Heartland Industrial Partners, LLC

National Labor Relations Board - Administrative Judge Opinions

Jun 16, 2005

34-CE-000009 (N.L.R.B. Jun. 16, 2005)

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Greenwich, CT
UNITED STATES OF AMERICA
BEFORE THE NATIONAL LABOR RELATIONS BOARD
DIVISION OF JUDGES
NEW YORK BRANCH OFFICE

HEARTLAND INDUSTRIAL PARTNERS, LLC
AND UNITED STEELWORKERS OF
AMERICA, AFL-CIO

AND CASE 34-CE-9

LINDA KANDEL, AN INDIVIDUAL; GALEN E.
RABER, AN INDIVIDUAL; JUANITA M.
MILLER, AN INDIVIDUAL & RENATE CROLL,
AN INDIVIDUAL

Jennifer F. Dease, Esq., Counsel for the
General Counsel
William L. Messenger, Esq., Counsel
for the Charging Party
Peter D. Nussbaum, Esq. and Danielle E.
Leonard, Esq., Counsel for the Union
James M. Stone, Esq. and David E.
Weisblatt, Esq., Counsel for Heartland

DECISION

Statement of the Case

Raymond P. Green, Administrative Law Judge. I heard this case in Hartford Connecticut
on March 21, 2005. The charge and amended charge was filed on August 6, 2003 and
September 24, 2004. The Complaint was issued on February 9, 2005 and alleged:

1. That the Respondent Heartland, which is located in Greenwich Connecticut, is a
private equity firm that invests in industrial manufacturing companies.

2. That on or about November 27, 2000, Heartland by David Stockman, entered into an
agreement with the Union which sets forth conditions under which Heartland's “covered
business entities,” shall enter into “neutrality agreements” with the Union.

3. That Section 3 of a Side Letter defines covered business entities (CBEs) as being
any enterprise in which Heartland:

Directly or indirectly (i) owns more than 50% of the common stock; (ii) controls
more than 50% of the voting power; or (iii) has the power, based on contacts,
constituent documents or other means, to direct the management and policies of
the enterprise…

4. That Section 2 of the Side Letter provides in part;

If, at any time after six months following a transaction, the Union notifies
Heartland in writing of its actual intent to organize any of the facilities of the CBE,

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then within ten days of such notification, Heartland will cause the CBE to
immediately execute an agreement (hereafter known as the "Framework for a
Construction Collective Bargaining relationship" or "Framework Agreement")
between said CBE and the USWA…., as well as the Side Letter, both of which
shall also at that time be executed by the Union.

5. That Section I of the Framework requires a CBE employer to grant the Union access
to distribute information and to meet with employees; provide the Union with the names and
addresses of employees; grant recognition to the Union based on a card check procedure;
bargain within 14 days of recognition and engage in interest arbitration of open issues within 90
days of bargaining.

6. That in June 2002, Heartland acquired Trimas as a CBE entity. Trimas is located in
Bloomfield Hill, Michigan and is engaged in the manufacture of engineered products such as
fasteners and automobile accessories.

7. That on or about July 11, 2003, Heartland required Trimas to enter into an agreement
with the Union that required Trimas to implement the substance of the Heartland agreement. It
is alleged that by such action, the Respondents Heartland and the Union reaffirmed the
provisions of the Heartland agreement.

8. That by entering into and maintaining the Heartland Agreement and reaffirming it on
July 11, 2003 vis a vis Trimas, the Respondents have entered into an agreement by which
Heartland has agreed to not do business with another person or employer and thereby the
Respondents have violated Section 8(e) of the Act.

I. Jurisdiction

The parties agree and I find that the Company is an employer engaged in commerce
within the meaning of Section 2(2), (6), and (7) of the Act and that the Union is a labor
organization within the meaning of Section 2(5) of the Act.

II. The Alleged Unfair Labor Practices

The facts are not in dispute and the parties agree that this is a case of first impression.1

Heartland, a limited partnership located in Greenwich, Connecticut. It is principally a
private investment vehicle somewhat similar in design and hopes of Berkshire Hathaway. It
aggregates large amounts of capital and has sought to purchase controlling interests, primarily
in old line industrial enterprises located in the Midwest. (Hence the name Heartland). In the
trade, this is called a leveraged buyout firm. Heartland itself, does not directly employee
industrial workers, having a relatively small staff of people in Greenwich, Connecticut. Its direct
employees are not represented by any labor organization.

Dan Tredwell, Heartland’s Senior Manager Director testified that inasmuch as many of
the potential targeted enterprises were already unionized, it was decided at the outset, that
Heartland would attempt to have good relationships with the large industrial unions in the United
States.

1 I would like to express my appreciation for the excellent briefs filed by all parties.

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In 1999, David Stockman, one of the founding partners, sometime after spending time as
Budget Director in the Reagan Administration, decided to establish Heartland. At that time, he
and Tredwell entered into talks with Ron Bloom who was the Special Assistant to the President
of the Steelworkers Union of America.

Mr. Bloom presented an agreement based on a model that the Steelworkers had
negotiated with another company. That model was transmitted to Heartland as a proposed
“Framework” and was modified, after negotiations, into a side letter. (This is referred to by the
parties as “The Side Letter”). For whatever reasons, the parties refer to the “Heartland
Agreement” as being the combination of the “Framework” and the “Side Letter.” There are in
fact, two documents, both dated November 27, 2000.

In any event, there is no question but that there is an agreement between Heartland and
the Steelworkers Union which has already been described above. Essentially this agreement
provides that if Heartland purchases the stock of an existing enterprise, and if it becomes the
controlling entity, and if the Union decides, after six months from the acquisition date that it will
seek to organize the employees of the controlled entity, and if the Union notifies Heartland of its
intention to organize, then Heartland will, (as the controlling entity), require the acquired entity to
agree to recognize the Union based on a card check. And if the card check establishes a
bargaining relationship and if no agreement is reached, then the parties will enter into interest
arbitration.2

Notwithstanding the General Counsel’s contention that the Heartland agreement
contains “investment restrictions,” the documents themselves, by any normal use of the English
language, do not contain any restrictions on the types of investments that can be made by
Heartland. Nor is there any evidence to suggest that the Union’s intention in reaching the
agreement was to restrict the set of enterprises that Heartland could invest in or acquire. The
agreement does not limit Heartland from negotiating only with unionized firms or with firms that
would agree to become unionized. It does not prohibit Heartland from negotiating with firms
who would vigorously fight any efforts to unionize or with firms whose managements may have
never thought about unions at all. Whatever opinions about unions may have been entertained
by the management of a firm being sought by Heartland, those opinions were simply irrelevant
to Heartland and according to Tredwell, never played any part in its negotiations for an
acquisition. Tredwell testified that Heartland has never disclosed its arrangement with the
Union when it negotiates with targeted companies because; “It is none of their business.” 3
Continued
2 The Charging Party’s counsel contends that the agreement is an example of top down
organizing. By this, I assume he means that it constitutes a form of assistance by an employer
to a union in relation to the selection by employees of union representation. I don’t agree and
don’t see the relevance of this contention in any event. The Heartland agreement, although
providing that the employer will not actively campaign against a union and will allow access to
employees, also provides for a mechanism whereby the employer when faced with a union
organizing drive, will resolve a question concerning representation without invoking the
procedures of the NLRB. The Union is still required to convince employees to sign union
authorization cards. And a neutral person is designated to determine if the Union has achieved
majority support within an appropriate bargaining unit. Under Board law, an employer can
voluntarily recognize a union if it demonstrates majority support. There is nothing in the law that
requires an employer to mount an anti-union campaign. Nor is there anything improper about
establishing an interest arbitration procedure if, after union recognition, the parties reach an
impasse and are unable to agree on the terms and conditions of an initial contract.
3 The Charging Party’s counsel suggests that the agreement would somehow hinder

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_________________________
Continued

I note that this agreement between the Union and Heartland, encompasses a number of
contingencies pursuant to which the Union might possibly become the recognized bargaining
representative of the employees of an enterprise which has been acquired in such a way that
Heartland acquires the controlling interest in that enterprise. There is nothing in the agreement
that would require Heartland to cease doing business with any entity, (including an acquired
entity) that did not execute or agree to be bound by a collective bargaining agreement with the
Union. Therefore, it cannot be asserted that the agreement between Heartland and the Union is
a “union signatory agreement,” which is the type of contract which requires a company to only
do business with other enterprises that either are signatory to or have agreed to be bound to a
collective bargaining agreement.

I further note that in a certain sense the agreement between the Union and Heartland
does not really involve a third person at all inasmuch as that third party, although perhaps
retaining its separate legal existence, would have ceased to exist as an independent separate
entity once Heartland has acquired it.4 Therefore, once Heartland becomes the controlling
entity it simply carries out, vis a vis itself, the terms of the “neutrality” agreement that it had
previously agreed to with the Union.

In June 2002, Heartland acquired a company called Trimas Corporation. In doing so, it
acquired about 60% of the stock and controlled the majority of its Board of Directors. Heartland
was also responsible for hiring the CEO and had the authority to fire him or determine his level
of compensation. There can be no question but that Trimas, upon its acquisition by Heartland,
not only became a CBE in terms of the union agreement, but also became, as a matter of
practical reality, a controlled entity subject to the wishes and direction of Heartland’s partners. If
Stockman et al wanted their chosen CEO of Trimas to jump, they had the legal power and
authority to do so.

Some time after the acquisition of Trimas, the Union gave notice that it intended to
organize the employees and Heartland implemented the agreement via a letter executed in the
name of Trimas that it would abide by the “neutrality” agreement. This letter was executed on
July 11, 2003 and it is, according to the Complaint and the General Counsel’s theory, the
triggering event for the alleged violation. By that I mean that the General Counsel contends that
the July 11, 2003 transaction constitutes a re-entering into of an unlawful 8(e) agreement.5
Heartland in relation to the pool of investible companies because there might be some
companies whose managements might want to vigorously resist union organizational efforts
because of “ideological” considerations or in order to protect any remaining stake that they
might have in the company after its acquisition by Heartland. This assertion is speculative at
best and there is no evidence to suggest that the owner/managers of Trimas or any of the other
acquired companies either were told about Heartland’s agreement with the Union or if they had
known, that it would have made any difference to them. Experience suggests that when owners
or managers of an enterprise make their companies available for sale, the most compelling
reason for making a deal is price and not ideology.
4 Heartland’s control may be exercised in a number of ways. It may own more than 50% of
the acquired company’s stock. It may have negotiated for an agreement whereby it has control
over the Board of Directors or have supermajority or veto rights. It also can exercise control by
having negotiated an agreement with the shareholders of the acquired company for the right to
hire or fire the Chief Executive Officer and/or the right to determine his or her level of
compensation.
5 Since its inception, Heartland has also acquired Collins & Aikman and another company

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III. Analysis

(a) The Statute of Limitations Issue

The Respondents contend that the Complaint is barred by the Act’s statute of limitations
in Section 10(b). While acknowledging that in cases involving Section 8(e), the 10(b) period will
start to run not only from the time the original agreement is entered into, but from the time that
agreement is re-entered, the Respondent contends that the Complaint in this case is at
substantial variance from the charges that were filed.6

The Respondents note that both the original and first amended charge, filed on August
6, 2003 and September 24, 2004, alleged that the Heartland Agreement was reaffirmed in
relation to the acquisition of another company called Collins & Aikman and that the contested
agreement was implemented in January 2003, more than 6 months before the filing of the
charge and amended charge. In this respect, I would be inclined to agree that if the Complaint
relied on the transactions involving Collins & Aikman as the triggering event, then the Complaint
would be barred by the statute of limitations.

Nevertheless, the Complaint alleges that the agreement was re-entered in June 2003,
when the Heartland Agreement was applied to the Trimas acquisition. Therefore, the June
2003 reaffirmation clearly would be within the 10(b) period. Perhaps it would have been better
form if a new charge had been filed, identifying the Trimas transaction as being the 8(e)
triggering event. But I don’t think this was necessary inasmuch as the essential allegations of
the charge and Complaint are (a) that it is the underlying agreement that is unlawful under 8(e)
and (b) that it was reaffirmed within the 10(b) period. Since the implementation of the
agreement can be reaffirmed irrespective of what acquisition company is involved, I think that
the Complaint’s reliance on the Trimas transaction, instead of the Collins & Aikman acquisition,
is sufficiently related to the charge and amended charge so as to fulfill the requirements of the
Act’s statute of limitation. Redd-I Inc., 290 NLRB 115 (1988); Nickles Bakery of Indiana, 296
NLRB 927 (1989); Ross Stores Inc., 329 NLRB No. 59 (1999); Seton Company, 332 NLRB No.
89 (2000) and Kentucky Tennessee Clay Co., 343 NLRB No. 102, slip op. p. 2 (2004).

(b) The 8(e) Issue

The basic questions here are (1) whether the Heartland agreement requires Heartland to
cease doing business with anyone, and (2) if so, who?

Inasmuch as Section 8(e) of the Act was designed to close a loophole in the then
existing secondary boycott provisions of the statute, it is necessary to understand its purpose by
first considering the language and purpose of Section 8(b)(4)(i)&(ii)(B).
called Metaldyne. The degree of control that Heartland had in those other transactions was
somewhat different than in the case of Trimas. But those acquisitions are not at issue in the
present case, as neither is claimed to involve an illegal reaffirmation of the alleged 8(e)
agreement.
6 For cases dealing with the 10(b) statute of limitations being met by a reentering into within
the limitations period, see for e.g. Dan McKinney Co., 137 NLRB 649, 653-657 (1962);
Teamsters Local 277 (J & J Farms Creamery Co.), 335 NLRB 1031 (2001); Carrier Air
Conditioning Co. v. NLRB, 547 F.2d 1178, 1185-86 (2nd Cir. 1976); Los Angeles Mailers Union
No. 9 v. NLRB, 311 F.2d 121 (D.C. Cir. 1962).

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Section 8(b)(4)(i)(ii)(B) makes it illegal for a labor organization to (i) induce or encourage
any individuals employed by any person to engage in a work stoppage or a refusal to perform
services or (ii) to threaten, restrain or coerce any person for (B) an object of forcing or requiring
any person to cease doing business with any other person. This section of the Act typically
prohibits a union from striking, picketing or otherwise coercing entity A, (if it does not have a
primary dispute with A), to force or require entity A to cease doing business, (in whole or in
part), with entity B. It should be noted that the Act also specifically states: “Provided, that
nothing contained in this clause (B) shall be construed to make unlawful, where not otherwise
unlawful, any primary strike or primary picketing.7

Section 8(e) was enacted to get around a loophole in the Act as it became apparent that
one way to get around the then existing secondary boycott provisions, was for a union having a
strong or dominant relationship with certain employers, to require those employers to enter into
agreements, whereby they agreed, in advance, not to do business with any other employers
with whom the union had a dispute. In that situation, it no longer would be necessary for a
union to call its members out on strike or put up picket signs or bother with any other kind of
coercive conduct. A union could simply enforce the agreement, either in arbitration or through a
lawsuit, and accomplish its aim.8 In pertinent part, Section 8(e) states:
7 Section 8(b)(4)(i)&(ii)(A) makes in illegal for a union to engage in coercive conduct to force
or require an employer to enter into an 8(e) agreement.
8 In National Woodwork Manufacturers Association, et al v. NLRB, 386 U.S. 612, the
Supreme Court described the purpose of 8(e) as follows:
In Local 1976, United Brotherhood of Carpenters, etc v. National Labor Relations
Board (Sand Door), 357 U.S. 93, the Court held that it was no defense to an unfair
labor practice charge under Sec. 8(b)(4)(A) that the struck employer had agreed, in
a contract with the union, not to handle nonunion material. However, the Court
emphasized that the mere execution of such a contract provision (known as a "hot
cargo" clause because of its prevalence in Teamster Union contracts), or its
voluntary observance by the employer, was not unlawful under Sec. 8(b)(4)(A).
Section 8(e) was designed to plug this gap in the legislation by making the "hot
cargo" clause itself unlawful. The Sand Door decision was believed by Congress
not only to create the possibility of damage actions against employers for breaches
of "hot cargo" clauses, but also to create a situation in which such clauses might be
employed to exert subtle pressures upon employers to engage in "voluntary"
boycotts.
Congress therefore intended that 8(e) was to supplement and not supplant the secondary
boycott provisions of the Act. The use of the words "contract or agreement," does not
appear to have been intended to encompass those situations where an employer, in the
absence of a prior agreement, simply acquiesces in union pressure to cease doing business
with a person with whom the union has a dispute, or voluntarily acquiesces in a simple
request that it cease doing business with another person. Thus, in NLRB v. Servette Inc.,
377 U.S. 76, the Court held that a union could lawfully appeal to a secondary employer to
agree to exercise its managerial discretion not to do business with a primary person so long
as the request was not accompanied by threats or coercion. It therefore seems that the
words "contract or agreement" as used in Section 8(e) contemplates the entering into of an
agreement between a union and an employer, on a continuing basis, (and not as a one time
transaction), whereby the employer enters into a contract to cease doing business with other
persons with whom the Union may have a present or future disputes.

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It shall be an unfair labor practice for any labor organization and any employer to
enter into any contract or agreement, express or implied, whereby such employer
ceases or refrains or agrees to cease or refrain from handling, using, selling,
transporting, or otherwise dealing in any of the products of any other employer,
or cease doing business with any other person, and any contract or agreement
entered into heretofore or hereafter containing such an agreement shall be to
such extent unenforceable and void.9

Taken together, Sections 8(b)(4)(i)(ii)(A) & (B) and 8(e) constitute a comprehensive
schema to prohibit secondary boycotts by either conduct or contract, but to continue to allow
primary strikes, work stoppages or other primary activities. In either case, the critical element
for finding a violation is that the conduct or contract must be designed to force or require
Employer/Person A to cease doing business, in whole or in part, with Employer/Person B.10 If
the conduct or contract does not have as an object, a cessation of at least some business
between two or more separate and independent enterprises, then whatever else it may be, it is
not a violation of the National Labor Relations Act.

The most obvious type of 8(e) agreement is one that is embedded in a collective
bargaining agreement and provides that in the event that the contracting Union has some
dispute with another Employer B, the contracting Employer A will not deliver to, receive from or
otherwise do business with the other employer. If enforced, (either by a judge or by an
arbitrator), that type of agreement would necessarily require the contracting employer to cease
doing business with Employer B.

There are however, less obvious situations where the alleged 8(e) agreements are more
ambiguous. For example, there is a line of cases where one must distinguish if a contractual
provision has a cease doing business object or is simply designed to protect the work of the
employer’s bargaining unit workers. In National Woodwork, 386 U.S. at 644, the Supreme
Court held that a union did not violate Section 8(e) by including in its collective bargaining
agreement a provision stating that none of its members would handle pre-fitted doors purchased
by their employer. The Court held that although the provisions of the clause, if taken literally,
would require the company to cease doing business with the door’s vendors, the object of the
clause was to preserve work traditionally assigned and done by the employer’s own employees
who were covered by the collective bargaining agreement. In this respect, the Court stated that
although a literal reading of 8(e) would lead to a conclusion that the clause in question had a
cease doing business objective, the Court stated that Congress meant 8(e) and 8(b)(4)(B) only
to prohibit “secondary objectives.”

There exists a set of cases dealing with a union’s attempt to prevent an employer from
contracting out the work of bargaining unit employees to other companies. For example, an
agreement that simply bars an employer from subcontracting existing bargaining unit work
would be perfectly legal as it would have the object of preserving bargaining unit work even if
9 I have left out the two provisos to 8(e) which deal with agreements made in the
construction and garment industries. These are not relevant to the present case.
10 The Supreme Court in NLRB v. Operating Engineers, Local 825 (Burns & Roe Inc.), 400
U.S. 297, 305 (1971) stated that Sections 8(b)(4)(B) and 8(e) do not require a total cancellation
of a business relationship. See also Board decisions in Sheet Metal Workers Local 91 (Schebler
Co.), 294 NLRB at 767; and International Longshoremen’s Local 1410,(I.H. Mercer), 235 NLRB
172 at 179.

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would incidentally also preclude the contracting employer from doing business with others. Milk
Drivers and Dairy Employees Union, etc., Local No. 546, International Brotherhood of
Teamsters (Minnesota Milk Company), 133 NLRB 1314, 1316-1317, enfd. 314 F.2d 761 (8th Cir.
1963). On the other hand, a clause which permitted the employer to subcontract out bargaining
unit work only to companies having a collective bargaining agreement with the Union, would be
considered to be illegal under 8(e) because in that case, the object, (or intent), would principally
be to affect the labor relations of the other employer and not merely to preserve the work of the
contracting employer. (The Act only requires that an object be secondary in order for a violation
to exist). Such contract clauses, called union signatory clauses, are universally held to violate
8(e) in the context of subcontracting cases because their objective has been deemed to be
secondary and not primary and their enforcement would require the contracting employer to
cease doing business with its subcontractor. Staten Island Cable and IBEW Local 3, 344 NLRB
No. 36; J&J Farms Creamery, 335 NLRB 1031 (2001).

There also exists another set of cases where the Board has concluded that the clauses
in question, although not explicitly requiring one entity to cease doing business with another,
can be interpreted as implicitly requiring such a result.

In Raymond O. Lewis, 148 NLRB 249 (1964) (remanded on other grounds sub nom.
Lewis v. NLRB, 350 F.2d 801 (D.C. Cir. 1965)), the Board held that a contract provision that
imposed a substantial penalty to be paid by the contracting employer if it purchased coal from a
non-union signatory company violated Section 8(e). The Board opined that although the clause
in question purported to allow the contracting employer to do business with others, the penalty
provisions made the exercise of that right so onerous as prevent the company from doing
business with another company. Similarly, in Truck Drivers & Helpers Local Union No. 78
(Brown Transport Corp.) 140 NLRB 1436, 1438-39 (1963), the Board held that a penalty clause
was “an implied agreement” to cease dong business because it had the effect of making it
difficult, expensive, and unlikely for an employer signatory to the agreement to insist that his
employees handle ‘hot cargo’ goods or equipment.”

In Brotherhood of Teamsters Local 85, (Southern Pacific Transportation), 199 NLRB
212, the contract between the Union and an employer required its unionized employees to load
and unload goods and if the employer’s customers insisted on using their own employees to do
that work, the signatory employer would be required to pay a penalty in the form of “runaround”
wages to the union employees who lost the work. The Board held that the use of a penalty as
an alternative to requiring the use of a union employer, constituted an implied agreement to
cease doing business. It stated that “it need not be shown that a cessation of business has
occurred or is inevitable,” but that “it is enough to show that the agreement offers the
alternatives of a cessation of business or of adopting other injurious courses of action.” The
Board noted that these “injurious alternatives” were prohibited by 8(e) because they presented
the contracting employer with “no real choice” other than to cease doing business.” (Underlined
for emphasis) See also Local 282, International Brotherhood of Teamsters, (Precon Trucking
Corp.) 1077, 1088 (1962) for the Board’s use of the phrase “no real choice.”

Relying on the Raymond O. Lewis and Southern Pacific Transportation, the Board in
Mobile Steamship, 235 NLRB 172 (1978), held that a clause requiring the signatory employer to
pay a penalty of $1000 per cargo load upon using any non-union labor to load or unload ships,
constituted a violation of 8(e) as it impliedly required the company to cease doing business with
another. The Board stated: “The fact that the penalty has not, to date, resulted in any actual
cessation of business, so far as this record shows, is not of controlling significance. It is enough
that its inherently deterrent character is such that it may forseeably have that effect under
certain circumstances.”

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A brief aside. Both Section 8(b)(4)(B) and Section 8(e) require that there be a cease
doing of business. (Even if that means that something less than a total cessation of business is
required). However, the former deals with union conduct, typically if the form of strikes, work
stoppages and picketing, while the later deals with contract enforcement through judicial or
arbitration means. There is, in my opinion a conceptual difference.

In the context of Section 8(e), we are dealing with an agreement between a union and
employer/person A intended to force or require it to cease or at least diminish its business with a
separate employer/person B. There are no other people on the scene. In that context, the
agreement either requires A to cease or lessen its business with B or it does not.
Hypothetically, if there was an agreement with Employer A that said that if it did business with B,
against whom the union was engaged in a strike, that the Employer would allow its employees
to appear on the local cable network to say that A was not supporting union workers, such an
agreement could hardly be said to require, explicitly or implicitly, that A cease doing business
with B. That is, although the intention of the agreement might be to provide moral suasion on A
to support the union’s actions against B, the agreement itself would not require any cessation of
business between the two enterprises.

Where a union engages in a strike or work stoppage against Employer A, in
circumstances where it wants to put pressure on Employer B, it is not really necessary to show
that an object of that conduct is to force or require a cessation of business between A and B.
This is because when this type of conduct is taken against Employer A, it necessarily causes a
cessation or some diminution of business between Employer A and all of its other suppliers and
customers who we can label as Employers C D E …n. That is, where a union engages in a
strike or work stoppage against Employer A, that conduct automatically causes some cessation
of business between that employer and all other persons with whom it does business.
Therefore, in an 8(b)(4)(B) case, the real question is not whether the proscribed conduct has a
cease doing business result, (it does), but whether the conduct, notwithstanding that result,
constitutes a primary strike or picketing.

There are also a set of cases where the Board has held that certain limited business
transactions do not constitute “business” within the meaning of Section 8(e). In Cascade
Employers Association, 221 NLRB 751 (1975), the Board stated that “the sale or transfer of an
enterprise has been viewed not as a business transaction but as a substitution of one entity for
the other while the conduct of business continues without interruption.” The Board therefore
concluded that a successorship clause, which required an employer to condition the sale of its
business on the purchaser’s adoption of the union’s contract, did not violate Section 8(e). See
also Mine Workers (Lone Star Steel Co.), 231 NLRB 573 (1977) enforced on this point, 639
F.2d 545, 550 n. 12 (10th Cir. 1980); and Teamsters Local 814 (Bader Bros. Warehouses, Inc.),
225 NLRB 609, n. 1 (1976) (Holding that an agreement requiring the purchaser of all or part of
its moving and storage operations to assume the collective bargaining agreement, was not a
violation of 8(e)).

A seeming exception to the above, might be the Board’s decision in National Maritime
Union (Commerce Tankers Corp.), 196 NLRB 1100, 1101 (1972) enfd., 486 F.2d 907 (2nd Cir.
1973), cert. denied 416 U.S. 970. In that case, Commerce Tankers Corporation had agreed to
bound to a multi-employer association contract that had a provision requiring it to obtain a
written undertaking from the purchaser of a vessel that it would recognize the NMU as the
representative for the vessel’s unlicensed seamen and would agree to be bound by the terms of
the existing collective bargaining agreement. (This would be a typical union signatory clause).
The Union contended that the sale and transfer of a vessel did not constitute “doing business”

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within the meaning of Section 8(e) of the Act and the Board disagreed. Unlike cases involving
the sale, in whole or in part, of a business entity, the Board noted

[I]n the maritime industry the sale of a vessel is a fairly common occurrence.
Thus, in the years 1964 to 1971, approximately 400 American flag vessels…
averaging 50 per year were sold from one U.S. company to another. Similarly,
during this same period approximately 150 U.S. flag vessels were transferred
foreign, excluding vessels sold foreign for scrapping. Accordingly, the
transactions involved herein do not represent a novel situation but occur in the
normal course of doing business in the maritime industry. In these
circumstances we conclude that in the maritime industry buyers and sellers of
ships are doing business with each other with the meaning of Section 8(e). As it
is unnecessary to our decision, we have not considered questions concerning
the applicability of this section to the sale of capital assets in other industries or
in other circumstances.

It is quite clear to me that the decision in Commerce Tankers, which involved the sale of
large boats, did not purport to overrule the decisions in Cascade, Lone Star and Bader Bros.,
which involved the sale, in whole or in part, of a business enterprise. It seems to me that the
Board’s decision in Commerce Tankers was limited to the maritime industry and the particular
set of facts involved in that industry. I am not aware of any cases which purport to overrule
Cascade et al.

One might think that if the sale of a business enterprise does not constitute doing
business within the meaning of Section 8(e), that it would necessarily follow that the purchase of
a business enterprise would also not constitute doing business within the meaning of Section
8(e). But that is what the General Counsel seems to be contending in this case. This case
does not involve an ongoing series of business transactions between Heartland and the
companies it has bought. This is not a situation where one company is a licensee or contractor
to another, such as was the case in Amax Coal Co., 614 F.2d 872 (3.d Cir., 1980). Here
Heartland purchased the controlling interest of Trimas in a one time transaction.

If the sale or purchase of a business enterprise does not constitute “doing business”
within the meaning of Section 8(e) of the Act, the inquiry must end here and the Complaint
should be dismissed.

Nevertheless, the General Counsel and the Charging Party cite to another set of cases
dealing with “anti-dual shop” clauses whereby the provisions in a union contract with an
Employer A, sets up an impediment to that company making an investment in another non-
union company. Typically, these clauses require that the unionized Company A, if it invests in
non-union Company B, to require the latter either to adopt Company A’s union contract or pay
the same wages and offer the same terms and conditions as the union contract.11 If not
explicitly required by the contracts, the Board has concluded that the clauses in question
required Company A to terminate its relationship with Company B. (The no choice theory). In
11 If instead, a contract provision prohibited subcontracting to companies that did not meet
area standards or who did not have equivalent labor costs, the outcome might be entirely
different. It would, in my opinion, be appropriate for a union to seek to limit subcontracting by
limiting it to firms that did not have a labor cost advantage so long as the union did not seek to
also determine how those costs would be allocated to the subcontractors employees, by way of
specific wages, and other terms and conditions of employment.

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all of these cases, the Unions contended that the reason for the provisions was to prevent
Company A from diverting work from its own unionized work force to the non-union work force
of another company.12 This work preservation rationale cannot apply to the present case as
Heartland itself does not directly employ any workers whose work would be adversely affected
by the acquisitions.

In Carpenters District Council of Northeast Ohio (Alessio Construction), 310 NLRB 1023,
the issue was whether the Union violated 8(b)(3) by insisting, as a condition of reaching
agreement, on the inclusion of a clause called an “anti-dual-shop clause,” aimed at “prohibiting
or discouraging a unionized employer’s maintenance of an affiliation with a non-union company
in a so-called double-breasting arrangement.” The Board found that the Union violated 8(b)(3)
because it insisted upon a provision that the Board construed as a “hot cargo” clause unlawful
under Section 8(e) of the Act. The proposed clause stated:

In the event that the partners, stock holders or beneficial owners of the company
form or participate in the formation of another company which engages or will
engage in the same or similar type of business enterprise in the jurisdiction of his
Union and employs or will employ the same or similar classifications of employees
covered by this Collective Bargaining Agreement, then that business enterprise
shall be manned in accordance with the referral provision herein and covered by
all the terms of this contract.

The Board stated:

It is an 8(e) clause because, by requiring the extension of the collective-
bargaining agreement to Alessio’s affiliates as it defines them, (1) it is calculated
to cause Alessio to sever its ownership relationship with affiliated firms that seek
to remain nonunion or to forebear from forming relationships with such firms, even
though those firms are separate employers under court approved Board law, and
(2) it is aimed not a preserving the work of Alessio’s union-represented employees
but rather at satisfying “union objectives elsewhere,”, i.e., the objective of affecting
the labor relations between the nonunion affiliated companies and their
employees over which Alessio has no right of control. Such an attempt to impose
a contract on separate employers of employees in “work units far removed from
the contractual unit” is plainly secondary and is unlawful under Section 8(e),
absent proviso protection.

Notwithstanding the discussion of Section 8(e) in the context of an a Complaint alleging
an 8(b)(3) violation, I note that in reaching this decision, the Board did not examine the actual
relationship between Alessio and any company that it had or intended to affiliate with. The
clause was dealt with as an abstraction and the Board’s findings were based on the hypothetical
assumption that the clause “is not limited to cases in which common control or diversion of work
is demonstrated.” There was no discussion of how this clause would be treated if a transaction
involved the sale or acquisition of a business enterprise and it does not appear that any of the
parties, or the Board, considered its previous decisions in Cascade, Lone Star and Bader Bros.,
supra.

12 This result might have been legally obtained without requiring the second company to, in
effect, accept the identical terms and conditions of Company A’s union contract, but merely to
abide by area standards. Cf. Teamsters Local 107 (S&E McCormick Inc.) 159 NLRB 84 (1966).

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In Operating Engineers, Local 520, (Massman Construction Co.), 327 NLRB 1257
(1999), the issue was whether the Union engaged in a strike against Massman in an effort to
compel that Employer to agree to an 8(e) clause. The proposed contract clause stated:

The Employer shall require as a condition for entering into any joint venture or
joint work undertaking or arrangement for construction work that all parties to the
contract for such undertaking or arrangement accept and agree to be bound by
this Agreement. The Employer shall be responsible for compliance with the
requirements of this provision.

The Board, relying on Alessio, concluded that the proposed clause was an illegal hot
cargo clause and was not protected by the construction industry proviso to Section 8(e). The
Board stated:

[W]e find no evidence that joint venture clauses like the clauses at issue in this case
were part of the pattern of bargaining in the construction industry at the time of the
proviso’s enactment in 1959. The disputed clauses are not subcontracting
agreements of the sort previously found lawful by the Board and the courts, but
instead like the anti-dual shop clause found unlawful in Alessio, are an attempt to
control the signatory employer’s business relationships…. (footnotes omitted).

Unlike the facts in Alessio, the Administrative Law Judge noted that there was a history
of business transactions that would give “a framework in which to consider the contractual
provision that Local 520 sought to impose on Massman….” He noted that Massman has been a
party to a number of joint ventures in order to lessen its financial exposure or to obtain financial
support for its performance of large projects. Using the Clark Bridge project as a recent
example, the Judge noted that Massman had entered into an arrangement with Ben Hur
Construction Company whereby these two unequivocally separate business entities, (Massman
being unionized and Ben Hur being non-union) set up a joint venture for the purpose of directing
the construction, and pursuant to which Massman would be one of its subcontractors. The
Judge noted that when the joint venture won the bid it hired employees, (none of whom were
union workers), it let subcontracts, it obtained its own telephone number at the project site, and
it acquired its own stationary, (which gave as the joint venture’s address and telephone number
the address and telephone number of Massman’s headquarters).

In Massman, it is obvious that based on the past history of doing business, Massman, as
a normal part of its business operations, entered into joint venture arrangements with other
independent companies for construction work which could involve the use of labor that was not
represented by the Union having a contract with Massman. That case, unlike the present case,
did not involve a factual pattern which entailed the acquisition of another company. And once
again there is no indication that the Board intended to overrule Cascade, Lone Star and Bader
Bros., supra.

In Sheet Metal Workers Local 91 (Schebler Co), 294 NLRB 766 (1989), (predating
Alessio), one of the questions was whether a union violated Section 8(b)(4)(ii)(A) and 8(b)(3) by
striking a company called Winger Contracting Company and insisting, as a condition of reaching
a collective bargaining agreement, that it execute a so called “Integrity Agreement.” The facts
are complex and I will attempt to summarize. For many years, the Union and contractors having
agreements with it, worked in a market where there was significant competition from non-union
companies. Also, it appears that many of the union companies had set up separate companies
that operated as non-union entities. In order to preserve work for union members, the Union
agreed that it would grant concessions to union contractors when they had to bid against non-

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union companies. However, in order to prevent abuse by employers having dual operations, the
Union insisted that a signatory employer agree to a clause that would subject it to a fine of $500
per day or the rescission of the collective bargaining agreement if it had an ownership interest in
a corporation or business entity that used employees whose wages and working conditions
were inferior to those set forth in the collective bargaining agreement. As the clause was
obviously a “union signatory clause” inasmuch as the sanctions could be avoided if the affiliated
company was bound by the union’s contractual terms, the Judge concluded that the clause,
instead of having a work preservation object, had a secondary object of imposing union terms
and conditions on separate non-union companies. The Judge noted that the Union did not
argue that the clause’s application would be limited to those situations where two companies
constituted a single employer and he noted that “the Integrity Clause, as written, was not limited
to influencing the relationship between entities which come within the single employer
definition.” In this regard, the Judge stated that “The Integrity Clause requires only that the
signatory employer have a limited ownership interest in the affiliate which must then apply union
terms and conditions.”

As in the previously cited cases, the facts in Schebler did not deal with a situation
involving the sale or acquisition of a business enterprise. Nor does it appear that anyone raised
or discussed Cascade, Lone Star and Bader Bros., supra.

In Central Pennsylvania Regional Council of Carpenters (Novinger’s, Inc.), 337 NLRB
No. 162 (2002), the Board held that a union violated 8(e) when, within the 10(b) period, it
reaffirmed an 8(e) agreement by taking steps to pursue a grievance alleging a violation of the
clause in question. In that case, the contracting employer, Novinger Inc., was a wholly owned
subsidiary of Novinger Group, Inc. (N.G.), which also owned another subsidiary company called
Kelly Systems, Inc. The Employer and Kelly, both of whom were owned by James Novinger,
were both engaged in the installation of dry wall, board walls, and ceilings in the construction
industry and, to an extent, shared some equipment commonly used in the drywall construction
industry. The Union and Novinger Inc. were parties to a collective bargaining agreement
covering its carpenters, but Kelly had operated for some time as a non-union entity. (This is a
classic “double breasted” operation where two companies that have common ownership operate
separately and have separate units, one employing union labor and the other non-union labor).
The contract between the Union and the Employer contained a provision that stated:

The employers stipulated that any of their subsidiaries or joint venture to which they
may be parties when such subsidiaries or joint venture engage in multiple dwelling,
commercial, industrial or institutional building construction work shall be covered by
the terms of this agreement. . . . It is agreed that any dispute relating to the above
Recognition and Union Security clause cannot be resolved between representatives
of the Keystone Contractors Association and the Central Pennsylvania Regional
Council of Carpenters shall be submitted to arbitration.

As noted, the Union invoked the grievance machinery against Novinger Inc. in an effort
to compel Kelly to be bound by the terms of the agreement when it did business within its
geographic jurisdiction. Among other defenses, the Union contended that Novinger and Kelly
constituted a single employer based on the ownership relationship between the companies.
The judge opined that there was an absence of evidence to show that either entity controlled, in
any measurable way, the labor relations of the other entity. He noted that there was no
evidence that the workers of each worked interchangeably or that there were any management
personnel common to all entities who could affect their labor relations.

Notwithstanding the Judge’s conclusion that there was a lack of evidence showing

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common control, the Board did not rely on the judge’s discussion of the Respondent’s single-
employer defense and held instead that the clause violated Section 8(e) on its face, “i.e., by its
express terms it authorizes unlawful secondary conduct, without regard to its actual effect on
any particular entity.”

To repeat myself, the facts in Novinger’s did not involve a sale or acquisition transaction
and the cases dealing with that type of business transaction were not discussed.

Finally, in Iron Workers (Southwestern Materials), 328 NLRB 924 (1999), the Board
found that a union violated 8(e) by seeking to enforce, by judicial means, contract clauses with
an employer, (Edwin G. Smith, Inc.) that stated in substance, that the collective bargaining
would be “effective in all places where work is being performed or is to be performed by the
Employer or any person, firm or corporation owned of financially controlled by the Employer…
and the Employer agrees to sublet any work under the jurisdiction of the Association or its local
unions to any person, firm or corporation not in contractual relationship with this Association or
its affiliated Local Unions.”

In that case, the contracting employer, Edwin G. Smith Inc., was the business entity that
emerged after a series of mergers and restructurings. The original firm, (also named Edwin G.
Smith), had maintained a collective bargaining relationship with the Union since 1959 after
which it was acquired by the Cyclops Corporation. Without describing the ins and outs of the
corporate arrangements, suffice it to say that by 1986, Edwin G. Smith was one subsidiary that
operated as a union contractor and Southwestern Materials was another subsidiary of Cyclops
that had been operating for some time as a non-union contractor. By this date, both
corporations had been performing work in the construction industry and the Union began to
suspect that at a number of construction sites, Smith was subcontracting bargaining unit work to
Southwestern.

The basic argument that ensued in the Board litigation, apart from the 10(b) and Bill
Johnson’s contentions,13 centered on the Union’s contention that the clauses had valid work
preservation objectives. Finding that the unambiguous language of the provisions required work
subcontracted to any person, firm or corporation owned or financially controlled by the
Employer, only if it was a “union signatory,” it is not surprising that the Union did not prevail in its
work preservation argument. But again, this situation did not involve a business enterprise
acquisition transaction and did not require a discussion of Cascade, Lone Star and Bader Bros.,
supra.

In light of the above, I am going to recommend that this Complaint be dismissed. I do so
for the following reasons:

First, it is my opinion that the Heartland agreement essentially is an agreement that
relates to the acquisition by Heartland of other business enterprises. To the extent that it could
conceivably impose any type of restriction on its desire or ability to acquire industrial
enterprises, this type of single event transaction would not constitute “doing business” with the
meaning of Section 8(e) of the Act.

Second, there is nothing in the agreement itself, which restricts Heartland from making
any transaction it chooses to make. The evidence shows that the terms of the agreement did
not play any role in Heartland’s decision to acquire a business enterprise or that its content even
13 Referring to NLRB v. Bill Johnson’s Restaurants, 461 U.S. 730 (1983).

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entered into the negotiations for a sale. (Of for that matter that the management of the seller is
even notified of the agreement). If Heartland does acquire the controlling interest in a company
it can unilaterally require the acquired entity to abide by the Heartland agreement and there is
no reason to, and no mechanism to effectuate a termination of the purchase or otherwise cause
either to cease doing business with the other. Hypothetically, in the event that the Union
notified Heartland that it is going to attempt to organize employees, if any of the former owners
or managers wished to mount an anti-union campaign, they simply would not have any say in
the matter and their desires would be irrelevant. In this instance, the “no choice” theory
regarding implicit agreements to cease doing business, could not apply.

Third, the General Counsel and the Charging party argue that the agreement between
Heartland and the Union, to the extent that it requires Heartland to force any acquired controlled
business to abide by the neutrality agreement is, in effect, an agreement whereby Heartland has
agreed to not do business, (either in whole or part), with another person. But if the acquired
entity is controlled by Heartland, (as in the case of Trimas), then the neutrality agreement would
simply be an agreement, by Heartland, to cease doing business with itself. It would not be an
agreement by an employer to cease doing business with any other person. In this regard, the
Charging Party relies heavily on Painters Dist. Council 51 (Manganaro Corp., MD), 321 NLRB
158 (1996), where the Board, in a case with a complex fact pattern and an even more complex
discussion, essentially distinguished Alessio and held that an anti-dual-shop clause was lawful
where the clause, on its face, preserved bargaining unit work of the signatory employer, and
where the signatory employer had the effective right to control the dual shop.

On these findings of fact and conclusions of law and on the entire record, I issue the
following recommended:14

ORDER

The Complaint is dismissed.

I note here that the dismissal of this 8(e) Complaint would not preclude the employees of
Trimas, or any other future acquired Covered Business Entity, (CBE), from challenging, under
Sections 8(a)(1),(2) or (3) or 8(b)(1)(A) & (2), any application of the Heartland agreement that
resulted in illegal assistance or in an illegal grant of recognition to the Union. (The companies
involved here, and those that are likely to be involved in the future, are not engaged in the
construction industry where, pursuant to Section 8(f), pre-hire recognition agreements are
legal).

Notwithstanding an agreement to be bound by a card check, a Charging Party, subject
to the statute of limitations provisions of the Act, would still be free to prove that an employer
gave illegal assistance if the actions or statements of its supervisors or managers were of a kind
to interfere with, coerce or restrain employees in the choice of union representation. A Charging
Party could assert and prove that notwithstanding a card check, any recognition accorded was
not supported by an uncoerced majority of the employees in an appropriate unit. Thus, it could
be shown that the Union never actually obtained majority status. A Charging Party could show
that recognition was invalid by evidence that the unit in which the count was made, excluded
14 If no exceptions are filed as provided by Sec. 102.46 of the Board's Rules and
Regulations, the findings, conclusions, and recommended Order shall, as provided in Sec.
102.48 of the Rules, be adopted by the Board and all objections to them shall be deemed
waived for all purposes.

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employees who should have been counted. Or vice versa. Any recognition could be
challenged by evidence showing that statements made by the Employer’s supervisors or the
Union’s agents coerced employees into signing the authorization cards used for the count. It
could be shown that in soliciting cards, union representatives made substantial
misrepresentations regarding the card’s purpose. Or it could be shown that a determinative
number of the cards were solicited by company supervisors.

Dated, Washington, D.C.

_______________________
Raymond P. Green
Administrative Law Judge