Court Draws Line Against Union Hotel Boycotts: National Labor Relations Act Bans "Secondary Boycotts"

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HIGHLIGHTS:

  • A recent decision of the federal appeals court in Chicago gave hotel operators some welcome protection against union-organized boycotts arising from a labor dispute. The context of this decision is a provision of the National Labor Relations Act that prohibits "secondary boycotts," which are generally understood as an effort by unions to coerce or induce third-party businesses to "cease doing business" with the company with whom the union has its primary labor dispute.
  • The statute contains a provision – commonly called the "publicity proviso" – which states that the federal ban on "secondary boycotts" does not apply to union publicity (other than picketing) for the purpose of "truthfully advising the public" that certain goods or services are being offered by an employer that the union regards as being "unfair to labor."
  • When properly advised, hotels have some legal tools that would allow them to counteract these tactics and strengthen their ability to resist the union's demands.

A recent decision of the federal appeals court in Chicago gave hotel operators some welcome protection against union-organized boycotts arising from a labor dispute. In that case, 520 S. Michigan Ave. Associates, Ltd. v. Unite Here Local 1, 13-1938, 2014 WL 3720253 (7th Cir. July 29, 2014), Unite Here Local 1 (the "union") was engaged in a long-running strike against the Congress Plaza Hotel in Chicago. As a pressure tactic to induce the hotel to accede to its demands, the union began targeting trade associations that had no role in the labor dispute but had made arrangements to reserve large blocks of rooms, urging them to cancel their plans – in a word, a boycott. While the court held that some of the union's conduct was lawful, in some significant instances the court found that the union crossed the line from a lawful dissemination of information about their labor dispute with the Congress Plaza to unlawful interference with the hotel's business relations.

"Secondary Boycotts" Prohibited by National Labor Relations Act Do Not Apply to Union Publicity

The context of this decision is a provision of the National Labor Relations Act that prohibits "secondary boycotts," which are generally understood as an effort by unions to coerce or induce third-party businesses to "cease doing business" with the company with whom the union has its primary labor dispute. That statute, however, contains a provision – commonly called the "publicity proviso" – which states that the federal ban on "secondary boycotts" does not apply to union publicity (other than picketing) for the purpose of "truthfully advising the public" that certain goods or services are being offered by an employer that the union regards as being "unfair to labor." In other words, striking against a hotel to gain leverage in a labor dispute is lawful, as is publicizing the existence of that dispute to the customers of the struck employer. But, coercion against neutral third parties to induce them to exert "secondary" economic pressure on the actual target of the union's dispute by withdrawing their business with the target company is forbidden.

The central question in the Michigan Avenue case was whether the union's conduct was coercive (so as to constitute an illegal "secondary boycott") or persuasive, as would be, for example, in the case of distributing handbills outside of an establishment to alert the public of its dispute with that business. While the union's conduct did not fit neatly into either category, the court concluded that some parts of the union's campaign were unlawful.

The Union's Conduct Deemed Potentially Illegal

Union activities against three specific hotel customers were identified as potentially illegal:

1. The American Tango Institute had booked its annual festival at the hotel. After having had several heated phone conversations and one in-person meeting with the union, the president of the Institute had told union representatives that he was not persuaded to join their cause. Subsequently, without permission, the union snuck into the institute's offices to drop off union literature. The court found that this behavior could be considered trespassing and, therefore, in violation of federal labor law.

There was also testimony that the union threatened to attend the tango festival at the hotel in order to disrupt it. Union delegates also allegedly threatened to confront the American Tango affiliates and "go to their houses or companies." In addition, there were allegations that union delegates had called the institute's president frequently – one morning, he was called every 10 minutes for an hour. In the end, to avoid further harassment, the American Tango Institute cancelled its booking with Congress Plaza and, at significant expense, changed venues. The court found that if the allegation were found true at trial, the threats and harassing conduct could be easily deemed illegally coercive.

2. The International Housewares Association had booked space at the hotel for its annual trade show. After several unwanted union appearances at the association's headquarters (including one that required the police to be called) and one incident where a union delegate walked past security, the association became concerned that the union would picket the trade show and disrupt the busses providing transportation to it. Union delegates also went to meetings of association customers and shouted at the attendees. Further, they went inside restaurants (which were customers of the association) to distribute leaflets that made almost no mention of the strike. The court reasoned that going inside a restaurant to hand out leaflets (as opposed to distributing them while outside the restaurant) could be considered disruptive and that the union widened the labor dispute when it extended its campaign to include the customers of the customers of the hotel (which, as the court noted, was exactly the kind of "scorched earth" conduct the secondary boycott law was designed to avoid).

3. Reed Exhibitions reserved rooms at the hotel for its annual Comic and Entertainment Expo. The union sent agents to follow the organizer of the expo to nine comic book locations over several days until the organizer gave into their demands. The agents also entered the comic book stores carrying small signs of protest. As a result of the union activity, Reed Exhibitions canceled its reservations with the hotel. The court concluded that the union's repeated conduct could be interpreted by a jury as harassing.

Tertiary Businesses Not an Acceptable Target for Union Pressure Tactics

The court emphasized that much of the pressure in these three instances was aimed neither at the hotel or even at a secondary organization, but rather against tertiary businesses whose relationship with the hotel was extremely attenuated. Federal labor law is designed to balance a union's interest in publicizing its labor dispute to the larger public against the danger of economic boycotts. The premise of the federal ban of "secondary boycotts" is that "neutral" or "secondary" employers – which are businesses that do business with the "primary" employer (here the hotel) that is the actual target of the union's demands – should not be harmed by union pressure tactics. Consequently, while a union may inform third parties of its dispute with the primary employer in the hope that they will discontinue its business relationship with the union's primary target, it cannot pressure them to do so.

Remedies Include Filing for an Injunction During Occurrence

The Michigan Avenue case was filed under a provision of federal law that allows the victims of secondary boycotts to sue for damages in federal court. But an after-the-fact lawsuit for damages has its limitations. In several instances, the court denied a claim not because the union's conduct was lawful, but only because the hotel could not prove it suffered a loss of business as a result. But, when faced with similar union activity, hotels do not have to wait to be damaged before obtaining legal redress – they can file for an injunction to stop the secondary boycott while it is occurring. That remedy, however, cannot be obtained directly from the court. Rather, the aggrieved business must file with the National Labor Relations Board, which will consider the matter on an expedited basis and proceed to court on behalf of the employer if it has probable cause to believe that a secondary boycott is occurring.

Hotels Can Take Legal Steps to Counteract Secondary Boycotts

In recent years, unions have intensified their tactics to pressure hotels by attempting to persuade trade associations and professional organizations not to hold their events at the target hotel. As this case shows, hotels are not defenseless to this strategy. When properly advised, hotels have some legal tools that would allow them to counteract these tactics and strengthen their ability to resist the union's demands.

To ensure compliance with Treasury Regulations (31 CFR Part 10, §10.35), we inform you that any tax advice contained in this correspondence was not intended or written by us to be used, and cannot be used by you or anyone else, for the purpose of avoiding penalties imposed by the Internal Revenue Code.

Topics:  Appeals, Hotels, Labor Disputes, NLRB, Secondary Boycott, Strike, Unions

Published In: Business Torts Updates, Civil Remedies Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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