It has long been true that, in order to avoid too sharp a clash between labor and antitrust policies, collective bargaining agreements do not run afoul of the antitrust laws. But what about certain provisions within collective bargaining agreements between a union and employer that seek to exclude other employers who do not have a collective bargaining agreement with the union? These types of provisions are called “hot cargo” provisions and are the subject of a recent Seventh Circuit opinion written by Judge Posner.
United Rentals is a construction subcontractor who provides traffic control for various construction projects in Indiana. In Indiana, the majority of construction contractors belong to a trade association called Indiana Contractors, which negotiates collective bargaining agreements for its members with the Laborers International Union. The collective bargaining agreement in place contains a hot cargo provision that forbids association members from subcontracting work at a construction site to any firm that had not signed a collective bargaining agreement with the Laborers Union. This was to the detriment of United Rentals because they have a collective bargaining agreement with another union.
After concluding that the hot cargo provision did not violate the National Labor Relations Act (NLRA) based on what is known as the construction industry exception, Judge Posner turned to the question of whether such a provision violates the Sherman Act. On its face, Judge Posner wrote, a hot cargo provision appears to be an exclusionary practice, which can be challenged under the Sherman Act. In addition, it may make no sense for contractors to agree with a union to squeeze out a low-cost subcontractor from the market. But, as Judge Posner reminds us, an antitrust claim that simply doesn’t make sense is not, by itself, unlawful.
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