NLRB Approves Union Card Check/Neutrality Agreements With Private Equity Firms
June 13, 2007 by Beeson Tayer & Bodine
Last November the Board held in Heartland Industrial Partners, 348 NLRB No. 72, that Section 8(e) of the NLRA does not prohibit a union and a private equity firm from entering into a card check and union neutrality agreement that required its terms to be applied to any companies in which the private equity firm obtained a majority stake. Section 8(e) — the "anti-hot cargo" provision – prohibits unions and employers from entering into any agreement or understanding in which the employer agrees to refrain from dealing with the products of another enterprise or cease doing business with another (i.e. nonunion) enterprise.
The Heartland company specializes in investing and turning around manufacturing firms in the Midwest. It entered into an agreement with the United Auto Workers under which Heartland agreed to ensure that any businesses in which it acquired a majority stake – and thereby directed management of the business — would in turn execute the neutrality and card check agreement.
Several minority shareholders of a company acquired by Heartland filed a ULP charge, and the NLRB’s General Counsel issued a complaint asserting that Heartland’s arrangement with the UAW violated section 8(e) because it "had the effect" of inducing another company to becoming unionized or else have its relationship severed or otherwise compromised with Heartland (as would be prohibited by § 8(e)).
The Board disagreed, holding that nothing in the agreement would require Heartland to "cease doing business" with any of its acquired companies in the event they breached the neutrality agreements. Rather, the Board held, the agreement only provided the procedures for union recognition and binding arbitration in the event disputes arose. The agreement did not provide for liability against Heartland — nor that Heartland must divest from an acquired company — in the event the acquired company breached or violated the neutrality agreement.
If a private equity firm is operating in your sector or acquiring companies in which your members work, consider whether your interests and the equity firm’s are aligned (in most cases they won’t be – as such firms make their money by "extracting value" from the companies they acquire). But if you recognize the company needs a turn around, and the equity firm has a good track record (i.e. it doesn’t shut down operations or outsource jobs), then consider the type of approach taken by the UAW.
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