U.S. Supreme Court Will Review Neutrality Agreements and Promises Between Employers and Unions


The U.S. Supreme Court announced that it will review the U.S Court of Appeals for the Eleventh Circuit’s decision in Mulhall v. UNITE HERE Local 355, a significant decision in which the court revived an employee’s claim that a neutrality agreement between his employer and Local 355 was unlawful.

In Mulhall, Mardi Gras Gaming and Local 355 had entered a Memorandum of Agreement (MOA) in which the company agreed to provide Local 355 with employee information, allow the union access to company property for organizing purposes, remain neutral during the union’s organizing effort and conduct a card-check in lieu of a secret-ballot election. In the MOA, the union also promised that it would refrain from striking, picketing, boycotting or undertaking other economic pressure against the company, and would give approximately $100,000 in support of a slot machine ballot initiative benefitting the company. Assisted by the National Right to Work Foundation, an employee filed a lawsuit seeking to enjoin the MOA. 

Mulhall concerns Section 302 of the Labor-Management Relations Act (the anti-bribery provision), which makes it illegal for an employer to deliver to a union, or for a union to receive from an employer, any “thing of value” (there are exceptions not relevant to this dispute). The issue is whether a “thing of value” extends to promises employers make in neutrality agreements. The district court concluded that while the LMRA provides an individual with a private right of action, the employee did not have standing to sue because the types of assistance promised in the MOA were not a “thing of value” under the LMRA.

A divided Eleventh Circuit disagreed, ruling that a “thing of value” could extend to the promises an employer makes in a neutrality agreement.  The court explained:

a violation of § 302 cannot be ruled out merely because intangible assistance cannot be loaned or delivered. Section 302 also prohibits payment of a thing of value, and intangible services, privileges, or concessions can be paid or operate as payment. Whether 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.

The Eleventh Circuit remanded the case and instructed the district court to consider what motivated the cooperation between the company and Local 355. The Eleventh Circuit further clarified that an agreement setting ground rules is permissible, but Section 302 may be violated if the company was wrongfully attempting to influence the union in its representation duties.

Local 355 challenged the Eleventh Circuit’s decision. The issue for the U.S. Supreme Court is whether a neutrality agreement violates Section 302 – that is, do promises by an employer that it will remain neutral and provide the union with access to employees and facilities during an organizing drive, and, in exchange, promises by the union to not boycott or picket that employer, violate Section 302?

The U.S. Supreme Court has never before agreed to review a decision that so closely implicates neutrality agreements. The Supreme Court’s decision to address Mulhall during its October 2013 term puts the use of neutrality agreements in a state of flux. If the Supreme Court endorses neutrality agreements, they will likely become even more commonly used as an organizing strategy. Neutrality agreements are already a powerful tool in corporate campaigns, where companies are pressured to cooperate with a union or face negative publicity and regulatory pressure. On the other hand, the Supreme Court could affirm the Eleventh Circuit’s decision and curtail the use of neutrality agreements, thereby weakening unions’ corporate campaign arsenals. Employers and labor practitioners will be closely watching for clarification from the Supreme Court about what is a “thing of value” under the LMRA’s anti-bribery provision.

Photo credit: YanC

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.