United States: Upending A Fifty-Three Year Old Precedent, National Labor Relations Board Holds That An Employer's Obligation To Deduct Union Dues From Employee Paychecks Continues After The Expiration Of A Collective Bargaining Agreement

Last Updated: September 8 2015
Article by Igor Babichenko

On August 27, 2015, the National Labor Relations Board (the "Board") held that an employer's obligation to deduct union dues from employee paychecks continues after the expiration of a collective bargaining agreement. Lincoln Lutheran of Racine, Case 30-CA-111099 (Aug. 27, 2015). In doing so, the Board nullified its fifty-three year old Bethlehem Steel, 136 NLRB 1500 (1962) decision, which held that an employer's obligation to "check-off" union dues ends when its collective bargaining agreement with the union expires.

In a 3-2 decision, the Board majority, through Chairman Pearce, Member Hirozawa and Member McFerran, reversed the Administrative Law Judge's dismissal of a complaint alleging that the employer unlawfully ceased checking off union dues after its contract with the union expired. The Administrative Law Judge relied on Bethlehem Steel (and ignored WKYC-TV, Inc. 359 NLRB No. 30 (2012)) in dismissing the complaint. As we previously discussed, in WKYC-TV, Inc., the Board overruled Bethlehem Steel. The Board's composition at that time, however, included two members whose appointments the Supreme Court subsequently found invalid in NLRB v. Noel Canning, 134 S. Ct. 2550 (2014). In Lincoln Lutheran of Racine, the Board again revisited and overruled Bethlehem Steel. Finding that the National Labor Relations Act (the "Act") prohibits employers from unilaterally changing employees' terms and conditions of employment without prior notice and meaningful opportunity to bargain, the Board held that "[a]n employer's decision to unilaterally cease honoring a dues-checkoff arrangement established in an expired agreement obstructs collective bargaining just as other, prohibited unilateral changes do."

The Board majority concluded that the Bethlehem Steel decision, while longstanding, lacked "a coherent explanation" and was flawed for several reasons. First, that decision ignored Section 302(c)(4) of the Act, which "contemplates" that dues check-off arrangements normally should survive the expiration of a collective bargaining agreement. Second, Bethlehem Steel improperly treated dues check-off provisions identically to union-security provisions, which expire when a collective bargaining agreement expires. According to the Board majority, union-security and dues check-off provisions should be treated differently because: 1) parties have the option of negotiating either without the other; 2) the Act itself treats union-security and dues check-off differently by explicitly making union-security dependent on the existence of a contract; and 3) union-security is mandatory, while "employees cannot be required to authorize dues checkoff as a condition of employment." Finally, the Board majority stated that developments in the Board's case law subsequent to Bethlehem Steel cast doubt on its reasoning.

Recognizing that its decision is an abandonment of a decades old standard, the Board majority concluded that the new standard would not apply retroactively. Accordingly, the Board will decide cases involving an employer's unilateral cessation of dues check-off arrangements following contract expiration pending as of August 27, 2015 under Bethlehem Steel. Going forward, however, an employer will be in violation of the Act if it unilaterally ceases to deduct union dues from employee paychecks after the expiration of a collective bargaining agreement.

Members Miscimarra and Johnson dissented from the Board majority's decision. According to the dissenting members, "[t]he 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." Whereas, under Bethlehem Steel, employers ordinarily did not consider dues check-off a major bargaining issue, under the new standard: 1) dues check-off will become another contentious bargaining issue; 2) with the elimination of post-expiration dues check-off as bargaining leverage, employers will turn to lockouts to strengthen their bargaining position; and 3) employers and unions will enter into more new agreements without dues check-off provisions. Members Miscimarra and Johnson predicted that each of these "predictable outcomes" will destabilize labor relations in contravention of the Act's purposes.

Although the Lincoln Lutheran of Racine decision appears on its face very beneficial to organized labor, the Board might have unintentionally—or predictably according to the dissenting members—made it more difficult for unions and employers to reach agreement on new contracts. The Board's decision provides employers an easier path for bargaining to impasse in successor contract negotiations.

Under Board precedent, impasse on a single critical issue can create an impasse on the entire agreement, provided that 1) a good faith bargaining impasse actually exists; 2) the single issue involved is critical; and 3) the impasse on this single, critical issue led to a breakdown in the overall negotiations. See Erie Brush & Manufacturing Corp. v. NLRB, Case No. 11-1337 (D.C. Cir. Nov. 27, 2012) (holding that that the employer and the union were at an impasse over union security). Although Erie Brush provides employers reluctant to bargain with a union an opportunity to create a bona fide dispute by insisting on an open shop, the Board generally views an employer's reluctance to agree to union security as evidence of bad faith bargaining. See Clarke Manufacturing, 352 NLRB 141 (2008) (concluding that an employer's submission, without a tenable explanation, of a regressive proposal to eliminate a union security provision was unlawful under the Act). Accordingly, the detrimental effect of Erie Brush, at least from organized labor's perspective, was somewhat limited.

Lincoln Lutheran of Racine, however, provides employers another avenue to create a singular issue (dues check-off) impasse. Because some employers will want to secure elimination of dues check-off as an economic weapon in subsequent negotiations, they now have a "tenable position" for being committed to proposals that either: 1) do not provide for dues check-off; or 2) expressly provide that dues check-off will cease immediately upon the expiration of the collective bargaining agreement. Given that most unions likely will refuse to agree to either proposal, it certainly appears that a bona fide impasse may be more likely to result. In turn, this may result in more strikes, lockouts, and other industrial strife. As Members Miscimarra and Johnson quipped in dissent: "The majority's position here is likely to produce a situation that resembles the dog in Aesop's fable, which had a self-destructive 'desire for more, rather than being content with what one has.'"

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