Tag: union dues

October 10, 2022

NLRB Changes Course on Dues Checkoff

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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December 17, 2019

Employers Can Again Stop Union Dues Checkoff Under Expired CBA

In a December 16, 2019 decision, the National Labor Relations Board reverted to a legal principle that had stood for over 50 years. In 2015, the NLRB ruled that employers could no longer discontinue a union dues checkoff after a collective bargaining agreement had expired. Now a 3-1 Board majority restores the long-established standard from a 1962 case.

What Is Dues Checkoff?

Dues checkoff refers to the practice of deducting union dues from employees’ pay and remitting the money to the union. This practice is legal where the union and employer have agreed to it and employees have signed dues-deduction authorizations. Unions usually seek and obtain authorizations from most, if not all, bargaining unit members.

Unions typically bargain for provisions requiring employers to make a dues checkoff. This is at least an administrative convenience for unions. Otherwise, they would need to obtain the dues money directly from individual employees.

Legal Debate

Generally, many provisions of a collective bargaining agreement continue past contract expiration if no successor contract is in place. This results from the obligation to maintain the status quo on terms and conditions of employment. The employer can only make unilateral changes after contract expiration if it first bargains to impasse over desired changes.

There are exceptions to this unilateral change doctrine. These historically have included contract provisions for no-strike/lockout pledges, arbitration, management rights, union security, and dues checkoff.

In a 1962 case involving Bethlehem Steel, the NLRB found that dues checkoff was solely a contractual right that ends upon contract expiration. That analysis governed until 2015. Then, an Obama-era NLRB majority reasoned that “[u]nlike no-strike, arbitration, and management-rights clauses, a dues-checkoff provision in a collective-bargaining agreement does not involve the contractual surrender of any statutory or nonstatutory right be a party to the agreement”. The Board, in Lincoln Lutheran, continued, “similar to other voluntary checkoff agreements, such as employee savings accounts and charitable contributions, which the Board has recognized also create ‘administrative convenience’ and, notably, survive the contracts that establish them.”

New Ruling

In a case involving Valley Hospital Medical Center, the NLRB now reinstates the holding of the 1962 Bethlehem Steel case.

The Republican Board majority (all appointed by President Trump) reiterates that there would be no obligation to checkoff dues unless there is a contractual agreement to do so. Thus, once a contract including that obligation expires, the employer has no further duty to withhold and remit dues.

The Board’s lone Democratic member (whose term expired the day of this decision) strenuously objected. She argues that the majority’s analysis is “irrational” and “serves no legitimate statutory purpose.”

Ultimately, it’s tough to deny the purely partisan rift in opinion on this subject. Union dues checkoff is one of many areas where pro-business Republicans and pro-labor Democrats interpret the National Labor Relations Act differently. As such, future oscillation on this and other essential aspects of federal labor law is predictable.

Impact of New Dues Checkoff Rule

Under this latest ruling, employers have the (current) NLRB’s backing to stop a dues checkoff during periods of contract expiration. Employers must, of course, still negotiate in good faith for a new collective bargaining agreement. Assuming a new contract is reached, the company will likely have to reinstate the checkoff (barring the unlikely prospect of an agreement to remove it from the CBA.)

Note that even if the company ends the dues checkoff, the union may still collect dues directly from their members.

June 28, 2018

Supreme Court Rules Against Public Unions

On June 27, 2018, the U.S. Supreme Court issued a long-awaited decision affecting public sector unions. In Janus v. American Federation of State, County and Municipal Employees (AFSCME) Council 31, the Court ruled that government employees cannot be required to support financially unions that represent them. This decision reverses precedent from a case the Supreme Court decided 41 years ago. Public unions will now face new challenges.

Public Unions as Exclusive Bargaining Representatives

Unionizing usually means employees select by majority support a single union to represent them in dealings with their employer regarding terms and conditions of employment. The union must represent every employee fairly. Even employees who do not support the union are subject to what the union negotiates on their behalf. Employees in represented units typically cannot deal directly with their employer on topics like wages and benefits.

Agency Fees

Not all states permit unions to represent government employees in negotiations and other dealings with their public employers. But those that do often allow unions and governmental employers to agree to deduct money from represented employees’ pay to fund the union.

In a 1977 case (Abood v. Detroit Board of Education), the Supreme Court addressed Constitutional challenges to such requirements. The Court acknowledged that forcing public employees to fund every nature of union activity would violate employees’ First Amendment rights. Specifically, public employers could not compel their employees, even through collective bargaining, to contribute to unions’ political activities and lobbying efforts. However, the Court allowed at that time that public unions and employers could agree to require all employees within a bargaining unit to contribute toward the costs of collective bargaining and grievance administration. Consequently, a public employee could refrain from joining the union and paying full union dues, but would still have to pay a portion of the dues known as an agency fee.

Twenty-eight states have “right-to-work” laws that give employees the choice of whether to support a union. The Supreme Court’s ruling essentially converts all states to right-to-work states for public employees.

Janus Decision

The Supreme Court has reversed its 1977 holding on agency fees. Five Justices agreed that requiring public employees to pay anything to a union violates the employees’ First Amendment free speech rights. Four Justices joined in a vigorous dissent.

The majority justified its reversal, in part, by observing that public sector unionism was a new phenomenon in 1977: “The first State to permit collective bargaining by government employees was Wisconsin in 1959, and public-sector union membership remained relatively low until a ‘spurt’ in the late 1960’s and early 1970’s. . . .”

It also bluntly concluded that the 1977 case “was not well reasoned.”

The dissenters obviously disagreed. They contended that there are still sufficient government interests to justify this limitation on public employees’ free speech rights:

“First, exclusive representation arrangements benefit some government entities because they can facilitate stable labor relations.”
“Second, the government may be unable to avail itself of those benefits unless the single union has a secure source of funding.”
“And third, agency fees are often needed to ensure such stable funding. That is because without those fees, employees have every incentive to free ride on the union dues paid by others.”

The Justices in the majority rejected those points as inconsistent with current realities of the public-sector labor market. They noted, for example, that federal government employees do not have to pay agency fees to unions representing them; nonetheless, approximately 27% of the federal workforce are voluntary union members.

Impact on Public Unions

While allowing that public unions may retain their numbers despite this decision, the Janus majority acknowledges a potential adverse impact. But this risk, they find, does not trump the First Amendment:

“We recognize that the loss of payments from nonmembers may cause unions to experience unpleasant transition costs in the short term, and may require unions to make adjustments in order to attract and retain members. But we must weigh these disadvantages against the considerable windfall that unions have received under Abood for the past 41 years. It is hard to estimate how many billions of dollars have been taken from nonmembers and transferred to public-sector unions in violation of the First Amendment. Those unconstitutional exactions cannot be allowed to continue indefinitely.”

The dissenters emphasize that 22 states have freely chosen to permit agency fees based on compelling public interests. These states, they assert, recognize stability in bargaining with a solvent employee representative. The dissenting opinion unabashedly slights the majority of states and the federal government that evidently disagree:

“Of course, not all public employers will share that view. Some would rather not bargain with an exclusive representative. Others would prefer that representative to be poorly funded—to serve more as a front than an effectual bargaining partner.”

There is no doubt that public unions have feared this day. Eliminating agency fees will not benefit them. Surely, some employees will opt not to support the unions that represent them. These employees may risk some loss of union benefits. The Supreme Court majority specifically suggests that employees who do not join the union “could be required to pay for [union representation in disciplinary matters] or could be denied union representation altogether.”

Impact on Public Employers

Most notably, public employers may no longer transfer any money from employees’ pay to a union without the employee’s authorization. Most employers will not need to change anything for union members who have signed dues authorization cards. But employers presumably must immediately stop deducting agency fees from any employees for whom they do not have such authorization.

Employees could perhaps still authorize only a portion of the full union dues consistent with the agency fee calculation, subject to union amenability. Employers faced with this situation should first review any potentially relevant collective bargaining agreement provisions. In some cases, negotiation or clarification with the union may be appropriate.

Many states that have historically permitted the mandatory agency fee deduction are considering or have passed new laws to protect public unions. Public employers should consult these and preexisting state laws to evaluate the full extent of their obligations under Janus.

Given the complexity and Constitutional complexion of this issue, government employers should strongly consider discussing their obligations with an experienced labor lawyer.

You can read review the Supreme Court’s full majority and dissenting opinions here.