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Reversing a decision by the National Labor Relations Board, the 3rd U.S. Circuit Court of Appeals has ruled that a company must be allowed to withdraw from a multi-employer contract where a union and a trade association deliberately kept the company in the dark about the start of negotiations. In its 22-page opinion in NLRB v. D.A. Nolt Inc., a unanimous three-judge panel found that while labor law ordinarily binds an employer to a multi-employer contract if it does not withdraw from a trade association prior to the start of negotiations, an exception must be created if the negotiations were conducted in secret. “It may be counter-productive for negotiating committees to broadcast the substance of offers and counter-offers made during the negotiation process, but no precept of labor management law mandates that negotiating committees keep secret the fact that negotiations have begun when profound deleterious effects may directly result from the secrecy,” Senior U.S. Circuit Judge Ruggero J. Aldisert wrote. The ruling is a victory for attorney Thomas C. Zipfel of Cohen Seglias Pallas Greenhall & Furman in Philadelphia who argued that his client, D.A. Nolt Inc., a Berlin, N.J., roofing company, was misled about its rights. Nolt was a member of the Roofing Contractors’ Association, a multi-employer bargaining association, and was bound by the terms of two prior four-year contracts with the United Union of Roofers, Waterproofers and Allied Workers. In June 1999, Nolt signed a “bargaining agent authorization” with RCA, allowing RCA to negotiate a new contract with the union. Under the terms of the BAA, any employer could withdraw from the RCA 90 days prior to the expiration of the contract in place at that time. But in June 2000 — 10 months before the then-existing contract was set to expire — RCA and the union began negotiations for the next contract. According to court papers, union officials told RCA that they did not want the union membership to become aware of the terms being discussed and asked if RCA would keep the negotiations confidential. Richard Harvey, RCA’s executive director, testified that the union and RCA ultimately agreed to keep the negotiations secret from their respective memberships. By July 2000, the negotiations led to a proposed eight-year contract, but RCA shared it only with the eight employers who were members of the negotiating committee. Only after it had been ratified by those eight was the contract sent to the 10 other employer members of RCA, including Nolt. Aldisert found that when ballots were sent to the 10 non-negotiating employers, they came with a cover letter that included a “glaring inconsistency.” The cover letter stated that each employer could withdraw from the RCA until 90 days before the then-current contract’s expiration date of Jan. 30, 2001, but also stated that if the employer wished to withdraw from the RCA it must do so within two days, or July 16. David Nolt, the president of D.A. Nolt Inc., said he voted to accept the terms of the agreement because he thought he could withdraw from the RCA at a later time, and because he feared that prematurely withdrawing from the RCA would strain his relationship with the union. When Nolt announced that he was withdrawing from the RCA about 90 days prior to the expiration of the prior contract, the union filed an unfair labor practice complaint. Administrative Law Judge Margaret M. Kern sided with Nolt, but the NLRB, in a split decision, reversed and held that Nolt’s withdrawal was illegal. In a dissenting opinion, NLRB Chairman Robert J. Battista wrote: “My colleagues say that the union and the employer association did not deliberately intend to prevent [Nolt] from withdrawing from the association. However, they deliberately kept them in the dark about the start of negotiations and … this interfered with [Nolt's] right to withdraw from the association prior to the start of negotiations.” Now the 3rd Circuit has ruled that Kern and Battista were right, and that the secrecy surrounding the start of the negotiations amounted to an “unusual circumstance” that justified an exception to the rule binding employers to a contract. Aldisert, in an opinion joined by U.S. Circuit Judges Dolores K. Sloviter and Thomas L. Ambro, found that the “fundamental purpose” of the National Labor Relations Act is “fostering and maintaining stability of bargaining relationships.” As a result, Aldisert said, an employer or union may not withdraw from a multi-employer bargaining unit after negotiations have begun absent “unusual circumstances” or “mutual consent.” Historically, Aldisert said, the “unusual circumstances” exception has been limited to extreme situations, as where the employer is subject to extreme financial pressure or where the multi-employer unit has dissipated to the point where the unit is no longer a viable bargaining entity. But Aldisert found guidance in Chel LaCort, a 1994 decision from the NLRB in which the board refused to extend the “unusual circumstances” exception to situations where the multi-employer association fails, either deliberately or otherwise, to inform its employer-members of the start of negotiations. The decision, Aldisert noted, included a comment in dicta that the decision might have been different if there had been evidence of “collusion or conspiracy.” Nolt’s case, Aldisert said, “is a such a case.” Aldisert concluded that the NLRB majority’s decision was “not rational or consistent with the act” because it “improperly valued stability over freedom in the context of multi-employer bargaining.” The NLRB majority — Wilma B. Liebman and Dennis P. Walsh — concluded that the RCA and union’s conduct did not constitute collusion or conspiracy under the Chel LaCort dicta because the effort to have secrecy in the negotiations was directed at the union’s membership, not at Nolt or other employer-members of the RCA. In so ruling, the majority defined “collusion or conspiracy” as “actions by the union and the employer association that are deliberately intended to prevent an employer from exercising its right to withdraw.” Aldisert disagreed, saying “we are not satisfied that this restricted definition is rational and consistent with the act’s purpose of maintaining industrial peace. It does not balance freedom in multi-employer negotiations with stability because it impinges upon an employer’s freedom to withdraw when it has been intentionally kept in the dark about the negotiation process.” Under the NLRA, Aldisert said, “it is not necessary to show that the parties actually agreed to an illegal plan to harm a specific person to prove ‘conspiracy’ or that they specifically intended to defraud a person of his rights to prove ‘collusion.’ It is enough to prove that there was a secret agreement that resulted in harm to another.”

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