U.S. Supreme Court Strikes Down California's Attempt To Regulate Employer Speech

On June 19, 2008, in Chamber of Commerce of the United

States of America v. Brown, No. 06-923, the U.S. Supreme

Court reversed the Court of Appeals for the Ninth Circuit and

held that the National Labor Relations Act ("NLRA")

preempted a California law that barred employers receiving

state funds from using the funding to engage in any activity

that opposed union organizing activity, because the statute

"impermissibly 'predicat[es] benefits on refraining

from conduct protected by federal labor law.'"

The California Law - AB 1889

In 2000, California enacted AB 1889, which prohibited

employers who receive more than $10,000 in state funds from

using those funds to "assist, promote or deter union

organizing." The prohibition included expenditures of any

kind, including the payment of employee salaries,

attorneys' fees or payments to consultants, that were used

in "any attempt by an employer to influence the decision

of its employees" regarding whether or not they should

join a union. Despite this seemingly neutral stance, another

provision granted an exemption for expenditures that could be

viewed as promoting unionization, such as allowing union

meetings on company property or entering into voluntary

recognition agreements.

The law imposed strict record keeping requirements on

employers receiving state funds to ensure they had not

improperly used those monies to oppose union organizing.

Although AB 1889 did not specifically prohibit employers from

using other funds for that purpose, it created a presumption

that all expenditures from commingled state and non-state funds

were made from the state funds.

Violation of the statute would result in severe sanctions,

including repayment of the funds used for organizing

activities, plus double that amount in civil penalties. The

statute was enforceable both by the state attorney general and

private parties, with the employer being required to pay a

prevailing plaintiff's attorneys' fees and costs.

The District Court and Ninth Circuit Decisions

AB 1889 was challenged by the Chamber of Commerce in 2002.

The District Court granted summary judgment on behalf of the

Chamber, finding that the statute was preempted by the NLRA.

The Ninth Circuit twice affirmed the lower court's

decision. In 2004, a three judge panel held that the NLRA

preempted AB 1889, because the California statute unlawfully

interfered with the NLRA's protection of free debate over

labor issues. The Ninth Circuit panel subsequently granted...