Walsh v. Schlecht

• Citation: 429 U.S. 401,97 S.Ct. 679,50 L.Ed.2d 641
• Decision Date: 18 January 1977
• Docket Number: No. 75-906,75-906
• Parties: Thomas J. WALSH, Jr., dba Tom Walsh & Co., Petitioner, v. E. A. SCHLECHT et al., as Trustees, etc
• Court: United States Supreme Court

429 U.S. 401

97 S.Ct. 679

50 L.Ed.2d 641

Thomas J. WALSH, Jr., dba Tom Walsh & Co., Petitioner,

v E. A. SCHLECHT et al., as Trustees, etc.

No. 75-906.

Argued Nov. 1, 1976.

Decided Jan. 18, 1977.

Syllabus

Section 302(a)(1) of the Labor Management Relations Act prohibits agreements of employers to pay money to any representative of their employees, but §§ 302(c)(5) and (6) exempt from this proscription agreements to pay money to trust funds jointly created and administered by trustees representing employer associations and a labor union for the purpose of providing medical or hospital care, pensions, or pooled vacations for employees of signatory employers, or to defray the costs of apprenticeship or other training programs. A collective-bargaining agreement between petitioner general contractor and a carpenters' union required signatory employers to pay contributions at an aggregate rate of 96 cents per hour worked by carpenter employees to certain trust funds (Health and Welfare, Pension, Vacation Savings, Apprenticeship and Training, and Construction Industry Advancement (CIAF) ) administered by respondent trustees. With respect to nonsignatory subcontractors, a subcontractor's clause of the agreement specified that petitioner should require the subcontractor to be bound by the agreement or that petitioner should maintain daily records of the subcontractor's employees' hours and to be liable for payment of the contributions to the trust funds with respect to these employees. Petitioner subcontracted certain carpentry work on a federally subsidized low-income apartment project in Oregon to a nonsignatory employer (whose employees were not entitled to benefits in the trust funds), but did not exercise either of the above options. Instead, the subcontractor paid directly to his employees, as fringe benefits, 96 cents per hour in addition to their wages at union scale, thus paying out the same aggregate of wages and fringe benefits paid by signatory employers in the form of wages to their employees and contributions to the trust funds. Upon completion of the project, respondents sued petitioner in Oregon state court to enforce the subcontractor's clause, and petitioner defended on the ground that the clause violated § 302(a)(1). The trial court sustained respondents' demurrer, and, while holding that it would be "inequitable" to require contributions to the Health and Welfare, Pension and Vacation Savings Funds because they would amount to a double payment with respect to the subcontractor's employees, ordered an accounting limited to contributions to the Apprenticeship and CIAF trusts that did "not accrue benefits directly to the workmen." The Oregon Supreme Court affirmed sustainment of the demurrer, but, construing the subcontractor's clause as giving all the funds equal standing, reversed the judgment insofar as it limited the accounting to the Apprenticeship and CIAF trusts. Held :

1. Federal- rather than state-law principles of contract construction apply in determining the meaning of the subcontractor's clause, since it is a provision of a collective-bargaining agreement and application of federal law is necessary to avoid the "possibility that individual contract terms might have different meanings under state and federal law," Local 174, Teamsters, etc. v. Lucas Flour Co., 369 U.S. 95, 103, 82 S.Ct. 571, 577, 7 L.Ed.2d 593. Pp. 407-408.

2. The subcontractor's clause, as construed by the Oregon Supreme Court to require petitioner to make contributions to the trust funds measured by the hours worked by his subcontractor's employees, the benefits being payable only to carpenters employed by petitioner or other signatory employers, does not violate § 302(a)(1) but is authorized by §§ 302(c)(5) and (6). Enforcement of the clause as so construed not only is consistent with the wording of §§ 302(c) (5) and (6) but also does no disservice to the congressional purpose in enacting § 302 to combat "corruption of collective bargaining through bribery of employee representatives by employers, . . . extortion by employee representatives, and . . . the possible abuse by union officers of the power which they might achieve if welfare funds were left to their sole control." Arroyo v. United States, 359 U.S. 419, 425-426, 79 S.Ct. 864, 868, 3 L.Ed.2d 915. Pp. 408-411.

3. The objective of the Davis-Bacon Act to protect contractors' employees from substandard earnings by fixing a floor under wages on Government projects, is not "frustrated" by the subcontractor's clause, since such objective is clearly not "frustrated" when contractual arrangements between employers and their employees result in higher compensation and benefits than the floor established by that Act. P. 411.

273 Or. 221, 540 P.2d 1011, affirmed.

Carl R. Neil, Portland, Ore., for petitioner.

Paul T. Bailey, Portland, Ore., for respondents.

Mr. Justice BRENNAN delivered the opinion of the Court.

The question presented by this case is whether the provision of a collective-bargaining agreement between petitioner, a general contractor, and the Oregon State Council of Carpenters, requiring that petitioner pay contributions to certain trust funds with respect to hours of carpentry work performed by employees of a nonsignatory subcontractor, violated § 302(a)(1) of the Labor Management Relations (Taft-Hartley) Act, 29 U.S.C. § 186(a)(1). That section generally prohibits agreements of employers to pay money to any representative of their employees. Sections 302(c)(5) and (6), however, exempt from this general proscription written agreements to pay money to trust funds jointly created and administered by trustees representing employer associations and the union for the purpose of providing medical or hospital care, pensions, pooled vacations for employees of signatory employers, or to defray the costs of apprenticeship or other training programs.¹

Petitioner constructed a federally subsidized low-income apartment project in Salem, Ore. A collective-bargaining agreement between petitioner and the Oregon State Council of Carpenters required petitioner to pay contributions to five employer-union trust funds jointly created by the carpenters' union and multiemployer general contractors associations, and jointly administered by respondents, trustees designated in equal numbers by the employers and union. The trusts are, respectively, the Health and Welfare Trust Fund, the Pension Trust Fund, the Vacation Savings Trust Fund, the Apprenticeship and Training Trust Fund, and the Construction Industry Advancement Fund (CIAF). Only signatory employers may contribute to the funds, and no carpenter employee of a nonsignatory employer is entitled to benefits in the Health and Welfare, Pension, and Vacation Savings Funds, the three funds that provide benefits for carpenter employees.² Contributions were payable at the aggregate rate of 96 cents per hour of carpentry work done at the project.

Petitioner subcontracted the framing work on the project to Lloyd Jackson, a framing specialist, who was a nonsignatory employer and whose employees were therefore not eligible for trust fund benefits. In such cases petitioner had the option under a "subcontractor's clause," Art. IV of the collective-bargaining agreement, of requiring "such subcontractor to be bound to all the provisions of this Agreement," or of maintaining "daily records of the subcontractors employees jobsite hours and be liable for payment of these employees (sic ) . . . (trust fund) contributions in accordance with this Agreement." ³ Petitioner did neither. He did not require that the subcontractor "be bound" to the agreement and the subcontractor made no contributions to the funds. Instead the subcontractor paid directly to his carpenter employees, as fringe benefits, 96 cents per hour in addition to their wages at union scale,⁴ thus paying out the same aggregate of wages and fringe benefits paid by signatory employers in the form of wages to their employees and contributions to the trust funds.

Nor did petitioner maintain daily records of and pay contributions to the trust funds with respect to the hours of carpentry work performed on the project by the subcontractor's carpenter employees. Therefore, after completion of the project, respondent trustees brought this action in the Circuit Court of Multnomah County, Ore., to enforce the provision of Art. IV. Grounded upon petitioner's agreement to "be liable for payment of these (the subcontractor's) employees (sic ) . . . (trust fund) contributions . . .," the complaint sought, inter alia, an accounting of the hours of carpentry work performed by the subcontractor's employees on the project, and a judgment for the amount of such work at 96 cents per hour. Petitioner's principal defense was that the subcontractor's clause violated § 302(a)(1). The Circuit Court sustained respondents' demurrer to that defense. The Circuit Court held, however, that it would be "inequitable" to require contributions to the Health and Welfare, Pension, and Vacation Savings Funds because they would in effect amount "to double fringe benefits" with respect to the subcontractor's employees. It therefore ordered an accounting limited to contributions to the Apprenticeship and CIAF trusts that did "not accrue benefits directly to the workmen." The Supreme Court of Oregon affirmed the judgment insofar as it sustained the demurrer to petitioner's defense based on § 302(a)(1) but, construing the subcontractor's clause as giving all the "funds . . . equal standing under the terms of the contract . . .," reversed the judgment insofar as it limited the accounting to the Apprenticeship and CIAF trusts. 273 Or. 221, 225-226, 540 P.2d 1011, 1013-1014 (1975). We granted certiorari, 424 U.S. 942, 96 S.Ct. 1408, 47 L.Ed.2d 347 (1976). We affirm.

I

(1, 2) The parties agree that the determinative question for decision is that of the proper construction of the subcontractor's clause: whether...