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Employer's Suit Against Unions Is Not Unfair Labor Practice

November 26, 2013

The U.S. Court of Appeals for the 6th Circuit rejected a National Labor Relations Board (NLRB) order that found an employer’s lawsuit against two unions for engaging in secondary boycotts to be an unfair labor practice (ULP) in violation of the National Labor Relations Act (NLRA). 

Facts of the Case:  In NLRB v. Allied Mechanical Services, Inc., an employer sued two unions for violating the secondary boycott provisions of the NLRA, as one union refused to provide the employer with access to certain business funds because the employer had not signed a collective bargaining agreement with the other union.  The district court dismissed the case, finding the complained-of conduct was not sufficient to trigger the NLRA’s protections against secondary boycotts.  The unions then brought an ULP charge against the employer, claiming that the lawsuit violated the NLRA.  The presumptive remedy for such an ULP is that the employer must reimburse the Union for its attorneys’ fees in the underlying lawsuit.

While the case was pending, the U.S. Supreme Court issued its opinion in BE&K Constr. Co. v. NLRB, in which it addressed the issue of what standards should be applied to find employers liable under the NLRA for filing suits against labor unions.  The Supreme Court suggested that a more stringent test should apply in order to avoid First Amendment concerns associated with the right of citizens to petition the government for the redress of their grievances. 

In light of the BE&K Constr. Co. case, the administrative law judge (ALJ) developed a test that a violation of the NLRA occurs if the litigation is: (1) objectively baseless and (2) retaliatory. Under his test, the ALJ found a violation and required the employer to reimburse the unions for all of their litigation expenses from the lawsuit.  The Board adopted the ALJ’s findings, and the employer appealed to the 6th Circuit, arguing that the Board’s test “underprotected [its] First Amendment rights to file suit in federal court.”

The Court’s Ruling:  In examining the Board’s test and its application in this case, the 6th Circuit found that “substantial evidence does not support the Board’s conclusion that Allied lacked an objective basis for filing the suit.  While Allied may have lost in court, its claims do not sink to the level that no reasonable litigant could have expected to succeed on the merits of the case.”  Thus, an unsuccessful lawsuit may still have an objective or reasonable basis, which the 6th Circuit found to be the case here. 

The 6th Circuit recognized, however, that the Supreme Court’s ruling in BE&K Constr. Co. left open the possibility that liability can still be found even where there is an objective basis for the suit “if the suit is retaliatory in the heightened sense that the motive is only to impose the costs of litigation on the opposing party.”  In this particular instance, the 6th Circuit determined that there was no evidence that the employer’s motive was solely to punish the unions through litigation costs.

Lessons Learned:  This case provides some reasonable protections for employers’ rights to file lawsuits against unions under certain circumstances, despite the NLRB’s attempts to restrict those rights.