A contractor signatory to an old “me-too” agreement with
an “evergreen” clause could be responsible for benefit and other fund
contributions required by a later multiemployer collective bargaining agreement
(a “CBA”) even though the contractor was not a member of the multiemployer
group and did not grant continuous bargaining rights to the group, the U.S.
Court of Appeals for the Third Circuit (DE, NJ, PA) has held.
The contractor in the case, Management Resource Systems
(“MRS”), signed a letter of assent in 1997 binding it to the 1997-2001 CBA
between the Interior Finish Contractors Association (“IFCA”), and Metropolitan
Regional Council of Carpenters. It did not sign a subsequent letter of
assent or other agreement with the union, and it stopped making fund
contributions after the CBA expired. The funds sued MRS in 2014, claiming
that MRS improperly failed to make contributions required under the 2012-2015
CBA between the IFCA and Carpenters. The funds argued that MRS was bound
to the successor CBA because the 1997 me-too agreement contained an evergreen clause stating that the agreement
would remain in effect “for the duration of the collective bargaining agreement
between the [union] and [IFCA] that is effective on the date of this Agreement
and for the duration of any addition, modification or renewal thereof until one
party shall provide to the other written notice…to terminate,” and MRS
(undisputedly) never provided such notice.
The district court dismissed the funds’ complaint.
The court relied on the National Labor Relations Board’s 1994 Luterbach
ruling. In Luterbach, the Board held that a nonsignatory 8(f)
employer will be bound by multiemployer bargaining only if the employer (1) was
"part of the multiemployer unit prior to the dispute" and (2)
"has, by a distinct affirmative action, recommitted to the union that it
will be bound. Because neither element was satisfied here, the court held
that MRS could not be bound by the 2012-2015 CBA.
The circuit court reversed the district court’s decision
and revived the complaint. The court found that the Luterbach test
does not apply here because Luterbach did not involve an evergreen
clause and because the test only applies to resolve ambiguity about the
employer's commitment to be bound. The circuit court noted that the Board
in Luterbach recognized that “there can be cases where an employer has
expressly given continuing consent to bargain a successor contract on a
multiemployer basis.” Here, the evergreen clause in the “me-too”
agreement constitutes such consent. “Luterbach is limited to
cases that do not involve evergreen clauses or other continuing grants of
bargaining authority,” the circuit court held.
Instead of applying Luterbach, the circuit court
relied on the Board’s 1995 Baker Electric decision. Baker
Electric held that an employer was bound to a successor CBA pursuant to a
me-too agreement with an evergreen clause. The court rejected MRS’s
argument that Baker Electric is distinguishable because it involved a
broader delegation of bargaining authority than in the present case. The
court found no significant difference between the contract clauses granting
authority in the two cases. The court further noted that its decision to
apply Baker Electric, and to enforce an evergreen clause in the
absence of termination notice, is consistent with decisions of the Fifth (LA,
MS, TX), Sixth (KY, MI, OH, TN), Eighth (AR, IA, MN, MO, NE, ND, SD), and Ninth
(AK, AZ, CA, ID, MT, NV, OR, WA, HI) Circuits.
The court also rejected a policy argument by MRS about
the importance of protecting employers’ rights to bargain on their own
behalf. “Nothing here suggests that MRS was somehow coerced or duped into
entering into the me-too agreement clearly binding it to future CBAs,” stated
the court. “The agreement was voluntarily executed, and MRS does not
argue to the contrary. MRS failed to terminate or properly repudiate the
agreement according to its express terms. We are therefore confident that
enforcement of the me-too agreement in no way vitiates MRS’ rights.”
This case serves as an important reminder that
contractors should be cognizant of the terms they’ve agreed to their labor
agreements, including less formal letter agreements. A contractor that
leaves an area where it has been signatory to a labor agreement other than a
project labor agreement may find itself still bound by the agreement’s
contribution requirements, wage provisions, subcontracting restrictions, and
other terms if it returns to the area in the future without first terminating
the agreement in accordance with the contract terms. Contractors seeking
to end their labor obligations should pay careful attention to the provisions
of evergreen and termination clauses. They should also consider the
potential for withdrawal liability.
Furthermore, those with 9(a) agreements may have a
continuing duty to recognize the union even after contract termination.
(For information on the distinction between 8(f) and 9(a) agreements, visit
AGC’s online Labor & HR
Topical Resources library.
Select the main category “Collective Bargaining” and the subcategory
“Collective Bargaining Agreements: 8(f) vs. 9(a).” AGC-member login
is required to access most resources.) Consultation with a construction
labor lawyer is well-advised. (Click here
for a directory of AGC Labor and Employment Law Council members.)
Carpenters
Health & Welfare Fund of Phil. & Vicinity v. Management Resource
Systems, Inc., Case No. 15-2508 (3rd
Cir., 9/13/16).
Source: AGC
of America
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