In Local Joint Executive Board of Las Vegas, etc. v. National Labor Relations Board (Hacienda III), No. 10-72981 (9th Cir., Sept. 13, 2011), the U.S. Court of Appeals for the Ninth Circuit resolved a 15-year-old case, after three NLRB rulings and two remands, by holding that an employer in a right-to-work state, unlike employers in states where union security clauses are lawful, may not unilaterally discontinue dues checkoff after the expiration of a collective bargaining agreement.

After a collective bargaining agreement expires, an employer generally cannot lawfully change wages, hours, working conditions, or other terms and conditions of employment unless it has either reached agreement with the union to do so or has bargained to impasse in a good faith effort to reach agreement.  Unilateral change absent agreement or impasse violates the employer’s duty to bargain in good faith under section 8(a)(5) of the National Labor Relations Act.  The NLRB held in 1962 in the Bethlehem Steel case that a dues checkoff provision (under which an employee may voluntarily authorize in writing that the employer withhold union dues from the employee’s pay) in a contract containing a union security clause is an exception to the general rule against unilateral changes.  That is, after contract expiration an employer may lawfully cease withholding dues without having bargained with the union to agreement or impasse. The NLRB’s rationale was that a dues checkoff provision is an adjunct to the union security clause.  Union security clauses, which require employees to pay union dues as a condition of employment, are authorized under section 8(a)(3) of the Act; employees can be required to pay dues only if a collective bargaining agreement containing a union security clause is in effect.  Accordingly, during a period in which no agreement is in effect, an employer cannot lawfully require payment of dues as a condition of employment.  Given its view that the dues checkoff provision was directly related to union security, the NLRB decided that no reason existed to require the employer to bargain over cessation of checkoff after contract expiration, because union security was not enforceable during that period.

Then, in the Tampa Sheet Metal case in 1988, the NLRB extended the exception from the post-expiration bargaining obligation to include dues checkoff provisions in collective bargaining agreements in right-to-work states.  Right-to-work states are states that have elected to exercise the option under section 8(a)(3) of the Act to prohibit union security clauses. In the case before the Ninth Circuit, the petitioning unions challenged the continued application of the Tampa Sheet Metal holding on the grounds that the NLRB had never articulated a reason for the holding, and that the rationale of Bethlehem Steel did not apply because no union security clause exists in right-to-work states.  According to the court, in those states, an employer who agrees to a dues checkoff provision is providing a convenience for the employees, not assisting in implementation of union security.  Thus, in the view of the court, under the general principle requiring bargaining over terms and conditions of employment, a right-to-work state employer that discontinued checkoff after contract expiration without bargaining to agreement or impasse would be unlawfully unilaterally changing a term or condition of employment. The court ruled that the employer had violated the Act by, in essence, refusing to negotiate over the discontinuation of dues checkoff following the expiration of the contract. 

Employers in right-to-work states who contemplate cessation of dues checkoff after the collective bargaining agreement expires will not necessarily be thwarted by the Ninth Circuit’s decision.  The ruling is binding only in right-to-work states in the Ninth Circuit.  A different court of appeals agreed with the NLRB’s Tampa Sheet Metal decision.  In Office and Prof’l Emps. Int’l Union v. Wood Cnty. Tel. Co., 408 F.3d 314, 317 (7th Cir. 2005), the Seventh Circuit stated that it had “no . . . problem understanding the basis of the [NLRB’s] rule.”  The great unknown is whether the NLRB as currently constituted will, if given the opportunity, try to articulate a rational basis for the Tampa Sheet Metal holding, or whether it will instead adopt the Ninth Circuit’s view that dues checkoff (in right-to-work states or otherwise) is in fact a term or condition of employment that cannot be discontinued unilaterally. An employer contemplating cessation of a checkoff provision during a contract hiatus should be aware of the possibility that, if it takes such action, it may become the test case.