No. 80-123 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

AUDIT SERVICES, INC. , a Montana Corporation, 

Plaintiff and Respondent, 

STEWART AND JANES, 

a Montana Corporation, 

Defendant and Appellant. 

Appeal from: District Court of the Eleventh Judicial District, 

In and for the County of Flathead. 

Honorable Robert Holter, Judge presiding. 

Counsel of Record: 

For Appellant: 

Hash, Jellison, O'Brien and Bartlett, Kalispell, 

Montana 

Eugene R. Nielson argued, Kalispell, Montana 

For Respondent: 

Cure and Borer, Great Falls, Montana 

Maxon R. Davis argued, Great Falls, Montana 

For Amicus Curiae: 

Kevin A. Campana, Helena, Montana 

Hilley and Loring, Great Falls, Montana 

Emilie Loring argued, Great Falls, Montana 

Submitted: November 20, 1980 

Filed: 
Mr. Justice John C. Harrison delivered the Opinion of the Court. 

Plaintiff trust fund, assignee of claims of certain 

benefit trust funds, sued defendant Stewart and Janes, 

employer, to recover contributions plaintiff alleged were 

due and owing pursuant to the terms of certain collective 

bargaining agreements executed by defendant. The cause was 

tried before the District Court of the Eleventh Judicial 

District, sitting without a jury, on July 12, 1979. The 

District Court entered judgment in favor of plaintiff and 

against defendant in the sum of $27,980.96. Defendant 

appeals from this judgment. 

The sole issue on appeal is whether the collective 

bargaining agreements on which plaintiff sued are judicially 

enforceable. 

The following facts are derived from extended findings 

of fact entered by the District Court and are disputed by 

defendant. 

Defendant Stewart and Janes is a Montana corporation 

engaged in the construction industry in this state. In its 

construction business, defendant employs laborers and carpenters. 

Defendant was a member of and had assigned its bargaining 

rights to a multi-employer bargaining group in Kalispell, 

Montana, for purposes of negotiating collective bargaining 

agreements with the local Carpenters and Laborers Unions. 

The Flathead Contractors ~ssociation or Western Montana 

Employers Association negotiated a series of collective 

bargaining agreements with several of the local unions in 

the area. 

Because of the nature of defendant's business, defendant 

executed compliance agreements with several of the local 

carpenters' unions. These compliance agreements incorporated 

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the principal collective bargaining agreement. All the 

collective bargaining agreements incorporated the trust 

agreements; more specifically, the collective bargaining 

agreementsand the compliance agreements required an hourly 

fringe benefit contribution from defendant to the trust on 

behalf of the signatory employers and the laborer and carpenter 

employees. 

From January 1, 1972, to December 31, 1976, defendant 

properly reported 90.1 percent of the hours worked by its 

laborer and carpenter employees to the Montana Carpenters 

and Laborers Trust Funds. Defendant failed to report 9.9 

percent of the hours worked by its carpenter and laborer 

employees between January 1, 1972, and December 31, 1976. 

Audit Services, plaintiff, became the assignee of the trustees 

of the above trust fund for the unreported hours and initiated 

this action for the trustees' claim for delinquent fringe 

benefits contributions, liquidated damages, interest and 

audit fees. Defendant has steadfastly denied any liability 

to the trustees of the trust fund. 

Defendant claims that its operations constituted two 

divisions: the "Home Division" and the "Construction Division." 

Defendant claims that the Home Division utilized nonunion 

labor and the Construction Division employed union employees. 

No fringe benefits were paid on the nonunion employees of 

the Home Division. Defendant contends that the union was 

aware of the dual operation and that negotiations were 

conducted separately for these construction and operating 

divisions. 

The District Court found that: the Home Division and 

the Construction Division were nothing more than "an internal 

bookkeeping division of defendant corporation"; the two 
that 

divisions have one single employer;/all of defendant's 

laborer and carpenter employees fall within the scope of the 

collective bargaining and trust agreements; and the employees 

work "back and forth" between the union and nonunion divisions 

of defendant. 

At no time prior to May 5, 1978, did defendant ever act 

or attempt to void any of the above compliance and collective 

bargaining and trust agreements. The District Court found 

that defendant voluntarily recognized the collective bargaining 

representatives for its laborer and carpenter employees. 

Defendant contended throughout the trial that the union 

never made any claim to defendant that it had been designated 

to represent a majority of the employees. The union and 

plaintiff admit that there were no N.L.R.B. election proceedings 

to determine the union's majority status among the employees 

and that it never received majority status in a formal way. 

This action was brought by plaintiff under Section 301 

of the Taft Hartley Act, 29 U.S.C. 8185. Although we have 

concurrent jurisdiction with federal courts to hear Section 

301 suits, we must apply federal substantive law, not state 

law. Textile Workers Union v. Lincoln Mills of Ala. (19571, 

353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972; Charles Dowd Box 

Co. v. Courtney (19621, 368 U.S. 502, 82 S.Ct. 519, 7 L.Ed.2d 

483; Local 174, Teamsters, etc. v. Lucas Flour Co. (19621, 

369 U.S. 95, 82 S.Ct. 571, 7 L.Ed.2d 593. This suit is for 

the collection of certain fringe benefits allegedly due 

under certain collective bargaining agreements. The validity 

of the trust funds claim is dependent upon whether the 

contracts are enforceable. 

Defendant contends that the contracts sued on are, by 

their very nature, prehire contracts and, therefore, under 

applicable federal law are not enforceable. We disagree. 

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The National Labor Relations Act provides: 

"It shall not be an unfair labor practice . . . for an employer engaged primarily in the building and construction industry to make an agreement covering employees engaged (or who, upon 

their employment, will be engaged) in the building and construction industry with a labor organization of which building and construction 

employees are members . . . because (1) the 

majority status of such labor organization has 

not been established under the provisions of 

section 159 of this title prior to the making 

of such agreement . . . Provided further, that 

any agreement which woula be invalid, but for 

clause (1) of this subsection, shall not be a 

bar to a petition filed pursuant to section 

159 (c) or 159 (e) of this title." 29 U.S.C. 

S158 (f) . 

This section (hereinafter referred to as section 8(f)) 

of the NLRA permits a construction industry, such as defendant, 

and a union to enter into a collective bargaining agreement 

without the union being designated as the bargaining representative by a majority of the employees covered by that 

agreement. Without that proviso, the making of such a 

prehire agreement would constitute an unfair labor practice. 

The purpose of Congress in allowing the execution of 

prehire agreements in the construction industry is discussed 

in Bricklayers Local 3 (1966), 162 NLRB 476, 64 LRRM 1085. 

In that case the Board described the purpose of a prehire 

agreement as: 

". . . an initial attempt by a union and an 

employer in the construction industry to commence such a collective bargaining relationship. Thus, the entire legislative history 

of Section 8 (f) (1) is couched in terms of 

'pre-hire agreements,' a reference which can 

have no meaning in the situation where, as 

here, the parties are continuing an existing 

bargaining relationship under which employees 

have previously been hired . . . Congress envisioned its prehire provisions as applying 

only to the situation where the parties were 

attempting to establish - a bargaining relation- 

--- ship for thefirst time." 64 LRRM at 1086. 

(Emphasis added.) 
The record here, however, indicates that the contracts 

between defendant and the unions were not prehire agreements. 

There had been an ongoing collective bargaining relationship 

for a number of years between defendant and the unions. The 

employer himself testified at trial that he had "work in 

progress" at the time he signed at least some of the agreements 

although he "couldn't remember" whether he had laborers on 

the payroll but that "more than likely" when he signed a 

particular laborers' contract he did. 

Similarly, in connection with a carpenters' agreement, 

defendant's president testified that he "probably" had 

carpenters on the payroll at the time it was signed. He 

further testified that when he signed agreements for Butte, 

defendant had the job constructing what was known as the 

Butte Stadium at the junior high school; when he signed 

agreements applying to central Montana, defendant had a job 

in that area, the Toole County State Bank in Shelby; when he 

signed the the agreement for Anaconda, defendant had a job 

at the Warm Springs State Hospital. When other agreements 

were signed, defendant's president testified that he was 

"sure we were building something," and that "more than 

likely" he had laborers on the payroll at the time. Again, 

he testified he was "building things" when another agreement 

was executed. 

Carpenters' business agent Rosman testified he had 

first determined he had members working on the Toole County 

State Bank project in Shelby and presented the compliance 

agreement to an agent of defendant. 

According to the N.L.R.B., prehire agreements do not 

include multi-employer collective bargaining agreements to 

which an employer is a party by virtue of being a member of 

a multi-employer association. Authorized Air Conditioning 

Company (1978), 236 NLRB No. 24, 98 LRRM 1538, enforced (9th 
Cir. 1979), 606 F.2d 899; Amamdo Electric (1978), 238 NLRB 

No. 3, 99 LRRM 1453. In a multi-employer bargaining group, 

the appropriate bargaining unit is group-wide, such that the 

question of majority support of one member's work force is 

irrelevant. 

Defendant had participated in multi-employer bargaining 

units (the Flathead Contractors Association and the Western 

Montana Employers Association) in dealing with the unions. 

 his was not the initial bargaining attempt that Congress 

had in mind under section 8(f). 

In participating with multi-employer bargaining groups, 

defendant cannot claim that its collective bargaining relationship with the unions never developed past infancy: 

"This voluntary act of the defendant effectively merged his company with the other 

member companies of the Associated General 

Contractors as one large collective bargaining unit. Thenceforth, it became irrelevant 

whether a majority of Schafer's employees 

favored the union so long as a majority of 

those employed by the Associated General 

Contractors were union people." Trades Council 

v. E.C. Schafer Constr. Co. (1980), 104 LRRM 

2114, 2116. 

The District Court made extensive findings of fact. In 

one finding the court held that "[iln executing each of the 

above compliance agreements and in authorizing the Flathead 

Contractors Association and Western Montana Employers Association 

to execute multi-employer bargaining agreements with the 

Laborers and Carpenters Unions, Stewart and Janes voluntarily 

recognized the Laborers and Carpenters Unions as collective 

bargaining representation for its laborer and carpenter 

employees." Clearly, this finding is supported by substantial 

evidence. We also find that defendant made a voluntary 

recognition of the unions as the majority bargaining representative 

of its employees. 
Under the National Labor Relations Act, a union can 

become the bargaining representative for a particular group 

of employees in either of two ways. One way is for the 

employer to refuse to recognize the union as representing a 

majority of the employees. Then the union may petition the 

N.L.R.B. for an election. If the union wins the election, 

the N.L.R.B. will certify it as the exclusive bargaining 

agent of the employees. 

The second way for a union to become the bargaining 

representative of the employees is for the employer to 

voluntarily recognize the union as the representative of a 

majority of the employees. No particular procedure is 

required for the employer to follow in making its determination 

that the union represents a majority of the employees. 

However, the employer would commit an unfair labor practice 

in violation of sections 8 (a) (5) and 9 (a) of the National 

Labor Relations Act if it recognized a collective bargaining 

agent which did not represent a majority of the employees. 

Defendant recognized the unions as the collective 

bargaining agent of its employees under the second alternative. 

The record bears this out: 

(1) Defendant bargained with the unions on a number of 

different projects. 

(2) Defendant signed a number of different contracts. 

(3) Defendant engaged in a protracted collective bargaining 

relationship. 

(4) Defendant demonstrated recognition by the manner in 

which it paid the very fringe benefit contributions at issue 

here. Defendant properly reported over 90 percent of the 

hours worked by its laborer and carpenter employees. Hours 

were reported for union members; nonunion employees were not 

reported. Given the 90 percent figure, it can be presumed 
that a majority of defendant's employees, as union members, 

supported the unions. Quad C Corporation and Associated 

General Contractors and Carpenters, California State Council 

(19791, 246 NLRB No. 75, 102 LRRM 1597. 

(5) Laborers' business agent Fleming and carpenters' 

business agent Robinson testified that members of their 

unions were employed by defendant,and they dispatched members 

from their hiring halls to defendant's construction projects. 

Carpenters' business agent Rosman also dispatched union 

members to defendant's jobs. There was undisputed evidence 

of union members working on defendant's projects. 

The N.L.R.B. has ruled that an employer cannot rely on 

the case of N.L.R.B. v. Local Union No. 103, Intern. Ass'n., 

etc. (1978), 434 U.S. 335, 98 S.Ct. 651, 54 L.Ed.2d 586, and 

repudiate a prehire contract at a time when a majority of 

its employees are union members. V. M. Construction Co. 

(1979), 241 NLRB No. 84, 100 LRRM 1625. 

Defendant's claim that the unions never demonstrated 

majority support means nothing. While construction industry 

employers can execute "prehire agreements" under section 

8(f), any employer--including ones in the construction 

industry--can voluntarily recognize a labor union as the 

representative of a majority of its employees without the 

necessity of N.L.R.B. certification. N.L.R.B. v. Morse 

Shoe, Inc. (9th Cir. 1979), 591 F.2d 542; Pioneer Inn ~ssociates 

v. N.L.R.B. (9th Cir. 1978), 578 F.2d 835. Such agreements 

are valid under Section 9(a) of the Labor Management Relations 

Act, 29 U.S.C. §159(a). 

Once an employer voluntarily recognizes a union as the 

bargaining representative of a majority of his employees, a 

presumption of continued majority support arises. In SaharaTahoe Corp. v. N.L.R.B. (9th Cir. 1978), 581 F.2d 767, 769, 

the Court stated: 

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". . . As a general rule, an uncertified but 

voluntarily recognized union enjoys a conclusive presumption of majority status for a 

reasonable time, usually one year, after 

voluntary recognition and a rebuttable presumption thereafter. [Citation omitted.] 

'The presumption is rebutted if the employer 

shows, by clear, cogent, and convincing evidence, that the union was in the minority or 

that the employer had a good faith reasonable 

doubt of majority support at the time of the 

refusal.'" 

Moreover, when an employer voluntarily recognizes a 

union, a presumption attaches that a majority of the affected 

employees desire union representation. N.L.R.B. v. Rogers 

I.G.A., Inc. (10th Cir. 1979), 605 F.2d 1164; N.L.R.B. v. 

Morse Shoe, Inc., supra. The rationale is plain--if an 

employer enters into a collective bargaining agreement with 

a minority union, both the employer and the union have 

violated the law. It is assumed that neither party knowingly 

would do so. N.L.R.B. v. Rogers I.G.A., Inc., supra, 605 

F.2d at 1165. The presumption applies to construction 

industry employers. See Authorized Air Conditioning Co. v. 

NLRB (9th Cir. 1979), 606 F.2d 899, 907, cert. denied 103 

LRRM 3002; see also, Arco Electric Co. v. N.L.R.B. (1980), 

103 LRRM 3114. 

Defendant presented no evidence to rebut this presumption. 

When the presumption is combined with the testimony of 

carpenters' business agent Rosman and with the fact that 

defendant paid union-sponsored fringe benefits for 90 percent 

of the hours worked by its laborer and carpenter employees, 

the conclusion is inescapable that defendant recognized that 

the unions represented a majority of its laborer and carpenter 

employees at all times relevant to this action. Defendant's 

"prehire" defense came only as an afterthought after it was 

billed for its audited delinquencies. 

This conclusion is reinforced when one takes into 

account the fact that all of the underlying collective 
bargaining agreements contained union-security clauses. 

While it is true that the unions never sought an NLRB certification 

election, the absence of any effort by any of the employees 

themselves to do so, to say nothing of the employer, strengthens 

the presumption of majority support for the unions. Custom 

Sheet Metal Service Co., Inc. (1979), 243 NLRB No. 142, 102 

LRRM 1163. 

If at any time during its collective bargaining relationship, 

defendant ever doubted that the unions represented a majority 

of the employees on a particular project, all it had to do 

was to reject the contract or refuse to bargain with the 

unions. In all likelihood, the unions would have then filed 

an unfair labor practice charge alleging a violation of 

section 8(a)(5) of the Act. The N.L.R.B. would have then 

made a determination as to whether or not the unions represented a majority of the employees. But, defendant never 

raised the question while the jobs were in progress. 

Instead, defendant signed the agreements; operated 

pursuant to the contracts; paid wages and fringe benefits 

pursuant to the contracts. Only on the nonunion employees 

did it not pay the necessary trust fund payments. The 

unions and employees believed a binding contract was in 

existence. It was only when the trust fund sought the 

delinquent payments that defendant disavowed the contracts 

as unenforceable prehire contracts. By then, it was impossible 

to have an N.L.R.B. representation election or gather authorization 

cards on the long-completed projects. The workers had 

scattered, as they do in the construction industry, and it 

was impossible to reconstruct the work force. 

It would indeed be an injustice to allow an employer to 

gain the benefits of a collective bargaining relationship 
all during the project and retroactively void the contract 

when called upon to perform its side of the agreement. That 

is precisely what defendant is asking this Court to do when 

it asks this Court to declare the contracts to be unenforceable 

prehire agreements. 

Defendant relies on Dee Cee Floor Covering (1977), 232 

NLRB No. 72, 97 LRRM 1072, for the proposition that a union 

must establish majority support at each jobsite at which it 

seeks to apply a section 8(f) prehire agreement. However, 

the -- Dee Cee ruling, as such, is limited to section 8(f) 

prehire agreements. For nonsection 8(f) construction industry labor agreements, the National Labor Relations Board 

has consistently adhered to the position that the presumptively 

appropriate bargaining unit is employer-wide, recognizing 

this as the prevailing practice of the industry. New Enterprise 

Stone and Lime Co. (1968), 172 NLRB No. 240, 69 LRRM 1145. 

Since defendant failed to demonstrate that any of its labor 

agreements were section 8(f) prehire agreements, Dee -- Cee 

Floor Covering is of no import. See also G. M. Masonry Co. 

(1979), 245 NLRB No. 54, 102 LRRM 1542. 

Secondary to its fundamental irrelevancy, defendant's 

-- Dee Cee argument fails for utter lack of proof. The record 

is totally devoid of any evidence indicating which projects 

were covered by which labor agreements. Nor is there any 

evidence by which the trustees' claims can be separated 

among these various (unspecified) projects. This failure is 

all the more telling in light of Audit Services- having 

presented a detailed audit by which its claims were broken 

down according to hours worked by each individual employee 

on a monthly basis. 

As this Court has noted many times in the past, our 

function on appeal is not to substitute its view of the 
facts for that of the District Court. Toeckes v. Baker 

(1980) , - Mont. P.2d , 37 St.Rep. 948. The -I - 

District Court specifically concluded: 

"In voluntarily entering into each of the abovedescribed collective bargaining agreements, the 

actions of Stewart & ~anes sive rise to a presumption that the unions signatory thereto-were 

the representatives of the majority of the employees of Stewart & Janes covered by said 

agreements. Stewart & Janes has not produced ---- 

any evidence sufficient to overcome -- that presumption." (Emphasis added.) 

The District Court was plainly not satisfied that 

defendant had proved that any of its labor agreements were 

"prehire contracts." In light of the record presented for 

review, no basis exists for reversal of the District Court. 

A federal district court in Washington has held the 

trust payment provisions of a prehire agreement unenforceable 

where there was "no dispute over the material fact that the 

union which negotiated the 'pre-hire' agreement . . . did 

not represent a majority of the employees." Trust Fund v. 

McDowell (W.D. Wash. 1979) , F.Supp. , 103 LRRM 

2219. The case is presently on appeal to the Ninth Circuit. 

As there was no dispute, the court did not address the 

question of burden of proof had this fact not been conceded. 

This burden is on the party questioning the enforceability 

of the contract, here the employer. It is an affirmative 

defense, to be proven by a preponderance of substantial 

evidence. The employer has failed to carry this burden. 

Defendant has failed to establish that these contracts 

are section 8(f) contracts; therefore, we will not address 

the issues raised in the Trust Fund v. McDowell, supra, 

case, nor will we address the ambiguous law in N.L.R.B. v. 

Local Union No. 103, Intern. Ass'n., etc., supra. 
Defendant waited years after its construction work was 

performed before claiming that its labor agreements were 

unenforceable. It apparently has never raised the prehire 

issue directly with the unions themselves. Rather, the 

testimony as a whole portrays an employer who has worked to 

maintain an amicable relationship with the unions in Montana. 

Defendant always met and negotiated with the unions and when 

in need of workers frequently resorted to the union hiring 

hall. The vast majority of hours worked by the laborer and 

carpenter employers were properly reported to the trust 

funds . 

In belatedly raising its prehire defense, defendant 

seeks to require the trustees to recreate its labor force of 

years gone by to meet that defense. To do so imposes an 

unfair burden on the trustees who were not present at the 

time. The magnitude of that burden (as well as defendant's 

failure to carry its own burden on the question) is graphically 

illustrated by defendant's own inability to recreate its 

labor force at the time any of the agreements at issue were 

executed. As a matker not only of "judicial administration," 

but also of fundamental fairness to everyone concerned, 

defendant should have pursued the prehire issue with the 

unions directly and should not be allowed to raise it now 

against the trustees' claims. 

The contract is enforceable. The District Court made 

proper findings of fact and conclusions of law in applying 

federal law to this labor dispute. We find no error. 

Af f irmed. 
We Concur: 

Chief Justice 

/ / Justices u / 

This cause was submitted prior to January 5, 1981.