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December 14, 2010

NLRB Holds Employers and Unions May Enter into Pre-recognition Bargaining Agreements

On December 6, 2010, the National Labor Relations Board (“Board”) held that employers and unions may negotiate substantive terms and conditions of employment before a union is recognized as the employees’ bargaining representative.  Dana Corp., 356 N.L.R.B No. 49 (Dec. 6, 2010).  If upheld, the decision will allow employers and unions to establish the framework for the initial collective bargaining agreement that will be negotiated if the union succeeds in organizing the employees. 

In Dana Corp., the employer and the union entered into a letter of agreement (“LOA”) regarding the employer’s plant, where the union was attempting to organize 305 unrepresented employees.  The LOA provided that the employer would be “totally neutral” regarding the issue of union representation and would recognize and bargain with the union without election if a neutral third party card check revealed a majority of employees signed union authorization cards.  The LOA also governed the framework for any future collective bargaining if the union were to be recognized as the employees’ collective bargaining representative.  The LOA addressed several topics including health insurance cost-sharing, minimum contract duration, minimum number of job classifications and mandatory overtime.  The Board’s General Counsel issued a complaint, asserting that because the LOA included specific terms and conditions and the union lacked majority status at the time of negotiation, the employer unlawfully assisted the union.  An administrative law judge (“ALJ”) disagreed and dismissed the complaint. 

On appeal, in a 2-1 decision, the Board upheld the ALJ’s dismissal, holding that the pre-recognition negotiation of the LOA did not violate the National Labor Relations Act.  The Board held that the LOA in this case merely created a framework for future collective bargaining in the event that the union was the first to establish majority status by means of a neutral third party card-check.  According to the Board, the LOA’s potential future effect was limited to and contingent upon future negotiations.  The Board found that the employer’s conduct did not constitute unlawful assistance because “[n]othing in the [LOA], its context, or the parties’ conduct would reasonably have led employees to believe that the recognition of the Union was a foregone conclusion or, by the same token, that rejection of the Union representation by employees was futile.”  However, the Board limited its decision, stating that such pre-recognition negotiations will not always be lawful, but rather will be evaluated on a case-by-case basis.  Additionally, for procedural reasons, the Board did not address two other theories for invalidating the LOA.  Specifically, the Board did not consider whether the LOA constituted an unlawful promise of benefits or whether the union violated its duty of fair representation by entering into the LOA.  These issues may be addressed by the Board on a later occasion. 


Significance for Employers

Employers should proceed cautiously when considering Dana-type agreements.  The legality of such agreements will ultimately depend on the facts of the agreement.  Additionally, it is not clear to what extent employers may rely on Dana-type agreements because the Board has not yet considered how such agreements will be enforced if and when a union is recognized and collective bargaining begins. 

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If you have any questions regarding this decision, please do not hesitate to contact us.