Supreme Court Grants Review Of Whether Neutrality, Card Check Agreements Violate LMRA

by Franczek Radelet P.C.
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Overshadowed by the Supreme Court’s decision to hear the National Labor Relations Board’s appeal of Noel Canning, the D.C. Circuit’s recess appointments ruling, the Supreme Court also granted certiorari in Mulhall v. UNITE HERE Local 355 to resolve a split among the circuit courts about whether neutrality or card check agreements between an employer and a union violate Section 302 of the Labor Management Relations Act (LMRA).  Section 302 makes it illegal for an employer to “pay,” “loan,” or “deliver” (or for a union to receive from an employer) any “thing of value,” subject to a few exceptions not relevant to Mulhall.

Neutrality and card check agreements are often sought by unions as part of collective bargaining agreements.  Unions offer employers concessions in exchange for employers’ agreements to remain “neutral” or to waive their rights to secret ballot elections in favor of a card check agreement should the union decide to organize additional employees of the employer.  Often, neutrality agreements also contain provisions that give the union access to employees and employee contact information to make it easier for the union to organize them.  Such access and information understandably makes it easier for unions to prevail in certification elections.  Since unions are increasingly seeking neutrality and card check agreements are increasingly being sought by unions in collective bargaining agreements, the Mulhall decision could have a far greater and longer term impact on labor relations than Noel Canning.

In the case, Martin Mulhall, an employee of a south Florida greyhound track, sued to enjoin an agreement between his employer and UNITE HERE Local 355.  The employer and the Union agreed that the Union would have access to non-public work areas and confidential information about employees, as well as a commitment from the employer to remain neutral in any union organizing efforts.  In return, the Union agreed not to strike or file charges with the NLRB, and to support a casino gaming ballot initiative that would benefit the track.  Mulhall, who vigorously opposed the Union, argued that the neutrality agreement violated Section 302 because it “delivered” a “thing of value” to the Union, but the district court twice dismissed the case reasoning first that Mulhall had no standing to sue, and, after Mulhall successfully appealed, that he had not stated a claim.

In 2012, the Eleventh Circuit disagreed and again ruled that Mulhall’s claim could go forward.  The court held that “organizing assistance can be a thing of value that, if demanded or given as payment, could constitute a violation of Section 302,” though such assistance could only be paid, not loaned or delivered under the statute.  The Second Circuit had arrived a similar conclusion.  However, other circuit courts that have considered this issue found that an employer’s assistance to a union organizing campaign was either not a “thing of value” (Third Circuit) or could not qualify as a “payment, loan or delivery” under Section 302 (Fourth Circuit).

Importantly, though, the Eleventh Circuit also broadly stated that any neutrality and cooperation agreements could fall under Section 302 if they went beyond broad ground rules and into the realm of improper assistance.  The decision therefore raised yet another potentially expensive and time consuming concern for employers facing union organizing activity: that individual employees opposed to unionization (at least in Florida, Georgia, and Alabama, for now) could challenge the validity of neutrality and card-check agreements, and that courts could deem them unenforceable.

The Union had sought review before the Supreme Court on whether organizing assistance can be a “thing of value.”  Mulhall also petitioned the Court, but on whether intangible things could also be “delivered” under Section 302.  The Supreme Court’s ultimate decision in the case, whether on the “thing of value” issue, the “delivery” issue, or both, could dramatically alter or limit employers’ and unions’ ability to enter into neutrality and card check agreements.  The Mulhall case attracted amicus briefs at the appellate level from both employer and labor groups as diverse as the SEIU and the National Federation of Independent Business, and will present employer groups with the difficult question of which side to support in the upcoming Supreme Court case, particularly those employers who have already entered into such agreements.

We will follow the upcoming briefings and oral arguments closely and update clients as this case proceeds to a final decision.

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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