion labor.

The trial examiner (what administrative law judges were called before the 1970s) had no problem determining that the deceptive closure of Garwin and refusal to bargain with the union about the move violated Sections 8(a)(1), (3), and (5) of the NLRA. There was plenty of evidence in the record of union animus from the owners and little proof that the company was in dire economic straits. The trial examiner additionally criticized the board’s traditional remedies in runaway shop cases, which were to provide back pay for the terminated workers, place them on preferential hiring lists for jobs at the new facility, and grant the union a bargaining order at the facility once it could demonstrate proof of majority support. These remedies were clearly inadequate in the Garwin case. The employer had moved over a thousand miles away, so few if any workers were going to pack their bags from New York and head down to a hostile shop in Florida. Moreover, the newly hired Florida workers were on notice that their bosses would go to extreme lengths to retaliate against unions, so organizing them would likely be extremely difficult. The bargaining order was thus a conditional remedy at best rather than any form of restorative justice, and it certainly wouldn’t deter Garwin or any like-minded employer from acting similarly in the future.

The Kennedy-Johnson board of the 1960s was both respected and loathed for its willingness to experiment with the board’s stagnant remedial authority under Section 10(c) of the Act, and it characteristically answered the trial examiner’s plea to strengthen the remedy for runaway shops. The result sent shockwaves across the field of industrial relations—S’agaro, the alter ego, was forced to recognize the union at the Florida facility despite its complete lack of organizing presence (let alone lack of majority support) in the shop. While carefully considering past boards’ reluctance to impose a union upon a workplace that had never expressed majority support for representation, the board members reasoned that this was the only way to effectively deter employers from engaging in capital flight if their reason for doing so (explicit or hidden) was to flee a union, as it deprived them of the unorganized workforce they would receive under prior case law.

The Kennedy-Johnson board made another prescient point. Because the Florida workers’ jobs only existed due to (1) Garwin’s flagrantly unlawful behavior, (2) the board’s unwillingness to order restoration of the New York facility, in light of growing rejections of this remedy by the courts, and (3) the inevitable failure of the New York workers to come and claim the Miami jobs for themselves, the Labor Board was within its rights to weigh these workers’ Section 7 rights a little less than usual. However, the board did not ignore the consequences of the imposed union representation; it reduced the contract bar’s protection against petitions for decertification or an election by a rival union from the standard three years to a mere one year.

How long did the Garwin remedy last? Barely thirty months. In reviewing the board’s decision, the DC Circuit refused to enforce the bargaining order at the Miami facility on the basis that there was no sign of support for the union among the workforce. The majority, led by future chief justice Warren Burger, reasoned that the Labor Board had exceeded its authority by leveling a punitive penalty against Garwin to try and deter a problem prevalent across all of industrial relations. (While the Supreme Court prevents the NLRB from exercising such punitive powers, there’s a great Student Note which persuasively argues that SCOTUS got it wrong.)

A Kennedy-appointed judge, Carl McGowan dissented from this opinion and would have upheld the board’s remedy under traditional New Deal–era judicial deference to administrative expertise. McGowan pointed out that the Board had given attention to the Florida workers’ situation while still reaching the conclusion it did for acceptable reasons — i.e., to effectuate the NLRA’s policies.

The NLRB petitioned the Supreme Court for certiorari but was denied review. In handling the Garwin case on remand (169 NLRB 1030), the Labor Board had the choice of striking a defiant tone by signaling plans for future application of the beefed-up bargaining order remedy in other jurisdictions to create the desired circuit split or of heeding the DC Circuit’s reprimand and return to the “conditional” bargaining order for the Florida facility. The board backed down. Perhaps expecting unanimous rejection of this remedy in all reviewing courts, the Kennedy-Johnson board declined to defend the decision and instead stated that the union’s interests could be preserved with more traditional remedies: requiring S’Abaro to furnish the names and addresses of all the Miami workers to the union for one year; granting union access to all bulletin boards; permitting union organizers to access employer property during nonworking hours; and having the bargaining order attach upon a showing of majority support.

As we know today, these remedies are hardly compensation for most employer unfair labor practices, let alone those as dramatic and damaging as the runaway shop. I have no idea what happened to the new Florida venture, but I highly doubt the facility was ever unionized, let alone became home to a stable collective-bargaining relationship. The Garwin case is emblematic of the federal courts’ failures to adopt more creative administrative remedies against intransigent employers and the Labor Board’s inability to clamp down on unlawful activity at a time when it was proliferating across the country. Even worse, the DC Circuit’s logic has carried the day in other areas of the law as applied by conservative board members. For example, judges remain extremely skeptical of Gissel bargaining orders where there has been any sort of turnover in the facility from the original roster of workers, and the Reagan board declared a ban on non-majority bargaining orders in the Gourmet Foods case, which still exists today.

There is no easy fix here. While I have advocated for the Biden board to revive several aggressive remedies from past board history, the Garwin remedy would be dead on arrival in the current judicial landscape. Its philosophy has been roundly rejected in subsequent legal developments and would require years of unraveling across several labor doctrines even if the PRO Act were to pass the Senate. However, I think it is valuable to grapple with the case’s history if for no other reason than to inspire future board members to be creative when evaluating the agency’s Section 10(c) authority. The Garwin case was just one vote in the DC Circuit away from becoming mainstream law. With union density at six percent in the private sector and falling, there isn’t much downside in throwing everything at the wall and seeing what sticks.