In Precedent-Shifting Decision, NLRB Says Dues Checkoff Survives CBA Expiration

Take note, unionized employers: the National Labor Relations Board (“NLRB” or the “Board”) held on Monday that employers violate the National Labor Relations Act (“NLRA”) when, following expiration of the parties’ collective-bargaining agreement (“CBA”), they unilaterally cease deducting and remitting employee union dues to the union pursuant to contractual dues checkoff provisions. The 3-2 decision in Valley Hospital Medical Center (”Valley Hospital II”), split along partisan lines, is the next in what should be a steady stream of union-friendly decisions likely to be issued by the Biden Board in the coming months.

The ruling, which followed a remand from the Ninth Circuit, reverses the Board’s 2019 decision in the same case (“Valley Hospital I”) that reinstated the rule that stood from 1962 until 2015 allowing employers to withhold union dues following CBA expiration.

Post-Contract Expiration Changes to Terms and Conditions of Employment: An employer must generally maintain existing terms and conditions of employment following expiration of a CBA – typically, until the parties bargain to agreement or otherwise reach a good-faith impasse. This rule was established by the Supreme Court’s 1962 holding in NLRB v. Katz. But, there are certain terms that an employer may change unilaterally following expiration of the CBA. For example, an employer need not arbitrate post-CBA expiration grievances (it must process the grievances, however). That is because labor arbitration is an obligation created not by statute – the NLRA – but by the parties’ contract. For over 50 years, until the mid-2010s, employers were also permitted to unilaterally cease checking off and remitting employee dues to the union representing employees following CBA expiration.

History of the Law Regarding Post-Contract Expiration Changes to Dues Check-Off Obligation: In 1962, the Board held in Bethlehem Steel that an employer is not obligated to check off union dues upon expiration of the CBA containing the dues check-off obligation, and therefore may unilaterally cease checking off dues after CBA expiration. This was the law for 53 years. In 2015, the Obama Board changed the law on this subject in Lincoln Lutheran of Racine. There, the Obama Board held that dues checkoff – like other terms and conditions of employment, including wages and benefits – is part of the status quo that the employer must maintain or bargain over changing even after expiration of the CBA creating the dues check-off obligation. But, four years later in Valley Hospital I, the Trump Board overruled Lincoln Lutheran, and reinstated Bethlehem Steel’s holding that an employer may unilaterally cease checking off dues following CBA expiration.

The facts in this case were undisputed. Following expiration of the parties’ CBA, the employer unilaterally ceased dues checkoff. It did so at a time when the Board’s Lincoln Lutheran remained in effect. The Board then overruled Lincoln Lutheran in this case, Valley Hospital I. The Union appealed to the Ninth Circuit, which remanded the case to the Board. The Ninth Circuit reasoned that the Board had failed to address “apparently contrary precedents” holding that certain obligations created by the contract do survive expiration of that contract – for example, the requirement that an employer process grievances short of arbitration and the granting of seniority rights to union officials. By the time the case was remanded, however, the partisan composition of the Board had changed and a Democratic-majority was in place, ready and seemingly willing to overrule the previous holding in Valley Hospital I.

On remand, the Board held that dues checkoff provisions should be treated as part of the status quo that cannot be changed unilaterally after CBA expiration. The majority reasoned that previous Board cases finding that certain obligations survive contract expiration could not be “harmonized’ with the Board’s previous decision in Valley Hospital I. Moreover, the “contract creation” rule would result in the Board having to “create many additional exceptions to the status quo requirement.”

Members Kaplan and Ring, who were in the majority for the Board’s holding in Valley Hospital I, dissented. They noted that the Taft-Hartley Act, passed in 1947, amended the NLRA to make it illegal for employers to deduct dues unless workers agree to the deduction, and reinforces that dues checkoff cannot exist prior to bargaining relationship or the existence of a written agreement.

From a practical perspective, this ruling strips an employer of some bargaining leverage following expiration of a CBA. From 1962 to 2015, and since 2019, employers could lawfully cease remitting dues to the union following expiration of the CBA. Imperiling the Union’s ability to receive employee dues directly from employers – rather than haggling with employees themselves – could and often would push the union closer to reaching an agreement with the employer. Unions now know, however, that employers must continue remitting dues following contract expiration until the parties agree otherwise or the parties reach a good-faith impasse.

But given the three precedent-shifting decisions in this area of the law over the last seven years, it is not unreasonable to believe that Valley Hospital II may, too, be overruled when political winds shift and alter the Board’s composition once again.