Much has been written about the benefits available to employees of employers with fewer than 500 employees under the Coronavirus Aid Relief and Economic Security (“CARES”) Act, including enhanced unemployment, paid sick leave and paid family medical leave.
But what about mid-size employers – those with between 500 and 10,000 employees, who do not qualify for the programs available to small employers? The CARES Act empowers the Treasury Department to fund $500 billion to these larger employers who have not “otherwise received adequate economic relief” through the Act. The loans have an interest rate no greater than 2%, and interest and principal are not due and payable for the first six months.
Of course, such loans do not come without conditions. For example, loan recipients must agree to retain at least 90% of their workforce until September 30, 2020, must not pay dividends to shareholders or repurchase their own shares while the loan is outstanding, and not outsource or offshore jobs for the term of the loan plus two additional years.
The loans also contain two ambiguous labor relations conditions which were obviously sought by organized labor, and which mid-sized employers should carefully consider before pursuing a loan under the CARES Act. Each is addressed below.
No Abrogation of CBAs
Pursuant to Section 4003(b)(3)(D)(i)(IX) of the CARES Act, the loan recipient must agree “not to abrogate existing collective bargaining agreements for the term of the loan and 2 years after completing payment of the loan.” But what does it mean to abrogate a CBA? Black’s Law Dictionary defines “abrogate” as “to nullify a contract by means of mutual agreement.” However, in traditional labor parlance, the term has taken on a separate meaning – for one of the parties to a CBA to unilaterally repudiate or rescind the CBA.
As a general proposition, the National Labor Relations Act (“NLRA”) actually prohibits a party from unilaterally abrogating a CBA, either during its term or upon expiration. NLRB case law provides that employers must continue to observe all the terms and conditions of an expired CBA until a new agreement is reached, or the parties have reached a legitimate impasse in their negotiations. And even then, the employer can only unilaterally implement the changes over which the parties impasse. So would such unilateral changes, otherwise permissible under the NLRA, constitute “abrogation” of the CBA within the meaning of the CARES Act? That remains to be seen.
Another circumstance where arguable abrogation may arise is in a representational context. Specifically, the NLRA provides organized employees the right to petition the NLRB to decertify their union, provided the petition is timely and is supported by a 30% showing of interest. If an election is held and more than 50% of voters reject the union, the NLRB will issue an order decertifying the union. And board law makes it unlawful for an employer to abide by a CBA with a union that has been decertified. So would such an event constitute a prohibited abrogation under the CARES Act? Only time will tell.
Remain Neutral in Union Organizing Campaign
Pursuant to subparagraph (X), the loan recipient must agree to “remain neutral in any union organizing effort for the term of the loan.” Aside from the ambiguity of the phrase “remain neutral,” which is considered below, the neutrality requirement is directly at odds with an express provision in the NLRA. Section 8(c) of the NLRA provides that, “The expressing of any views, argument, opinion, or the dissemination thereof … shall not constitute or be evidence of an unfair labor practice under any of the provisions of this Act, if such expression contains no threat of reprisal or force or promise of benefits.”
In Chamber of Commerce of U.S. v. Brown, 554 U.S. 60 (2008), the U.S. Supreme Court referenced earlier decisions holding that Section 8(c) “merely implements the First Amendment.” But it went on to characterize the Congress’s adoption of 8(c) as manifesting a “congressional intent to encourage free debate on issues dividing labor and management,” and as “favoring uninhibited, robust and wide-open debate in labor disputes.”
In the case in chief, the state of California adopted a neutrality rule prohibiting private employers who have contracts with the state from assisting, promoting and deterring union organizing. The U.S. Supreme Court, relying on NLRA Section 8(c), held that the rule was preempted and therefore unconstitutional.
Of course, the rule, in this case, is not a state law that conflicts with national labor policy. It is a federal statute, whose neutrality rule would appear to be in direct conflict with another federal statute, the NLRA. To the extent the courts will construe Section 8(c) as merely codifying the First Amendment rights of employers, it should trump the neutrality rule of the CARES Act. But there will be no clear answers until the courts have weighed in, perhaps many months and years from now.
But even assuming there is no immediate answer to the conflict with Section 8(c), exactly what does it mean to remain neutral in any union organizing effort? Does it mean that the employer must remain completely silent in the face of union organizing? Does the employer lose its right to even provide its employees with a statement of their rights under the NLRA, including their right not to join or assist a union? Could the employer profess its neutrality to its employees, but still provide them with balanced information on the pros and cons of union representation? One would think that the First Amendment would protect an employer’s right to non-coercively communicate with its employees about such issues, but once again, only litigation will provide a definitive answer. In the meantime, mid-size employers should carefully consider the labor-related risks set forth above before accepting a CARES Act loan.