NLRB Reverses Long-Standing Precedent on Employers' Ability to Unilaterally Cease Checkoff for Union Dues

by Davis Wright Tremaine LLP
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Employers with collective-bargaining agreements that include union dues “checkoff” requirements may be unhappily surprised to learn that on Dec. 12, 2012, the National Labor Relations Board (the “NLRB”) wiped out 50 years of case law that had favored employers. Going forward, the NLRB will no longer allow employers to unilaterally discontinue checkoff when the contract expires or terminates. The result: Employers subject to checkoff must keep a steady stream of union dues open and flowing to the unions that represent their employees, even though the union contract has expired.

Many collective-bargaining agreements contain a “union security” provision, which requires employees—as a condition of employment—to become and remain members of the union that represents them for the life of that contract (employees have the right, however, to object to membership and thereafter only pay the union the equivalent of the dues and fees that are “germane to collective-bargaining, contract administration, and grievance adjustment”). In bargaining, unions want to ensure a reliable revenue stream, and will bargain hard for “dues checkoff authorization” (“checkoff”) provisions, whereby the employers must honor employees’ requests (“authorizations”) to have their union dues (or the equivalent for objecting nonmembers) deducted from their paychecks and submitted directly to the union.

Historically, the NLRB has held that arbitration, no-strike, and management rights clauses in collective-bargaining agreements do not survive expiration or termination of the underlying agreements. Since its 1962 decision in Bethlehem Steel, the NLRB treated checkoff provisions as similar “creatures of contract,” and had allowed employers to unilaterally cease checkoff upon contract expiration or termination. The NLRB’s reasoning was consistent; if there was no contract in place, it followed that the obligations and waivers created by those contract provisions were no longer effective. The NLRB also reasoned that employees who only paid dues pursuant to a union security clause should not be required to continue diverting portions of their income to the union once the obligation disappeared. Perhaps most important to employers was the advantage gained in collective-bargaining: By ceasing checkoff, employers would not have to dedicate resources to collecting and remitting money that would sustain union representatives during a long contract hiatus or the run-up to a strike.

In WKYC-TV, Inc., a case that many will surely view as another gift to organized labor, the NLRB wiped out that long-standing principle and will now require employers to continue deducting and funneling employees’ dues (or their equivalent) to the union that represents them even after the contract setting for the obligation expires or is terminated. Employers who unilaterally cease checkoff may be subject to allegations that they have violated the National Labor Relations Act (the “Act”).

The NLRB in WKYC-TV considered the relevant precedent since Bethlehem Steel, the legislative history of the Act and related statutes (including states’ “right to work” laws), and other voluntary employee deductions carried out by employers (for example to savings accounts or charitable organizations). The NLRB’s rationale for holding that checkoff survives contract expiration or termination boils down to this: checkoff is a matter related to wages, hours, and other terms and conditions of employment within the meaning of the Act and is therefore a mandatory subject of bargaining. In the NLRB’s view, checkoff is, therefore, unlike no-strike, arbitration, and management rights clauses because it does not “involve the surrender of any statutory or nonstatutory right.” Rather, checkoff is “simply a matter of administrative convenience to a union and employees.” Thus, like wage rates set by a contract, checkoff must endure beyond the life of the contract that established it.

To overrule Bethlehem Steel the NLRB majority rejected all of the arguments raised by dissenting Member Hayes. In short, the NLRB disagreed that checkoff was involuntary and that cessation of checkoff was necessary to protect employees’ rights to avoid supporting a union, if they chose to do so. The NLRB also discounted the importance of cessation of checkoff as an economic weapon available to employers; the NLRB concluded that any value cessation had for employers was outweighed by the “detrimental” impact to employees. Finally, the NLRB reiterated its position, contrary to Member Hayes, that checkoff is a term and condition of employment that must be maintained until the parties bargain for a successor agreement or to a valid impasse.

How can employers avoid the checkoff trap? The best approach might be to avoid being saddled with checkoff in the first place. Employers are required to approach collective-bargaining with an open mind toward reaching an agreement, but as the Act clearly states, the obligation to bargain in good faith “does not compel either party to agree to a proposal or require the making of a concession.” Employers that feel strongly about avoiding a checkoff obligation that will outlast the contract can protect themselves by seeking adequate concessions from a union as a fair trade for checkoff. Employers might also bargain for explicit language that its checkoff obligation ends with contract expiration or termination. In this regard, the assistance of a skilled negotiator could prove invaluable.

There is some other good news: Because the NLRB’s decision wiping out 50 years of clear precedent has caught many employers off guard, the NLRB correctly concluded that it would result in “manifest injustice” to apply that decision retroactively. That means that the NLRB will decide all pending cases under the Bethlehem Steel rationale.

There are also reasons for employers to remain optimistic over the short-term. First, there are pending challenges to the validity of the “recess appointments” of two members of the five-member panel that makes up the Board in Washington, D.C. The underlying legal issues are somewhat complicated, but suffice to say that, if the recess appointments are invalidated, the Board would have lacked a quorum since late-December 2011. In those circumstances, the Board would lack the authority—under recent Supreme Court precedent—to even decide WKYC-TV; if the recess appointments are invalid, the decision in WKYC-TV is likewise invalid.

In any event, the Board’s decision in WKYC-TV is at odds with decisions in at least two other circuits. As such, it is very likely that the Supreme Court will be asked to examine the NLRB’s rationale for reversing 50 years of precedent. If so, the NLRB’s decision could be short-lived.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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