Appeals Court Rules that Prior Oral Agreement Requires Employer to Recognize Union Through Authorization Cards
On October 16, the United States Third Circuit Court of Appeals issued a decision highlighting the danger of entering into oral agreements with labor unions. In the case of Rite Aid of New Jersey v. United Food and Commercial Workers Union, Local 1360, the court upheld an arbitrator’s award requiring Rite Aid to recognize and bargain with a union at any store where the union obtains majority support through authorization cards. Relying upon an oral agreement made many years earlier, the court rejected Rite Aid’s request for an election conducted by the National Labor Relations Board (“NLRB”).
In their first collective bargaining agreement (“CBA”), which ran from 1999 through 2002, Rite Aid and the Union agreed the Union could become a bargaining representative of employees in other stores through an NLRB-conducted election or “other demonstration of union status acceptable to” Rite Aid. Other evidence suggested Rite Aid orally agreed, in connection with the signing of the original CBA, that it would honor card check as the method of showing union majority status, rather than require an NLRB election.
Over several years, Rite Aid recognized the Union via card check on 63 occasions. After executing a later CBA, Rite Aid determined that card check was not an acceptable method of proving union majority status and began insisting on NLRB elections. The Union filed a grievance, and the arbitrator ruled that Rite Aid’s oral agreement from years earlier bound it. On appeal, the court held that, through the oral agreement, Rite Aid waived the right to reject card check status. The court also noted that Rite Aid received a benefit through the oral agreement because the Union’s Health and Welfare Plan agreed to use Rite Aid as a participating pharmacy provider. Additionally, Rite Aid negotiated two contracts with the Union after the oral agreement and could have raised and settled the issue during those negotiations. Having failed to do so, it was bound by its prior actions.
As this case demonstrates, oral agreements (even very old ones) can be binding in labor-management relationships. Management, therefore, should be wary of such oral agreements.