NLRB Holds Dues Continue Beyond Contract’s Expiration

For those that closely follow the National Labor Relations Board, it comes as no surprise that the current Biden Board overruled a decision previously issued by the Trump Board. The target this time: union dues. The NLRB held on October 3 that the employer’s obligation to deduct union dues from an employee’s wages and remit to the union under a collective bargaining agreement, must continue after the expiration of that collective bargaining agreement. This decision in Valley Hospital Medical Center, Inc. d/b/a Valley Hospital Medical Center and Local Joint Executive Board of Las Vegas overruled a 2019 case of the same name that gave employers the right to stop collecting union dues after the expiration of the collective bargaining agreement containing that requirement. This action is another reversal of longstanding precedent.  

The Law As It Once Was

As a general matter, the employer’s duty to bargain with the exclusive bargaining agent of employees pursuant to Section 8(d) of the National Labor Relations Act prohibits the employer from unilaterally changing the terms and conditions of employment without first bargaining with the union. NLRB v. Katz, 369 U.S. 736 (1962). As with any law, there are exceptions, which the Board has previously recognized. One such exception was that certain provisions of an expired collective bargaining agreement need not be honored because the contract is no longer in effect. Prior to its recent decision, the Board in Bethlehem Steel, 136 NLRB 1500 (1962), stated that dues checkoff provisions were one of these exceptions. Therein, the Board stated that “[t]he checkoff provisions in Respondent’s contracts with the Union implemented the union-security provisions. The Union’s right to such checkoffs in its favor, like its right to the imposition of union security, was created by the contracts and became a contractual right which continued to exist so long as the contracts remained in force.” Simply put – no contract, no dues checkoff. The same principle held true for other terms of the collective bargaining agreement such as management rights clause, and importantly the no-strike provision. Once the contract expires, the previously enforceable terms expire with it.

The Board overturned this 50-year-old precedent in 2015 in Lincoln Lutheran of Racine, 362 NLRB 1655 and then re-established it again in 2019 in Valley Hospital Medical Center, 368 NLRB No. 139 (2019). With the October 3 decision, the Board returns to the Lincoln Lutheran standard, allowing dues checkoff provisions to remain enforceable beyond the contract’s expiration.

2022 Valley Hospital

In this case, approximately 13 months after the expiration of the collective bargaining agreement, which contained a dues checkoff provision, the employer ceased its practice of checkoff, providing the union with five days’ notice. This action brought on years of litigation before the Board, leading to a decision by the U.S. Court of Appeals for the Ninth Circuit in 2021, which remanded the case back to the Board “so that it may have an opportunity to provide an adequate explanation for its approach to dues checkoff by explicitly addressing the precedents cited by the Union that appear to contradict the ‘contract-creation’ rationale used in this case” as previously held in Bethlehem.  

In distinguishing other terms that expire with the collective bargaining agreement, the Board stated that, “unlike 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 non-statutory right by a party to the agreement.” Further, the Board held,

… we find that dues-checkoff provisions are not analogous to union-security provisions, whose status after contract expiration is established by statute, nor to arbitration provisions, management rights clauses, or no-strike clauses, which cannot be enforced after contract expiration because they are waivers of statutory and non-statutory rights. We do find dues-checkoff provisions materially similar to other types of payroll deductions established for the administrative convenience of employees…we see no support for finding that their connection to union dues makes them less protected from unilateral changes than other types of deductions.

Accordingly, just because the union security provision of a collective bargaining agreement that authorizes dues checkoff expires, does not mean that the dues checkoff ceases or that an employer can unilaterally cease deducting the union dues.

The Board found the employer in this case, which unilaterally ceased dues deductions, in violation of Section 8(a)(5).  The Board ordered the employer to make the union whole for dues it would have received from employees who had authorized dues checkoff. This make-whole relief included payment of interest to the union.

Practical Considerations

The Board applied this change in the law retroactively for all pending cases where dues checkoff is at issue. For purposes of clarity, the Board, quoting SNE Enterprises, 329 NLRB 673 (2005), stated that it will:

apply a new rule “to the parties in the case in which the new rule is announced and in other cases pending at the time so long as [retroactivity] does not work a ‘manifest injustice.’”  In determining whether retroactive application will work a manifest injustice, the Board considers the reliance of the parties on preexisting law, the effect of retroactivity on accomplishment of the purposes of the Act, and any particular injustice arising from retroactive application. [emphasis added]

For employers, this decision results in the loss of an economic tool that could otherwise incentivize the union to enter into a new or successor agreement.

If an employer has ceased dues deductions following the expiration of a collective bargaining agreement, it would be wise to consult with labor counsel to determine whether an employer can utilize the “manifest injustice” argument. If an employer has continued to deduct dues following the expiration of an agreement, they should continue to do so.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.