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Principles Of Business Law - CHAPTER III























































Sec. 24. Introduction. Wage-earners and employers, like
others, are subject to the basic laws of the land. The laws of con-
tracts, agency, and torts are as applicable to those who work or em-
ploy as they are to society generally. However, through the years
there has been developed by legislation and court decisions a body
of law dealing directly with industrial relations. For a long period
of time the law expanded slowly, but recently, under the impetus of
federal and state legislation, rapid development in this area has
taken place. At the present time, labor law has not fully crystal-
lized, but some of the legislation and certain of the broad legal con-
cepts appear to be lasting enough to merit consideration by students
of business. In a book of this character, it is impossible to give
detailed consideration to all legislation which has been enacted for
the benefit of labor. However, such federal protective legislation
as the Fair Labor Standards Act, the Social Security Act, the Em-
ployers' Liability Act, the Workmen's Compensation Act, the Na-
tional Labor Relations Act, and the Norris-LaGuardia Act (anti-
injunction act) are considered in some detail.

Miscellaneous Legislation

Sec. 25. Fair Labor Standards Act. Wages and hours laws
have been enacted by the federal government and by some states
for the maintenance of fair standards of living, requiring a mini-
mum wage to be paid for services, and establishing the maximum
number of hours of work to be performed within a week at base pay.
The federal act is called the Fair Labor Standards Act. The rea-
sons and purposes of the Act are set out in its declaration of policy.
It states that industries, engaged in commerce or in the production
of goods for commerce, by paying inadequate wages and demanding
long hours of service cause commerce, and the channels and instru-
mentalities of commerce to be used to spread and perpetuate sub-

*The Labor Management Relations Act, 1947, commonly called the Taft-Hartley
Act became law while this revision of the text was in process. At the time of print-
ing, its constitutionality had not been established and its provisions had not been
construed by the courts. As a consequence, the matter dealing with the National
Labor Relations Act emphasizes primarily the rights and duties of the employer un-
der the previous law. However, where these rights have been clearly altered, the
text cares for some of the changes. The new law, insofar as it imposes new duties
and responsibilities upon labor organizations, has been outlined only and no attempt
has been made to construe or explain the provisions.



standard labor conditions among workers of the several states.
Such conditions burden commerce and the free flow of goods in
commerce, constitute unfair methods of competition, lead to labor
disputes, obstruct commerce, and interfere with orderly and fair
marketing. 1

Those employees exempt from the Act are: Any employee em-
ployed in a bona fide executive, administrative, professional, or
local retailing capacity or in the capacity of outside salesman ; any
employee engaged in any retail or service establishment, the greater
part of whose selling or services are in intrastate commerce; 2 any
employee employed as a seaman ; any employee of a carrier by air ;
any employee employed in the catching, taking, or harvesting of
any kind of fish, shell fish, etc.; any employee engaged in agricul-
ture ; any employee employed in connection with the publication of
weekly or semi-weekly newspapers with circulations of less than
3,000, the major part of which circulation is within the county
where printed and published ; any employee of a suburban railway
or motor bus carrier ; any employee, working in the area of produc-
tion, employed in the handling, packing, or canning of agricultural
commodities or dairy products; a switchboard operator employed
in a public telephone exchange which has less than 500 stations;
employees of railroads; agricultural workers not legally required to
attend school; and any children employed in the motion picture
or theatrical industry.

The Act specifically forbids "oppressive child labor." This means
the employment of any child under sixteen years of age other than
by parents or guardian or in some activities specified by the Secre-
tory of Labor, or the employment of any person between the ages
of sixteen and eighteen years in any occupation declared by the
Secretary of Labor to be particularly hazardous to health and well-

The constitutionality of this Act rests upon the powers of Con-
gress to regulate commerce among the several states. The Act
applies in all industries engaged in interstate commerce or in the
"production of goods for commerce." The term "production of
goods for commerce" includes production of goods which, at the
time of production, the employer, according to the normal course of
his business, intends or expects to move in interstate commerce,
even if all such goods do not thereafter actually enter interstate
commerce. 3 In determining whether the Act applies to an industry

1 United States v. Darby, 1941, 312 U.S. 100, 61 Sup. Ct. 451; p. 859.
3 J. L. Brandeis & Sons v. National Labor Relations Board, 1944, 142 F.(2d) 977;
p. 860.
8 United States v. Darby, 1941, 312 U.S. 100, 61 Sup. Ct, 451; p. 859.


and its employees, it is unnecessary to show that any particular
percentage of manufactured goods should reach interstate com-
merce or to show the amount of volume shipped in interstate com-
merce ; it is sufficient if any amount reaches interstate commerce. 4

The Act provides for minimum wages, including one and one-half
times the regular rate for all hours in excess of the prescribed time.
The Act is administered by the Administrator of the Wages and
Hours Division of the Department of Labor.

Proceedings before the Administrator of the Wages and Hours
Division, based upon the report of an Industry Committee, are
"judicial" in character, and before any orders may be issued, proper
notice and full hearings are required. Any person dissatisfied by
an order of the Administrator may obtain a review of such order in
the Circuit Court of Appeals of the United States for the circuit
wherein such person resides.

A person who violates any provision of the Act shall, upon con-
viction, be subject to a fine of not more than $10,000 or to imprison-
ment for not more than six months, or both. Also, any employer
who violates the provision as to minimum wages and maximum
hours shall be liable to the employee or employees affected to the
amount of their unpaid minimum wages or unpaid over-time, plus
an equal sum as damages. Such action may be maintained in any
court of competent jurisdiction.

Sec. 26. Social Security Act. A comprehensive social security
program has been adopted by the federal government in coopera-
tion with the states. It consists of unemployment insurance, fed-
eral-state relief and public welfare, a general national pension plan,
and special systems of pensions and unemployment insurance for
railroad employees.

There was created by the Social Security Act of 1935, a system of
unemployment insurance. States were encouraged to adopt their
own unemployment insurance laws in conformity with the federal
unemployment insurance plan. These laws provide that employ-
ers and, in a few states, employees shall contribute in the nature of
a tax to a fund, the amount of the contribution being a percentage
of the wages earned and paid. This fund is deposited partially in
the federal Treasury and partially with the particular state, to be
distributed later to unemployed former employees who are unable
to secure employment of a similar character. The details concern-
ing waiting period and length of time for which payments are to be
made have been worked out by the various states. The adminis-
trative expenses of each cooperating state are paid by the federal
government. At the present time unemployment insurance sys-

4 Wagner v. American Service Co., 1944, 58 F. Supp. 32; p. 861.


terns have been enacted in each of the forty-eight states, the Dis-
trict of Columbia, and the territories of Hawaii and Alaska. The
Unemployment Insurance System is under the Federal Security

The Social Security Act authorizes a federal-state plan by which
the federal government provides grants in aid for cash allowances
to the aged, the blind, and dependent children. Upon the forma-
tion of a plan submitted by a state to the Social Security Board and
its acceptance by the Board, the federal government makes a grant
of one dollar for every dollar provided by the state.

The Social Security Act also authorizes a national pension sys-
tem. This system is supported by a tax determined by a fixed per-
centage of the payroll, paid both by the employee and employer.
It provides for a life income payable in monthly installments to
qualified individuals who have attained the age of 65 years and who
are no longer in regular employment. Upon the death of an em-
ployee, monthly benefits are paid to properly qualified beneficiaries
such as his widow, children, or parents.

A complete social security legislative policy has not yet been
formulated and it is probable that many amendments and changes
will be made with reference to including more employees within the
Social Security program, and to the methods of procedure and ad-

Sec. 27. Employers' liability acts. At common law the re-
sponsibility of the employer for an injury occurring to an employee
is recognized, but because of the common law defenses available to
the employer, the remedy of an employee for such injuries has been
of little value. The common law defenses available to the em-
ployer before the adoption of employers' liability acts were: (1) the
fellow servant rule, (2) assumption of risk, and (3) contributory
negligence. Under the fellow servant rule, the employer was not
liable for injuries caused to the employee by a fellow servant. The
master owed certain duties to his servant with respect to a reasonably
safe place in which to work, safe tools and appliances, and the exer-
cise of ordinary care and diligence in keeping the plant and appli-
ances in repair and in safe condition. Injuries which arose because
of unsafe conditions of appliances or tools were not chargeable to
the employer in absence of the employer's negligence. Hence, if
an injury occurred, the employer was excused because the employee
assumed the risk under the unsafe conditions. Also, if the em-
ployee was in any degree guilty of negligence himself, he was
without remedy because his contributory negligence was the proxi-
mate cause of the injury.

This situation led to statutory remedies. One of the first reme-


dial statutes was the Federal Employers' Liability Act passed by
Congress in 1909. It established rules and regulations t^hich oper-
ate uniformly in all states with respect to interstate comifcetfce.
The effect of the Act, in cases to which it is applicable, is to abolish,
in whole or in part, the above mentioned common IsCW defenses of
the employer namely, the fellow servant rule, assumption of risk,
and contributory negligence of the employee. The employee does
not assume any risks of his employment in any case when' the em-
ployer, a common carrier, has violated any statute enacted for the
safety of employees, or in any case where injury or death results
from the negligence of officers or agents of the employer. Begin-
ning about 1880, many states enacted various types of employers'
liability acts applicable to various classes of employment. Some
modified the defense of contributory negligence, others abrogated
the fellow servant rule. Such statutes also gave a cause of action
for the death of an employee to the widow, the father or mother, or
children, without any limit as to the amount of damages. These
statutes were limited and were applicable only to workers in the
following industries: railroads, mining, building, and other hazard-
ous types of employment.

These state and federal employers' liability acts, although making
some changes for the better protection of the employee, mainly
reduced the defenses of the employer. The issue of the employer's
negligence was still a matter of proof for the employee. In order
for the employee to recover compensation for injuries, court action
was still necessary. Expensive litigations, delays, and problems of
statutory construction left the employee practically without com-
pensation for injuries.

Workmen's Compensation Laws

Sec. 28. Workmen's compensation acts. The failure of em-
ployers' liability acts to give adequate protection and compensation
to injured employees in hazardous employment brought about the
enactment by the states of workmen's compensation legislation.

Workmen's compensation acts are based upon the principle of
liability without fault. Compensation for injuries to employees
under the acts becomes a charge on industry. Once the employer-
employee relationship is established, the only issues to be deter-
mined are: (1) Did the injury arise out of and in course of the
employment? (2) What is the extent of the injury? (3) What
amount of compensation should be paid?

Workmen's compensation acts in the United States are based
upon the English Workmen's Compensation Act of 1897. Because
of the various types of industry in different parts of the country,
no two acts are alike. Each is different as to employments and


injuries covered, benefits paid, and methods of insurance coverage.

In order to give security for the payment of compensation, vari-
ous insurance systems have been developed. There are two general
plans. The first, which sets up a compulsory or exclusive state
insurance system, has been adopted in a few states. All employers
engaged in the hazardous industries specifically designated by the
act are required to pay a percentage of the payroll into a fund which
is administered and distributed by the state. The percentage of
the payroll paid by the employer is fixed by statute. However, the
amount of this percentage may change according to the "experience
rating" of a particular industry. Most statutes provide that indus-
tries that have operated over a period of time and have experienced
a small number of accidents, may contribute a smaller sum to the
state fund, the sum being determined by the "experience rating"
provided in the statute. The second plan, adopted in most states,
permits employers to carry their own risk upon filing a statement,
with the Workmen's Compensation Commission, of their financial
ability and depositing securities with the state as protection for
injured employees. Possible recovery by an employee for an in-
jury sustained in the course of his employment can be determined
only by careful scrutiny of the law in the state where the employer

Sec. 29. Industries included. The industries included within
compensation acts vary greatly among the several states. No state
act includes all industries. All state acts include hazardous occu-
pations but enumerate certain occupations to which the act does not
apply. Agricultural and casual laborers, domestics, and office em-
ployees are often not included within the act. However, in some
jurisdictions, even though the occupation is not hazardous or spe-
cifically included, employers may elect to come uncjer the act.

The injuries to be compensated are those "arising )3y accident out
of and in course of the employment," or "sustained while in the
performance of duty," or "accidental injuries in the course of
employment but not out of the occupation." Much of the litiga-
tion involving workmen's compensation acts concerns whether the
injury was accidental and arose out of and in course of the employ-
ment. 5

Some state courts have construed the present acts to include oc-
cupational disease as an injury within the act. Other states have
passed legislation enumerating certain occupational diseases and
providing for compensation for such diseases. States in which min-
ing, .smelting, or metal refining and freavy industries are predomi-
nant provide compensation for diseases peculiar to such industries.

6 Larsen v. State Industrial Accident Commission, 1932, 125 Cal. App. 13, 13 P.(2)
850; p. 862.


Sec. 30. Compensation benefits. Benefits provided for under
workmen's compensation acts are of two kinds money payments
and medical care. The majority of statutes enumerate fixed sums
to be paid dependents in case of death. Disabilities are classified as
permanent total disability, such as the loss of both feet, both hands,
or eyesight with specific sums designated ; temporary total disabil-
ity ; temporary partial disability ; and permanent partial disability.
Degrees of disability are indicated for different injuries and a cer-
tain sum provided for each degree of injury. No two statutes are
alike as to amount of benefits, and amendments are made almost
every year. Medical benefits and hospitalization are provided for
by most of the statutes. The employer or insurer, either state or
private, is charged with this service. This service is limited as to
amount and time, depending upon the character of the injury and
the time required for treatment and rehabilitation.

Sec. 31. Administration of workmen's compensation acts.
The removal of the so-called employers' defenses the fellow serv-
ant rule, assumption of risk, and contributory negligence of the
employee by the employers' liability acts, left only the questions
of the negligence of the employer and the amount of compensation
to be determined. Even though an injured employee recovered
damages for his injury in a court of law, such judgment gave inade-
quate protection because the judgment of a case in common law is
a final determination of the issue, thus making it impossible for any
readjustment in case of a change in the condition of the injured em-
ployee. Therefore, the workmen's compensation acts provide for
readjustment and changes in benefits and payments over a long
period of time, and permanent commissions have been created to
handle the many continuous problems within the field of adminis-
trative law. In the case of contested claims, however, the statutes
provide for appeals to the courts. In a few states the compensation
laws are administered by the courts; special commissions are ap-
pointed by the courts and, assisted by the state labor officers, they
carry out the continuous supervision required by the act. Most
states, however, administer workmen's compensation acts by boards
called Workmen's Compensation Commissions.

Competitive Conduct of Organized Labor

Sec. 32. Objectives of organized labor, and means used. It is
often said that workmen organize to obtain higher wages, shorter
hours, and better working conditions. It might be more accurate
to say that their organized efforts within the competitive system are
directed to gaining for the laboring class a greater share of the joint
product of labor and capital.


To accomplish this result, labor relies in large measure upon the
rights to bargain collectively, to strike, to picket, and to boycott.
Early common law denied employees the right to organize in an
attempt to improve their condition. Concerted effort to improve
their position as to wages, hours, or working conditions was held to
be a conspiracy.

National Labor Relations Act

Sec. 33. In general. Under the common law, laborers finally
gained the right to organize, but the employer was free to deal with
union representatives or not as he thought best served his interest.
He was free to discharge employees who became active in union
organizations or to extract a promise from his employees not to join
a union. The employer could make individual contracts with his
employees, or he might, if he thought it wise, promote and dominate
a company union, contracting with its representatives and settling
grievances through its committees.

In 1935, the federal government, under the power given it to
regulate interstate commerce, passed the National Labor Relations
Act with the expressed purpose of diminishing the number of labor
disputes which burdened or obstructed the free flow of commerce.
This objective was to be accomplished by assuring to the employees
the right to organize without the threat of losing their jobs and by
requiring employers to bargain with the selected representatives of
the organized group. In other words, the government undertook
to foster and to protect unions as bargaining agents for employees,
hoping thereby to reduce the number of interruptions in production.

The federal government can control only interstate trade, but
some of the states have enacted similar legislation for intrastate
business. The Supreme Court of the United States has also been
quite liberal in its interpretation of interstate trade. If a business
sells any part of its product in interstate trade or if it buys a sub-
stantial portion of its raw material from a producer in another state,
it is subject to the National Labor Relations Act.

Sec. 34. Employee protection. The Act expressly gives em-
ployees the right to organize, to form or to join a labor organization,
to bargain collectively, and to engage in concerted activities for the
purpose of collective bargaining. To insure this freedom, it is made
an unfair labor practice for an employer to do any of the following :

1. To interfere with, restrain, or coerce employees in the exercise
of the rights mentioned above ;

2. To dominate or interfere with the formation or administration

6 Santa Cruz Fruit Packing Co. v. National Labor Relations Board, 1938, 303 U.S.
453, 58 Sup, Ct. 282; p. 864.


of any labor organization, or to contribute financial or other support
to it;

3. By discrimination in regard to hire or tenure of employment,
to encourage or discourage membership in any labor organization,
except that it shall be legal for the employer to enter into a union
shop agreement;

4. To discharge or otherwise discriminate against an employee
because he has filed charges or given testimony under the Act; or

5. To refuse to bargain collectively with selected representatives
of his employees.

The administration of the National Labor Relations Act has been
placed in the hands of the National Labor Relations Board and any
employee, or group of employees, who feels aggrieved under the
Act, is free to file a complaint with the Board or its agents. If
the matter cannot be settled amicably, a hearing is held and, if the
Board finds an unfair labor practice has been indulged in, it issues
a cease and desist order which may be enforced in the Circuit Court
of Appeals if such order is properly issued.

Sec. 35. Employer protection. The Act as amended in 1947
accords the employer certain rights and imposes certain duties upon
labor unions and their agents. It specifically makes it an unfair
labor practice for any organized labor organization to do any of the
following :

1. To restrain or coerce employees in the exercise of their right
to organize, form, or join unions and to bargain collectively;

2. To cause or attempt to cause an employer to discriminate
against any employee because of his particular union activities, ex-
cept that in a union shop he may be compelled to be a member of a
union ;

3. To refuse to bargain collectively if it is the representative of
the employees;

4. To engage in or encourage a strike or a concerted refusal to
handle certain materials, if the object is to:

(a) Force an employer or self-employed person to join a
union or employer group or to cease doing business with or re-
frain from using the products of any other producer;

(b) Require an employer to bargain with a union unless it
has been certified as the bargaining agent;

(c) Compel the employer to assign particular work to a
particular union or class of employees unless the employer has
been so ordered by the Board;

5. To require the employee to pay an initiation fee which is ex-
cessive or discriminatory;


6. To cause an employer to pay money, in the nature of an exac-
tion, for services which are not to be rendered.

These provisions have not been construed by the courts, but they
seem to outlaw the secondary boycott and the jurisdictional strike.

Sec. 36. Interference, restraint, or coercion. Improper inter-
ference with union organization and activity by an employer usu-
ally takes one of two forms. The employer either intimidates his
employees or he uses measures to rid himself of union organizers.
Congress in passing the law and the courts in construing it, have
expressed the view that collective bargaining can function smoothly
only when employees feel free to join the union of their choice, un-
influenced by the likes or dislikes of their employers, and when
union organizers are given the utmost freedom in making contacts
with employees. To use or threaten force against organizers is an
improper labor practice, and the courts have gone so far as to give
organizers the right to enter on their own time the property of the
employer and pass out union literature to employees off duty.

Espionage spying openly or secretly upon union activities has
been held to be an unfair labor practice on the part of an employer. 7
Employees will not risk their jobs and participate fully in union
activities if they think their actions are being reported to their em-
ployer. It is improper for an employer to call employees into his
office and advise them against membership in a union. However,
the constitutional provision which guarantees freedom of speech
apparently does give to the employer the right to express frankly
his views on organized labor or about a particular union and to
transmit those views to his employees, provided he makes it clear
that they are at liberty to exercise their choice. He is not free to
make derogatory remarks about union organizations or untrue
statements, but is allowed to state in a general way his views on
them as related to his plant, so long as the message contains no
threat or language tending to intimidate the employees. 8 However,
the 1947 amendment permits freedom of speech, unless the state-
ment contains a threat of reprisal or a promise of some benefit.

Individual contracts of employment, which offer profit sharing
arrangements to the employee who contracts individually as dis-
tinct from those who contract through union representatives, are
improper. To destroy the good will of the union by offering a
bonus to those who disregard it is clearly an interference with the
freedom of organization.

7 Montgomery Ward & Co. v. National Labor Relations Board, 1939, 103 F.(2)

147 ; p. 865.

8 Big Lake Oil Co. v. National Labor Relations Board, 1945, 146 F.(2d) 967; p, 867.


Sec. 37. Employer support of union. Prior to the National
Labor Relations Act there were many company or independent
unions which were unaffiliated with national organizations. These
unions were often sponsored by the management, held meetings on
)ompany property, and were influenced by supervisory employees.
Upon the passage of the Act, such a union immediately became an
improper bargaining agent, even though it held a membership of
more than a majority of the employees. The union had to be dis-
established and reestablished without any aid from the company,
and became a proper bargaining agent only when it had entirely
divorced itself from its former associations. On the whole, the
National Labor Relations Board has looked with disfavor upon
company or independent unions as bargaining agents.

Sec. 38. Discrimination. An employer or a union is forbidden
to discriminate in regard to hire, tenure, or other conditions of em-
ployment because an employee is or becomes a member of a union.
To encourage or to discourage membership is equally improper,
except that a union-shop agreement made in good faith is legal. A
union-shop agreement, however, which has been entered into for
the express purpose of frustrating an attempt by a rival union to
organize the employees, has been held improper.

Because of the general principles suggested above, it is improper
to discharge an employee who has been active in union affairs or
who has been urging the employees to strike or who has been on a
strike. Even though the conduct of an employee has been such as
to justify dismissal, if the employer is at all influenced by the em-
ployee's union activities, the discharge is improper/* Similarly,
it has been held that an applicant for work may not be rejected
merely because of his affiliation with a union or because of his
activities in its behalf. In one case, an employer was compelled
to accept a new employee where it appeared that the only reason
for rejecting his application was his union connection.

Sec. 39. Reinstatement. At common law a contract of em-
ployment is not specifically enforceable against either the employer
or the employee, but under the National Labor Relations Act the
courts have held that the Board has power to order an employer to
reinstate an employee who has been discharged because of his union
activities. The employer is also obligated to pay wages which
would have been earned during the period of unemployment, unless
the employee has had employment elsewhere or could have obtained
such employment. Two rather important questions intrude at this
point: (1) must an employer reinstate an employee who has been

National Labor Relations Board v. Arcade-Sunshine Co., 1940, 118 F.(2d) 49;
p. 868.


on strike, particularly where non-strikers have been employed dur-
ing the strike; and (2) must the employer reinstate employees who
have been guilty of criminal conduct during the course of the
strike? 10

At the conclusion of a strike, the employer in giving employment
to the strikers must make no discrimination between those who
have been active in support of the strike and those who have not.
However, if the strike is not the result of an unfair labor practice,
the employer is not obligated to discharge new employees to make
room for those who have been out on strike. The reverse is true in
the case of a strike which has been called because of a refusal to bar-
gain collectively or because of wrongful discharge of certain em-
ployees. A strike called because of unfair labor practices gives the
employer no right to replace striking employees with permanent
new personnel. When the strike is settled, old employees have first
claim to the jobs which are available.

Those employees who during the course of the strike have been
guilty of serious offenses, such as wanton destruction of property,
taking over control of the employer's property, or injuring em-
ployees who continued to work, may properly be denied reemploy-
ment. Minor misdemeanors, such as assault and battery without
serious consequences, have, in the past, been held to be insufficient
reasons for denying reinstatement.

Sec. 40. Refusal to bargain collectively. The National Labor
Relations Act requires employers to bargain with the representa-
tives of organized labor, provided the latter have been selected
properly. This does not mean that the employer must comply
with all the requests made of him, but he must in good faith meet
with the representatives in a bona fide attempt to reach an agree-
ment. 11 He may not use dilatory tactics in order to place the union
in a bad light with its members, nor has he a right summarily to
reject all proposals made, without some proposal on his part. How-
ever, an employer, without being guilty of bad faith, may state his
position succinctly and emphatically. So long as he gives the rep-
resentatives of labor a fair and courteous hearing, he is not guilty
of an unfair labor practice merely because he refuses to grant them
the particular contract terms they desire. Under the 1947 amend-
ment, labor organizations must also exercise good faith in collective
bargaining, if they are the chosen representatives of the laborers
involved in the controversy.

10 National Labor Relations Board v. Fansteel Metallurgical Corporation, 1939, 306
U.S. 240, 59 Sup. Ct. 490; p. 870.

11 National Labor Relations Board v. P. Lorillard Co., 1942, 314 U.S. 512, 62 Sup. Ct.
397; p. 873.


Sec. 41. Selection of bargaining agent. An employer is en-
titled to evidence that bargaining agents represent the majority
of employees. In some cases the management is supplied with a
membership list which clearly indicates that a majority of the em-
ployees are members of the union. In case of doubt as to union
membership and as to who shall represent the employees as bar-
gaining agents, it is necessary for the employees to hold an election,
supervised by the Board. A majority of those voting determine
the result. The fact that fewer than a majority of the employees
vote does not invalidate the election. Employees on strike have
the same right to vote as employees who remain on the job, unless
they have been permanently replaced. The Act of 1947 provides
that employees on strike who are not entitled to reinstatement
shall not be eligible to vote.

The Board is given power to determine the employee unit which
is to bargain, as well as to determine the employer unit. 12 To
illustrate, if it thinks the employees will be better protected thereby,
the Board may determine that they are to bargain as an industry
rather than as a craft. It may determine whether the proper em-
ployer unit consist of all the employers in a given area or whether
the employer of a particular plant is the unit for bargaining.

A question has arisen as to the right of the Board to call an elec-
tion and certify a new bargaining agent during the existence of a
contract made with properly selected agents. The problem be-
comes acute when a majority of the employees change their alle-
giance from one union to another at the beginning or during the
middle of a contract period. Usually the Board refuses to call an
election until near the close of a contract period. In cases in which
the contract is one of long duration, and particularly where there
is evidence that it was made to block selection of new representa-
tives later, it is possible that the contract is illegal and a new elec-
tion is proper.

Enforcement of Union Agreements

Sec. 42. By the union. Labor law has developed slowly, and
now generally recognizes as contracts, most agreements between
labor unions and employers. At first, the courts found no consider-
ation given by the union which supported promises made by the
employer. Now, however, on equitable theories, the union is given
such relief as the situation merits. An injunction to compel the
employer to respect the terms of the agreement is the most custom-
ary relief obtained.

Occasionally the union, as distinct from its members, sustains

13 National Labor Relations Board v. Griswold Mfg. Co., 1939, 106 F.(2) 713; p. 875.


damages because of the failure of the employer to carry out the
agreement. In such a case, money damages may be recovered. In
a few instances the union has attempted to recover in a single suit
such damages as have been suffered by its members because of a
violation of the wage provisions of the union contract. The right
to recover in such a case has generally been denied because the
right to recover resides in the individual employee. 13

Sec. 43. By individual employees. The terms of a union agree-
ment which relate to wages, hours, and operating conditions may
be enforced by individual employees. One theory suggests that the
union representative acts as the agent of the employees in arrang-
ing the contract terms ; another suggests that by usage or custom,
the union terms become a part of the individual contracts of employ-
ment; and a third theory is that the union has made a contract for
the benefit of third parties, namely, the employees. Unless an em-
ployee has compromised his position by accepting less than the
union scale in full satisfaction of his claim for wages, he can recover
the union rate for work performed. This is true although the em-
ployee is not a member of the union. This is particularly true
under legislation which makes the bargaining agent of the majority
the representative of all employees.

The right of an individual employee to make a contract with his
employer which differs from the union agreement is questionable,
especially if the individual contract is less favorable to the em-
ployee. An individual agreement which provides better terms than
the union agreement is enforceable unless the purpose of such
agreements is to discredit the union by discouraging membership

Sec. 44. By the employer. Although most unions are unin-
corporated, it is now generally held that a suit against them will
prevail. In the federal courts, suits may be instituted against them
in the union name, while in most of the state courts class suits are
necessary, the suit being initiated against some of the members as
representatives of all of them. If union officials are active in per-
suading the employees to breach their contract, an injunction may
be had against them. If they call a strike in violation of their
agreement with the employer, money damages can be recovered,
although the judgment can be collected only from the union funds.

The union is liable for damages resulting from the torts com-
mitted by its officers or members in the course of their duties, such
duties having been approved or ratified by the union. Unless in-
dividual acts of terrorism committed by members are authorized or

13 Milk Wagon Drivers Union v. Associated Milk Dealers, 1941, 39 F. Supp. 671;
p. 876.


ratified by the union, it is not liable. The union is liable for in-
juries sustained by an employer through illegal use of the secondary
boycott or the jurisdictional strike.

Sec. 45. Closed shop agreements. A closed shop agreement
one whereby the employer agrees to employ only members of the
union is made illegal by statute in some of the states and by
the federal government. The union shop, however, is legalized by
the federal government, it being one in which any person may be
employed but must, within a short time, become a member of the

Picketing and Boycotts

Sec. 46. The right to picket. In most labor disputes the strike
is not very effective unless the employees are permitted to picket
the employer's place of business. Through picketing, the union
endeavors to persuade non-striking employees to cease work, and
to gain the support of the public in inducing the employer to meet
the union demands. Picketing, properly engaged in, is available
to labor as a pressure device in labor disputes. Although conduct
which injures a person's business is normally a tort, if the benefits
to the union group outweigh the injury done to the proprietor's
business, no tort is committed. Although picketing tends to injure
the business of the employer, the net gains to labor arc such that
the courts sanction it. Labor, in such a case, is competing with
capital. Even though there may be no dispute between manage-
ment and its employees, it has been held proper to picket an em-
ployer's business by outside organizers and non-employees for the
purpose of unionizing the management's employees. The right to
picket iu such a case derives its chief support from the Constitu-
tional guarantee of freedom of speech. 14

Picketing becomes illegal as soon as the pickets threaten violence,
make insulting remarks to employees, make untrue assertions about
the employer, force themselves on people who do not care to listen,
or congregate in such large numbers as to intimidate those who
desire to work or clo business with the employer. Picketing like-
wise becomes improper when the pickets damage the property be-
ing picketed, or attempt to take control of it.

Sec. 47. Use of injunction. The effect of the Norris-LaGuardia
Act and similar state laws is to deny to courts the right to issue in-
junctions in labor disputes, unless the following conditions are pres-

1. Unlawful acts must have been threatened and will be com-
mitted unless restrained, or have been committed and will continue.

14 American Federation of Labor v. Swing, 1941, 312 U.S. 321, 61 Sup. Ct. 568; n. 877.


(The injunction issues only against the guilty parties or associations
participating in or ratifying the illegal conduct.)

2. Substantial and irreparable damage to complainant's property
will follow.

3. The injury on complainant will be greater than that inflicted
upon defendants by the issuance of the injunction.

4. Complainant has no adequate remedy at law.

5. Public officers are unable or unwilling to supply adequate pro-

Although the injunction is not entirely denied to employers, its
use has been greatly curtailed. Where the injunction is issued,
there is some question as to whether picketing, as well as the illegal
conduct, should be enjoined. The tendency seems to be to restrain
only the illegal acts.

Some states have attempted by legislation to outlaw picketing
on the theory that it leads to strife and violence, but such legislation
has been held unconstitutional as abridging freedom of speech.

Sec. 48. Boycott. A boycott is a concerted effort to persuade
people not to deal with a particular person or to buy a certain prod-
uct. As related to labor disputes, it usually consists of representa-
tives of organized labor picketing an employer's place of business
in an attempt to persuade the public not to transact business with
the employer. Such action has been approved by the courts as a
proper device to be used by labor in promoting its interests. A boy-
cott becomes illegal whenever it ceases to be peaceful in character
or when intimidation of customers is resorted to.

A secondary boycott develops when labor fights a business against
which it has no grievance, in an attempt to force the business con-
cern not to deal with another employer against which grievances
are held. 15 An example is the boycott of a retailer who distributes
the product of a manufacturer whose employees are on strike.
Such a boycott not only affects his sales of the commodity pur-
chased from the "unfair" producer, but also affects the entire busi-
ness of the retailer. The legality of the secondary boycott has not
been fully determined, although its use has been sanctioned in some
cases as a legitimate means for advancing the interest of the labor-
ing group.

The secondary boycott is legal in those cases in which there is a
community of interest between the retailer and the producer against
whom the grievance is held. This community of interest exists if
the retailer tends to profit by a lower price made possible by the
producer's use of unorganized labor. If the thing against which

ir 'Mlle Rcif, Inc. v. Randau, 1937, 166 Misc. 247, N.Y.S.(2) 515; p. 879.


organized labor is fighting tends to benefit the boycotted party, the
boycott is proper. On the other hand, to picket a professional man
because he has made one purchase of the non-union product or to
picket the seller of raw materials to a manufacturer against whom a
grievance is held, is a questionable right. A peaceful secondary
boycott appears legal only when the person boycotted tends to
profit from the non-union activities of the primary enterprise, and
under the 1947 amendment to the federal law, secondary boycotts
for most purposes appear to be made illegal where interstate com-
merce is involved.

Review Questions and Problems

1. What is the purpose of the Fair Labor Standards Act?

2. What employees are exempt from the application of the present
Fair Labor Standards Act?

3. The Star Publishing Company publishes The Polk County Star, a
semi-weekly newspaper with a circulation of 3,800, the major part of
which is within Polk County where the paper is printed. At the present
time, three rural carriers are receiving 38^ an hour. Are these employees
entitled to an increase in wages under the Fair Labor Standards Act?

4. The Baker Drug Co. owns and operates a drug store in a town near
a state line. Ninety-five per cent of its merchandise is purchased and
shipped to it from outside the state. Sales to out of state customers do
not exceed .003 per cent of its total sales. During the year 1945-46, an
employee worked an average of twelve hours per day for six days per
week. The employee brings an action in the local circuit court to recover
back wages at one and one-half times the regular rate for all hours in
excess of forty hours per week. Should he recover?

5. Enumerate what benefits are given to employees under the Social
Security Act.

6. At common law what defenses were available to employers in suits
brought by employees for injuries received during employment?

7. Why are employers' liability acts inadequate protection for injured

8. Under workmen's compensation acts, what are the only issues to be

9. Name the different types of insurance plans used to protect injured
workmen under compensation acts.

10. Would a laundry, doing a purely local business but located in a
city on a state line and buying its supplies from out of state and engaged
in collecting and delivering garments across state lines, be subject to
the jurisdiction of the National Labor Relations Board?

11. A manufacturing company employs several hundred employees.
The company has established a pension plan, recreational clubs, and va-
cation plans for its employees. Company representatives known as per-


sonnel officers aid and supervise the employees in these activities. In
performing their duties, these personnel officers keep files in which they
record information concerning the various activities of different employ-
ees and make periodic reports to the management. Later, a union was
organized and investigation disclosed that during the period of organ-
izing, those individuals most active in labor organization did not receive
promotions or were discharged for the slightest infractions of the rules of
employment. The union filed charges of unfair labor practices with the
National Labor Relations Board. After notice, hearing, and proof, for
what unfair labor practice may the Board issue a cease and desist order?

12. The A Corporation refused to bargain with an elected representa-
tive of its employees; the representative was not an employee. The em-
ployees went out on a strike. During the strike, the president called
into his office several employees and informed them that they were a
committee representing the employees and that he would deal with them.
The president prepared a letter with a heading, "Collective Bargaining
Representatives of A Corporation Employees. " Upon this letter was
typed a contract of employment. Each member of the committee signed
the letter and was instructed to secure the signatures of the other em-
ployees. A majority of the employees signed the contract set forth in
the letter.

Does the above procedure constitute proper collective bargaining under
the National Labor Relations Act?

13. A worked for the X Corporation as a boiler operator in the same
plant for sixteen years. His work was efficient, and he had a record for
being punctual. He had been active in organizing the employees of the
plant and was warned by the vice-president that "he had better watch
his step; he might get into trouble/' A became an officer in the union.
Immediately he was transferred to a small plant owned by the firm.
Here he had little opportunity to contact the employees at the large plant
and was denied the opportunity for overtime.

Is the above conduct by the X Corporation discrimination in regard to
time and tenure under the National Labor Relations Act?

14. T is employed as a truck driver by defendant company. A collec-
tive bargaining agreement had been entered into between the company
and the Truck Drivers Union, providing for hours, wages, and conditions
of employment. T was employed at a wage less than that provided for
in the union contract. When T joined the union he learned about the
higher wages. May T recover from the employer defendant company as
back wages the difference between what he received and the amount pro-
vided for by the union contract? May the union sue on the contract in
T's behalf?

15. The Del Ray Cafe had entered into a closed shop agreement with
its employees through the C.I.O. union. The A.F.L. union picketed the
cafe claiming in its placards that the cafe was unfair to organized labor.
The cafe had no dispute with its C.I.O. union employees. The cafe
brings an equity action to enjoin the picketing. The A.F.L. union de-


fends that to enjoin such picketing would be an interference with free
speech. Does the right of free speech, as a basis for picketing, go this

16. The defendant Dairy Union workers picketed a retail store which
sold dairy products. The union, at the time, was out on strike against
the Dairy Products Corporation which sold to the retail store. The re-
tail store had no dispute with its own employees. The pickets carried
placards stating "Buy Union Dairy Products Only/' "This store sells
non-union goods." Should the union be enjoined from picketing the re-
tail store?

Suppose the retail store was a drug store which purchased only small
quantities of dairy products for its fountain from the Dairy Products
Corporation. What result?

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