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QUESTION NO. 13

Has the Recovery Act changed the law as to the validity of contracts whereby the employer agrees to employ none but union members, i. e., "closed shop agreements?"

ANSWER: This is one of the most important questions arising out of the Recovery Act. Before the Act was passed, many courts had held closed shop agreements invalid. Generally, however, closed shop agreements were sustained, particularly where it appeared unlikely that they would result in an actual monopoly of employment in the community. The decisions for the most part turned on the question of whether the agreement in actual operation gave the union a monopoly of employment.

The Federal Courts had held that a combination to secure or compel the employment of none but union men was a violation of the Sherman Act where it involved interstate commerce, since it contemplated a restraint of that

commerce.

It was also the general rule that where the scope of a closed shop agreement was such as to operate generally throughout the community and to render union membership necessary to obtain employment, the agreement was contrary to public policy and void.

In my opinion, if Section 7 (a) of the Recovery Act is valid, it has made an important change in the prior law as to closed shop agreements, and such agreements are now universally void, per se, in plants operating under 7 (a), for the following reasons:

(1) The law, as heretofore stated and interpreted by the Recovery Administration, guarantees to every employee the right to choose freely the method by which he will deal with his employer. This may be directly and take the form of an individual agreement. It may be indirectly, through a collective arrangement. If he selects the latter method, it may be through a company union or an ordinary labor union. But the important thing is that under this Act every employee makes this choice for himself, and no other employee or group of employees can make it for him, any more than his employer can. Hence, any arrangement by which he is refused employment or is discharged because he will not follow a method of bargaining not of his voluntary choosing, is clearly invalid as a restrain of his right under the statute.

(2) Let us assume that a particular plant has a bona fide company union to which a majority of the employees belong. Suppose the employees through their chosen representatives in this company union enter into an agreement with the employer that he will not employ any person who will not join the company union. This would be a "closed shop" agreement-the shop would be closed to workmen who wished to select some other method of dealing with the employer.

Since the Recovery Act leaves to the employee the clear option as to the form of collective bargaining he desires, if any, there is no difference whatever under the law between a company union, on the one hand, and an affiliate of the American Federation of Labor, on the other. Hence, one of two things must be true: Either a closed shop agreement is invalid, whether made with one or the other types of labor organizations, or both kinds of closed shop agreements are valid, and by a bona fide agreement with the employees through a company union the employer may outlaw other unions in his plant.

In my opinion, having in mind not only the language of Section 7 (a), but its legislative history and the clear intent of the law, if 7 (a) is valid, both types of closed shop agreements are unlawful per se.* (see note on page 7).1 (3) Let us take another illustration: In many cases there are two or more unions to which workers in the same occupation and industry are eligible. (The two unions of Federal employees are a good example. One of these is affiliated with the American Federation of Labor, the other is not.) A closed shop agreement with any one of such unions would clearly be a limitation by the employer of the worker's right to join "a labor organization of his own choosing."

(4) Prior to the enactment of the Recovery Act, a "non-union" shop was legal that is, the employer could validly stipulate with his employees 1 Appears on following page.

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that union members would not be employed. Section 7 (a) undertakes to outlaw this practice. Now, if this section should be so interpreted as to mean that the employer may not agree to employ only non-union men, but may agree to employ only union men, the result would be a gross and arbitrary discrimination against workmen because of their non-affiliation with a labor organization. No legal proposition is better settled than that statutory classifications and discriminations must be based upon real differences between the classes dealt with. A statutory discrimination against either union or non-union men is invalid because it is arbitrary and capricious, and does not take into account differences in the ability, efficiency and trustworthiness of the individual employee.

If, therefore, governmental authority is to be upheld at all in the field it can only be on the theory that all citizens are equally protected in their right to seek and earn a livelihood, and that such right cannot be qualified by the requirement of membership or non-membership in a labor organization. (5) There are two provisions of the Recovery Act, in addition to Section 7 (a), which have received scant consideration, but which have an important bearing on the question here discussed. These are the so-called "Borah Amendment" in Section 3 (a) of the Act, and the "Long Amendment" (Section 5). (a) Under the Borah Amendment monopolies and monopolistic practices are prohibited; exclusive union employment agreements are very definitely "monopolistic" in character.

(b) Section 5 says that no action shall be permitted under the Act which will "prevent an individual from pursuing the vocation of manual labor." A closed shop agreement arbitrarily operates in that manner by adding other employment qualifications which have no bearing on his skill or ability.

JOHN C. GALL, Associate Counsel.

*NOTE.-General Johnson, National Industrial Recovery Administrator, in his address on Labor Day, said:

"The obligation of employers is not to seek to interfere with efforts of workers to organize or with their choice of representatives. Employers cannot refuse to bargain about conditions of employment with the self-chosen representatives of their workers. Employers cannot make as a condition of employment that their workers join a company union. But employers are not compelled to agree on any particular scale of wages or conditions of employment merely because they are bargaining with self-chosen representatives of organized workers. And no employer is denied the right to bargain individually with any worker if the worker so chooses. It is, however, the worker's choice as to whether he shall bargain individually or collectively through a representative. If any employer should make a contract with a particular organization to employ only members of that organization, especially if that organization did not have one hundred per cent membership among his employees, that would in effect be a contract to interfere with his workers' freedom of choice of their representatives or with their right to bargain individually and would amount to employer coercion on these matters which is contrary to the law."

PHILOSOPHY OF TRADE UNION LEADERS

(1) "With the patriot, we say may my country always be right, but whether right or wrong, my country.' To this, let each worker add this: 'May my union always be right, but whether right or wrong, my union"." (Samuel Gompers, American Federationist, January, 1909).

(2) "Our local unions-may they be right-but right or wrong, our local union." (Matthew Woll, American Photo-Engraver, February, 1928).

(3) "The organized labor movement cannot be limited." (William Green, A. F. of L., Building Trades Department Convention, September, 1927). (4) "There is no room in the United States for any other labor movement." (William Green, September 17, 1933).

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Law Department: Investment Building, Washington, D. C.

MEMORANDUM OF CONFERENCE OF COUNSEL, WASHINGTON OFFICE, NOV. 3, 1933

I. Validity of closed shop contracts under National Recovery Act.

General opinion that closed shop contracts were illegal where they did not include 100% of those employed by agreement with them.

II. Questions as to jurisdiction of National Labor Board, including authority to compel elections to be supervised by the National Labor Board. Agreement that the present authority of the Labor Board was limited by the executive order of the President but that he could enlarge its jurisdiction as his agency in prescribing hours, wages and working conditions, both under the agreement in coded industries to accept prescription by the President of hours, wages and working conditions and, under Section 7, Paragraph (c), of NRA.

III. Status of strikers under National Recovery Act. Are they employes within the meaning of the first paragraph of Section 7 (a).

1. That where negotiations are undertaken with former employes on strike they are entitled to negotiate through representatives of their own choosing.

2. That a number of decisions in State courts have given recognition to strikers as enjoying a temporary status. This aspect deserves further investigation as well as the determination of whether or not circumstances of a labor dispute provide grounds for consideration of the relationship of employer and employe under strike circumstances as one of status rather than contract.

IV. Does the offering of special inducements by an employer to those employes who will select a particular form of bargaining, amount to "coercion" under the law?

The giving of special inducements to those operating under an employe representation plan which is not given to those who are not parties to it, the same being freely accepted, is not coercion nor is the employer prohibited by the provisions of Section 7 (a), (1) and (2), from presenting the advantages of one form of collective organization rather than another and undertaking to persuade the acceptance of one plan rather than another without coercion or interference with the free choice of the employe in the face of the arguments made.

V. Under the License Section, does the law contemplate that an entire industry must be licensed, or that a license may be declared with respect to a particular business unit?

Some disagreement as to the proper construction of Section 4 (b). Agreement that there was ground to support the construction that it applied to individual enterprises, but a prevailing opinion that on the face of the provision it contemplated that it was to be applied collectively to a trade or industry or subdivision thereof. That is, that the licensing provision must be applied collectively rather than individually and to the group rather than to a single business unit.

1 See also exhibits 5403-5405.

VI. Where an employe has exercised his right to designate a representative and has selected a particular representative for a specified time, does he retain the right to change that representative from time to time as he sees fit, or is he bound by his election at the outset?

The general opinion that where a representative was chosen for a specified time, without reservation as to change, that such representation should continue during the agreed period.

VII. Where an election has been held in a plant and a majority of the employes have voted to bargain through a particular form, what is the legal effect upon the rights of the minority?

The general opinion that the minority is not affected by the determination of a majority to bargain individually or collectively in a particular form but are protected by Section 7 (a) in determining the manner in which such minority or its parts shall bargain individually or collectively. VIII. Validity of assessment of expenses of administration against non-members or persons who have not participated in the drafting and/or presentation of a code.

Opinion on this question colored by the preliminary determination as to whether or not those who are not parties to a code are bound by its provisions. Strong opinion by some participating counsel that the non-conformer could not be bound validly by the action of a trade group. Second, that if he were so bound his liability for the expense of the administration would be confined to the expense of operating a code authority but not the expense of a trade association, although the code authority were composed of officers of such association.

IX. Under what circumstances, if at all, may the members of a code authority be personally liable? Is incorporation advisable?

The general opinion that the code authority would be liable individually for injury resulting from prosecution of concerns violating a code only where serious negligence could be shown. Consideration of the incorporation of code authority a matter for industries in accordance with their condition and experience.

X. Has the National Recovery Act altered prior law as to the legality of boycotts and strikes?

Agreement that the general principles of law in particular jurisdictions with respect to the legality of boycotts and strikes not altered by provisions of NRA.

XI. What is the obligation of a company with respect to making price adjustments under P. R. A. on goods contracted for prior to the time the Agreement was signed?

The question unconsidered.

A number of other questions were considered upon which individual opinions were expressed without formulation of a conclusive agreement.

For the purposes of this discussion, aimed primarily at the interpretation of the provisions of the National Recovery Act, its validity was presumed, with the exception of discussion relating to Question VIII.

EXHIBIT 5399

CORRESPONDENCE ABOUT ARTICLE BY FATHER JOHN A. RYAN

Rt. Rev. Mons. JOHN L. BELFORD,

Church of the Nativity, 20 Madison Avenue, Brooklyn, New York. DEAR FATHER BELFORD: I enclose herewith an article appearing in the Commonweal of October 6 by Father Ryan. There are a good many economic fallacies in his article but I wish to call your attention particularly to Section IV, dealing with labor unions. It seems to me that Father Ryan either fails to consider or deliberately neglects to consider a number of points, for example: (a) "The right to organize" implies the right "not to organize." In other words, if it is a "right" then it is a privilege which may be exercised or not as

desired. Those who most vehemently insist upon this "right" neglect to con sider the corresponding "right" of workers to remain unorganized and to deal individually with their employers if they desire.

(b) Father Ryan's statement that "experience has abundantly proved" that the "regular national unions" are the "only kind of associations" complying with Pope Leo's rules is obviously a matter of individual opinion. Other individuals may just as honestly believe either that the "regular national unions" are not conforming to the fundamental principles enunciated by Pope Leo, or may believe that they do so conform but that other types of organization may equally conform.

(c) Father Ryan states that Pope Leo "implicitly demands" by "prescription" that employers "permit unions of this kind." I assume that by the word "permit" Father Ryan means "must make agreements with." I do not believeand I know you have also expressed yourself to the same effect-that Pope Leo would for an instant state that employees "must" deal with organizations which state that contracts are binding on the employer but not on the union; which state that they must be subject to no regulation by the public; which state that laws which displease them shall be disregarded; which in the majority of cases state that all workers, regardless of individual ability, must receive the same rate of pay.

(d) Father Ryan describes as "ethically unsound" the decision of the United States Supreme Court in the Hitchman Coal Company case. If Father Ryan had investigated this case closely he would have found that the Hitchman Company had no quarrel with its own workers, who were all union members; that the union called its men out because of strikes in other mines; that the union members unsuccessfully sought official union permission to return to work for the Hitchman Company and that these local members of the union then asked the Hitchman Company to return them to work under non-union contracts. You, as a priest of the Church, would be better qualified than any layman to answer the arguments of another priest. Father Ryan's article is so full of misleading statements that it is likely to leave a very unfortunate impression and understanding with many of its readers. If you should care to undertake an answer to Father Ryan, I should be glad to assist you in gathering detailed information along the lines indicated above. I do not believe that the time elapsed since the appearance of Father Ryan's article would be a real deterrent, and the subject would be extremely timely at this time in view of the proposal to impose the National Labor Board as a permanent body with increased powers.

With best wishes for an enjoyable holiday season, I remain

Sincerely yours,

NS: RW.
Enc.

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The necessity of organization to enable labor to secure adequate conditions of employment is fully established by our experience with the capitalist system. Therefore, the right to organize is a natural right, a necessary implication of the moral law. A further implication is that the workers have a right to maintain whatever form of organization is best adapted to secure just working conditions. As Pope Leo XIII put it: "We may lay it down as a

An address by Right Reverend Monsignor John A. Ryan before the National Conference of Catholic Charities, New York, October 2.

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