Section 302: The LMRA s Criminal Cousin 1

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1 Section 302: The LMRA s Criminal Cousin 1 Enacted for the purpose of preventing corruption and disloyalty in labor-management relations, Section 302 of the Labor Management Relations Act (LMRA), 29 U.S.C. 186, 2 prohibits employers or agents of employers from providing any money or thing of value to its employees, a labor organization, its officers, or a representative of employees. 29 U.S.C. 186(a). 3 The statute also prohibits any representative of any employees from demanding, requesting, or receiving such payments from the employer. 29 U.S.C. 186(b). Violators face penalties of fines of up to $15,000 and/or up to five years imprisonment. 29 U.S.C. 186(d). A variety of federal court jurisprudence exists concerning Section 302, centering mostly on the appellate courts review of criminal convictions under the provision. Below is a survey of case law in this area, sorted by subject matter. I. Representative of Employees The courts require the government to show that a defendant charged with violating Section 302(b) is a representative of employees. U.S. v. Ryan, 350 U.S. 299 (1956). The Supreme Court in U.S. v. Ryan interpreted the term representative to include any person authorized by the employees to act for them in dealings with their employers. Ibid. at 305. The courts have consistently included as representatives bargaining agents (See U.S. v. Inciso, 292 F.2d 374 (7 th Cir. 1961)), union presidents and other officers (See Ryan and U.S. v. Motzell, 199 F.Supp. 192 (Dist. N.J. 1961)), and union organizers (See U.S. v. Baker, 293 F.2d 613 (3 rd Cir. 1961). Further, the defendant must be a representative of employees in fact, not merely one in appearance. In Ventimiglia v. U.S., 242 F.2d 620 (4 th Cir. 1957), the Fourth Circuit overturned a conviction of conspiracy to violate Section 302 against the business agent of a local union who was paid by employers to distribute union cards to employees. The Court of Appeals ruled that it was immaterial that the defendant was viewed by union members as their representative, because factually he did not deal with employers on employees behalf. II. Receiving a Thing of Value The government must show that the defendant received or requested a tangible and identifiable amount of money or thing of value. 29 U.S.C What constitutes a thing of 1 By Bill Lurye, Associate General Counsel, American Federation of Labor-Congress of Industrial Organizations, with the assistance of Michael Haynes. 2 Section 302 is attached. There are statutory exceptions to this rule, set forth in Section 302(c), which includes the payment of dues and employer payments to pension, health and other employee benefit trust funds that are managed by a board of trustees consisting of an equal number of union and employer trustees. 3 Section 302 does not apply to the rail or air industries, because they are not covered by the LMRA. See 29 U.S.C. 152(2).

2 value is a matter for the fact finder to decide, as it is generally a dispute of fact. U.S. v. Douglas, 398 F.3d 407 (6 th Cir. 2005). In U.S. v. Cervone, 907 F.2d 332 (2 nd Cir. 1990), the Second Circuit reversed the lower court s conviction of a union officer for receiving what the government argued as an intangible ability to control corrupt union activities with the employer. The court ruled that it was impossible to determine what benefits the defendant received from the employer, and that the law could not be reasonably construed to openly apply to defendants without the government identifying tangible benefits. An interest-free loan without collateral and no request for repayment is considered a thing of value under Section 302. U.S. v. Roth, 333 F.2d 450 (2 nd Cir. 1964). A representative for hotel employees violates the LMRA by accepting a discount from the employer for a room rate for which he could otherwise not qualify. U.S. v. Schiffman, 552 F.2d 1124 (5 th Cir. 1977). Pension payments beyond the normal employer contribution are also considered things of value. U.S. v. Phillips, 19 F.3d 1565 (11 th Cir. 1994). (See also U.S. v. Motzell, 199 F.Supp. 192 (Dist. N.J. 1961), use of employer equipment and resources for personal business declared thing of value) The representative does not have to receive the payments directly from the employer; the inclusion of a third party such as a bank or loan company does not wash the act of its criminal nature. U.S. v. Holt, 333 F.2d 455 (2 nd Cir. 1964). (See also U.S. v. McMaster, 343 F.2d 176 (6 th Cir. 1965), conviction upheld where employer made payments to union official s company, not directly to the official). An employer agreement to remain neutral in an union organizing campaigns is not a thing of value, and therefore, is not violative of Section 302. So, where the concessions made by employer in a card check agreement granted the union access to employees during the organizing campaign, the employer did not violate Section 302 because the concessions, which were not inimical to collective bargaining process and had no ascertainable value whatsoever, did not constitute things of value within meaning of Section 302. Adcock v Freightliner LLC, 550 F3d 369 (4 th Cir. 2008). Neither a neutrality agreement s requirement that the union and the employer submit disputes to arbitration nor the agreement's provisions for card check procedures required an employer to provide "things of value" to union in violation of 302. HERE Local 57 v. Sage Hospitality Res., LLC, 390 F3d 206 (3 rd Cir. 2004). III. Third Party Acquisitions It is possible for a union representative to be convicted of violating Section 302 without actually receiving a payment. The Seventh Circuit in U.S. v. Inciso, 292 F.2d 374 (7 th Cir. 1961) affirmed the conviction against a union negotiator who on more than twenty occasions assisted local union officials in making arrangements with employers to make unlawful payments to the 2

3 union. The court ruled that the negotiator violated Section 302 even though he personally received no payments from the employers, and that the act of helping to acquire unlawful payments was sufficient to violate the statute. In U.S. v. Carlock, 806 F.2d 535 (5 th Cir. 1986), a union officer was convicted for demanding that the employer rent construction equipment from a company owned by the officer s friend, who in exchange for the reference provided kickbacks to the official. The Fifth Circuit affirmed the conviction, ruling that a Section 302 violation occurs even when money is paid to a third party for purposes of benefitting the union official, notwithstanding the fact that the official never actually receives money. However, a representative of employees does not violate the LMRA if he/she intercepts payments made lawfully by employers. In Arroyo v. U.S., 359 U.S. 419 (1959), a union president received two checks from the employer to deposit into the union s welfare fund, but instead used the checks to open another fund in his name. The Supreme Court ruled that the act was not violative of Section 302, because the payment was made for a legitimate purpose (although it was likely he broke other criminal laws). IV. State of Mind Requirements Section 302(d) adds that a person charged with violating the statute must have willfully acted in such a way. 29 U.S.C. 186(d). The Fifth Circuit ruled in U.S. v. Fischetti, 450 F.2d 34 (5 th Cir. 1971), that an indictment for substantively violating Section 302 must include the willful state of mind element, but a charge of conspiracy to violate the statute does not carry such a requirement. The courts do not differentiate between willfulness to make payments to a union and intent to break the law. In U.S. v. Papia, 910 F.2d 1357 (7 th Cir. 1990), the Seventh Circuit upheld the conviction of a restaurant manager who paid the union dues of her employees for several years. The manager argued that she did not intend to break the law, but she willingly paid the dues year after year. The court ruled that the willfulness element of Section 302(d) only concerned her intent to make payments to the union, a fact against which there was no dispute. See also U.S. v. Phillips, 19 F.3d 1565 (11 th Cir. 1994), where the court upheld the conviction of a union officer who received kickbacks in the form of personal pension payments. The union officer argued that he did not know the kickbacks violated the law, but willfully accepted the pension payments nonetheless. In U.S. v. Carter, 311 F.2d 934 (6 th Cir. 1963), a corporate defendant was acquitted of violating the LMRA because it proved it was unaware that the loan payments it was making to union officials were actually a cover for illegal payments, which had been arranged by a company it had taken over. V. Indictments 3

4 In charging defendants with violations of Section 302, the courts have ruled that each unlawful transaction between employer and employee representative can be considered a separate violation of the statute. U.S. v. Alaimo, 297 F.2d 604 (3 rd Cir. 1961). (See also U.S. v. Piasecki, 300 F.2d 152 (3 rd Cir. 1962), and U.S. v. Keegan, 331 F.2d 257 (7 th Cir. 1964). The government can charge, try, and convict the defendant on as many charges as there are violations. Alaimo at 606. Alternatively, the government may also charge multiple instances of unlawful transactions as one joint count of violating Section 302. Korholz v. U.S., 269 F.2d 897 (10 th. Cir. 1959). See also U.S. v. Donovan, 339 F.2d 404 (7 th Cir. 1964)(convictions reversed where indictment was unconstitutionally vague because it did not adequately provide proper notice of charges for violating the LMRA). VI. Civil Suits for Injunctive Relief The courts can grant injunctive relief to prevent violations of 302. In Carroll v. Amer. Fed. of Musicians, 295 F.2d 484 (2 nd Cir. 1961), the Second Circuit granted an injunction to orchestra musicians against the performance of an agreement between orchestra management and the union. The agreement provided that the employer levy a traveling surcharge on union members that was to be paid to the union, for any performances made outside the local area. The court ruled that the surcharge was an unlawful employer-to-union payment, which, if carried out, would violate the LMRA. VII. Evidentiary Matters The Second Circuit ruled that evidence of coercive and threatening behavior in connection with demands for payments is sufficient to prove a charge of conspiracy to violation Section 302. U.S. v. Overton, 470 F.2d 761 (2 nd Cir. 1972). Courts have generally accepted proof of violating or conspiracy to violate Section 302 as a predicate indictable offense as required under the Racketeer Influenced and Corrupt Organizations (RICO) Act. U.S. v. Kaye, 556 F.2d 855 (7 th Cir. 1977). The Section 302 charges and/or convictions establish a pattern of racketeering, thus satisfying certain elements of a RICO Act violation. Ibid. The Third Circuit in U.S. v. Baker, 293 F.2d 613 (3 rd Cir. 1961) viewed a union organizer s testimony during a U.S. Senate committee hearing as his admission to violating Section 302, given that there was sufficient corroborating evidence. The Second Circuit affirmed a conviction based mostly on testimony that the company president told his son that he was giving money to the union official. U.S. v. Annunziato, 293 F.2d 373 (2 nd Cir. 1961). See also U.S. v. Gard, 344 F.2d 120 (2 nd Cir. 1965)(use of testimony regarding post-agreement events to establish the existence of a payment agreement). 4

5 APPENDIX 186. Restrictions on financial transactions (a) Payment or lending, etc., of money by employer or agent to employees, representatives, or labor organizations. It shall be unlawful for any employer or association of employers or any person who acts as a labor relations expert, adviser, or consultant to an employer or who acts in the interest of an employer to pay, lend, or deliver, or agree to pay, lend, or deliver, any money or other thing of value-- (1) to any representative of any of his employees who are employed in an industry affecting commerce; or (2) to any labor organization, or any officer or employee thereof, which represents, seeks to represent, or would admit to membership, any of the employees of such employer who are employed in an industry affecting commerce; or (3) to any employee or group or committee of employees of such employer employed in an industry affecting commerce in excess of their normal compensation for the purpose of causing such employee or group or committee directly or indirectly to influence any other employees in the exercise of the right to organize and bargain collectively through representatives of their own choosing; or (4) to any officer or employee of a labor organization engaged in an industry affecting commerce with intent to influence him in respect to any of his actions, decisions, or duties as a representative of employees or as such officer or employee of such labor organization. (b) Request, demand, etc., for money or other thing of value. (1) It shall be unlawful for any person to request, demand, receive, or accept, or agree to receive or accept, any payment, loan, or delivery of any money or other thing of value prohibited by subsection (a). (2) It shall be unlawful for any labor organization, or for any person acting as an officer, agent, representative, or employee of such labor organization, to demand or accept from the operator of any motor vehicle (as defined in section of title 49, United States Code) employed in the transportation of property in commerce, or the employer of any such operator, any money or other thing of value payable to such organization or to an officer, agent, representative or employee thereof as a fee or charge for the unloading, or in connection with the unloading, of the cargo of such vehicle: Provided, That nothing in this paragraph shall be construed to make unlawful any payment by an employer to any of his employees as compensation for their services as employees. (c) Exceptions. The provisions of this section shall not be applicable (1) in respect to any money or other thing of value payable by an employer to any of his employees whose established duties 5

6 include acting openly for such employer in matters of labor relations or personnel administration or to any representative of his employees, or to any officer or employee of a labor organization, who is also an employee or former employee of such employer, as compensation for, or by reason of, his service as an employee of such employer; (2) with respect to the payment or delivery of any money or other thing of value in satisfaction of a judgment of any court or a decision or award of an arbitrator or impartial chairman or in compromise, adjustment, settlement, or release of any claim, complaint, grievance, or dispute in the absence of fraud or duress; (3) with respect to the sale or purchase of an article or commodity at the prevailing market price in the regular course of business; (4) with respect to money deducted from the wages of employees in payment of membership dues in a labor organization: Provided, That the employer has received from each employee, on whose account such deductions are made, a written assignment which shall not be irrevocable for a period of more than one year, or beyond the termination date of the applicable collective agreement, whichever occurs sooner; (5) with respect to money or other thing of value paid to a trust fund established by such representative, for the sole and exclusive benefit of the employees of such employer, and their families and dependents (or of such employees, families, and dependents jointly with the employees of other employers making similar payments, and their families and dependents): Provided, That (A) such payments are held in trust for the purpose of paying, either from principal or income or both, for the benefit of employees, their families and dependents, for medical or hospital care, pensions on retirement or death of employees, compensation for injuries or illness resulting from occupational activity or insurance to provide any of the foregoing, or unemployment benefits or life insurance, disability and sickness insurance, or accident insurance; (B) the detailed basis on which such payments are to be made is specified in a written agreement with the employer, and employees and employers are equally represented in the administration of such fund, together with such neutral persons as the representatives of the employers and the representatives of employees may agree upon and in the event the employer and employee groups deadlock on the administration of such fund and there are no neutral persons empowered to break such deadlock, such agreement provides that the two groups shall agree on an impartial umpire to decide such dispute, or in event of their failure to agree within a reasonable length of time, an impartial umpire to decide such dispute shall, on petition of either group, be appointed by the district court of the United States for the district where the trust fund has its principal office, and shall also contain provisions for an annual audit of the trust fund, a statement of the results of which shall be available for inspection by interested persons at the principal office of the trust fund and at such other places as may be designated in such written agreement; and (C) such payments as are intended to be used for the purpose of providing pensions or annuities for employees are made to a separate trust which provides that the funds held therein cannot be used for any purpose other than paying such pensions or annuities; (6) with respect to money or other thing of value paid by any employer to a trust fund established by such representative for the purpose of pooled vacation, holiday, severance or similar benefits, or defraying costs of apprenticeship or other training programs: Provided, That the requirements of clause (B) of the proviso to clause (5) of 6

7 this subsection shall apply to such trust funds; (7) with respect to money or other thing of value paid by any employer to a pooled or individual trust fund established by such representative for the purpose of (A) scholarships for the benefit of employees, their families, and dependents for study at educational institutions, (B) child care centers for preschool and school age dependents of employees, or (C) financial assistance for employee housing: Provided, That no labor organization or employer shall be required to bargain on the establishment of any such trust fund, and refusal to do so shall not constitute an unfair labor practice: Provided further, That the requirements of clause (B) of the proviso to clause (5) of this subsection shall apply to such trust funds; (8) with respect to money or any other thing of value paid by any employer to a trust fund established by such representative for the purpose of defraying the costs of legal services for employees, their families, and dependents for counsel or plan of their choice: Provided, That the requirements of clause (B) of the proviso to clause (5) of this subsection shall apply to such trust funds: Provided further, That no such legal services shall be furnished: (A) to initiate any proceedings directed (i) against any such employer or its officers or agents except in workman's compensation cases, or (ii) against such labor organization, or its parent or subordinate bodies, or their officers or agents, or (iii) against any other employer or labor organization, or their officers or agents, in any matter arising under the National Labor Relations Act, as amended [29 USCS , ], or this Act; and (B) in any proceeding where a labor organization would be prohibited from defraying the costs of legal services by the provisions of the Labor- Management Reporting and Disclosure Act of 1959; or (9) with respect to money or other things of value paid by an employer to a plant, area or industrywide labor management committee established for one or more of the purposes set forth in section 5(b) of the Labor Management Cooperation Act of (d) Penalties for violations. (1) Any person who participates in a transaction involving a payment, loan, or delivery of money or other thing of value to a labor organization in payment of membership dues or to a joint labor-management trust fund as defined by clause (B) of the proviso to clause (5) of subsection (c) of this section or to a plant, area, or industry-wide labor-management committee that is received and used by such labor organization, trust fund, or committee, which transaction does not satisfy all the applicable requirements of subsections (c)(4) through (c)(9) of this section, and willfully and with intent to benefit himself or to benefit other persons he knows are not permitted to receive a payment, loan, money, or other thing of value under subsections (c)(4) through (c)(9) violates this subsection, shall, upon conviction thereof, be guilty of a felony and be subject to a fine of not more than $ 15,000, or imprisoned for not more than five years, or both; but if the value of the amount of money or thing of value involved in any violation of the provisions of this section does not exceed $ 1,000, such person shall be guilty of a misdemeanor and be subject to a fine of not more than $ 10,000, or imprisoned for not more than one year, or both. (2) Except for violations involving transactions covered by subsection (d)(1) of this section, 7

8 any person who willfully violates this section shall, upon conviction thereof, be guilty of a felony and be subject to a fine of not more than $ 15,000, or imprisoned for not more than five years, or both; but if the value of the amount of money or thing of value involved in any violation of the provisions of this section does not exceed $ 1,000, such person shall be guilty of a misdemeanor and be subject to a fine of not more than $ 10,000, or imprisoned for not more than one year, or both. (e) Jurisdiction of courts. The district courts of the United States and the United States courts of the Territories and possessions shall have jurisdiction, for cause shown, and subject to the provisions of section 17 (relating to notice to opposite party) of the Act entitled "An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes," approved October 15, 1914, as amended (U. S. C., title 28, sec. 381), to restrain violations of this section, without regard to the provisions of sections 6 and 20 of such Act of October 15, 1914, as amended (U. S. C., title 15, sec. 17, and title 29, sec. 52), and the provisions of the Act entitled "An Act to amend the Judicial Code and to define and limit the jurisdiction of courts sitting in equity, and for other purposes," approved March 23, 1932 (U. S. C., title 29, secs ). (f) Effective date of provisions. This section shall not apply to any contract in force on the date of enactment of this Act [June 23, 1947], until the expiration of such contract, or until July 1, 1948, whichever first occurs. (g) Contributions to trust funds. Compliance with the restrictions contained in subsection (c)(5)(b) upon contributions to trust funds, otherwise lawful, shall not be applicable to contributions to such trust funds established by collective agreement prior to January 1, 1946, nor shall subsection (c)(5)(a) be construed as prohibiting contributions to such trust funds if prior to January 1, 1947, such funds contained provisions for pooled vacation benefits. 8