Senate-Passed CARES Act's Loans for Businesses Come at the Price of Union Neutrality, and with Other Strings Attached

Both the Senate and the House have passed the CARES Act, the portion of the stimulus bill that will provide favorable loans to "mid-sized" employers (defined as employers of between 500 and 10,000 employees). Under the Act, such employers may apply to the Secretary of the Treasury for these loans, but the loans come with several strings attached.

For example, the employer must enter into a "good faith certification" agreeing to use the funds to retain at least 90 percent of its workforce at full compensation and benefits until September 30, 2020, and must restore its workforce to not less than 90% of its February 1, 2020 level and restore all compensation and benefits to its employees no later than four months after termination of the public health emergency. The employer must also refrain from outsourcing or offshoring jobs for the entire term of the loan plus two years after completing repayment of the loan.

As part of the "certificate of good faith," the employer must also agree that it will "remain neutral in any organizing effort for the term of the loan." The bill does not define "neutrality" or give any guidance as to what activities may be engaged in by a targeted employer. Must the employer remain silent on the subject of unionization? Can the employer meet with employees to discuss the subject as long as it remains "neutral?"  Can the employer disseminate written or visual material on the subject? Can the employer answer employee questions on the possible impact of unionization on their jobs? Can the employer campaign or communicate aggressively prior to the start of an organizing drive? None of the answers to these questions are found in the bill.

This neutrality requirement interferes with the employer's ability to communicate effectively with employees on the important question of unionization and to deprive the employees of valuable and necessary information to assist them in making their choice, while making it substantially easier for unions to succeed in organizing new members. Since the broad restriction interferes with the employer's ability to communicate with its employees, many believe that it may actually violate the First Amendment's prohibition on laws that prohibit freedom of speech.

Although employer neutrality was not required prior to passage of the CARES Act, unions have succeeded in getting some employers to agree to neutrality. In such instances, the neutrality pledges have included concessions like:

  • recognition of the union without an election if the union obtains cards from more than 50% of the employees;
  • requiring the employer to inform employees that it is "neutral" or does not oppose unionization of its workforce;
  • prohibiting the employer from disseminating any written, audio, or video materials regarding the union;
  • providing the union with employee personal contact information;
  • giving the union access to the employer's facilities, including parking lots and beak rooms, to permit union organizers to meet with employees to solicit union cards;
  • prohibiting the employer from using consultants or other representatives to engage in activities inconsistent with the pledge of neutrality;
  • preventing the employer from criticizing, or disparaging the union or its officers;
  • preventing the employer from having any one-on-one conversations or employee meetings on paid time where the subject of unionization is discussed; and/or
  • preventing the employer from doing any act or communicating in any way to encourage employees to vote "No" or to refrain from signing a union card.

As the meaning of "neutrality" under the CARES Act becomes clearer, we will update our COVID-19 Resource Center. But one thing seems certain, any employer applying for a CARES Act loan and required to sign a Certificate of Good Faith which includes a pledge of neutrality should consult with their labor counsel before signing.

If you have any questions regarding this employer neutrality requirement or other Labor and Employment issues, please do not hesitate to contact Howard Bernstein or your Neal Gerber Eisenberg attorney.

The content above is based on information current at the time of its publication and may not reflect the most recent developments or guidance. Neal Gerber Eisenberg LLP provides this content for general informational purposes only. It does not constitute legal advice, and does not create an attorney-client relationship. You should seek advice from professional advisers with respect to your particular circumstances.