Opinion ID: 2997476
Heading Depth: 2
Heading Rank: 2

Heading: Unilateral Repudiation

Text: This Court has recognized that, generally, a signatory to a § 8(f) pre-hire agreement “is bound to its terms for the duration of the agreement unless the employees covered by that agreement reject the signatory union in a Board conducted election.” Bufco, 899 F.2d at 610 (relying on the decision of the Board in John Deklewa & Sons, 282 NLRB 184 (1987), enf. sub nom. Int’l Ass’n of Bridge Workers, Local 3 v. NLRB, 843 F.2d 770 (3d Cir. 1988)). Deklewa marked a significant change in the policy of the NLRB. Prior to that decision, the Board interpreted § 8(f) as permitting the unilateral repudiation of pre-hire agreements until the union achieved majority support. Id. at 609. In Bufco, we determined that the Board had not been No. 04-2797 11 precluded by Supreme Court or Seventh Circuit precedent from reversing its prior policy, and stated that “we must enforce the Board’s Deklewa rule if we deem it to be based upon a reasonably defensible construction of the Act.” Id. at 611. Finding it “reasonable and consistent with the Act,” we joined several of our sister Circuits in accepting the Board’s Deklewa rule. Id. The issue before us now is whether this case falls within a recognized exception to the Deklewa rule in situations involving bargaining units of one or no employees.3 Peters points to several decisions in which the Board articulated this so-called “one-man unit” rule. In Stack Electric, Inc., 290 NLRB 575 (1988), the Board explained: It is settled that if an employer employs one or fewer unit employees on a permanent basis that the em- ployer, without violating Section 8(a)(5) of the Act, may withdraw recognition from a union, repudiate its contract with the union, or unilaterally change employees’ terms and conditions of employment without affording a union an opportunity to bargain. Id. at 577 (citations omitted). The Board first explained the basis for this rule in Foreign Car Center, Inc., 129 NLRB 319, 320 (1960) (“[T]he principle of collective bargaining presupposes that there is more than one eligible person who desires to bargain. The Act therefore does not empower the Board to certify a oneman unit.”) (internal citations omitted), quoted in Stack Electric, 290 NLRB at 577. The Board also applied the one-man unit rule in Haas Garage Door Co., 308 NLRB 1186 (1992). In that case, the employer was a member of a multi-employer association, 3 We noted in Martin that our Bufco holding had not yet been modified in relation to the one-man unit rule but expressly declined to address the issue. 945 F.2d at 1005, 1006. 12 No. 04-2797 through which it signed a § 8(f) agreement effective from 1990 through 1993. Id. at 1186. At some point during that period, the employer refused to execute the collective bargaining agreement despite explicit requests from the union that it do so. Id. The employer also refused to furnish information requested by the union, arguing that it was not bound by the agreement because it had no employees doing unit work. Id. The administrative law judge (“ALJ”) found that the employer had violated §§ 8(a)(5) and (1) of the Act. Id. Relying on the one-man unit rule, the Board reversed the ALJ’s decision, stating: “[W]e disagree with the judge’s finding that even if an employer has no employees doing unit work it cannot repudiate an 8(f) contract.” Id. at 1187. Because the Board found no evidence that the employer had more than one employee performing unit work at all material times, it concluded that the employer “did not violate Section 8(a)(5) and (1) by repudiating the contract, by refusing to execute the contract, or by refusing to furnish information to the Union.” Id.; see also Searls Refrigeration Co., 297 NLRB 133, 135 (1989) (upholding ALJ’s conclusion that employer’s mid-term repudiation of a § 8(f) agreement did not violate NLRA because the “appropriate unit consisted of no employees for approximately 2 years”); Garman Constr. Co., 287 NLRB 88, 89 (1987) (relying on one-man unit rule to affirm ALJ’s dismissal of allegations that employer violated §§ 8(a)(5) and (1) by repudiating a § 8(f) contract and withdrawing recognition from union). Appellees argue that these NLRB decisions stand for the limited proposition that an employer’s unilateral repudiation of a collective bargaining agreement applicable to a one or no-man bargaining unit would not be a violation of the employer’s statutory duty to bargain. According to appellees, these cases do not speak to the continued validity of the collective bargaining agreement itself, or to the employer’s contractual obligations thereunder. The Board’s decisions do not support appellees’ No. 04-2797 13 argument. While many of its decisions specifically addressed the statutory duty to bargain, the Board has not limited the one-man unit rule to excusing an employer from this particular duty. Rather, the Board’s decisions explicitly allow an employer, more generally, to repudiate a pre-hire agreement and discontinue its duties under the agreement where it employs no more than one employee in the relevant unit. See, e.g., Sunray Ltd., 258 NLRB 517, 518 (1981) (“[T]he Board will not enforce a contract covering a single-person unit. Nor will we certify or find appropriate a single-person unit in a representation proceeding.”); SAC Constr. Co., Inc., 235 NLRB 1211, 1220 (1978) (where employer had a unit consisting of only one employee, it “did not violate Section 8(a)(1) and (5) of the Act by discontinuing payments to the health and welfare, apprenticeship, and pension fringe benefit plans”), enforcement denied on other grounds, NLRB v. SAC Constr. Co., Inc., 603 F.2d 1155 (5th Cir. 1979). Peters urges this Court to recognize explicitly the oneman unit exception to the Board’s Deklewa rule and apply it to this case. We have traditionally extended the Board deference in fashioning national labor policy and find no reason to proceed otherwise in this case. See Bufco, 899 F.2d at 609. The Board’s decisions applying the one-man unit rule accord with the principles of collective bargaining and the terms of the NLRA. See, e.g., 29 U.S.C. § 159(a) (“Representatives designated or selected for the purposes of collective bargaining by the majority of the employees in a unit appropriate for such purposes, shall be the exclusive representatives of all the employees in such unit for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment, or other conditions of employment”) (emphases added). Moreover, as a matter of common sense, it seems illogical to continue to bind Peters to a prehire agreement simply because it has no employees who could reject the Union as their bargaining representative in 14 No. 04-2797 a Board-conducted election. We therefore conclude that Peters’s unilateral repudiation of the pre-hire agreement was lawful under the one-man unit rule and hold that Peters’s repudiation of the contract relieved it of its contractual obligation to arbitrate before the JAB. Only one other appellate court has applied the oneman unit rule in a similar case. See Laborers Health & Welfare Trust Fund v. Westlake Dev., 53 F.3d 979 (9th Cir. 1995). Noting “the unique circumstances of a single-employee bargaining unit in the construction industry,” the court held in Westlake that “[a] construction industry employer who employs a single employee pursuant to a Section 8(f) pre-hire agreement is entitled to repudiate the agreement by conduct sufficient to put the union and the employee on notice that the agreement has been terminated.” Id. at 982 (quoting Operating Eng’rs Pension Trust v. Beck Eng’g & Surveying Co., 746 F.2d 557, 565-66 (9th Cir. 1984)). Reviewing the relevant NLRB authority, the Ninth Circuit concluded: Clearly these post-Deklewa decisions by the Board speak not only in terms of the standard application of the one-employee unit rule (where there is no statutory obligation to bargain in a representation proceeding), but also directly in terms of lawful unilateral repudiation of section 8(f) agreements where there is a single (or no) employee unit. We adopt the Board’s reasoning in concluding that Westlake, a “one-employee employer,” lawfully repudiated the CBA. Id. at 983. Because the employer had lawfully repudiated the collective bargaining agreement, the court held that the employer was relieved of all of its obligations thereunder, including its duties to pay into a trust fund and to arbitrate disputes arising out of the agreement. Id. at No. 04-2797 15 984 (concluding that the employer’s repudiation rendered the collective bargaining agreement “void, not merely voidable”). Thus, the Ninth Circuit explicitly rejected the argument appellees make here—that the one-man unit rule relieves an employer of its statutory duty to bargain but does not allow it to invalidate the agreement itself. Appellees take issue with the Ninth Circuit’s reasoning in Westlake, arguing that there is a “critical distinction” between the statutory duty to bargain under § 8(a)(5) of the Act and an employer’s contractual obligations under a prehire agreement. Appellees rely primarily on the following statement by the Supreme Court in Jim McNeff, Inc. v. Todd: There is a critical distinction between an employer’s obligation under the Act to bargain with the representative of the majority of its employees and its duty to satisfy lawful contractual obligations that accrued after it enters a prehire contract. 461 U.S. 260, 267 (1983). Appellees read too much into this language. In McNeff, the Court was discussing its prior decision in NLRB v. Local 103, International Association of Bridge Workers (Higdon), 434 U.S. 335 (1978), in which it affirmed the Board’s view that a pre-hire agreement does not make a union the “representative of an employer’s employees” under § 8(b)(7)(C) of the NLRA.4 McNeff, 461 U.S. at 266-67. The Court explained that only the former obligation—the duty to bargain—was treated in Higdon, and that different concerns animated its analysis in the case before it. Id. at 267. 4 Section 8(b)(7)(C) prohibits a union from picketing an employer unless it is the certified representative of the employer’s employees. See 29 U.S.C. § 158(b)(7)(C). 16 No. 04-2797 The Court held in McNeff that monetary obligations assumed by an employer under a pre-hire agreement could be recovered in a § 301 action brought by the union prior to the repudiation of the contract. Id. at 271-72. That decision did not address whether an employer who employs one or no employees may lawfully repudiate a pre-hire agreement. McNeff was decided several years prior to the Board’s decision in Deklewa, and the Court assumed without deciding that a party to a § 8(f) agreement could repudiate such an agreement.5 Significantly, in McNeff, the employer “never manifested an intention to void or repudiate the contract,” and the record showed conclusively that the employer “accepted the benefits of the prehire agreement and misled the union of its true intention never to fulfill its contractual obligations.” Id. at 270. This decision does not support appellees’ argument that repudiation of the pre-hire agreement leaves unaffected an employer’s contractual obligations under the agreement. Appellees also argue that Westlake is contrary to this Court’s decision in Martin v. Garman Construction Co., 945 F.2d 1000 (7th Cir. 1991). Our opinion in Martin followed an earlier decision by the Board in Garman Construction Co., 287 NLRB 88. In that case, the parties had entered into a collective bargaining agreement in 1978 governing fringe benefit contributions to several pension and trust funds on behalf of the union members that Garman employed. Id. at 89. Because Garman did not provide timely notice of termination, that agreement was automatically extended from 1981 to 1984. Id. at 89 & n.6. During the relevant 5 See McNeff, 461 U.S. at 271 n.13 (“We need not consider in this case whether considerations properly cognizable by a court under § 301 might prevent either party, in particular circumstances, from exercising its option under § 8(f) to repudiate a prehire agreement before the union demonstrates majority status.”). No. 04-2797 17 period, Garman employed only one member of the union, and until September 1981, made regular, monthly contributions to the funds on behalf of this employee. Id. at 89. On September 3, 1981, however, the company sent a letter to the union stating that the agreement “is null and void as of the present date.” Id. The union then brought a complaint before the Board, alleging that Garman violated Sections 8(a)(5) and (1) of the Act by repudiating the contract and withdrawing recognition from the union. Id. The remedy sought by the union included compensation to the funds for missed contributions. The ALJ found that Garman’s repudiation was not an unfair labor practice and dismissed the complaint, relying on the one-man unit rule. Id. The Board affirmed on the same ground. Id. At issue before this Court in Martin was the preclusive effect of the Board’s decision on a separate action filed in district court by the trustee of the funds to recover money from the employer under ERISA.6 The trustee had filed an ERISA suit in the district court prior to the Board’s decision, and the district judge stayed proceedings pending the outcome of the Board’s action, stating that she would give “collateral estoppel effect to the NLRB’s determination that a contract existed between July 1, 1981 and May 31, 1984.” Martin, 945 F.2d at 1002. Following the Board’s decision, the district court held Garman liable for unpaid contributions to the funds during this period, and Garman appealed. Id. at 1003. This Court affirmed. 6 See Employee Retirement Income Security Act, 29 U.S.C. § 1145. That provision states: Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement. 18 No. 04-2797 Garman’s argument on appeal was that the Board’s decision had established the parties’ rights under both the NLRA and ERISA, and that the district court failed to afford appropriate preclusive effect to the Board’s decision. We rejected that argument on the ground that the Board lacked jurisdiction over the ERISA claim, which enjoys exclusive jurisdiction in the federal courts. Id. (citing 29 U.S.C. § 1132(e)(1)). We also explained that our decision rested on the statutory language and unique considerations present in the ERISA context, concerns that are not at issue here. See id. at 1005 (“[M]any of the defenses available under the NLRA or under traditional contract law do not fly under ERISA. The one-man rule may remain valid for purposes of unfair labor practice proceedings while counting for naught when the contract is cognizable under ERISA.”). As this Court explained in Central States, Southeast & Southwest Areas Pension Fund v. Gerber Truck Service, Inc., Congress added § 515 to ERISA in 1980 to address the problems that arose when employers repudiated pre-hire agreements and refused to make pension and wel- fare contributions. 870 F.2d 1148, 1152-53 (7th Cir. 1989) (en banc). That statute made employers’ promises to contribute to such plans “enforceable ‘to the extent not inconsistent with the law.’ ” Id. at 1153 (quoting 29 U.S.C. § 1145). “If the contract provides for the commission of unlawful acts, it will not be enforced.” Id. (citation omitted). However, if “the employer simply points to a defect in its formation—such as fraud in the inducement, oral promises to disregard the text, or the lack of majority support for the union and the consequent ineffectiveness of the pact under labor law—it must still keep its promise to the pension plans.” Id. (emphasis added), quoted in Martin, 945 F.2d at 1004. In other words, “nothing in ERISA makes the obligation to contribute depend on the existence of a valid collective bargaining agreement.” Id. Appellants have not claimed that Peters has refused to No. 04-2797 19 comply with its obligations under ERISA; they have spoken solely in terms of Peters’s contractual duty to arbitrate. Therefore, Martin does not restrict us from applying the Board’s one-man unit rule in this context.