By Kristin E. Michaels

As union organizing is increasingly a top priority in big labor’s agenda, they are pushing to include in collective bargaining agreements provisions that make it easier for labor to organize newly opened businesses, affiliates, joint ventures and even suppliers.  The language of such contractual provisions are often drafted in such a way as to give the appearance of being lawful “after-acquired” or “anti-dual shop” provisions.  However, upon closer inspection, such provisions may be unlawful and thus unenforceable under Section 8(e) of the National Labor Relations Act (NLRA).  A recent decision of the NLRB – while not finding the provision at issue to be unlawful under Section 8(e) – underscores that this lesser known section of the NLRA should not be overlooked when analyzing collective bargaining provisions and proposals that purport to extend the application of a company’s collective bargaining agreement.

Section 8(e) makes it an unfair labor practice for a union and an employer to enter into any agreement, express or implied, where the employer agrees to cease or refrain from doing business with any other person.  Not every collective bargaining provision with a “cease doing business objective” is necessarily unlawful, however.  Contract provisions that have the primary objective of preserving or protecting work performed by employees of the employer bound by the contractual provision are lawful.  On the other hand, provisions that have the secondary objective of controlling the labor relations of another employer are unlawful under Section 8(e).

So how does an employer tell if a contract provision is a lawful work preservation agreement or whether it has a proscribed secondary objective?  The Supreme Court in NLRB v. Longshoreman ILA, 447 U.S. 490 (1980), established the following two-part test:  (1) the clause must have as its objective the preservation of work traditionally performed by employees represented by the union; and (2) the contracting employer must have the power to give the employees the work in question, i.e., the right to control the work.  The NLRB has clarified that control of work must be actual, and not potential. 

By way of example, the NLRB has found the following contract provision to be lawful under Section 8(e):

To protect and preserve, for the employees covered by this Agreement, all work heretofore performed by them, and in order to prevent any device or subterfuge to avoid the protection and preservation of such work, it is hereby agreed that if and when the Employer shall perform any work of the type covered by this Agreement, under its own name or under the name of another, as a corporation, company, partnership or any other business entity, including a joint venture, wherein the Employer exercises either directly or indirectly any significant degree of ownership or management control, the terms and conditions of this Agreement, including fringe benefits shall be applicable to all such work.

The NLRB reasoned that this provision met the two-part test laid out by the Supreme Court because, by its express terms, its objective was to preserve work traditionally performed by employees represented by the union and the provision only applied where the signatory employer exercised actual control over the assignment of work of the other entity’s employees.

By contrast, the NLRB has found the following provisions to be unlawful under Section 8(e):

This agreement shall be effective in all places where work is being performed or is to be performed by the Employer – or any person, firm, or corporation owned or financially controlled by the Employer, and covers all work coming under the jurisdiction of the [union].


In the event that the partners, stock holders or beneficial owners of the company form or participate in the formation of another company which engages in or will engage in the same or similar type of business enterprise in the jurisdiction of this Union and employs or will employ the same or similar classifications of employees covered by this Collective Bargaining Agreement, then that business enterprise shall be manned in accordance with the referral provisions herein and be covered by all terms of the this contract.

The NLRB concluded that the first provision failed the right to control test because the clause required the parties’ contract to be extended to affiliated entities whose assignment of work the signatory employer did not control.  It concluded that the second provision also was unlawful because the provision went beyond entities controlled by the signatory employer to reach entities linked to the signatory only by common ownership or less.  

In the most recent case addressing this issue, Cosco Fire Protection, Inc., 357 NLRB No. 176 (Dec. 30, 2011), the provision being challenged as unlawful under Section 8(e) stated:

Should the employer establish or maintain operations that are not signatory to this Agreement, under its own name or another or through another related business entity to perform work of the type covered by this Agreement within the Union’s territorial jurisdiction, the  terms and conditions of this Agreement shall become applicable to and binding upon such operations at such time as a majority of the employees of the entity (as determined on a state-by-state, regional or facility-by-facility basis consistent with NLRB unit determination standards), designates the Union as their exclusive bargaining representative on the basis of their uncoerced execution of authorization cards, pursuant to applicable NLRB standards or in the event of a good faith dispute over the validity of the authorization cards pursuant to a secret ballot election under the supervision of a private independent third party to be designated by the Union and the [Employer] within thirty (30) days of the ratification of this Agreement.   

NLRB member Brian Hayes argued that because the provision extended the parties’ collective bargaining agreement to any entity which the signatory employer “maintained,” it did not on its face apply only to entities over which the signatory employer exercised control.  Members Craig Becker and Mark Pearce disagreed, holding that the provision could only be construed to require the application of the terms of the parties’ collective bargaining agreement to an entity whose work the signatory employer controls.

While arguably the provision in Cosco Fire Protection is broader than some of the previous contract provisions that the NLRB has found unlawful, the case is an important reminder that employers should analyze any application of contract provisions in their collective bargaining agreements or any such proposals in light of Section 8(e), and refuse to apply or agree to such provisions where they seek to bind an entity whose work is not actually controlled by the employer.