Many commentators have noted the decline in unions’ use of the NLRB’s formal election process to organize new groups of employees.  A central tool that has arisen in its place is the neutrality and card check agreement.  In these agreements, an employer agrees that it will recognize and bargain with a union if the union can show that it represents a majority of the employer’s employees, usually by way of signed authorization cards.  While not necessary, these agreements usually also require the employer to remain neutral on the question of whether employees should join a union.

An employer may be interested in signing a neutrality agreement for a number of reasons.  It may see advantages in avoiding a protracted battle with a union.  It may perceive advantages to unionization when it comes to entering new markets or selling to particular consumers.  What an employer doesn’t know, however, is what its labor costs might look like with a unionized workforce.

In an opinion announced today, however, the NLRB took a step towards alleviating some of that uncertainty for an employer confronted with the decision of whether to sign a neutrality agreement.  In Dana Corporation, 356 N.L.R.B. No. 59 (Dec. 6, 2010), the employer and union agreed to a neutrality and card check agreement for one of the employer’s auto parts plants.  The union already represented some employees at other plants that the employer operated.  The agreement also contained a disclaimer that the employer was not recognizing the union as the representative of a majority of its employees. 

The agreement, however, went beyond just the process by which the union could gain recognition.  Instead, it also contained substantive provisions that would "inform future bargaining" on particular topics.  For example, the agreement specified that any labor contract would (1) not weaken the employer’s and union’s understandings on containing health care costs, (2) have a minimum duration of four years, (3) recognize "flexible compensation," (4) allow for mandatory overtime when necessary, and (5) incorporate the employer’s "idea program."  There were other provisions as well, including a limit on the employee’s right to strike and an interest arbitration provision for the resolution of any disputes over the contents of the labor agreement.

The NLRB held, in a 2-1 decision, that the employer and union did not violate the NLRA by entering into the agreement.  The majority reasoned that the agreement disclaimed majority representation status and did not change the existing terms and conditions of employment of the employees.  The agreement was vague enough to still require, in the NLRB’s view, "substantial" negotiations in order to conclude a labor agreement.  The majority also reasoned that there were important policy reasons related to stable labor relations to encourage the formation of agreements such as the one at issue.

The dissent viewed the majority’s action as overruling a case decided decades ago by the NLRB.  It viewed the substantive provisions of the agreement as significantly limiting the parameters of bargaining over a future labor contract.  It limited employees’ right to strike.  It dictated certain health care related terms.  It limited the duration of a contract to 4 – 5 years.  Thus, the employer and union violated the NLRA by negotiating a collective bargaining agreement prior to the union’s demonstration of majority support.

There are three significant points for labor professionals with this decision:

  • For those employers that may have business reasons for entering into a neutrality agreement, the decision provides those employers with the opportunity to more carefully predict what impact the unionized workforce will have on labor costs.
  • How far an employer and union can go without violating the NLRA, however, is left for another day.  The majority refused to announce a "bright line" test, holding instead that each case will depend on the facts of the situation.
  • For employers wishing to remain union free, the decision will be less welcome.  As the dissent recognized, the decision could "encourage the escalation of top-down organizing" where unions organize the employer first (e.g., through a "corporate campaign") and then organize the employees.