LABOR

Personal Liability for Breach of Contract

In Employee Painter's Trust v. J&B Finishes, 77 F.3d 1188 (9th Cir. 1996), the president of a drywall business had signed a two-page short form or "me too" agreement that bound the employer to the terms of a collective bargaining agreement between the union and a contractor's association and to the terms of trust agreements providing benefits to employees. He was not given a copy of those documents. The documents not only called for the payment of unpaid union dues, trust fund contributions, and attorney's fees, they also provided that corporate officers and the individual signatory of the agreement would be personally liable for any breach.

Looking to state law under Cement & Concrete Workers District Council v. Lollo, 35 F.3d 29 (2d Cir. 1994), the district court held that an agent for a disclosed principal is not personally liable under the principal's contract. The Ninth Circuit, however, held that while Lollo was persuasive authority, it was only one circuit's view as to adopting a portion of state contract law to resolve a labor dispute. It was not binding on another circuit. The court found that the general approach in the Ninth Circuit is to strictly interpret clear contract language, and not to resort to more lenient state law. Parties to a collective bargaining agreement are conclusively presumed to have equal bargaining power, and the union has no duty to explain to employers the terms or consequences of the agreement. The court stated that personal liability in such circumstances may be harsh for the signatory, but nothing suggests it is contrary to federal labor policy.

Because such short form agreements are commonly used in the construction trades, employers in such industries should seek counsel before signing any such agreement.

Joe Robinson

Senior Attorney, Labor Law

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