Employment Law Daily Employer may repudiate Sec. 8(f) contract where no employees in bargaining unit
Monday, April 25, 2016

Employer may repudiate Sec. 8(f) contract where no employees in bargaining unit

By Ronald Miller, J.D. In a case of first impression in the Sixth Circuit, the appeals court held that an employer had the right under the NLRA to repudiate both its statutory and contractual obligations under a Section 8(f) collective bargaining agreement when it did not employ anyone within the relevant bargaining unit. In affirming a district court’s judgment, the appeals court adopted the single-employee-unit rule (Baker Concrete Construction, Inc. v. Reinforced Concrete Contractors Association, April 21, 2016, Batchelder, A.). In 2000, the employer became a signatory to a multiemployer CBA between an employer association and an Iron Workers local. It was intended to cover current employees as well as employees that the employer had not yet hired. The CBA was a pre-hire agreement allowed only in the construction industry. Essentially, it established the basic workplace conditions, wage rates, and employee protections that can be found in any other CBA, and then was renewed automatically from year to year. Contract repudiation. On January 25, 2013, the employer sent a letter to the union providing notice that it intended to terminate the agreement. The union responded that the request to withdraw was untimely. However, the employer asserted that it had no employees performing bargaining unit work, so that it was not bound to any provisions of the CBA. The union filed a grievance against the employer and the employer agreed to appear at an arbitration hearing only to preserve its position that it was free to repudiate the contract because it did not employ any workers under the CBA. After the arbitrator found the employer in violation of the CBA, it filed this suit for declaratory judgment. It was undisputed that the employer had not hired any employees under the CBA for several years prior to its repudiation of the agreement. Following discovery, the parties filed cross-motions for summary judgment. Eventually, the district court granted the employer’s motion and vacated the arbitration award, declaring that the employer had no duty to bargain with the union and had no ongoing contractual obligations under the CBA. One-employee-unit rule. This appeal presented the questions of whether the employer had the right to repudiate the CBA, whether its repudiation was effective with respect to both its statutory and contractual obligations, and whether the district court correctly adjudicated these questions on the merits without deferring to the judgment of the arbitrator. The Sixth Circuit observed that this case hinged on the applicability and scope of the one-employee-unit rule. This is a narrow rule that has been articulated and applied by the NLRB in cases involving CBAs under NLRA Section 8(f). Under the one-employee-unit rule, an employer that employs one or fewer unit employees on a permanent basis may withdraw recognition from a union, repudiate its contract with the union, or unilaterally change employees’ terms and conditions of employment without affording the union an opportunity to bargain. Only the Seventh Circuit, in J.W. Peters, Inc. v. Bridge, Structural, & Reinforcing Iron Workers, Local Union 1, and the Ninth Circuit, in Laborers Health & Welfare Trust Fund v. Westlake Dev., have had the opportunity to address this rule, and they both endorsed it. Here, the Sixth Circuit determined that the rationale expressed by its sister circuits was applicable to the present case. The employer found itself as a party to a Section 8(f) agreement that was inapplicable to any of its employees and had been for some time. Moreover, it sent clear notice of termination to the union. Consequently, the Sixth Circuit held that the employer had the right to repudiate the CBA, and with such repudiation, all of its statutory and contractual obligations under the agreement were terminated. Logic of rule. The logic of the one-employee-unit rule fits perfectly with (1) the nature of collective bargaining, (2) the nature of Section 8(f) agreements, and (3) the Supreme Court’s rationale in Jim McNeff, Inc. v. Todd. First, with reference to the nature of collective bargaining, the NLRB has long held that the very concept of collective bargaining “presupposes that there is more than one eligible person who desires to bargain.” Second, with reference to the nature of Section 8(f) agreements, the court observed that section was enacted to address a very narrow and specific problem. Third, with reference to the Supreme Court’s rationale in McNeff, the one-employee-unit rule is in line with the Court’s holding regarding the repudiation of Section 8(f) agreements. Finding that the one-employee-unit rule was properly applicable in this case, and that the employer properly repudiated its CBA, the Sixth Circuit affirmed the judgment of the district court.

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