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MARTIN v. BENESH & BRUNS

United States District Court, Northern District of Illinois, E.D


January 6, 1982

WILLIAM F. MARTIN, ET AL., PLAINTIFFS,
v.
BENESH & BRUNS, INC., A CORPORATION, DEFENDANT.

The opinion of the court was delivered by: Marshall, District Judge.

MEMORANDUM OPINION

In this action, plaintiffs seek to compel defendant Benesh & Bruns, Inc. to make the contributions to various pension and welfare funds of the International Union of Operating Engineers, Local 150, which defendant allegedly contracted to make. Defendant claims it need not honor the contract, since the union in question did not enjoy the support of a majority of defendant's employees.

For the purposes of this motion, the relevant facts are as follows. Defendant was party to a contract between the I.U.O.E., Local 150, and certain employer associations. The contract required the defendant to make contributions to the union's Welfare Fund, Pension Trust Fund, Apprenticeship Fund, and Vacation Savings Fund. Defendant has not made the required contributions. As a result, plaintiffs*fn1 filed suit to recover the amounts due and owing on the contract. This court has jurisdiction under § 301(a) of the Labor Management Relations Act, 29 U.S.C. § 185(a)(1976), and § 502(f) of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132(f)(1976).

Defendant moved for summary judgment on the ground, inter alia, that the union did not have the support of a majority of defendant's employees, and therefore could not enforce the contract. In an opinion dated September 22, 1981, this court ruled that the alleged nonmajority status of the union was not a defense to this action.*fn2 Defendant has moved the court to reconsider its earlier ruling.

In suits under § 301, a federal common law of labor relations is applied. Textile Workers Union v. Lincoln Mills of Alabama, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957). This common law is formulated by reference to § 301's ultimate purpose of furthering the goals of national labor policy. Id. at 456-57, 77 S.Ct. at 917-18. One of the fundamental goals of national labor policy is protecting the freedom of choice of employees. The National Labor Relations Act is intended to protect the principle that the majority of employees should be free to decide whether they wish to be represented by a union, and, if so, which union will be chosen to provide representation. In order to protect the will of the majority, the Act makes it an unfair labor practice for an employer to sign a labor contract with a nonmajority union. See International Ladies' Garment Workers' Union v. NLRB, 366 U.S. 731, 737-38, 81 S.Ct. 1603, 1607, 6 L.Ed.2d 762 (1961). This result is dictated by the "generally prevailing statutory policy that a union should not purport to act as the collective bargaining agent for all unit employees, and may not be recognized as such, unless it is the voice of the majority of the employees in the unit." NLRB v. Local Union No. 103, International Association of Bridge, Structural & Ornamental Iron Workers, 434 U.S. 335, 344, 98 S.Ct. 651, 657, 54 L.Ed.2d 586 (1978) [hereinafter Higdon]. See Connell Construction Co. v. Plumbers & Steamfitters Union, Local 100, 421 U.S. 616, 632-33, 95 S.Ct. 1830, 1839-40, 44 L.Ed.2d 418 (1975).

However, § 8(f) of the National Labor Relations Act, 29 U.S.C. § 158(f)(1976), is an exception to the general rule requiring majority representation. Higdon, 434 U.S. at 345, 98 S.Ct. at 657; Connell, 421 U.S. at 632, 95 S.Ct. at 1839. Section 8(f) provides:

  It shall not be an unfair labor practice under
  subsections (a) and (b) of this section for an
  employer engaged primarily in the building and
  construction industry to make an agreement
  covering employees engaged (or who, upon their
  employment, will be engaged) in the building and
  construction industry with a labor organization of
  which building and construction employees are
  members (not established, maintained, or assisted
  by any action defined in subsection (a) of this
  section as an unfair labor practice) because (1)
  the majority status of such labor organization has
  not been established under the provisions of
  section 159 of this title prior to the making of
  such agreement, or (2) such agreement requires as
  a condition of employment, membership in such
  labor organization after the seventh day following
  the beginning of such employment or the effective
  date of the agreement, whichever is later, or (3)
  such agreement requires the employer to notify
  such labor organization of opportunities for
  employment with such employer, or gives such labor
  organization an opportunity to refer qualified
  applicants for such employment, or (4) such
  agreement specifies minimum training or experience
  qualifications for employment or provides for
  priority in opportunities for employment

  based upon length of service with such employer,
  in the industry or in the particular geographical
  area: Provided, That nothing in this subsection
  shall set aside the final proviso to subsection
  (a)(3) of this section [relating to invalid
  dismissals pursuant to union security clauses]:
  Provided further, That any agreement which would be
  invalid, but for clause (1) of this subsection,
  shall not be a bar to a petition filed pursuant to
  section 159(c) or 159(e) of this title.

The exception created by § 8(f) allows employers and nonmajority unions to sign contracts, which are commonly referred to as "pre-hire agreements." However, the exception is a limited one. In Higdon, the Supreme Court held that union picketing aimed at requiring an employer to adhere to a pre-hire contract was an unfair labor practice under § 8(b)(7)(C) of the Act, 29 U.S.C. § 158(b)(7)(C)(1976) (prohibiting picketing where an object thereof is forcing an employer to bargain with or recognize a union). Defendant concedes that the holding of Higdon does not reach this case, since Higdon was decided under a statute which prohibits certain forms of picketing, and no picketing is present in this case. However, defendant argues that the free choice rationale of Higdon reaches attempts to enforce contracts made with nonmajority unions under § 301. This is a question on which courts have split.*fn3 It is the view of this court that national labor policy favors the enforcement of pre-hire contracts. Therefore, the motion to reconsider is denied.

Our analysis is essentially in two parts. First, in suits to enforce pre-hire agreements, there is present a strong national labor policy favoring enforcement of labor contracts, which was not at issue in Higdon. Second, we find that the national labor policy favoring free choice which was at the core of Higdon is not present in this case.

It is beyond doubt that there is a strong national labor policy favoring the enforcement of labor contracts and the removal of defenses to enforcement. See Lewis v. Benedict Coal Co., 361 U.S. 459, 80 S.Ct. 489, 4 L.Ed.2d 442 (1960); Textile Workers Union of Lincoln Mills of Alabama, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957); Pennington v. United Mine Workers, 325 F.2d 804, 819 (6th Cir. 1963), rev'd on other grounds, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965); Trustees of the Atlanta Iron Workers Local 387 Pension Fund v. Southern Stress Wire Corp., 509 F. Supp. 1097, 1100-01 (N.D.Ga. 1981). Moreover, basic fairness dictates that these contracts should be enforced; employers should not be allowed to break their promises with impunity. See Contractors, Laborers, Teamsters & Engineers Health & Welfare Fund v. Associated Wrecking Co., 638 F.2d 1128, 1134 (8th Cir. 1980) ("An employer who accepts the benefits of such an agreement must also honor the obligations under that agreement").*fn4 The strength of the national labor policy favoring enforcement of contracts is heightened in this case for two reasons. First, this case involves contributions to various welfare funds, and the national labor policy favoring enforcement of contracts applies "with even greater force to protecting the interests of beneficiaries of the welfare fund, many of whom may be retired, or may be dependent. . . ." Lewis v. Benedict Coal Co., 361 U.S. at 470, 80 S.Ct. at 496. Second, the policy is especially relevant here because of the risk of unjust enrichment. If the defense of nonmajority status is allowed, defendant will be relieved of having to pay money due and owing to the various pension funds. However, this money is not rightfully the defendant's. Rather, these "payments are really another form of compensation to the employees, and as such the obligation to pay royalty might be thought to be incorporated into the individual employment contracts." Id. at 469, 80 S.Ct. at 495, see Huge v. Long's Hauling Co., 590 F.2d 457, 464-65 (3d Cir. 1978) (Adams, J., concurring); Lewis v. Seanor Coal Co., 382 F.2d 437, 441 (3d Cir. 1967), cert. denied, 390 U.S. 947, 88 S.Ct. 1035, 19 L.Ed.2d 1137 (1968). Defendant's obligation was really to its individual employees, who were the ultimate beneficiaries of the contract, and it is unfair that they should lose past compensation due and owing because of the union's status.

Higdon simply did not involve these considerations. There, the Court was addressing the question of whether picketing to enforce a pre-hire agreement by a minority union was the sort of coercion forbidden by § 8(b)(7)(C). The national labor policy favoring enforcement of contracts was not at issue, because Higdon was not an enforcement action. Higdon was a case about picketing, which Congress has specifically labelled as unduly coercive in § 8(b)(7)(C). Higdon was decided in a context very different from the context of this case. See Associated Wrecking, 638 F.2d at 1132-33; Southern Stress, 509 F. Supp. at 1103-04; Eastern District Council of the United Brotherhood of Carpenters & Joiners of America v. Blake Construction Co., 457 F. Supp. 825, 829 (E.D.Va. 1978).*fn5 Defendant relies on Higdon's statement that "[t]he employer's duty to bargain and to honor the contract is contingent on the union's attaining majority support at the various construction sites," 434 U.S. at 345, 98 S.Ct. at 657, and that prior to that point the agreement is "voidable and does not have the same stature as a collective bargaining contract entered into with a union actually representing a majority of the employees. . . ." Id. at 341, 98 S.Ct. at 655. However, defendant ignores the context in which this language appears. The Court's holding was that the pre-hire agreement was "voidable" only for purposes of the National Labor Relations Act.

  It does not necessarily follow, however, that the
  absence of majority status leaves the union
  without a remedy for breach of contract on any
  provision of the section 8(f) agreement. To say
  that an employer may challenge the majority status
  of a union in an unfair labor practice proceeding
  is not to say that the employer may assert the
  union's lack of majority status as a defense in a
  breach of contract action on a type of contract
  specifically authorized by the act. Associated
  Wrecking, 638 F.2d at 1133.

In fact, the Higdon Court itself termed pre-hire agreements "comparable" to hot-cargo clauses, which are unenforceable for purposes of the NLRA, but which can be enforced in a breach of contract action under § 301. See id. at 349 n. 11, 98 S.Ct. at 659 n. 11.*fn6 Moreover, the Court has specifically held that the § 301's definition of "contracts" which can be sued on under its provisions is broader than the term "collective bargaining contract" which is enforceable for the purposes of the NLRA. Retail Clerks v. Lion Dry Goods, Inc., 369 U.S. 17, 25, 82 S.Ct. 541, 546, 7 L.Ed.2d 503 (1962). Thus, there is no reason to assume that what is considered an invalid contract for one act should also be considered invalid under the other.

In short, the context of Higdon is much different than that of the instant case. Higdon arose in the context of picketing under the NLRA, a practice which Congress felt was especially coercive. See 434 U.S. at 346-48, 98 S.Ct. at 658-59. This case arises under § 301. Here, the special concern with picketing is not present; instead a set of policies favoring the enforcement of contracts free of defenses operates. The different mix of national labor policies requires a different result than that reached in Higdon.

Although the mix of policies present in this case substantially differs from that present in Higdon, that observation should not end the analysis. The essence of defendant's position is not merely sterile reliance on Higdon, it is the contention that enforcement of a contract with a nonmajority union poses the sort of threat to employee free choice that national labor policy strongly condemns. One court put it this way:

  If the goal is the maintenance of
  employee free choice, it matters not whether the
  sword dangling above the employer's head is an
  unfair labor practice charge or a breach of
  contract suit. The direction of the pressure is the
  same — toward treatment of a nonmajority union as
  the employee's agent for collective bargaining.
  Baton Rouge Building & Trades

  Council v. E.C. Schafer Construction Co.,
  657 F.2d 806, 813 (5th Cir. 1981).

If the Baton Rouge court's assessment of pre-hire contracts with nonmajority unions were correct, then this court might hold such contracts unenforceable, despite the differences between this case and Higdon. National labor policy strongly favors allowing the majority of employees to decide for themselves whether or not they favor representation by a given union. See Chicago District Council of Carpenters Pension Fund v. Sorenson, No. 80 C 2392, slip op. at 6-7 (N.D.Ill. Aug. 24, 1981). However, enforcement of a pre-hire agreement does not present the threat to employee free choice which national labor policy condemns.

First, the absence of any recognitional objective means that the normal policies against employer dealings with non-majority unions are not present. The danger posed by contracts between employers and non-majority unions is not that an employer is observing his contract with a minority union, since § 8(f) permits that. Rather it is the threat of "top-down" organizing; that an outside union will use its rights under such a contract to harass employees into joining that union. See 434 U.S. at 346-49, 98 S.Ct. at 658-59; International Union of Operating Engineers, Local 150, 255 N.L.R.B. No. 83 (1981). However, as noted above, this harassment is the result of picketing, and not the result of breach of contract suits. See Associated Wrecking, 638 F.2d at 1133-34; House Rep. No. 741, 86th Cong., 1st Sess. 23-24 (1959), reprinted in 1 NLRB, Legislative History of the Labor-Management Reporting and Disclosure Act of 1959 781-82 (1959) [hereinafter cited as Legislative History]. We fail to see how a breach of contract action poses the same threat to employee free choice that picketing does. The contract inures to the benefit of the individual employees, not the union. Congress recognized this point in the area of hot cargo clauses, which it concluded were not so coercive as to be unenforceable in a breach of contract action, but which become unduly coercive only when they give rise to picketing. See NLRA § 8(e), 29 U.S.C. § 158(e)(1976); Donald Schriver, Inc. v. NLRB, 635 F.2d 859, 876 (D.C. Cir. 1980); Western Washington Cement Masons Health & Security Trust Funds v. Hills Homes, Inc. 26 Wn. App. 224, 612 P.2d 436 (1980). Congress has always been especially concerned with picketing, see 434 U.S. at 346-48, 98 S.Ct. at 658-59, here, there is only a breach of contract action. Employees are not pressured to join the union; they receive the same benefits under the contract whether or not they are union members. Therefore, the threat to employees' rights not to join a given union, or any union at all, is simply not present in this case. To the extent that employees are encouraged to join the contracting union, it is not the result of coercion, but simply because they are pleased with the benefits that the union has obtained for them under the contract. Enforcing this contract under § 301 poses no significant risk to employee free choice. See Carpenters Health & Welfare Trust Fund for California v. Dos Reis, No. S-80-960 (E.D.Cal. Nov. 10, 1981).*fn7

Second, the final proviso to § 8(f) protects employee free choice in this case. That clause allows employees to petition the NLRB for a certification election at any time after the signing of a pre-hire agreement. Because dissatisfied employees have resort to this mechanism, pre-hire agreements pose no threat to their freedom to reject the contracting union. See Local No. 150, International Union of Operating Engineers v. NLRB, 480 F.2d 1186, 1189-91 (D.C. Cir. 1973); Oilfield Maintenance Co., 142 N.L.R.B. 1384, 1387 n. 10 (1963).

Finally, it is entirely possible that the result defendant wishes this court to reach would pose a greater threat to employee free choice than would the result we do reach. If pre-hire agreements were held unenforceable unless the contracting union attains majority support, the union might be able to threaten employees with possible loss of the contractual pension and welfare entitlements unless they support the union. This could prove to be a powerful barrier to employee free choice, and could provide a minority union a powerful weapon with which to conduct "top-down" organizing.

In sum, enforcement of the pre-hire agreements under § 301 poses no significant threat to employee free choice. National labor policy does not support defendant's position.

Before concluding this memorandum, the court notes that thus far it has made little reference to the legislative history of § 8(f). This is because there is little of aid in that history; Congress seems not to have given the question presented in this case much thought when it enacted § 8(f). However, to the extent that there is relevant evidence of legislative intent, it supports this court's holding.

First, Congress clearly recognized, when enacting § 8(f), that it was not feasible for unions in the construction industry to demonstrate majority support, because of the short duration of employment in that sector of the economy. See Sen.Rep.No. 187, 86th Cong., 1st Sess. 55-56 (1959), reprinted in 1 Legislative History 451-52; House Rep.No. 741, 86th Cong., 1st Sess. 19-20 (1959), reprinted in 1 Legislative History 777-78. It is hardly reasonable to suppose Congress intended unions to be required to make a showing in suits to enforce § 8(f) contracts which it considered nearly impossible to make when enacting that section.*fn8

Second, the structure of the Act indicates that Congress did not intend to make pre-hire agreements unenforceable. When Congress wished to limit the ability of non-majority unions to engage in "top-down" organizing, it did so explicitly, as in § 8(b)(7)'s prohibition on recognitional picketing, or § 8(b)(4)'s ban on secondary action by labor unions. Defendant's position, at bottom, is that these sections did not go far enough in dealing with the problem of "top-down" organizing. However, that is an argument which must be addressed to Congress, and not this court. See Donald Schriver, Inc. v. NLRB, 635 F.2d 859, 876 (D.C. Cir. 1980).

Third, the Senate's version of the 1959 Amendments*fn9 to the NLRA, which added §§ 8(e) and 8(f) to the NLRA, contained a clause in what became § 8(e) which made hot cargo agreements not only unfair labor practices, but unenforceable under § 301. See S. 1555, § 707(c), 86th Cong., 1st Sess. (1959), reprinted in 1 Legislative History 583. Section 8(f) contained no similar provision.*fn10 This absence of an unenforceability clause therefore creates a strong inference that the draftsmen of the Act intended § 8(f), unlike § 8(e), to give rise to enforceable contracts under § 301.

Finally, in its recent amendments to the ERISA statute, Congress has strongly indicated that it intends pre-hire contracts are enforceable without regard to a union's majority status. While amending the Act, Congress added 29 U.S.C. § 1145 (Supp. IV 1980):

  Delinquent Contributions. Every employer who is
  obligated to make contributions to a multi-employer
  plan under the terms of a collectively bargained
  agreement shall, to the extent not inconsistent
  with law, make such contributions in accordance
  with the terms and conditions of such plan and
  agreement.

Defendant is an employer covered by the terms of the statute. While the statutory language is ambiguous as to whether a union's nonmajority status is a defense, the sponsors of the legislation made it clear that they did not intend nonmajority status to be a defense.

    Recourse available under current law for
  collecting delinquent contributions is
  insufficient and unnecessarily cumbersome and
  costly. Some simple collection actions brought by
  Plan trustees have been converted into lengthy,
  costly, and complex litigation concerning claims
  and defenses unrelated to the employer's promise
  and the Plan's entitlement to the contributions.
  This should not be the case. Federal pension law
  must permit trustees of plans to recover
  delinquent contributions efficaciously, and
  without regard to issues which might arise under
  labor-management relations law (other than
  29 U.S.C. § 186). Sound national pension policy
  demands that employers who enter into agreements
  providing for pension contributions not be
  permitted to repudiate their pension promises.

    In this regard we endorse judicial decisions
  such as Lewis v. Benedict Coal Corp.; Lewis v.
  Mills Ridge Coals Inc.; and Huge v. Longs Hauling
  Co., Inc. Cases such as Western Washington Laborers
  Employers Health and Security Trust Fund v.
  McDowell, and Washington Area Carpenters Welfare
  Fund, et al. v. Overhead Door Co., are considered
  to have been incorrectly decided, and this
  legislation is intended to clarify the law in this
  respect by providing a direct, unambiguous ERISA
  cause of action to a plan against a delinquent
  employer. 126 Cong.Rec.S. 11673 (daily ed. Aug. 26,
  1980) (remarks of Sen. Williams); 126 Cong.Rec.H.
  7899 (daily ed. Aug. 26, 1980) (remarks of Rep.
  Thompson) (citations omitted).

The ERISA amendments are strong evidence that Congress does not intend pre-hire agreements to be unenforceable absent the union's demonstration of majority status.
*fn11

In sum, neither the holding nor the rationale of Higdon indicates that the result this court reached in its earlier opinion was incorrect.*fn12 National labor policy favors the enforcement of pre-hire contracts without regard to the majority status of a union. The motion to reconsider is denied.


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