Legal Updates
Employees May Challenge Neutrality And Card-Check Agreements
An employee who vigorously opposed being unionized had standing to sue his employer and a labor union to enjoin enforcement of a neutrality/card-check agreement, the U.S. Court of Appeals for the Eleventh Circuit (the “Eleventh Circuit”) has ruled. The decision, issued in Mulhall v. UNITE HERE Local 355, No. 09-12683 (11th Cir.), provides employers with another good reason not to enter into such agreements: these agreements may engender employee lawsuits and ultimately be declared unenforceable.
Background Of Mulhall Case
In Mulhall, Mardi Gras Gaming (“Mardi Gras”) and UNITE HERE Local 355 (“Unite”) entered into a Memorandum of Agreement (“MOA”), which required Unite to lend financial support to a ballot initiative that would benefit Mardi Gras. In exchange, Mardi Gras was required to remain neutral during the Union’s effort to organize the company’s non-union employees and to recognize Unite as their exclusive bargaining representative based solely on signed authorization cards from a majority of these employees. In this regard, Mardi Gras waived its right to seek a secret-ballot election supervised by the National Labor Relations Board (“NLRB”).
The MOA also provided that: Mardi Gras would give Unite an employee list containing names, job classifications, departments and home addresses; Mardi Gras would permit Unite to use its property, including non-public areas, for organizing; the parties would not file any charges against each other with the NLRB in connection with the MOA; and Unite, if successful in its organizing campaign, would refrain from picketing, boycotting, striking, or undertaking other economic activity against Mardi Gras.
Pursuant to the MOA, Unite spent more than $100,000 campaigning for the gaming-related ballot initiative favored by Mardi Gras. Then, as expected, Unite notified Mardi Gras that it was commencing its organizing campaign and asked Mardi Gras to provide the organizing assistance promised in the MOA. However, on the advice of new counsel, Mardi Gras refused to provide this assistance, contending that the MOA was illegal and unenforceable.
Federal District Court Proceedings
Litigation between Unite and Mardi Gras to resolve their rights and obligations under the MOA ensued, and this, in turn, prompted Mardi Gras employee Martin Mulhall (“Mulhall”) to take matters into his own hands. Mulhall vigorously opposed being unionized and, as such, did not like the prospect of having union representation foisted upon him by the MOA. Accordingly, Mulhall filed a civil action in the U.S. District Court for the Southern District of Florida seeking to enjoin enforcement of the MOA.
Mulhall brought his action under Section 302 of the federal Labor-Management Relations Act (“Section 302”), which makes it illegal for an employer to deliver to a union, or for a union to receive from an employer, any “thing of value,” subject to limited exceptions not relevant to the dispute. 29 U.S.C. § 186(a)-(b). The purpose of Section 302 is to “protect employees in dealings between the union and employer,” Jackson Purchase Rural Elec. Coop. Ass’n v. Local Union 816, Int’l Bhd. of Elect. Workers, 646 F.2d 264, 267 (6th Cir. 1981), particularly “from the collusion of union officials and management,” Mosley v. Nat’l Maritime Union Pension and Welfare Plan, 438 F. Supp. 413, 421 (E.D.N.Y. 1977). In this regard, the legislative history of Section 302 indicates that it was intended to “prohibit[], among other things, the buying and selling of labor peace.” S. Rep. No. 98-225 (1984), as reprinted in 1984 U.S.C.C.A.N. 3182, 3477.
The District Court determined that Section 302 provides a “private right of action,” i.e., that individual employees have a right to seek relief for alleged violations of this statute, but that Mulhall lacked standing to proceed with the case. In this regard, the court reasoned that Mulhall failed to show an injury-in-fact that was “actual or imminent” because it was possible for Unite to fail in its organizing drive even if Mardi Gras provided the assistance promised under the MOA. Accordingly, the court dismissed Mulhall’s complaint.
Reversal By The Eleventh Circuit
Mulhall appealed the order of dismissal to the Eleventh Circuit, which reversed the District Court’s ruling. According to the Eleventh Circuit, the potential for Mulhall to be “thrust unwillingly into an agency relationship” with the Unite was “real enough and concrete enough” to affect Mulhall’s associational rights and, in turn, to confer him with standing to proceed with his case.
Importantly, the Eleventh Circuit ruled only that Mulhall may proceed with his case in District Court. The Eleventh Circuit did not make any rulings on the merits of Mulhall’s claim. Accordingly, the District Court ultimately will determine in the first instance whether the consideration exchanged by the parties under the MOA, i.e., Unite’s support for the ballot initiative championed by Mardi Gras in exchange for Mardi Gras’s support of Unite’s organizing drive, constitutes “thing[s] of value” within the meaning of Section 302 so as to render the MOA a form of prohibited collusion under this law.
Nonetheless, the Eleventh Circuit’s decision is significant because the nine federal district courts within this judicial circuit (three each in Florida, Georgia and Alabama) must follow its ruling that the validity of neutrality/card-check agreements may be challenged under Section 302 by individual employees who oppose unionization. Moreover, Mulhall may be cited as persuasive authority by courts in other judicial circuits that may be asked to decide whether to permit similar lawsuits to go forward.
Implications For Employers
The Mulhall decision gives employers another good reason to reject union demands to enter into neutrality/card-check agreements. In this regard, it is generally advisable for employers to avoid such agreements because, among other things, an employer may need to respond to inaccuracies or rhetoric communicated by the union in the course of its organizing campaign, and the existence of a “neutrality” pledge may prevent an effective response.
Moreover, employers asked to recognize a union based on signed authorization cards often will not know when the signatures were obtained, whether the union may have pressured one or more employees into signing, or whether the signatories understood the implications of signing the cards, concerns that do not arise in the context of NLRB-supervised secret-ballot elections.
Now, as a result of Mulhall, employers have yet another concern—employees opposed to unionization may be able to sue to challenge the validity of the neutrality/card-check agreement, imposing a potentially significant litigation burden on the employer, and raising the possibility that the agreement will be deemed unenforceable.
Recommendations For Employers
As a preliminary matter, non-unionized employers seeking to remain union-free should be sure to have enforceable non-solicitation, non-distribution of literature, and no-access policies in place before any union organizing drive gets under way. Attempting to promulgate such policies after a union organizing drive begins may be viewed by the NLRB as unlawful retaliation against union supporters.
Next, employers asked by a union to enter into a neutrality/card-check agreement should confer carefully with labor counsel about the legal implications of such an agreement before responding. Unionization affects virtually all aspects of an employer’s business, for example, by making it more difficult to impose discipline, by restricting the employer’s ability to communicate directly with employees, and by significantly limiting the employer’s ability to make operational changes. It is critical to understand the big picture in order to evaluate whether the concessions being offered by a union in a proposed neutrality/card-check agreement are sufficiently valuable to warrant serious consideration of the agreement.
For employers nonetheless interested in considering a neutrality/card-check agreement, it is important to acknowledge the developing state of applicable law. As Mulhall illustrates, the law is emerging as to whether employees will be able to enjoin enforcement of such agreements.
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If you have any questions about the Mulhall case, neutrality/card-check agreements or labor law generally, or if you may need assistance with union avoidance or in NLRB proceedings, please do not hesitate to contact us.
