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06/15/82 Washington Area Carpenters v. Overhead Door Co. of

June 15, 1982




Before: ROBINSON, Chief Judge, HOMER THORNBERRY,* Senior Circuit Judge, and WILKEY, Circuit Judge.



Opinion for the Court filed by Circuit Judge WILKEY.

WILKEY, Circuit Judge: This is an appeal of the district court's grant of summary judgment in favor of appellee Overhead Door Company of Metropolitan Washington. Appellants, union fringe benefit funds ("the Funds"), brought suit in January 1979 to recover contributions Overhead Door allegedly owed the Funds under successive agreements with the Carpenters' District Council Washington, D.C. and Vicinity ("the Union"). Overhead Door argued that these "prehire" agreements, made pursuant to section 8(f) of the National Labor Relations Act ,1 were not enforceable because the Union never gained majority support of the bargaining unit. The district court agreed, and entered summary judgment against the Funds. We reverse. I. BACKGROUND

Section 8(f) of the NLRA provides that it shall not be an unfair labor practice for construction industry unions and employers to make agreements (called "prehire" agreements), even though the union has not attained majority status among the workers.2 This exempts construction industry employers from the normal rule that bargaining with anyone other than the majority representative is an unfair labor practice.3 Once the union gains majority support, the prehire agreement matures into a fully effective collective bargaining agreement.4 The status of a prehire agreement prior to that time is the issue in this case.

In 1969 an area-wide collective bargaining agreement existed between the Union and the Construction Contractors Council, Inc. of Washington, D.C., an employers association. Overhead Door was not a member of the Contractors Council and thus not a party to the agreement. According to the president of Overhead Door, in October 1969 the company was told by the Union's representative that to complete a job it was working on as a subcontractor it would have to sign an agreement with the Union, and its two employees working on the job would have to join the Union.5 These workers complied, leaving Overhead Door with three Union members out of fiteen employees. Overhead Door also complied, entering into an "Acceptance Agreement" which incorporated the terms of the area-wide collective bargaining agreement. Similar Acceptance Agreements were signed by Overhead Door in July 1972 and December 1976, incorporating the provisions of subsequent area-wide agreements. The 1976 agreement expired in 1978, meaning that the agreements between Overhead Door and the Union were in effect for a ten-year period.

The parties agree that these Acceptance Agreements, which cover all terms and conditions of employment for carpentry services, were prehire agreements. One provision of each agreement required Overhead Door to make contributions to the Funds on behalf of all covered employees. For example, by the end of the ten-year period Overhead Door was required to pay, for each hour worked by each employee, $.80 per hour to the Health and Welfare Fund, $.60 per hour to the Pension Fund, and $.07 per hour to the Apprenticeship Training Fund. In 1976 the Funds conducted a partial audit of the company's records, and concluded that is had failed to make contributions for most employees and had undercounted the hours worked by the few employees for whom contributions were made.

In January 1979 the Funds brought this suit under section 301 of the Labor Management Relations Act and section 502 of the Employee Retirement Income Security Act,6 seeking to collect the unpaid contributions. In response Overhead Door conceded that it contributed to the Funds on behalf of its three union employees, who have received some benefits from the Funds.It argued, however, that the agreements did not cover most hours worked by two of these three employees because one had not worked as a carpenter since 1969 and the other had been a supervisor since 1969. More important, the company denied responsibility for contributions based on hours worked by its nonunion employees. It claimed that it had never applied the agreements to these employees, and asserted that the agreements could not be enforced because the Union had not achieved majority status.

In April 1980 the district court granted summary judgment for Overhead Door. It determined that agreements under section 8(f) are permissible but not enforceable until the union gains majority support among the employees. The court also rejected the Funds' argument that the company was not permitted to assert the defense of unenforceability in a suit brought by the Funds, third party beneficiaries of the agreements. Since the Funds failed to establish the majority status of the Union, the agreements could not be enforced. Overhead Door was not liable for contributions on behalf of any employees, whether union or nonunion.7

The Funds then appealed. On 12 June 1981 this court stayed the appeal pending the Supreme Court's decision in Kaiser Steel Corp V. Mullins.8 In Mullins this court had held that in a suit brought by union funds to recover unpaid contributions, the employer could not raise the defense that the contract was illegal. The Supreme Court reversed, holding that the defense of illegality was legitimate.

Turning again to this appeal, we reverse and remand to the district court for a decision on the merits of the Fund's claims. II. LEGITIMATE EMPLOYER DEFENSES TO A TRUST FUND SUIT TO RECOVER UNPAID


The Funds contend that Overhead Door is not entitled to defend this suit on the basis of the alleged unenforceability of the prehire agreements. The district court rejected this argument, but the legal bases of its decision have been largely superceded by a recent Supreme Court decision and a new statutory provision dealing with this issue. We therefore must consider these new developments.

In Kaiser Steel Corporation V. Mullins the Supreme Court held that a company which had promised to contribute to union welfare funds was "entitled to plead and have adjudicated a defense that the promise is illegal under the antitrust and labor laws."9 The collective bargaining agreement between Kaiser Steel and the United Mine Workers included a clause requiring Kaiser Steel to make contributions to union funds based on each ton of coal produced and each hour worked by employees, as well as on each ton of coal purchased from another operator who did not make contributions on his production. In a suit brought by the union funds to recover the latter form of contributions, Kaiser Steel sought to raise the defense that the purchased coal clause was void and unenforceable because it violated sections 1 and 2 of the Sherman Act and section 8(e) of the Labor Management Relations Act (which prohibits "hot cargo" clauses whereby an employer agrees not to do business with another employer).10 The district court ...

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