Union Could Be Subject to Antitrust Attack for Efforts to Assist Contractors

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The U.S. Court of Appeals in Boston has directed a lower court to take a closer look at allegations of a conspiracy between an iron workers union and union contractors to shut non-union contractors out of the structural steel industry in the greater Boston area.

The appellate court reversed the lower court’s decision (2007-1 CCH Trade Cases ¶75,764), granting summary judgment in favor of the union on the ground that the union was exempt under the federal labor laws from antitrust liability.

Five non-union New England-based steel erectors alleged that Local Union No. 7 of the International Association of Bridge, Structural, Ornamental & Reinforcing Iron Workers, which has a collective bargaining agreement (CBA) with the Building Trades Employers' Association of Boston and Eastern Massachusetts (BTEA), conspired with the BTEA and union contractors to restrain trade.

Subsidies to Union Contractors

The antitrust claims focused on the union’s job-targeting program. The union created the program to mitigate the disadvantage imposed on union contractors by union wages. Under the program, the union targets certain construction projects and offers subsidies to assist union contractors in underbidding nonunion contractors on erection jobs. The program is funded in part by deductions from the wages of union members. The union and the BTEA agreed to codify the method of fund contributions in their CBA. The complaining contractors alleged that, as a result of the union’s conduct, they were excluded from the market.

Statutory Labor Exemption

The statutory labor exemption did not shield the union from antitrust liability for establishing and administering the job targeting program, the appellate court ruled. The union raised the statutory exemption from antitrust liability as an affirmative defense against the Sherman Act claims, and thus had the burden of proving the defense applied. The statutory exemption did not apply, however, because the statutory exemption did not extend to agreements between labor and non-labor actors.

In administering the program, the union was acting in combination with a non-labor group, according to the appellate court. The program could not have operated except in tandem with union contractors. Furthermore, there was evidence from which a rational fact-finder could reasonably infer that the union and union contractors worked together to identify and win targeted projects away from non-union employers.

Nonstatutory Labor Exemption

The union might still be shielded from antitrust liability under the nonstatutory labor exemption, which applies where the alleged anticompetitive conduct is anchored in the collective-bargaining process. However, additional fact-finding had to be conducted with regard to the extent of the collaboration between the union, union contractors, and the construction companies that hired them. Because the district court did not to make a finding as to the applicability of the nonstatutory exemption, the appellate court remanded the matter to the district court.

Application of the nonstatutory exemption was usually limited to situations where the alleged restraint operated primarily in the labor market and had only tangential effects on the business market. The complaining nonunion contractors had alleged “concerted union-employer action that extended beyond merely the wage deduction provided for in the CBA and the job-by-job subsidy agreements, to collaboration in the identification and acquisition of target projects.”

Text of the August 1 decision in American Steel Erectors, Inc. v. Local Union No. 7 of the International Association of Bridge, Structural, Ornamental & Reinforcing Iron Workers, No. 07-1832, will appear at 2008-2 Trade Cases ¶76,241.