A Minnesota federal court recently entered summary judgment in favor of a plaintiff and against a Teamsters local and entered judgment in the amount against for $1,238,315 for the Teamsters’ illegal picketing of plaintiff’s facility.

In the case, Sysco Minnesota, Inc. v. Teamsters Local 120, a Teamsters Local – Local 41 – who had no bargaining relationship with plaintiff and did not represent plaintiff’s employees picketed plaintiff’s food distribution facility for one day in November 2017.  However, Local 41 did have a bargaining relationship with plaintiff’s sister company that was located in Missouri.  That sister company, however, was a wholly separately owned and operated company.  In response to Local 41’s picket line, plaintiff’s employees, who were represented by Teamsters Local 120, refused to cross the picket line.  Plaintiff was unable to make its food deliveries to commercial customers preparing for the upcoming Thanksgiving holiday. Plaintiff  suffered more than $1.2 million in lost profits and lost customers as a result of the picketing and sympathy strike. Importantly, Local 120 did not have any labor grievance with plaintiff and had just begun a new four year contract with plaintiff.

Plaintiff brought suit against Teamsters Local 120 for violating the CBA which contained a no strike clause that stated “there shall be no lockout, strike or any other interference with the operation of the business during the life of this Agreement.”  Both sides moved for summary judgment.  Local 120 raised two defenses on summary judgment in support of its claim that the case should be dismissed.  First, it argued that plaintiff’s claims were subject to an arbitration provision in the agreement.  Second, it argued that the CBA’s no strike clause permitted sympathy strikes.

Arbitration

The Court first addressed Local 120’s arbitration argument.  While not the thrust of the Court’s opinion, the Court’s decision on Local 120’s arbitration argument is nonetheless important.  The Court ruled that Local 120 waived arbitration by engaging in extensive discovery and not filing a timely motion to compel arbitration.  This ruling is a reminder for anyone that has an arbitration provision in any contract – whether it be a CBA or an ordinary construction contract – to timely raise arbitration.

Sympathy Strikes and the No Strike Clause

The Court then moved to Local 120’s main argument that the no strike clause did not prohibit so called sympathy strikes. A sympathy strike is where a worker not part of the striking unit shows “sympathy” or solidarity for the strikers and refuses to cross a picket line and thereby goes on strike herself.  As the Court noted, the National Labor Relations Act (“NLRA”) protects the right of unionized workers to engage in sympathy strikes, unless the CBA clearly and unambiguously waives employees’ sympathy-strike rights.

While the no strike clause did not expressly reference sympathy strikes, it did state that “there shall be no lockout, strike or any other interference with the operation of the business during the life of this Agreement.”  The Court believed that this language was clear.  Particularly, the Court believed that the clause “any other interference” included sympathy strikes.  Therefore, the Court concluded that Local 120 breached the CBA when it engaged in a sympathy strike in support of Local 41.

Takeaway

A primary reason that employees enter into collective bargaining agreements is for labor stability which includes no work stoppages and strikes during the term of the agreement. Therefore, it amazes me that in negotiating a CBA that employers do not always expressly state that sympathy strikes are included in the no strike clause.  Here, while plaintiff was ultimately successful, if it had simply expressly stated that sympathy strikes were included in the no strike provision it would have not given Local 120 any wiggle room whatsoever and its actions would be indefensible.

I received several emails regarding the expose by Caitlin McCabe and Erin Arvedlund in the Philadelphia Inquirer titled “Rotting Within.”  The story outlines the epidemic of defective stucco and other “building envelope” issues in Southeastern Pennsylvania that is causing homes to literally rot from within.  Having litigated several of these cases, they are frustrating for both the attorneys that handle them and the homeowners who must deal with the reality that their home is rotting away.  The story points to the multiple (and all too common) causes for the epidemic:  unskilled subcontractors, lack of oversight and care, and poor construction drawings.  The is no quick solution to the crisis and litigation regarding these defects is sure to proliferate.

However, there is one potential solution that the story does not cover and which could help alleviate some of the challenges homeowners face in recovering damages for their claims.  The Pennsylvania Legislature must act to change the insurance laws in Pennsylvania to make defective construction covered by a developer’s, contractor’s, and subcontractor’s commercial general liability policy (“CGL”).  Most homeowners and many attorneys incorrectly assume that defective construction is covered by insurance.  This assumption makes sense.  If someone operates a car in a negligent manner and hits your car and causes damage, the negligent driver’s insurance company with cover your loss.  In reality, Pennsylvania courts follows a minority of states that holds that generally speaking defective workmanship is not a “covered occurrence” under an insurance policy. (There are several exceptions to this rule and thorough discussion is beyond this blog post and would probably bore you.)

Why is coverage for defective workmanship so important (beyond the obvious reasons)? First, many contractors and subcontractors are small businesses with little to no assets.  Therefore, even when liability is clear, many times plaintiffs are faced with the prospect of a judgment but no ability to collect on it.  However, insurance policies contain an indemnification provision that require the insurance company to pay a judgment against its insured.  Second, most insurance companies take the position that because the claims are not covered by a policy they have no indemnification and, therefore, no obligation to pay a judgment against their insured.  This means insurance companies feel no pressure to settle a claim. The insurance companies believe they will not be required to pay a judgment anyway, so why settle.

Critics (including most contractors and home builders) will howl that making coverage of defective workmanship claims mandatory will increase the cost of insurance with the cost being passed on to the home buyer.  They are right.  But, I doubt the homeowners that have been impacted by this crisis would mind paying a few dollars more for a home knowing an insurance company would step up to the plate to cover their damages. (Plus,any additional cost would be negligible anyway when prorated over the a typical thirty year mortgage).

Until then, I hope the attorneys mentioned in the article that are prosecuting these claims get their clients the justice they deserve.

 

I am pleased to announce that I will be speaking in an upcoming Strafford live webinar, “Negotiating Project Labor Agreements: Key Terms for Managing Costs, Limiting Risks” scheduled for Thursday, November 29, 1:00pm-2:30pm EST. Because of your affiliation with my firm, you are eligible to attend this program at half off. As long as you use the links in this email, the offer will be reflected automatically in your cart.

Our panel will provide construction practitioners with practical insight into drafting PLAs. The panel will discuss key contract provisions for owners, contractors and labor providers and best practices for avoiding pitfalls in their use in public and private construction projects, including what a municipality and a union can legally do through a PLA and what is not legal under a PLA.

After our presentations, we will engage in a live question and answer session with participants so we can answer your questions about these important issues directly.

I hope you’ll join us.

For more information or to register >

Or call 1-800-926-7926
Ask for Negotiating Project Labor Agreements on 11/29/2018
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Back in June, I posted about changes coming to the Pennsylvania Contractor and Subcontractor Payment Act (CAPSA), 73 P.S. Section 501, et. seq. The Act applies to virtually all private construction projects in Pennsylvania.  As of last week (Oct. 10), those changes are effective.  While there is some argument to the contrary, these changes are NOT retroactive and apply to all projects going forward from that date.  To recap, here are some of the important changes you need to be aware of:

  1. Contractual waivers.  Parties cannot waive the applicability of the act through contract.  Therefore, any clause in a contract purporting to waive the Payment Act’s applicability is void.
  2. Suspension of work.  Unpaid contractors and subcontractors have always enjoyed a common law right to suspend performance until payment was made.  Now, they also have a statutory right to do so.  Section 5 of the Payment Act ads a subpart (e) which states that an unpaid contractor or subcontractor can suspend performance without penalty if it is not paid.
  3. Written notice of deficiency items.  Owners or contractors seeking to withhold payment must now do so in writing and with a written explanation of its good faith reason for non-payment within 14 days of receiving an invoice that it intends not to pay in whole or in part.
  4. Waiver of defense to payment.  Perhaps the most critical change to the Payment Act is the part that says failure to provide written notice explaining non-payment within 14 days shall constitute a waiver of the basis and necessitate payment in full for the invoice.  As it stands, if notice is not timely and properly provided a contractor or subcontractor could file a complaint, get an admission that written notice was not provided, and move for judgment on the pleading or summary judgment.  In essence, failure to provide the required notice makes an owner or contractor strictly liable. (I cannot underscore enough how important this change is.  Going forward you must be hyper vigilant about providing written notice to a contractor or subcontractor the reason you are withholding payment.)
  5. Retainage.  If retainage is to be withheld beyond 30 days after final acceptance of the work, then an owner or contractor, as the case may be, must provide written notice as required for deficiency items.

 

A few days ago, IBEW Local 98 began began protesting a restaurant owned by professional football player Jahri Evans. The organizers are accusing Evans of violating local construction wage standards and are advertising their dispute with “handbills.”

What are handbills?

Walking down Fremont Street in Las Vegas is impossible without one or several characters putting a small business card with “questionable” adult entertainment advertisements in your hand. Some will slap papers to your chest, leaving you no choice but to grab the flyers.

On a different level, this action occurs on a regular basis by union member.  But instead of shady characters pushing questionable entertainment, it is union representatives pushing a dispute with a local employer over working conditions.  However, in either case the practice is known as i as handbilling.

When is Handbilling Legal?

For the most part, the First Amendment (and Supreme Court precedent) protects peaceful handbilling.  So, while you might be annoyed by it, you can do little to stop a schlub handing out homemade flyers deriding your business.  However, there are some exceptions:

  • Persons passing out handbills are prohibited from impeding egresses or ingresses to your business. So, if union members were handbilling in front of a large chain grocery store, they are well within their rights provided disinterested shoppers were not impeded from entering the store.
  • Handbilling is allowed only on publicly accessible walkways or areas generally open to the public and to others advertising a particular message. A union representative cannot come onto private property to distribute handbills.
  • Handbilling loses its First Amendment protection when it turns violent, coercive, or otherwise significantly disruptive to regular business practices.
  • Handbilling must be truthful and cannot contain willfully false information.

Why Handbilling Takes Place

Unions handbill for any number of reasons, allegedly unfair wages. Frequently, handbilling occurs when a non-union construction company is working on a project.

Takeaways

Handbilling is a common union activity. Generally, it is a constitutionally protected activity with certain exceptions.   For the most part, it can be safely ignored.  However, if it crosses the line, an offended owner can take action.

One of the most powerful weapons in labor’s arsenal is a strike.  Like most powerful weapons there is a dichotomy in a strike. On one hand, it can bring about concessions from management that labor seeks.  On the other hand, it can permanently change the relationship between management and labor.  However, one thing is certain, strike are – to put it mildly – chaotic.

During this chaotic period, employees and employers may wonder what rights they have during union-initiated strikes. We provide some brief explanations below, along with how union litigation can help enforce your rights.

Employers can Not Fire or Threaten Striking Employees

 The National Labor Relations Act expressly protects union workers who engage in lawful strikes.  Therefore, except in limited circumstances, employers cannot fire striking workers.  Indeed, even in the limited circumstances under which an employer can lawfully terminate a striking employee, such as when employees engage strikes unendorsed by unions or when there exists a “no strike clause,” employers should proceed with caution before terminating the striking employee. Terminating an employee who strikes lawfully may result can result in an award of back due to the employee and immediate reinstatement of employment.

Lawful strikes are those that occur at the conclusion of a collective bargaining agreement and relate to economic conditions (an economic strike) or arise from an alleged unfair labor practice the employer has committed (an unfair labor practice strike).  Workers can also potentially lawful strike over unsafe workplace conditions.  Unlawful strikes are those which endorse violence, block workers from entering a facility, or promote unfair labor practices.

An employer can hire replacement workers.

Employers have the right to hire replacement workers for their striking employees.  The striking employees have the right to reinstatement at the conclusion of the strike.  The extent of the striking worker’s reinstatement rights depends on whether the strike is an economic strike or an unfair labor practice strike.  If the strike is an economic strike, the employer has the right to hire permanent replacement workers.  At the conclusion of the economic strike, the striking working is not entitled to unconditionally receive her old job back.  Instead, she is placed on a preferential hiring list.  On the other hand, if the strike is an unfair labor practice strike, the employer may only hire temporary replacement workers.  At the conclusion of the unfair labor practice strike, the striking workers are entitled to their old positions back if they make an unconditional offer to return to work.

Conclusion

Regardless of the union that is striking, issues without an amicable resolution will undoubtedly turn into a long legal dispute spanning months. Employees may go without pay, employers may fall behind in production schedules, and innocent persons who cross picket lines will find themselves accosted by union members vying for better treatment.

Strikes are tough on employers, unions, and employees who brave the elements to stand up for workplace values. There are no wrongs or rights in strikes, but laws do protect the interests of all involved. Employees concerned about strike pay, employers concerned about legalities, and unions that wish to remain compliant would find retaining an attorney beneficial during any contentious argument.

The Buffalo News has an article that shows that unionization is not the rainbows and unicorns that organizers promise.   The story involves the Ironworkers organizing of a company call Wendt Corp.  Over a year ago, Wendt’s employees voted in favor representation by the Ironworkers.  But, Wendt and the union still have yet to agree on a contract.  As we often tell employees thinking about organizing, voting in favor of the union and receiving the benefit of what the organizers promises are different things.  An affirmative vote means only that the employer must bargain in good faith with the union.  It does not mean the employer is forced to sign a collective bargaining agreement containing all of the goodies the union promises employees.

The article also shares some important statistics.  According to Cornell University:

reaching a first contract took an average of 378 days. Research showed 40 percent of contracts were settled within a year, 63 percent within two years, 70 percent within three years and 75 percent within four years.

That means a whopping 60% of union elections took over a year to result in a contract. It also means 25% (1 in 4) still had no contract in four years.  Why is that important to your employees?  Because while negotiations are ongoing, Section 8(a)(5) of the National Labor Relations Act prevents any changes in benefits.  That means no wages increases or other raises during that time period.  For Wendt’s employees, this means they have not appreciated the benefits of rising wages that other employees in the construction industry have seen. If I told you had a 1 in 4 chance of not getting a raise for four years if you did something, would you do it?   Not surprisingly, 20% of Wendt’s employees have left or retired.  They no doubt realized that in a tight labor market they could make more money elsewhere while not being beholden to the union’s negotiations.

What the article doesn’t say is if given the chance to do it over again, would Wendt’s employees vote for the union?  My suspicion is they would not.  And, neither would your employees if they knew that after a vote for a union money does not rain from the sky.

 

Bad omen. Last week, I wrote about a Appeals Court decision that affirmed a contractor’s escape from an over $600,000 withdrawal liability assessment from the Laborers Union.  The next day the Third Circuit (which covers PA, NJ, and DE) handed down a decision affirming a federal court’s decision to assess withdraw liability.  This one shows the dark side of not reading and understanding your CBA.

The belligerents in the litigation were, Penn Jersey, a construction material supplier, and Teamsters Local 676.  Their collective bargaining agreement contained a clause purportedly covering withdrawal liability.  Specifically, the clause stated “should the Employer withdraw from the Agreement in the future, there will be no withdrawal liability.  The CBA expired and Penn Jersey did not renew its agreement with the Teamsters.

The Teamsters Pension Fund later notified Penn Jersey that the company had incurred withdrawal liability amounting to $961,281.59—more than half of which had accrued after Penn Jersey withdrew from the Fund.  The Fund sued Penn Jersey, Penn Jersey sued the Teamsters (the Pension Fund and the Union are separate entities).  Penn Jersey argued that  the CBA absolved the company from making payments to the Fund and that responsibility for doing so shifted to the Local. (Sound familiar).  Importantly, Penn Jersey maintained that the withdrawal liability clause remained operational even after the expiration of the CBA.  Thus, Penn Jersey argued that the clause have it perpetual protection from any withdrawal liability.

The District Court granted summary judgment to the Teamsters and Penn Jersey appealed.  On appeal, the Third Circuit affirmed.  The Court reasoned that ordinary principles of contract interpretation should apply generally to collective-bargaining agreements. The Court then stated “[o]ne traditional principle of contract interpretation is that ‘contractual obligations will cease, in the ordinary course, upon termination of the contract.  The Court held that the Supreme Court noted that “an expired bargaining agreement has by its own terms released all its parties from their respective contractual obligations, except obligations already fixed under the contract but as yet unsatisfied.” 

Against this backdrop, the Court held that the CBA in question did not contain a “survival” clause—a provision which explicitly indicates which duties or obligations will continue beyond the life of a contract, and how long those obligations or duties are to endure.  The Court also ruled that the clause was silent on whether its duties and obligations continued past the life of the agreement.

The Takeaway

You have to feel for Penn Jersey who no doubt thought it was free to walk away from the CBA without recourse.  However, as we saw in last weeks post, the drafting of language of a CBA demands precision.  In this instance, that lack of precision swung in favor of the union.  Sadly, had Penn Jersey insisted on clarity with one additional sentence stating that the clause survived termination it would have save itself $1,000,000.

 

Withdrawal liability is a huge issue facing unionized employers.  According to Bloomberg, 93% of the Top 200 largest pension plans are underfunded by a combined $382 billion.  Contractors that withdraw from a multi-employer pension plan can face hundreds of thousands or millions of dollars in assessed withdrawal liability.  However, employers may be able to avoid that liability, plus the legal and consulting fees to fight it, by simply reading their collective bargaining agreement.

In Laborers’ Pension Fund v. W.R. Weis Co., Inc., 879 F.3d 760, 762 (7th Cir. 2018), a contractor escaped an over $600,000 withdrawal liability assessment based on a common ambiguity found in a CBA.  In that case, W.R. Weis was a party to a CBA with the local Laborers Union that required it to contribute to a multi-employer pension plan for each hour worked by Laborers union members.  Gradually, W.R. Weis started assigning work that the Laborers traditionally performed to marble setters, who were covered by a collective bargaining agreement with the Bricklayers Union.  Finally, in 2012, W.R. Weis stopped using Laborers totally and formally terminated its CBA with the Laborers, thereby triggering withdrawal liability.

After the Laborers Union assessed liability, W.R. Weis challenged it under the construction industry exception.  Under that rule, a construction industry employer is liable for withdrawal liability only if “it continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required,” or resumes works within five (5) years after ceasing to do so.

The Union argued that the collective-bargaining agreement required pension-fund contributions for all “employees doing covered work.”  Thus, it did not matter if the employee performing covered work was a Laborers Union member.  In the Union’s eyes, if the work was covered by the CBA a contribution was owed. Conversely, Weis argued that the CBA required contributions only for “hours worked by Laborers [union members]”

The CBA required the Weis to “make a pension contribution of $8.57 per hour for each hour worked by all Employees covered by this Agreement in addition to the wages and welfare payments herein stipulated.”  However, the CBA also stated that Weis “agree[d] to be bound by the Agreements and Declarations of Trust establishing the Laborers’ Pension Fund, as well as any amendments thereto, and agree[d] to be bound by all actions taken by the Trustees of that fund pursuant to the Agreements and Declarations of Trust.”

The Fund trust agreement defined “Employee” “(1) any person “covered by a Collective Bargaining Agreement between an Employer and the Union or any of its local affiliates who is engaged in employment with respect to which the Employer is obligated by the Collective Bargaining Agreement to make contributions to the Pension Fund”; or (2) any person “employed by an Employer who performs work within the jurisdiction of the Union as said jurisdiction is set forth in any applicable Collective Bargaining Agreement or by any custom or practice in the geographic area within which the Employer operates and his Employees perform work.”

The Court explained, the term “Employee” in the collective-bargaining agreement implies that “Fund contributions are only required for employees who are laborers[ ] because the agreement is between [the] employer[ ] and the General Laborer’s District Council of Chicago and Vicinity.”  On the other hand, the Fund documents acknowledges that “Employees” for whom pension-fund contributions are made may well be workers covered by the agreement and anyone who performs work within the jurisdiction covered by the agreement. The Court concluded this created an ambiguity requiring evidence of the course of dealing between the parties to clarify it.

The Union admitted during trial that the Fund does not collect contributions from an employer who has already contributed to another union’s pension fund for the same work.  Thus, although the Bricklayers members were performing work that was within the work jurisdiction of the Laborers, historical practice showed that the Laborers treated the CBA narrowly and required contributions only for work actually performed by Laborers members.  The arbitrator concluded that contributions for work within the gamut  of the CBA were not required because the Laborers Union had not “previously required” contributions for work performed by members of a different union.

The Takeaway

Weis escaped an over $600,000 withdrawal liability not with expensive actuaries and consultants, but by arguing a common ambiguity found in collective bargaining agreements and trust fund documents.  So, whether it be a withdrawal liability assessment or just a demand for fringe benefit contributions, examine your CBA and trust documents first.