As readers of this blog know, the NLRB took a major step two short years ago in Dana Corporation, 356 N.L.R.B. No. 49 (2010) by finding (2-1) that a pre-recognition framework agreement between an employer and the union did not violate the NLRA. Recently, the Sixth Circuit issued its decision in Montague v. NLRB, Case No. 11-1256 (6th Cir. Aug. 23, 2012) (pdf), affirming the NLRB’s decision in Dana and ruling that pre-recognition agreements can be lawful.

In Montague, two employees appealed the NLRB's decision in Dana.  In affirming the NLRB's decision, the Sixth Circuit held that a Letter of Agreement (LOA) between the union and the employer containing provisions related to health care benefits and future collective-bargaining agreements, before the union obtained majority support from employees, was legal under the NLRA.  For example, the LOA limited the employees' right to strike, required bargaining over certain benefits and compensation issues within certain parameters, and set a minimum duration of any union contract.

In response to the employees' claims that the LOA effectively limited worker choice and constituted an unlawful recognition of the union, the Court found that the NLRB was within its discretion to allow some substantive terms to be determined between the employer and union prior to recognition.  The Court noted that the agreement did not ultimately impact employees’ choice regarding union representation.

The Court went on to explain that the NLRB’s decision on the pre-recognition agreement was reasonable under the NLRA because: 

  1. The LOA provided that the employer would not recognize the union prior to the union receiving a majority vote of the employees; and 
  2. The LOA was not a full collective bargaining agreement, but, rather, required substantial negotiations post-recognition.

Indeed, when it came to assessing just how substantive the terms that the union and the employer negotiated, the Court noted that the "NLRB was within its discretion to allow some substantive terms to be determined between the employer and union prior to recognition, as long as that agreement did not ultimately impact employees' choice regarding union representation."  The Court then suggested that if employees didn't want to assume the risk of union-sponsored concessions during bargaining that resulted from the LOA, they could reject that union -- as they ultimately did by not selecting the United Auto Workers in this case. 

For those labor professionals who work for employers with business reasons for entering into a neutrality agreement, the Sixth Circuit’s approval of the Dana decision provides those employers with the opportunity to more carefully predict what impact the unionized workforce will have on labor costs.

For labor professionals who work for employers wishing to remain non-union, however, the decision will be less welcome. To use the words of the dissenting NLRB member, the Court’s recognition could “encourage the escalation of top-down organizing,” where unions “organize” the employer first and then organize the employees.