In Valley Hospital Medical Center, Inc. d/b/a Valley Hospital Medical Center, 368 NLRB No. 139 (2019), the National Labor Relations Board reversed yet another decision issued during the prior administration, and returned to employers the right to cease contractual dues checkoff obligations after a collective bargaining agreement expires. Overturning its 2015 decision in Lincoln Lutheran of Racine, 362 NLRB 1655, a 3-1 Board majority1 restored the 50+-year precedent set forth in Bethlehem Steel, 136 NLRB 1500 (1962).

In Valley, the Board held that dues checkoff provisions belong in the limited category of mandatory subjects of bargaining that are exclusively created by contract and are only enforceable through Section 8(a)(5) of the National Labor Relations Act (NLRA) for the duration of the contract. As noted by the Board majority, there is no independent statutory obligation to check off and remit union dues after the expiration of the collective bargaining agreement.

Prior Law on Dues Checkoff

In NLRB v. Katz, 369 U.S. 736, 743 (1962), the United State Supreme Court held that the general duty to bargain collectively under Section 8(d) of the NLRA requires that an employer refrain from unilaterally changing bargaining unit employees' terms and conditions of employment from the commencement of a bargaining relationship until the parties have first reached a lawful impasse in good-faith attempts to negotiate a collective-bargaining agreement. The Board has, however, recognized exceptions to the Katz unilateral change doctrine, permitting or requiring the cessation of certain contractual obligations upon contract expiration.

The Board first recognized the exception from the Katz doctrine for dues checkoff in Bethlehem Steel. There, the Board held that the unilateral termination of dues checkoff procedures was lawful and essentially constituted economic leverage that employers could apply during contract negotiations. The Bethlehem Steel rule went unchallenged for over 50 years.

In 2015, the Board overruled Bethlehem Steel in Lincoln Lutheran,2 holding that pursuant to Katz, an employer must continue dues checkoff after the expiration of a contract, recognizing a duty enforceable under Section 8(a)(5) of the NLRA. In Lincoln Lutheran, the Board held that dues checkoff provisions survive the term of the collective bargaining agreement, unless the parties “expressly and unequivocally” said otherwise, as the provisions were merely matters of “administrative convenience” to the parties. The 2015 Board distinguished dues checkoff provisions from other provisions such as management rights, no-strike, union security, and arbitration clauses, all of which expire when the contract expires.

Return to Long-Standing Precedent

In Valley, the employer stopped deducting and remitting employees' dues to the union some 13 months after the expiration of the parties' contract. The employer took that action after five days' notice but without providing the union an opportunity to bargain. The expired agreement contained a checkoff provision that, by its terms, “continued in effect for the term of the Agreement.” The authorization form also stated that it was valid “during the term of the Agreement.”

The Board held that the employer properly ceased remitting dues to the union. In explaining why dues checkoff falls within an exception to the Katz doctrine, the Board held essentially that not all subjects of mandatory bargaining are equal, distinguishing the contractual provision related to dues checkoff from other contractual provisions:

It is undisputed that upon commencement of a collective-bargaining relationship, there is no statutory obligation to refrain from strikes or lockouts, to submit employee grievances to arbitration, to cede unilateral control over a term of employment to one party, to require employees to become union members, or to check off dues and remit them to a union. That is the status quo before any contract is negotiated. The statutory obligation to do any of those things is “rooted in the contract” and does not exist until a contract provision imposing the obligation is in effect. And until that statutory obligation exists, there is no corollary statutory right to enforce compliance through Section 8(a)(5) or 8(b)(3) of the Act. When the contract expires, so do both the statutory obligation and the statutory right to enforce it.

The Board also noted that the holding in Lincoln Lutheran conflicts with the statutory bargaining process because, prior to Lincoln Lutheran being decided in 2015, “the Bethlehem Steel principle that an employer can lawfully cease dues checkoff upon expiration of a contract has been an established part of the collective-bargaining process and the settled expectations of parties negotiating in good faith under Section 8(d) of the Act.” Further, the Board noted that the Lincoln Lutheran decision was largely based on unsupported assumptions, as the decision “made no reference to anecdotal or statistical evidence from a 50-year history of bargaining under Bethlehem Steel to support its claim of allegedly dire adverse consequences resulting from permitting employers to cease dues checkoff upon expiration of a bargaining agreement.”

Member McFerran dissented from the majority, stating that the Board’s decision had little regard for the NLRA’s goal of encouraging collective bargaining. The dissent expressed the opinion that the longstanding precedent to which Valley returned was not proper or justified to begin with, thereby casting doubt on the rationale for returning to it.

Practical Considerations

The Board’s decision in Valley restores an employer’s economic tool that can be used in contract negotiations to push for a successor contract before expiration of the existing contract and/or to justify refusing to agree to an extension of the contract during continued negotiations. This “new” leverage should incentivize unions to reach settlements more quickly than they otherwise would in light of the possibility of ceased dues deductions and to consider longer collective bargaining agreements.

Further, the Board held that its decision will be applied retroactively with respect to the present case and to all pending cases.

Last, the Board’s decision in Valley represents yet another case where the Board has acted on the enforcement agenda outlined by General Counsel Peter B. Robb in Memorandum GC 18-02. Employers should expect the General Counsel and the Board to continue to focus on topics outlined in the Memorandum.