                            In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

Nos. 03-3767 & 03-3769
LID ELECTRIC, INC.,
                                              Plaintiff-Appellee,
                                v.


INTERNATIONAL BROTHERHOOD OF ELECTRICAL
WORKERS, LOCAL 134, and ELECTRICAL JOINT
ARBITRATION BOARD,
                                        Defendants-Appellants.

                         ____________
       Appeals from the United States District Court for the
          Northern District of Illinois, Eastern Division.
          No. 02 C 1390—Ronald A. Guzmán, Judge.
                         ____________
  ARGUED FEBRUARY 25, 2004—DECIDED MARCH 29, 2004
                   ____________



 Before EASTERBROOK, ROVNER, and WILLIAMS, Circuit
Judges.
  EASTERBROOK, Circuit Judge. The Electrical Contractors’
Association of Chicago bargains with Local 134 of the
Electrical Workers Union on behalf of its members, one of
which is Lid Electric. When appointing the Association as
its agent for collective bargaining, Lid elected to be bound
by the agreement then in effect between the Association
and the Union, as well as any amendments to or extensions
2                                   Nos. 03-3767 & 03-3769

of that agreement. (The “Principal Agreement” or “Inside
Agreement” is the main collective bargaining agreement.
There are some additional pacts that we need not describe,
so we refer simply to the “Agreement.”) Lid’s assent re-
mains in force to this day, but it has refused to implement
one rule that the Association and the Union promulgated:
that a drug-testing program adopted in 2001 be applied to
all employees of each participating firm. When Lid declined
to test any employees other than the electricians repre-
sented by the Union, a grievance was filed and led to an
order by the Electrical Joint Arbitration Board (the EJAB)
that the Union would not refer any members to Lid for
employment until Lid complied. Lid then commenced this
proceeding for judicial review of the award. The district
judge held that the award is invalid.
  Both the Union and the EJAB have appealed. Why
the arbitrators should be a defendant, Lid has never
explained. Nor do we know why Lid omitted the Association
as a party. If anyone has violated Lid’s rights, it is the
Association—which, by Lid’s lights, is a faithless agent. Yet
the EJAB has not complained about its status as a litigant,
and neither the Union nor the EJAB has protested the
Association’s absence. As a practical matter, this appeal
will determine everyone’s rights (the Union, Association,
and EJAB are contractual partners), so there is no reason to
insist that the cast of characters be altered. Moreover, the
controversy remains live despite the expiration of the
Agreement that was in force when the EJAB issued its
award. See Cox Corp. v. NLRB, 593 F.2d 261 (6th Cir.
1979). That Agreement ran from 1999 through 2003 but has
been succeeded by one that is identical in all respects
material to this dispute. The parties agreed that the
renewal process in 2003 would not affect their legal
entitlements. Thus, if the district judge’s decision should be
reversed, referrals would again be suspended until Lid
applied the drug-testing program to all of its employees.
Nos. 03-3767 & 03-3769                                      3

  Lid’s grant of authority to the Association provides:
    the undersigned firm does hereby authorize
    Electrical Contractors’ Association of City of Chi-
    cago, Inc., NECA as its collective bargaining repre-
    sentative for all matters contained in or pertaining
    to the current and any subsequent approved Inside
    labor agreement between the Electrical Contrs.
    Assoc., NECA, City of Chicago and Local Union 134,
    IBEW. In doing so, the undersigned firm agrees to
    comply with, and be bound by, all of the provisions
    contained in said current and subsequent approved
    labor agreements. This authorization, in compliance
    with the current approved labor agreement, shall
    become effective on the 27 day of September, 1996.
    It shall remain in effect until terminated by the un-
    dersigned employer giving written notice to the
    Electrical Contrs. Assoc., NECA, City of Chicago
    and to the Local Union at least one hundred fifty
    (150) days prior to the then current anniversary
    date of the applicable approved labor agreement.
This language authorizes the Association to adopt, on Lid’s
behalf, any provision “pertaining to” the electricians’ wages,
working conditions, and other matters normally covered by
a collective bargaining agreement. Lid must implement “all”
provisions of the agreements, not just those it approves.
And we must take it that the Association and Union did
adopt the drug-testing program as a protocol to the 1999
Agreement. The 1999 Agreement specifies a program to be
negotiated later. The record is not clear just how these
negotiations were completed; it may well be (as Lid con-
tends) that the negotiators were the same eight persons
who make up the EJAB (four from management, four from
labor). Negotiating details do not matter, for two reasons:
first, the Agreement itself authorizes the EJAB to amend as
well as to interpret the document; second, both the Associa-
4                                    Nos. 03-3767 & 03-3769

tion and the Union have embraced the drug-testing proto-
col, and ratification puts it into force no matter how the text
came into being.
  The Union was willing to have the electricians tested but
not to be singled out. So it insisted on a form of most-
favored-nations clause: the electricians would submit to
drug testing only if the employers tested their other work-
ers too. The Association assented; and Lid, as a member, is
bound if the program became one “of the provisions con-
tained in said current and subsequent approved labor
agreements.” Lid insists that the program is not a “pro-
vision” of the Agreement, but the EJAB thought otherwise,
and in doing so did not exceed the wide latitude allowed to
a labor arbitrator. See Major League Baseball Players Ass’n
v. Garvey, 532 U.S. 504, 509-10 (2001). Collective bargain-
ing agreements include their amendments, protocols, and
other supplemental documents; terms can be among their
“provisions” without appearing on the sheet of paper that
contains the parties’ signatures. Many an agreement
incorporates other documents by reference; this is the norm,
for example, with respect to retirement and health-care
plans, which may be elaborately detailed but are rarely set
out verbatim in the collective bargaining agreements. Just
as a labor agreement may incorporate a pension plan, so
may it incorporate a drug-testing plan. The 1999 Agreement
said that this was the idea; by the time the 2003 Agreement
(which governs today) was ratified, the drug-testing plan
had been in place for two years. It is no less among the
Agreement’s “provisions” than is the pension plan—or so an
arbitrator could find without just making things up. Even
an oral understanding may be counted among the compo-
nents of a collective bargaining agreement. See, e.g.,
Transportation-Communication Employees v. Union Pacific
R.R., 385 U.S. 157, 160-61 (1966); United Steelworkers v.
Warrior & Gulf Navigation Co., 363 U.S. 574, 578-81 (1960);
Matuszak v. Torrington Co., 927 F.2d 320, 324 (7th Cir.
Nos. 03-3767 & 03-3769                                      5

1991). But this plan was written and is as much part of this
Agreement as a codicil is part of a will.
  Lid believes, however—and the district court held—that
even if the drug-testing plan is part of the Agreement, the
Union and Association have no authority to make rules
binding on other employees. Unions represent workers in
units certified by the National Labor Relations Board; they
do not speak for workers in gross. The Union cannot waive
any rights of persons outside the bargaining unit or nego-
tiate contracts on their behalf. True enough, but irrelevant.
The Agreement (with the drug-testing rider) does not
purport to establish legal obligations for anyone other than
the Association’s members and the electricians the Union
represents. It does not have to. The Agreement binds Lid
itself; no more is necessary. The Union and Association
jointly created, not an undertaking by non-unit employees
to submit to tests, but an obligation that Lid administer
drug tests to all of its employees. The Association acted
as Lid’s agent when agreeing that Lid (like other members)
would conduct these tests. None of Lid’s non-unit employees
is obliged to submit; but Lid must attempt to secure their
cooperation using the tools of persuasion at its disposal. For
employees without term contracts (that is, employees at
will), Lid can credibly threaten discharge. It is Lid’s own
disregard of its promise to implement the Agreement in full
that the EJAB penalized by the termination of referral
services. Lid could have adopted a drug-testing regimen for
its other workers unilaterally; the employees would have
had no legal complaint (with one exception discussed
below). Choices that Lid could make on its own it also could
delegate to the Association to make as its agent in the
course of collective bargaining (and in exchange for some-
thing employers value). Transferring bargaining chips to an
agent for many employers may strengthen the hand of all.
  Labor law permits collective bargaining agreements to
reach beyond the certified unit of workers. How employers
6                                   Nos. 03-3767 & 03-3769

treat non-unit workers is a permissive subject of bargain-
ing. Neither union nor employer is required to negotiate
about permissive subjects (that’s what it means to call them
“permissive” rather than “mandatory”), see NLRB
v. Borg-Warner Corp., 356 U.S. 342 (1958), but they can do
so when they find it mutually beneficial. Employers may
promise to provide breaks, clean lunchrooms, and comfort-
able working conditions for all employees; likewise they
may promise to treat bargaining-unit employees no worse
than they treat others even though such promises (like the
one in the drug-testing plan) affect those others. These
points are well established with respect to pension and
welfare plans. Retired employees are no longer in a bar-
gaining unit, but union and employer may bargain (if they
choose) over benefits that the retirees will receive. See
Chemical Workers v. Pittsburgh Plate Glass Co., 404 U.S.
157 (1971). If the Union and the Association can set the
health-care benefits available to retirees, and they may,
they also may establish drug-testing plans and reach other
agreements that affect how employers deal with persons
outside the bargaining unit. See also Florida Power & Light
Co. v. Electrical Workers, 417 U.S. 790, 812 n.22 (1974)
(agreement may cover terms and working conditions of
supervisors, even though they cannot be included in the
bargaining unit); Pall Corp. v. NLRB, 275 F.3d 116, 123
(D.C. Cir. 2002).
  What the Association cannot do on Lid’s behalf, however,
is commit Lid to violate rules of positive law. Nor may an
arbitration award require unlawful acts. See George Watts
& Son, Inc. v. Tiffany & Co., 248 F.3d 577 (7th Cir. 2001).
That the Agreement may require Lid to discharge unco-
operative non-unit employees does not present any risk
of illegality; even an obligation to break a contractual prom-
ise does not meet that standard. See W.R. Grace & Co. v.
Rubber Workers, 461 U.S. 757 (1983) (that an arbitrator’s
award requires employer to break a different contract is not
Nos. 03-3767 & 03-3769                                     7

a reason to refuse enforcement). But more than a contract
may stand in the way of Lid’s full implementation of the
Agreement. Local 150 of the International Union of Operat-
ing Engineers represents some of Lid’s other employees,
who are covered by a collective bargaining agreement
running through May 31, 2007. Federal law requires Lid to
respect that agreement; it is not just a matter of paying
damages for breach. If that agreement (which is not in the
record) has its own drug-testing rules, Lid must follow them
rather than anything in the agreement between the Associ-
ation and the electricians’ union. If that agreement does not
provide for drug testing, then Lid cannot institute testing
unilaterally—for the operating engineers’ terms and
working conditions are a mandatory subject of collective
bargaining. Many agreements forbid mid-term changes
without mutual assent, so the topic might not reach the
table until 2007. No matter when negotiations begin,
however, bargaining—and either an agreement or an
impasse—must precede any change in terms and conditions
under which the operating engineers are employed. To the
extent that the EJAB’s order requires Lid to implement drug
testing for employees represented by Local 150, without
first bargaining collectively with that union, it commands
a violation of federal law and must be set aside.
  The judgment of the district court is vacated, and the case
is remanded with instructions to enter an order enforcing
the arbitral award, except to the extent that it requires Lid
to violate the bargaining rights of workers represented by
other unions.
8                              Nos. 03-3767 & 03-3769

A true Copy:
      Teste:

                    ________________________________
                    Clerk of the United States Court of
                      Appeals for the Seventh Circuit




               USCA-02-C-0072—3-29-04
