September 13, 1994
Ms. Terri Toth McGaughey Attorney at Law Post Office Box 389 Raleigh, North Carolina 27602-0389
RE: Advisory Opinion; Application of G.S. 95-98 to the Research Triangle Regional Public Transportation Authority
Dear Ms. McGaughey:
On behalf of your client, the Research Triangle Regional Public Transportation Authority ("TTA"), you have requested an opinion as to whether G.S. § 95-98 prohibits TTA from entering into, and/or prevents the enforceability of, an agreement with a labor union representing private or public employees working in the TTA’s service area.
It is our understanding that TTA is a body corporate and politic organized pursuant to Chapter 160A, Article 26 of the North Carolina General Statutes ("Regional Public Transportation Act"). The purpose of TTA is to "finance, provide, operate, and maintain for a safe, clean, reliable, adequate, convenient, energy efficient, economically and environmentally sound public transportation system" for its service area. G.S. § 160A-608. Among the general powers of TTA is the power "to obtain grants, loans and assistance from the United States . . . ." G.S. § 160A610(18).
In order to purchase coaches for use in regional bus service, TTA has applied for a grant from the Federal Transit Administration and is attempting to satisfy the provisions of Section 5333(b) (formerly 13(c)) of the Federal Transit Act, 49 U.S.C. § 1601, et seq. Section 5333(b) requires, as a grant condition, the development of terms and conditions which are "fair and equitable" (as determined by the U.S. Department of Labor) in order to protect the interests of unionized employees of mass transportation providers operating in TTA’s service area who are dismissed or displaced due to TTA’s use of the federal grant money. This requirement is typically implemented by negotiated protective arrangements with local unions whose members may be negatively impacted by the grant. TTA has been so negotiating with the Amalgamated Transit Union ("ATU"). These negotiations relate to terms and conditions of employment, including hiring preferences for union members dismissed as a result of TTA’s expansion of operations.
G.S. § 95-98 reads as follows:
Any agreement, or contract, between the governing authority of any city, town, county, or other municipality, or between any agency, unit, or instrumentality thereof, or between any agency, instrumentality, or institution of the State of North Carolina, and any labor union, trade union, or labor organization, as bargaining agent for any public employees of such city, town, county or other municipality, or agency or instrumentality of government, is hereby declared to be against the public policy of the State, illegal, unlawful, void and of no effect.
On its face, G.S. § 95-98 seems to invalidate only those agreements with unions acting as bargaining agent for the public employees of the governmental unit. However, judicial interpretations of the statute indicate a broad legislative proscription against contracts with unions.
In Atkins v. City of Charlotte, 296 F. Supp. 1068 (W.D.N.C. 1969), the U.S. District Court for the Western District of North Carolina, in upholding the constitutionality of G.S. § 95-98, stated that the statutory provision "simply voids contracts between units of government within North Carolina and labor unions and expresses the public policy of North Carolina to be against such collective bargaining contracts." Id. at 1077. Notably, although the facts of the case applied to public employees, the court appeared to apply the statutory provisions to all contracts between public bodies and labor unions and did not appear to limit the scope of the statute to contracts between a public body and its employees. We note that the employees for whom the ATU is negotiating may become public employees under the priority of re-employment provisions of Section 5333(b).
In Winston-Salem/Forsyth County v. Phillps, 381 F. Supp. 644 (M.D.N.C. 1974), the U.S. District Court for the Middle District of North Carolina explained that one rationale for prohibiting contracts between public bodies and public employee unions is that these contracts allow public employees to become part of the "political decision-making process" in a way that provides those employees an advantage over all other citizens. Id. at 647. The General Assembly’s public policy determination that it is detrimental to the State’s interests to allow the degree of intrusion into public decisions inherent in agreements with public employee collective bargaining units, weighs against adopting a different standard where negotiated agreements with private employee units are involved. Adoption of a different standard could, under the priority of re-employment provisions of Section 5333(b), allow collective bargaining units to achieve indirectly that which the General Assembly has prohibited them from achieving directly.
Citing Atkins, the U.S. District Court for the Eastern District of North Carolina stated that "[p]rison administrators may refuse to contract with any group or union of inmates; moreover, any such contract is void under the laws of North Carolina and of no effect whatsoever." North Carolina Prisoners’ Labor Union v. Jones, 409 F. Supp. 937, 945 (E.D.N.C. 1976), rev’d on other grounds, 433 U.S. 119 (1977) (stating that "[c]ollective bargaining for inmates with respect to . . . terms and conditions of incarceration is illegal under N.C.G.S. § 95-98 (1975)." 433 U.S. 122 (n.1). Since inmates are not public employees, see Harker v. State Use Industries, 990 F.2d 131 (4th Cir. 1993), cert. denied, U.S. , 114 S. Ct. 238 (1993); Franks v. Oklahoma State Industries, 7 F.3d 971 (10th Cir. 1993), the court’s statement suggests that the scope of the prohibition of G.S. § 95-98 against contracting with labor unions extends beyond contracts with public employee units.
Based on these cases, we have serious concerns regarding the enforceability of a contract between the TTA and ATU. We note, however, that the Department of Labor has anticipated the inability of some states to enter such contracts and provided in its regulations as follows: In instances where states or political subdivisions are subject to legal restrictions on bargaining with employee organizations, the Department of Labor will utilize special procedures to satisfy the Federal statute in a manner which does not contravene state or local law. For example, employee protective terms and conditions, acceptable to both employee and applicant representatives, may
be incorporated into a resolution adopted by the involved local government.
29 C.F.R. § 215.3(a)(2). We are aware of no legal prohibition against TTA’s adopting a
resolution to provide protective arrangements consistent with Section 5333(b).
Andrew A. Vanore, Jr.
Chief Deputy Attorney General
John R. McArthur
Chief Counsel