## Facts

- Penasquitos Village, Inc. employed Ysidro Martinez and Tony Rios as workmen at its residential complex operations.
- During a period of union-organizing activity, a supervisor, Jesus Zamora, questioned employees about union matters; Martinez and Rios later claimed this questioning was coercive.
- Zamora discharged Martinez and Rios, stating they were terminated for failing to complete assigned work on time and for working slowly or not working on multiple occasions.
- Martinez and Rios filed charges with the National Labor Relations Board (NLRB), alleging the employer (1) coercively interrogated employees about union activity and (2) discharged them because of their union involvement.
- The NLRB’s General Counsel issued a complaint alleging violations of NLRA § 8(a)(1) (interference, restraint, coercion) and § 8(a)(3) (discrimination to discourage union membership), among related allegations.
- After a hearing, an Administrative Law Judge (ALJ) found for the employer, concluding the General Counsel had not carried the burden of proving unlawful motive and expressly discrediting key parts of the employees’ testimony regarding the circumstances of questioning and discharge.
- On exceptions, the NLRB reversed the ALJ. The Board accepted the employees’ version of events, found coercive interrogation in violation of § 8(a)(1), and found discriminatory discharge in violation of § 8(a)(3), issuing an order against Penasquitos.
- Penasquitos petitioned the Ninth Circuit for review, arguing the Board’s findings were not supported by substantial evidence when the full record—including the ALJ’s credibility findings—was considered. The NLRB cross-applied for enforcement.

## Issues

1. Whether the NLRB’s findings of § 8(a)(1) coercive interrogation and § 8(a)(3) discriminatory discharge were supported by substantial evidence on the record considered as a whole, where the Board reversed the ALJ’s credibility-based findings.
2. What weight a reviewing court should give to an ALJ’s credibility determinations (including demeanor-based findings) when the Board reaches contrary factual findings on the same record.

## Decision

- The Ninth Circuit granted Penasquitos’s petition for review and denied the NLRB’s cross-application for enforcement.
- The court set aside the Board’s order, concluding that the Board’s reversal of the ALJ’s credibility determinations was not supported by substantial evidence on the record considered as a whole.
- Applying the whole-record review required by NLRA § 10(e)–(f) and Universal Camera, the court treated the ALJ’s credibility findings as an important part of the record, especially because the dispute turned largely on witness credibility.
- Given the ALJ’s reasoned disbelief of key testimony supporting the unfair labor practice allegations, the remaining evidence was too thin to sustain the Board’s conclusions that coercive interrogation occurred and that the discharges were motivated by antiunion animus.

## Legal Principles

- Under NLRA § 10(e)–(f), a court must uphold the Board’s factual findings only if they are supported by substantial evidence on the record considered as a whole.
- Deference under the statute runs to the NLRB as the final agency factfinder, but the ALJ’s findings remain part of the whole record a court must weigh.
- When the Board and the ALJ disagree on facts that depend heavily on witness credibility, the ALJ’s credibility determinations—particularly those tied to live testimony and demeanor—carry significant weight in whole-record review.
- The Board may disagree with an ALJ’s credibility determinations, but its contrary findings must still be supported by substantial evidence when the ALJ’s findings are accounted for; a conclusory disagreement or a shift in credibility calls without persuasive record support will not satisfy substantial-evidence review.
- Where proof of unlawful motive and coercion rests largely on credited testimony that the ALJ rejected after observing witnesses, the Board’s reversal requires a sound evidentiary basis that withstands review in light of the ALJ’s contrary findings.

## Conclusion

The Ninth Circuit refused to enforce the NLRB’s unfair labor practice order and set it aside, holding that the Board’s rejection of the ALJ’s credibility-based findings was not supported by substantial evidence on the whole record and therefore could not sustain findings of coercive interrogation under § 8(a)(1) or discriminatory discharge under § 8(a)(3).


Penasquitos Village, Inc. v. National Labor Relations Board, 565 F.2d 1074 (1977)