In a welcome decision for employers facing union organizing efforts, the U.S. Supreme Court has struck down a controversial California law that barred employers that receive state funds from using any of that money to oppose organizing.

At issue was the validity of A.B. 1889, which was signed into law in 2000. The law prohibited employers who received more than $10,000 in state grants or funds from using that money to "assist, promote, or deter union organizing." In addition, an employer that intended to oppose an organizing drive had to segregate all state funds and document that its efforts were not funded by the state's money. The law also gave unions and the state attorney general the right to sue an employer that violated A.B. 1889. An employer found to have improperly used state funds, or to have commingled state and private funds, would have to return the state funds and pay a 200 percent penalty.

In Chamber of Commerce of the U.S.A. v. Brown (U.S. Supreme Court, No. 06-1939 (2008)), the Supreme Court has now decided that the National Labor Relations Act (NLRA) preempts A.B. 1889. In a 7-2 decision, the Court explained that the NLRA left the area of noncoercive speech unregulated in order to encourage free debate on labor issues. Thus, the NLRA states that employers may express their views as long as the expression doesn't coerce employees (threaten them or promise benefits) with respect to their organizing rights.

The spending restrictions in A.B. 1889, however, amounted to a "targeted negative restriction on employer speech about unionization," said the Court. "California may not indirectly regulate [noncoercive speech about unionization] by imposing spending restrictions on the use of state funds." The compliance burdens on employers to show that they had not used state funds for union advocacy placed further undue restrictions on speech, as did the large penalties for any type of violation. 

Big Employer Victory

According to Timothy Ryan, a senior partner in Morrison & Foerster LLP's Employment & Labor Law Group, "The decision frees employers from having to make a choice between accepting state funds and freely communicating with their employees regarding union organizing." The case also provides guidance, says Ryan, to "governmental entities that may, in the future, consider interfering with employer rights under federal labor policy by enacting laws and regulations that deter or punish employers for exercising such rights."

California's A.B. 1889 was the first statute in the nation to prohibit an employer's use of state funds in connection with deterring union organizing. A number of other states have been considering similar laws--and the new decision sounds the death knell for those efforts, too.