463 U.S. 491 (1983)

BELKNAP, INC.
v.
HALE ET AL.

No. 81-1966.

Supreme Court of United States.

Argued January 11, 1983 Decided June 30, 1983 CERTIORARI TO THE COURT OF APPEALS OF KENTUCKY

*492 Larry E. Forrester argued the cause and filed a brief for petitioner.

Samuel A. Alito, Jr., argued the cause for the National Labor Relations Board as amicus curiae urging reversal. *493 On the brief were Solicitor General Lee, Robert E. Allen, Norton J. Come, and Linda Sher.

Cecil Davenport argued the cause for respondents. With him on the brief was Hollis Searcy.^[*]

JUSTICE WHITE delivered the opinion of the Court.

The federal labor relations laws recognize both economic strikes and strikes to protest unfair labor practices. Where employees have engaged in an economic strike, the employer may hire permanent replacements whom it need not discharge even if the strikers offer to return to work unconditionally. If the work stoppage is an unfair labor practice strike, the employer must discharge any replacements in order to accommodate returning strikers. In this case we must decide whether the National Labor Relations Act (NLRA or Act) pre-empts a misrepresentation and breach-of-contract action against the employer brought in state court by strike replacements who were displaced by reinstated strikers after having been offered and accepted jobs on a permanent basis and assured they would not be fired to accommodate returning strikers.

I

Petitioner Belknap, Inc., is a corporation engaged in the sale of hardware products and certain building materials. A bargaining unit consisting of all of Belknap's warehouse and maintenance employees selected International Brotherhood of Teamsters Local No. 89 (Union) as their collective-bargaining representative. In 1975, the Union and Belknap entered into an agreement which was to expire on January 31, 1978. The two opened negotiations for a new contract *494 shortly before the expiration of the 1975 agreement, but reached an impasse. On February 1, 1978, approximately 400 Belknap employees represented by the Union went out on strike. Belknap then granted a wage increase, effective February 1, for union employees who stayed on the job.

Shortly after the strike began, Belknap placed an advertisement in a local newspaper seeking applicants to "permanently replace striking warehouse and maintenance employees."^[1] A large number of people responded to the offer and were hired. After each replacement was hired, Belknap presented to the replacement the following statement for his signature:

"I, the undersigned, acknowledge and agree that I as of this date have been employed by Belknap, Inc. at its *495 Louisville, Kentucky, facility as a regular full time permanent replacement to permanently replace____________________ in the job classification of_____________________________."

On March 7, the Union filed unfair labor practice charges against petitioner Belknap. The charge was based on the unilateral wage increase granted by Belknap. Belknap countered with charges of its own. On April 4, the company distributed a letter which said, in relevant part:

"TO ALL PERMANENT REPLACEMENT EMPLOYEES

.....

"We recognize that many of you continue to be concerned about your status as an employee. The Company's position on this matter has not changed nor do we expect it to change. You will continue to be permanent replacement employees so long as you conduct yourselves in accordance with the policies and practices that are in effect here at Belknap.

.....

"We continue to meet and negotiate in good faith with the Union. It is our hope and desire that a mutually acceptable agreement can be reached in the near future. However, we have made it clear to the Union that we have no intention of getting rid of the permanent replacement employees just in order to provide jobs for the replaced strikers if and when the Union calls off the strike."

On April 27, the Regional Director issued a complaint against Belknap, asserting that the unilateral increase violated §§ 8(a)(1), 8(a)(3), and 8(a)(5) of the Act.^[2] Also on April 27, the company again addressed the strike replacements:

*496 "We want to make it perfectly clear, once again, that there will be no change in your employment status as a result of the charge by the National Labor Relations Board, which has been reported in this week's newspapers.

"We do not believe there is any substance to the charge and we feel confident we can prove in the courts satisfaction that our intent and actions are completely within the law."

A hearing on the unfair labor practice charges was scheduled for July 19. The Regional Director convened a settlement conference shortly before the hearing was to take place. He explained that if a strike settlement could be reached, he would agree to the withdrawal and dismissal of the unfair labor practice charges and complaints against both the company and the Union. During these discussions the parties made various concessions, leaving one major issue unresolved, the recall of the striking workers. The parties finally agreed that the company would, at a minimum, reinstate 35 strikers per week. The settlement agreement was then reduced to writing. Petitioner laid off the replacements, including the 12 respondents, in order to make room for the returning strikers.

Respondents sued Belknap in the Jefferson County, Ky., Circuit Court for misrepresentation and breach of contract. Belknap, they alleged, had proclaimed that it was hiring permanent employees, knowing both that the assertion was false *497 and that respondents would detrimentally rely on it. The alternative claim was that Belknap was liable for breaching its contracts with respondents by firing them as a result of its agreement with the Union. Each respondent asked for $250,000 in compensatory damages, and an equal amount in punitive damages.

Belknap, after unsuccessfully seeking to remove the suit to federal court,^[3] moved for summary judgment, on the ground that respondents' causes of action were pre-empted by the NLRA. The trial court agreed and granted summary judgment. The Kentucky Court of Appeals reversed. The court first concluded that pre-emption was inappropriate because Belknap's alleged activities were not unfair labor practices. Belknap's action was not prohibited by 29 U. S. C. § 158(a)(3), which makes unlawful discrimination in personnel decisions for the purpose of encouraging or discouraging membership in a particular union, since plaintiffs did not seek membership in any labor organization.^[4] Relying on Linn v. Plant Guard Workers, 383 U. S. 53 (1966), the court also concluded that the suit was not pre-empted because the contract and misrepresentation claims were of only peripheral concern to the NLRA and were deeply rooted in local law. The Kentucky Supreme Court granted discretionary review, but later vacated its order as having been improvidently entered.

We granted Belknap's petition for certiorari, 457 U. S. 1131 (1982). We affirm.^[5]

*498 II

Our cases have announced two doctrines for determining whether state regulations or causes of action are pre-empted by the NLRA. Under the first, set out in San Diego Building Trades Council v. Garmon, 359 U. S. 236 (1959), state regulations and causes of action are presumptively pre-empted if they concern conduct that is actually or arguably either prohibited or protected by the Act. Id., at 245. The state regulation or cause of action may, however, be sustained if the behavior to be regulated is behavior that is of only peripheral concern to the federal law or touches interests deeply rooted in local feeling and responsibility. Id., at 243-244; Sears, Roebuck & Co. v. Carpenters, 436 U. S. 180, 200 (1978); Farmer v. Carpenters, 430 U. S. 290, 296-297 (1977). In such cases, the State's interest in controlling or remedying the effects of the conduct is balanced against both the interference with the National Labor Relations Board's *499 ability to adjudicate controversies committed to it by the Act, Farmer v. Carpenters, supra, at 297; Sears, Roebuck & Co. v. Carpenters, 436 U. S., at 200, and the risk that the State will sanction conduct that the Act protects. Id., at 205. The second pre-emption doctrine, set out in Machinists v. Wisconsin Employment Relations Comm'n, 427 U. S. 132 (1976), proscribes state regulation and state-law causes of action concerning conduct that Congress intended to be unregulated, id., at 140, conduct that was to remain a part of the self-help remedies left to the combatants in labor disputes, id., at 147-148.

Petitioner argues that the action was pre-empted under both Garmon and Machinists. The Board and the AFL-CIO, in amicus briefs, place major emphasis on Machinists; they argue that the Kentucky courts are attempting to impose Kentucky law with respect to areas or subjects that Congress intended to be unregulated. We address first the Machinists and then the Garmon submissions.

III

It is asserted that Congress intended the respective conduct of the Union and Belknap during the strike beginning on February 1 " `to be controlled by the free play of economic forces,' " Machinists v. Wisconsin Employment Relations Comm'n, supra, at 140, quoting NLRB v. Nash-Finch Co., 404 U. S. 138, 144 (1971), and that entertaining the action against Belknap was an impermissible attempt by the Kentucky courts to regulate and burden one of the employer's primary weapons during an economic strike, that is, the right to hire permanent replacements. To permit the suit filed in this case to proceed would upset the delicate balance of forces established by the federal law. Subjecting the employer to costly suits for damages under state law for entering into settlements calling for the return of strikers would also conflict with the federal labor policy favoring the settlement of labor disputes. These arguments, it is urged, are valid whether or not a strike is an economic strike.

*500 We are unpersuaded. It is true that the federal law permits, but does not require, the employer to hire replacements during a strike, replacements that it need not discharge in order to reinstate strikers if it hires the replacements on a "permanent" basis within the meaning of the federal labor law. But when an employer attempts to exercise this very privilege by promising the replacements that they will not be discharged to make room for returning strikers, it surely does not follow that the employer's otherwise valid promises of permanent employment are nullified by federal law and its otherwise actionable misrepresentations may not be pursued. See J. I. Case Co. v. NLRB, 321 U. S. 332 (1944); see infra at 505-506, 511-512, n. 13. We find unacceptable the notion that the federal law on the one hand insists on promises of permanent employment if the employer anticipates keeping the replacements in preference to returning strikers, but on the other hand forecloses damages suits for the employer's breach of these very promises. Even more mystifying is the suggestion that the federal law shields the employer from damages suits for misrepresentations that are made during the process of securing permanent replacements and are actionable under state law.

Arguments that entertaining suits by innocent third parties for breach of contract or for misrepresentation will "burden" the employer's right to hire permanent replacements are no more than arguments that "this is war," that "anything goes," and that promises of permanent employment that under federal law the employer is free to keep, if it so chooses, are essentially meaningless. It is one thing to hold that the federal law intended to leave the employer and the union free to use their economic weapons against one another, but is quite another to hold that either the employer or the union is also free to injure innocent third parties without regard to the normal rules of law governing those relationships. We cannot agree with the dissent that Congress intended such a lawless regime.

*501 The argument that entertaining suits like this will interfere with the asserted policy of the federal law favoring settlement of labor disputes fares no better. This is just another way of asserting that the employer need not answer for its repeated assurances of permanent employment or for its otherwise actionable misrepresentations to secure permanent replacements. We do not think that the normal contractual rights and other usual legal interests of the replacements can be so easily disposed of by broad-brush assertions that no legal rights may accrue to them during a strike because the federal law has privileged the "permanent" hiring of replacements and encourages settlement.

In defense of this position, Belknap, supported by the Board in an amicus brief, urges that permitting the state suit where employers may, after the beginning of a strike, either be ordered to reinstate strikers or find it advisable to sign agreements providing for reinstatement of strikers, will deter employers from making permanent offers of employment or at the very least force them to condition their offer by stating the circumstances under which replacements must be fired. This would considerably weaken the employer's position during the strike, it is said, because without assuring permanent employment, it would be difficult to secure sufficient replacements to keep the business operating. Indeed, as the Board interprets the law, the employer must reinstate strikers at the conclusion of even a purely economic strike unless it has hired "permanent" replacements, that is, hired in a manner that would "show that the men [and women] who replaced the strikers were regarded by themselves and the [employer] as having received their jobs on a permanent basis." Georgia Highway Express, Inc., 165 N. L. R. B. 514, 516 (1967), aff'd sub nom. Truck Drivers and Helpers Local No. 728 v. NLRB, 131 U. S. App. D. C. 195, 403 F. 2d 921, cert. denied, 393 U. S. 935 (1968).^[6]

*502 We remain unconvinced. If serious detriment will result to the employer from conditioning offers so as to avoid a breach of contract if the employer is forced by Board order to reinstate strikers or if the employer settles on terms requiring such reinstatement, much the same result would follow from Belknap's and the Board's construction of the Act. Their view is that, as a matter of federal law, an employer may terminate replacements, without liability to them, in the event of settlement or Board decision that the strike is an unfair labor practice strike. Any offer of permanent employment to replacements is thus necessarily conditional and nonpermanent. This view of the law would inevitably become widely known and would deter honest employers from making promises that they know they are not legally obligated to keep. Also, many putative replacements would know that the proffered job is, in important respects, nonpermanent and may not accept employment for that reason. It is doubtful, with respect to the employer's ability to hire, that there would be a substantial difference between the effect of the Board's preferred rule and a rule that would subject the employer to damages liability unless it suitably conditions its offers of employment made to replacements.^[7]

Belknap counters that conditioning offers in such manner will render replacements nonpermanent employees subject to discharge to make way for strikers at the conclusion or settlement of a purely economic strike, which would not be the case if replacements had been hired on a "permanent" basis as the Board now understands that term. The balance of power would thus be distorted if the employer is forced to condition its offers for its own protection. Under Belknap's submission, *503 however, which is to some extent supported by the Board, Belknap's promises, although in form assuring permanent employment, would as a matter of law be nonpermanent to the same extent as they would be if expressly conditioned on the eventuality of settlement requiring reinstatement of strikers and on its obligation to reinstate unfair labor practice strikers. As we have said, we cannot believe that Congress determined that the employer must be free to deceive by promising permanent employment knowing that it may choose to reinstate strikers or may be forced to do so by the Board.

An employment contract with a replacement promising permanent employment, subject only to settlement with its employees' union and to a Board unfair labor practice order directing reinstatement of strikers, would not in itself render the replacement a temporary employee subject to displacement by a striker over the employer's objection during or at the end of what is proved to be a purely economic strike. The Board suggests that such a conditional offer "might" render the replacements only temporary hires that the employer would be required to discharge at the conclusion of a purely economic strike. Brief for NLRB as Amicus Curiae (NLRB Br.) 17. But the permanent-hiring requirement is designed to protect the strikers, who retain their employee status and are entitled to reinstatement unless they have been permanently replaced. That protection is unnecessary if the employer is ordered to reinstate them because of the commission of unfair labor practices. It is also meaningless if the employer settles with the union and agrees to reinstate strikers. But the protection is of great moment if the employer is not found guilty of unfair practices, does not settle with the union, or settles without a promise to reinstate. In that eventuality, the employer, although it has prevailed in the strike, may refuse reinstatement only if it has hired replacements on a permanent basis. If it has promised to keep the replacements on in such a situation, discharging them to *504 make way for selected strikers whom it deems more experienced or more efficient would breach its contract with the replacements. Those contracts, it seems to us, create a sufficiently permanent arrangement to permit the prevailing employer to abide by its promises.^[8]

*505 We perceive no substantial impact on the availability of settlement of economic or unfair labor practice strikes if the employer is careful to protect itself against suits like this in the course of contracting with strike replacements.^[9] Its risk *506 of liability if it discharges replacements pursuant to a settlement or to a Board order would then be minimal. We fail to understand why in such circumstances the employer would be any less willing to settle the strike than it would be under the regime proposed by Belknap and the Board, which as a matter of law, would permit it to settle without liability for misrepresentation or for breach of contract.

Belknap and its supporters, the Board and the AFL-CIO, offer no substantial case authority for the proposition that the Machinists rationale forecloses this suit. Surely Machinists did not deal with solemn promises of permanent employment, made to innocent replacements, that the employer was free to make and keep under federal law. J. I. Case Co. v. NLRB, 321 U. S. 332 (1944), suggests that individual contracts of employment must give way to otherwise valid provisions of the collective-bargaining contract, id., at 336-339, but it was careful to say that the Board "has no power to adjudicate the validity or effect of such contracts except as to their effect on matters within its jurisdiction," id., at 340. There, the cease-and-desist order, as modified, stated that the discontinuance of the individual contracts was "without prejudice to the assertion of any legal rights the employee may have acquired under such contract or to any defenses thereto by the employer." Id., at 342 (emphasis deleted); see n. 13, infra.

*507 There is still another variant or refinement of the argument that the employer and the Union should be privileged to settle their dispute and provide for striker reinstatement free of burdensome lawsuits such as this. It is said that respondent replacements are employees within the bargaining unit, that the Union is the bargaining representative of petitioner's employees, and the replacements are thus bound by the terms of the settlement negotiated between the employer and "their" representative.^[10] The argument is not only that as a matter of federal law the employer cannot be foreclosed from discharging the replacements pursuant to a contract with a bargaining agent, but also that by virtue of the agreement with the Union it is relieved from responding in damages for its knowing breach of contract — that is, that the contracts are not only not specifically enforceable but also may be breached free from liability for damages. We need not address the former issue — the issue of specific performance — since the respondents ask only damages. As to the damages issue, as we have said above, such an argument was rejected in J. I. Case.

If federal law forecloses this suit, more specific and persuasive reasons than those based on Machinists must be identified to support any such result. Belknap insists that the rationale of the Garmon decision, properly construed and applied, furnishes these reasons.

IV

The complaint issued by the Regional Director alleged that on or about February 1, Belknap unilaterally put into effect a 50¢-per-hour wage increase, that such action constituted unfair *508 labor practices under §§ 8(a)(1), 8(a)(3), and 8(a)(5), and that the strike was prolonged by these violations. If these allegations could have been sustained, the strike would have been an unfair labor practice strike almost from the very start. From that time forward, Belknap's advertised offers of permanent employment to replacements would arguably have been unfair labor practices since they could be viewed as threats to refuse to reinstate unfair labor practice strikers. See NLRB v. Laredo Coca Cola Bottling Co., 613 F. 2d 1338, 1341 (CA5), cert. denied, 449 U. S. 889 (1980).^[11] Furthermore, if the strike had been an unfair labor practice strike, Belknap would have been forced to reinstate the strikers rather than keep replacements on the job. Mastro Plastics Corp. v. NLRB, 350 U. S. 270, 278 (1956). Belknap submits that its offers of permanent employment to respondents were therefore arguably unfair labor practices, the adjudication of which were within the exclusive jurisdiction of the Board, and that discharging respondents to make way for strikers was protected activity since it was no more than the federal law required in the event the unfair labor practices were proved.^[12]

*509 Respondents do not dispute that it was the Board's exclusive business to determine, one, whether Belknap's unilateral wage increase was an unfair labor practice, which would have converted the strike into an unfair labor practice strike that required the reinstatement of strikers, and, two, whether Belknap also committed unfair labor practices by offering permanent employment to respondents. They submit, however, that under our cases, properly read, their actions for fraud and breach of contract, are not pre-empted. We agree with respondents.

Under Garmon, a State may regulate conduct that is of only peripheral concern to the Act or that is so deeply rooted in local law that the courts should not assume that Congress intended to pre-empt the application of state law. In Linn v. Plant Guard Workers, 383 U. S. 53 (1966), we held that false and malicious statements in the course of a labor dispute were actionable under state law if injurious to reputation, even though such statements were in themselves unfair labor practices adjudicable by the Board. Likewise, in Farmer v. Carpenters, 430 U. S. 290 (1977), we held that the Act did not pre-empt a state action for intentionally inflicting emotional distress, even though a major part of the cause of action *510 consisted of conduct that was arguably an unfair labor practice. Finally, in Sears, Roebuck & Co. v. Carpenters, 436 U. S. 180 (1978), we held that a state trespass action was permissible and not pre-empted, since the action concerned only the location of the picketing while the arguable unfair labor practice would focus on the object of the picketing. In that case, we emphasized that a critical inquiry in applying the Garmon rules, where the conduct at issue in the state litigation is said to be arguably prohibited by the Act and hence within the exclusive jurisdiction of the NLRB, is whether the controversy presented to the state court is identical with that which could be presented to the Board. There the state-court and Board controversies could not fairly be called identical. This is also the case here.

Belknap contends that the misrepresentation suit is pre-empted because it related to the offers and contracts for permanent employment, conduct that was part and parcel of an arguable unfair labor practice. It is true that whether the strike was an unfair labor practice strike and whether the offer to replacements was the kind of offer forbidden during such a dispute were matters for the Board. The focus of these determinations, however, would be on whether the rights of strikers were being infringed. Neither controversy would have anything in common with the question whether Belknap made misrepresentations to replacements that were actionable under state law. The Board would be concerned with the impact on strikers not with whether the employer deceived replacements. As in Linn v. Plant Guard Workers, supra, "the Board [will] not be ignored since its sanctions alone can adjust the equilibrium disturbed by an unfair labor practice." Id., at 66. The strikers cannot secure reinstatement, or indeed any relief, by suing for misrepresentation in state court. The state courts in no way offer them an alternative forum for obtaining relief that the Board can provide. The same was true in Sears and Farmer. Hence, it appears to us that maintaining the misrepresentation action would not *511 interfere with the Board's determination of matters within its jurisdiction and that such an action is of no more than peripheral concern to the Board and the federal law. At the same time, Kentucky surely has a substantial interest in protecting its citizens from misrepresentations that have caused them grievous harm. It is no less true here than it was in Linn v. Plant Guard Workers, supra, at 63, that "[t]he injury" remedied by the state law "has no relevance to the Board's function" and that "[t]he Board can award no damages, impose no penalty, or give any other relief" to the plaintiffs in this case. The state interests involved in this case clearly outweigh any possible interference with the Board's function that may result from permitting the action for misrepresentation to proceed.

Neither can we accept the assertion that the breach-of-contract claim is pre-empted. The claimed breach is the discharge of respondents to make way for strikers, an action allegedly contrary to promises that were binding under state law. As we have said, respondents do not deny that had the strike been adjudicated an unfair labor practice strike Belknap would have been required to reinstate the strikers, an obligation that the State could not negate.^[13] But respondents *512 do assert that such an adjudication has not been made, that Belknap prevented such an adjudication by settling with the Union and voluntarily agreeing to reinstate strikers, and that, in any event, the reinstatement of strikers, even if ordered by the Board, would only prevent the specific performance of Belknap's promises to respondents, not immunize Belknap from responding in damages for its breach of its otherwise enforceable contracts.

For the most part, we agree with respondents. We have already concluded that the federal law does not expressly or impliedly privilege an employer, as part of a settlement with a union, to discharge replacements in breach of its promises of permanent employment. Also, even had there been no settlement and the Board had ordered reinstatement of what it held to be unfair labor practice strikers, the suit for damages for breach of contract could still be maintained without in any way prejudicing the jurisdiction of the Board or the interest of the federal law in insuring the replacement of strikers. The interests of the Board and the NLRA, on the one hand, and the interest of the State in providing a remedy to its citizens for breach of contract, on the other, are "discrete" concerns, cf. Farmer v. Carpenters, 430 U. S., at 304. We see no basis for holding that permitting the contract cause of action will conflict with the rights of either the strikers or the employer or would frustrate any policy of the federal labor laws.

V

Because neither the misrepresentation nor the breach-of-contract cause of action is pre-empted under Garmon or Machinists, the decision of the Kentucky Court of Appeals is

Affirmed.

*513 JUSTICE BLACKMUN, concurring in the judgment.

I

Earlier this month, the Court unanimously reaffirmed the principle that the National Labor Relations Board's construction of the National Labor Relations Act (NLRA), if reasonable, is entitled to deference from the courts. NLRB v. Transportation Management, Inc., 462 U. S. 393, 402-403 (1983). The Court today, it seems to me, ignores this fundamental premise of federal labor law in order to conform the substance of the NLRA to the contract and tort laws of the Commonwealth of Kentucky. Having done so, the Court not surprisingly concludes that those state laws are not pre-empted by the refashioned NLRA. I cannot participate in this extraordinary approach to labor law pre-emption.

The Court recognizes that, "as the Board interprets the law, the employer must reinstate strikers at the conclusion of even a purely economic strike unless it has hired `permanent' replacements, that is, hired in a manner that would `show that the men [and women] who replaced the strikers were regarded by themselves and the [employer] as having received their jobs on a permanent basis.' " Ante, at 501, quoting Georgia Highway Express, Inc., 165 N. L. R. B. 514, 516 (1967), aff'd sub nom. Truck Drivers and Helpers Local 728 v. NLRB, 131 U. S. App. D. C. 195, 403 F. 2d 921, cert. denied, 393 U. S. 935 (1968). See post, at 540-541, n. 13 (dissenting opinion). The Court holds today, however, that the employer may refuse to reinstate strikers at the end of an economic strike if the employer has promised its strike replacements "permanent employment, subject only to settlement with its employees' union and to a Board unfair labor practice order," ante, at 503 (emphasis supplied) — in other words, if the employer has promised that the jobs are permanent unless it later decides they are temporary. Such a promise bears little resemblance to a promise of permanent employment. During settlement negotiations, the union can be *514 counted on to demand reinstatement for returning strikers as a condition for any settlement; the employer can be counted on to acquiesce, at a price the union certainly will be willing to pay.^[1]

In rejecting the Board's longstanding view of the Act, the Court does not pause to determine whether the Board's view is reasonable, or whether it is contrary to the statutory mandate or frustrates Congress' policy objectives. See FEC v. Democratic Senatorial Campaign Committee, 454 U. S. 27, 32 (1981); NLRB v. Brown, 380 U. S. 278, 291 (1965). Rather, it adopts an approach that itself is at wide variance with the NLRA. Under the Act, an employer may eliminate economic strikers' jobs only by showing " `legitimate and substantial business justifications.' " NLRB v. Fleetwood Trailer Co., 389 U. S. 375, 378 (1967), quoting NLRB v. Great Dane Trailers, Inc., 388 U. S. 26, 34 (1967). As the Court recognizes, this rule flows from the Act's fundamental premise that economic strikers "retain their employee status and are entitled to reinstatement." Ante, at 503; see post, at 525-527 (dissenting opinion). The employer may refuse reinstatement if it has promised permanent employment to replacements. But this is true only because such promises are deemed necessary to serve the employer's legitimate and substantial business justification in seeking "to protect and continue his business by supplying places left vacant" by the strikers. NLRB v. Mackay Co., 304 U. S. 333, 345 (1938). *515 See NLRB v. Erie Resistor Corp., 373 U. S. 221, 232 (1963). The Board reasonably has concluded that this purpose is served only by a promise that the job is not subject to cancellation at the employer's option. Covington Furniture Mfg. Corp., 212 N. L. R. B. 214, 220 (1974), enf'd, 514 F. 2d 995 (CA6 1975).^[2] It is patently unreasonable to suppose that the promise the Court substitutes — that the replacements are permanent unless the employer decides otherwise — would further the employer's legitimate goal at all. It is in order to allay the potential replacements' fear that the employer will replace them as part of a settlement with the *516 union that the employer must make the promise in the first place.

Indeed, an employer who makes a conditional promise has no legitimate, much less substantial, business justification to refuse to agree with the union to reinstate the strikers. Under the Court's scenario, the employer has managed to operate its business by hiring replacements on the understanding that they may be fired as part of a settlement of the strike. And whether or not state contract and tort remedies are pre-empted by the Act, the employer can agree to reinstate state the strikers at the replacements' expense without incurring liability. The Court's convoluted attempt to establish that its conditional promise would serve some legitimate business purpose, see ante, at 503-504, and n. 8, fails to come to grips with these simple facts.

The Court's conditional promise achieves only one thing: it permits an employer, during settlement negotiations with the union, to threaten to retain replacement employees in preference to returning strikers despite the fact that the employer has not promised to do so. The naked interest in making such a threat, silently endorsed in the Court's opinion, could not be less legitimate under the NLRA. From the employer's point of view, one benefit of offering strike replacements permanent employment is that strikers become fearful that they will lose their jobs. But it is clear that creating this fear, which discourages union membership and concerted activities, is a deleterious side effect of, rather than a legitimate business justification for, the power to hire permanent strike replacements. See NLRB v. Erie Resistor Corp., 373 U. S., at 232. Promises of permanent employment, and subsequent retention of replacements, are permitted only because it is believed that the harm to protected activities is outweighed by the employer's interest in operating its plant during a strike. Ibid. Thus, an employer who succeeds in operating the plant without promising permanent employment would have no legitimate basis for not reinstating *517 economic strikers. In my view, having made only the Court's conditional promise, an employer who threatened during strike negotiations to retain strike replacements in preference to economic strikers would commit an unfair labor practice. See 29 U. S. C. §§ 158<