Restaurant Emp., Bartenders, and Hotel Service Emp. Welfare Fund v. Rhodes

• Decision Date: 08 June 1978
• Docket Number: No. 45051,45051
• Citation: 580 P.2d 611,90 Wn.2d 162,99 L.R.R.M. 2868
• Parties: , 99 L.R.R.M. (BNA) 2868 RESTAURANT EMPLOYEES, BARTENDERS AND HOTEL SERVICE EMPLOYEES WELFARE FUND and the Restaurant and Hotel Employees and Bartenders Pension Trust Fund, Appellants, v. Morris RHODES and Claire Rhodes, his wife, and the marital community comprised thereof, d/b/a Claire's Pantry, Respondents/Cross-Appellants.
• Court: Washington Supreme Court

Page 162

90 Wn.2d 162

580 P.2d 611, 99 L.R.R.M. (BNA) 2868

RESTAURANT EMPLOYEES, BARTENDERS AND HOTEL SERVICE EMPLOYEES WELFARE FUND and the Restaurant and Hotel Employees and Bartenders Pension Trust Fund, Appellants, v. Morris RHODES and Claire Rhodes, his wife, and the marital community comprised thereof, d/b/a Claire's Pantry, Respondents/Cross-Appellants.

No. 45051.

Supreme Court of Washington,En Banc.

June 8, 1978.

Donaldson & Kiel, Robert Bohrer, Seattle, for appellants.

Oseran, Hahn, Kelley & Spring, Gerald Hahn, E. Allen John, Jr., Bellevue, for respondents/cross-appellants.

ROSELLINI, Associate Justice.

This is a suit to recover payments allegedly owing to joint health and welfare and pension trusts, pursuant to a collective bargaining contract. The agreement was signed by the defendant husband, on behalf of the marital community which operated a restaurant called Claire's Pantry.

The contract incorporated by reference a "master agreement" between the union and a Seattle restaurant association. The master agreement provided that employers would require all of their employees to join the union within 30 days, ¹ and further provided that monthly payments should be made to the health and welfare and pension trusts on behalf of all employees.

According to the stipulated facts, a union agent represented to the employers, before the execution of the contract, that they were not required to make payments on behalf of employees who were not union members, and they relied in part on this statement. The contract was signed in August 1972. Each month thereafter and until its expiration date, the employers submitted monthly report forms to the trusts, which forms called for the reporting of all employees. The employers paid contributions only for those who were union members. The stipulated facts do not disclose whether they made any attempt to comply with the provision in the master agreement whereby they undertook to require their employees to join the union.

On October 30, 1974, the trustees caused an audit to be made of the payroll records of the employers, which revealed that welfare and pension contributions had not been made on behalf of a number of employees. This suit was instituted to recover the delinquent payments. The union is not a party.

The employers offered several theories of nonliability, all of which were rejected by the superior court save for a contention that Rhodes signed the contract laboring under a mistake as to its terms. Although the employers' theory had been that there was a mutual mistake of fact, the court found that it was a unilateral mistake induced by the union agent. It concluded that as a result of it no contract had been formed. However, the court refused to order a refund of the payments made on behalf of the union employees, holding in effect that there had been a contract "established by conduct" to make such contributions.

Both parties have appealed. The trustees complain of inferences which the trial court drew from the stipulated facts, namely, that Rhodes did not know and the union agent did know that the master agreement required employer contributions for nonunion employees, that the employers never assented to a requirement that they make payments on behalf of all employees, and that the union agent knew this. It is their contention that the stipulated facts do not support such inferences or the conclusions which the court based on them.

There is merit in this contention. The stipulated facts show that the trusts were created pursuant to section 302(c)(5) of the Labor Management Relations Act of 1947, 29 U.S.C. § 186(c)(5). Under that statute, a trust fund agreement is invalid unless it is in writing. That there was a written agreement here and that it required that payments be made on behalf of all employees are undisputed. The actions of the employers in submitting monthly report forms and payments on behalf of some employees was consistent with the existence of a written agreement requiring such payments. There is a strong federal labor policy, which favors written labor contracts (29 U.S.C. § 158(d)), H. J. Heinz Co. v. NLRB, 311 U.S. 514, 61 S.Ct. 320, 85 L.Ed. 309 (1941) and also favors their enforcement. Trust Fund Servs. v. Heyman, 88 Wash.2d 698, 565 P.2d 805 (1977).

There is also a strong federal policy favoring the protection of trust funds, provided they are maintained according to the federal law, because of the fact that employees are presumed to have worked in reliance upon them and upon the availability of their benefits. Lewis v. Seanor Coal Co., 256 F.Supp. 456 (W.D.Pa.1966), aff'd 382 F.2d 437 (3d Cir. 1967), cert. denied 390 U.S. 947, 88 S.Ct. 1035, 19 L.Ed.2d 1137 (1968).

In fashioning the body of federal law to facilitate the enforcement of such contracts, the courts have said that common law contract principles do not govern, where they conflict with federal labor policy. ² Gatliff Coal Co. v. Cox, 152 F.2d 52 (6th Cir. 1945); NLRB v. George E. Light Boat Storage, Inc., 373 F.2d 762 (5th Cir. 1967); Walsh v. Schlecht, 429 U.S. 401, 97 S.Ct. 679, 50 L.Ed.2d 641 (1977).

In Gatliff Coal Co. v. Cox, supra at 56 n. 1, which involved a claim by employees for overtime pay under the terms of a written collective bargaining agreement with an employer who resisted the suit on grounds he had an oral agreement with the union business agent that the written agreement would not be enforced, the Sixth Circuit Court of Appeals (adopting verbatim the district court's opinion) said:

In utilizing collective bargaining agreements to implement a National labor policy designed to remove certain recognized sources of industrial strife by encouraging friendly adjustment of industrial disputes as to wages, hours of work and other conditions of employment, upon a plane of equality of bargaining power between employers and employees, the National Labor Relations Act, in the public interest, has given such collective bargaining agreements a more secure and stable position in our National economy than that of ordinary common law contracts which may be altered at pleasure (,) by rendering ineffectual and unavailable any collateral agreements between individual members of the collective bargaining group designed to obtain a diminution of the obligations of a particular employer or abridgment of the benefits accruing to particular employees under the collective agreement, regardless of the circumstances that may be relied upon to justify them or the terms thereof. To hold otherwise " * * * would reduce the National Labor Relations Act to a mere futility and leave collective agreements no stronger than the weakest members of the union." . . .

The Act also contemplates that a collective bargaining agreement be in writing. In H. J. Heinz Co. v. National Labor Relations Board, 311 U.S. 514, 61 S.Ct. 320, 324, 85 L.Ed. 309 (1941), after commenting upon the history of the collective bargaining process and pointing out that its object "has long been an agreement between employer and employees * * * evidenced by a signed contract or statement in writing," the Supreme Court said:

"We think that Congress, in thus incorporating in the new legislation the collective bargaining requirement of the earlier statutes included as a part of it, the signed agreement long recognized under the earlier acts as the final step in the bargaining process."

It thus appears that the National Labor Relations Act clearly precludes defendant's reliance upon the prior or contemporaneous oral agreement upon which its defense to these actions is based.

That misrepresentations, whether innocent or fraudulent, cannot be relied upon to alter the obligations of a written collective bargaining contract is established in the following cases, in all of which recovery of contributions required under collective bargaining agreements was sought by third party beneficiary trustees: Lewis v. Mearns, 168 F.Supp. 134 (N.D.W.Va.1958), aff'd 268 F.2d 427 (4th Cir. 1959) (employer claiming that a collective bargaining contract was void for fraud and misrepresentation of business agent); Lewis v. Young & Perkins Coal Co., 190 F.Supp. 838 (W.D.Ky.1960) (employer relying on a promise of a business agent which was inconsistent with the written terms of the contract); Lewis v. Gilchrist, 198 F.Supp. 239 (N.D.Ala.1961) (employer contending that labor agreement was merely a sham to create the appearance of a labor agreement); Lewis v. Harcliff Coal Co., 237 F.Supp. 6 (W.D.Pa.1965) (employer relying on oral statement at odds with the terms of the contract); Local 509, ILGWU v. Annshire Garment Co., 65 L.R.R.M. 2769 (D.C.Kan. June 30, 1967) (employer relying on a union agent's statement that he need pay contributions for union employees only); Pipe Trades v. England, 69 L.R.R.M. 2379 (Cal.Super. August 30, 1968) (employer relying on oral statement by union agent which contradicted written labor agreement); Lerwill v. Inflight Servs., Inc., 86 L.R.R.M. 3139 (N.D.Cal. July 24, 1974) (employer relying on oral modification); and Pio v. Kelly, 275 Or. 585, 552 P.2d 1301 (1976) (employer relying on misrepresentation).

The policy which guided the courts in these decisions was explained in Local 509, ILGWU v. Annshire Garment Co., supra at 2772. After reciting the national labor policy which insulates collective bargaining agreements from attacks based on alleged sham or oral side agreements contrary to their terms, the court said:

To be sure, there are two possible evils to consider in connection with such a national labor policy. One is the overzealous or unprincipled union negotiator who will induce a management signature to a collective bargaining agreement with side assurances that management will not have to comply with certain controverted provisions. The other is management who will avoid certain obligations required by the executed collective bargaining agreement and attempt to justify such action by...