Lawyers for a union and the Obama Administration on Wednesday urged the U.S. Supreme Court to hold that neutrality agreements between employers and unions seeking to organize their workforces are legal under federal labor laws.

A number of justices seemed to share a sentiment expressed by Justice Anthony Kennedy during arguments in Unite Here Local 355 v. Mulhall that to rule against the union would be “contrary to years of settled practice and understandings.”

Management and labor lawyers have called the case the most significant labor-relations case in a generation because it involves a challenge to unions’ most successful organizing practice.

When asked how important these neutrality agreements are to unions, Unite Here’s counsel, Richard McCracken of San Francisco’s Davis Cowell & Bowe, said a study compared National Labor Relations Board-run elections to elections under these agreements. It showed a success rate of about 67 percent in NLRB elections and a success rate of about 76 percent under the agreements.

The high court case stems from an effort by Unite Here to organize workers at a Florida casino. The casino and union organizers entered into a neutrality agreement in which the casino promised to remain neutral during the organizing effort, provide employee names and addresses, allow a card check election and permit access to certain parts of the casino. The union agreed not to strike or boycott the casino and to support a ballot initiative to allow slot machines in Miami-Dade and Broward counties. The union spent an estimated $100,000 in support of the initiative, which subsequently passed.

Under Section 302 of the Labor Management Relations Act, it is a crime for an employer to “pay, lend or deliver … any money or other thing of value to a union that seeks to represent its employees. And labor unions are prohibited from receiving money or other thing of value.

Martin Mulhall, a casino employee, filed a lawsuit challenging the agreement. He charged that it violated the law because it required the casino to deliver three things of value: employees’ names and addresses, access to casino property and the promise to remain neutral during the organizing process.

The U.S. Court of Appeals for the Eleventh Circuit, creating a split with at least two other circuits, held that those items were things of value and violated the law. The appellate court remanded the case to the district court to determine whether the reasons for the agreement were “corrupt.”

Unite Here’s McCracken told the justices there was “nothing nefarious here.” Neutrality agreements, he said, are useful to employers and unions because they avoid conflict during organizing campaigns. “They serve the core objectives of the Labor Management Relations Act, those being freedom of contracts, organizing employees for collective bargaining and labor peace.”

McCracken faced a series of questions begun by Justice Kennedy, who asked whether the three claimed things of value at issue became property once they were traded and thus had value to the union. McCracken answered that the agreement only produced waivers by both sides—for example, waiver by the union of the right to strike and waiver by the casino of the right to block access to its property.

Justices pressed him several times about whether the employer gave things of value—for example, the employee list and neutrality—for the union’s $100,000 contribution to passage of the ballot initiative. “Well, the argument that Justices Scalia and Kennedy are referring to is that the employer paid with the employee list, the access to the facility, the promises not to strike to get the 100,000,” Justice Sonia Sotomayor said.

McCracken answered: “The union spent $100,000 of time of its staff knocking on doors exercising its speech and petition rights in order to get this legislation passed so that the employer could get into business. “

Deputy Solicitor General Michael Dreeben, supporting the union, said the employee list, access to property and the promise of neutrality have been elements of federal labor policy for years. All of the federal courts of appeals, he added, have decided that these ground-rule agreements are lawful. The Eleventh Circuit, he said, added a “motive limitation” on the agreements that is not reflected in the law’s language.

However, Mulhall’s counsel, William Messenger of the National Right to Work Foundation, argued that the union and the government were making an organizing exception to the federal law. No neutrality agreement is lawful, he contended, arguing, “It’s difficult to think of anything that unions value more than an employer’s assistance with unionizing more employees into the union.”

Contact Marcia Coyle at mcoyle@alm.com.