Employers, Perform Your Dues Diligence: NLRB Reinstitutes Post-CBA Dues Checkoff Mandate

In Valley Hospital Medical Center, Inc. (Valley Hospital II), the collective bargaining agreement between the Respondent Hospital and its employees’ labor union had been expired for over a year when the hospital elected to stop deducting union dues from its employees’ paychecks. The practical impact of the hospital’s action was to require the union to collect its dues directly from employees going forward (at least until such time as a new agreement reinstating dues checkoff was reached). The union objected, arguing the hospital should be mandated to continue acting as its dues collector even in the absence of a CBA. Based on extant law, the union’s charge, when filed with the Board, was not well founded.

As a general proposition, the National Labor Relations Act (NLRA) prohibits employers from unilaterally changing terms and conditions of employment for union-represented employees without first bargaining with the union, either to an agreement on new terms or a good faith bargaining impasse. However, for decades, previous Boards and courts had consistently affirmed the Board’s 1962 decision in Bethlehem Steel, 136 NLRB 1500 (1962), which excepted dues checkoff procedures as a contractually created obligation that expires with a collective bargaining agreement. As such, it was lawful for employers to unilaterally cease dues checkoff upon a CBA’s expiration—so the Board’s longstanding precedent held.

Then beginning in 2015, things started to get wonky. In Lincoln Lutheran, [1] the Board upended its precedent, holding that dues checkoff is a term and condition of employment that must be maintained as the status quo unless and until the union and employer agree to a change. Then in 2019, the Board overruled Lincoln Lutheran and brought back the Bethlehem Steel rule, once again allowing (but not requiring) employers the option to halt dues checkoff when a CBA has expired.[2] This was the state of play when the Board took up the issue again in Valley Hospital II.

The Board majority in Valley Hospital II acknowledged that decades of precedent permitted employers to halt union dues checkoff following a CBA’s expiration. Undeterred, the majority argued that “[p]rior Boards have never cogently explained why dues checkoff should not be part of the status quo that employers must maintain when a contract expires.” Instead, the majority said that because the Act strongly disfavors unilateral employer action, and because union dues checkoff does not strongly resemble other terms and conditions that expire with the CBA, such as mandatory arbitration, no-strike, and management-rights provisions, the Lincoln Lutheran approach was correct. The Board further found that an employer’s unilateral decision to cease dues checkoff was unfair to union workers because it “interfere[s] with the financial lifeline between employees and the union they have chosen to represent them.” The Board applied this holding retroactively to all pending cases, including those where an employer acted when Valley Hospital I was in effect. The Board reasoned that this retroactive application does not impose a “particular injustice” on employers because the rule reinstituted in Valley Hospital I “has been subjected to sustained judicial criticism” and faced a “backdrop of legal uncertainty.”

Board Members Marvin Kaplan and John Ring dissented from the majority opinion, observing that the Bethlehem Steel rule was “consistently applied by the Board and enforced in the United States Courts of Appeals” for a “half-century.” The dissenters further cited text of the Act, which provides that employers cannot “deduct[] from the wages of employees in payment of membership dues in a labor organization” unless “the employer has received from each employee . . . a written assignment which shall not be irrevocable for a period more than one year, or beyond the termination date of the applicable collective bargaining agreement, whichever comes sooner.” “[T]he logical implication” from this provision, Members Kaplan and Ring argued, is “that employers may terminate dues-checkoff provisions upon the expiration of the agreement containing such provisions.” Finally, the dissenters argued that the Board’s decision impermissibly interferes with the bargaining process by “eliminating one of the employers’ legitimate economic weapons” to encourage a union to enter a new or successor agreement.

This latest waffle on dues checkoff continues the current Board’s strong push to remake labor relations law, and further demonstrates the decidedly unfriendly terrain employers face in actions before the Board. As a practical matter, after this decision, it is important that employers with collective bargaining relationships continue to maintain dues checkoff procedures even after the expiration of a collective bargaining agreement that provides for them. ArentFox Schiff will continue to monitor the labor relations landscape and report on notable developments.

[1] Lincoln Lutheran of Racine, 362 NLRB 1655 (2015).

[2] The Board’s 2019 decision issued in an earlier ruling involving the same dispute that culminated in the September 30, 2022 decision, Valley Hospital Medical Center, 368 NLRB No. 139 (2019) (Valley Hospital I).