Employers should carefully consider the potential business consequences of entering into unit preservation or anti-dual shop agreements with a union. In a case decided in the final days of 2011 and at the end of Member Becker’s term, Road Sprinkler Fitters, 357 NLRB No. 176 (2011), the Board majority (Chairman Pearce and Member Becker) determined that the union had not violated the National Labor Relations Act when it entered into an “anti-dual shop” clause with the National Fire Sprinkler Association, Inc., a multiemployer association. Specifically, the multiemployer agreement included an addendum that if the employer “establish[ed] or maintain[ed] operations that are not signatory to this Agreement . . . the terms and conditions of this Agreement shall become applicable to and binding upon such operations at such time as a majority of employees of the entity designate the Union as their exclusive bargaining representative.” Road Sprinkler Fitters is an expansive new reading of unit preservation and anti-dual shop language. 

Section 8(e) of the NLRA makes it an unfair labor practice for a union and an employer to enter into an agreement whereby the employer refrains from or agrees to cease doing business with another entity. The Board held that the provision in Road Sprinkler Fitters did not violate Section 8(e) because the addendum seeks to “preserve unit work” and covers only those entities that an employer “necessarily controls.” Hence, the addendum does not require a signatory to cease doing business with anyone in violation of Section 8(e), and the terms “establish and maintain” mean that the provision properly applies only to those entities that signatory employers “control.” The majority found that the provision in question merely sought to preserve the unit’s work. In his dissent, Member Hayes argued that the addendum applied to “spinoffs” and other entities that a signatory may not actually “control” and that it would force a signatory to cease doing business with entities that it did not control, thereby violating the Act.

Based on the Board’s reasoning, if a signatory employer who enters into an agreement with similar anti-dual shop language were to refuse to recognize a union at a “spinoff” entity established or maintained by a signatory, the signatory could apparently avoid monetary damages for breach of contract only by ceasing to do business with that spinoff entity. Employers entering into any unit preservation agreements or anti-dual shop agreements must take care to avoid unknowingly entering into agreements that may cover subsidiaries that the employer may not even “control” in the traditional sense of the word. Poor drafting of these agreements could force the signatory employer on a master agreement to extend the terms of the collective bargaining agreement to entities it did not fathom would otherwise be covered by the agreement.

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