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Supreme Court Doesn’t Rule on Legality of Neutrality Agreements

By Joanne Deschenaux  12/11/2013

The U.S. Supreme Court dismissed, without opinion, a case raising the lawfulness of neutrality agreements entered into between employers and unions that are seeking to organize company employees. In a one-line ruling issued Dec. 10, 2013, the high court said the dispute in Unite Here Local 355 v. Mulhall (No. 12-99) was not properly before it.

At issue was an 11th U.S. Circuit Court of Appeals decision that an agreement between Unite Here Local 355 and Mardi Gras Gaming violated Section 302 of the Labor Management Relations Act, an anti-bribery provision that makes it a crime for an employer “to pay, lend or deliver, or agree to pay, lend or deliver, any money or other thing of value” to a labor union that represents or seeks to represent its employees.

In the agreement, the company promised to:

*Provide union representatives with access to nonpublic work premises to organize employees during nonwork hours.

*Give the union a list of employees, with their job classifications, departments and addresses.

*Remain neutral on the unionization of employees.

In exchange, the union agreed to forgo its right to picket, boycott or otherwise put pressure on the employer’s business.

The appellate court ruled that the agreement violated the law, noting that, “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.”

However, two other federal appellate courts, the 3rd and 4th circuits, have concluded that neutrality and cooperation agreements are not a thing of value and are lawful.

To resolve the conflict, the high court agreed on June 24, 2013, to review the 11th Circuit ruling; oral argument was held Nov. 13.

Three Justices Would Not Have Dismissed

Although there was no opinion in support of the dismissal, Justice Stephen Breyer, joined by Justices Sonia Sotomayor and Elena Kagan, wrote a dissenting opinion.

Breyer noted that, in considering the briefs filed in the case and the oral argument, the court “became aware of two logically antecedent questions that could prevent us from reaching the question of the correct interpretation of Section 302.” First, Breyer wrote, it is possible that the case is moot because the contract between the employer and union that contained the allegedly criminal promises appears to have expired by the end of 2011, before the 11th Circuit rendered its decision on the scope of Section 302. Second, he continued, it is arguable that the sole plaintiff, Martin Mulhall, a Mardi Gras employee opposed to being unionized, lacked constitutional standing to bring the case.

Even so, according to the dissent, rather than dismissing the case, the court should have asked for additional briefs addressing these two questions. “If it turns out that the federal courts lack jurisdiction either because the case is moot or because Mulhall lacks standing, then we cannot reach the merits.” But, Breyer added, if that is the case, the court should order the 11th Circuit’s decision vacated, so it does not continue to have precedential effect.

“Unless resolved, the differences among the Courts of Appeals could negatively affect the collective-bargaining process,” Breyer wrote. “In my view, given the importance of the question presented to the collective-bargaining process, further briefing, rather than dismissal, is the better course of action.”

Questions Left Open

“The Supreme Court’s quick dismissal of this case raises a lot more questions than provides answers,” Michael Lebowich, co-head of law firm Proskauer’s Labor-Management Relations Group, told SHRM Online.

“On a practical level, companies need to give close consideration to the purpose and intent of a neutrality agreement as it is being proposed,” Lebowich said. “Is the proposal on the table part of a larger collective bargaining agreement? Is it a proactive tactic to avoid union unrest in an area where an employer is considering development? Is it to garner political support for a corporate campaign? The Supreme Court’s dismissal leads us right back to where we were—at least two circuits that found that neutrality agreements are appropriate, while the 11th Circuit says that they are not.” 

Joanne Deschenaux, J.D., is SHRM’s senior legal editor. 

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