The U.S. Court of Appeals for the Seventh Circuit recently upheld a joint arbitration committee’s (“JAC”) decision finding that a business’s “double-breasting” arrangement violated a collective bargaining agreement. The decision provides two important reminders — one procedural and the other substantive. 

But let’s begin with a couple of the facts. Two brothers owned a floor installation business that employed union installers. Because of competition from non-union competitors, they established a non-union company that would only use non-union installers and compete for that market, and a corporate entity to provide management services to both companies. 

The union grieved the arrangement and the matter went to the JAC. The JAC consisted of three union representatives and three employer group representatives and was the last step in the grievance process before arbitration before a neutral (in the event that the JAC deadlocked). In this case, the JAC ruled in favor of the union and the companies unsuccessfully challenged the ruling in court. 

As noted above, there are two lessons from this decision. First, it is important to raise any issues you have before the JAC. JACs (or similar arrangements) are common in many industries. Although they seem somewhat informal, and many parties think they always deadlock, that is not the case. In this case, the court would not consider an important legal issue raised by the employers because they had not raised the issue at the JAC.

Second, double-breasting arrangements are receiving more scrutiny now by the NLRB and the courts. It is critical that in planning the arrangement, you consider carefully making the two entities as independent as possible and review the four key factors in determining a single employer:  interrelation of operations, common management, centralized control of labor relations, and common ownership.