Supreme Court Enters the Union Battles

a | A

Nov. 13 (Bloomberg) -- Fights over forming unions are hardball -- which is why the decision process is more heavily regulated than almost any other act of association in American life. One popular technique favored by unions is to promise management something in exchange for a promise to stay neutral and even allow organizers access to the workplace.

Now a federal appeals court has essentially banned these neutrality agreements, and the U.S. Supreme Court will hear arguments to decide whether a side deal between a union and management is a form of illegal bribery or just part of the game.

The facts of Unite Here Local 355 v. Mulhall are straightforward. The union promised the Mardi Gras Gaming Co., owner of a racetrack in Hallandale, Florida, to support a public gambling initiative to the tune of $100,000 and refrain from picketing during its unionization campaign. In exchange, the company agreed not to oppose unionization. Mardi Gras Gaming also agreed to recognize the union if a majority of employees submitted written cards saying they wanted a union (“card check”), sparing the union the need for a secret-ballot election.

Federal appeals courts for the Third and Fourth circuits -- which cover the mid-Atlantic region -- had in the past upheld such neutrality agreements. But the U.S. Court of Appeals for the 11th Circuit, which covers Florida, Alabama and Georgia, struck down the deal between the union and Mardi Gras Gaming. It reasoned that management’s promise of neutrality and allowing card check amounted to the “delivery” of “a thing of value” to the union in contravention of the iconic Labor Management Relations Act of 1947, also known as the Taft-Hartley Act. Faced with a split of authority between different circuits, the Supreme Court took the case.

Pressure Tactics

For unions, the stakes are enormous. Neutrality agreements make it vastly easier to unionize, and they are in place in perhaps half of all successful unionization drives. If the agreements amount to bribery under federal law, the practical result will be to raise the costs of unionization nationwide.

For management, the issue is more complicated. To the extent employers want to avoid unionization, anything that raises the cost of organizing looks pretty good. Instinctively, employers may find themselves rooting for Mardi Gras Gaming in this case.

But even if neutrality agreements are not an option, unions won’t simply go away. Instead, they’ll employ the pressure tactics legally available to them, including picketing. In short, unions will try to impose costs on management in the hopes of coercing employers to back down. The two sides just won’t be able to negotiate a deal ex ante -- before the unionization fight takes place. Some employers might therefore actually prefer to have the option of signing a neutrality agreement that would spare them the cost of union efforts and buy them something in return, such as Unite Here’s support of a gambling initiative.

The case can’t really be resolved on legal language alone. Sure, a neutrality agreement has “value” to the union -- that’s why it’s part of the negotiation. So the company probably wins on literal meaning divorced from context. And yes, the Taft-Hartley Act probably had in mind more ordinary forms of bribery, like Cadillac cars, when it prohibited “delivery” of “a thing of value.” So the union should win on original legislative intent. Each side therefore has a plausible statutory argument.

Real-World Sense

Cynics will note that the more liberal appellate Third and Fourth circuit courts decided the issue for the unions, while the more conservative 11th Circuit decided for management, setting up the Supreme Court battle pitting the usual five conservatives (Justice Anthony Kennedy is not notably pro-labor) against the familiar four liberals.

But the court shouldn’t be in the business of handing victories to favored political constituencies. The right decision should turn on what makes the most sense in the real world.

The whole point of the Taft-Hartley Act -- and of the theory of labor-relations law more broadly -- is to make the messy business of forming unions and negotiating labor contracts more manageable and less costly to society as a whole. It can be hard to remember today, but from the Civil War to World War II and beyond, labor unrest was probably the single most important political-economic issue in the U.S. and the industrialized world. Making and breaking unions, striking and retaliation imposed enormous costs on workers, shareholders and the economy as a whole. On many occasions, conflict was actively violent, and it often brought whole industries to the brink of crisis.

Legal regulation, adopted by bipartisan agreement (remember that?), was intended to reduce and manage the transaction costs of these complicated negotiations. It was intended, as much as possible, to clean up the process, impose transparency and help both sides get to yes.

The game has changed as unions have weakened, but neutrality agreements are simply one updated technology in negotiators’ toolkits. Unions may like them more than management does, but they have value for both sides. More important, smoother negotiations lower the costs that labor-management disputes impose on the rest of the economy, which means on us. The court should reverse the 11th Circuit’s decision and uphold neutrality agreements, not because it prefers labor to management, but because deal making is better than a fight.

(Noah Feldman, a law professor at Harvard University and the author of “Cool War: The Future of Global Competition,” is a Bloomberg View columnist. Follow him on Twitter at @NoahRFeldman.)

To contact the writer of this article: Noah Feldman at noah_feldman@harvard.edu.

To contact the editor responsible for this article: Tobin Harshaw at tharshaw@bloomberg.net.