Eleventh Circuit Rules Agreement to Provide Organizing Assistance May Violate Taft-Hartley Act

In a narrowly worded decision, the Eleventh Circuit Court of Appeals ruled in Martin Mulhall v. Unite Here Local 355, No. 11-10594 (11th Cir. January 18, 2012) that an employer's agreement to provide “organizing assistance” to a labor union under a neutrality agreement, if demanded or given as a payment to fulfill an obligation, may violate the prohibited payments rule of the Taft-Hartley Act. In doing so, the court recognized that its decision conflicts with decisions of the Third and Fourth Circuits, which have ruled that neutrality and cooperation agreements do not constitute a “thing of value” and, therefore, cannot violate the Taft-Hartley Act.

The Taft-Hartley Act generally prohibits employers from giving payments or any “thing of value” to labor organizations and their officers. Section 302 of the statute prohibits unions from demanding or accepting payments from employers, and employers from making such payments. Section 302 is intended to prohibit unions from demanding payments in exchange for favorable treatment, and to prohibit employers from bribing unions in exchange for such favorable treatment. Nonetheless, certain payments are exempt from Section 302, such as forwarding dues to the union, compensating employees who also serve as union officers for services rendered, and contributing to employee pension and welfare funds.

At issue before the Eleventh Circuit was a gaming industry neutrality agreement that provided for union access to the employer's property for organizing activity, disclosure of the names, classifications, departments and addresses of employees, and a commitment to remain neutral to unionization. In exchange for the employer's neutrality agreement, the complaint alleged that the union agreed to give financial support for a ballot initiative involving casino gambling. According to the complaint, the union allegedly spent more than $100,000 campaigning for the ballot initiative.

An employee opposed to unionization filed suit, seeking to enjoin enforcement of the neutrality agreement. The employee claimed that the neutrality agreement violated Section 302 of the Taft-Hartley Act because it amounted to an unlawful payment in exchange for the union's political support. The district court dismissed the complaint, reasoning that the organizing assistance the employer promised could not, as a matter of law, constitute a “thing of value.”

The Eleventh Circuit reversed, holding that organizing assistance can, in an appropriate case, constitute a “thing of value.” The court ruled that “[w]hether something qualifies as a payment depends not on whether it is tangible or has monetary value, but on whether its performance fulfills an obligation. If employers offer organizing assistance with the intention of improperly influencing a union, then the policy concerns in § 302 – curbing bribery and extortion – are implicated.” Thus, while the court agreed that employers and unions ordinarily may set “ground rules” for organizing campaigns, such agreements can constitute illegal payments “if used as valuable consideration in a scheme to corrupt a union or to extort a benefit from an employer.”

It is important to note that the Eleventh Circuit's decision involved the appeal of an order dismissing the complaint, and the court did not rule on whether the agreement actually was intended to bribe or corrupt union officials. However, employers considering neutrality and card-check agreements should be aware that precedent now exists to hold that the very act of entering into such an agreement may satisfy the “thing of value” test of the Taft-Hartley Act and subject an employer to a lawsuit aimed at determining whether there is any evidence that the agreement was designed or intended to be used as valuable consideration in a scheme to corrupt a union or extort a benefit from an employer. More broadly, the Eleventh Circuit’s decision demonstrates that intangible, non-monetaryconsideration may satisfy the “thing of value” test where the consideration fulfills an obligation of the employer and otherwise implicates the policy concerns of Section 302.