December 2013 FBA Labor and Employment Law Third Circuit Update

Posted on Wednesday, January 22nd, 2014.

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December 2013 FBA Labor and Employment Law Third Circuit Update

Stephen E. Trimboli, Esq.
Trimboli & Prusinowski, LLC

The NLRB may direct a union to withdraw legal action for money damages against an employer when the union seeks relief that conflicts directly with an existing NLRB determination in a work jurisdiction dispute.

Sheet Metal Workers International Association Local Union No. 27 v. E.P. Donnelly, Inc., et al., decided December 13, 2013,, involved consolidated appeals arising from a construction trades jurisdiction dispute, centered on the question whether roofing work on a new, publicly-funded community center building in Egg Harbor Township, New Jersey, should be performed by sheet metal workers or carpenters. The case involved an appeal from a final administrative decision of the National Labor Relations Board, and appeals from various summary judgment orders entered by the District Court in a breach-of-labor-contract action brought by Sheet Metal Workers International Association Local Union No. 27 under Section 301 of the Labor Management Relations Act, 29 U.S.C.A. Sec. 185.

Background: Sambe Construction Company, Inc., had been retained by Egg Harbor Township to serve as general contractor on the community center project. Sambe, in turn, subcontracted the roofing work on the project to E.P. Donnelly, Inc. Both Sambe and Donnelly became signatories to a project labor agreement. However, Donnelly decided to assign the roofing work to carpenters employed by the United Brotherhood of Carpenters and Joiners, Local Union No. 623, with whom Donnelly had a collective bargaining relationship. The Carpenters union was not a party to the project labor agreement, and the Sheet Metal union, who was a party to the project labor agreement, demanded that the work be assigned to its members instead. The Carpenters union responded by threatening to picket if Donnelly reassigned the roofing work.

The Sheet Metal union invoked binding arbitration under the project labor agreement and won a determination awarding the work to its members. (Because the Carpenters union was not a party to the project labor agreement and did not participate in the arbitration voluntarily, the award was not binding upon it). The Carpenters union persisted in its threat to picket Donnelly if it reassigned the work. This continuing threat allowed Donnelly to invoke NLRB procedures designed to resolve such work jurisdiction disputes.

Under Section 8(b)(4)(ii)(D) of the National Labor Relations Act, (NLRA), 29 U.S.C.A. Sec. 158(b)(4)(ii)(D), a union commits an unfair practice by, inter alia, threatening to picket an employer for the purpose of forcing the employer to reassign work to that union from another union. In addition, under Section 10(k) of the NLRA, 29 U.S.C.A. Sec. 160(k), the filing of a charge under Section 8(b)(4)(ii)(D) triggers a hearing before the NLRB to resolve the underlying work jurisdiction dispute unless all interested parties agree to an alternative voluntary means of resolving the issue.
Donnelly’s filing of an unfair practice charge triggered such as Section 10(k) hearing, But while the Section 10(k) hearing was pending, the Sheet Metal union filed a breach of contract action under Section 301 against Donnelly in the United States District Court for the District of New Jersey, seeking declaratory and monetary relief and a preliminary injunction enforcing its arbitration award. The complaint was later amended to add Sambe, the general contractor, as a defendant.

The NLRB issued its Section 10(k) determination six months after the Sheet Metal union filed its Section 301 action. The NLRB determined that the work should be awarded to the Carpenters union. When the Sheet Metal union persisted in its Section 301 lawsuit, Donnelly filed a second unfair practice charge, asserting that the Sheet Metal union’s continued pursuit of its lawsuit was a violation of Section 8(b)(4)(ii)(D) in that it sought reassignment of work in contravention of the NLRB’s Section 10(k) determination.

While this second unfair practice charge was pending, the Sheet Metal union filed a second amended complaint. It no longer sought reassignment of the work, but instead demanded money damages from Sambe and Donnelly for its members’ loss of the work. The District Court subsequently entered summary judgment in the union’s favor on the breach of contract claims, assessing $365,349.75 in damages against Donnelly and $1.00 in nominal damages against Sambe.

Two years after summary judgment was granted by the District Court, the NLRB issued a final decision on the second unfair practice charge, holding that the Sheet Metal lawsuit against Donnelly was an unfair practice in violation of Section 8(b)(4)(ii)(D) because it directly conflicted with the NLRB’s Section 10(k) determination. As a remedy, the NLRB ordered the Sheet Metal union to withdraw its lawsuit against Donnelly. However, because Sambe had not been a party to the Section 10(k) proceeding, the NLRB allowed the Sheet Metal union claims against Sambe to continue.

Appeals from all of these determinations were consolidated into a single appeal before the Third Circuit.

Analysis: The Donnelly case afforded the Third Circuit to revisit and clarify its precedent on the question whether unfair practice liability could be premised upon the Sheet Metal union’s pursuit of a Section 301 action for money damages against Donnelly.

In Bill Johnson’s Restaurants, Inc. v. NLRB, 461 U.S. 731, 744 (1983), the United States Supreme Court outlined a two-prong test for determining whether a lawsuit constitutes an unfair practice under Section 8(b)(4)(ii)(D): there must be (1) an improper motivation, and (2) a lack of a reasonable legal basis for the suit. However, in dicta, the Supreme Court identified an exception to this two-part test: when the lawsuit has an objective that is illegal under federal law. Id. at 737, n. 5.

The Third Circuit first addressed the Bill Johnson’s Restaurants standard in what came to be known as the Gundle trilogy of cases. In Hoeber v. Local 30, United Slate Tile & Composition Roofers, 939 F.2d 118, 122 (3d Cir. 1991)(Gundle I), the Third Circuit upheld the denial of the NLRB’s application for a preliminary injunction barring a union from pursuing a Section 301 action contrary to an NLRB Section 10(k) determination. Among other factors, the Third Circuit in Gundle I expressed skepticism that the union lawsuit would meet the “improper motivation” prong of the Bill Johnson’s Restaurants test.

However, in Local 30, United Slate, Tile & Composition Roofers v. NLRB, 1 F.3d 1419 (3d Cir. 1993)(Grundle II), the Third Circuit affirmed a final NLRB determination which found that this same union had committed an unfair practice by pursuing its Section 301 action, and which ordered the union to withdraw its lawsuit. In Grundle II, the Third Circuit agreed that the continued pursuit of a Section 301 action for money damages in the face of a contrary Section 10(k) determination constituted an unfair practice under the Bill Johnson’s Restaurants “illegal objective” exception.

The Donnelly Court agreed that Grundle II controlled the case before it, rejecting the Sheet Metal union’s argument that Grundle II was “inconsistent” with Grundle I. The two cases arose in different procedural postures, and whereas Grundle I involved only the application of the “improper motivation” test, Grundle II instead applied the “illegal objective” exception.

The Donnelly Court also rejected the Sheet Metal union’s argument that a legal action for money damages in lieu of work is distinguishable from an action seeking reassignment of the disputed work. Again citing Grundle II, the Court found the distinction between seeking the work itself and seeking payment for it to be “ephemeral.” A majority of Courts of Appeals have held that there is no material difference between seeking disputed work and seeking payment in lieu of the disputed work. “Twenty years ago, we warned that ‘if a union is permitted to recover damages for work awarded to another union in a {S}ection 10(k) proceeding, the policy underlying {S}ection 8(b)(4)(ii)(D) of protecting employers from the detrimental impact of jurisdictional disputes would be severely undermined … These policy concerns, which motivated our decision in Grundle II, are equally persuasive today.”

However, the Donnelly Court clarified that its precedent applied only to suits for damages against the employer that actually made the disputed work assignment resolved by the NLRB’s Section 10(k) determination. The precedent does not apply with respect to other parties, such a general contractors, that were not responsible for making the disputed work assignments. Joining the NLRB and the Seventh Circuit, the Donnelly Court held that there was no bar against the Sheet Metal union pursuing its Section 301 claim against Sambe, the general contractor who played no role in the making the disputed work assignment.

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