January 18, 2013

It’s Getting Harder to Say Goodbye: NLRB Limits Construction Industry Employers' Contract Expiration Withdrawal Rights from Multi-Employer Association

Holland & Knight Alert
Howard Sokol

The National Labor Relations Act (NLRA or Act) allows employers, including those in the construction industry, to join together to bargain with a union. This is called "multi-employer bargaining." But there are specific rules and requirements that an employer must follow in order to remove itself from multi-employer bargaining and avoid being bound by the next collective bargaining agreement negotiated by the multi-employer group. Failure to follow these rules means that an employer will continue to be bound by the contract resulting from multi-employer bargaining — whether it wants to or not.

In a decision issued late last year, the National Labor Relations Board (Board or NLRB) made it even more difficult for a construction industry employer to leave a multi-employer bargaining group. Previously, and for almost 20 years, a union seeking to keep a construction industry employer in a multi-employer group and bind it to a new contract had to show that the employer affirmatively demonstrated to the union its intention to be bound by the new contract. Now it appears that the NLRB will bind a construction industry employer to the multi-employer agreement if it failed to follow the multi-employer association’s rules for withdrawing from multi-employer bargaining — even if the employer did not give the union any indication it intended to be bound by a new contract. Carr Finishing Specialties, Inc., 358 NLRB No. 165 (2012).

As a result, in 2013 and going forward, construction employers considering whether and how to join or withdraw from multi-employer bargaining associations should pay careful attention to Carr Finishing as they make their strategic business and employment-related decisions.

Employer Repudiation of Union Relationships in Construction Industry

Section 8(f) of the NLRA gives construction industry employers a unique exception to the standard election procedures and requirements under section 9(a) of the Act. Outside the construction industry, unions receive recognition under section 9(a) only by either: (1) establishing majority status representation of employees through a secret ballot election conducted by the Board, or (2) through voluntary recognition by the employer. The section 8(f) exception, however, recognizes the special predicament of construction employers, which typically do not have permanent workforces, need to be able to predict their labor costs when submitting bids on contracts, and rely upon the local unions as their source of labor. Accordingly, construction employers are permitted to recognize and enter into collective bargaining agreements with construction industry unions even before they hire any employees, and without any expression of union support by the employees.

While neither party to such an 8(f) "pre-hire" agreement may repudiate the agreement during its term, once a pre-hire agreement expires, and unlike in the section 9(a) context,1 either side is then free to repudiate the relationship and refuse to continue to honor the expired agreement. The employer may even refuse to recognize the union in the absence of the union’s demonstrated majority status.

In addition to being able to enter Section 8(f) "prehire" agreements, construction industry employers can also band together with other employers to engage in multi-employer bargaining. The intersection of the right to repudiate a "pre-hire" contract and the rules for exiting a multi-employer bargaining group can create problems for employers, as the Carr Finishing decision demonstrates.

Prior Precedent Favored Allowing Single Employer Withdrawal from Multi-Employer Negotiations

The Board’s rules for withdrawal from multi-employer associations has evolved. It established the rules on which an employer outside the construction industry can withdraw from participation in a multi-employer bargaining association in the Section 9(a) context in Retail Associates, Inc., 120 NLRB 388 (1958). Under Retail Associates, an employer outside the construction industry that was previously part of a multi-employer bargaining association must affirmatively demonstrate its intention to withdraw from the multi-employer association before multi-employer bargaining starts; an employer that remains silent before and during multiemployer bargaining will be bound to the next agreement negotiated by the multiemployer association.

In its 1994 decision in James Luterbach Construction Co., 315 NLRB 976 (1994), the Board addressed withdrawal from a multi-employer association by a construction industry employer subject to a pre-hire agreement. It ruled that because a single 8(f) employer may automatically repudiate the agreement and its relationship with the union, once its pre-hire agreement with a union expires, an employer participating in a multiemployer association must also demonstrate some "affirmative action" illustrating its intention to be bound to the association’s bargaining efforts, in order to be found to be bound to any successor agreement.  

Thus, in Luterbach, the Board formalized this distinction with its two-part test. The first prong (like the test for 9(a) employers) asks whether the employer was part of the multiemployer association prior to the dispute at issue. If that answer is yes, prong two then asks whether "the employer has, by a distinct affirmative action, recommitted to the union that it will be bound" by the upcoming or current multiemployer negotiations. Luterbach strongly implies that only where the second prong is also answered in the affirmative will a single employer in the construction industry then be bound to a successor multiemployer agreement.

Luterbach has remained the law, but it has been enforced rarely since 1994. See Iron Workers Tri-State Welfare Plan v. Carter Construction, Inc., 530 F. Supp. 2d. 1021, 1031 (N.D. Ill. Jan. 18, 2008) (finding that a single employer undertook no distinct affirmative act sufficient to bind it to subsequent multiemployer negotiations). For example, and on the federal appellate level, the First, Third and Tenth U.S. Circuit Courts of Appeals have cited the Luterbach two-prong approach as background in section 9(a) contexts, but each then applied the Retail Associates method.2 See, e.g., Haas Electric, Inc. v. NLRB, 299 F.3d 23, 27 (1st Cir. 2002) (covering Connecticut, Massachusetts, Maine, New Hampshire and Rhode Island); Sheet Metal Workers' Int'l Ass'n Local 19 v. Herre Bros., Inc., 201 F.3d 231, 242 (3d Cir. 1999) (covering Delaware, New Jersey and Pennsylvania); NLRB v. Triple C Maintenance, Inc., 219 F.3d 1147, 1156 (10th Cir. 2000) (covering Colorado, Kansas, New Mexico, Oklahoma, Utah and Wyoming).

Limits on Employer Withdrawal and Repudiation under Association Agreements

In Carr Finishing, the Board added a roadblock to individual employers seeking to exit multiemployer associations. In this recent decision, the Board determined that the employer at issue violated the Act by unilaterally ceasing to apply the terms of the multi-employer collective bargaining agreement to unit employees without following the multi-employer association’s rules to withdraw. In the case, the Upstate Iron Workers Employers’ Association (UIWEA) — like many multi-employer bargaining associations — accepted those employers that completed an agency agreement stating that the UIWEA would be the sole and exclusive agent of the employers in collective bargaining with local unions.

The Board explained that the employer would have only been able to lawfully withdraw from the UIWEA by complying with the agency agreement’s express terms, which the employer failed to do when it neglected to resign its membership in the UIWEA before the final 90 days of the prior collective bargaining agreement.

What This Means for Construction Industry Employers

Carr Finishing strongly suggests that once a single employer has designated the multi-employer association as its bargaining agent, the NLRB will not require any additional affirmative action to bind the employer to subsequent multi-employer negotiations or agreements. It is, then, virtually automatic — making it significantly harder for the employer to say goodbye to the multi-employer association and avoid being bound to the association’s next negotiated agreement with the union.

As a result of Carr Finishing, employers in the construction industry who enter multi-employer associations should carefully scrutinize the obligations conferred on them under their association’s documents. Carr Finishing raises a concern that by joining an association for the convenience of shared resources and greater negotiating leverage than each individual employer would have alone, an employer may be sacrificing significant advantages it would otherwise hold under section 8(f), namely, the ability to repudiate freely its recognition of a union at the end of each collective bargaining agreement term.


1 Employers outside the construction industry can end a relationship with a union only on a showing that the union no longer represents a majority of the bargaining unit employees no longer supports the union or the union no longer wishes to represent the employees.

2The employers at issue in both Herre Bros. and Triple C Maintenance, respectively, were each found to have voluntarily recognized the union as a section 9(a) bargaining representative by including recognition language in their collective bargaining agreements with the unions. The employer in Haas Electric never challenged the application of the Retail Associates analysis, so the First Circuit did not apply the Board’s reasoning and test of Luterbach in its review.

To ensure compliance with Treasury Regulations (31 CFR Part 10, §10.35), we inform you that any tax advice contained in this correspondence was not intended or written by us to be used, and cannot be used by you or anyone else, for the purpose of avoiding penalties imposed by the Internal Revenue Code.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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