again.

Chairman Talent. We will move immediately to the next panel,
because we took a long time with the first one. So, as soon as the
Chairman and his staff leave, if they would come forward.

I will try with this panel to stick to the 5-minute limit. I know
that some people have travelled here and I'm grateful for that. I'm
not going to cut people off.

[Recess.]

Chairman Talent. All right. You have all thoughtfully lined up
in accordance with the names we have there. That's nice of you.
We'll just go from our left to right here, if that's OK I will intro-
duce witnesses as their time to testify comes up.

Again, I'm going to ask you if you can to summarize your testi-
mony if it's longer than 5 minutes. On the other hand, and particu-
larly for those witnesses who have come a long distance, if there
is anything you feel it's important to say, I want you to feel free
to say it.

Our first witness in the second panel is Mr. James Coleman, who
is the general counsel for the National Council of Chain Res-
taurants from Arlington, Virginia.

Mr. Coleman, please go ahead.

TESTIMONY OF JAMES COLEMAN, GENERAL COUNSEL,
NATIONAL COUNCIL OF CHAIN RESTAURANTS

Mr. Coleman. Thank you, Mr. Chairman and Congresswoman.
As you have stated, I am here in my capacity as general counsel
of the National Council of Chain Restaurants. The council is a
Washington, DC trade industry group which represents approxi-
mately 40 of the Nation's multiunit, multi-State chain restaurant
companies.

Collectively, these 40 companies own and operate approximately
30,000 restaurant establishments. Then through franchise and li-



32

censing agreements, an additional 50,000 establishments are oper-
ated under their trademarks. In many cases, these are done by in-
dividuals who act in the capacity of owner/operator.

Mr. Chairman, I am going to try to be very brief, and stay within
your rule. I note that the council's testimony has been referenced
somewhat extensively already, so I'm going to try to be even briefer
than I would have otherwise. But I would ask that our written tes-
timony be entered into the record.

Chairman TALENT. Without objection. That will be the case for
everybody who summarizes.

Mr. Coleman. It's the council's position that the adoption of a
rule that sets forth a virtually irrebuttable presumption that a sin-
gle-location unit is appropriate absent extraordinary circumstances
is unwise and would be counterproductive because of the adverse
impact that such a rule would have on the growth and expansion
of restaurants and other small retail businesses.

The board has now rejected the multi-factor test it has applied
for well over 30 years to fashion its proposed rule, which is based
on three very limited criteria. With one broad stroke, the board will
eliminate 30-plus years of well-established precedent by determin-
ing that the currently recognized factors of functional integration,
centralized management control, common skills, employee transfers
and bargaining history will in the future be considered
nonmaterial.

The board did not support its decision to eliminate these addi-
tional factors with specific case law, but rather, simply engaged in
what we believe is second-guessing of prior board decisions.

The board's proposed rule simply fails to deal with the underly-
ing reality of most businesses, which it reluctantly acknowledges
require centralized control and functional integration of its retail
operations.

In its notice of proposed rulemaking, the board stated, "Few busi-
nesses today with more than one location fail to maintain central-
ized control over the conduct of operations. It is a matter of good
business practice."

In view of the board's recognition that more businesses exercise
common control of employment and labor practices at geographi-
cally independent locations, it is arbitrary for the board to state
that centralized control is a non-material factor in its analysis re-
garding the appropriateness of single-location bargaining units.

If the period from 1980 through 1994 of the board's history is any
measure of the future, ignoring these additional factors dem-
onstrates that in approximately one-half of the cases, the board
will find that a single facility unit is appropriate, where under the
prior test, based on the same or similar factual record, the single
facility unit would have been held to be inappropriate.

Chairman Talent. Where is that from your testimony? What
page is it on?

Mr. Coleman. Oh, I'm sorry.

Chairman Talent. No, that's OK. I want to refer to it. I assumed
you were reading it.

Mr. Coleman. It's the top of page 7.

Chairman Talent. Seven.



33

Mr. Coleman. Right about there in the middle, "In proposing the
instant rule."

Chairman Talent. Thank you.

Mr. Coleman. The history of the chain restaurant and retail in-
dustry adjudication of this issue has made it clear that the pre-
sumption of a single facility location has been rebutted on numer-
ous occasions, given the centralization of management in this in-
dustry.

Now, if the board inexplicably seeks to group the restaurant in-
dustry and retail industry with every other industry except for
public utilities, construction and ocean-going vessels. In proposing
the rule, the board fails to take into account the fact that the chain
restaurant industry is different from other industries in the oper-
ational requirements for uniformity of policies and procedures.

This uniformity is demonstrated bv many chain restaurants hav-
ing identical exterior and interior designs, offering the same lim-
ited number of food and beverage items at a uniform price, having
identical hours of operation, requiring employees to wear the same
or similar uniforms during working hours, and maintaining the
same labor and employee relations policies and rates of pay.

The board has found it significant that chain restaurants conduct
business under standardized policies and procedures, subject to
close centralized control. Prior board decisions also clearly indicate
that the chain restaurants tend to be highly integrated enterprises.
This trend will no doubt continue, given tne widespread advances
in new technology.

Two of the board's stated reasons for proposing the rule are, one,
that the historical likelihood is that in most cases a single facility
will be found to be appropriate, and two, that there is extensive
litigation currently involved and there are delays associated with
that litigation.

A review of past board decisions reveals that the board's reasons
for the rule are not supported based on past experience or by any
empirical evidence that we have been able to review.

During the period of 1980 through 1994 there were 61 reported
board decisions regarding the appropriateness of a single facility
bargaining unit. In 33 of those cases, the board held that the single
facility was not an appropriate bargaining unit. In only 28 cases
did the board find that the single facility was the appropriate bar-
gaining unit.

Given the fact that the board determined that a single location
unit was not appropriate in the majority of its decisions published
during the past 15-year period, the Agency should not now promul-
gate a rule which would create an irrebuttable presumption that
the single facility is appropriate.

The board has not supported the proposed rule with any empiri-
cal evidence of extensive litigation or delay. A review of the re-
ported decisions by the board during the 35-year period of 1960
through 1995, reveals that litigation regarding the appropriateness
of a single location unit has declined tremendously.

I would just like to briefly direct attention to the chart, Mr.
Chairman, that you held up that is attached to our written testi-
mony and is here in a blown -up version. I direct the Subcommit-
tee's attention briefly to that chart, which reflects the total number



34

of cases involving this issue in 5-year increments that were pub-
lished in board decisions.

As you can see, the largest number of published board decisions
regarding this issue were decided during the 5-year period between
1965 and 1969. Seventy-three such decisions were issued.

After this period, the number of published decisions concerning
the issue have declined dramatically, with only 11 cases having
been published during the 5-year periods from 1985 through 1989
and 1990 through 1994, respectively.

In fact, during 1995, there were no published board decisions
concerning this issue. Thus, the board has averaged only two pub-
lished decisions per year during the past 5 years. Obviously, we be-
lieve the board's premise regarding "extensive litigation currently
involved" is in fact contradicted by the board's own published deci-
sions.

In conclusion, the council submits that the board's proposed rule
will not achieve the goals announced by the board. The multifactor
test currently relied upon by the board has worked well for well
over 30 years and it is the council's position that there is no valid
reason to change board case law and procedure at this time.

Accordingly, the council respectfullv urges the board to refrain
from engaging in the proposed rulemaking. Thank you.

Chairman Talent. I thank you, Mr. Coleman,

Our next witness is Ms. Haunani Kekuna, chairwoman of the
Franchisee Advisory Council of the Coffee Beanery Advisory coun-
cil, K&I, and also operator and owner, I think, of K&I Management
from Allentown, Pennsylvania.

[Mr. Coleman's statement may be found in the appendix.]

TESTIMONY OF HAUNANI SUE LIN KEKUNA, K&I
MANAGEMENT/THE COFFEE BEANERY

Ms. Kekuna. Thank you, Mr. Chairman and Congresswoman.
My name is Haunani Kekuna and I am appearing here today on
behalf of the International Franchise Association. The Inter-
national Franchise Association is the oldest and largest trade orga-
nization that represents both franchisors and franchisees.

Since 1960, the IFA has worked to promote a healthy and vi-
brant regulatory climate for the successful expansion of franchis-
ing. IFA members include some of the most recognized names in
the retail and service industries who have proven that franchising
provides unique advantages over traditional methods of distribut-
ing goods and sersaces.

Franchising works in many different industries because its
unique flexibility allows franchise companies to respond quickly to
changes in the marketplace, in a competitive marketplace. I am
here to share IFA's opposition to the rule proposed by the National
Labor Relations Board.

Small businesses like mine are faced with countless challenges to
their success. To add another Government burden like the proposed
rule will further diminish our chances for success, as Congressman
Longley already articulated from his constituents.

This proposal would deny small businesses like mine the oppor-
tunity to show at a hearing the reasons why single unit organizing
may not be advantageous or fair for either the management or the



35

employees in an integrated, multiunit business like many fran-
chises.

In addition, there appears to be no compelling reason to change
the current practice of evaluating single unit organizing requests
on a case-by-case basis. For any retail or service organization or op-
eration, labor costs are a major component of the total costs of run-
ning the business.

Increases in workers' and unemployment compensation taxes,
health care and health insurance costs and other employee benefits
already limit the ability of many U.S. small businesses to compete
in a global marketplace.

The proposed NLRB rule further threatens our ability to compete
globally and to maintain uniformity and consistency within the or-
ganization. This is especially important in a franchised business,
which depends on a seamless and transparent set of relationships
to deliver customers a consistent and reliable experience.

If enacted, this rule will expand the likelihood of increased costs,
limiting our ability to create jobs and opportunities for our current
and future employees, as well as their families.

In addition, we oppose this rule because it implies that all situa-
tions fit neatly within the confines of a single rule and because it
creates a rigid and inflexible structure that ignores the realities of
the marketplace in which, as small businesses, struggle daily to
compete.

I am president and founder of K&I Management, Inc., a company
that operates three gourmet franchise units in the Philadelphia
area. We have been in business since 1988 and annually employ 30
to 50 employees.

Our experience is similar to that of many thousands of small
businesses around the United States. Like many franchisees, I op-
erate more than one unit. During the course of any business week
I have many employees and managers working at several different
units, depending on the time of the year, the level of activity at cer-
tain stores, and the travel and family schedules of my employees.

Though I operate several locations, the management and oper-
ational control for the entire business is mine. I do not manage
each unit independently, but rather, manage each unit as part of
an integrated whole. The proposed rule would treat each of my
units as if it were an independently operated business and ignores
the fact that while there are multiple locations, the centralized
management function is essential to success.

Of the nearly 550,000 franchised businesses in the U.S., many
are operated by businessmen and businesswomen like me who have
more than one location. The proposed rule is a threat to all of these
small businesses, who would no longer have an opportunity to dem-
onstrate at a hearing the similarity of skills, functions, and work-
ing conditions of their employees, the centrality of control of their
businesses, and the degree of employee interaction within those
businesses.

All of these are factual determinations which potentially argue
against single unit organizing, but as questions of fact would not
be adequately explored under the NLRB s proposed rule.

In the interests of time and expediency, the proposed rule would
deny me a fundamental right: The opportunity to state my case



36

and explain the essential nature of centralized management to a
franchised business.

Small business in general, and franchising in particular, have
consistently been job creators during the past decade. As Fortune
500 companies lay off thousands of employees, those of us who op-
erate small, independent businesses have successfully created em-
ployment opportunities and wealth for literally millions of Ameri-
cans and their families.

If our Nation is to enjoy the blessings of this successful pattern
of employment opportunity and wealth creation, the Federal Gov-
ernment must not further burden small businesses and their em-
ployees and families with costW and unnecessary regulations.

On behalf of the members of the International Franchise Associa-
tion and the thousands of other small businesses, owners and oper-
ators around the country, I urge the Subcommittee to communicate
our opposition to this rale to tne NLRB and ask the proposed rule
be withdrawn.

Thank you for the opportunity to be here today.

Chairman Talent. Thank you, Ms. Kekuna.

The next witness is Mr. Rock Magnan, vice president of oper-
ations of Con-Way Transportation Services, Inc. of Menlo Park,
California.

You have come a long way, sir, and we appreciate it.

[Mr. Ms. KeKuna's statement may be found in the appendix.]

TESTIMONY OF ROCK MAGNAN, VICE PRESIDENT-
OPERATIONS, CON-WAY TRANSPORTATION SERVICES

Mr. Magnan. Good afternoon, Mr. Chairman and Congress-
woman Velazquez. As stated, my name is Rock Magnan. I am vice
president of operations for Con-Way Transportation Services in
Menlo Park, California.

We operate three less-than-truckload carriers and a nationwide
over-the-road and intermodal truckload company. We opened for
business in 1983 and have grown to $1.3 billion in revenues in
1995. We employ 14,000 employees in all 50 States and in Canada.

CTS is not a small business. We have over 300 service centers
ranging in size from 2 employees to over 500. Most facilities have
managers on site, but well over 100 do not. The issue of single loca-
tion bargaining units in representation cases is important to the
trucking industry, whether the firm is a small business or a na-
tional transportation company like CTS.

Congress began to deregulate the trucking industry in 1980. The
companies that survived and thrived under these new, freer mar-
ket conditions found new efficiencies, reduced costs, and improved
their service.

The key elements to success in today's trucking environment are
a system- wide approach to planning and coordination, flexibility to
meet customers' needs and a quality team of drivers.

We use a computerized system of dispatch at centralized loca-
tions to efficiently plan routes and schedules on a daily basis, to
meet our on-time service standards and reduce our costs. Drivers
work at various ftinctions during the course of the work day from
dock, to pickup and delivery, to line haul, and perform light main-
tenance duties.



37

The interaction of service centers and drivers is a way of life for
our trucking company. The line haul, or what we call the freight-
flow operation of our company, is how we move freight between
service centers. Drivers move freight from facility to facility. They
work on a common dock with employees from various locations to
drop off freight and coordinate loads.

Our drivers run what we call a meet- and- turn operation, which
runs much like the old Pony Express operation. Drivers from var-
ious locations meet at various truck stops or sites along the high-
way to exchange freight, to move freight in a relay fashion across
our system.

Without centralized freight flow control and dispatch and com-
monality of work rules, a system-wide line haul operation would be
almost impossible to manage. An operating environment with mul-
tiple contracts, various labor unions and a variety of work rules
would render us noncompetitive in today's market.

In our business there should not be the presumption that a sin-
gle facility is an appropriate bargaining unit. A trucking company
must function as an organized system to be competitive and serv-
ice-sensitive.

The NLRB should continue to allow inquiries into the facts of in-
tegration of operation, centralization of labor relations, and the
community of interests of the employees, as well as the viability of
the bargaining unit to determine if a bargaining unit is appro-
priate.

Thank you, Mr. Chairman.

Chairman Talent. Thank you, Mr. Magnan.

Next witness, Mr. Harold Coxson of Coleman, Coxson, Penello,
Fogleman and Cowen, for the American Bankers Association,
Washington, DC.

[Mr. Magnan's statement may be found in the appendix.]

TESTIMONY OF HAROLD P. COXSON, AMERICAN BANKERS
ASSOCIATION

Mr. Coxson. Thank you, Mr. Chairman, and Ms. Velazquez. I
am here today representing the American Bankers Association. I
would also note that I serve as 1 of 25 lawyers on the NLRB's Man-
agement Advisory Panel, selected by the current chairman and
members of the National Labor Relations Board.

Banking is perhaps the most regulated industry in the United
States. As a result of such extensive regulations, bank operations
are, by necessity, highly centralized and fully functionally inte-
grated. This makes banks particularly ill-suited for single-oranch
bargaining units, which would result in the proliferation and frag-
mentation of small groups of employees for purposes of union orga-
nizing and collective bargaining.

Federal regulatory monitoring requires a high degree of stand-
ardization of all bank activities and mandates uniform procedures
in all branches and head offices. Today there are 10,000 commer-
cial banks in the United States, of which more than 4,200 operate
two or more branches.

A typical small bank has two branches. Larger institutions oper-
ate hundreds of branches. Many of these branches are virtually
identical, with identical procedures, operations and personnel poli-



38

cies, with nearly identical employee skills, functions and working
conditions, and with little real local autonomy on labor relations
practices.

Mr. Chairman, the banks' real concern with this rule is not that
unions will organize employees in the industry — ^that's up to the
employees involved — but that the rule will result in unreasonably
fragmented, chaotic, unstable collective bargaining relationships
with individual branches being organized and represented for pur-
poses of collective bargaining by multiple unions with multiple con-
tract expirations and different contract terms and work rules. This
flies in the face of other Federal regulations in the banking indus-
try which require highly centralized and functional integration of
banks.

Mr. Chairman, this is not a minor issue for banks, despite what
NLRB Chairman Gould describes as a "crap-shoot." What he calls
a "crap-shoot" — unit determination — is at the heart of our collective
bargaining system, which even the most basic text on labor law ac-
knowledges. Unit determination provides the initial context in
which employees may exercise their right to freedom of choice, as
well as the basic framework within which collective bargaining will
either succeed or fail.

As the NLRB stated over 30 years ago, if the NLRB's unit deter-
mination fails to relate to the factual situation with which the par-
ties must deal, efficient and stable collective bargaining is under-
mined, rather than fostered.

Chairman Tai^nt. Where are you in the statement, Mr. Coxson?

Mr. Coxson. Page 3.

Chairman Talent. Three. Good.

Mr. Coxson. The Supreme Court has emphasized that the test
of an appropriate bargaining unit is not susceptible to inflexibile
rules; in fact, the determination should be flexible, taking into ac-
count the factual circumstances of each workplace.

While the board has established certain presumptions in favor of
single facility bargaining units, including such a presumption in
the banking industry, it has been careful to consider specific factors
in a case-by-case analysis which may rebut such presumptions.

In Hawaii National Bank, for example, then-NLRB Chairman
Miller stated, "Because of the highly integrated functional oper-
ation of banks generally, we ought to closely scrutinize the facts in
each individual case arising in the banking industry, applying no
preconceived notions or presumptions." Since Hawaii National
Bank, the board has applied the single facility presumption to
banks with only mixed success in the courts.

The NLRB's proposed rule is disappointing because it substitutes
a mechanical-mathematical rule for carefully reasoned analysis on
a case-by-case basis. After nearly 60 years of judicial deference to
the board's substantive expertise based on careful, case-by-case
analysis of unit determinations, the board now proposes inflexible
rulemaking. Even in light of today's complex new workplace oper-
ations, organizational structures and rapid technological develop-
ments, the Agency now announces that it merely neeofs to apply an
inflexible mechanical rule for unit determinations.

In a recent speech, Chairman Gould denigrates unit determina-
tions — this once important and proud function of the Agency and



39

the job duties of countless professional board staff— to a simple ad-
ministrative task, by announcing that in his view the proposed rule
only requires a calculator and an odometer to administer.

The proposed rule totally eliminates from consideration by the
board and the Federal courts the most critical and most relevant
factors in unit determinations in the banking industry which, if
given their deserved weight in the reality of today's banking oper-
ations, would tend to rebut the single location presumption in
banking units. Conversely, the only factors the NLRB will now con-
sider in unit determinations are the least relevant to banks and
are skewed in favor of single location units.

The narrow "extraordinary circumstances" exception relying on
the "temporary interchange of employees" seems to suggest that
the only way for banks to avoid fragmented single facility units is
to keep their employees on a conveyor belt oetween branches
through frequent interchange.

The proposed rule also will, in effect, give controlling weight to
the "extent of organizing" as dictated by the union's petitioned-for
unit. This, despite the clear prohibition on that practice contained