WASHINGTON DC -- U.S. Supreme Court justices questioned the California Attorney General's office yesterday over whether the state can prohibit employers from union-related speech in the workplace.

Attorneys from Jerry Brown's office were in court defending an eight-year-old state law requiring companies who receive state funds to remain neutral in the face of union organization efforts.

The U.S. Chamber of Commerce challenged the law in 2002, arguing the National Labor Relations Act allows employers to weigh in on union activities, as long as the speech is not construed as threatening.

"Traditionally, when the state gave grant money, one of the permissible uses of that money was for the costs of employees who had to perform the grant, and without this limitation, that would have included the employer spending the money to combat unions. That would be --could arguably be a legitimate cost," Michael Gottesman, the attorney for Brown's office told the justices, according to court transcripts.

"The state is entitled to prescribe what it is prepared to pay for in a grant and what not and it is not required to subsidize the employer's campaign."

Attorneys for the Chamber of Commerce said the law goes beyond fiscal concerns and is intended to suppress the employers' right to free speech.

"[It] affects on an across-the-board basis every single contractor, every single employer doing business with the State of California," Willis Goldsmith, an attorney for Chamber said.

"So if --if the state could show that it were making that --it was making that policy decision for some fiscal purpose, then there might be an argument. But that's concededly not the case here."

The bill was authored by State Senator Gilbert Cedillo, D-Los Angeles, and supported by the California State Labor Federation and the AFL-CIO. It prohibits employers that receive money from state grants and programs from using those state funds to "assist, promote, or deter union organizing."

The law has far-reaching impacts in heavily subsidized industries, such as health care.

Hospitals and other health care providers rely on state reimbursement for low-income patients through the Medi-Cal program. Under the terms of the terms of the state's agreement, health care providers are prohibited from "provider expenditures to assist, promote, or deter union organizing."

With more than a dozen large health care systems in the process of a unionization battle, the court's decision could have an impact on tens of thousands California employees.

This week alone, more than 4,000 nurses are preparing for a 10-day strike at eight facilities owned by Sutter Health in the San Francisco Bay Area.

"If the court strikes down the law it would certainly give a green light to for employers and anti-union law firms who are hostile to unions to escalate their activity," Charles Idelson, a spokesman for the California Nurses Association told LNL.

As other states mull similar laws, the Bush Administration is weighing in on the case.

In an amicus brief prepared by Paul Clement, the U.S. Solicitor General, the Bush Administration argues that a 1947 addition to the NLRA encourages " a free debate on issues dividing labor and management."

"The expressing of any views, argument, or opinion, or the dissemination thereof … shall not constitute or be evidence of an unfair labor practice…if such expression contains no threat of reprisal or force or promise of benefit," Clement wrote.

"California has adopted a policy of coercing certain employers to remain silent in response to union organizing efforts," the Solicitor General added.

"That state labor policy conflicts with the NLRA's longstanding policy in favor of robust debate during organizing drives and impinges on the board's generally exclusive authority to regulate employer speech regarding union organizing."