Main Menu

Bill Prohibiting Employers From Using State Funds To Oppose Union Organizing Passes New York State Assembly and Senate

July 23, 2002

New York Governor George Pataki may soon sign a proposed law which would prohibit employers from using State funds to oppose a union organizing drive. Legal and consulting fees paid for advice on opposing a union would specifically be included among the types of expenses for which use of State funds is prohibited. New York Assembly Bill No. 11784, an act to amend the State labor law, was passed by the State Assembly on June 26, 2002 and by the Senate on July 2, 2002. According to media reports, Governor Pataki plans to sign the Bill into law.

Specifically, under the proposed law employers who receive State funds would be prohibited from using State funds to

(a) train managers, supervisors or other administrative personnel regarding methods to encourage or discourage union organization, or to encourage or discourage an employee from participating in a union organizing drive;

(b) hire or pay attorneys, consultants or other contractors to encourage or discourage union organization, or to encourage or discourage an employee from participating in a union organizing drive; or

(c) hire employees or pay the salary and other compensation of employees whose principal job duties are to encourage or discourage union organization, or to encourage or discourage an employee from participating in a union organizing drive.

The proposed law would require employers to keep detailed audited financial records for three years to show that State funds were not used to encourage or discourage union organizing. Employers would also be required to furnish these financial records to the State entity that provided the funds and to the Attorney General within ten business days of receipt of a request. The form and content of the required financial records is to be set forth in regulations.

The proposed law would be enforced by a civil action brought by the Attorney General. If a violation is found, a court may order the return of the State funds and may also impose a civil penalty not to exceed one thousand dollars. In addition, a court may impose a civil penalty not to exceed one thousand dollars or three times the amount of money unlawfully expended, whichever is greater, where it is shown that the employer "knowingly" engaged in a violation of the law or where the employer previously had been found to have violated the law within the preceding two years. Any damages awarded would be paid into the general fund of the State.

It appears likely that the proposed Labor Neutrality bill will be signed into law in this election year, when Governor Pataki is courting the support of organized labor. If enacted, however, the law almost certainly will be challenged on First Amendment grounds, in that it regulates employer speech. Employers who are not able to segregate their State funds and keep adequate financial records may simply chose to give up their First Amendment right to talk to their employees about a union organizing drive.

In addition, the law may also be challenged on the grounds that it may be preempted by federal labor law. The National Labor Relations Act ("NLRA") preempts State and municipal regulation of conduct that the NLRA "protects or prohibits, or arguably protects or prohibits." San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959). The NLRA also preempts State and municipal regulation "concerning conduct that Congress intended to be unregulated." Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 749 (1985). The NLRA clearly protects the right of employers, within certain limits, to attempt to persuade their employees not to join or form unions, and a State law which would place restrictions on that right, such as New York's proposed neutrality statute, arguably is preempted by federal law. At the same time, there is some authority suggesting that where (as here) a State regulates conduct through its spending power, rather than through its police power, the State's actions may be immune to a preemption challenge.

Accordingly, the prospects for a legal challenge to New York's proposed neutrality law are unclear. In the meantime, employers who currently receive funds from New York State or who anticipate receiving State funds should be mindful of the requirements of the proposed law.