Winston & Strawn LLP: Labor News May 2009

In This Issue

Unions won 66.8 percent of representation elections conducted by the National Labor Relations Board in 2008, which, according to the NLRB, is the highest win rate since 1955 when unions won 67.6 percent of the elections (an inconvenient fact, perhaps, for proponents of the Employee Free Choice Act, who argue the new law is necessary because unions cannot win elections due to employer interference…). The union win rate in 2007 was 60.4 percent in 2007. Additionally, for the second year in a row the Teamsters participated in the most NLRB sponsored elections and organized the most workers, adding 13,815 workers, followed by SEIU with 10,928, and UFCW with 9,243.

The push for unionization of Wal-Mart employees has stepped up dramatically since President Obama's election. The United Food and Commercial Workers stated that in the last several months approximately 1,000 Wal-Mart employees from more than 100 stores have signed union authorization cards. The UFCW also brought 77 of its union organizers to Washington, D.C. to meet with lawmakers and discuss wage rates and benefits at Wal-Mart.

Pilots at Cape Air Inc., based in Hyannis, Massachusetts, voted to replace the Teamsters as their bargaining agent with the Cape Air Pilots Association. The Cape Air pilots are the second group this year represented by Teamsters Local 747 that has voted to oust the Teamsters. According to Cape Air Pilots, they were "dissatisfied with the confrontational and sporadic IBT representation" and wanted "strong advocacy" which they believe they will receive from the Cape Air pilots Association.

Hospital employees at Doctors Medical Center in San Pablo, California voted in the first election for representation by the newly created National Union of Healthcare Workers. The California Public Employment Relations Board certified the election by secret mail ballot among a bargaining unit of nearly 300 skilled and unskilled hospital employees. While the SEIU United Healthcare Workers had represented the Doctors Medical Centers since 2003, a break-away group of former-SEIU leaders who were ousted after SEIU President Andy Stern placed the local union under trusteeship and removed its elected leaders formed NUHW in response to widespread dissatisfaction with the SEIU.

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Workers United members announced plans to conduct a sit-in at Hartmarx Corp., a Chicago-area garment factory, if the company's creditors proceed with liquidation and closing of the plant. The company is currently unable to repay more than $114 million it owes to one of its creditors and has no viable offers to be acquired. The union stated that it would model the sit-in after the Republic Windows and Doors sit-in that occurred in December when union employees organized a successful sit-in that pressured management and its principal creditor, Bank of America, to reach a solution that allowed the workers to keep their jobs and/or receive separation pay.

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The United Auto Workers voted to accept major concessions negotiated by the UAW, Chrysler, Fiat SpA, and the Treasury Department. Among other things, the contract modification suspends bonuses and the jobs bank program, limits overtime to hours worked over 40 in a week, rather than eight in a day, changes work rules, eliminates cost-of-living adjustments, and changes the funding of the Chrysler retiree health care benefit allowing Chrysler to pay half of its funding obligation in company stock. Despite the numerous concessions, the contract modification does not cut core wages, health care benefits, or jobs.

GM and the UAW announced on May 21 that they had reached a tentative agreement on modifications to their 2007 collective bargaining agreement and union retiree health care trust, which the membership promptly ratified on May 29. In addition to agreeing to many of the same concessions the UAW gave Chrysler, under the UAW/GM agreement, the UAW will receive 17.5 percent of GM's common stock, the VEBA will get $6.5 billion in preferred stock in the revamped company that pays a nine percent dividend, a $2.5 billion note to be repaid in installments until 2017 and warrants for as much as 2.5 percent of the common shares, thereby sparing GM from having to fund its obligations to the VEBA in cash. The retirees would give up some medical benefits, such as dental and vision programs and some coverage for medications for ulcers and erectile dysfunction. GM agreed to new incentives to entice workers to leave the company. Those not eligible to retire would get as much as $115,000 in cash and a $25,000 voucher to buy a car, the union has said in information distributed to members. Retirement-eligible production workers would be offered $20,000 and skilled-trades employees who qualify to retire would get $45,000. Both groups would also receive $25,000 vehicle vouchers.

Like their American brothers, the Canadian Auto Workers also ratified a concessionary agreement with GM that substantially reduces GM's labor costs. The new contract freezes pension benefits for GM retirees through 2015, reduces health and other benefits costs and withdraws cash bonuses negotiated in the three-year agreement ratified in May 2008, among dozens of other give backs and changes.

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The New York Times Co. and Boston Globe management reached tentative agreements with six of seven unions from which they have sought concessions to avoid closing down the Boston Globe completely. A Globe spokesman stated that the tentative agreements would save the Times Co. approximately half the amount it needs to avoid the newspaper's shutdown. Some of the proposed changes include pay cuts, reduced contribution to employee retirement and health care plans and elimination of lifetime job guarantees.

The New York Times and the Newspaper Guild of New York members reached an agreement to accept temporary five percent wage reductions through the end of 2009. These pay cuts are identical to pay cuts imposed on the Times' nonunion employees.

Northern Indiana Public Service Co. reached agreements with United Steelworkers Local 12775 and Local 13796, providing wage increases and changes in the current health insurance plan. Under the new agreement, workers will receives 2.75 percent hourly wage increase in 2010 and 2011; 3 percent hourly increases in 2012 and 2013 and a 3.5 percent increase in 2014. Additionally, the contract changes the current health insurance benefits plan for both locals from traditional indemnity plans to structured PPO plans which will have the effect of increasing employee's premiums, but decreasing their overall healthcare costs because insurance costs less through the PPO than the indemnity plan.

UAW and Mack Trucks Inc. reached an agreement covering 1,700 employees. The agreement, which UAW members will vote on within the next weeks, would transfer the company's retiree health care liability to a voluntary employees' beneficiary association (VEBA). If ratified, Mack Truck's parent company, AB Volvo, would fund the VEBA with $525 million in cash to be paid over a five-year period in equal installments.

Southwest Airlines and Members of Transport Workers Union Local 556 ratified a four-year contract that includes wage increases and benefit improvements. The agreement provides three percent pay raises for 2008 through 2010 and a variable profitability-based pay raise of one percent, twopercent, or three percent for 2011.

Lockheed Martin and two unions representing electrical workers and office and professional employees ratified three-year collective bargaining agreements that provide wage and benefit increases. The employees will receive wage increases of four percent the first year and three percent in each of the second and third years. The agreement also provides a pension increase ranging from $68 per month per year of service to $79 per month per year of service for each worker.

Alaska Airlines and members of the Air Line Pilots Association ratified a tentative agreement for a four-year contract that provides first-year pay increases ranging from 11.8 percent to 29.5 percent for 1,455 pilots. The agreement is the first contract in at least thirty years negotiated under Section 6 of the Railway Labor Act rather than under provisions of a letter of agreement with the company that triggered binding arbitration when an agreement could not be reached. Pilots subject to the agreement will receive pay increases, an option to participate in the same performance incentive plans as non-union employees and more flexibility in their retirement plan options.

The Screen Actors Guild and American Federation of Television and Radio Artists members ratified new three-year contracts with advertising agencies and national advertiser representatives that cover performers in television, radio, and other commercials. The agreements establish a new payment structure for commercials made for Internet and new media.

Collective bargaining data compiled by BNA shows an average first-year wage increase for 2009 is 2.8 percent, down 0.7 percent from 3.5 percent in 2008; and the median first-year increase for settlements is three percent, down from 5.1 percent in 2008.

Data compiled by BNA shows that the average base rate wage increases reached in major Canadian collective bargaining agreements decreased from 3.3 percent in the fourth quarter of 2008 to 2.4 percent in the first quarter of 2009. Agreements reached in March 2009, however, increased up to 2.9 percent, higher than the 2.4 percent for the same period in 2008.

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Two federal appellate courts issued conflicting opinions on whether the NLRB, which has consisted of only two members since the start of 2008, possesses the statutory authority to render decisions with only a two-member board. The District of Columbia Circuit court held that the NLRA requires at least three-sitting members at all times. In contrast, the Seventh Circuit, concurring with a First Circuit opinion issued earlier this year, ruled that the two-member Board may hear and decide cases. Cases challenging the validity of the nearly 400 decisions issued by the two-member board since early 2008 are currently pending in seven other circuit courts. On May 18, the NLRB's two current members announced that they will continue issuing decisions and orders and will file a petition for rehearing with the U.S. Court of Appeals for the District Court of Columbia's decision invalidating their authority. Laurel Baye Healthcare of Lake Lanier Inc. v. NLRB (D.C.Cir.); New Process Steel LP v. NLRB (7th Cir.).

The Ninth Circuit overturned an NLRB decision that a Las Vegas golf course legally withdrew union representation only six months after resuming bargaining based on the parties substantial bargaining during an earlier eight-month round of negotiations. The court found no evidentiary basis for the NLRB's finding that the earlier bargaining relieved the burdens associated with negotiating an initial contract and therefore remanded the case for further review of the impact the first round of negotiations had on the new negotiations. Laborers' Int'l Union Local 872 v. NLRB.

The District of Columbia Circuit Court denied the Association of Flight Attendants challenge to the U.S. Department of Transportation's decision to certify Virgin American as an air carrier. According to the court, the AFA lacked standing to pursue its challenge of the DOT's decision because the union failed to show a causal connection between the DOT's certification of Virgin American as an airline and any alleged injury sustained by the union. Assoc. of Flight Attendants et al. v. U.S. Dep't of Trans.

A Minnesota District Court judge ruled that Northwest Airlines pilots may bring a claim against their union for negotiating a benefit plan that allegedly discriminates against older pilots. Northwest and the pilots' union made an agreement in 2005, after Northwest entered into bankruptcy, which froze benefits under the plan so they could not accrue in the future. The longest-serving pilots had received their maximum benefits and thus were not affected by the plan. Less senior pilots, however, lost the change to accrue more benefits. To off-set this result, Northwest agreed on a plan which provided fewer benefits to long-serving pilots and greater benefits to more junior pilots. Some longer-serving pilots have challenged this plan as violating ERISA. The parties will proceed with their case in the Minnesota District Court. Northwest Airlines Inc. v. Filipas.

A federal bankruptcy court judge granted Star Tribune Company the right to amend two collective bargaining agreements as part of a plan for the company to exit bankruptcy. Since filing bankruptcy in early January 2009, Star Tribune has sought to amend its collective bargaining agreements and withdraw from any multiemployer pension plans. The bankruptcy court permitted Star Tribune to both amend the agreements and withdraw from the pension plans, finding the company had given "good, sufficient and sound business justifications" for wanting to change the arrangements. In re Star Tribune Holdings Corp. et al.

A federal court in Michigan held that an employer lawfully withdrew recognition from IBEW Local 131 after merging its represented facility with an unrepresented facility. After closing its unionized facility, the employer reassigned fourteen of its service technicians to a non-union facility with 27 employees. The court reasoned that after the merger the formerly represented employees did not maintain a separate identity, but were fully integrated into the other branch, thereby becoming one bargaining unit. Thus, the employer was justified in withdrawing recognition from IBEW Local 131. Glasser v. ADT Sec. Servs. Inc.

A federal judge in Chicago granted the NLRB's request for an injunction against an employer that terminated the employment of three of its 13 licensed practical nurses (LPN) during an organizing drive by the SEIU. An NLRB Administrative Law Judge found that the LPNs were not supervisors prohibited from unionizing, and that the employer acted illegally by interrogating LPNs about their union views, threatening them with reprisals, firing three of them for union activity, which created the impression that the LPNs' union activity was under surveillance and promising rewards to certain employees if they would spy on their co-workers, thereby precluding the possibility of a fair representation election. The court entered an order requiring the employer to cease and desist from engaging in similar unlawful conduct, and to recognize and bargain with SEIU Local 4. Barker v. Regal Health & Rehab Ctr. Inc.

An NLRB regional director ruled that interns and residents at a New York hospital are "employees," as defined by the National Labor Relations Act, not students, and therefore entitled to coverage under the NLRA. The hospital argued that the residents were not employees based on the Pension Fund Equity Act which provides employers with federal funding for "graduate medical education." The regional director rejected this argument, finding that statutory definitions of residents in non-related pension and tax laws had no effect on the Board's view, first proffered in Boston Medical Center, 330 NLRB 152, 162 LRRM 1329 (1999), that medical residents are employees covered by the Act. In connection with her ruling, the regional director ordered an election within 30 days among the 280 residents on whether they want to be represented by the Committee of Interns and Residents, an affiliate of the SEIU. St. Barnabas Hospital.

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Governor David Paterson of New York issued a new policy requiring all operators of new hotels and convention centers for which New York state has provided some form of financing to enter into labor peace agreements as a condition of receiving state assistance. The labor peace agreements require any owner or operator of a new hotel or convention center and a labor organization seeking to represent the employees at such hotel or convention center to agree that the labor organization and its members will refrain from engaging in labor activity that will disrupt the hotel's operations.

Congress continues to negotiate an alternative to the Employee Free Choice Act in hopes of gaining enough votes for some version of the EFCA to avoid a filibuster in the Senate. Some Democratic senators have expressed concerns about the current proposed statute's card check provisions and are working to make any changes necessary to secure the bill's passage.

An international coalition of institutional investors sent Congress a letter urging passage of the Employee Free Choice Act. Several of the letters' signatories were individuals involved in union pension investing, including Daniel F. Pedrotty, director of the AFL-CIO's office of investment, and Stephen Abrecht, of SEIU Employees and Affiliates Pension Plans. The letter stated that EFCA would "help balance the relationship between worker and employer in the U.S." Opponents of the bill, however, contend that the legislation would worsen the current recession by forcing employers to eliminate more jobs.

A group of religious leaders in the U.S. announced they are forming an organization, "Faith Leaders for Workplace Fairness," to promote passage of the proposed EFCA. More than 200 religious leaders of myriad denominations signed statements supporting EFCA. Rabbi Mordechai Liebling stated that a deep-rooted support for the right to organize exists in Judaism. Additionally, Catholic theologian, Joseph J. Fahey, stated that Catholic scholars believe EFCA is rooted in Catholic social teaching that labor unions are necessary for just order.

On May 12, Vice President Joe Biden delivered a speech in support of the EFCA's passage at the annual American Federation of State, County and Municipal Employees' legislative conference. In his speech, Vice President Biden bemoaned the fact that only 7.5 percent of the private sector workforce in the United States is unionized, compared with 37 percent of federal, state, and local government employees. According to Biden, EFCA is a necessary measure in the effort to restore the middle class.

President Obama reiterated his support for EFCA during a town hall meeting in New Mexico. Obama, who supported the bill during his presidential campaign, stated that he is looking for ways to compromise certain parts of the bill in order to obtain enough votes in the Senate without eliminating the "core idea of the legislation" which he states is to "make it easier for people who want to form a union to at least get a vote and have an even playing field."

Celebrities from Hollywood and Broadway released a video endorsing the passage of EFCA and urging viewers to lobby their members of Congress to do the same. The video was developed by a number of entertainment unions that are affiliates of the AFL-CIO including Actors' Equity Association; the American Federation of Musicians; and the Screen Actors Guild. Among the performers appearing in the videos are actress Amy Brenneman and comedian Jerry Stiller.

Senator Tom Harkin (Dem. Iowa) announced on May 19 that he plans on bringing EFCA for debate "in the next month."

Colorado Governor Bill Ritter vetoed a bill that would have allowed locked-out workers to receive unemployment benefits. According to Governor Ritter, the legislation would have negatively effected ongoing contract negotiations between the United Food and Commercial Workers and the three largest grocers in Colorado. When the Governor vetoed the message, he stated that he believed it was "ill-advised and counterproductive to enact legislation that materially impacts the relative bargaining position of parties in the midst of ongoing negotiations."

The House recently voted to pass the Federal Aviation Administration legislation which will enable unions to more easily organize FedEx employees. The Railway Labor Act, which governs labor relations in the airline industry, currently covers FedEx workers' collective bargaining rights. The new legislation, however, would shift FedEx employees coverage from the RLA to the NLRA, which provides different rules and procedures for union organizing rights that would make it easier for unions to organize FedEx ground transport workers.

The Federal Election Commission closed a case accusing Wal-Mart of using company meetings to pressure employees against voting for Democrats. In a 3-3 vote, the FEC split over whether there was reason to believe a violation of federal election law occurred, thus stymieing further action on the matter. Five organizations, including the AFL-CIO and Change to Win, brought a complaint against Wal-Mart alleging that the company violated federal election law when it made presentations to managers informing them that "if Democrats win enough Senate seats and we elect a Democrat president in 2008 EFCA will pass." Three of the Commissions' members found these statements were "acceptable conventional wisdom," not express advocacy. The other three members, however, believed that such statements could be interpreted as warning employees against voting for democratic candidates. Due to the deadlock vote, the Commission stated it was unable to conclusively determine that Wal-Mart violated federal election law and therefore dismissed the complaint.

Rep. Joe Wilson (R-S.C.) introduced the Freedom From Union Violence Act, legislation that would amend the Hobbs Anti-Racketeering Act, to impose fines of up to $100,000 and/or a prison sentence of up to 20 years to any person who commits an act of violence or extortion against another person during a labor dispute. According to Rep. Wilson, a loophole exists in the current Hobbs Act which permits violence and intimidation on behalf of labor unions if such coercion is to further a "legitimate" union objective. The proposed legislation would prohibit all violence and intimidation during labor disputes, creating express exemptions for peaceful picketing and incidents involving "minor bodily injury or minor damage to property."

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A federal jury in Chicago convicted the former president of Teamsters Local 743, Richard Lopez, and two former Teamster officers, former union comptroller Thaddeus Bania and former Teamster organizer David Rodriguez, with labor fraud and theft in connection with a union election rigging scheme. According to the Justice Department, the three men diverted hundreds of official mail ballot packages to family and friends and then cast the ballots in favor of the incumbent officers.

Harry Keil, an administrative manager of a multiemployer pension fund associated with the International Machinists District 9, pleaded guilty to one felony count of embezzlement for misappropriating over $341,000 from the union's benefits plans and one count of mail fraud. Keil faces up to five years in prison on the embezzlement charge and up to 20 years imprisonment for the mail fraud charge.

Former president of the New York City Central Labor Council, Brian McLaughlin, was sentenced to 10 years in prison for racketeering and making false statements in a loan application. According to prosecutors, McLaughlin admitted to stealing from the union's bank account, accepting payments from union contractors, secretly maintaining an interest in a company doing business with union employers, and using his position as a union official to advance the company's financial interests.

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The SEIU is establishing a nationwide hotline and Web site to support small business owners threatened with closing and workers facing job loss during the recession. The hotline and Web site, "Keep America Working," will serve as an information gathering services to document and share the experiences of those affected by the recession. SEIU representatives stated that the hotline and Web site will also connect workers and small business owners with resources to take action and save jobs including connecting workers with community activists, neighbors, and elected officials.

UNITE HERE's president, John Wilhelm, suspended the union's general president, Bruce Raynor, in a move endorsed by the union's General Executive Board by a 32-0 vote. The union board cited several reasons for Raynor's suspension in a recent statement, including his "attempts to divide the union, promote the SEIU as a competing labor organization and remove the union from control of the Amalgamated Bank, the Union's pension and benefits funds and the Union's building in New York City as well as fostering the illegal secession of joint board from the Union."

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