• Employers and Unions Remain Guessing After Mulhall

    by  • December 13, 2013 • Faculty Commentary • 0 Comments

    By César F. Rosado Marzán

    The Supreme Court recently decided that it had improvidently granted certiorari in Unite Here Local 355  v. Mulhall, leaving management and labor stuck in a troubling game of chance.

    The Supreme Court initially granted certiorari in Mulhall to decide whether an agreement between an employer and a union led the employer to grant the union “a thing of value” in violation of Section 302 of the Labor Management Relations Act (“LMRA”). In Mulhall v. Unite Here Local 355, the 11th Circuit decision that the Supreme Court was going to review, the employer and the union entered into an agreement in which the employer would (1) remain neutral in respect to the union’s efforts to organize the employer’s employees, (2) give the union access to it premises so that the union could speak to the workers about union representation, and (3) give the union a list of employees’ names and contact information for organizing purposes. In return, the union would lobby the state legislature for certain gambling rules that the employer, a racetrack, wanted changed to benefit its business.

    Section 302 of the LMRA is an anti-bribery statute. It aims to stop union corruption. The plaintiff did not prove that there was actual bribery, extortion, or union corruption involved in Mulhall. However, the plaintiff argued that anything valuable given to the union by the employer was a per se violation of Section 302. While the 3rd and 4th Circuits had ruled against plaintiffs in similar cases, [1] the 11th Circuit held that the employer could be found in violation of Section 302 if it attempted to corrupt the union through these kinds of agreements or if the union attempted to extort the employer. [2]

    Rather than deciding the issue at hand—a matter of importance for today’s unions and employers that want to establish stable and collaborative industrial relations—the Supreme Court ruled that it improvidently granted certiorari. Therefore, the question remains open whether such deals, which are commonplace in labor relations, violate Section 302.

    Justice Bryer, joined by Justices Kagan and Sotomayor, dissented, stating that, at a minimum, the Court should have asked for further briefs in the case and vacated the 11th Circuit’s holding to stop the guessing game.

    How problematic is this guessing game for employers and unions? It could be significantly problematic. For example, the United Auto Workers (“UAW”) and Volkswagen may today risk violating Section 302 if the employer voluntarily recognizes the union and then sets up a works council with the union.  Works councils are employee representation bodies mandated for most large employers in Germany, such as Volkswagen, and for some trans-European employers in the European Union. Works councils may bargain for certain things with management, make some managerial decisions, and obtain certain information from the employer not normally available to employees. News sources have reported that  Volkswagen, which has a major facility in Chattanooga, Tennessee, is planning to recognize the UAW and, with the collaboration of the UAW, establish a works council in the plant. Since works councils are created by management to negotiate certain issues, at least in their pure German version, they could violate Section 8(a)(2) of the National Labor Relations Act (“NLRA”), which makes it illegal for employers to create “company unions,” or to dominate or support labor organizations. [3]

    In the USA, Volkswagen and the UAW seem to believe that they can open a works council without violating section 8(a)(2) if the union bargains the creation of the works council with the employer, rather than letting the employer unilaterally create the works council. But that’s a reasoned guess under the law, since no one has yet attempted to organize an American version of this European corporate governance institution. However, now the uncertainty of violating the labor law increases by the very agreement to recognize the union and start a works council at the plant. Would the employer be giving “something of value” to the union if it agrees to recognize it voluntarily and set up a corporate governance committee where the union can make managerial decisions?

    It is bad enough that industrial relations in the U.S. are governed by the NLRA, a 78-year old statute that, while still valuable in principle, has “ossified” [4] rules governing the workplace, such as those pertaining to so-called “company unions.” It is worse, however, that unions and employers that attempt to craft their own rules regarding industrial relations through voluntary agreements can be found in violation of the labor law. It is as if the NLRA mandates only the most dogmatic of Marxist-Leninist industrial relations, where labor and management must be locked in adversarial relationships and any truce is an intrinsic violation of workers’ or capitalists’ rights. Even worse, however, is the guessing game that the Court has forced onto such parties.

    We could ask Congress to act and clarify these and other labor law issues, but perhaps it would be even more “pie in the sky” to expect that our legislators will resolve anything before getting bogged down in partisanship.  For the meantime, it seems that unions and employers interested in collaborating for better and more productive relations must continue to roll the dice.

    [1] Adcock v. Freightliner LLC, 550 F.3d 369, 374 (4th Cir.2008); Hotel Emps. & Rest. Emps. Union, Local 57 v. Sage Hospitality Res., LLC, 390 F.3d 206, 219 (3d Cir.2004).

    [2] The 11th Circuit held:

    It is too broad to hold that all neutrality and cooperation agreements are exempt from the prohibitions in § 302. Employers and unions may set ground rules for an organizing campaign, even if the employer and union benefit from the agreement. But innocuous ground rules can become illegal payments if used as valuable consideration in a scheme to corrupt a union or to extort a benefit from an employer.

    667 F.3d 1211, 1215.

    [3] Section 8(a)(2) of the NLRA states: “It shall be an unfair labor practice for an employer … to dominate or interfere with the formation or administration of any labor organization or contribute financial or other support to it….” 29 USC 158(a)(2).

    [4] See Cynthia L. Estlund, The Ossification of American Labor Law, 102 Colum. L. Rev. 1527, (2002).


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