In a decision announced in late September 2006, the U.S. Court of Appeals for the Ninth Circuit dealt a blow to California employers by reviving critical provisions of a California statute designed to prevent those wishing to do business with the state from resisting union organizing efforts. U.S. Chamber of Commerce vs. Lockyer, __ F.3d __ ; 06 C.D.O.S. 8928, 2006 U.S. App. LEXIS 24025 (9th Cir. 2006).
On September 21, 2006, the court dissolved an injunction that had for four years barred enforcement of key sections of the controversial California law that prohibits private sector employers from using funds received from state contracts and grants to oppose, or even question, unionization. In overturning both the trial court and a three-judge panel of its own judges, a 15-member en banc panel of the court ruled that two critical sections of the California statute, AB 1889 (2000), California Government Code §§16645 through 16649, do not improperly interfere with the National Labor Relations Act (the federal union-management law), or with federal administration of that law by the National Labor Relations Board. With the court’s action, private sector employers doing business with the state who attempt to resist unionization in any way now do so at their peril. Indeed, smaller contractors and those dependent upon the state for a significant share of their business have at a stroke been rendered vulnerable to such organizing, while simultaneously being deprived of the ability to defend themselves or potentially even address their workers about the pros and cons of unions.
AB 1889 forbids the use of "state funds" or "facilities" by public or private sector employers to "assist, promote or deter union organizing." Among other things, the statute prohibits the "reimbursement" of any state contractor for the costs incurred in assisting, promoting, or deterring union organizing, and likewise prohibits employers conducting business on state property "pursuant to a contract or concession agreement" from holding meetings with employees or supervisors "if the purpose of the meeting is to assist, promote, or deter union organizing." Significantly, AB 1889 also prohibits state contractors "receiving" "state funds" in contracts or grants from using such "funds" to assist, promote or deter union organizing, and imposes complex accounting and reporting obligations upon state contractors to insure that no "state funds" they receive are used for such prohibited activities. The statute carries significant potential penalties, ranging from fines of $1,000 per day per employee to "treble damages," and may be enforced by the state Attorney General or "any state taxpayer"—including the very labor unions on whose behalf the legislation was enacted. Moreover, the Attorney General is afforded broad investigatory powers to assure statutory compliance and may obtain pertinent records from employers upon demand.
With the trial court injunction now dissolved, it is to be expected that union organizing efforts against employers involved in state-funded projects and programs will increase significantly. The stakes for organized labor are great, and the potential prize is substantial. While at present the statute only affects "state" grants and "state" contracts, the size of such grants and contracts is large and growing. The $125 billion state budget for 2006-2007 contains billions of dollars in state contracts and grants, many of which are distributed by local governments, districts and agencies. Tens of thousands of private sector workers are employed in the execution of these state contracts, and in programs funded in whole or part by state grants. State contractors aware of the restrictions of AB 1889 may in most cases be deterred from resisting union organizing efforts, and in many cases will be completely prohibited from doing so. Employers understanding the revived statute’s implications may simply decide to forego bidding on state work. Those not appreciating the statute’s limitations may soon be ensnared in an expensive trap.
California employers having or contemplating active dealings with any state or local government entity must accordingly carefully evaluate their vulnerability under the law. Employers receiving any government funding, and in particular employers involved in public works projects, must carefully identify all of the sources for their funding, to determine if any fall within the ambit of the statute. If so, they will need to in turn evaluate their vulnerability to union organizing. If an employer believes it may be vulnerable, and may wish to resist a union organizing effort, it should make plans to "segregate" its sources of income, so that it can respond to any organizing efforts without exposing itself to the law’s considerable penalties.
It is anticipated that the Chamber of Commerce will file a petition for certiorari in the U.S. Supreme Court to seek review of this important decision, and it remains to be seen whether the Ninth Circuit’s decision will survive a Supreme Court challenge. But in the meantime, the Chamber of Commerce decision poses a dangerous dilemma for employers doing business with the state.
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