In June, the U.S. Supreme Court announced that it will review Mulhall v. UNITE HERE Local 355 during its October 2013 term.  Mulhall involves so-called “neutrality agreements” between employers and unions and poses the question whether or not the promises contained in those agreements violate federal law.  Neutrality agreements are a powerful tool in corporate campaigns, in which the union starts at the top and approaches the company’s management rather than the employees themselves.  The Court’s decision could have ramifications for both employers and unions regarding how employees are unionized.

Mulhall concerns Section 302 of the Labor Management Relations Act (LMRA), the anti-bribery provision.  Section 302 makes it unlawful for an employer “to pay, lend, or deliver” any “thing of value” to a labor union that seeks to represent its employees, and prohibits the labor union from receiving the same (there are exceptions not relevant to this case).  The neutrality agreement in Mulhall is typical in that it sets up ground rules for union organizing campaigns and includes the employer’s promise to remain neutral (i.e., not to voice opposition to unionizing) in exchange for certain union promises.  Accordingly, if the Supreme Court holds that such promises violate Section 302, unions’ ability to engage in “top-down” organizing through corporate campaigns will suffer a serious blow, and unions will be limited to expensive, time-consuming, and contentious grassroots campaigns.

In Mulhall, a casino company and labor union Local 355 entered into an agreement 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 instead of a secret-ballot election to determine whether there was majority support for the union among employees.  In exchange, Local 355 promised that it would refrain from striking, picketing, boycotting or undertaking other economic pressure against the company, and would give more than $100,000 in support of a slot machine ballot initiative benefitting the company.  Martin Mulhall, a casino company employee opposed to being unionized, sought to enjoin enforcement of the agreement, contending that it violated Section 302 because it “delivered” a “thing of value” to the union.

The district court twice dismissed the case reasoning first that Mulhall had no standing to sue, and, after Mulhall successfully appealed, that he had not stated a claim.  The district court added that the types of assistance promised in the agreement were not a “thing of value” under Section 302 of the LMRA.  In 2012, upon Mulhall’s second appeal, the Eleventh Circuit Court of Appeals disagreed and again ruled that his claim could go forward.  The Eleventh Circuit held that “organizing assistance can be a thing of value that, if demanded or given as payment, could constitute a violation of Section 302.”  When considering the same issue, the Second Circuit has arrived at a similar conclusion as the Eleventh Circuit, but other circuit courts, including the Third and Fourth, have held that neutrality agreements and the promises typically made in them are not payment of a “thing of value” under Section 302.

The issue facing the Supreme Court, then, is whether neutrality agreements violate Section 302 of the LMRA—that is, whether promises by an employer that it will remain neutral and provide the union with access to employees and facilities during an organizing campaign and, in exchange, promises that the union not boycott or picket that employer, violate Section 302.

While the Court’s decision to review Mulhall in the Fall puts the use of neutrality agreements in a state of flux for now, its decision will settle the issue once and for all.  An endorsement of neutrality agreements will likely increase the already-powerful tool’s use as an organizing strategy.  On the other hand, a contrary decision will likely curtail the use of neutrality agreements, thereby weakening unions’ power in organizing campaigns (i.e., unions will have a more difficult time convincing employers to remain neutral).  We will update you as soon as the Supreme Court announces its decision in Mulhall.