NLRB General Counsel: Some Neutrality Agreement Provisions Are Invalid

Allen Smith, J.D. By Allen Smith, J.D. October 16, 2020
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​The National Labor Relations Board (NLRB) general counsel is calling for closer scrutiny of neutrality agreements between unions and employers, saying in a recent memo that many common neutrality agreement provisions are invalid.

"A neutrality agreement is an agreement—in reality, a contract—between a union and a company that an employer will remain neutral in any organizing efforts by the union of the company's workforce," said David Pryzbylski, an attorney with Barnes & Thornburg in Indianapolis.

Most neutrality agreements go further and contain other provisions, including an agreement by the employer to voluntarily recognize the union as the employees' representative once a majority of the employees sign union authorization cards or a petition supporting the union as their representative, said Mark Kisicki, an attorney with Ogletree Deakins in Phoenix. Many also include the types of provisions identified in the NLRB general counsel's memo, he noted.

The memo will allow employers that are concerned about some of the overreaching provisions of a neutrality agreement an opportunity to reject them based on the view that they are illegal, said Todd Lyon, an attorney with Fisher Phillips in Portland, Ore., and Seattle. The memo "provides insights into the current NLRB's agenda," he said.

Neutrality agreements should be examined under the same strict standard that decertification of a bargaining unit is scrutinized under, rather than the less-stringent standard currently applied to union organizing, the NLRB's general counsel, Peter Robb, wrote in the memo.

Neutrality agreements that are truly neutral and don't interfere with employee rights, such as when an employer agrees to remain neutral during an organizing campaign in exchange for the union's refraining from a corporate campaign, will remain lawful under the stricter standard. Lyon explained that a corporate campaign is when a union targets an employer using legal action, media attention, community organizing, picketing and strikes, and political influence to pressure the employer into recognizing the union as the exclusive bargaining representative.

Invalid Provisions

Neutrality agreement provisions that may be invalid, according to the general counsel's memo, include those that:

  • Allow nonemployee union organizers access to employer facilities.
  • Inform employees of the presence of union organizers.
  • Allow union solicitation during worktime.
  • Provide a union with employee contact information.
  • State a preference for a specific union.

Prior to the memo's release, employers could offer significant help to a union, regardless of whether employees really wanted to be represented, said Phillip Wilson, president and general counsel with Labor Relations Institute in Broken Arrow, Okla.

With neutrality agreements, employees are "likely to believe that because the company is offering this help to the union that they might be in trouble if they don't support the union," Wilson said. "This does not create an environment where employees can freely choose whether or not they wish to be represented."

Neutrality agreements that negotiate substantive terms and conditions of employment are unlawful, the memo also stated. In addition, the memo read that the board incorrectly decided in Dana Corp. that pre-recognition agreements dealing with terms and conditions of employment are unlawful only if they contain a full agreement.

Other unlawful agreement provisions negotiated before recognition of union representation include those that:

  • Set post-recognition wages or otherwise deal with wages. The memo stated a pre-recognition agreement containing a comparable-wages provision that requires the parties to consider the wage rates of unionized competitors or the employer's other facilities would be unlawfully coercive.
  • Submit collective bargaining disputes to "interest arbitration" (i.e., arbitration settling a bargaining dispute, such as a disagreement over wage increases, between the employer and union).
  • Waive employees' right to strike.
  • Provide union organizers with access to employer facilities.
  • Prematurely agree on the scope of the bargaining unit.
  • Mandate opposition to employees' seeking to vindicate their rights before the NLRB.

"Many employers don't like interest arbitration because adverse awards can impose terms and conditions of employment that are detrimental to their business," Pryzbylski said.

Interest arbitration is most common in the public sector involving essential workers, such as firefighters, 911 dispatchers and sometimes bus drivers, when they're prohibited by state statute from striking, Lyon said.

The NLRB may conduct elections only among groups of workers considered appropriate for bargaining. "An appropriate unit is one where workers share a community of interest with each other that makes bargaining over that group meaningful," Wilson said. "This ensures that groups with little or no connection to each other are not bargaining a contract together."

[Need help with legal questions? Check out the new SHRM LegalNetwork.]

Why Do Employers Enter Neutrality Agreements?

Some employers enter into neutrality agreements because they are not concerned about giving up the ability to run their businesses without the limitations imposed by the National Labor Relations Act (NLRA), Kisicki said. The NLRA requires employers to negotiate about all terms and conditions of employment for union-represented employees. "In fact, some employers enter into these agreements because they are favorably disposed to unions," he said.

Pryzbylski said, "Many companies desire to remain union-free for a host of reasons, so entering into a neutrality agreement may seem counterintuitive to many people." But companies have a variety of reasons for doing so, he added.

Often, companies that embrace neutrality agreements have large segments of their workforce already unionized, he said. Employers may enter into a neutrality agreement in such circumstances to secure favorable labor agreement terms at their existing unionized sites.

"Other times a company may be pressured by a unionized customer to enter into a neutrality agreement," he said. "Sometimes, unions wage corporate campaigns and engage in picketing and similar tactics to leverage a company to agree to enter into one."

Companies being asked to enter into neutrality agreements—or operating under them—should carefully evaluate the terms in light of this memo, Pryzbylski said. "Even aside from this memo, a company should carefully evaluate the pros and cons of entering into such an agreement because it is surrendering important rights to voice its opinion on unionization to its workforce."

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