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Stuck in Neutral?

Neutrality Agreements Under the Gun at Supreme Court

Unions have increasingly turned to ‘corporate campaigns’ to pressure larger employers not to resist efforts to unionize their workers.  Corporate campaigns are concerted and sophisticated efforts to publicly embarrass for-profit and nonprofit employers among their stakeholders and within their communities so that they acquiesce to union demands.
What is happening now at Wal-Mart is a corporate campaign. These efforts have become more prevalent as unions’ traditional grassroots organizing efforts, especially at larger employers, have become less successful. For unions, the holy grail of the corporate campaign quest is the ‘neutrality agreement,’ in which the employer promises not to oppose unionization. The future of neutrality agreements lies in the balance as the Supreme Court is set to decide their legality.

Neutrality agreements are promises between employers and unions about what employers will — or will not — do in response to a union-organizing campaign.  While the terms of neutrality agreements vary, they generally consist of employer promises not to oppose unionization. Sometimes, such agreements also contain waivers of employee rights, like secret-ballot elections.
The effect of neutrality agreements is that employers stand on the sidelines while the union campaigns, usually without organized opposition, for employee support for unionization. Neutrality agreements are powerful tools that increase the likelihood of a successful union campaign.
However, federal labor law contains an anti-bribery statute (Section 302) which makes it criminal for an employer “to pay, lend, or deliver … any money or other thing of value” to a labor union that seeks to represent its employees, and prohibits unions from accepting the same. The purpose of Section 302 is to keep employers from tampering with the loyalty of union officials and to deter union officials from extorting employers.
A lawsuit was filed in Florida challenging the legality of neutrality agreements under Section 302. Martin Mulhall, who was opposed to unionization, sued his employer and a local labor union, claiming that the neutrality agreement they signed violated Section 302 because the employer’s neutrality and other cooperation constituted a ‘thing of value.’
The case wound its way to the U.S. Supreme Court, where oral arguments were recently heard. The Supreme Court is very selective about the cases it decides, but it probably decided to review this case because several federal courts of appeals had disagreed on whether a neutrality agreement was a ‘thing of value’ under Section 302. The Supreme Court will now settle those disagreements.

The Mulhall Case

Mulhall worked for a casino company, which entered into an agreement with a union, UNITE HERE Local 355, to:
• Provide Local 355 with employee contact information;
• Allow the union on company property so it could organize employees; and
• Remain neutral during the union’s organizing effort and conduct a card check instead of a secret-ballot election to determine whether there was majority employee support for the union.
In exchange, Local 355 promised that it would not strike, picket, or pressure the company, and would give more than $100,000 to help pass a slot-machine ballot initiative benefiting the company.
The Eleventh Circuit Court of Appeals, which handles federal appeals from Florida and surrounding states, ruled that Mulhall’s claim could go forward. It held that “organizing assistance can be a thing of value that, if demanded or given as payment, could constitute a violation of Section 302.” Local 355 appealed to the Supreme Court.

What Will Be Decided

The case is now teed up for the Supreme Court to decide whether neutrality agreements are legal. The question to be decided is “whether an employer and union may violate Section 302 by entering into an agreement under which the employer exercises its freedom of speech by promising to remain neutral to union organizing, its property rights by granting union representatives limited access to the employer’s property and employees, and its freedom of contract by obtaining the union’s promise to forego its rights to picket, boycott, or otherwise put pressure on the employer’s business.”
The Supreme Court oral arguments focused on whether the types of promises employers make in neutrality agreements are ‘things of value’ and whether Section 302 should apply to these types of agreements at all.
Based on the justices’ questions to the lawyers, the court was troubled by the union’s promise of $100,000 to pass the slot-machine ballot initiative to help the company in exchange for its neutrality. Mulhall’s lawyer argued that Section 302 bans any employer cooperation during union organizing campaigns not required by law. Local 355’s lawyer countered by arguing that neutrality agreements have been around for many years and promote labor peace, a goal of national labor policy. It is always hard to predict the outcome just from the justices’ questions, but a unanimous decision either way seems unlikely.

Biggest Labor Case at the Supreme Court in a Generation?
Neutrality agreements have become commonplace in union-organizing campaigns as the number of secret-ballot union elections have steadily declined, so the Supreme Court’s decision on their legality will have a dramatic impact on the future of union organizing.
If the Supreme Court decides that neutrality agreements are not a form of illegal bribery, it will boost union organizing by stamping the court’s approval on them.  On the other hand, if the Supreme Court decides that neutrality agreements are illegal, unions will have to rely on the grassroots organizing campaigns of years past to recruit new members. Unions’ ability to engage in ‘top-down’ organizing through corporate campaigns then will suffer a serious — and maybe fatal — blow, and employers will be far less likely to cooperate during unionization efforts.
A decision is expected before July 2014. No matter which way the case comes out, it will impact employers and unions for years to come.

Timothy Murphy, Esq. and David McBride, Esq. are attorneys with Skoler, Abbott & Presser P.C., Springfield; (413) 737-4753.

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