Neutrality agreements upheld by NLRB

By G. Phillip Shuler

Heartland Industrial Partners LLC is an investment firm that invests in manufacturing companies located in the Midwest. 

Heartland and the United Steelworkers of America AFL-CIO entered into an agreement whereby when Heartland gained control over a “covered business entity” (CBE) it would require the CBE to remain neutral during a union organizing campaign, grant the union access to its premises, provide the union names and addresses of employees, recognize the union based upon a card check, bargain within 14 days and submit unresolved issues to final and binding interest arbitration. 

Heartland entered into such neutrality agreements with two CBEs (Trimas Corporation and Collin and Aikman Corporation). 

Several employees of the CBEs challenged the neutrality agreements by filing charges with the National Labor Relations Board (NLRB) under Section 8(e) of the National Labor Relations Act (NLRA).

Section 8(e) provides that “It shall be an unfair labor practice for any labor organization and any employer to enter into any contract or agreement, express or implied, whereby such employer ceases or refrains or agrees to cease or refrain from handling, using, selling, transporting or otherwise dealing in any of the products of any other employer, or cease doing business with any other person, and any contract or agreement entered into heretofore or hereafter containing such an agreement shall be to such extent unenforceable and void.”

Section 8(e) was enacted to get around a loophole in the NLRA whereby a dominant union having a strong relationship with certain employers could circumvent the NLRA’s secondary boycott provisions (e.g. picketing of a neutral employer) by requiring those employers to enter into agreements in advance which require them not to do business with any other employers that do not have agreements with the union. 

Under Section 8(e), so called union signatory clauses that permit an employer to subcontract bargaining unit work only to companies having a collective bargaining agreement with the union, are in violation of Section 8(e) because the object of such clauses is to principally affect the labor relations of the other employer and not merely preserve bargaining unit work of the contracting employer. The enforcement of such clauses violates Section 8(e) because it would require the contracting employer to cease doing business with its subcontractor. 

Under NLRB precedent, the “cease doing business element” may be proved by “prohibitions against forming business relationships in the first place” and “it need not be shown that cessation of business has occurred or is inevitable, it is enough to show the agreement offers the alternative of cessation of business or adopting other injurious courses of action.”

In Heartland Industrial Partners LLC, 348 NLRB No. 72 (November 13, 2006), the NLRB held 2-1 that the neutrality agreements which Heartland required its CBEs to enter into with the union did not violate Section 8(e), finding that the neutrality agreement did not require or have the effect of requiring Heartland to refrain from investing in any company. 

Dissenting, Chairman Battista concluded, “It is clear that Heartland may not invest in a company unless that company will be bound to neutrality and card check recognition.” The majority found that the neutrality agreement in Heartland does “not require Heartland to choose between inducing a CBE to become unionized or severing its relationship with the CBE” and does not “require Heartland to sever its relationship with a CBE that does not become bound by” the neutrality agreement.

The Heartland case did not involve the construction industry, but it is easy to see its application in the construction industry where top down organizing has been commonplace. For example, it is not uncommon for unions to pressure or demand owners or construction management firms to require project labor agreements on a project whereby all contractors working on a project must sign a union agreement as a condition of working on the project. 

In Heartland, the board did distinguish certain construction industry cases finding anti-dual shop clauses aimed at prohibiting or discouraging a unionized employer’s maintenance of an affiliation with a non-union company in a so-called double breasting arrangement to be violation of Section 8(e). 

Of course, pending legislation by Senator Kennedy, the Employee Free Choice Act, would legalize all neutrality, card check agreements.

Labor notes. The Sheet Metal Workers’ photographing of employees being offered union literature without offering them an adequate explanation during the run-up to a 1995 representation election at Randell Warehouse of Arizona Inc. constitutes objectionable conduct requiring a new election, the NLRB ruled July 26 in a 3-2 decision.

The board originally certified the union in 1999 and held 4-1 that a union’s photographing of employees engaged in protected activity during an election campaign is not objectionable when unaccompanied by any implied threat or other coercion (328 N.L.R.B. 1034, 161 LRRM 1265; 148 DLR AA-2, 8/3/99).

However, the U.S. Court of Appeals for the District of Columbia Circuit in 2001 remanded the case, asking the board to address a particular board precedent and explain why several instances of potentially threatening conduct by pro-union employees, which did not accompany the photographing, did not warrant overturning the election results (252 F.3d 445, 167 LRRM 2340; 117 DLR A-10, 6/19/01).

This time a board majority, consisting of Chairman Robert J. Battista and members Peter C. Schaumber and Peter N. Kirsanow, reversed the board’s 1999 decision in the case and held that “in the absence of a valid explanation conveyed to employees in a timely manner, photographing employees engaged in Section 7 activity constitutes objectionable conduct whether engaged in by a union or an employer.”

The 1999 Randell decision created different standards for unions and employers by “retain[ing] the rule that employer photographing was presumptively coercive, even if it was not accompanied by an express or implied threat or other coercion,” the board majority said.  Disagreeing, it asserted that “the rationale for finding that unexplained photographing was a reasonable tendency to interfere with employee free choice applies regardless of whether the party engaged in such conduct is a union or an employer.”

Dissenting, members Wilma B. Liebman and Dennis P. Walsh stood by the 1999 decision in the case.  “[T]here are basic differences between union conduct and employer conduct,” they said. “A union has much less access to employees and much stronger legitimate interests in photographing them, and its conduct is far less likely to coerce them. Imposing the same rule on unions simply puts an unwarranted burden on the ability to organize,” they maintained.