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Shhh – CARES Act Hush Money Loans Require Desperate Employers Not to Oppose Unionization

In the chaos of a global health pandemic and what some economists are calling the Great Suppression, Americans have shown amazing solidarity in the battle against the coronavirus (“COVID-19”).  Nationwide, citizens are social distancing and staying home while businesses are closing their doors and redeploying their resources to meet emergent demands.  However, this collective American commitment has come at a steep economic cost.  Millions of Americans suddenly find themselves unemployed or unable to work while previously thriving businesses have been thrown into financial despair.  Unfortunately, rather than join in the collective effort, labor unions seized on the desperation to gain unprecedented advantages, suppress employer rights and deprive employees of their full freedom of choice – namely unions were able to obtain a single sentence in the CARES Act which mandates employers remain silent and commit to not oppose unionization of their employees in order to obtain the loans needs to maintain those jobs and save their businesses.

After Almost of Week of Wrangling, Congress Passed the CARES ACT Stimulus

Reeling from shelter-in-place, isolation orders and mandated closures, American businesses and citizens will soon receive some much needed relief.  After stalling in Congress for nearly a week, on Friday, March 27, President Trump signed into law the Coronavirus Aid Relief Economic Security Act (“CARES Act”), a historical stimulus package that will provide a broad range of critical financial assistance to American workers, families and businesses confronting the extraordinary challenges of the COVID-19 crisis.  (For a broader analysis of the CARES Act see here).

This bill is unprecedented in both its momentous scale and its overwhelming bipartisan support.  In a time when most acts of Congress seem to split directly down party lines, the CARES. Act passed unanimously in the Senate and nearly unanimously in the House of Representatives, and President Trump signed it into law the very same day.  This begs an important question, though.  Why, if the bill had such widespread support among Democrats and Republicans alike, did it take nearly a week to reach the President’s desk when every day delayed was another day where uncertainty wreaked havoc on economic markets and Americans went without critical relief?

The answer is disappointingly simple.  It was politics as usual as legislators vied for advantages for their top political contributors.  One of the political demands that held the bill up, and ultimately made its way into the signed law, was a Democratic-backed union neutrality mandate.  Tucked away in a single line in the middle of the multi-hundred page Act, this provision dramatically alters core rights of employers and employees under the National Labor Relations Act (“NLRA”) and could have seismic repercussions for businesses who have no choice but to submit to this condition in order to secure an economic lifeline during the coronavirus pandemic.

What is “Neutrality”?

Simply put, “neutrality” is a waiver of an employer’s statutorily protected free speech rights.  Under the NLRA both unions and employers enjoy federally protected free speech rights.  For employers, these rights, which are known as 8(c) rights, allow an employer to share facts, opinions and experiences about unions with its employees.  These rights are essential tools during union organizing drives, necessary to allow employers to combat misinformation and educate employees on the realities of unionization, particularly those unions often downplay or ignore such as the cost to employees on investment of union dues, the impact of strikes on employees and the workplace, the loss of a direct relationship with their employer and the reality that employees can, and often do, lose wages and benefits in union negotiations.

Hearing both perspectives allows employees to make informed and free choices on whether  or not they want to be represented by a union.  “Neutrality,” however, destroys this crucial balance of perspectives by requiring employers to remain impartial and silent on unions while unions remain free to give their one-sided point of view to employees.  It is of course not surprising, then, that the ultimate consequence of “neutrality” is that it is much easier for unions to organize employees.

The CARES Act Neutrality (Hush Money) Mandate 

Although the CARES Act provides multiple different kinds of loans and other financial assistance – including Paycheck Protection Program loans (for small businesses with up to 500 employees and nonprofit organizations), expanded Economic Injury Disaster Loans (for small businesses with up to 500 employees, sole proprietors, independent contractors,  and nonprofit organizations), Emergency Relief Loans (for air carriers, businesses critical to maintaining national security, and credit facilities established by the Federal Reserve) and various tax credits – probably the most fundamental part of the assistance package is the Act’s Mid-Sized Business loan program.  Under the CARES Act Mid-Sized Business loans, mid-size businesses (those with 500 to 10,000 employees) can obtain a loan with no greater than a two-percent annualized interest rate, and no interest or principal payments for six months, to enable them to retain at least 90 percent of the business’s workforce, at full compensation and benefits, until September 30, 2020.

One of the “compromise” amendments Democratic legislators were able to exact was labor unions’ demands that as a condition of any Mid-Sized Business loan, the borrowing employer must make a “good-faith certification” that they “will remain neutral in any union organizing effort for the term of the loan.”

In other words, if a mid-size business needs a loan in order to weather their temporary closure, shelter-in-place orders, new mandated paid leaves, or loss of revenue from other economic impacts of COVID-19, it must agree to waive its free speech rights and acquiesce to a targeted union misinformation campaign to unionize its employees.  Notably, while hopefully COVID-19 will be a short term crisis, this unprecedented disruption of the Labor-Management balance will silence employers for the duration of their loan term and, if the employees are misled into unionizing, the impact is usually permanent given the restrictions and difficulties the NLRA places on decertifications.

Moreover, it remains unclear who will determine when a violation occurs and what the consequences for violation will be.  Some may argue that a violation is an unfair labor practice that should be adjudicated by the National Labor Relations Board with all the attendant Board remedies.  However, given that Section 8(c) of the NLRA specifically protects employers’ right to not remain neutral, the Board would presumably be without jurisdiction to hear such claims absent further legislation.  That said, the other potential consequences outside Board processes could be even more impactful and range from mid-term calling of the remaining balance of the loan, detrimental modification of loan terms, financial penalties, and/or the loss of tax advantages.  Questions still remain as to who would decide an actual violation occurred and when such penalties are warranted and whether labor unions would have third party rights to enforce them.

While the CARES Act is silent on such matters, regulations illuminating the answers to these questions may be forthcoming.  The CARES Act gives the Secretary of the  Treasury the authority to promulgate regulations to enforce the provisions of the CARES Act, and these regulations could shed more light on the actual consequences for violating the neutrality mandate and who will adjudicate violations.  Notably, this authority is not limited in time and theoretically a different Secretary of the Treasury in a different Presidential Administration could amend or create new regulations which have significant consequences.

Unions Have Already Begun Efforts to Profit from Hush Money Neutrality – What Employers Should Expect

For businesses to whom these loans are a vital lifeline through the coronavirus pandemic, the union neutrality mandate in the CARES Act amounts to a compelled waiver of employers’ federally-protected free speech rights that will give unions a significant advantage in organizing drives.  Legislatively-mandated union neutrality inevitably leads to an uptick in union organizing drives, and since these loans will be a matter of public record, unions will have a literal roadmap on which employers to target.  Thus, employers who obtain these loans should be fully prepared to contend with union organizing campaigns.  In fact, the loans are not even available yet, some employers are reporting that unions are not waiting to exploit this political advantage and have already started inquiring about the employer’s intent to obtain  a CARES Act loan and raising the union neutrality mandate.

Clearly in these troubling times employers need to take necessary steps, including seeking CARES Act loans, to maintain their financial solvency and ensure their ability to maintain jobs and payroll for their employees, they should do so understanding that their silence is part of the cost.

©2020 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume X, Number 90

TRENDING LEGAL ANALYSIS


About this Author

Adam C. Abrahms Labor Management Relations attorney Healthcare law lawyer
Member

ADAM C. ABRAHMS is a Member of the Firm in the Labor and Employment and Health Care and Life Sciences practices, in the firm's Los Angeles office, where he serves as a member of the firm's Labor Management Relations practice group. He has devoted his practice almost exclusively to aiding employers in developing strategies to remain union-free and, in organized operations, to securing and expanding management rights.

Mr. Abrahms:

  • Represents clients before the National Labor Relations Board and other federal and state agencies, and in federal and state...
310-557-9559
Steven M. Swirsky labor employment lawyer health care and life sciences attorney
Member of the Firm

STEVEN M. SWIRSKY is a Member of the Firm in the Labor and Employment and Health Care and Life Sciences practices, in the firm's New York office. He regularly represents employers in a wide range of industries, including retail, health care, manufacturing, banking and financial services, manufacturing, transportation and distribution, electronics and publishing. He frequently advises and represents United States subsidiaries and branches of Asian, European and other foreign-based companies.

Mr. Swirsky:

  • Advises employers on a full range of labor and employment matters involving labor and employment issues in transactional matters
  • Represents employers in union avoidance, organizing campaigns, and related proceedings before the National Labor Relations Board
  • Represents employers in collective bargaining and in connection with strikes, picketing and arbitration proceedings
  • Handles grievances and arbitrations concerning work rule disputes and discharges, for both unionized and non-unionized employers
  • Assists with employment litigation, including Title VII, ADEA, ADA and other employment discrimination matters before state and federal courts and administrative tribunals including the EEOC, and the New York State Division of Human Rights
212-351-4640
Christina C. Rentz, Epstein Becker, Labor Lawyer, Workforce Management practice attorney
Associate

CHRISTINA C. RENTZ is an Associate in the Employment, Labor & Workforce Management practice, in the Los Angeles office of Epstein Becker Green.

Ms. Rentz’s experience includes:

  • Advising employers on labor laws, labor relations issues, collective bargaining agreements, and negotiations with labor unions

  • Defending employers against claims of unfair labor practices, from responding to the initial charge through hearing and appeal

  • ...

310-557-9543
Associate

BROCK OLSON is an Associate in the Employment, Labor & Workforce Management practice, in the Los Angeles office of Epstein Becker Green.

Mr. Olson:

  • Counsels employers on labor laws, labor relations issues, and collective bargaining agreements, and negotiates with labor unions
  • Represents employers in unfair labor practices proceedings and arbitrations
310-557-9509