Why Mulhall is a Hard Case

Published November 11th, 2013 -  - 11.11.1310


The Supreme Court case considering the legality of union organizing agreements – UNITE HERE Local 355 v. Mulhall – is being argued Wednesday.  Ben describes Mulhall in today’s NYT as potentially “the most significant labor case in a generation.”  The case is significant because, as Ben once noted, “essentially all successful union organizing campaigns today are conducted according to ground rules established” by organizing agreements.  If the Court agrees with the Respondent that such agreements are per se unlawful, it will be a huge blow to union power.

I have already explained why Mulhall is infested with procedural problems.  If the Court reaches the merits, it will face a very tricky question of statutory interpretation.  The central issue is whether a union organizing agreement violates Section 302 of the Labor Management Relations Act, 29 USC § 186.  Simplifying a great deal, Section 302 prohibits an employer from paying “anything of value” and prohibits a union from receiving any such thing of value from an employer.  In the organizing agreement in Mulhall (which is typical), the employer agrees to (1) recognize the union based on a card-check procedure; (2) give the union access to work premises during non-work hours; (3) provide the union a list of employees and their addresses; and (4) remain neutral in the union’s organization efforts.  In return, the union agrees not to strike, picket, or engage in “other economic activity” during the life of the contract.  In addition, the agreement did not come into force until slot machines were installed at the employer’s gaming facility.  In this connection, according to the Complaint, the union promised to spend money in support of a ballot initiative authorizing casino gaming (and, according to Respondent, actually spent over $100,000 to that end).

The main focus of the briefs in Mulhall is whether the terms of the organizing agreement – access to premises, employee lists, and neutrality – are “things of value” that are per se banned by the statute.  Petitioner and its amici devote many pages to arguing that they are not “things of value,” but I find the argument unsuccessful on its own terms.  The term “things of value” is construed throughout the U.S. Code to include intangible property, and naturally includes valuable legal rights.  And as this case makes abundantly clear, the employer’s contractual concessions have economic value to the union – as is evidenced by the large sums of money the union spent to ensure that the conditions of the contract (the placement of slot machines on the employer’s premises) are realized.

So far things look bad for the union.  But there is a big problem with this plain-text interpretation of “things of value”: It would mean that Section 302 wipes out not just organizing agreements, but also any contract between an employer and union, for such contracts almost by definition involve an exchange of things of value.  This implication calls into question the correctness of the plain-text interpretation, for Congress in other parts of the U.S. Code clearly favors employer-union contracts (see, e.g., 28 U.S.C. § 185(a), which contemplates suits for “violation of contracts between an employer and a labor organization”).  And indeed, despite the Respondent’s attempts to show otherwise, its plain-meaning interpretation of Section 302 would criminalize collective bargaining agreements – a result that clearly cannot be right.  (Section 302 is a criminal statute also enforceable, as in this case, by private rights of action.)  Hence, as the government argues (at 20, citation omitted), the plain-meaning interpretation of Section 302 is “‘textually permissible in the narrow sense’ but ‘structurally implausible’ because it would render other statutory provisions ‘functionally void.”’

The hard legal question in the case, then, is how to resolve the contradiction between the commands of the plain text and the unacceptability of its structural implications.  One old-fashioned possibility is to look to the purposes of Section 302.  “The dominant purpose of §302,” according to the Ninth Circuit, “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 one stated, 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 animating purpose of Section 302 is to ensure that employers do not exchange “things of value” with unions in a way to benefit the union at the undue expense of employees.  However, it is not easy to come up with a legal rule that captures when organizing agreements unduly burden employees.  One can imagine some easy cases – for example, if employer concessions were given in exchange for a secret promise from the union (a) to ask for significantly substandard wages for union members, or (b) otherwise to bargain in bad faith.  But such obvious cases of corruption by contract are not likely to occur openly, and articulating a legal standard to capture the relevant form of corrupt contract is not easy.  Particularly in the context of a collective bargaining agreement with many non-wage clauses, it would be hard to know whether (for example) a union’s relatively weak wage demands were corrupt, or whether simply reflect tough economic conditions or tradeoffs for other gains.

Despite these difficulties, such a purposive construction of Section 302 is precisely what the Eleventh Circuit was groping towards.  The Eleventh Circuit did not hold that organizing agreements are per se unlawful.  Rather, it reasoned (with emphasis added):

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.

Three comments on the Eleventh Circuit’s purposive reading of Section 302:

First, the parties’ briefs practically ignore the Eleventh Circuit’s holding.  They focus on the all-or-nothing issue whether Section 302 per se invalidates organizing agreements, and they address the Eleventh Circuit’s middle course as an afterthought.  But for reasons stated above, it is hard to conclude either that Section 302 has no application to organizing agreements, or that it invalidates all organizing agreements.  Thus a middle way between these two extremes that tracks the statute’s purposes might seem attractive.

However, and second, the Eleventh Circuit’s middle way has several difficulties.  It doesn’t have any obvious basis in the text or even (at least as far as I can tell) the structure of Section 302.  It is based on naked purposivism that is out of favor in the Court.  It is also unclear, as noted above, what precise evil the statute addresses.  “Corruption between employer and union” one might respond.  But what counts as corruption?  My examples above are relatively clear cases where the employer and union conspire to advance their interests at the expense of workers.  But depending on economic conditions and other contextual factors, unions and employers might in good faith exchange many things of value that nonetheless adversely affect employees.  Identifying the proper baseline of employee treatment, and what counts as an alteration of that baseline amounting to corruption, is a major challenge for the middle way interpretation of Section 302 – a challenge that the Eleventh Circuit (and the briefs in Mulhall) ignore, and one made all-the-more-difficult because the middle way lacks any obvious textual guidance.  If the Court chooses a purposivist interpretation of Section 302, therefore, the devil will be in the details of how it crafts the test for corruption.  One can imagine the bar for success under Section 302 being very high (for example, prohibiting only clear cases of self-dealing at the expense of employees, as in the examples I gave above) or much lower (in which, for example, any diminution of employee benefits or Wagner Act rights raises a question under Section 302).

Third, if the Court adopts some version of the middle way approach, it might result in a technical victory for the union on Iqbal grounds, since (as I have previously argued), “one searches in vain in Mulhall’s Complaint (App. 63 ff.) for any allegation that the neutrality agreement was part of a scheme to corrupt the union or extort a benefit from the employer.”  However, although a middle ground holding would not give plaintiff-Respondent Mulhall and his anti-union sponsors everything they seek, it could nonetheless be a major defeat for union power if the Court adopts an easy-to-satisfy corruption standard under Section 302.   Such a standard would mean that most if not all organizing agreements could be judicially scrutinized for evidence of corruption, that Section 302 attacks on such agreements would proliferate, and that employers would be chilled to some degree from entering in to such agreements, not only because they invite litigation, but also because they implicate possible criminal liability.

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