Old, Unwritten Card Check Agreement Enforced

By Allen Smith Oct 24, 2012

A company that benefitted years later from an old, oral card check agreement could not unilaterally require secret ballot elections before recognizing a union as its employees’ collective bargaining representative, the 3rd U.S. Circuit Court of Appeals ruled Oct. 16, 2012. The company would have to again bargain over union recognition.

Agreement’s Trade-offs

Rite Aid and the United Food and Commercial Workers Union, Local 1360 entered an oral card check agreement in 1999. The company promised to recognize the union in any store absent an election if the union presented signed union authorization cards showing that a majority of store employees wished to be represented—the “card check” procedure. The company also agreed to remain neutral on union organizing efforts.

Before Rite Aid accepted the card check process, union members covered by the Tri-State Health and Welfare Fund were unlikely to fill their prescriptions at Rite Aid pharmacies, because the company was not approved as a participating pharmacy services provider. In exchange for its promise to accept the card check process, Rite Aid became a participating provider in the fund, which then removed Rite Aid competitors CVS and Eckerd Drugs as providers.

The company first entered a collective bargaining agreement (CBA) with the union in 1999, and CBAs were entered subsequently in 2002 and 2005. In 2001, the fund agreed to include Rite Aid as a participating provider for union employees in parts of Delaware, Maryland and Pennsylvania, and to exclude Rite Aid competitors, including CVS, Eckerd Drugs, Walgreen’s, Wal-Mart and Kmart.

Rite Aid tried to change course in 2003 after it replaced its director of labor relations. From 2003 to 2005, the company refused to recognize union representation at five New Jersey stores based on card checks. It also did not respond to repeated union requests for an explanation of its failure to accept the card checks.

Recognition Clause Amended

The union submitted to arbitration a grievance maintaining that Rite Aid was violating the card check agreement.

The arbitrator concluded that Rite Aid had violated the card check agreement. It noted that the recognition clause in the CBAs provided that nonunion stores may be “added to the union via [National Labor Relations Board] NLRB elections or other demonstration of the union’s status acceptable to Rite Aid under the jurisdiction of the union.” If this language stood alone, Rite Aid would have retained the option to insist on an NLRB election, even when the union presented authorization cards.

The arbitrator determined that the card check agreement amended the recognition clause. The arbitrator emphasized that Rite Aid received “a substantial monetary benefit when it was included in the fund” in exchange for entering the agreement.

A district court agreed, and the 3rd Circuit affirmed. The appeals court stated that the card check agreement modified the recognition clause for purposes of the 1999 CBA and continued to govern the 2002 and 2005 CBAs.

The 3rd Circuit rejected Rite Aid’s assertion that the recognition clause unambiguously preserved Rite Aid’s “unfettered recognition discretion.”

Rite Aid accepted card checks from 1999 to 2002, showing that it deemed the process an acceptable method of demonstrating a nonunion store’s intent to unionize.

Moreover, the court noted that Rite Aid continued to enjoy the economic benefit of its agreement. Neither the oral card check agreement nor an internal memorandum Rite Aid sent to nonunion employees suggested that the agreement governed the parties’ relationship only for the 1999 CBA.

Perpetual Recognition?

Rite Aid argued that the district court was mandating “perpetual and indefinite card recognition.”

The 3rd Circuit disagreed, determining that to restore the NLRB election as the sole recognition method, the company must “make a proposal terminating this waiver of the election requirement as part of the collective bargaining process” (Rite Aid of New Jersey Inc. v. United Food and Commercial Workers Union, Local 1360, No. 11-4554 (3rd Cir. 2012)).

Allen Smith, J.D., is manager, workplace law content, for SHRM.


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