Maui Trucking, Inc. v. Operating Engineers Local Union No. 3 International Union of Operating Engineers
Docket: No. 92-15321
Court: Court of Appeals for the Ninth Circuit; May 18, 1994; Federal Appellate Court
This lawsuit centers on a collective bargaining agreement, specifically the Master Agreement, between Operating Engineers Local Union No. 3 and the General Contractors Labor Association, which includes subcontracting provisions in Section 24E. This section mandates that General Contractors may only subcontract off-site work to subcontractors who agree to pay wages and benefits equivalent to those in the Master Agreement, adhere to the established work schedule, provide certified payroll records, and resolve compliance disputes through the agreement's grievance procedures. Independent nonunion truckers, concerned that Section 24E would restrict their business opportunities, threatened legal action, prompting the Associations to refrain from implementing the section due to potential legal concerns.
In response, Local No. 3 sought a declaratory judgment, which resulted in Judge David A. Ezra ruling that Section 24E is facially valid and does not violate section 8(e) of the National Labor Relations Act, as it functions as a permissible 'union standards clause.' Judge Ezra emphasized that such clauses aim to protect the work opportunities and standards of employees in the bargaining unit. However, he cautioned that while Section 24E appears valid, it could be deemed unlawful in application if it is found to control the employment practices of businesses seeking to engage with the General Contractors rather than preserving employee work standards. He referenced similar cases where restrictions were deemed secondary and unlawful when their application did not relate to protecting the bargaining unit's work.
Judge Ezra deferred the decision on the validity of certain restrictions as applied, noting that the determination depends on specific factual situations yet to unfold. He ruled that a disputed clause did not violate section 8(e) and constituted a legitimate subcontracting restriction, as well as being exempt from federal antitrust law due to its nature as traditional union activity. Although Local No. 3 and the Associations were satisfied with the ruling, independent nonunion truckers were not and subsequently filed a lawsuit challenging the validity of Section 24E as it applied to them.
The independent truckers, not parties to the prior lawsuit, were allowed to litigate the issues, including the previously undecided 'as applied' issue. Initially, they sued only Local No. 3, but the district court permitted the Associations to intervene. Motions for summary judgment led Judge Samuel King to rule in favor of the Associations and Local No. 3, confirming the validity of Section 24E as a 'union standards clause' that aimed to preserve union work and standards.
The independent truckers appeal this ruling. The court must determine whether the work preservation analysis applies statewide across Hawaii, as argued by the Associations and Local No. 3, or is limited to Maui, as the independent truckers contend. Judge King held that the relevant work universe was the entire State of Hawaii, a position the court upheld, citing the interconnected nature of contracting across the islands.
The next legal question is whether, as applied statewide, Section 24E is valid by assessing whether the clause primarily protects unit work or standards or serves to assert control over other employers' labor relations. The Supreme Court's precedent indicates that Section 8(e) focuses on whether an agreement concerns the labor relations of the contracting employer regarding their employees or is intended to fulfill broader union objectives elsewhere.
Judge King determined that if the analysis of work preservation is limited to Maui, there is a genuine issue of material fact regarding relevant work to preserve. However, examining the entire state shows that Association members completed 2.5% to 7.5% of the off-site hauling work typically performed by plaintiffs, which he deemed legally sufficient to indicate a legitimate work preservation purpose under Section 24E. The dissenting opinion argues that while Maui is not the only focus, its data cannot be disregarded. On Maui, only three of sixty-seven General Contractors occasionally perform the disputed work, and similarly, on Oahu, only three contractors engage in it, indicating that this work has not been traditionally performed by General Contractors statewide. This situation parallels a previous case where the Board found that a similar clause violated section 8(e) due to a lack of work preservation purpose. Additionally, most contractors have historically sourced their materials from mass production manufacturers rather than fabricating them, suggesting that the involvement of Associations in this work is minimal and declining. The dissent concludes that Section 24E does not have a legitimate primary object of preserving relevant work, as it appears insufficient to address labor relations effectively. The validity of Section 24E hinges on individualized fact-finding and its potential violation of section 8(e), affecting its classification as a mandatory subject of collective bargaining. Consequently, the decision to grant summary judgment in favor of the Associations and Local No. 3 is reversed regarding the violation of the Sherman and Clayton Acts.
Judge King determined that Section 24E remains valid even without work to preserve, as it also aims to uphold union standards. He asserted that while "work preservation" and "union standards" are frequently discussed together, they are distinct objectives that unions can pursue through subcontracting agreements. Protecting union wages and benefits for unit employees is a legitimate interest of the union, independent of work preservation, as it helps prevent wage erosion by non-union truckers.
The analysis faced disagreement, with the argument that without substantial work or competition for it, preserving union standards alone equates to pursuing union goals in unrelated areas. The reliance on precedent from Sheet Metal Workers Local 91 was deemed misplaced, as that case emphasized protecting unit work, not merely union standards. The excerpt also references that similar clauses can be lawful in contexts like subcontracting if they protect unit work.
The Supreme Court and the NLRB have clarified that not all work preservation agreements violate the National Labor Relations Act. A union standards clause aims to prevent subcontracting of work traditionally performed by unit members, but clauses serving broader union interests without focusing on unit work or standards are unlawful under Section 8(e). Local No. 3's argument about "fairly claimable" work, which could uphold a clause covering work similar to traditional unit work, was noted but not addressed by the district court, leading to further proceedings on remand. Section 8(e) prohibits labor organizations and employers from entering agreements to cease business with others, rendering such contracts unenforceable.
