In Valley Hospital Medical Center, 371 NLRB No. 160 (Sept. 30, 2022) (Valley Hospital II), a divided National Labor Relations Board held that employers must continue to deduct union dues from employees’ pay and remit such dues to their union – a process known as “dues checkoff” – even after the expiration of the collective bargaining agreement containing a checkoff provision. The decision demonstrates the current Board’s rather unfriendly approach to employers. It also illustrates how employers have been whipsawed in recent years by swings in Board precedent depending on the Board’s political makeup.
In Valley Hospital, the employer and union were parties to a collective bargaining agreement that had a dues-checkoff clause. Over a year after the agreement had expired, the employer ceased deducting union dues from its employees’ pay. The practical effect was that the union would have to collect dues directly from the employees. The union objected and claimed that the employer’s action violated the National Labor Relations Act (NLRA).
Under well-established U.S. Supreme Court precedent, where a collective bargaining agreement has expired, an employer must generally refrain from unilaterally changing terms and conditions of employment until the parties either negotiate a new contract or bargain to lawful impasse. However, in its 1962 decision, Bethlehem Steel, 136 NLRB 1500 (1962), the Board held that an employer’s obligation to check off union dues ends when the collective bargaining agreement containing a checkoff provision expires. As such, an employer could unilaterally – and lawfully – cease dues checkoff upon expiration. For over 50 years, the Bethlehem Steel rule was consistently applied by the Board and enforced in the United States Courts of Appeals.
But things changed in 2015. The Obama Board overruled Bethlehem Steel and held that an employer’s obligation to check off union dues continues after expiration of the collective bargaining agreement establishing such an arrangement. Lincoln Lutheran of Racine, 362 NLRB 1655 (2015). Lincoln Lutheran was short-lived, however, because in 2019, in an earlier decision in the Valley Hospital case, the Trump Board overruled Lincoln Lutheran and reinstated the Bethlehem Steel rule. Valley Hospital Medical Center, 368 NLRB No. 139 (2019) (Valley Hospital I). The union appealed to the United States Court of Appeals for the Ninth Circuit, which remanded the case to the Board.
On remand in Valley Hospital II, the Board – now controlled by Biden-appointees – reversed its decision in Valley Hospital I, once again rejected Bethlehem Steel, and reinstated the rule of Lincoln Lutheran. The Board majority observed that the NLRA’s policies would be furthered by holding that dues checkoff provisions survive expiration of the collective bargaining agreement. The majority also distinguished dues checkoff provisions from other contract terms that do not survive contract expiration – mandatory arbitration, no-strike, and management-rights clauses – reasoning that the latter category involves the waiver of rights the parties would otherwise enjoy and thus are presumed not to survive contract expiration. The majority concluded that it would apply its decision retroactively in all pending cases – even in cases in which the employer acted in reliance on Valley Hospital I. Finally, the majority ordered the employer to make the union whole for dues that it should have deducted and remitted had it not ceased dues checkoff, but prohibited the employer from recouping from the employees any dues amounts that it was required to reimburse. This is a particularly harsh remedy because union dues are a financial obligation that employees owe to their union. The employer simply performs an administrative service of facilitating union dues collection.
Members Kaplan and Ring dissented. They quoted language from the Taft-Hartley Act providing that employers may not deduct union dues from their employees’ pay unless “the employer has received from each employee, on whose account such deductions are made, a written assignment which shall not be irrevocable for a period of more than one year, or beyond the termination date of the applicable collective agreement, whichever occurs sooner.” The “logical implication” from the reference to “applicable collective agreement,” they argued, was that employers may terminate dues-checkoff provisions upon expiration of the agreement containing such provisions. They also argued that the majority decision impermissibly interferes with the bargaining process by “eliminating one of employers’ legitimate economic weapons” to persuade unions to agree to a successor collective bargaining agreement. Finally, they argued that it would be manifestly unjust to apply this decision retroactively to employers who acted pursuant to current Board law (Valley Hospital I) and to “a practice that had been settled law for decades”; and that the make-whole order barring the employer from recouping funds that it had already paid the employees in dues money was “clearly punitive” and exceeded the Board’s remedial authority.
Valley Hospital II is the latest swing in the dues checkoff “pendulum.” Going forward, employers who are parties to collective bargaining agreements containing dues-checkoff provisions must continue to deduct and remit dues after the agreement expires. Failing to do so could not only violate the NLRA, but also make the employers financially responsible for the union dues of their employees.
