• How Federal Preemption Affects Local and State Labor Peace Agreements
  • January 11, 2016 | Author: David F. Loeffler
  • Law Firm: Ogletree, Deakins, Nash, Smoak & Stewart, P.C. - Milwaukee Office
  • Unions have been largely unsuccessful in their efforts to organize employees and negotiate first contracts within the system created by the National Labor Relations Act (NLRA). Only about 7 percent of the private-sector labor force is unionized. Consequently, unions have adopted new organizing strategies. Some states and municipalities in which unions have substantial political clout have enacted statutes and ordinances that are designed to give unions a governmental hand up in organizing employees and successfully negotiating start-up collective bargaining agreements. This type of legislation often requires employers to agree to relinquish their statutory rights and curb their exercise of economic power (as permitted by the NLRA) in order to enjoy certain benefits that are conferred by government.


    In addition to worrying about such state and municipal legislation, employers must also be aware of federal law. Employers operate in the two overlapping, but not coextensive, legal systems of federal and local laws and regulations. Under the U.S. Constitution, when federal and local laws and regulations conflict, federal law prevails if the conflict is substantial and does not displace state law in areas in which states have historically been the primary regulator.

    “Labor Peace” Agreements

    In each transaction that local authorities have with private businesses (such as contracts for operational materials and supplies and large-scale public infrastructure projects), the local authorities may condition the deal on the private employer’s acceptance of a “labor peace” or “labor harmony” agreement. These agreements regulate relevant labor markets to encourage the employer’s acceptance of unions. To the extent that these agreements require an employer to abandon rights secured by the NLRA and its regulatory system as a condition of receiving a government benefit, they may be preempted by the Supremacy Clause of the federal Constitution. That is, the local authorities’ union-friendly requirements may be null and void.

    The following are some examples of conditions by local authorities that would be preempted:
    1. The employer is required to be “neutral” during an organizational campaign. The employer may not speak out against unionization through any medium, even though the content, location, timing, and vehicle for communication are affirmatively protected by the NLRA (in addition to the First and Fourteenth Amendments to the federal Constitution). The Supreme Court of the United States has declared that this sort of local regulation conditioning a flow of benefits on employer passivity is preempted.
    2. The employer is required to recognize the union as the legitimate bargaining representative of employees upon the presentation of “authorization cards,” which, on the faces of the documents, indicate a positive choice of a union relationship by the employees. The Supreme Court has held that an employer has an NLRA-based right to insist upon a secret ballot election conducted by the National Labor Relations Board (NLRB) as the means of establishing a union’s legitimacy as a bargaining representative. The condition that an employer recognize authorization cards as evidence that the union is a legitimate bargaining representative is most likely preempted.
    3. The employer promises not to use “coercive” electoral tactics if a secret ballot election is to be held under the auspices of local authority and agrees that a local decision-maker will decide whether coercion has occurred. The NLRA assigns determination of whether an employer’s electoral tactics are coercive to a federal administrative agency, namely the NLRB. The employer’s federal right to an NLRB determination of “coercion” may not be compromised by local authority.
    4. An employer has a right under the NLRA to insist on its terms in any contract with a union and for the final outcomes to be determined by relative market power. Some labor peace agreements mandate third-party “interest arbitration” of contractual terms that determine whether the union is a legitimate bargaining representative, if the parties fail to agree on the terms of their agreement. Local authorities may not compel an employer to accept the judgment of an outsider on what those terms will be.
    Whether a particular term of a local labor peace agreement substantially impairs an employer’s exercise of an NLRA right or restrains conduct otherwise permitted by the NLRA is a matter to be discussed with an attorney.

    Project Agreements

    The Supreme Court has validated one kind of labor peace agreement required by local authorities—the so-called “project agreement.” These are agreements that require that all firms performing construction work on a well-defined project with a reasonably determinate duration be parties to a particular kind of collective bargaining agreement. The types of construction work that are the subjects of these agreements are, invariably, large scale infrastructure projects. The final product is “owned” by the local government. The total cost of the project is minimized if the labor input is supplied by workers with proven skills, and the terms of the agreement create a high probability that work will proceed continuously, without strikes, picketing, or other disturbances arising from disputes with unions.

    Key Takeaways for Employers

    A proposed labor peace agreement that conditions receipt of a government benefit on signing always presents a hard decision. Given the desire for union avoidance in the long-term, it is important to analyze the cost of passing on the government benefit discounted to present value, compared with an estimate of the cost of unionization, also discounted to present value—a calculation that entails a determination of the probability that the union will prevail in any electoral process conducted by the terms of the labor peace agreement. Given the complexities inherent in the electoral process, which are compounded by the NLRA preemption doctrine, employers may want to consult with counsel when making this calculation.