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An employee can serve two masters: the Supreme Court rules on 'salting.'

The popularity of a union organizing technique known as "salting" has resulted in a vigorous debate among the federal circuit courts of appeals over the meaning of the term employee in the National Labor Relations Act (NLRA). The Supreme Court's recent decision in NLRB v. Town & Country Electric, Inc., 116 S. Ct. 450, 64 USLW 4022, 1995 WL 696375 (U.S. Nov. 28, 1995), has now resolved the dispute. In Town & Country, the Court held that a worker at a company could be an employee, even if that worker is, at the same time, being paid by a union to help organize the company's workers.

The Supreme Court's decision represents a rare victory, at least in recent years, for organized labor and a setback to nonunion employers, who will be faced with the prospect of being forced to hire avowed union organizers or members as employees and risk an active organizing campaign to avoid unfair labor practice charges. The impact of Town & Country could be profound, especially in the construction industry, where union organizing campaigns will gain new momentum and the technique of salting will likely become more prevalent. Dissatisfaction on the part of many employers with the Supreme Court's decision could, however, bring Congress into the picture, and lead to statutory modification in the NLRA's definition of employee.

WHO IS AN EMPLOYEE?

Section 8(a)(1) of the National Labor Relations Act makes it an unfair labor practice for an employer to "interfere with ... employees in the exercise of the rights [under the Act]."(1) Similarly, Section 8(a)(3) prohibits an employer from discriminating in regard to "hire or tenure of employment to encourage or discourage membership in any labor organization."(2) Both of these protections are afforded only to employees as that term is defined by the Act. Thus, the scope of the term employee is obviously a critical starting point for labor disputes; indeed it is often dispositive.

The Act offers a broad definition of employee that is subject to only a few specific exceptions. In relevant part, the Act provides that: "The term 'employee' shall include any employee, and shall not be limited to the employees of a particular employer, unless this subchapter explicitly states otherwise...."(3)

None of the various exceptions has any application to the dispute over whether paid union organizers are employees.

Various unions, especially those in the construction industry, have availed themselves of the broad language in the NLRA by the use of a technique known as "salting" to help organize nonunion companies.(4) The union sends paid organizers or members to apply for employment, and once these "salts" are hired, they engage in concerted activity to organize a union at the company. In the case of professional union organizers, they may be full-time union officials while they are working as full-time company employees. In the case of union members, the union sometimes pays the member the difference between a union wage and the nonunion company wage, as well as paying health and pension benefits. The paid organizers or members in some cases disclose their affiliation and their intent to organize the company at the time they apply for employment. Of course, many of these union organizers or members are either refused employment at the outset or discharged after they engage in organizing activity. Unfair labor practice charges are then brought by the union, raising before the National Labor Relations Board (NLRB) the issue of whether a paid union organizer or member can also qualify as an employee under the NLRA.

The NLRB consistently sided with union organizers in accord with its broad interpretation of the term employee as it is used in the Act. As early as 1975, in Oak Apparel, 218 NLRB 701,701 (1975), the NLRB concluded that a paid union organizer was an employee despite the organizer's lack of intent to remain in the employ of the company after the end of the organizing campaign. Since Oak Apparel, the NLRB consistently has held that paid union organizers are statutory employees entitled to the Act's protection.(5)

LOWER COURTS DIFFER ON WHETHER PAID ORGANIZERS ARE EMPLOYEES

Following NLRB action, many of these disputes between employers and unions arrived in the federal courts. Various circuits in the United States courts of appeals reached differing conclusions on whether an employer's discharge or refusal to hire a paid union organizer or member as an employee amounted to an unfair labor practice.

One of the first courts of appeal to address the issue was the Sixth Circuit, which concluded in NLRB v. Elias Brothers Big Boy, Inc., 327 F.2d 421 (6th Cir. 1964), that a paid union organizer did not qualify as an employee under the Act. In Elias, a waitress who was assisting a union organizing effort and being paid for her work was terminated by the restaurant. The Sixth Circuit denied enforcement of an NLRB order and ruled in favor of the employer, holding that the waitress was not a bona fide employee within the intent of the NLRA.

The Fourth Circuit reached a similar conclusion in a case decided 25 years later. In H.B. Zachry Co. v. NLRB, 886 F.2d 70 (4th Cir. 1989), the employer refused to hire a job applicant who was a full-time union organizer.(6) The employee intended to remain in the employ of the union while working at the company and conceded that he sought employment in order to help organize the plant. In addition, the union had promised to make up any shortfall in the employee's salary and planned to make payments for the employee's health and life insurance coverage. The Fourth Circuit concluded that the worker was not a bona fide employee under the Act. In reaching this conclusion, the court relied heavily on the notion that the term employee "contemplates an employee working under the direction of a single employer" and "plainly does not contemplate someone working for two different employers at the same time and for the same working hours." The Fourth Circuit also noted that the Board's position that a paid union organizer can be an "employee" is bad policy. Because the Supreme Court had already held in NLRB v. Babcock & Wilcox, 351 U.S. 105, 110, 76 S. Ct. 679, 683, 100 L. Ed. 975 (1956), that a company can post its property against nonemployee distribution of union literature, the court in Zachry held that to require the company to allow the union organizer to solicit and organize on its property because he claimed to be a "job applicant" would render ineffective the protection offered employers in the Babcock decision.

Other courts of appeal reached the opposite conclusion after examining similar facts. The District of Columbia Circuit in Willmar Electric Service, Inc. v. NLRB, 968 F.2d 1327 (D.C. Cir. 1992), agreed with the NLRB that a worker could be employed by a union and company at the same time and still qualify as an employee under the Act. The employer in Willmar refused to hire an applicant who made clear to the construction project foreman that he would use his free time during lunch and after work to try to organize Willmar's employees. The D.C. Circuit relied first on the language in the statute, concluding that the Act's broad language supported the Board's position. The court then examined the common-law meaning behind the term employee. The court noted that under common-law principles, a person could be the servant of two masters at the same time, so long as the service to one did not involve abandoning service to the other. Unless the employee "abandons" the nonunion employer in favor of the union employer, the employee was entitled to protection under the Act. Other circuits reached similar conclusions that paid union organizers or members could be employees entitled to protection from discrimination under the Act.(7)

BACKGROUND OF TOWN & COUNTRY

In early September 1989, Town & Country, a large electrical nonunion contractor in Wisconsin, was awarded a contract to perform electrical work at Boise Cascade's paper mill in International Falls, Minnesota. Because of a Minnesota state law that mandated the hiring of Minnesota-licensed electricians for job sites in the state, Town & Country retained a temporary employment agency to recruit a Minnesota-licensed electrician. The agency advertised the opportunity in local newspapers. Town & Country Human Resources Manager Ron Sager then began interviewing applicants. Almost all of the applicants who showed up for the interview were union members (some were union officials) who had been encouraged to apply for the position and, if hired, to organize the job site. Although Sager declined to interview most of the union members and officials, he eventually interviewed and hired union member Malcolm Hansen.

On September 12, the Town & Country crew began work at the mill. Hansen immediately announced that he intended to organize the job site for the union and talked continuously to his coworkers about the benefits of the union and tried to get them to sign with the union. Several days later, Hansen was dismissed, technically by the temporary employment agency. After he sought a position directly with the company, he was refused consideration, at least arguably because of his union organizing activity.

Members of the union filed an unfair labor practice complaint with the NLRB, claiming that Town & Country had failed to interview union members and officials and then discharged and failed to rehire a union member in violation of the Act. Following an administrative law judge's ruling in favor of the union, the NLRB affirmed.(8) The NLRB determined that Town & Country had violated Sections 8(a)(1) and 8(a)(3) of the Act by refusing to interview union officials and members and by discharging and later refusing to consider the rehiring of Hansen.

The Eighth Circuit disagreed and reversed the NLRB.(9) It concurred with the decisions of the Fourth and Sixth Circuits that a worker or job applicant who was being paid by a union to conduct union organizing could not be an employee as that term is used in the Act. Relying primarily on the common law of agency, the court determined that neither the union officials nor the union members could serve the employer at the same time they were seeking to organize the company on behalf of the union. The Eighth Circuit held that because the union officials' goal was to further the union's interest by Organizing Town & Country's workforce, "an inherent conflict of interest exists." The Eighth Circuit further determined that the union members, of which Hansen was one, were also under the union's control because the union paid their wage differential and their travel expenses. This service to the union precluded their qualifying as employees.

THE SUPREME COURT OPINION IN TOWN & COUNTRY

With Town & Country, the Supreme Court was asked to resolve the conflicting decisions among the circuit courts over whether paid union organizers (and presumably paid union members) could qualify as employees entitled to protection under the NLRA. The Supreme Court held that a worker can be a company's employee under the Act even if, at the same time, a union pays that worker to help organize the company. Writing for a unanimous Court, Justice Breyer declared: "We hold only that the Board's construction of the word 'employee' is lawful; that term does not exclude paid union organizers."

In reaching its decision, the Court relied on several different legal concepts. First, the Court examined the language of the Act. The Court began with the basic precept that the NLRB's interpretation of the Act is entitled to deference.(11) Despite that fact, the Court had little difficulty in interpreting the term employee to cover paid union organizers. Among other things, the language of the Act is broadly worded and includes various exceptions from employee status, and paid union organizers do not appear on that list. Indeed, a broad interpretation of the term employee was consistent with the broad purposes of the Act, the legislative history of the Act, and prior Supreme Court cases. Finally, the Court found persuasive the fact that a provision of the Labor Management Relations Act of 1947 forbids payment by an employer to a person employed by a union unless those payments constitute wages paid to "any ... employee of a labor organization, who is also an employee" of the company.(12) Justice Breyer remarked dryly that: "If Town & Country is right, there would not seem to be many (or any) human beings to which this last phrase could apply."

The Court did not, however, rely solely on the Act's language as support for its holding. It also examined the common law of agency and found that the NLRB's interpretation of the term employee was consistent with the common law. In doing so, the Court squarely rejected the basis for the Eighth Circuit's holding in favor of the employer. The Supreme Court quoted the Restatement (Second) of Agency Section 226 for the proposition that "[a] person may be the servant of two masters ... at one time as to one act, if the service to one does not involve abandonment of the service to the other."

Although the Eighth Circuit had held that a paid union organizer could not serve both a union and employer at the same time, the Supreme Court disagreed, stating that "common sense" suggested that a worker could perform the necessary tasks for the employer during the day regardless of the union's payment to the worker for organizing activities. The Court analogized the position of a union organizer on the payroll of an employer to the practice of moonlighting, which, the Court stated, was a practice wholly consistent with a company's control over its workers as to their assigned duties. To use the example cited by the Supreme Court, the worker's union organizing tasks are the equivalent of a police detective who takes a job as a waiter while off duty, but still searches for clues during the moonlighting work.

Finally, the Court rejected Town & Country's argument that practical considerations should weigh against affording employee status to a paid union organizer. The company had argued that the practice of salting could harm it because union organizing employees could quit when the company needed them, disparage the company, or even sabotage the company's products. The Court brushed aside these assertions for several reasons. First, the Court concluded that there was no evidence of acts of disloyalty present in this case to a degree sufficient to cause the company to lose control over the worker's daily tasks. The Court also noted that any employee might leave the company or perform unlawful acts against the company, but their actions did not affect their status as employees. Instead, the Court recommended other remedies for practical problems potentially caused by paid union organizers. These alternative solutions included offering fixed-term contracts to employees, negotiating for a notice period with employees, and discharging employees who are found to have committed unlawful activities. The Court reiterated that the paid union organizers' status as employees was not affected by the lawfulness of their activities while on the payroll of the company. Even an arsonist, the Court ruminated, can still be an employee, although, the Court thankfully added, one who could be discharged.(13)

Finally, the Court offered a few tokens to employers, reminding them that Lechmere, Inc. v. NLRB, 502 U.S. 527, 538, 112 S. Ct. 841, 848, 117 L. Ed. 2d 79 (1992), held that they may limit access of nonemployee union organizers to company property. Also, the Court hinted that paid union organizers may not be treated the same as other company employees in all circumstances, for instance, inclusion in bargaining units.(14)

IMPLICATIONS OF TOWN & COUNTRY

Reactions to the Supreme Court's unanimous decision were divided predictably along union/employer lines, with union leaders praising the Court's decision and nonunion business owners expressing disappointment.(15) The impact of the Town & Country decision is likely to be broad, however, with a likely increased use of the technique of salting and an increase in organizing activity at companies. It also seriously undermines Lechmere's holding that employers may ban nonemployee union members from company property. If unions are able to "infiltrate" the company itself to conduct organizing activities from the inside, why bother with outside organizing efforts?

Although it is easy to see that Town & Country will make salting a more potent and viable tool for unions, especially construction unions, one important unresolved issue is what the response will be from nonunion employers. Although the Supreme Court's decision has answered definitively the question of who is an employee, it did provide options to employers that run into difficulties with paid (or unpaid) union organizers and members who are in their employ. The Court said that "a company faced with unlawful (or possibly unlawful) activity can discipline or dismiss the worker, file a complaint with the Board, or notify law enforcement authorities." Employers may try to test the boundaries of what type of activity by paid union organizer employees can qualify as unlawful.

For instance, assume a paid union organizer joins a construction crew and attempts to foment organization. If the employee is performing tasks inadequately, using work time to conduct concerted organizing activity, or otherwise violating company rules, the employer will likely use one of these reasons as a justification for dismissal. Litigation over whether these proffered reasons are pretextual may become common in the coming years. Although employer claims of disloyalty will probably not support dismissal, claims that an employee is not performing work because of organizing activity may be effective weapons.

Further, the Supreme Court left intentionally unanswered the question of whether in other contexts, such as voting, the treatment of paid union organizer employees will be different from that of other employees. Permitting employees who are paid union organizers to vote in contested union elections could undermine the entire process, and the more union salts who participate, the more the results might be skewed.

CONCLUSION

The Supreme Court's decision in Town & Country allows paid union organizers and members openly to seek employment with companies. If they are hired, they can attempt to organize from the inside, where it will be most effective. If they are not hired, or are discharged, they of course have the option to file unfair labor practice charges against the employer. It is a win-win situation for the union and its members. Nonunion employers are placed conversely in a precarious situation. Failure to hire (or discharge) will result in litigation; hiring the union salts will assure that the employer will have an aggressive inside effort at organization.

Statutory changes in how the Act defines employee could be on the horizon, but for now, unions have received an unexpected boost in their efforts to organize nonunion employers. Salting, at least as things stand now, is here to stay.

NOTES

1. 29 USC [section]158(a)(1).

2. 29 USC [section]158(a)(3).

3. 29 USC [section]152(3). The full statutory definition of employee is the following:

The term "employee" shall include any employee, and shall not be limited to the employees of a particular employer, unless this subchapter explicitly states otherwise, and shall include any individual whose work has ceased as a consequence of, or in connection with, any current labor dispute or because of any unfair labor practice, and who has not obtained any other regular and substantially equivalent employment, but shall not include any individual employed as an agricultural laborer, or in the domestic service of any family or person at his home, or any individual employed by his parent or spouse, or any individual having the status of an independent contractor, or any individual employed as a supervisor, or any individual employed by an employer subject to the Railway Labor Act, as amended from time to time, or by any other person who is not an employer as herein defined.

4. See Susan E. Howe, Note, "To Be or Not To Be An Employee: That Is the Question of Salting," 3 Geo. Mason Indep. L. Rev. 515 (1995) (describing that, although salting is not unique to the construction industry, construction trade unions have "a systematic (salting) program" that encourages paid union organizers and union members to seek employment with nonunion contractors); Note, "Organizing Worth Its Salt: The Protected Status of Paid Union Organizers," 108 Harv. L. Rev. 1341 (1995) (noting that although salting has always been a component of union organizing, recent litigation over salting stems from concerted campaigns by several construction unions, including the boilermakers and electrical workers).

5. See, e.g., Multimatic Products, 288 NLRB 1279, 1313 n. 226, 1316 (1988); Pilliod of Mississippi, 275 NLRB 799, 811 (1985); Palby Lingerie, Inc., 252 NLRB 176, 182 (1980); Margaret Anzalone, Inc., 242 NLRB 879, 888 (1979); Lyndale Mfg. Corp., 238 NLRB 1281, 1283 n.3 (1978); Anthony Forest Prods., 231 NLRB 976, 977-78 (1977).

6. Under well-established law, the Act protects job applicants to the same extent that it protects those who are eventually hired. Phelps Dodge Corp. v. NLRB, 313 U.S. 177, 185-86, 61 S. Ct. 845, 85 L. Ed. 1271 (1941).

7. See NLRB v. Henlopen Mfg. Co., 599 F.2d 26 (2d Cir. 1979); Escada (USA) Inc. v. NLRB, 970 F.2d 898 (Table) (3d Cir. 1992) (enforcing NLRB order without opinion); Fluor Daniel v. NLRB, 976 F.2d 744 (11th Cir. 1992) (enforcing NLRB order without opinion).

8. 309 NLRB 1250, 1258 (1992).

9. Town & Country Electric, Inc. v. NLRB, 34 F.3d 625 (8th Cir. 1994), rev'd, 116 S. Ct. 450, 64 USLW 4022 (Nov. 28, 1995).

10. NLRB v. Town & Country Elec., Inc., 116 S. Ct. 450, 64 USLW 4022, 1995 WL 696375 (U.S. Nov. 28, 1995). The Court did not determine whether Town & Country had in fact committed an unfair labor practice by its actions; rather, the Court only addressed the interpretation of employee under the Act.

11. Id. at 453; see ABF Freight Sys., Inc. v. NLRB, 510 U.S. -----, -----, 114 S. Ct. 835, 839,127 L. Ed. 2d 152 (1994) (NLRB's views entitled to "the greatest deference").

12. 29 USC [section]186(c)(1).

13. Citing Willmar Elec. Serv. v. NLRB, 968 F.2d 1327, 1330 (D.C. Cir. 1992).

14. Interestingly, this concern about participation in voting was one reason that the Fourth Circuit in Zachry had construed the term employee not to cover paid union organizers. The Fourth Circuit voiced the fear that union organizers could unfairly affect the results of union elections and impinge on the employees' rights to self-determination.

15. See David F. Pike, "Supreme Court Hands Unions Major Victory," L.A. Daily Journal (Nov. 29, 1995) at 1; Daily Labor Report (BNA), No. 229 (Nov. 29, 1995).

Arthur F. Silbergeld is a partner in the Los Angeles office of Graham & James and chair of the firm's Labor and Employment Practice Group. Robert M. Howie is an associate in the Seattle office of Graham & James.
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Author:Silbergeld, Arthur F.; Howie, Robert M.
Publication:Employment Relations Today
Date:Mar 22, 1996
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