On August 27, 2015, in the case Lincoln Lutheran of Racine, Case No. 30-CA-111099, the National Labor Relations Board (the "Board") ruled that an employer's obligation to "check off" union dues from employees' wages continues upon the expiration of a collective bargaining agreement.  In rendering this decision, the Board overruled the 53-year-old standard set forth in Bethlehem Steel, 136 NLRB 1500 (1962), which previously held that an employer's obligation to "check off" -- that is, collect --  union dues ended upon the expiration or termination of a collective bargaining agreement.

THE FACTS

Respondent employer Lincoln Lutheran ("Lincoln") had collectively bargained with Service Employees International Union Healthcare Wisconsin, SEIU-HCWI (the "Union") since 2007, and previously entered into successive collective bargaining agreements, which included a dues checkoff provision that permitted Lincoln to deduct union initiation fees and membership dues from paychecks of participating employees and transmit those funds directly to the Union.  During negotiations for the next collective bargaining agreement, Lincoln advised the Union that it intended to terminate the dues-checkoff and union security provisions when the agreement expired on February 19, 2013, and subsequently discontinued dues checkoffs on March 19, 2013. 

A complaint was subsequently filed alleging that Lincoln unlawfully violated the National Labor Relations Act (the "Act") when it unilaterally stopped checking off union dues after its collective bargaining agreement with the Union expired.  The Administrative Law Judge below, relying on Bethlehem Steel, ruled in favor of Lincoln, holding that the decision to unilaterally stop dues checkoff after expiration of the collective bargaining agreement did not violate the Act, and dismissed the complaint.

THE BOARD'S RULINGS

In a 3-2 decision, the Board reversed the Administrative Law Judge's dismissal of the complaint.  Significantly, while the Administrative Law Judge relied on Bethlehem Steel, the Board noted that it had previously overruled Bethlehem Steel in the 2012 case, WKYC-TVInc., 359 NLRB No. 30 (2012).  Nonetheless, as the Supreme Court's Noel Canning decision1  vacated the WKYC decision, the Board revisited this issue in Lincoln Lutheran.

The Board majority first overruled Bethlehem Steel, finding that although the rule inBethlehem Steel was longstanding, the Board "never provided a coherent explanation" for such a rule and referenced the Ninth Circuit's decision, Local Joint Executive Board of Las Vegas v. NLRB, 657 F. 3d 865 (9th Cir. 2011), which noted the Board's lack of justification for the Bethlehem Steel standard.

Next, the Board noted that an employer's decision to stop unilaterally honoring a dues checkoff arrangement established in an expired collective bargaining agreement "obstructs collective bargaining just as other, prohibited unilateral changes do."  Specifically, the Board found that "[a]n employer's unilateral cancellation of dues checkoff when a collective bargaining agreement expires both undermines the union's status as the employees' collective bargaining representative and creates administrative hurdles that can undermine employee participation in the collective-bargaining process" and that "[c]ancellation of dues checkoff eliminates the employees' existing voluntarily-chosen mechanism for providing financial support to the union."  The Board also noted a distinction between an employee's voluntary choice to checkoff union dues from their paychecks -- which the Board deemed analogous to other voluntary checkoff agreements, such as employee savings accounts and charitable contributions -- and  a union-security agreement, which contractually requires an employee to pay union dues or face termination.

Against this background, the Board determined that "requiring employers to honor dues checkoff arrangements after contract expiration serves the Act's goal of promoting collective bargaining, consistent with longstanding Board precedent proscribing post contract unilateral changes in terms and conditions of employment."   The Board further stated that "in short, there is no reason why employees who wish to support their union financially should be denied the administrative convenience of voluntary dues checkoff, simply because the collective-bargaining agreement has expired."  Thus, the Board held that "an employer, following contract expiration, must continue to honor a dues checkoff arrangement established in that contract until the parties had either reached a successor collective-bargaining agreement or a valid overall bargaining impasse permits unilateral action by the employer."  Importantly, however, the court noted that its holding did not preclude parties from expressly agreeing that, as part of the terms of a collective bargaining agreement, a union could chose to waive its statutory right to benefit from a dues checkoff upon the expiration of a collective bargaining agreement.

TAKEAWAYS

This decision will impact employers and employees during both the initial collective bargaining agreement negotiations and during negotiations for subsequent agreements.  For example, employers can no longer use the potential cancellation of dues checkoffs as a point of leverage when negotiating.   Additionally, this decision may create other hurdles during negotiations as more employers will likely request that the parties agree that dues checkoffs are discontinued upon the expiration of a collective bargaining agreement.  As dues checkoffs are important to participating union members, more time may be spent bargaining over this issue.

This decision is a dramatic shift from previous Board precedent.  Employers and their attorneys should be aware of this new development in an effort to reduce any potential liability under the Act.