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Contractor Awarded Damages for Union's Secondary Boycott
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July 3, 2006
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By Laura A. Kamas
Thelen Reid Brown Raysman & Steiner LLP
A contractor responsible for building part of a stadium's concrete superstructure entered into a collective bargaining agreement with the carpenters' union covering work in the Louisville (Kentucky) area, including the contractor's portion of the stadium work. Another contractor was awarded the contract to supply and install stadium seating on the same project, but this contractor and its installation subcontractor refused to enter into a collective bargaining agreement with the union.
The union informed the seating subcontractor that it would establish a picket line, and the union specifically requested that the concrete contractor's workers join the picket line. The day before the planned picketing, the project manager set up a reserve gate for the seating contractor's and seating subcontractor's employees, suppliers and visitors. But, the union's office was closed by the time the project manager's fax explaining the system arrived. So, the union workers did not know of the system before coming to work on the day of the picketing.
On the morning of the picketing, two gates had signs stating that the seating contractor and its employees, suppliers and visitors were prohibited from using those entrances. A third gate was labeled as being exclusively for the seating contractor, its employees, suppliers and visitors. Because the signs did not specifically mention the seating subcontractor – the announced target of the picketing – union members picketed all three gates, not just the one reserved for the seating contractor. All work on the project was shut down because other union members refused to cross the picket line.
The seating subcontractor's name was added to the signs four days later, and the union stopped picketing at those gates not meant for the seating contractor and subcontractor. The day after the signs were changed, all other unions returned to work. One day later, the union stopped picketing after a letter arrived from its national headquarters advising that the strike was affecting a union contractor with a no-strike clause. At no time during the strike did the union encourage its members to return to work.
The concrete contractor sued the union, alleging injuries from the secondary boycott and a violation of the no-strike clause in the parties' collective bargaining agreement. The U.S. District Court for the Western District of Kentucky held the union liable and awarded damages. The 6th U.S. Circuit Court of Appeals affirmed the finding of liability, affirmed the award of certain damages and reversed the denial of other damages. F.A. Wilhelm Construction Co. v. Kentucky State District Council of Carpenters, 293 F.3d 935 (6th Cir. 2002)
The union argued that the employees acted on their own initiative. Under the National Labor Relations Act, a union having a problem with a "primary" employer must focus on that employer only and may not pressure unrelated "secondary" employers. It is illegal for unions to encourage employees to unite against their employer so as to pressure their employer to refuse to deal with the primary employer. As the appeals court explained:
In a "secondary boycott," a union brings economic pressure to bear on a "primary employer" to do something the union wants -- say, to agree to a union contract -- by inducing a "secondary employer" doing business with the primary employer to bring economic pressure on the primary employer -- say, to stop doing any further business with the employer. Under § 8(b)(4) of the Taft Hartley Act of 1947, a secondary boycott is illegal if the union seeks to persuade secondary employees to boycott the primary employer, but it is not illegal if the secondary employees act purely on their own initiative to boycott the services of the primary employer.
In considering a violation of §8 (b) (4) of the Act, a court must determine whether the union's actions were directed at the secondary employer or whether there were merely ancillary consequences. A court need only find that one of the union's objectives was to influence a secondary employer to pressure the primary employer; the sole object of the strike need not be focused on the secondary employer. This question of intent or motivation is determined based on the totality of the union's conduct under the circumstances.
The District Court concluded, and the 6th Circuit agreed, that the union violated the Act by directly soliciting the concrete contractor's employees before the picket line had been established and that the union intended to keep the concrete contractor's employees off the job and to entangle the concrete contractor in a labor dispute against the seating subcontractor.
The National Labor Relations Act provides a private cause of action for violations of §8 (b) (4). The District Court found that the strike lasted 6˝ days and awarded $44,548 in damages based on rental equipment costs, payment of expenses to key employees, increased labor costs and subcontractor expenses.
On appeal, the union argued that there was no secondary boycott, that no damages should have been awarded and that, even if damages were proper, the District Court erred in awarding damages for costs incurred in renting equipment because proof of loss was lacking. The concrete contractor argued that the District Court erred by refusing to award damages for loss of use of its own equipment.
The Sixth Circuit affirmed the District Court's finding of an unfair labor practice and its award of damages for rental equipment prorated at the monthly rate. The appeals court reversed the damage award as to the contractor's own equipment and remanded for recalculation consistent with its opinion.
The 6th Circuit held that once liability had been established, the contractor was entitled to recover all damages directly and proximately caused by the violation. It noted that idle equipment is a real loss to the contractor, regardless of whether the equipment is rented or owned by the contractor. The appeals court held that the contractor was not required to show damages arising from its own equipment with the degree of specificity required by the District Court, and it allowed compensation based on a prorated monthly rental rate.
Given the finding of an illegal secondary boycott, neither the District Court nor the Sixth Circuit found it necessary to reach the issue of whether the no-strike clause in the union contract was breached.
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For more information about the issues covered in this report, please contact Laura A. Kamas in our Washington, D.C. office at 202-508-4296 or at lkamas@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
©2006 Thelen Reid Brown Raysman & Steiner LLP
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