Hunton Employment & Labor Perspectives

Last week, the National Labor Relations Board (“Board” or “NLRB”) decided that an employer no longer can unilaterally stop union dues deductions from employee pay pursuant to a dues-checkoff clause once a collective-bargaining agreement (“CBA”) expires absent a lawful impasse during negotiations for a successor agreement. Valley Hosp. Med. Ctr., Inc., 371 NLRB No. 160 (2022) (“Valley Hosp. II”). The decision marks another reversal of Board precedent in favor of unions by the Biden NLRB. (We discussed a prior reversal, which concerned employee appearance policies here.)

Background on Dues-Checkoff Clauses and Board Precedent

During collective bargaining negotiations, unions frequently ask for dues-checkoff clauses that require employers to automatically deduct union dues from employees’ paychecks and send the money directly to the unions. Employers historically have had the right to stop deducting union dues from employee pay once a CBA expires. Bethlehem Steel Co., 136 NLRB 1500 (1962), remanded on other grounds sub nom. Marine & Shipbuilding Workers v. NLRB, 320 F.2d 615 (3d Cir. 1963), cert. denied 375 U.S. 984 (1964). In 2015, the Board reversed course in Lincoln Lutheran of Racine, 362 NLRB 1655 (2015), deciding that such unilateral action by employers violated the National Labor Relations Act (“NLRA” or “Act”). The decision in Lincoln Lutheran was short lived. In 2019, the NLRB returned to its longstanding precedent in Valley Hosp. Med. Ctr., Inc., 368 NLRB No. 139 (2019) (“Valley Hosp. I”). The union appealed the decision in Valley Hosp. I to the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit remanded the case to the Board in Local Joint Exec. Bd. of Las Vegas v. NLRB, 840 F. App’x 134 (9th Cir. Dec. 30, 2020), which set the stage for Valley Hosp. II.

A Summary of the Valley Hospital II Decision

Facts

The facts of Valley Hosp. II are straightforward. The employer and a union were parties to a CBA that contained a dues-checkoff clause. The clause said that it “continued in effect for the term of the Agreement.” After the CBA expired, the employer notified the union that it was going to stop automatically deducting union dues from employees’ pay. Although Lincoln Lutheran was the law at the time, the employer in its notice to the union pointed to a memorandum by then-General Counsel Peter Robb (a Trump appointee) stating that the General Counsel may seek to overturn the decision in Lincoln Lutheran.

Procedural History

The procedural history is more convoluted, albeit not unusual when it comes to NLRB proceedings.

• The union filed an unfair labor practice charge against the employer. It argued that the employer violated Section 8(a)(5) of the NLRA—which makes it unlawful for an employer to refuse to bargain with a union over terms and conditions of employment—by unilaterally stopping the dues-checkoff practice after the CBA expired.

• The Board issued a complaint. The matter proceeded to a hearing before an administrative law judge (“ALJ”), who dismissed the complaint in light of the language in the dues-checkoff language stating that the clause “continued in effect for the term of the Agreement.”

• Upon review, the NLRB upheld the dismissal of the complaint but for a different reason. It explained that “a dues-checkoff provision properly belongs to the limited category of mandatory bargaining subjects that are exclusively created by the contract and enforceable through Section 8(a)(5) of the Act only for the duration of the contractual obligation created by the parties,” thereby overturning Lincoln Lutheran and restoring longstanding Board precedent. Valley Hosp. I, 368 NLRB at slip op. 1.

• The union appealed the NLRB’s decision to the Ninth Circuit Court of Appeals. The court faulted the Board for failing to address “apparently contrary precedents,” pointing to other clauses “created by the contract”—such as grievance and seniority clauses—that survive contract expiration under NLRB precedent, and remanded the case to the Board to “supplement[] its reasoning. “

Decision

On remand, the NLRB overturned Valley Hosp. I and readopted Lincoln Lutheran, deciding that it is unlawful for an employer to unilaterally stop union dues deductions pursuant to a dues-checkoff clause when a CBA expires absent a lawful impasse during negotiations over a successor agreement. The Board opined that a dues-checkoff clause should not be treated any differently than other terms and conditions of employment that generally cannot be terminated upon contract expiration pursuant to the Supreme Court of the United States’ decision in NLRB v. Katz, 369 U.S. 736 (1962). According to the NLRB, its decision in Valley Hosp. II implements the NLRA’s policies of encouraging collective bargaining and protecting employees’ free choice in their exercise of protected concerted activity. The Board ordered the employer to make the union whole for lost dues. The NLRB further decided that its decision in Valley Hosp. II would be retroactively applied to all pending cases.

Dissent

The dissent challenged the decision on numerous grounds. As an initial matter, the dissent questioned the majority’s decision to overturn precedent in light of the Ninth Circuit’s instruction that the Board merely supplement its reasoning in Valley Hosp. I. In addition to this:

• The dissent opined that dues-checkoff clauses are unique clauses that do not fall under the general rule articulated in Katz. It explained that the Labor Management Relations Act (“LMRA”) generally prohibits an employer from making a payment to a union, and one limited exception exists if an employee authorizes the employer to deduct union dues so long as the authorization is revocable when a CBA terminates. The dissent further explained that dues-checkoff obligations are unique because they cannot exist at the commencement of the bargaining relationship but only if the parties agree to them—unlike other obligations and terms and conditions of employment that can and frequently do exist before the parties actually enter into a CBA.

• The dissent explained that employers and unions have statutory rights to exercise economic weapons during collective bargaining negotiations and one such weapon historically available to employers has been the ability to stop union dues deductions when a CBA expires.

• The dissent pointed to the Supreme Court’s acknowledgment—without criticism—in Litton Fin. Printing Div. v. NLRB, 501 U.S. 190 (1991) of the NLRB’s longstanding precedent permitting employers to unilaterally cease union dues deductions when CBAs expire.

• The dissent disagreed with the Board’s order requiring the employer to pay the union for lost dues instead of allowing the employer to recoup the money it already paid to employees to cover the lost dues, opining that such an order was punitive in nature and therefore impermissible under the NLRA (which does not provide for punitive damages) and inconsistent with the LMRA’s prohibition of employer payments to unions.

• The dissent said that the decision should not be retroactively applied to employers who relied on Valley Hosp. I because it would be manifestly unjust to do so.

Conclusion

The decision in Valley Hosp. II may have little to no impact on employers who historically have not stopped union dues deductions pursuant to dues-checkoff clauses (despite their right to do so). However, the decision is noteworthy for all employers as it now marks yet another change in Board law by the Biden NLRB in favor of unions. Many more such changes are expected. We will keep you posted.