Negotiations between the Congress Plaza Hotel in Chicago and UNITE HERE Local 1 have been at a standstill for the past two years. The union, which comprises nearly 130 housekeepers, cooks, dishwashers and other hotel employees, went on strike in 2003. The sudden lack of workers left the hotel in a bind, one that the Illinois legislature only worsened with its passage of an amendment to the state's Employment of Strikebreakers Act.
The amendment, which lawmakers passed in 2003, made it illegal for employers to contract with day-labor and temporary services agencies to meet staffing requirements during a strike. Worse, the Act made violation a criminal offence for which an individual could be fined up to $1,000 and imprisoned for up to a year. This dramatically reduced the hotel's options for dealing with the sudden loss of its workforce.
"The law changed the playing field for management and the union," says Peter Andjelkovich, counsel for the hotel. "Unions can pull employees out without any notice, and the employer is stuck operating his business without any employees. To replace 130 people by hiring directly is not something that can occur in a day."
The hotel sued (520 South Michigan Avenue Assocs. Ltd. v. Devine), claiming the amendment to the Strikebreakers Act was unconstitutional. The 7th Circuit agreed Jan. 10, holding both that it was unconstitutional and pre-empted by federal law.
"If a union chooses to exercise its weapon of walking out and striking, then you as an employer should have the right to hire temporary workers," says Fred Schwartz, a partner at Littler Mendelson in Chicago who specializes in labor law. "To swing that balance of power ties employers' hands and goes against national labor laws."
That was the logic the hotel used when it asked the court for a declaratory judgment and an injunction against the Act's enforcement. On its face, the Act blatantly violates federal law, and courtroom challenges to the law followed immediately on the heels of
In July 2003, for instance, Peoria-based Caterpillar Inc. filed suit in the Central District of Illinois seeking a preliminary injunction on the law's enforcement, which the court granted. However, because that decision didn't bind courts outside the Central District, it was unclear whether the Illinois Department of Labor (IDOL) would still try to enforce the law. The Congress Plaza Hotel believed it would.
"We wrote a letter to the Illinois Department of Labor citing the Caterpillar case and stating that we expected the law wouldn't be enforced," Andjelkovich says. "They gave us a vague answer so we filed suit."
Afraid that a criminal enforcement action was imminent, the hotel filed suit in the Northern District of Illinois. Although the district court dismissed the case on procedural grounds, the 7th Circuit overturned that ruling and issued a scathing opinion remanding the case with instructions to invalidate the Act. Judge Frank Easterbrook bashed the state's legislature for passing a law that is blatantly pre-empted.
"The state's efforts to make the hiring of replacement workers a crime is so starkly incompatible with federal labor law ?? 1/2 that we do not understand how a responsible legislature could pass, a responsible Governor sign, or any responsible state official contemplate enforcing such legislation," he wrote.
Indeed, under the federal National Labor Relations Act (NLRA), employers have many options for hiring workers in the event of a strike, but the Illinois law made many of the practices illegal and forced companies to spend a lot of time and money replacing workers.
"Normally, employers turned to temporary services and said, 'Can you get me a hundred hotel maids?'" says Doug Darch, a partner at Seyfarth Shaw in Chicago. "This was an important cog in the strike contingency plan because the HR function shrinks so much."
This ruling signals the death of the Strikebreakers Act. Illinois employers can once again turn to the NLRA for guidance on how to hire workers in the event of a strike. The NLRA
is a 1935 federal law that governs labor relations.
Under the NLRA, employers have multiple avenues for replacing workers including contracting temporary workers through an agency, hiring temporary workers without an agency, transferring employees from another location and hiring permanent replacements.
"If you are a big company, hiring temporary or contract employees keeps the operations going," Schwartz says. "You can convert those employees to permanent replacements under any temp-to-hire relationship. This is going to be your best bet if you immediately need to staff on short notice."
With the invalidation of the short-lived Strikebreakers Act, employers can expect labor laws to return to the status quos. No longer are the options of an employer limited in the event of a strike.
The federal labor law strikes a balance of power between the workers and the employer. The Strikebreakers Act created an imbalance where workers could use their most extreme measure, a walkout, while employers were prevented from affordably maintaining their operations.
"The major impact of this case is that now Illinois employers can go by federal laws, which can help shorten up the replacement process and make it easier to ride out any negative effects of the strike on business," says Jerry McInnis, a partner at Jackson Lewis in Chicago.
Although Illinois employers won a major victory when the 7th Circuit invalidated the Strikebreakers Act, they now have to worry about another legislative initiative that will make it harder for them to deal with unions. An employer's ultimate weapon in the event of a contract negotiation breakdown is the lockout. The lockout allows employers to bar union workers from their positions while negotiations are underway.
But the Illinois legislature is trying to weaken the power of the lockout. Lawmakers passed a bill in January that allows locked-out workers to collect unemployment.
"The offensive measure is obviously going to be somewhat weakened when employees are going to be able to collect not only unemployment but presumably some form of strike benefits in the event of a lockout," says Fred Schwartz, a partner at Littler Mendelson.
Schwartz says that, unlike the Strikebreakers Act, this law may remain on the books. Because unemployment benefits are a state fund, federal law isn't pre-emptive in this case.