During oral arguments on Nov. 14 in one of the most important labor cases before the U.S. Supreme Court this term, the justices seemed skeptical about the claim that employers' “neutrality” agreements with unions violate federal labor law.

The case, Unite Here Local 355 v. Mulhall, centers on whether an employer's agreement to remain neutral during a union organizing campaign is legal under the Labor Management Relations Act (LMRA). Neutrality agreements are widely used in the service and hospitality industries and sometimes in the construction industry. Union officials contend that a high-court ruling invalidating such pacts would be a major setback for organizing efforts.

The case involves a lawsuit brought by Martin Mulhall, an employee of Mardi Gras Gaming, Hollywood, Fla., who objected to being represented by a Unite Here local.

Maurice Baskin, Associated Builders and Contractors general counsel, says the case "could have an impact on union demands for neutrality pacts in the construction industry, though the pre-hire provisions of [federal labor law] make Mulhall-type union organizing agreements less common in construction.”

Federal appellate courts have split over the neutrality-pact issue. The 11th U.S. Circuit Court of Appeals said Mardi Gras Gaming's neutrality agreement violated the LMRA because the pact was a “thing of value.” Section 302 of the LMRA makes it a crime for a company “to pay, lend or deliver … any money or other thing of value” to a union seeking to represent its workers.

But two other federal appellate courts have ruled that neutrality agreements are permissible.

Unite Here, supported by a Justice Dept. brief, wants the high court to overturn the circuit court's opinion. 

Under the agreement, Mardi Gras Gaming provided the union with a list of employees, on-site access to workers and a "card check" representation election; in return, the union local promised not to strike and to support a state ballot initiative to allow casinos in Florida. Attorney Richard G. McCracken, representing the union, and Michael R. Dreeben, U.S. deputy solicitor general, told the justices that the agreement was consistent with federal labor law and a standard part of collective bargaining.

Attorney William L. Messenger, representing Mulhall, argued the circuit court's opinion should be upheld, contending that the list and access to employees for organizing purposes was indeed a “thing of value.” Messenger said the only things employers are permitted to promise or agree to provide a union are the items that labor law specifically authorizes.

But several of the justices raised questions about Messenger's position. Justice Elena Kagan said, “I would have thought that the premise and policies of the labor laws are to encourage a wide variety of employer-employee agreements, both things that are listed in the labor laws … but many things that are not—that the idea is to get these parties together to reach agreements on a wide variety of things that matter to them, regardless of whether the labor law specifically refers to that.”

Justice Anthony Kennedy said Messenger’s legal argument was “contrary to years of settled practices and understandings.”

But Justice Sonia Sotomayor said she was troubled by some of the union's arguments. “There are some things that I think have value even though they may not have market value,” she said. Sotomayor also cited the $100,000 the union spent supporting the ballot initiative and said she found it particularly problematic. “It does feel like a bribe to the employer,” she said.

McCracken replied that the money spent supporting the ultimately successful ballot initiative helped not only the employer, but also the union, by leading to jobs for workers.

ABC's Baskin, who also is a shareholder in the Washington, D.C., office of Littler, an employment and labor law firm, says it is unclear what, if any, impact a decision in the case will have on project labor agreements, "which are unique to the construction industry.”