Subcontracting and the Duty to Bargain


An employer’s decision to subcontract should be a mandatory subject of bargaining. The United States Supreme Court appeared to settle this issue in Fibreboard Paper Products Corp. v. NLRB, where it declared that the “contracting out” of work traditionally performed by bargaining unit employees is a mandatory subject of bargaining under the National Labor Relations Act [hereinafter NLRA]. Subsequent decisions, however, have not followed that broad mandate. Although the exact limits of an employer’s duty are now unclear, today many employers are only being required to bargain about subcontracting when the decision turns upon “labor costs.” If a subcontracting decision can be characterized as affecting the scope, direction, or nature of a business, the employer may not have to bargain with a union. This interpretation of an employer’s duty to bargain not only ignores actual industry practice contrary to Supreme Court directives, it fails to recognize that a fundamental purpose behind the National Labor Relations Act is the preservation of industrial peace.

The Supreme Court has indicated that proof that a majority of employers engage in particular behavior is not necessary to establish that the behavior is “practiced” in an industry. Nevertheless, two recent studies confirm that the majority of collective bargaining agreements in the United States do address subcontracting. Most employers recognize that bargaining about subcontracting can educate employers as to options and alternatives, and unions as to competitive pressures facing particular employers. However, there are still employers who either do not recognize this benefit or exaggerate concerns about confidentiality and flexibility.

The Supreme Court has decided that industrial practices are valuable guides for determining what is a mandatory subject of bargaining. Building upon this foundation, this Article maintains that actual industry practice reveals that subcontracting must be considered a mandatory subject of collective bargaining. Section I begins by explaining how the assumptions underlying collective bargaining and the intent behind the National Labor Relations Act require that subcontracting be considered a mandatory subject. A policy that isolates entrepreneurial discretion as a dominant concern for determining whether parties must bargain about subcontracting disregards the goals of national labor legislation. Section II outlines the cases which have shaped the current position regarding collective bargaining and explains why the pivotal concurring opinion by Justice Stewart in Fibreboard Paper Products Corp. v. NLRB should not have been followed in subsequent cases. Finally, Section III shows that many employers do bargain about subcontracting and that objections to mandatory bargaining can be overcome. Specific language from numerous collective bargaining agreements is provided to illustrate how various concerns can be resolved.

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