September 12, 2008

In a highly contested case, the Supreme Court of the United States, in Chamber of Commerce v. Brown, recently addressed the issue of whether a state could enact a statute that restricted employer speech during a union organizing campaign. The California statute at issue in Brown was passed in an effort to undermine the effectiveness of employer opposition in response to union organizing campaigns.

Statistics show that unions win about 40 percent of elections when employers contest their organization efforts. In contrast, labor organizations win up to 80 percent of elections in which an employer remains neutral during an organizing campaign.1 As a result, unions have used their local and state influences to petition legislatures to pass laws mandating employer neutrality during union organizing campaigns.

California became the first state to pass this type of “union neutrality” law in 2000. Until the Supreme Court ruling, the California neutrality statute prohibited employers who receive more than $10,000 in state funds per year from using any of the state-funded money to finance anti-union efforts. To enforce this measure, the statute mandated the implementation of costly accounting systems which particularly burdened small businesses. In addition, the statute imposed severe financial penalties for violations, as well as authorizing private taxpayers to file lawsuits to obtain civil damages and attorney fees. Because of the financial penalties and potential for lawsuits, employers were forced to make the draconian choice of ceasing to communicate with employees about unionization or turning down state funds.

In response to employer outcry, the National Chamber of Commerce brought a lawsuit seeking to prevent enforcement of the California statute. In a 7–2 decision, the Supreme Court of the United States ultimately sided with the Chamber of Commerce by holding that the California statute violated federal labor policy set forth in the National Labor Relations Act, which protects an employer’s right to share its views on unionization. In its holding, the court declared that states cannot regulate employer speech during union organizing campaigns.

Although the ruling in this case is limited to the California law, the Supreme Court’s decision will have a nationwide impact in that 16states (Arizona, Colorado, Connecticut, Georgia, Illinois, Indiana, Iowa, Louisiana, Missouri, New Hampshire, New Jersey, North Dakota, Oregon, Pennsylvania, Tennessee and Washington) have proposed legislation similar to California’s statute. In addition to raising an issue as to the legality of the pending legislation, the holding will likely be used to overturn similar laws already enacted in New York and Florida.

While this may be a victory for employers, unions will now concentrate their efforts on lobbying Congress to pass the Employee Free Choice Act, which would allow unions to be certified without an election. Without elections, the ability of employers to oppose organizing drives will be severely hindered. Thus, the debate surrounding this legislation will soon become the next battleground for employers.

If you have any questions about the Supreme Court’s recent ruling or state statutes mentioned herein or the proposed Employee Free Choice Act, please contact Michael J. Hanlon or a member of Blank Rome’s Employment, Benefits, and Labor Practice Group.

See David Sherwyn et al., The Hotel Industry’s Summer of 2006: A Watershed Moment for America’s Labor Unions?, Cornell Hotel & Restaurant Admin. Quarterly, November 1, 2006.