LID Electric Inc v. Int'l Brohd Elec 134 ( 2004 )


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  •                             In the
    United States Court of Appeals
    For the Seventh Circuit
    ____________
    Nos. 03-3767 & 03-3769
    LID ELECTRIC, INC.,
    Plaintiff-Appellee,
    v.
    INTERNATIONAL BROTHERHOOD OF ELECTRICAL
    WORKERS, LOCAL 134, and ELECTRICAL JOINT
    ARBITRATION BOARD,
    Defendants-Appellants.
    ____________
    Appeals from the United States District Court for the
    Northern District of Illinois, Eastern Division.
    No. 02 C 1390—Ronald A. Guzmán, Judge.
    ____________
    ARGUED FEBRUARY 25, 2004—DECIDED MARCH 29, 2004
    ____________
    Before EASTERBROOK, ROVNER, and WILLIAMS, Circuit
    Judges.
    EASTERBROOK, Circuit Judge. The Electrical Contractors’
    Association of Chicago bargains with Local 134 of the
    Electrical Workers Union on behalf of its members, one of
    which is Lid Electric. When appointing the Association as
    its agent for collective bargaining, Lid elected to be bound
    by the agreement then in effect between the Association
    and the Union, as well as any amendments to or extensions
    2                                   Nos. 03-3767 & 03-3769
    of that agreement. (The “Principal Agreement” or “Inside
    Agreement” is the main collective bargaining agreement.
    There are some additional pacts that we need not describe,
    so we refer simply to the “Agreement.”) Lid’s assent re-
    mains in force to this day, but it has refused to implement
    one rule that the Association and the Union promulgated:
    that a drug-testing program adopted in 2001 be applied to
    all employees of each participating firm. When Lid declined
    to test any employees other than the electricians repre-
    sented by the Union, a grievance was filed and led to an
    order by the Electrical Joint Arbitration Board (the EJAB)
    that the Union would not refer any members to Lid for
    employment until Lid complied. Lid then commenced this
    proceeding for judicial review of the award. The district
    judge held that the award is invalid.
    Both the Union and the EJAB have appealed. Why
    the arbitrators should be a defendant, Lid has never
    explained. Nor do we know why Lid omitted the Association
    as a party. If anyone has violated Lid’s rights, it is the
    Association—which, by Lid’s lights, is a faithless agent. Yet
    the EJAB has not complained about its status as a litigant,
    and neither the Union nor the EJAB has protested the
    Association’s absence. As a practical matter, this appeal
    will determine everyone’s rights (the Union, Association,
    and EJAB are contractual partners), so there is no reason to
    insist that the cast of characters be altered. Moreover, the
    controversy remains live despite the expiration of the
    Agreement that was in force when the EJAB issued its
    award. See Cox Corp. v. NLRB, 
    593 F.2d 261
    (6th Cir.
    1979). That Agreement ran from 1999 through 2003 but has
    been succeeded by one that is identical in all respects
    material to this dispute. The parties agreed that the
    renewal process in 2003 would not affect their legal
    entitlements. Thus, if the district judge’s decision should be
    reversed, referrals would again be suspended until Lid
    applied the drug-testing program to all of its employees.
    Nos. 03-3767 & 03-3769                                      3
    Lid’s grant of authority to the Association provides:
    the undersigned firm does hereby authorize
    Electrical Contractors’ Association of City of Chi-
    cago, Inc., NECA as its collective bargaining repre-
    sentative for all matters contained in or pertaining
    to the current and any subsequent approved Inside
    labor agreement between the Electrical Contrs.
    Assoc., NECA, City of Chicago and Local Union 134,
    IBEW. In doing so, the undersigned firm agrees to
    comply with, and be bound by, all of the provisions
    contained in said current and subsequent approved
    labor agreements. This authorization, in compliance
    with the current approved labor agreement, shall
    become effective on the 27 day of September, 1996.
    It shall remain in effect until terminated by the un-
    dersigned employer giving written notice to the
    Electrical Contrs. Assoc., NECA, City of Chicago
    and to the Local Union at least one hundred fifty
    (150) days prior to the then current anniversary
    date of the applicable approved labor agreement.
    This language authorizes the Association to adopt, on Lid’s
    behalf, any provision “pertaining to” the electricians’ wages,
    working conditions, and other matters normally covered by
    a collective bargaining agreement. Lid must implement “all”
    provisions of the agreements, not just those it approves.
    And we must take it that the Association and Union did
    adopt the drug-testing program as a protocol to the 1999
    Agreement. The 1999 Agreement specifies a program to be
    negotiated later. The record is not clear just how these
    negotiations were completed; it may well be (as Lid con-
    tends) that the negotiators were the same eight persons
    who make up the EJAB (four from management, four from
    labor). Negotiating details do not matter, for two reasons:
    first, the Agreement itself authorizes the EJAB to amend as
    well as to interpret the document; second, both the Associa-
    4                                    Nos. 03-3767 & 03-3769
    tion and the Union have embraced the drug-testing proto-
    col, and ratification puts it into force no matter how the text
    came into being.
    The Union was willing to have the electricians tested but
    not to be singled out. So it insisted on a form of most-
    favored-nations clause: the electricians would submit to
    drug testing only if the employers tested their other work-
    ers too. The Association assented; and Lid, as a member, is
    bound if the program became one “of the provisions con-
    tained in said current and subsequent approved labor
    agreements.” Lid insists that the program is not a “pro-
    vision” of the Agreement, but the EJAB thought otherwise,
    and in doing so did not exceed the wide latitude allowed to
    a labor arbitrator. See Major League Baseball Players Ass’n
    v. Garvey, 
    532 U.S. 504
    , 509-10 (2001). Collective bargain-
    ing agreements include their amendments, protocols, and
    other supplemental documents; terms can be among their
    “provisions” without appearing on the sheet of paper that
    contains the parties’ signatures. Many an agreement
    incorporates other documents by reference; this is the norm,
    for example, with respect to retirement and health-care
    plans, which may be elaborately detailed but are rarely set
    out verbatim in the collective bargaining agreements. Just
    as a labor agreement may incorporate a pension plan, so
    may it incorporate a drug-testing plan. The 1999 Agreement
    said that this was the idea; by the time the 2003 Agreement
    (which governs today) was ratified, the drug-testing plan
    had been in place for two years. It is no less among the
    Agreement’s “provisions” than is the pension plan—or so an
    arbitrator could find without just making things up. Even
    an oral understanding may be counted among the compo-
    nents of a collective bargaining agreement. See, e.g.,
    Transportation-Communication Employees v. Union Pacific
    R.R., 
    385 U.S. 157
    , 160-61 (1966); United Steelworkers v.
    Warrior & Gulf Navigation Co., 
    363 U.S. 574
    , 578-81 (1960);
    Matuszak v. Torrington Co., 
    927 F.2d 320
    , 324 (7th Cir.
    Nos. 03-3767 & 03-3769                                      5
    1991). But this plan was written and is as much part of this
    Agreement as a codicil is part of a will.
    Lid believes, however—and the district court held—that
    even if the drug-testing plan is part of the Agreement, the
    Union and Association have no authority to make rules
    binding on other employees. Unions represent workers in
    units certified by the National Labor Relations Board; they
    do not speak for workers in gross. The Union cannot waive
    any rights of persons outside the bargaining unit or nego-
    tiate contracts on their behalf. True enough, but irrelevant.
    The Agreement (with the drug-testing rider) does not
    purport to establish legal obligations for anyone other than
    the Association’s members and the electricians the Union
    represents. It does not have to. The Agreement binds Lid
    itself; no more is necessary. The Union and Association
    jointly created, not an undertaking by non-unit employees
    to submit to tests, but an obligation that Lid administer
    drug tests to all of its employees. The Association acted
    as Lid’s agent when agreeing that Lid (like other members)
    would conduct these tests. None of Lid’s non-unit employees
    is obliged to submit; but Lid must attempt to secure their
    cooperation using the tools of persuasion at its disposal. For
    employees without term contracts (that is, employees at
    will), Lid can credibly threaten discharge. It is Lid’s own
    disregard of its promise to implement the Agreement in full
    that the EJAB penalized by the termination of referral
    services. Lid could have adopted a drug-testing regimen for
    its other workers unilaterally; the employees would have
    had no legal complaint (with one exception discussed
    below). Choices that Lid could make on its own it also could
    delegate to the Association to make as its agent in the
    course of collective bargaining (and in exchange for some-
    thing employers value). Transferring bargaining chips to an
    agent for many employers may strengthen the hand of all.
    Labor law permits collective bargaining agreements to
    reach beyond the certified unit of workers. How employers
    6                                   Nos. 03-3767 & 03-3769
    treat non-unit workers is a permissive subject of bargain-
    ing. Neither union nor employer is required to negotiate
    about permissive subjects (that’s what it means to call them
    “permissive” rather than “mandatory”), see NLRB
    v. Borg-Warner Corp., 
    356 U.S. 342
    (1958), but they can do
    so when they find it mutually beneficial. Employers may
    promise to provide breaks, clean lunchrooms, and comfort-
    able working conditions for all employees; likewise they
    may promise to treat bargaining-unit employees no worse
    than they treat others even though such promises (like the
    one in the drug-testing plan) affect those others. These
    points are well established with respect to pension and
    welfare plans. Retired employees are no longer in a bar-
    gaining unit, but union and employer may bargain (if they
    choose) over benefits that the retirees will receive. See
    Chemical Workers v. Pittsburgh Plate Glass Co., 
    404 U.S. 157
    (1971). If the Union and the Association can set the
    health-care benefits available to retirees, and they may,
    they also may establish drug-testing plans and reach other
    agreements that affect how employers deal with persons
    outside the bargaining unit. See also Florida Power & Light
    Co. v. Electrical Workers, 
    417 U.S. 790
    , 812 n.22 (1974)
    (agreement may cover terms and working conditions of
    supervisors, even though they cannot be included in the
    bargaining unit); Pall Corp. v. NLRB, 
    275 F.3d 116
    , 123
    (D.C. Cir. 2002).
    What the Association cannot do on Lid’s behalf, however,
    is commit Lid to violate rules of positive law. Nor may an
    arbitration award require unlawful acts. See George Watts
    & Son, Inc. v. Tiffany & Co., 
    248 F.3d 577
    (7th Cir. 2001).
    That the Agreement may require Lid to discharge unco-
    operative non-unit employees does not present any risk
    of illegality; even an obligation to break a contractual prom-
    ise does not meet that standard. See W.R. Grace & Co. v.
    Rubber Workers, 
    461 U.S. 757
    (1983) (that an arbitrator’s
    award requires employer to break a different contract is not
    Nos. 03-3767 & 03-3769                                     7
    a reason to refuse enforcement). But more than a contract
    may stand in the way of Lid’s full implementation of the
    Agreement. Local 150 of the International Union of Operat-
    ing Engineers represents some of Lid’s other employees,
    who are covered by a collective bargaining agreement
    running through May 31, 2007. Federal law requires Lid to
    respect that agreement; it is not just a matter of paying
    damages for breach. If that agreement (which is not in the
    record) has its own drug-testing rules, Lid must follow them
    rather than anything in the agreement between the Associ-
    ation and the electricians’ union. If that agreement does not
    provide for drug testing, then Lid cannot institute testing
    unilaterally—for the operating engineers’ terms and
    working conditions are a mandatory subject of collective
    bargaining. Many agreements forbid mid-term changes
    without mutual assent, so the topic might not reach the
    table until 2007. No matter when negotiations begin,
    however, bargaining—and either an agreement or an
    impasse—must precede any change in terms and conditions
    under which the operating engineers are employed. To the
    extent that the EJAB’s order requires Lid to implement drug
    testing for employees represented by Local 150, without
    first bargaining collectively with that union, it commands
    a violation of federal law and must be set aside.
    The judgment of the district court is vacated, and the case
    is remanded with instructions to enter an order enforcing
    the arbitral award, except to the extent that it requires Lid
    to violate the bargaining rights of workers represented by
    other unions.
    8                              Nos. 03-3767 & 03-3769
    A true Copy:
    Teste:
    ________________________________
    Clerk of the United States Court of
    Appeals for the Seventh Circuit
    USCA-02-C-0072—3-29-04