What is a hot cargo agreement?
The term "hot cargo agreement" refers to a type of agreement in organized labor law where workers or unions, on an ongoing and temporary basis, refuse to handle or transport goods from employers. For example, the union and workers may agree that they refuse to handle any goods coming from a particular company or geographical territory until all terms of negotiable union issues are resolved with that employer. This type of agreement can express a form of work stoppage by not allowing the employer to deliver or receive goods.
Labor unions have traditionally used hot cargo agreements against any employer they have grievances against, even if that particular employer is currently providing goods with no direct union grievances . Hot cargo agreements are strategically used to affect companies further along in the employer chain-of-command.
Hot cargo agreements are seen as an easier way to get what the union wants. The union requires other companies, who are in a beneficial working relationship with the union’s already-striking employer, to cease receiving deliveries from, or delivering goods to, that already-striking employer. These types of agreements can be seen as unlawful secondary boycotts that adversely affect employers not directly involved with the labor dispute.
History of hot cargo agreements
The mindset of construction companies and their unions is that a hot cargo agreement is not a real union security plan if it does not apply to employers and all materials, equipment, and supplies. Such an agreement steers work to one supporter while passing an enormous amount of non-union work to others who do not discriminate in favor of unions. Historically, the use of a hot cargo provision as a way for a union to pressure an employer to agree to unionize the entire site grew up alongside the emergence of large construction industry employers during the 1930s. It was the Great Depression that spurred the movement toward comprehensive labor legislation to assure the rights of workers to organize. The typical arrangement was for the union to make an explicit request, which the employer would accept or reject. In the latter case, the union would likely refuse to handle or deliver the products supplied by the objecting supplier or contractor. Generally, the unions’ efforts were successful because the construction employer would recognize its own economic vulnerability, seeking unionization of an otherwise non-union employer in order to assure competitiveness in an industry that was largely organized at that time. Id. at 1382-83. In 1947, Congress enacted the Taft-Hartley Act to regulate the activity of unions and limiting their power. The Taft-Hartley Act was limited both with respect to activities involved in hot cargo agreements and to the parties with whom unions could bargain. Essentially, employer neutrality agreements were prohibited with respect to all work of other bargaining units, and 8(e) of the National Labor Relations Act was added to the provisions of the Taft-Hartley Act, stating: It shall be an unfair labor practice for a labor organization and any employer to enter into any agreement, express or implied, whereby such employer is forced or requires (i) to cease handling, using, selling, transporting, shipping, or marketing any product, product line, or related services to or from any secondary place of business or secondary supplier, or (ii) to cease doing business with any other employer or to cease using the products, or doing business with the employees, of any other employer…; toy "hot cargo" provisions in shipper-contractor (Destination) agreements, whereby the contractor would cease to transport goods of a non-signatory (shipper-consumer), were outlawed. LMRA 8(e) 29 U.S.C. 158(e) (emphasis added) Id. at 1383-84. However, exceptions to this prohibition developed as the result of bargained for agreements made by the contracting parties. Thus, a general contractor who did not agree with the union, but nevertheless subcontracts to a unionized employer, was not subject to a hot cargo agreement. Id. at 1384. Similarly, if an employer consents to the hot cargo provision in a subcontract agreement at the time of its negotiation, but objects at some later date, the agreement would not be unlawful. Id. (citing Local 134, IBEW v. Mohr, 312 U.S. 284 (1941)). Further, a union’s unilateral refusal to work with a non-union employer even though there is no formal "hot cargo" agreement, can constitute an illegal secondary boycott. Id. at 1384-85 (citing Local 348, I.B.E.W v. NLRB, 285 F.2d 277 (D.C. Cir. 1960), cert. denied,345 U.S. 939 (1953)).
Legal prohibition and framework
Hot cargo agreements are effectively outlawed under federal labor law by the National Labor Relations Act ("Act") and by the Taft-Hartley Act. However, a very small number of states have remained untouchable by Taft-Hartley, and have enacted their own provisions that are thus not controlled by the Taft-Hartley restrictions. Although federal courts have held state hot cargo provisions are not preempted by federal law, they must yield to federal law whenever the related federal provision evidences an intent to occupy the field and/or demonstrate a "significant conflict" with the federal Act that might impede its objectives. Accordingly, both federal and state laws must be analyzed to determine whether a hot cargo provision is invalid.
Implications for employers and unions
The impact of hot cargo agreements on employers and unions varies based on the circumstances of each particular agreement. However, there are a number of significant legal and practical differences from non-hot cargo agreements, or Section 8(e) agreements.
Hot cargo agreements can often expand the scope of picketing and other secondary boycott activity under Section 8(b) of the NLRA. Additionally, they can often open up employers to liability under 8(e) for acknowledging employee preference, without engaging in conduct that would encourage picketing. Unions on the other hand have rights under certain hot cargo agreements that they may not have under ordinary Section 8(e) agreements under the NLRA. For example, the rights to utilize common situs picketing even if the union does not represent employees at the primary location being struck.
Despite their additional protections under the NLRA, hot cargo agreements can be much less common than 8(e) agreements because it can sometimes be more difficult for unions to prove that their employer actually conducted secondary boycott activities.
Controversies and litigation
A Hot Cargo Agreement includes an acceptance by the Employer that they will not handle the goods being transported – for example a container of goods coming from china on a container ship. When the Union accepts that they will not handle these goods, it has implications for their liability under the law. For example they will not be breaching the trade union act by refusing to load the ship as they’re not actually doing anything that’s in the interests of their employer. Whilst they may not be required under the contract of employment to do so, the fact they won’t be actually refusing to do anything for their employer avoids certain additional civil and or criminal liabilities.
Elsewhere, hot cargo agreements have proven deeply controversial. In 1955, the United States Supreme Court upheld the constitutionality of an anti-hot cargo clause. At the same time, the Court recognised this, noting that ‘the unions’ threat not to handle the merchandise of neutral companies is a means of sanctioning the fair collective bargaining process, a central element of industrial peace that Congress has sought to promote.’
Decades later, hot cargo agreements have still proven the focus of continuing court battles. In, Local 780 Laborers International Union of North America, for example, the Court of Appeal for the Third Circuit examined a case where a plaintiff asserted that the local union breached a collective bargaining agreement; the plaintiff’s employer alleged that the plaintiff had bound itself by the hot cargo provision of the CBA; and a defendant, a third-party employer, alleged that the plaintiff and the third party were striking parties that were denied relief under section 301 .
As no hot cargo clause was actually present, the case demonstrated that unions must take great care when including such provisions in CBAs. The work stoppage must be between bargaining parties, not the parties subject to the hot cargo provision. If a hot cargo provision is not worded carefully, the court stated, ‘it could spur non-bargaining parties to strike a third party in support of an attempt by the bargaining parties to impose specific work practices upon the third party, which could result in opportunities for abuse.’
When negotiating a hot cargo clause, it is essential that bargaining parties define their relationship with the relevant third party and add the warning that no third party will be bound by a contractual provision that has not been clearly negotiated. In South Coast Permanent Employees General Carriers Union No 2 v Australian Stevedoring Industry Stevedoring Company Pty Ltd, for example, the Federal Court of Australia confirmed this, observing: ‘A voluntary recognition agreement between the maritime union and a third party stevedoring company is not in itself sufficient to create an ABC [a ‘carved out’ hot cargo clause].’
Hot cargo provisions should be carefully and intelligently addressed to ensure that they are used in a way that will promote the bargaining parties’ interests. In refusing hot cargo, however, unions must also avoid impoverishing those in the industry more widely.
Modern case studies and implications
In the contemporary labor market, while hot cargo agreements are less utilized than they were decades ago, they are far from obsolete. These arrangements continue to have a place in collective bargaining negotiations, particularly in the context of secondary boycotts. Their modern use and viability are particularly relevant as both union and management representatives navigate an increasingly globalized market, given that these agreements allow unions to wield considerable power over multi-national companies in pursuing secondary boycotts. Thus, those employers involved in multi-state, multi-national work need to stay cognizant of the issues these agreements can pose where they are deployed.
Recent examples show how hot cargo agreements have been utilized in the context of secondary boycotts. In September 2017, a regional National Labor Relations Board (NLRB) dismissed an unfair labor practice (ULP) charge filed against a trade association by a union alleging violations of Section 8(b)(4)(ii)(B) of the National Labor Relations Act (NLRA) for the union’s efforts to boycott the trade association’s members. The Board’s decision was notable due to the timeline of the events that preceded it. In April 2015, the union targeted a related corporation for a secondary boycott due to its relationship with a signatory employer whose employees were in the midst of a protected strike. In November 2015, in response to the union’s actions, the trade association entered into an agreement with the signatory employer that provided for five years of neutrality, which included a promise not to oppose future organizing or bargaining efforts and further promised to require all employees to participate in the NLRB election if one were held. Under these terms, the trade association lifted its boycott of the signatory employer.
However, this agreement did not stop the union’s actions against the trade association’s members. In 2016, the trade association filed an unfair labor practice charge alleging the continuation of the union’s action in support of a secondary boycott. The Board found the union’s actions to be lawful based on the parties’ previous agreement to lift their boycott, which then terminated the existence of a leafleting violation by the trade association. The Board’s decision obligates the union to behave according to its agreement with the trade association, which indicates the effectiveness of hot cargo agreements in the contemporary labor market.
Another example regarding the modern use of hot cargo agreements is seized upon by the International Union of Operating Engineers (IUOE) in a current ULP charge against non-party member company, Turner Construction Company, and the Hudson Yards Construction Manager Owner’s Association (Association) for committing secondary boycotts under Section 8(b)(4)(ii)(B) of the NLRA. IUOE’s ULP charge has yet to be decided. However, the hot cargo agreement between the IUOE and the Association is noteworthy. In the agreement, the IUOE agrees to refrain from engaging in, inducing, or encouraging a secondary boycott against the Association and its members, in exchange for which the Association promises to remain neutral concerning the IUOE’s organizing efforts, refrain from opposing its bargaining efforts, and mandate all of its employees work under IUOE’s collective bargaining agreements for five years.
An example where a similar agreement did not yield similar results for another union was alleged in June 2016 when two unions alleged that its members had been retaliated against by the Association for striking against a construction project located at 435 Elm Street in San Francisco, California. As part of this purported retaliation, the Association allegedly threatened to cease working for the two unions’ signatory employers unless the two unions lifted their secondary boycott and ceased their protest of the 435 Elm Street site. After an investigation, the Board’s General Counsel issued a consolidated complaint against the Association. In July 2018, the Board dismissed the complaint, finding that the General Counsel failed to prove the allegation that the Association violated the NLRA. These examples indicate the potential for hot cargo agreements to affect collective bargaining representations and disputes.
Additional recent case law also indicates the possible use of hot cargo agreements in wage theft disputes or if such a wage theft claim falls within the ambit of a ULP charge under Section 8(b)(4)(ii)(B) and other subsections of the NLRA. For example, with the increase of wage theft claims, some unions may address worker pay issues by conducting sham drives to support those unions. In September 2016, the Regional Director granted a motion in response to the hotel workers’ request to issue subpoenas, striking the Hanford Inn and expressing concern regarding the hotel’s outdated books and records, including payroll materials that were over a year old. Lawyers representing the hotel sought to compel the Hanford Inn to comply with the subpoenas, but the court denied the appeal due to the delay or failure to comply by the hotel with the original subpoenas.
The hot cargo agreements of today provide unions and labor organizations with valuable leverage to pressure and cause disruptions among employers in a unionized labor market. While the high amount of mobility in the modern labor market negates some uses, these agreements are integral in other areas of labor relations, such as the case study involving the hotel workers’ wage issue above. The overwhelming use of consumers to influence a brand or tangible goods may very well leave hot cargo agreements less popular in the future. Nevertheless, the right agreement, well-situated, in the right circumstances, can still be immensely useful to unionized labor.
The future of hot cargo agreements
As the world of labor law continues to evolve, so too does the future of hot cargo agreements. Key areas that are likely to impact these agreements moving forward include: 1) continuing emergence and expansion of the gig economy which will impact how workers are classified and, ultimately, whether hot cargo agreements continue to withstand scrutiny, 2) changes in anti-discrimination law that may impact "peaceful picketing" under hot cargo agreements, 3) political control and mandates impacting the National Labor Relations Board and its authority to adjudicate unfair labor practices under hot cargo agreements, 4) the increasing influence of technology on the manner in which hot cargo agreements operate and how contractors and subcontractors engage with one another, and 5) the potential generational shift in the labor market that may lead to more union-organized facilities or contractors.
The continuing emergence and expansion of the gig economy, which has resulted in the rise of independent contractors and freelancers, is something that many unions are working to organize. By expanding the definition of "employee," unions are attempting to limit the ability of gig economy businesses to classify their workers as independent contractors. Whilst recent decisions in the California courts have limited the area of gig economy businesses, courts in other states have rejected the same arguments. It remains to be seen whether gig economy businesses will continue to operate as they have in recent years or whether there will be a shift toward greater classification under the employee model. It is clear, however, that this is an area that unions believe warrants their particular attention, and continuing to target such businesses for organization is somewhat of a given. Employers who either utilize independent contractors or who themselves have a large fieldwork force should keep up to date on this issue and, if possible, be active in nurturing their relationships with their independent contractors by not solely relying on joint check agreements or hot cargo agreements to ensure full payment to themselves and their lower-tier contractors.
This leads into the next foreseeable change: the impact of anti-discrimination law on the use of peaceful picketing to trigger hot cargo agreements. As discussed above, the Supreme Court has historically viewed peaceful picketing as not being punishable unless it represents a type of economic coercion that causes extensive and irreparable harm. The capacity for peaceful picketing to be used as a tool to trigger a hot cargo agreement is thus relatively broad under the current law.
However, this long-standing perception of peaceful picketing as a tool that is shielded from various anti-discrimination laws is clearly under review. Ultimately, the question at issue boils down to whether peaceful picketing can, or should be, used to create hot cargo agreement liabilities when the picketing is being done based on a company’s race or nationality, or whether the act of picketing itself, regardless of the circumstances surrounding it, is protected from legal challenge. A series of cases that culminated in the 2016 NLRB decision in finding that a union’s peaceful picketing of a contractor engaged on a small residential construction project was permissible—even though the owner had not signed a contract with the union’s employer association , thus setting the stage for a hot cargo agreement liability—has raised serious questions about how far unions can stretch the contours of peaceful picketing in furtherance of the same goals. The unanswered question is, under the increasingly progressive anti-discrimination laws that impact a growing majority of states, whether a union will be permitted to utilize peaceful picketing that is arguably racially or ethnically motivated or biased in triggering a hot cargo agreement, or whether such a use of peaceful picketing can be prohibited even if the picketing itself is peaceful. While this issue remains to be resolved, it is an area impacting unions that is not going away any time soon.
The future of hot cargo agreements will also be determined by whether the membership of the National Labor Relations Board will change during President Trump’s second term in office. If, as expected, this occurs in 2020, the Board will likely return to its pre-Republic Steel, 1984, standard finding that unions can face punitive damages under the Norris-LaGuardia Act where peaceful picketing is found unlawful. This is a prerequisite for tripartite hot cargo agreement liability to occur and, as a result, unions will likely rethink the manner in which they utilize peaceful picketing to attempt to trigger hot cargo agreements.
In addition to the recovery of punitive damages, the Board may also view this issue differently than in prior years, permit unions to obtain injunctive relief to prevent hot cargo agreement liability to occur, and allow parties to initiate motions for summary judgment on account of hot cargo agreements. Each of these potential changes impacts the legal consequences of a party wishing to trigger a hot cargo agreement by utilizing peaceful picketing. There appears to be a limited appetite at the current Board to move in this regard. However, this may change based on the composition of the Board over the next few years.
How technology impacts hot cargo agreements will also change over the coming years. For example, under traditional hot cargo agreements, a downstream contractor would list its upstream contractor on a sign that reads, "this place is the property of 1-2-3 Contractors." (i.e., a blackboard where the downstream contractor lists all of its upstream contractors). As technology continues to proliferate, it becomes much easier for contractors and subcontractors to communicate with one another. Could this technology be utilized to create an automatic chain of liability, i.e., if a downstream contractor ceases to utilize a specific upstream contractor, an automatic contractual triggering of the hot cargo agreement itself? This remains to be seen.
Perhaps no group will feel the impact of a shift in the generational makeup of the workforce than the construction industry, particularly on account of the use of craft unions in trade work within the industry. An expanding recognition among younger employees of their rights and the methods to vindicate them will impact the landscape of the workforce and construction unions will likely be called upon to adjust their recruitment strategies to attract a younger workforce. This, in turn, will likely impact contractor company expenditure and, perhaps, innovation in terms of union contracts.