Employer's Union Dues Checkoff Duty Outlasts Contract

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By Kevin McGowan

Aug. 28 — An employer's duty to abide by a union dues checkoff provision in which it deducts dues from employees' paychecks and remits them to the union survives expiration of the relevant collective bargaining agreement, a divided National Labor Relations Board ruled Aug. 27.

In a 3-2 decision, the board overruled Bethlehem Steel, 136 NLRB 1500, 50 LRRM 1013 (1962), which said an employer's union dues checkoff obligation expires along with the union contract. Instead, the NLRB majority said no good reason exists for treating dues checkoff provisions differently under the National Labor Relations Act from other mandatory subjects of bargaining an employer isn't free to change unilaterally after a union contract expires.

The Bethlehem Steel holding “is inconsistent with established policy generally condemning unilateral changes in terms and conditions of employment, is contradicted by both the plain language and legislative history of the only statutory provision addressing dues checkoff, and finds no justification in the policies of the Act,” said an NLRB majority consisting of Chairman Mark Gaston Pearce and Members Kent Y. Hirozawa and Lauren McFerran.

Acknowledging Bethlehem Steel has been NLRB policy for more than 50 years, the board nevertheless said it declined “to keep following a course that has never been cogently explained—and, in our view, cannot be.”

“Accordingly, we now hold that an employer, following contract expiration, must continue to honor a dues-checkoff arrangement established in that contract until the parties have either reached a successor collective-bargaining agreement or a valid overall bargaining impasse permits unilateral action by the employer,” the board said.

Prospective Application Only 

The NLRB, however, said its new rule applies only to future cases, as its decision “definitively changes longstanding Board law governing parties' conduct, rather than merely changing a remedial matter.”

Employers have relied on Bethlehem Steel for more than 50 years in considering whether to cease honoring dues checkoff arrangements when union contracts expire, the board said. “As the Board has done in other cases involving departures from longstanding precedent, we conclude that this reliance interest warrants prospective application only of today's decision,” the NLRB said.

The NLRB therefore said the instant case, which involved Lincoln Lutheran of Racine's decision to halt dues checkoff to a Service Employees International Union local in 2013, and other similar cases occurring before Aug. 27, would be decided under Bethlehem Steel. The administrative law judge therefore appropriately dismissed the unfair labor practice charge against the Racine, Wis., nursing home, albeit for reasons the NLRB now rejects, the board said.

Dissent: Change for Congress, Not NLRB 

Dissenting in part, Members Philip A. Miscimarra and Harry I. Johnson said the Bethlehem Steel exception to the general rule barring an employer from making unilateral changes in mandatory subjects of bargaining is “justified by statutory and policy considerations that warrant its continuation.”

“[T]he primary consequence of this change [made by the majority] is to substantially alter the current balance that exists between the interests of employers and unions upon contract expiration,” the dissenters said. “In our view, this type of change should be the province of Congress, not the Board.”

Miscimarra and Johnson concurred in the outcome, “only because our colleagues refrain from applying their changed standard retroactively.”

But the board's ruling rests on a misunderstanding of Bethlehem Steel and is likely only to change collective bargaining for the worse, the dissent said.

“The practical result of the majority's new rule will be to increase the difficulties parties will face when attempting to reach agreements in collective bargaining,” the dissent said. More employers will feel compelled to take the “unusual step” of formulating, presenting and bargaining over proposals to eliminate dues checkoff, the dissent said.

“[W]e suspect our colleagues will be disappointed in the outcome of the bargaining that they now require,” Miscimarra and Johnson wrote. “[W]e will have more bargaining over proposals to eliminate dues-checkoff, even though such proposals have been extremely rare in the past, and we are likely to see more agreements that have no dues-checkoff provisions, especially given the array of options enabling employees to directly control whether and how they make union dues payments.”

“This outcome will depend more on the parties, not the Board, but the process by which parties sort out these issues is likely to undermine bargaining relationships and cause more contentious bargaining, contrary to the Act's objective of fostering labor relations stability,” the dissent said.

Dues Checkoff Mandatory Subject 

But the board majority said its new rule barring employers from scuttling dues checkoff arrangements because the contract has expired better serves the act's purposes and is more consistent with U.S. Supreme Court and board decisions.

“[W]e find that requiring employers to honor dues-checkoff arrangements after contract expiration serves the Act's goal of promoting collective bargaining, consistent with longstanding Board precedent proscribing post-contract unilateral changes in terms and conditions of employment,” the board said.

In NLRB v. Katz, 369 U.S. 716, 50 LRRM 2177 (1962) , the Supreme Court ruled an employer violates NLRA Section 8(a)(5) if it unilaterally changes union-represented employees' wages, hours and other terms and conditions of employment without giving their union prior notice and a meaningful opportunity to bargain, the board said.

Under Katz, an employer's obligation to refrain from unilateral changes applies both when a union is newly certified and the parties have yet to reach an initial agreement and when an existing agreement has expired and the parties' negotiations have yet to produce a new agreement, as in the Racine case, the board said.

Dues checkoff is a “matter related to wages, hours and other terms and conditions of employment” and therefore is a mandatory bargaining subject, the board said. An employer's unilateral decision to cease honoring a dues checkoff provision “obstructs collective bargaining just as other, prohibited unilateral changes do,” the board said.

“An employer's unilateral cancellation of dues-checkoff when a collective-bargaining agreement expires both undermines the union's status as the employees' collective-bargaining representative and creates administrative hurdles that can undermine employee participation in the collective-bargaining process,” the board said.

Such a step can threaten employees' ability to remain union members in good standing, distract the union from focusing in bargaining on other issues and send a “powerful message” the employer is “free to interfere with the financial lifeline between the employees and the union” they chose to represent them, the board said.

“Because unilateral changes to dues-checkoff undermine collective bargaining no less than other unilateral changes, the status quo rule should apply, unless there is some overriding ground for an exception,” the board said. “As the Katz Court observed, an employer's unilateral change ‘will rarely be justified by any reason of substance.' We see no such reason here.”

‘Matter of Administrative Convenience.'

Some contractually established employment terms and conditions—including arbitration provisions, no-strike clauses and management rights clauses—don't survive contract expiration even though they are mandatory bargaining subjects, the board acknowledged.

But in agreeing to each of those terms, the parties “waived rights they otherwise would enjoy in the interest of concluding a collective bargaining agreement, and such waivers are presumed not to survive the contract,” the board said.

By contrast, a dues checkoff provision doesn't involve “the contractual surrender of any statutory or nonstatutory right” held by any party to the agreement, the board said.

Rather, dues checkoff arrangements are provided as “a matter of administrative convenience” to a union and employees, the board said. Payments through a dues checkoff system are “similar to other voluntary checkoff arrangements, such as employees savings accounts and charitable contributions, which the Board has recognized also create ‘administrative convenience' and, notably, survive the contracts that establish them,” the board said.

“Nothing in federal labor law or policy, meanwhile, suggests that dues-checkoff arrangements should be treated less favorably than other terms and conditions of employment for purposes of the status quo rule,” the board said.

Distinct From Union Security 

In Bethlehem Steel, the NLRB confronted whether an employer had violated Section 8(a)(5) by unilaterally ceasing to observe and implement both union security and dues checkoff provisions in the parties' expired bargaining agreement, the board said.

The Bethlehem Steel board found no violation in the employer ceasing to honor the union security provision, because Section 8(a)(3) makes a provision requiring union membership as a condition of employment an explicit matter of contract, the board said. “This finding, compelled by the Act's plain language, is not in dispute today,” the board said.

But the Bethlehem Steel board erred by not distinguishing the dues checkoff arrangement from the union security clause, the board said.

The Bethlehem Steel board ignored Section 302(c)(4) of the Labor-Management Relations Act, federal labor law's only provision that addresses dues checkoff, the board said. Section 302(c)(4) “clearly contemplates that dues-checkoff normally does survive contract expiration,” the board said.

In addition to ignoring the differing statutory treatment, Bethlehem Steel “failed to acknowledge another crucial dissimilarity between dues checkoff and union security: the fundamental difference between their compulsory and voluntary natures,” the board said.

Participation in dues checkoff is “entirely voluntary” and an employee under Section 7 has the right to choose to pay dues by a different method, the board said. Contrary to the assertion in Bethlehem Steel, “union-security and dues-checkoff are ‘distinct and separate matters,' ” the board said.

NLRB case law developments since Bethlehem Steel “cast further doubt” on its reasoning for allowing employers unilaterally to drop dues checkoff when a contract expires, the board said.

Among them are decisions recognizing an employer doesn't violate the NLRA by voluntarily continuing dues checkoff after a collective bargaining agreement expires, while an employer voluntarily continuing to enforce a union security provision certainly would violate the act, the board said.

“The incompatibility of the two lines of cases demonstrates that the connection between union security and dues-checkoff cannot bear the burden the Board assigned to it in Bethlehem Steel,” the board said.

To contact the reporter on this story: Kevin McGowan in Washington at kmcgowan@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

Text of the opinion is available at http://www.bloomberglaw.com/public/document/NLRB_Board_Decision_Lincoln_Lutheran_of_Racine_362_NLRB_No_188_20.