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May 17, 2005

Echoing Council arguments, court overturns state's controversial 'labor neutrality' law

Echoing strong arguments advanced by The Business Council and others, a federal appeals court has declared that New York State's controversial, union-friendly "labor neutrality" law is pre-empted by the National Labor Relations Act (NLRA) and a long line of case law based on it.

The U.S. District Court in the Northern District of New York ruled Tuesday in a suit brought against the state by a coalition of health-care groups. The Business Council and other business groups had filed an amicus brief in the case, arguing that the state law was pre-empted by federal labor law.

Governor Pataki signed the Labor Neutraility Act, which was championed by organized labor and strongly supported by both Democrats and Republicans in the state legislature, in 2002. The law took effect despite strong objections from the Council and groups representing hospitals, nursing homes, and other health-care providers.

The law restricted the ability of employers to use funds derived from government payments to hire or pay attorneys, consultants, or other contractors who encourage or discourage union organization, or participation in union drives, or to hire or pay the salary of employees whose principal job duties are to encourage or discourage union organization or participation in drives.

The court essentially held that the law would disrupt the balance between employers and employees in labor relations. Specifically, the court said the law would deny employees free access to both management and labor perspectives on the merits of unions by curtailing employers' opportunity to express their views in a union organizing campaign.

"Section 7 of the [National Labor Relations Act] gives employees a host of rights, including the right to join a labor union," the court said. "Basically under that statute employees also have the right to refuse to join a union."

"It is difficult if not impossible to see, however, how an employee could intelligently excercise such rights, especially the right to decline union representation, if the employee only hears one side of the story—the union's. Plainly hindering an employer's ability to disseminate information opposing unionization 'interferes directly' with the union organizing process which the NLRA recognizes," the court said.

Under the law, employers that received state funds could be required to prove that they did not spend any of the funds inappropriately, and to submit those records to any state entity and the state attorney general if asked to do so.

The court's ruling is available at www.nysd.uscourts.gov/courtweb/pdf/D02NYNC/05-03127.PDF.