The Two Central Issues in Mulhall

Published August 19th, 2013 -  - 08.19.133


As Ben noted, the contract at issue in Mulhall is an alternative to the Wagner Act/NLRB regime for labor organizing and bargaining.  In the contract, the employer agreed to remain neutral toward union organizing efforts, to recognize the union through a majority card-check procedure (which makes it easier for unions to win than secret-ballot NLRB election), to give access to employer premises, and to provide a list of employee names and addresses.  In return, the union agreed not to “engage in a strike, picketing or other economic activity” at the employment site for the life of the contract.  It also agreed “to expend monetary and other resources to support a ballot proposition favored by” the employer, which led the union to spend $100,000 to support a successful ballot initiative to permit use of slot machines at the employer’s site.

At first glance this contract seems fine.  A voluntary bilateral contract presumptively enhances the welfare of both parties.  Especially in light of dinosaur-ish traditional labor law rules and processes, we might view such contracts as a huge step toward more efficient labor agreements and more fruitful labor relations.

But there are not just two parties here (employer and union).  There is a third party as well, the workers.  And the worry is that a union might enter into a neutrality contract to serve its own interests rather than the workers.  Something like this worry is what motivates Section 302 (aka 29 U.S.C. § 186), the law at issue in Mulhall.  “The dominant purpose of § 302,” the Ninth Circuit once said, “is to prevent employers from tampering with the loyalty of union officials and to prevent union officials from extorting tribute from employers.”  Or as the Supreme Court stated somewhat differently in Arroyo v. United States, 359 U.S. 419, 425 (1959), Congress in Section 302 was “concerned with corruption of collective bargaining through bribery of employee representatives by employers, with extortion by employee representatives, and with the possible abuse by union officers of the power which they might achieve if welfare funds were left to their sole control.”

The problem is that these statutory aims are not well expressed in the language of Section 302.  In relevant part, Section 302 makes it illegal for an employer to “to pay, lend, or deliver, or agree to pay, lend, or deliver, any money or other thing of value” to a labor union or other employee representative, 29 U.S.C. § 186(a)(2), or for a labor union to “request, demand, receive, or accept, or agree to receive or accept, any payment, loan, or delivery of any money or other thing of value” prohibited by 29 U.S.C. § 186(a)(2), see 29 U.S.C. § 186(b)(1).*  Fourth Circuit in Adock and the Third Circuit in Sage Hospitality ruled that employer concessions in neutrality agreements were not payment or delivery of a “thing of value” and thus were not barred by Section 302.  The Eleventh Circuit in Mulhall ruled that the concessions could be (but were not always, or even usually) “things of value.”

This disagreement – which is about whether neutrality agreements can ever implicate Section 302 – is the first issue in Mulhall.  Although the issue is much harder than it let on, I think the Eleventh Circuit has the better of this argument.  My reasons in a nutshell are (a) the concessions were part of a contractual bargain (and parties do not bargain over things that lack value), (b) “thing of value” has been read to include intangibles in other criminal statutes, and (c) if the employer concessions were given in exchange for a secret promise from the union to seek substandard wages for union members, the language and purposes of Section 302 would (I think) presumptively be implicated.

If the Eleventh Circuit is wrong – if neutrality agreements can never be “things of value” under Section 302 – the case is over and the union wins.  (There may be other labor law tools to regulate the contract.)  But if it is right, a second issue arises: designing a limiting principle for Section 302.  For if employer concessions are “things of value” under Section 302, then the statute read literally seems to prohibit not just neutrality agreements, but all contracts between employers and unions, including a collective bargaining agreement.  That cannot be right (and indeed, this absurd conclusion, considered alone, counts sharply against reading Section 302 to include employer concessions in contracts).

The Eleventh Circuit did not go nearly this far.  It did not read Section 302 to implicate all or even most employer-union contracts, and indeed did not read it to prohibit all (or even most) neutrality agreements.  Its crucial reasoning:

It is too broad to hold that all neutrality and cooperation agreements are exempt from the prohibitions in § 302.  Employers and unions may set ground rules for an organizing campaign, even if the employer and union benefit from the agreement. But 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. . . . As we see it, an employer’s decision to remain neutral or cooperate during an organizing campaign does not constitute a § 302 violation unless the assistance is an improper payment. . . .  Consequently, . . . we remand so that the district court can consider the § 302 claim and determine the reason why Unite and Mardi Gras agreed to cooperate with one another.

What the Eleventh Circuit essentially did was to graft the broad purpose of Section 302 – which was to bar schemes “to corrupt a union or to extort a benefit from an employer” – on to the statute (albeit without tying this purpose to the language of Section 302).  What it did not do, unfortunately, was to provide any guidance about how to make this determination.  Nor did it say whether its “improper payment” query applies beyond neutrality contracts to every other type of employer-union contract.  It simply remanded to the District Court for a determination of “the reason why” the union and employer agreed to cooperate in the contract before it.

In sum: It is hard to exclude neutrality agreements altogether from Section 302 (issue 1), but it is also hard to articulate a limiting principle on Section 302 that captures its purposes (issue 2), and especially hard to do so consistent with the (seemingly extraordinarily broad) language of Section 302.

* An earlier version of this post inaccurately described 29 U.S.C. § 186(b)(1).

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