Last week, the United States Supreme Court ruled that the National Labor Relations Act (NLRA) preempted a California law that required employers who received state funds to remain neutral in regard to union representation. In Chamber of Commerce v. Brown, No. 06-939 (June 19, 2008), the court held that an employer's right to engage in a debate over issues concerning union representation is a fundamental policy embodied in this country's national labor relations laws and that a state cannot interfere with it.

The California law, Assembly Bill 1889, prohibited employers receiving state funds or more than $10,000 a year for a state program from using those funds to "assist, promote, or deter union organizing." The broadly written law prohibited employers from using the funds for any expenses connected with informing employees about the risks of unionization, but permitted the use of the funds for expenses associated with giving unions access to the workplace and voluntarily recognizing unions without a secret ballot election. The law also contained provisions allowing unions to audit employers' financial records and to obtain injunctive relief.

The United States Chamber of Commerce and other employer groups sued the State of California, arguing that the NLRA preempted the California law. In a 7-2 decision, the court agreed, holding that the NLRA preempted the California law under the Machinists v. Wisconsin Employment Relations Comm., 427 U.S. 132 (1971) doctrine, which prohibits both the National Labor Relations Board and the states from regulating areas Congress intended to be left unregulated and "controlled by the free play of economic forces." The Supreme Court reasoned in pertinent part that (1) by enacting the law, California was acting as a regulator rather than a market participant, and (2) the California law imposed "a targeted negative restriction on employers' speech about unionization," and (3) the fact that the restriction came in the form of a use restriction rather than a receipt restriction was inconsequential given the difficulties employers faced trying to demonstrate that they did not improperly use state funds.

The decision in Brown is not just significant to employers in California. Many other states, counties and local governments have passed legislation requiring employer neutrality. Clearly, all such attempts to limit employer free speech by governments are now subject to challenge. Most importantly, this decision reaffirms the firmly held policy of the NLRA to promote free speech by employers and unions regarding whether or not employees should to be represented by unions.