For many decades, the National Labor Relations Board permitted employers to discontinue dues checkoff arrangements following the expiration of a collective bargaining agreement. More recently, employers’ right to do so has fluctuated depending on which political party has held the majority of seats on the NLRB. On September 30, 2022, the current Democratic majority ruled that employers must continue a contractual dues checkoff despite the expiration of the subject union contract.

Dues Checkoff Provisions

A dues checkoff agreement requires that the employer deduct union dues from employees’ wages and remit them to the union as authorized by the employee. Historically, upon expiration of a collective bargaining agreement (CBA) containing a dues checkoff provision, the employer could lawfully stop collecting dues for the union without having to bargain over the changed practice. In other words, the dues checkoff did not outlive the contract.

Bethlehem Steel Precedent

In 1962, the U.S. Supreme Court held that an employer must maintain employees’ terms and conditions of employment following the expiration of a CBA until the parties either agree to new terms or reach an impasse in their negotiations of a successor agreement. However, the NLRB has always recognized exceptions to this doctrine.

The Board first expressed such an exception for dues checkoff agreements in a 1962 Bethlehem Steel case. There, the NLRB reasoned: “The Union’s right to such checkoffs in its favor . . . was created by the contracts and became a contractual right which continued to exist so long as the contracts remained in force.”

The Bethlehem Steel holding survived at the Board, and in the federal courts, until 2015. Then, with a Democratic majority, the NLRB first held that employers must continue to deduct dues even after the contract expires. By 2019, Republicans gained the Board majority and reinstated the Bethlehem Steel precedent.

Valley Hospital Medical Center Reversal

The 2019 reinstatement of Bethlehem Steel occurred through a case involving Valley Hospital Medical Center. Following that decision, the union requested review by the U.S. Court of Appeals for the Ninth Circuit. The Ninth Circuit remanded the case to the NLRB to “supplement[] its reasoning” for reversing the 2019 decision.

Instead of supplementing the 2019 reasoning, the Board, again with a Democratic majority, rejected the application of Bethlehem Steel. According to the majority opinion, “treating contractual dues-deduction provisions comparably with nearly all contractual provisions, which establish terms and conditions of employment that cannot be changed unilaterally after contract expiration, implements the [National Labor Relations] Act’s policy goals of both encouraging the practice and procedure of collective bargaining and of safeguarding employees’ free choice in the exercise of their Section 7 rights.”

Thus, under the latest Valley Hospital Medical Center ruling, employers must continue deducting union dues despite CBA expiration.

What does this mean for employers?

The NLRB ordered Valley Hospital Medical Center to make the union whole for dues it would have received from employees. This remedy includes paying the unpaid dues with interest to the union. The Board applied this changed interpretation retroactively to all pending cases where dues checkoff is at issue. Accordingly, all employers that have unilaterally stopped withholding and remitting union dues after a CBA expired are no longer in compliance with the law and could be required to pay the dues with interest.

This latest ruling will likely return to the courts for further proceedings. However, there is no certainty of a return to the long-standing Bethlehem Steel exception. Thus, most employers will likely choose to continue dues checkoff following contract expiration as long as the current Valley Hospital Medical Center decision remains the Board’s majority view.

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