Sixth Circuit Affirms NLRB Position on Pre-Recognition Agreements - Articles

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Posted by: Christy Gibson on Oct 9, 2012

By:  C. Eric Stevens and Matthew G. Gallagher*

     As labor unions and employers explore more creative approaches to partner together in today’s competitive marketplace, they must still respect the limits imposed on them by Sections 8(a) and 8(b) of the National Labor Relations Act.  The U.S. Court of Appeals for the Sixth Circuit’s decision in Montague v. NLRB,[i] affirming the NLRB decision in Dana Corporation, 356 N.L.R.B. 49 (2010), provides some certainty concerning the propriety of pre-recognition agreements between unions and employers.  The case also addresses the extent to which such agreements may be used as part of a “neutrality” approach to union recognition under the NLRA.              

     In early 2002, the UAW began a campaign to organize the St. Johns, Michigan facility of Dana Corporation, an automotive parts manufacturer.  Dana and the UAW were familiar counterparts, having bargained collectively since at least the mid-1950s, and the UAW already represented approximately 2,200 Dana employees in bargaining units across several of Dana’s facilities.

     On August 6, 2003, Dana and the UAW entered into a Letter of Agreement (LOA) setting forth a framework that would govern bargaining if a majority of St. Johns employees selected the UAW as their bargaining representative. The parties’ stated purpose in entering into the LOA was to form a positive, non-adversarial partnership to better position Dana and its employees to meet the challenges posed by “dramatic changes in the domestic automotive market.” The parties acknowledged in the LOA that Dana could not legally recognize the union absent a showing of  majority support from an appropriate bargaining unit, or if Dana specifically disclaimed any recognition of the union.  The LOA also reiterated the employees’ rights to choose their collective bargaining representative.

     In addition, the LOA memorialized several ground rules by which the parties would be bound if the UAW sought recognition at a non-organized Dana facility.  For example, Dana agreed to remain “totally neutral regarding the issue of representation,” inform employees of its neutrality, provide the UAW access to employees, and provide the UAW with employee contact information upon request. The parties also created a mechanism for determining if and when the union achieved majority status and voluntarily limited their respective rights, to commence a strike or a lockout during organizing.

     The LOA also described certain principles that would be included in future collective bargaining agreements between the parties. These included shared health care costs, a minimum duration, the importance of attendance and productivity, a minimum number of job classifications, emphasis on team-based approaches, promotion of Dana’s “idea program,” promotion of continuous improvement, flexible compensation, and mandatory overtime when necessary. The parties also agreed to a dispute resolution procedure in the event a final agreement could not be reached. While certain of the terms, such as those related to mandatory overtime and compensation could become binding, they had no immediate impact on employees’ terms and conditions of employment.

     When, pursuant to the LOA, the UAW requested a list of employees working at Dana’s St. Johns facility, three St. Johns employees filed unfair labor practice charges. The National Labor Relations Board’s General Counsel issued a complaint alleging that, by entering into the LOA, Dana rendered unlawful assistance to a minority union in violation of Sections 8(a)(2)[ii] and (1)[iii] of the NLRA.  The Board also asserted that the UAW accepted that assistance in violation of Section 8(b)(1)(A) of the Act.[iv] The General Counsel alleged the LOA constituted unlawful assistance in that it “set forth terms and conditions of employment to be negotiated in a collective bargaining agreement should [the UAW] obtain majority status.”[v] The General Counsel’s theory was premised upon the U.S. Supreme Court’s decision in International Ladies’ Garment Workers Union v. NLRB (“Bernhard-Altmann), holding that an employer unlawfully assists a union by recognizing that union as the exclusive bargaining representative of employees from whom it has not gained majority support.[vi]  The Board also relied on its decision in Majestic Weaving[vii] that an employer unlawfully assists a minority union when it negotiates a collective bargaining agreement conditioned on the union winning majority support.

     An Administrative Law Judge dismissed the complaint, finding that the General Counsel failed to plead unlawful recognition and, in the alternative, that the LOA constituted neither unlawful recognition by Dana of a minority union nor a substantive agreement regarding the terms and conditions of employment for the St. Johns employees. The Board affirmed, by a 2-1 majority, in a written decision authored by Chairman Wilma Liebman and Member Mark Pearce. Member Brian Hayes dissented.

     The Board distinguished the Dana LOA from the facts of both Bernhard-Altmann and Majestic Weaving. The Board found that while the employer had explicitly recognized a minority union in Bernhard-Altmann, the LOA explicitly disclaimed any such recognition. The Board further found that while Majestic Weaving involved an initial, oral grant of exclusive recognition, and subsequent negotiation of a bargaining agreement to be consummated upon the union’s attainment of majority status, the LOA between Dana and the UAW “did no more than create a framework for future collective bargaining.”[viii] The dissent disagreed, arguing that the LOA contained substantive contract provisions, which made it indistinguishable from the agreement in Majestic Weaving.

     On appeal, the Sixth Circuit affirmed the Board’s decision.  The court began by noting the significant deference to be given to the Board’s expertise in interpreting the Act,[ix]  and consequently limited its inquiry to whether the Board’s decision was reasonable.  With regard to whether the LOA contained pre-negotiated concessions and contractual obligations, the court held that while the LOA’s mandatory overtime and compensation provision could become binding if submitted to arbitration, “the Board was within its discretion to allow some substantive terms to be determined . . . prior to recognition, so long as that agreement did not ultimately impact employees’ choice regarding representation.”  Additionally, in response to the petitioners’ argument that they were bound by the LOA’s no-strike/no-lockout and dispute resolution mechanisms, the court noted those provisions would only apply before a collective bargaining agreement was reached.  The employees were free to reject them by not choosing the UAW, and, therefore, they too had no impact on employee choice of a bargaining representative.

     It is of note that neither the Board nor the court considered any conduct of the parties outside the terms of the LOA.  Dana had issued a press release announcing it had reached a “partnership agreement” with the UAW and that the agreement supported the rights of its employees to choose whether or not they wished to be represented by a union.  However, there was nothing in the record regarding the extent to which either the press release or the LOA was made available to employees.  While the court noted that the employees ultimately did not select the UAW as their bargaining representative, it did not engage in a meaningful inquiry as to whether the existence of the LOA interfered with, coerced, or restrained the employees’ exercise of their Section 7 rights or provided the UAW with a “cloak of authority with which to persuasively elicit additional employee support.”[x]

     The Montague decision provides some level of certainty to employers and unions that may find the implementation of a pre-recognition “neutrality” agreement to be advantageous.  It also serves as a reminder to all sides of the importance of success at the Board level and the difficulty of overturning a Board decision, particularly in the Sixth Circuit, which fully respected the administrative standard of review of a Board decision.

     Employers should work with counsel to consider if and when a neutrality agreement is ever appropriate, and whether one may be entered into lawfully.

*C. Eric Stevens is a shareholder in the Nashville office, and Matthew Gallagher is an associate in the Memphis office, of Littler Mendelson, P.C. Mr. Stevens may be reached at, while Mr. Gallagher’s email address is

[i]Case No. 11-1256 (Aug. 23, 2012).

[ii]Section 8(a)(2) provides that an employer may not “dominate or interfere with the formation or administration of any labor organization or contribute financial or other support to it.” 29 U.S.C. § 158(a)(2).

[iii]Section 8(a)(1) provides that an employer may not “interfere with, restrain, or coerce employees in the exercise of their Section 7 rights.” 29 U.S.C. § 158(a)(1). Section 7 provides that employees have the right to bargain collectively through representatives of their own choosing or to refrain from bargaining. See 29 U.S.C. § 157.

[iv]Section 8(b)(1)(A) similarly provides that a union may not restrain or coerce employees in the exercise of their Section 7 rights.”

[v]Consolidated Complaint, ¶ 9, Case No. 7-CA-46965 et al.

[vi]366 U.S. 731 (1961), aff’g Bernhard-Altmann Texas Corp., 122 N.L.R.B. 1289, 1292-93 (1959).

[vii]147 N.L.R.B. 859 (1964).

[viii]356 N.L.R.B. 49, at *8.

[ix]“[C]ongress has given the Board the power to make industrial policy as long as it is doing so within the confines of the statutory language.  While ‘[w]e review the Board’s conclusions of law unrelated to the National Labor Relations Act de novo … otherwise [we] show deference to the Board’s reasonable interpretation of the Act.” Montague, Case No. 11-1256 at 10-11, (citingLee v. NLRB, 325 F.3d 754 (6th Cir. 2003)).

[x]See Bernhard-Altmann, 366 U.S. at 736.