Winston & Strawn LLP: Labor News January 2009

In This Issue

On Jan. 27, Caritas Christi Health Care, a hospital chain employing 13,000 workers at six Massachusetts hospitals, announced it would remain neutral in organizing drives by SEIU Local 1199 United Healthcare Workers East. The union seeks to organize approximately 6,500 workers, consisting of virtually all employees except doctors, nurses, and administrators.

According to data released by the U.S. Labor Department's Bureau of Labor Statistics, the proportion of public- and private-sector workers who were members of a labor union grew to 12.4 percent in 2008, representing the first increase in union membership since 1983. Of the nation's 129.4 million workers, 16.1 million were members of unions—an increase of nearly 450,000 from 2007. 36.8 percent of public-sector workers were union members in 2008, whereas only 7.6 percent of the private workforce was unionized.

On Jan. 21, the Labor Department's Office of Labor-Management Standards issued a final rule updating Form LM-2, the annual financial disclosure report for unions with annual receipts of at least $250,000. The rule requires additional disclosure of compensation received by union organization officers and employees, further details about parties buying and selling union assets, and additional disclosures regarding specified types of receipts, including separate identification of any payments received totaling more than $5,000. The rule also revokes the ability for unions with receipts of less than $250,000 to file the simplified LM-3 if they have previously been deficient or delinquent in filing the report. The rule takes effect on Feb. 20, 2009 and applies prospectively to labor organizations whose fiscal years begin on or after July 1, 2009.

The Service Employees International Union launched a $50 million publicity and lobbying campaign, which it is calling "Change that Works," in support of an economy recovery plan, an overhaul of the health care system, and the Employee Free Choice Act.

American Rights at Work, a labor policy and advocacy organization, announced a $3 million advertising and lobbying campaign to support efforts for Congress to approve the EFCA. The EFCA would allow unions to be recognized based on authorization cards signed by employees, with the NLRB performing a card check and determining whether the union has majority support.

On Jan. 30, President Obama signed three executive orders reversing a number of Bush administration labor policies. The first order requires federal contractors to post notices informing workers of their rights under federal labor laws, and eliminating the requirement that employees be notified of their Beck rights. The second prohibits federal contractors from being reimbursed for expenses related to efforts to influence union organizing. Such expenses can include hiring legal counsel or consultants and holding meetings. The third order requires successor contractors to offer jobs to workers currently on the job when the contractor takes over.

Members of the International Association of Machinists, Local 735, voted to accept a contract proposal by Vought Aircraft, ending a 15-week strike stemming from rejection of an earlier contract offer. Seventy-two percent of members voted for approval, which came days after Vought threatened to replace approximately 850 striking workers in its Nashville, Tenn. plant. Under the terms of the three-year agreement, the existing defined benefit pension plan for employees with less than 16 years of seniority will be frozen and replaced by a 401(k) plan. Employees with more than 16 years of service are eligible for $20,000–$25,000 buyouts depending on whether they return to active employment. In addition, hourly wages will be increased 75 cents, 50 cents, and 50 cents, respectively, over the next three years. The contract also increases pension multipliers, boosts workers' health care contributions, and reduces the maximum out-of-pocket health care cost levels.

The Frontier Airline Pilots Association voted to approve a bargaining agreement containing wage and benefit concessions with Frontier Airlines in an effort to push the airline out of Chapter 11 bankruptcy. Under the deal, the pilots' wages were modified and some benefits, such as matching contributions for 401(k) plans, were removed. Frontier will also be able to furlough certain employees during lean times and recall them when more work is available. As a result of this agreement, Frontier has now reached agreements with all of its employees.

The UAW has agreed to suspend the "jobs bank" employee benefit program in an effort to help Detroit auto companies remain in business. Chrysler and GM have already ended the program, which has guaranteed continued pay and benefits for laid-off autoworkers since the mid 1980s, while Ford is still working on implementation of the change. GM and Chrysler were required to gain concessions from UAW as part of their receipt of federal bailout funds in December 2008.

Collective bargaining agreements negotiated in 2008 resulted in an average first-year wage increase of 3.6 percent, equaling the average increase for 2007. Second-year increases averaged 3.4 percent, and third-year wages increased 3.3 percent, up .1 percent from the respective 2007 numbers. First-year wage increases in manufacturing contracts averaged 2.6 percent, while non-manufacturing averaged 4.1 percent. Construction contracts increased first-year wages by 5.3 percent, whereas state and local government agreements provided a 3.2 percent increase. Of the 997 agreements included in the study, 49 percent included benefits changes with insurance being addressed in 80 percent of such contracts. Only 4 percent of all contracts contained lump-sum factoring for first-year wage increases. As to the duration of agreements reached in 2008, 36 percent contained terms lasting more than three years, 48 percent were for three years, 11 percent were for two years, and only 5 percent involved terms of one year or less.

Collective bargaining agreements reached during January 2009 showed an average first-year wage increase of 3.3 percent, down .6 percent for the same period in 2008. On average, manufacturing contracts contained wage increases of 1.6 percent, with non-manufacturing increases averaging 3.8 percent. In 2008, the respective increases were 3.6 percent and 4.5 percent.

On Jan. 21, the U.S. Supreme Court ruled that the First Amendment permits unions to charge fees to nonmembers to subsidize litigation outside the nonmembers' collective bargaining unit if two conditions are met. First, the litigation must cover a subject matter, such as collective bargaining, that would be chargeable if the litigation were local. Second, the charge must be reciprocal, meaning that an expectation exists that other locals would contribute to the national union's costs for similar litigation on behalf of the contributing local. The petitioners were current and former Maine employees who were not members of the SEIU local. SEIU is allowed to collect a fee to subsidize litigation concerning bargaining units nationwide from employees who have opted out of union membership but benefit from the union's collective bargaining efforts. The court rejected the petitioners' argument that the First Amendment prohibits a union from compelling support for litigation outside of that arising within the nonmembers' bargaining unit. (Locke v. Karass)

On Jan. 30, the U.S. Court of Appeals for the Ninth Circuit ruled that the Railway Labor Act does not completely preempt a former employee's state law claims alleging that Alaska Airlines failed to pay her the wages due to her under a collective bargaining agreement. As a result, the class action suit was allowed to continue in Oregon state court and did not have to be submitted to arbitration, as required by the RLA. The court stated that because the plaintiffs' wage and hour claim was not completely preempted by the RLA and not removable to federal court, it must be allowed to continue in Oregon state court. (Moore-Thomas v. Alaska Airlines)

On Jan. 27, the New Jersey Supreme Court ruled that striking nurses at a hospital were entitled to unemployment benefits because the hospital remained open during the dispute and, thus, did not suffer a "stoppage of work" under New Jersey law. In 2004, nearly 100 nurses who had joined a picket line filed for unemployment claims for the time during which the strike took place. Over the hospital's objection the New Jersey Board of Review granted the nurses' unemployment benefits upon determining that the hospital had not experienced a "stoppage of work." That decision was reversed on appeal, with a New Jersey Superior Court finding that the board had not considered the expense incurred by the hospital in order to maintain its normal community service. The New Jersey Supreme Court reinstated the board's benefits award, stating that the hospital had remained in full operation and that losses in revenue due to the strike were not akin to a "stoppage of work." The court rejected the hospital's arguments that, in effect, it was being made to subsidize the strike and that the service hospitals provide to the community should be considered and distinguished from typical companies in assessing whether a work stoppage had occurred. (Lourdes Med. Ctr. of Burlington County v. Bd. of Review)

On Dec. 30, 2008, the District Court for the Western District of Wisconsin held that Alexander Phillips, a black electrician who joined the International Brotherhood of Electrical Workers, had presented sufficient evidence of racial discrimination to proceed to trial. In 2004, Phillips passed a qualification exam and was found eligible for union membership and placement on its referral list. For approximately two years, however, the union denied Phillips work, claiming no jobs existed. In 2006, the union finally offered Phillips work—six days after the Madison Equal Opportunities Commission determined probable cause supported Phillips' claim of racial discrimination. The district court found that 19 white electricians, who had the same qualification and experience level as Phillips and joined during the same time period, were offered work when Phillips was told there was none and that no other black members were allowed to join. According to the court, such evidence would support an inference of racial discrimination if the case were to proceed to trial. The union argued that the white electricians were not similarly situated to Phillips because they had completed the required apprenticeship program, while Phillips had not. The court rejected the argument, stating that the union didn't learn of Phillips' failure to complete the program until he had been removed from the union's referral list. (Phillips v. Int'l Bd. of Elec. Workers Local 159)

On Jan. 16, a federal district judge in Connecticut granted the NLRB’s request for an injunction stemming from allegations that Parksite, a building materials wholesaler, violated Section 7 of the NLRA by employing a hiring process that discriminated against union members. Parksite owns a distribution center that was previously run by another company that had entered a collective bargaining agreement with the teamsters. When Parksite regained management of the center, it terminated the employees and allowed them to re-apply along with nonmembers. Parksite then hired 25 employees, 14 of whom were union members, but declined to recognize the union, claiming that it was not yet done hiring and that outside hires constituted a majority of the workforce. In granting the injunction, the judge said that because Parksite is a "successor employer" of the previous management company, which had recognized the union, Parksite has an obligation to recognize and bargain with the union. The injunction requires Parksite to recognize Teamsters Local 671, offer employment to 10 union members, and rescind any unilateral changes that had been made to employment terms when Parksite took over management of its warehouse. (Hoffman v. Parksite Group)

In a Jan. 6 memorandum, NLRB associate general counsel Richard Siegel directed that information about union organizing and salting practices provided to the NLRB as evidence of how long individual "salts" would have remained on the job absent discrimination is exempt from disclosure to employers. The NLRB requires presentation of such evidence to calculate backpay awards for those who have been discriminated against due to their union activity and, typically, the evidence must be disclosed to employers. However, according to Siegel, the information represents strategic evidence warranting confidential protection and exemption from disclosure because enforcement proceedings could be interfered with if disclosure to employers were required. (Memorandum OM 09-27)

Starbucks agreed to settle with the NLRB regarding allegations that it had fired a Michigan employee for participating in Industrial Workers of the World union activities. Starbucks maintains the employee was terminated for being late. Although settlement terms were not available, they reportedly do not include reinstatement or backpay.

On Jan. 27, SEIU placed United Healthcare Workers-West, the union's third largest local with 150,000 members in California, under trusteeship in order to correct financial malpractice and to restore compliance with democratic procedures, according to its president, Andy Stern. SEIU removed all of UHW's elected leaders, ordered its constitution and bylaws be suspended, and appointed two SEIU executive vice presidents as trustees. One day later, UHW announced plans to form a new union, the National Union of Healthcare Workers and stated that more than 100 UHW elected leaders had resigned their SEIU memberships and that UHW members are being encouraged to withhold dues and fees from SEIU.

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On Jan. 7, presidents of 12 of the nation's largest labor unions, as well as the heads of the AFL-CIO and Change to Win federations, met in Washington, D.C. to begin discussions about reunifying the labor movement into one organization. According to the 12 presidents, the goal of the meeting was to "create a unified labor movement that can speak and act nationally on the critical issues facing working Americans." Former House Rep. David Bonior, now head of American Rights at Work, organized and facilitated the meeting. Results of the meeting have not been released.

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