A federal appeals court in St. Louis has upheld a National Labor Relations Board ruling against a union for violation of the National Labor Relations Act by refusing to enter into a collective bargaining relationship with a neutral subcontractor in order to force the construction manager (the primary) to sign a union contract, where a collective bargaining relationship was necessary for union subcontractors, such as the neutral, to perform work on union construction projects managed by the primary. Laborers Dist. Council of Minn. and N.D. v. NLRB, No. 11-2848 (8th Cir. Aug. 7, 2012). Recognizing the union’s freedom to contract with a party included the right to refuse to enter into a contract, the Court found this freedom was not unlimited and would violate the NLRA where, as here, “the application of compelling economic pressure” by withholding agreement had an unlawful motivation.
Century Fence Company, a “construction manager” based in Wisconsin, has successfully bid on fencing contracts or subcontracts in Minnesota for many years. It uses subcontractors and does not employ laborers or perform fence installations.
A local of Laborers District Council of Minnesota and North Dakota (the “Union”) wished to enter into a “pre-hire” Highway-Heavy agreement with Century to ensure Century would work only with subcontractors that have a written labor agreement with the Union. (This type of agreement is lawful only in the construction industry.) Century refused, continuing as a nonunion contractor but using only union-affiliated subcontractors for projects awarded to general contractors who are signatories to a Highway-Heavy agreement.
In 2007, the Union began pressuring Century to sign a contract by asking union-signatory firms (i.e., secondary parties) not to do business with Century. In 2008, a Union representative told Century that unless it entered into an agreement with the Union, the Union would refuse to sign or renew pre-hire agreements with Century’s subcontractors. Century filed an NLRB unfair labor practice (ULP) charge about the threat. As a settlement, the Union promised not to threaten, coerce, or restrain subcontractors “or any other person” to force them to stop doing business with Century.
Lake Area, a newly formed fencing subcontractor that had two employees, the owner’s son and an experienced union installer, determined there was more union than nonunion work available. In 2010, Lake Area signed the Highway-Heavy agreement, subject to the Union’s approval, and submitted the Union’s new-contractor processing form. After the Union learned that Lake Area intended to work with Century and become a union-affiliated subcontractor, the Union notified Lake Area that it would not sign the agreement, allegedly because Lake Area submitted incomplete information.
Unfair Labor Practice Charge
Lake Area filed an unfair labor practice charge against the Union with the NLRB alleging an unlawful secondary boycott. NLRA § 8(b)(4)(ii)(B) prohibits a union from targeting (by “threaten[ing], coerc[ing], or restrain[ing]”) secondary or neutral parties (those not in a labor dispute with the union) to force them from doing business with a primary party (the one with which the union has a labor dispute). The law seeks to prevent a union from disrupting the business of parties with which it has no labor dispute, while preserving the union’s right to pressure those employers with which they may have labor disputes.
The NLRB Administrative Law Judge found that the Union’s stated reason for not entering into the agreement with Lake Area was pretextual. The ALJ said the Union was free not to enter into a Highway-Heavy agreement as long as its motive was not unlawful. According to the ALJ, however, the Union was trying “to enmesh Lake Area in the Union’s dispute with Century, with the aim of compelling the latter to become a signatory to a contract with the Union — that renders the Union’s otherwise legal refusal to enter into [a] relationship with Lake Area unlawful.”
On review, the Board, by a 2-1 vote, affirmed the ALJ’s findings and conclusions and adopted the cease-and-desist order recommended by the ALJ. The Union appealed, and the Board cross-applied for enforcement of its order.
Compelling Economic Pressure
The Union argued to the Eighth Circuit that it lawfully refused to enter into a voluntary agreement with an employer. The federal appellate court agreed the Union’s freedom to contract is important and it cannot be forced to enter into an agreement that is otherwise voluntary. However, the Court explained, the NLRA prohibits a union from coercing secondary or neutral parties to force them from doing business with a primary party. The Board has long defined coercion to include “economic retaliation or pressure in a background of a labor dispute,” and such conduct includes “refusing to execute a collective-bargaining agreement or to refer workers.”
In this case, the Union’s control over signatory status was a “powerful economic weapon,” the Court said, for that status dictated an employer’s access to union projects and workers. Here, because of Article 16 of the Highway-Heavy agreement, the Court found the Union’s refusal barred Lake Area from all union projects in Minnesota at a time when more union work than nonunion was available. It also deprived Lake Area of other benefits of union association, such as a ready supply of trained labor. In these circumstances, the Court determined, the Board reasonably concluded that the Union’s refusal “went beyond lawfully persuading Lake Area to cease doing business with Century and reached the level of unlawful secondary coercion through the application of compelling economic pressure.”
Finding the Board decision a reasonable construction of the statute and supported by substantial evidence, the Court denied the Union’s petition for review and granted the Board’s cross-petition to enforce its Decision and Order.