No. 80-123
I N THE SUPREME COURT OF THE STATE OF M N A A
O T N
AUDIT SERVICES, I N C . ,
a Montana C o r p o r a t i o n ,
P l a i n t i f f and Respondent,
STEWART AND JANES,
a Montana C o r p o r a t i o n ,
Defendant and A p p e l l a n t .
A p p e a l from: D i s t r i c t Court of t h e Eleventh J u d i c i a l D i s t r i c t ,
I n a n d f o r t h e County o f F l a t h e a d .
Honorable Robert H o l t e r , Judge p r e s i d i n g .
C o u n s e l o f Record:
For Appellant:
Hash, J e l l i s o n , O ' B r i e n and B a r t l e t t , K a l i s p e l l ,
Montana
Eugene R. N i e l s o n a r g u e d , K a l i s p e l l , Montana
F o r Respondent:
C u r e and Borer, G r e a t F a l l s , Montana
Maxon R. Davis a r g u e d , Great F a l l s , Montana
F o r Amicus C u r i a e :
K e v i n A. Campana, H e l e n a , Montana
H i l l e y a n d L o r i n g , Great F a l l s , Montana
E m i l i e L o r i n g a r g u e d , Great F a l l s , Montana
Submitted: November 20, 1980
Filed:
Mr. Justice John C. Harrison delivered the Opinion of the Court.
Plaintiff trust fund, assignee of claims of certain
benefit trust funds, sued defendant Stewart and Janes,
employer, to recover contributions plaintiff alleged were
due and owing pursuant to the terms of certain collective
bargaining agreements executed by defendant. The cause was
tried before the District Court of the Eleventh Judicial
District, sitting without a jury, on July 12, 1979. The
District Court entered judgment in favor of plaintiff and
against defendant in the sum of $27,980.96. Defendant
appeals from this judgment.
The sole issue on appeal is whether the collective
bargaining agreements on which plaintiff sued are judicially
enforceable.
The following facts are derived from extended findings
of fact entered by the District Court and are disputed by
defendant.
Defendant Stewart and Janes is a Montana corporation
engaged in the construction industry in this state. In its
construction business, defendant employs laborers and carpenters.
Defendant was a member of and had assigned its bargaining
rights to a multi-employer bargaining group in Kalispell,
Montana, for purposes of negotiating collective bargaining
agreements with the local Carpenters and Laborers Unions.
The Flathead Contractors ~ssociationor Western Montana
Employers Association negotiated a series of collective
bargaining agreements with several of the local unions in
the area.
Because of the nature of defendant's business, defendant
executed compliance agreements with several of the local
carpenters' unions. These compliance agreements incorporated
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the principal collective bargaining agreement. All the
collective bargaining agreements incorporated the trust
agreements; more specifically, the collective bargaining
agreementsand the compliance agreements required an hourly
fringe benefit contribution from defendant to the trust on
behalf of the signatory employers and the laborer and carpenter
employees.
From January 1, 1972, to December 31, 1976, defendant
properly reported 90.1 percent of the hours worked by its
laborer and carpenter employees to the Montana Carpenters
and Laborers Trust Funds. Defendant failed to report 9.9
percent of the hours worked by its carpenter and laborer
employees between January 1, 1972, and December 31, 1976.
Audit Services, plaintiff, became the assignee of the trustees
of the above trust fund for the unreported hours and initiated
this action for the trustees' claim for delinquent fringe
benefits contributions, liquidated damages, interest and
audit fees. Defendant has steadfastly denied any liability
to the trustees of the trust fund.
Defendant claims that its operations constituted two
divisions: the "Home Division" and the "Construction Division."
Defendant claims that the Home Division utilized nonunion
labor and the Construction Division employed union employees.
No fringe benefits were paid on the nonunion employees of
the Home Division. Defendant contends that the union was
aware of the dual operation and that negotiations were
conducted separately for these construction and operating
divisions.
The District Court found that: the Home Division and
the Construction Division were nothing more than "an internal
bookkeeping division of defendant corporation"; the two
that
divisions have one single employer;/all of defendant's
laborer and carpenter employees fall within the scope of the
collective bargaining and trust agreements; and the employees
work "back and forth" between the union and nonunion divisions
of defendant.
At no time prior to May 5, 1978, did defendant ever act
or attempt to void any of the above compliance and collective
bargaining and trust agreements. The District Court found
that defendant voluntarily recognized the collective bargaining
representatives for its laborer and carpenter employees.
Defendant contended throughout the trial that the union
never made any claim to defendant that it had been designated
to represent a majority of the employees. The union and
plaintiff admit that there were no N.L.R.B. election proceedings
to determine the union's majority status among the employees
and that it never received majority status in a formal way.
This action was brought by plaintiff under Section 301
of the Taft Hartley Act, 29 U.S.C. 8185. Although we have
concurrent jurisdiction with federal courts to hear Section
301 suits, we must apply federal substantive law, not state
law. Textile Workers Union v. Lincoln Mills of Ala. (19571,
353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972; Charles Dowd Box
Co. v. Courtney (19621, 368 U.S. 502, 82 S.Ct. 519, 7 L.Ed.2d
483; Local 174, Teamsters, etc. v. Lucas Flour Co. (19621,
369 U.S. 95, 82 S.Ct. 571, 7 L.Ed.2d 593. This suit is for
the collection of certain fringe benefits allegedly due
under certain collective bargaining agreements. The validity
of the trust funds claim is dependent upon whether the
contracts are enforceable.
Defendant contends that the contracts sued on are, by
their very nature, prehire contracts and, therefore, under
applicable federal law are not enforceable. We disagree.
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The National Labor Relations Act provides:
"It shall not be an unfair labor practice ...
for an employer engaged primarily in the build-
ing and construction industry to make an agree-
ment covering employees engaged (or who, upon
their employment, will be engaged) in the build-
ing and construction industry with a labor or-
ganization of which building and construction
employees are members ... because (1) the
majority status of such labor organization has
not been established under the provisions of
section 159 of this title prior to the making
of such agreement ... Provided further, that
any agreement which woula be invalid, but for
clause (1) of this subsection, shall not be a
bar to a petition filed pursuant to section
159 (c) or 159 (e) of this title." 29 U.S.C.
S158 (f) .
This section (hereinafter referred to as section 8(f))
of the NLRA permits a construction industry, such as defendant,
and a union to enter into a collective bargaining agreement
without the union being designated as the bargaining repre-
sentative by a majority of the employees covered by that
agreement. Without that proviso, the making of such a
prehire agreement would constitute an unfair labor practice.
The purpose of Congress in allowing the execution of
prehire agreements in the construction industry is discussed
in Bricklayers Local 3 (1966), 162 NLRB 476, 64 LRRM 1085.
In that case the Board described the purpose of a prehire
agreement as:
". . .an initial attempt by a union and an
employer in the construction industry to com-
mence such a collective bargaining relation-
ship. Thus, the entire legislative history
of Section 8 (f) (1) is couched in terms of
'pre-hire agreements,' a reference which can
have no meaning in the situation where, as
here, the parties are continuing an existing
bargaining relationship under which employees
have previously been hired . .
. Congress en-
visioned its prehire provisions as applying
only to the situation where the parties were
attempting to establish - bargaining relation-
a
---
ship for thefirst time." 64 LRRM at 1086.
(Emphasis added.)
The record here, however, indicates that the contracts
between defendant and the unions were not prehire agreements.
There had been an ongoing collective bargaining relationship
for a number of years between defendant and the unions. The
employer himself testified at trial that he had "work in
progress" at the time he signed at least some of the agreements
although he "couldn't remember" whether he had laborers on
the payroll but that "more than likely" when he signed a
particular laborers' contract he did.
Similarly, in connection with a carpenters' agreement,
defendant's president testified that he "probably" had
carpenters on the payroll at the time it was signed. He
further testified that when he signed agreements for Butte,
defendant had the job constructing what was known as the
Butte Stadium at the junior high school; when he signed
agreements applying to central Montana, defendant had a job
in that area, the Toole County State Bank in Shelby; when he
signed the the agreement for Anaconda, defendant had a job
at the Warm Springs State Hospital. When other agreements
were signed, defendant's president testified that he was
"sure we were building something," and that "more than
likely" he had laborers on the payroll at the time. Again,
he testified he was "building things" when another agreement
was executed.
Carpenters' business agent Rosman testified he had
first determined he had members working on the Toole County
State Bank project in Shelby and presented the compliance
agreement to an agent of defendant.
According to the N.L.R.B., prehire agreements do not
include multi-employer collective bargaining agreements to
which an employer is a party by virtue of being a member of
a multi-employer association. Authorized Air Conditioning
Company (1978), 236 NLRB No. 24, 98 LRRM 1538, enforced (9th
Cir. 1979), 606 F.2d 899; Amamdo Electric (1978), 238 NLRB
No. 3, 99 LRRM 1453. In a multi-employer bargaining group,
the appropriate bargaining unit is group-wide, such that the
question of majority support of one member's work force is
irrelevant.
Defendant had participated in multi-employer bargaining
units (the Flathead Contractors Association and the Western
Montana Employers Association) in dealing with the unions.
his was not the initial bargaining attempt that Congress
had in mind under section 8(f).
In participating with multi-employer bargaining groups,
defendant cannot claim that its collective bargaining relation-
ship with the unions never developed past infancy:
"This voluntary act of the defendant effec-
tively merged his company with the other
member companies of the Associated General
Contractors as one large collective bargain-
ing unit. Thenceforth, it became irrelevant
whether a majority of Schafer's employees
favored the union so long as a majority of
those employed by the Associated General
Contractors were union people." Trades Council
v. E.C. Schafer Constr. Co. (1980), 104 LRRM
2114, 2116.
The District Court made extensive findings of fact. In
one finding the court held that "[iln executing each of the
above compliance agreements and in authorizing the Flathead
Contractors Association and Western Montana Employers Association
to execute multi-employer bargaining agreements with the
Laborers and Carpenters Unions, Stewart and Janes voluntarily
recognized the Laborers and Carpenters Unions as collective
bargaining representation for its laborer and carpenter
employees." Clearly, this finding is supported by substantial
evidence. We also find that defendant made a voluntary
recognition of the unions as the majority bargaining representative
of its employees.
Under the National Labor Relations Act, a union can
become the bargaining representative for a particular group
of employees in either of two ways. One way is for the
employer to refuse to recognize the union as representing a
majority of the employees. Then the union may petition the
N.L.R.B. for an election. If the union wins the election,
the N.L.R.B. will certify it as the exclusive bargaining
agent of the employees.
The second way for a union to become the bargaining
representative of the employees is for the employer to
voluntarily recognize the union as the representative of a
majority of the employees. No particular procedure is
required for the employer to follow in making its determination
that the union represents a majority of the employees.
However, the employer would commit an unfair labor practice
in violation of sections 8 (a)(5) and 9 (a) of the National
Labor Relations Act if it recognized a collective bargaining
agent which did not represent a majority of the employees.
Defendant recognized the unions as the collective
bargaining agent of its employees under the second alternative.
The record bears this out:
(1) Defendant bargained with the unions on a number of
different projects.
(2) Defendant signed a number of different contracts.
(3) Defendant engaged in a protracted collective bargaining
relationship.
(4) Defendant demonstrated recognition by the manner in
which it paid the very fringe benefit contributions at issue
here. Defendant properly reported over 9 0 percent of the
hours worked by its laborer and carpenter employees. Hours
were reported for union members; nonunion employees were not
reported. Given the 9 0 percent figure, it can be presumed
that a majority of defendant's employees, as union members,
supported the unions. Quad C Corporation and Associated
General Contractors and Carpenters, California State Council
(19791, 246 NLRB No. 75, 102 LRRM 1597.
(5) Laborers' business agent Fleming and carpenters'
business agent Robinson testified that members of their
unions were employed by defendant,and they dispatched members
from their hiring halls to defendant's construction projects.
Carpenters' business agent Rosman also dispatched union
members to defendant's jobs. There was undisputed evidence
of union members working on defendant's projects.
The N.L.R.B. has ruled that an employer cannot rely on
the case of N.L.R.B. v Local Union No. 103, Intern. Ass'n.,
.
etc. (1978), 434 U.S. 335, 98 S.Ct. 651, 54 L.Ed.2d 586, and
repudiate a prehire contract at a time when a majority of
its employees are union members. V. M. Construction Co.
(1979), 241 NLRB No. 84, 100 LRRM 1625.
Defendant's claim that the unions never demonstrated
majority support means nothing. While construction industry
employers can execute "prehire agreements" under section
8(f), any employer--including ones in the construction
industry--can voluntarily recognize a labor union as the
representative of a majority of its employees without the
necessity of N.L.R.B. certification. N.L.R.B. v. Morse
Shoe, Inc. (9th Cir. 1979), 591 F.2d 542; Pioneer Inn ~ssociates
v. N.L.R.B. (9th Cir. 1978), 578 F.2d 835. Such agreements
are valid under Section 9(a) of the Labor Management Relations
Act, 29 U.S.C. §159(a).
Once an employer voluntarily recognizes a union as the
bargaining representative of a majority of his employees, a
presumption of continued majority support arises. In Sahara-
Tahoe Corp. v. N.L.R.B. (9th Cir. 1978), 581 F.2d 767, 769,
the Court stated:
-9-
". . . As a general rule, an uncertified but
voluntarily recognized union enjoys a con-
clusive presumption of majority status for a
reasonable time, usually one year, after
voluntary recognition and a rebuttable pre-
sumption thereafter. [Citation omitted.]
'The presumption is rebutted if the employer
shows, by clear, cogent, and convincing evi-
dence, that the union was in the minority or
that the employer had a good faith reasonable
doubt of majority support at the time of the
refusal.'"
Moreover, when an employer voluntarily recognizes a
union, a presumption attaches that a majority of the affected
employees desire union representation. N.L.R.B. v. Rogers
I.G.A., Inc. (10th Cir. 1979), 605 F.2d 1164; N.L.R.B. v.
Morse Shoe, Inc., supra. The rationale is plain--if an
employer enters into a collective bargaining agreement with
a minority union, both the employer and the union have
violated the law. It is assumed that neither party knowingly
would do so. N.L.R.B. v. Rogers I.G.A., Inc., supra, 605
F.2d at 1165. The presumption applies to construction
industry employers. See Authorized Air Conditioning Co. v.
NLRB (9th Cir. 1979), 606 F.2d 899, 907, cert. denied 103
LRRM 3002; see also, Arco Electric Co. v. N.L.R.B. (1980),
103 LRRM 3114.
Defendant presented no evidence to rebut this presumption.
When the presumption is combined with the testimony of
carpenters' business agent Rosman and with the fact that
defendant paid union-sponsored fringe benefits for 90 percent
of the hours worked by its laborer and carpenter employees,
the conclusion is inescapable that defendant recognized that
the unions represented a majority of its laborer and carpenter
employees at all times relevant to this action. Defendant's
"prehire" defense came only as an afterthought after it was
billed for its audited delinquencies.
This conclusion is reinforced when one takes into
account the fact that all of the underlying collective
bargaining agreements contained union-security clauses.
While it is true that the unions never sought an NLRB certification
election, the absence of any effort by any of the employees
themselves to do so, to say nothing of the employer, strengthens
the presumption of majority support for the unions. Custom
Sheet Metal Service Co., Inc. (1979), 243 NLRB No. 142, 102
LRRM 1163.
If at any time during its collective bargaining relationship,
defendant ever doubted that the unions represented a majority
of the employees on a particular project, all it had to do
was to reject the contract or refuse to bargain with the
unions. In all likelihood, the unions would have then filed
an unfair labor practice charge alleging a violation of
section 8(a)(5) of the Act. The N.L.R.B. would have then
made a determination as to whether or not the unions repre-
sented a majority of the employees. But, defendant never
raised the question while the jobs were in progress.
Instead, defendant signed the agreements; operated
pursuant to the contracts; paid wages and fringe benefits
pursuant to the contracts. Only on the nonunion employees
did it not pay the necessary trust fund payments. The
unions and employees believed a binding contract was in
existence. It was only when the trust fund sought the
delinquent payments that defendant disavowed the contracts
as unenforceable prehire contracts. By then, it was impossible
to have an N.L.R.B. representation election or gather authorization
cards on the long-completed projects. The workers had
scattered, as they do in the construction industry, and it
was impossible to reconstruct the work force.
It would indeed be an injustice to allow an employer to
gain the benefits of a collective bargaining relationship
all during the project and retroactively void the contract
when called upon to perform its side of the agreement. That
is precisely what defendant is asking this Court to do when
it asks this Court to declare the contracts to be unenforceable
prehire agreements.
Defendant relies on Dee Cee Floor Covering (1977), 232
NLRB No. 72, 97 LRRM 1072, for the proposition that a union
must establish majority support at each jobsite at which it
seeks to apply a section 8(f) prehire agreement. However,
the -- ruling, as such, is limited to section 8(f)
Dee Cee
prehire agreements. For nonsection 8(f) construction in-
dustry labor agreements, the National Labor Relations Board
has consistently adhered to the position that the presumptively
appropriate bargaining unit is employer-wide, recognizing
this as the prevailing practice of the industry. New Enterprise
Stone and Lime Co. (1968), 172 NLRB No. 240, 69 LRRM 1145.
Since defendant failed to demonstrate that any of its labor
--
agreements were section 8(f) prehire agreements, Dee Cee
Floor Covering is of no import. See also G. M. Masonry Co.
(1979), 245 NLRB No. 54, 102 LRRM 1542.
Secondary to its fundamental irrelevancy, defendant's
- Cee argument fails for utter lack of proof.
Dee - The record
is totally devoid of any evidence indicating which projects
were covered by which labor agreements. Nor is there any
evidence by which the trustees' claims can be separated
among these various (unspecified) projects. This failure is
all the more telling in light of Audit Services- having
presented a detailed audit by which its claims were broken
down according to hours worked by each individual employee
on a monthly basis.
As this Court has noted many times in the past, our
function on appeal is not to substitute its view of the
f a c t s f o r t h a t of t h e D i s t r i c t C o u r t . Toeckes v. Baker
(1980) , - Mont. -I - P.2d , 37 St.Rep. 948. The
D i s t r i c t C o u r t s p e c i f i c a l l y concluded:
" I n v o l u n t a r i l y e n t e r i n g i n t o e a c h o f t h e above-
described c o l l e c t i v e bargaining agreements, t h e
a c t i o n s o f S t e w a r t & ~ a n e s i v e r i s e t o a pre-
s
sumption t h a t t h e u n i o n s s i g n a t o r y t h e r e t o - w e r e
t h e r e p r e s e n t a t i v e s o f t h e m a j o r i t y of t h e em-
p l o y e e s of S t e w a r t & J a n e s c o v e r e d by s a i d
agreements. S t e w a r t - - a n e s h a s n o t produced
& J --
any e v i d e n c e s u f f i c i e n t t o overcome -- t h a t pre-
sumption." (Emphasis added.)
The D i s t r i c t C o u r t was p l a i n l y n o t s a t i s f i e d t h a t
d e f e n d a n t had proved t h a t any of i t s l a b o r agreements w e r e
"prehire contracts." I n l i g h t of t h e r e c o r d p r e s e n t e d f o r
r e v i e w , no b a s i s e x i s t s f o r r e v e r s a l of t h e D i s t r i c t C o u r t .
A f e d e r a l d i s t r i c t c o u r t i n Washington h a s h e l d t h e
t r u s t payment p r o v i s i o n s o f a p r e h i r e agreement u n e n f o r c e a b l e
where t h e r e w a s "no d i s p u t e o v e r t h e m a t e r i a l f a c t t h a t t h e
union which n e g o t i a t e d t h e ' p r e - h i r e ' agreement . . . did
n o t r e p r e s e n t a m a j o r i t y of t h e employees." T r u s t Fund v.
McDowell (W.D. Wash. 1979) , F.Supp. , 103 LRRM
2219. The c a s e i s p r e s e n t l y on a p p e a l t o t h e N i n t h C i r c u i t .
A s t h e r e w a s no d i s p u t e , t h e c o u r t d i d n o t a d d r e s s t h e
q u e s t i o n o f burden o f p r o o f had t h i s f a c t n o t been conceded.
T h i s burden i s on t h e p a r t y q u e s t i o n i n g t h e e n f o r c e a b i l i t y
of t h e c o n t r a c t , h e r e t h e employer. I t i s an a f f i r m a t i v e
d e f e n s e , t o b e proven by a p r e p o n d e r a n c e o f s u b s t a n t i a l
evidence. The employer h a s f a i l e d t o c a r r y t h i s burden.
Defendant h a s f a i l e d t o e s t a b l i s h t h a t t h e s e c o n t r a c t s
a r e section 8 ( f ) contracts; therefore, we w i l l not address
t h e i s s u e s r a i s e d i n t h e T r u s t Fund v. McDowell, s u p r a ,
case, n o r w i l l w e a d d r e s s t h e ambiguous law i n N.L.R.B. v.
L o c a l Union No. 103, I n t e r n . A s s ' n . , etc., supra.
Defendant waited years after its construction work was
performed before claiming that its labor agreements were
unenforceable. It apparently has never raised the prehire
issue directly with the unions themselves. Rather, the
testimony as a whole portrays an employer who has worked to
maintain an amicable relationship with the unions in Montana.
Defendant always met and negotiated with the unions and when
in need of workers frequently resorted to the union hiring
hall. The vast majority of hours worked by the laborer and
carpenter employers were properly reported to the trust
funds .
In belatedly raising its prehire defense, defendant
seeks to require the trustees to recreate its labor force of
years gone by to meet that defense. To do so imposes an
unfair burden on the trustees who were not present at the
time. The magnitude of that burden (as well as defendant's
failure to carry its own burden on the question) is graphically
illustrated by defendant's own inability to recreate its
labor force at the time any of the agreements at issue were
executed. As a matker not only of "judicial administration,"
but also of fundamental fairness to everyone concerned,
defendant should have pursued the prehire issue with the
unions directly and should not be allowed to raise it now
against the trustees' claims.
The contract is enforceable. The District Court made
proper findings of fact and conclusions of law in applying
federal law to this labor dispute. We find no error.
Af firmed.
W e Concur:
Chief J u s t i c e
/ /
/
Justices u
T h i s c a u s e was s u b m i t t e d p r i o r t o J a n u a r y 5 , 1 9 8 1 .