State Owes Damages for Refusing to Deduct Union Dues

Takeaway: Several states have enacted legislation that prohibits public employers from deducting union dues from the paychecks of certain classes of employees. Public employers in any such state must monitor the situation closely and get the best possible legal advice as to what their obligations may be. Statutory language, past and current contract provisions, and bargaining practices will be scrutinized.  

The Iowa Supreme Court recently ordered a public employer to pay a union damages equivalent to the dues that would have been deducted from employees’ paychecks under the applicable collective bargaining agreement despite a newly effective state law prohibiting dues deductions. 

In May 2016, while the parties’ 2015–2017 contracts were in effect, the union and the state agreed to negotiate new contracts for two bargaining units that would run from July 1, 2017, through June 30, 2019. On Dec. 20, 2016, the parties exchanged initial offers, both asking that most terms—including dues collection—remain the same. They held a negotiating session on Jan. 10, 2017—neither deviating from its initial offer—but canceled remaining January bargaining sessions.

In February 2016, state legislation was introduced that would exclude dues checkoffs—a procedure through which an employer withholds union dues from the employees’ pay and remits that amount to the union—[CA1] [LS2] from negotiation and prohibit the state from deducting dues from paychecks. These prohibitions, however, would not apply to collective bargaining agreements ratified before the legislation’s effective date of Feb. 17.

On Feb. 10—before the legislation was signed or could take effect—the union notified the state that its negotiating committee had voted to accept the state’s Dec. 20 offer. On Feb. 14, the union’s members voted unanimously to ratify the offer. The next day, the union notified the state of the ratification vote, but the state did not acknowledge that new contracts had been formed.

On Feb. 21, 2017, the union petitioned the district court to declare that new, enforceable contracts for 2017–2019 had been formed. The state continued to perform the 2015–2017 contracts—including collecting dues from union members who had submitted authorizations—until they expired on June 30, 2017.

In November 2017, the district court ruled that the 2017–2019 contracts were valid and enforceable, and ordered the parties to perform. The state appealed and asked for a stay, which ultimately was denied on Feb. 22, 2018. The state then began to partially implement the 2017–2019 agreements but did not resume collecting dues. Rather, it informed the union that before it would do so, it would need to receive a current written authorization from each employee.

As to retroactive dues collection, the state also demanded that the union indemnify the state for any claims arising from retroactive dues collection and release the state from any claim related to the state’s failure to collect dues between July 1, 2017, and the date deductions resumed. The union rejected all these demands. Although the union did not try to obtain new dues deduction authorizations, it directly collected over $350,000.

State Supreme Court

In May 2019, the state supreme court affirmed the district court’s ruling that enforceable 2017–2019 contracts had been formed. The union then began this suit, claiming that the state breached the 2017–2019 contracts by refusing to deduct dues. The district granted the union’s motion for summary judgment, and after trial on the issue of damages, awarded the union over $1 million for the state’s failure to deduct dues—representing the difference between the lost dues and the amount the union recovered directly. The district court denied the union’s request for attorney fees.

The state supreme court affirmed all the lower court rulings.

The state breached the 2017-2019 contracts by failing to collect dues, the court held. The parties had agreed that the relevant terms of the 2015-2017 and 2017-2019 contracts should be the same. On that basis, the court reasoned, the 2017-2019 contracts required the state to collect dues from all members who had submitted dues authorizations, including those who had done so under any prior contract.

The court also rejected all the state’s arguments as to why damages were not an appropriate remedy. The benefit of the union’s bargain with the state was the money it would have received if the state had performed its dues-collection duty and was well within the contemplation of the contracting parties. The indemnification clause did not apply to claims between the parties themselves. Nor did state law preclude money damages for suits to enforce collective bargaining agreements.

The state waived its sovereign immunity by failing to plead it as an affirmative defense. As to mitigation of damages, substantial evidence supported the district court’s ruling that the union’s efforts to collect dues were reasonably sufficient. 

The district court correctly denied the union’s claim for attorney fees. Common law attorney fees can only be awarded against a party whose behavior is extraordinarily culpable, the court said. And there was nothing in the record approaching this level of culpability.

UE Local 893/IUP vs. State of Iowa, Iowa S. Ct., No. 22–0790 (Oct. 27, 2023).

Margaret M. Clark, J.D., SHRM-SCP, is a freelance writer in Arlington, Va.