Employers Can't End Paycheck Deductions for Unions at Expiration of CBAs

​Employers must continue to deduct union dues directly from employees' paychecks and remit them to the union each month even after the expiration of a collective bargaining agreement (CBA), the National Labor Relations Board (NLRB) recently decided.

"For the third time in seven years, the board has again changed the law" on this topic, said Allison Anderson, an attorney with Foley Hoag in Boston. "This may not be the final word. Given recent history, the law may change yet again the next time there is a Republican-appointed board."

That said, for now the recent decision "will take away one of the tools employers have in labor agreement negotiations to leverage an agreement once negotiations stall," stated David Pryzbylski, an attorney with Barnes & Thornburg in Indianapolis.

Under prior precedent, when a union was unwilling to agree to terms acceptable to the company and a CBA expired, the company could cease deductions of dues until a new agreement was reached, he noted. "This oftentimes incentivized a union to get to the table and reach a deal," Pryzbylski said.

'Dues Checkoff Provisions' for Decades Expired with CBA

So-called dues checkoff provisions—common provisions in CBAs that state an employer will deduct union dues each month from paychecks—are unions' primary revenue source, Pryzbylski stated.

Dues checkoff provisions "don't cease until, if and when a union and employer agree to eliminate or modify the clause, which almost never happens in light of the fact unions don't want to cut off their revenue stream," he said.

Rather than collect money from each member each month, unions often request a checkoff clause that requires the employer to deduct the dues amount from the members and then send one check for the total amount to the union, explained Michael Lotito, an attorney with Littler in San Francisco.

For decades before the Obama administration, the NLRB held that because the checkoff clause is a creature of the contract, it expires when the contract ends.

"So, if the contract expires on Oct. 31, for example, but the parties continue to negotiate for another month before reaching agreement, the union is not a beneficiary of the checkoff clause for the month of November," Lotito said.

Background of Recent Holding

"In a typical situation, under long-standing law, even when a contract expires, most provisions of a CBA continue to be binding and cannot be unilaterally changed by the employer as the parties continue to bargain," said John Birmingham, an attorney with Foley & Lardner in Detroit. For example, the CBA's wages and benefits survive the expiration of the CBA, he noted.

In the 1962 decision of Bethlehem Steel, the board held that dues checkoff was one of the few provisions, including the no-strike clause, that terminated following the end of the CBA, Birmingham said. "Except for a brief hiatus between 2015 to 2019, this has been the law since 1962," he stated.

In 2015, the Obama administration NLRB determined in Lincoln Lutheran that dues checkoff continued after the end of the CBA. In 2019, the Trump administration NLRB ruled in Valley Hospital Medical Center that dues checkoff ended with the expiration of the agreement.

Recent Ruling

In its new decision, Valley Hospital Medical Center II, the current NLRB, which has a Democratic majority, reversed the Trump-era NLRB's determination that dues checkoff ended with the expiration of the CBA. The NLRB concluded that the original rationale of the 1962 decision wasn't persuasive.

In Bethlehem Steel, the NLRB held that dues checkoff was different because it was purely a creation of contract. But in Valley Hospital Medical Center II, the board said the NLRB provided "virtually no rationale for its view" in Bethlehem Steel.

In its recent ruling, the board stated that including dues checkoff as an exception to the general rule of maintaining the status quo was inconsistent with the purposes of the National Labor Relations Act.  A surviving dues checkoff provision protects the full freedom of workers in the selection of bargaining representatives of their own choice and helps maintain the status quo, the NLRB said.

Retroactive Application

Moreover, in its recent ruling, "somewhat remarkably, over a strong dissent, the board held that its decision was retroactive and ordered Valley Hospital to pay the dues without the possibility of recouping them from the bargaining-unit employees," Birmingham said.

NLRB General Counsel Jennifer Abruzzo has opined that the prior law allowing the elimination of dues checkoff was being weaponized against unions during contract negotiations, Birmingham noted.

A practical result from the board's recent decision "is that employers who have ceased dues checkoff after contract expiration, in reliance on the previous law, may now need to pay the dues out of the company coffers," Birmingham said. "Moving forward, employers should continue dues checkoff following contract expiration."

He added that the practical impact should not be overstated because many employers choose to continue dues checkoff after contract expiration, even before being required to do so.

Moreover, a new contract often is in place when the old one expires, so in those circumstances, the issue never comes up, said David Miller, an attorney with Bryant Miller Olive PA in Miami.