On Monday, October 3, 2022, in Valley Hospital Medical Center II, the National Labor Relations Board reversed a 50-year-old precedent, ruling that employers violate the National Labor Relations Act by unilaterally ceasing to withhold employees' union dues when the collective bargaining agreement expires. As a result, employees are forced to continue paying union dues, and employers are required to act as the conduit of those dues, even in the absence of a contractual "dues checkoff" provision. Although not entirely unexpected, the Board's decision is nonetheless a victory for unions – and another burden for employers.

NLRB General Counsel had announced in her August 2021 memo that dues checkoff was a "significant issue" for which she planned to seek a more union-friendly standard. In Valley Hospital Medical Center II, the Board granted her wish. Some observers are describing this ruling as the second major reversal of precedent in an ongoing campaign to counteract public perception that the Board had become too employer-friendly in recent years.

Underscoring this last point, the Board also ruled that its decision applies retroactively. This means that employers that unilaterally stopped checking off dues when the contract expired may face unfair labor practice liability for having done so, even though they acted in reliance on then-existing law. This also means that these employers may be ordered to reimburse unions for dues not paid during the checkoff hiatus, with interest.

The Back and Forth History of Dues Checkoff Provisions

While an employer is generally obligated to maintain the status quo with respect to mandatory subjects of bargaining after a collective bargaining agreement expires, there are a few recognized exceptions: union security clauses, management rights clauses, no-strike clauses, and arbitration clauses. It is generally understood that these provisions cannot exist in a bargaining relationship without affirmatively agreeing to them because they involve the waiver of a statutory right.

In Bethlehem Steel Co., decided in 1962, the Board ruled that dues checkoff provisions were among the exceptions to the general rule requiring maintenance of the status quo. As a result, and for more than 50 years, employers had been free to unilaterally cease dues checkoff after a CBA's expiration, providing employers with an important bargaining chip in contentious negotiations over successor agreements.

This changed in 2015 when the Obama-era Board decided Lincoln Lutheran, finding it to be an unfair labor practice for employers to unilaterally terminate dues checkoff provisions when a CBA expires.

But the Lincoln Lutheran ruling did not last long. Two years later, in Valley Hospital Medical Center I, the Trump-era Board overruled Lincoln Lutheran and returned to long-standing precedent. As the Board explained:

[A] dues-checkoff provision properly belongs to the limited category of mandatory bargaining subjects that are exclusively created by the contract and are enforceable through Section 8(a)(5) of the Act only for the duration of the contractual obligation created by the parties. There is no independent statutory obligation to check off and remit dues after expiration of a collective-bargaining agreement containing a checkoff provision, just as no such statutory obligation exists before parties enter into such an agreement. This holding and rationale apply even in the absence of a union-security provision in the same contract.

The union's petition to the Ninth Circuit Court of Appeals resulted in the case being remanded back to the Board. According to the Ninth Circuit, the Board did not adequately explain its rationale for reversing two-year-old precedent in favor of re-establishing precedent that was more than 50 years in the making.

But on remand, after the composition of the Board changed under the Biden administration, the Board opted to again restore Lincoln Lutheran (and once again overturn Bethlehem Steel). In explaining its rationale, the Board said that none of the previous Board's decisions, including Bethlehem Steel Co., had "cogently explained" why an employer's obligation to check off dues should end when the contract expires – even though the United States Supreme Court had recognized and relied upon this Board precedent in other cases. Concluding that Lincoln Lutheran provided a better interpretation of the NLRA, the Board majority declared that henceforth – and retroactively – employers must continue to honor dues checkoff arrangements until a successor CBA is reached or the parties bargain to impasse.

What about Union Security Clauses?

Although union security clauses and dues checkoff provisions are close cousins, union security clauses still expire when a contract expires. Nothing in Valley Hospital Medical Center II disturbs that precedent. This means, though, it is possible for a union security provision to expire with a CBA even though the employer's obligation to collect and remit union dues does not. While not addressed in Valley Hospital Medical Center II, employees should still be free under Section 302(c)(4) of the Labor Management Relations Act to voluntarily revoke dues checkoff authorization during a contract's hiatus, even if employers can no longer unilaterally cease doing so. This last issue, however, remains unresolved. Employers should thus consult with counsel when navigating what they can relay to employees about their ability to voluntarily revoke dues checkoff post CBA expiration.

What Does This Mean for Employers?

As a result of the Board's decision, an employer wishing to end the process of collecting and remitting union dues after a CBA expires must first provide notice to the union and an opportunity to bargain, as is the case with most other mandatory subjects of bargaining. Only if the union does not timely respond or the parties bargain to impasse will the employer then be free to terminate a dues checkoff obligation.

That scenario is likely impractical, however. The more likely reality is that employers will now have to look for other ways to obtain leverage in bargaining.