Can a NC regional transit authority sign a labor-protection agreement with a union as a condition of getting federal transit money?

Plain-English summary

NC G.S. § 95-98 is short and famously aggressive. It declares "against the public policy of the State, illegal, unlawful, void and of no effect" any agreement between a NC governmental unit and a labor union as bargaining agent for the unit's public employees. NC is a right-to-work state with one of the strictest no-collective-bargaining rules for public employees in the country.

Research Triangle Regional Public Transportation Authority (TTA, the precursor to today's GoTriangle) was organized under Chapter 160A, Article 26 to provide regional bus service. To buy coaches it applied for a Federal Transit Administration grant. Federal law (Section 5333(b), formerly Section 13(c) of the Federal Transit Act) requires grant recipients to negotiate "fair and equitable" protective arrangements with the unions representing transit employees who could be displaced by the grant-funded expansion. TTA had been negotiating with the Amalgamated Transit Union (ATU) over employment terms, hiring preferences, and displacement protections. Their attorney Terri Toth McGaughey asked the AG: does § 95-98 void any contract TTA ultimately signs with ATU?

Chief Deputy AG Andrew A. Vanore, Jr. and Chief Counsel John R. McArthur answered with "serious concerns" about contract enforceability. They read § 95-98 broadly, citing three federal cases:

Atkins v. City of Charlotte, 296 F. Supp. 1068 (W.D.N.C. 1969). Atkins upheld § 95-98 against constitutional challenge and described it as voiding "contracts between units of government within North Carolina and labor unions." The court did not visibly limit the prohibition to contracts with unions representing the governmental unit's own employees.

Winston-Salem/Forsyth County v. Phillips, 381 F. Supp. 644 (M.D.N.C. 1974). Winston-Salem articulated the rationale: collective bargaining contracts let public employees join the "political decision-making process" in a way that gives them an advantage over other citizens. The AG used Winston-Salem's reasoning to argue against drawing a private/public employee distinction; the same political-process concerns reach private union employees who may become public employees under the priority-of-reemployment rules of Section 5333(b).

NC Prisoners' Labor Union v. Jones, 409 F. Supp. 937 (E.D.N.C. 1976), rev'd on other grounds, 433 U.S. 119 (1977). The Eastern District applied § 95-98 to ban contracts with inmate unions even though inmates are not "public employees." That extension suggested § 95-98 reaches union contracts generally, not only employer-employee bargaining.

The serious-concerns conclusion did not leave TTA stuck, though. The U.S. Department of Labor saw this issue coming and built in an alternative under 29 C.F.R. § 215.3(a)(2): "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."

So TTA's path was to adopt the negotiated protective terms by resolution, not by a contract with the ATU. The resolution is unilateral local action; it does not form an agreement with a labor union; § 95-98 does not void it. The substantive employee protections satisfy Section 5333(b), so the FTA grant can proceed.

Currency note

This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. The Federal Transit Act has been reorganized under MAP-21 and the FAST Act; Section 13(c) protections are now codified at 49 U.S.C. § 5333(b). NC G.S. § 95-98 has remained essentially intact. TTA was renamed GoTriangle.

Background and statutory framework

NC's no-public-collective-bargaining regime. § 95-98 is part of NC's strong right-to-work statutory framework. It dates to 1959 and has survived multiple constitutional challenges.

Section 13(c) (now Section 5333(b)). Federal transit grants come with employee-protection conditions. The U.S. DOL certifies that recipients have negotiated "fair and equitable" protective arrangements with affected unions. This federal requirement, originally Section 13(c), is now 49 U.S.C. § 5333(b).

The Atkins-Phillips-Jones line. These three federal district court cases sketch the broad reach of § 95-98 in NC. The AG did not articulate which way an NC state appellate court might rule, but the federal authority was substantial enough to create serious enforceability risk.

TTA's authority. TTA was created under the Regional Public Transportation Act, Chapter 160A, Article 26. It has the power to obtain federal grants under G.S. § 160A-610(18). The opinion does not question TTA's authority to apply for the grant or to operate transit service; the issue is the form of the protective arrangement.

The DOL workaround. 29 C.F.R. § 215.3(a)(2) is the federal regulatory escape hatch. It explicitly contemplates states like NC where local governments cannot enter union contracts and provides for protective terms to be adopted by resolution.

Why resolution rather than contract works. A unilateral resolution adopted by TTA is not an "agreement, or contract, between [a NC governmental unit] and any labor union" within § 95-98. The substance of the protective terms can mirror what would have been in the union contract; the form change is what matters under § 95-98.

Common questions

Q: Can NC public sector unions ever sign contracts with state agencies?

A: § 95-98 has been read broadly to forbid public sector collective bargaining contracts. NC public employees can join unions; the union cannot bind the state by contract.

Q: How is § 95-98 different from right-to-work laws?

A: Right-to-work laws say workers cannot be required to join or pay a union as a condition of employment. § 95-98 goes further: it voids the contracts themselves between public bodies and unions.

Q: Does this opinion mean federal grants are impossible in NC?

A: No. The DOL regulation provides the resolution path, which most NC transit recipients use. Federal funds keep flowing.

Q: Does this rule apply to non-transit public sector grants?

A: § 95-98 applies generally to government-union contracts in NC. The Section 13(c) and 29 C.F.R. § 215.3(a)(2) regulations are specific to transit. Other federal funding regimes have their own state-law accommodations.

Q: What about local-government employees represented by unions for non-bargaining purposes?

A: Workers can be union members for advocacy, grievance representation, and lobbying. The bar in § 95-98 is on contracts with unions as bargaining agent.

Q: Could TTA sign a Memorandum of Understanding instead of a contract?

A: An MOU labeled as such but functioning as a binding agreement with a union may run into § 95-98. The resolution approach is the safer formal route the DOL regulation explicitly endorses.

Citations from the opinion

• N.C.G.S. §§ 95-98; 160A-608; 160A-610(18)
• Chapter 160A, Article 26 (Regional Public Transportation Act)
• 49 U.S.C. § 1601 et seq. (Federal Transit Act); § 5333(b)
• 29 C.F.R. § 215.3(a)(2)
• Atkins v. City of Charlotte, 296 F. Supp. 1068 (W.D.N.C. 1969)
• Winston-Salem/Forsyth County v. Phillips, 381 F. Supp. 644 (M.D.N.C. 1974)
• North Carolina Prisoners' Labor Union v. Jones, 409 F. Supp. 937 (E.D.N.C. 1976), rev'd on other grounds, 433 U.S. 119 (1977)
• Harker v. State Use Industries, 990 F.2d 131 (4th Cir. 1993), cert. denied, 114 S. Ct. 238 (1993)
• Franks v. Oklahoma State Industries, 7 F.3d 971 (10th Cir. 1993)

Source

• Landing page: https://ncdoj.gov/opinions/research-triangle-regional-public-transportation-authority/

Original opinion text

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. § 160A-610(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