Caterpillar Inc v. Intl Union United , 107 F.3d 1052 ( 1997 )

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit
3-4-1997
Caterpillar Inc v. Intl Union United
Precedential or Non-Precedential:
Docket 96-7012
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 96-7012
CATERPILLAR INC., a Delaware Corporation
doing business in Pennsylvania
v.
INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE
AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA; and
its affiliated LOCAL UNION 786,
Appellants
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
(D.C. Civil Action No. 92-01854)
Argued August 8, 1996
Before: NYGAARD, LEWIS and McKEE, Circuit Judges.
Reargued December 2, 1996
Before: SLOVITER, Chief Judge, and BECKER, STAPLETON, MANSMANN,
GREENBERG, SCIRICA, COWEN, NYGAARD, ALITO,
ROTH, LEWIS and McKEE, Circuit Judges.
(Opinion filed March 4, 1997)
DAVID M. SILBERMAN, ESQUIRE
(Argued)
Bredhoff & Kaiser
1000 Connecticut
Avenue, N.W.
Suite 1300
Washington, DC 20036
DANIEL W. SHERRICK, ESQUIRE
International Union of
United Auto Workers
8000 East Jefferson
Detroit, MI 48214
WENDY L. KAHN, ESQUIRE
Zwerdling, Paul, Leibig,
Kahn,
Thompson & Driesen
1025 Connecticut Avenue,
N.W. Suite 712
Washington, DC 20036
Attorneys for Appellants
GERALD C. PETERSON, ESQUIRE
COLUMBUS R. GANGEMI, Jr.,
ESQUIRE
(Argued)
Winston & Strawm
35 West Wacker Drive
Suite 4200
Chicago, IL 60601
Attorneys for Appellee
JAMES B. COPPESS, ESQUIRE
815 16th Street, N.W.
Washington, DC 20006
Attorney for Amicus-Appelant,
American Federation of Labor
& Congress of Industrial
Organizations (AFL-CIO)
ALLEN H. FELDMAN, ESQUIRE
EDWARD D. SIEGER, ESQUIRE
United States Dep't of
Labor 200 Constitution
Avenue, N.W. Washington, DC
20210
Attorneys for Amicus Curiae
United States of America
COUNCIL ON LABOR LAW EQUALITY
Proposed Amicus-Appellee
OPINION OF THE COURT
2
NYGAARD, Circuit Judge.
In this appeal, we must decide whether an employer
granting paid leaves of absence to employees who then become the
union's full-time grievance chairmen violates § 302 of the Labor
Management Relations Act, 29 U.S.C. § 186. The district court
held that this practice is illegal, relying on our decision in
Trailways Lines, Inc. v. Trailways, Inc. Joint Council,
Amalgamated Transit Union, 785 F.2d 101 (3d Cir. 1986). We will
reverse, and in doing so, overrule significant portions of
Trailways.
I.
The facts are stated comprehensively in the district
court's opinion, Caterpillar, Inc. v. International Union, United
Automobile Workers, 909 F. Supp. 254 (M.D. Pa. 1995). For our
purposes it suffices to recount that the United Auto Workers, its
Local 786 and Caterpillar have been parties to a collective
bargaining agreement since 1954. Until 1973, the agreement
contained a "no-docking" provision allowing employees who were
also union stewards and committeemen to devote part of their work
days to processing employee grievances without losing pay,
benefits or full-time status. In 1973, this agreement was
expanded to allow the union's full-time union committeemen and
grievance chairmen to devote their entire work week to union
business without losing pay. These employees are placed on leave
3
of absence and are paid at the same rate as when they last worked
on the factory floor. They conduct that business from the union
hall, perform no duties directly for Caterpillar, and are not
under the control of Caterpillar except for time-reporting
purposes.
In 1991, a nationwide labor dispute erupted between
Caterpillar and the union, which resulted in the employees
returning to work without a contract. A year later, Caterpillar
unilaterally informed the union that it would cease paying the
grievance chairmen and questioned the legality of such payments,
notwithstanding that it had paid them without complaint for
eighteen years. The union filed an unfair labor practice charge
with the National Labor Relations Board, alleging that, by
unilaterally rescinding the payments, Caterpillar refused to
bargain in good faith. A month later, Caterpillar filed this
suit seeking a declaratory judgment that those payments violate §
302 of the LMRA.
The district court stayed its proceedings pending the
decision of the NLRB. An administrative law judge later issued a
recommended decision and order dismissing the union's charges,
finding that the payments violated § 8 of the National Labor
Relations Act.1 The district court then lifted the stay and
1. The ALJ, while questioning the validity of the payments under
§ 302 of the LMRA, did not reach that issue in his proposed
holding.
4
held that Caterpillar's payments to the union's full-time
grievance chairmen violated § 302. The union now appeals.
II.
A.
Section 302(a) of the LMRA provides:
It shall be unlawful for any employer . . . to pay,
lend, deliver, or agree to pay, lend, or
deliver, any money or other thing of value--
(1) to any representative of any of his employees who are
employed in an industry affecting commerce; or
(2) to any labor organization, or any officer or employee
thereof, which represents . . . any of the employees of
such employer who are employed in an industry affecting
commerce[.]
29 U.S.C. § 186(a). Caterpillar is an employer in an industry
that affects commerce and the grievance chairmen are
representatives of Caterpillar's employees. On the face of §
302(a), then, Caterpillar's wage payments to them would appear to
be unlawful. Section 302(c), however, provides that
[t]he provisions of this section shall not be applicable (1) in
respect to any money or other thing of value payable by
an employer . . . to any representative of his
employees, . . . who is also an employee or former
employee of such employer, as compensation for, or by
reason of, his service as an employee of such
employer[.]
29 U.S.C. § 186(c)(1). Thus, if the grievance chairmen receive
their compensation "by reason of" their "service as employees,"
then Caterpillar's wage payments are lawful.
5
In Trailways, the employer agreed to continue making
contributions to a joint union-management trust fund on behalf of
employees who had taken leaves of absence to devote their time to
full-time union positions.2 There, the union argued that those
payments could pass muster under § 302(c)(1), which permits
payments to former employees "as compensation for, or by reason
of, [their] service as . . . employee[s.]" The Trailways court
rejected that possibility as a matter of statutory construction,
opining:
To the Union, the pension fund contributions made on
behalf of former employees currently on leave
to serve as union officials were earned
solely "by reason" of their past service to
Trailways. But for their past employment by
Trailways, the Union contends, these
officials would not be eligible for pension
fund contributions; therefore, these
payments are "by reason of their service as
an employee of" Trailways.
A logical reading of the statute makes clear
that the "payments to former employees'
exemption" of § 302(c)(1) applies solely to
payments made as "compensation or by reason
of" the former employees past service to the
employer. While the Union is correct in
asserting that had these individuals never
been Trailways' employees they would not be
eligible for pension contributions made on
their behalf, it does not therefore follow
that the pension fund contributions made by
Trailways pursuant to the collective
2. One issue before the court was whether the payments were
lawful under § 302(c)(5), which grants an exception for payments
to pension trust funds. The Trailways court concluded, however,
that the § 302(c)(5) exception applies only to current employees
and held that the union officials did not fit that description
because Trailways did not have sufficient control over their work
and because their work was solely for the benefit of the union.
785 F.2d at 104-07.
6
bargaining agreement were made "in
compensation for, or by reason of," their
former service to Trailways so as to fall
within the § 302(c)(1) exception. Clearly,
the statute contemplates payments to former
employees for past services actually rendered
by those former employees while they were
employees of the company. Just as clearly,
however, the pension fund benefits paid on
behalf of former employees serving as union
officials while on leave from Trailways are
not compensation for their past service to
Trailways.
Id. at 105-06 (emphasis in original).3
Were we to follow Trailways, its holding would control
our decision in this case. The grievance chairmen cannot be
considered current employees of Caterpillar who are being
compensated for their current services. The chairmen perform no
services directly for Caterpillar. Instead, they handle
grievances and other labor matters for the union, a situation
that often places them in a position adverse to Caterpillar's.
Section 302(c)(1) legalizes payments to current or former
employees based on their "services" as employees, not their
"status" as such. Thus, the mere fact that the chairmen remain
on the Caterpillar payroll and fill out the appropriate forms and
time sheets to get paid is legally irrelevant.
The union argues that, unlike the situation under
subsection (c)(5) in Trailways, under subsection (c)(1) the
3. In a footnote, the court noted that the pension contributions
were based on the employees' current union salary, indicating
that the payments were "geared to their contemporaneous services
to the Union." Id. at 106 n.5 (emphasis deleted).
7
chairmen can be employees of both the union and the employer. It
relies especially on NLRB v. Town & Country Electric, 116 S. Ct.
450, 456 (1995), in which the Supreme Court held that a paid
union organizer who obtained a job in order to "salt" the
workforce and organize for the union was still an employee within
the meaning of the National Labor Relations Act. But there, the
Court noted that the employee still performed services for the
benefit and under the control of the employer, even though part
of his time was spent organizing for the union. That situation
is different from ours. Here the chairmen do nothing for
Caterpillar's benefit.
Moreover, under Trailways we cannot conclude that the
chairmen's salaries were payments to former employees "as
compensation for" their past services as employees. The chairmen
were already compensated for their production line work long ago
in the form of wages and vested benefits. A fair reading of
Trailways does not support a finding that the payments at issue
here somehow "related back" to these former employees' services
on the factory floor.
B.
Nevertheless, after careful consideration and
reargument before the in banc court, we believe that Trailways
was wrongly decided and tends to subject innocuous, bargained-for
8
and fully disclosed payments to the criminal sanctions of the
LMRA.
We have no difficulty with the Trailways holding
regarding "current employee" status. See 785 F.2d at 106-07. We
also believe that the salary payments to these union officials
were not in compensation for their past services rendered as
production employees. Our disagreement is with the Trailways
court's conclusion that the "by reason of" language in §
302(c)(1) exempts only those payments for past services actually
rendered while the former employee was still employed by the
company. We think that statement misinterprets the text of §
302(c)(1) and does nothing to further the policy objectives
Congress had when it enacted the LMRA half a century ago.
The Trailways test would be quite appropriate if §
302(c)(1) referred only to payments as compensation for past
services. It is difficult indeed to comprehend how years, even
decades, of paid union leave can realistically be thought of as
compensation for time spent on the factory floor. The Trailways
court, however, applied the same test to the statute's "by reason
of" language; with that we can no longer agree.
First of all, Congress chose specifically to exempt
payments in "compensation for" or "by reason of" an employee's
service. By so doing, it must be presumed to have intended that
certain payments would be legal, even though they were not, as
Trailways recites, "for past services actually rendered by those
9
former employees while they were employees of the company." Id.
at 106 (emphasis deleted). Nevertheless, the Trailways court,
without any explanation, conflated the two phrases and developed
a unitary test for whether former employee compensation is
permissible.
Under the Trailways test, there are three requirements
for a "former employee" payment to qualify for the § 302(c)(1)
exemption:
(1) It must be for past, not present, services;
(2) the services must be actually rendered; and
(3) the services must have been rendered while the
payee was still an employee.
Under this standard, the chairmen's wages fail the Trailways
test, because the payments are not for services actually rendered
to the company while they were still employees. Indeed, under
Trailways, it appears that pay or continuation of benefits for
time spent serving on a jury or in the National Guard would be
illegal.
Likewise, even the "no docking" provisions of many
collective bargaining agreements, including the Caterpillar-UAW
contract here, fail to meet the Trailways standard. Under a no-
docking clause, the employer agrees that shop stewards may leave
their assigned work areas for portions of a day to process
employee grievances without loss of pay. By paying production
workers for the part-time hours when they leave their regular
duties , the company is paying for services not actually rendered
10
for it, since those employees are already receiving their regular
hourly wages and benefits for their production line work. Yet,
no-docking arrangements have been consistently upheld by the
courts as not in violation of § 302, see NLRB v. BASF Wyandotte
Corp., 798 F.2d 849, 854-56 (5th Cir. 1986); BASF Wyandotte Corp.
v. Local 227, 791 F.2d 1046 (2d Cir. 1986); Herrera v.
International Union, UAW, 73 F.3d 1056 (10th Cir. 1996), aff'g &
adopting dist. ct. analysis, 858 F. Supp. 1529, 1546 (D. Kan.
1994); Communications Workers v. Bell Atlantic Network Servs.,
Inc., 670 F. Supp. 416, 423-24 (D.D.C. 1987); Employees'
Independent Union v. Wyman Gordon Co., 314 F. Supp. 458, 461
(N.D. Ill. 1970), and Caterpillar does not even seek to have the
contract's no-docking clause declared illegal. Moreover, as the
union points out, it would be strange indeed if Congress intended
that granting four employees two hours per day of paid union
leave is permissible, while granting a single employee eight
hours per day of that same leave is a federal crime.
We believe that the payments at issue here, while they
were not compensation for hours worked in the past, certainly
were "by reason of" that service. We reach this conclusion
because the payments arose, not out of some "back-door deal" with
the union, but out of the collective bargaining agreement itself.
Caterpillar was willing to put that costly benefit on the table,
which strongly implies that the employees had to give up
something in the bargaining process that they otherwise could
11
have received. Thus, every employee implicitly gave up a small
amount in current wages and benefits in exchange for a promise
that, if he or she should someday be elected grievance
chairperson, Caterpillar would continue to pay his or her
salary.4 As our colleague Judge Becker pointed out, dissenting in
Trailways:
The collective bargaining agreement contains
the terms of workers' employment with
Trailways; each of the benefits the workers
receive under that collective bargaining
agreement are part of the consideration for
their services at Trailways. In addition to
the standard terms for wages, overtime pay,
and insurance, the collective bargaining
agreement provides that persons who take a
leave of absence to work as union officials
have a right to reinstatement at Trailways
after their union service and retain their
seniority during their absence. The
collective bargaining agreement also provides
that the employer will make payments into the
union's pension fund while the employee is on
leave. Although these contributions are made
during the leaves of absence, the employer's
promise to pay them is nonetheless a term of
the collective bargaining agreement and
therefore a part of the consideration for
work performed as a Trailways employee.
There is no reason for distinguishing the
pension fund payments from any of the other
terms of the collective bargaining agreement.
Like wages, overtime, insurance, or accrued
seniority, the pension fund payments are
consideration for services rendered and, as
such, are permissible under § 302(c)(1).
Trailways, 785 F.2d at 109 (Becker, J., dissenting).
4. We do not mean to imply that an employee hired after a
collective bargaining agreement could not be elected chairperson
because he or she never "agreed" to an implicit wage reduction.
Rather, like any other term of a labor agreement, it would be
binding on all employees, whenever hired, until the expiration of
the contract.
12
We find this line of reasoning persuasive. Indeed, it
has been taken by a number of decisions reached after Trailways.
See United States v. Phillips, 19 F.3d 1565, 1575 (11th Cir.
1994) (§ 302(c)(1) satisfied when former employee's entitlement
to payments vests before he or she goes out on leave, but not
after); Toth v. USX Corp., 883 F.2d 1297, 1301-04 (7th Cir. 1989)
(criticizing Trailways and opining that "[o]ne obvious instance
in which continuing payments constitute recompense for past
services is when those continuing payments were bargained for and
formed part of a collective bargaining agreement."); IBEW v.
National Fuel Gas Dist. Corp., 16 Employee Benefits Cases 2018,
2020-21 (W.D.N.Y. 1993) (same); Bell Atlantic, 670 F. Supp. at
421-22 (same). We are aware of no currently valid opinion that
follows the Trailways holding.
Caterpillar maintains that, under the reasoning we have
utilized, employers and unions can themselves decide what is
legal regardless of federal law by agreeing in a labor contract
to a particular course of conduct. Our point, however, is not
that a collective bargaining agreement can immunize unlawful
conduct, but that: (1) under § 302(c)(1), the lawfulness of the
conduct ab initio turns on whether the payment is "owed because
of . . . service as an employee"; and (2) what is "owed" depends
on the terms of the contract. Put differently, the contract does
not immunize otherwise unlawful subjects but, by defining the
basis for the payments, speaks directly to the question posed by
13
the statute as to whether the payments are "compensation for, or
by reason of . . . service as an employee."
We also believe that any attempt to distinguish "no
docking" provisions from the payments at issue here is
unpersuasive. We perceive no distinction between union officials
who spend part of their time (which may be quite substantial) in
adjusting grievances from the type of employees who are involved
here. Instead, “the nature of the absences and the payments made
by the employer owning them is the same.” Trailways, 785 F.2d at
111.
III.
In sum, we simply do not view the payments at issue
here as posing the kind of harm to the collective bargaining
process that Congress contemplated when it enacted the LMRA.
Section 302 of that statute was passed to address bribery,
extortion and other corrupt practices conducted in secret. See
Trailways, 785 F.2d at 110 (Becker, J., dissenting). These
expanded "no-docking" provisions, in contrast, are contained in
the collective bargaining agreement on which each rank-and-file
employee has the opportunity to vote. Thus, the officials
receiving the payments can be held accountable to the membership.
See Toth, 883 F.2d at 1304. Without explicit statutory
direction from Congress, we cannot condemn these payments as
criminal. Accordingly, we will reverse.
14
Circuit
JudgeCaterpillar, Inc. v. International Union
No. 96-7012
MANSMANN, J., dissenting, with whom Judge Greenberg joins.
In suggesting that "innocuous, bargained for and fully
disclosed payments" from an employer to an employee
representative should be lawful, the majority has placed its own
policy objectives above plain language. By its own terms, the
"by reason of" exception of 29 U.S.C. § 186(c)(1) simply does not
include payments made to an employee representative merely
because the payment is included in a collective bargaining
agreement and the representative worked for the employer at one
time. The plain language of the section 186(c)(1) exception is
supported by the legislative history and purpose of the
exception, and the majority's conclusion is at odds with
important federal policy. Because I believe that the payments at
issue in this case do not fall within the exception of section
186(c)(1), I respectfully dissent.
I.
Where statutory language is plain, we must enforce that
language according to its terms. Appalachian States Low-Level
Radioactive Waste Comm'n v. O'Leary, 93 F.3d 103, 108 (3d Cir.
1996); see also United States v. Ron Pair Enters., Inc., 489 U.S.
15
235, 241, 109 S. Ct. 1026, 1030, 103 L. Ed. 2d 290 (1989); New Rock
Asset Partners, L.P. v. Preferred Entity Advancements, Inc., ___
F.3d ___, ___, 1996 WL 708610, at *5 (3d Cir. Dec. 10, 1996)
(unless literal application will produce absurd result, plain
meaning is conclusive). It is for Congress, not the courts, to
create exceptions or qualifications at odds with the LMRA's plain
terms. Packard Motor Car Co. v. NLRB, 330 U.S. 485, 490, 67
S. Ct. 789, 792, 91 L. Ed. 1040 (1947).
Section 302(a) of the LMRA, 29 U.S.C. § 186(a), on its
face, makes it unlawful for any employer to pay any money or
thing of value to any representative of its employees. As the
majority recognizes, section 302(a), standing alone, prohibits
the payments at issue in this case. Maj. Op., at 4-5.
Section 302(a) contains several exceptions. Section
302(c)(1), 29 U.S.C. § 186(c)(1), renders section 302(a)
inapplicable in respect to any money or other thing of value
payable by an employer "to any representative of his employees,
who is also an employee or former employee of such employer, as
compensation for, or by reason of, his services as an employee of
such employer."
The majority concedes that the payments at issue in
this case are not payments to a current or former employee "as
compensation for . . . his services." Maj. Op., at 8. The sole
issue, then, is whether the payments to a former employee, who
presently works as a grievance chairperson for the union, are
16
made "by reason of . . . his services as an employee of such
employer." Contrary to the position of the majority, I must
conclude that the language of section 302(c)(1) is plain and does
not encompass the payments at issue here.
The "by reason of" exception of section 302(c)(1)
simply recognizes that current and former employees might have a
right to receive payments from their employers that arise from
their services for their employers but that are not properly
classified as "compensation." The "by reason of" exception
includes pensions, 401(k) plans, life and health insurance, sick
pay, vacation pay, jury and military leave pay, and other fringe
benefits to which all employees may be entitled "by reason of"
their service. See United States v. Phillips, 19 F.3d 1565, 1575
(11th Cir. 1994) ("by reason of" exception applies to fringe
benefits "such as vacation pay, sick pay, and pension benefits"),
cert. denied, ___ U.S. ___, 115 S. Ct. 1312, 131 L. Ed. 2d 194
(1995); BASF Wyandotte Corp. v. Local 227, Int'l Chem. Workers
Union, AFL-CIO, 791 F.2d 1046, 1049 (2d Cir. 1986) ("by reason
of" payments include "vacation pay, sick pay, paid leave for jury
duty or military service, pension benefits, and the like"); see
also Toth v. USX Corp., 883 F.2d 1297, 1303 n.8 (7th Cir.)
(severance pay and payments to disabled employees are "by reason
of" former employment), cert. denied, 493 U.S. 994, 110 S. Ct.
544, 107 L. Ed. 2d 541 (1989). Although not properly called
17
compensation, "by reason of" payments "arise from" the employee's
services for the employer.
Without the section 302(c)(1) exception, these payments
would be illegal if paid to any employee or former employee who
also worked for the union. Thus, an employee who worked full
time for the company, but who held a part-time position with the
union (a practice permitted by the Supreme Court's decision in
NLRB v. Town & Country Elec., Inc., ___ U.S. ___, 116 S. Ct. 450,
133 L. Ed. 2d 371 (1995)), would be unable to be paid his salary
and could not receive fringe benefits -- despite working full
time. Section 302(c)(1) plainly exists to enable company
employees to obtain what is rightfully theirs. In other words,
the section 302(c)(1) exception does not entitle union
representatives to receive payments because of their service for
the union; the exception allows union representatives to receive
payments in spite of their current service for the union.
The key, however, is that the employee must receive the
compensation or other payment because of his or her service for
the employer. See, e.g., Phillips, 19 F.3d at 1575 ("by reason
of" payments "from an employer to a union official must relate to
services actually rendered by the employee"); id. (under plain
meaning of exception, "payment given to former employee must be
for services he rendered while he was an employee"); BASF
Wyandotte Corp. v. Local 227, 791 F.2d at 1049 ("by reason of"
payments are those "occasioned by the fact that the employee has
18
performed or will perform work for the employer, but which is not
payment directly for that work"); Reinforcing Iron Workers Local
Union 426 v. Bechtel Power Corp., 634 F.2d 258, 261 (6th Cir.
1981) (under "literal construction" of section 302, payment to
industry steward who performs services for union, not employer,
are unlawful). The payments at issue in this case are entirely
unrelated to the representatives' services for the employer. I
believe that the plain language of the section 302(c)(1)
exception does not encompass the payments at issue here and that
we must affirm the judgment of the district court.5
5. The majority overstates the effect of our decision in
Trailways Lines, Inc. v. Trailways, Inc. Joint Council,
Amalgamated Transit Union, 785 F.2d 101 (3d Cir.), cert. denied,
479 U.S. 932, 107 S. Ct. 403, 93 L. Ed. 2d 356 (1986).
Section 302(c)(1) states that all payments made to
union representatives -- whether they are in direct compensation
for services (wages) or merely by reason of those services
(vacation pay, jury pay, et cetera) -- must somehow relate to
those individuals' services for the employer. The Trailways
opinion did not merge "compensation for" and "by reason of" as
the majority suggests; it does not dispute the fact that
"compensation for" and "by reason of" complement each other and
that the "by reason of" exception covers certain payments that
are not truly compensation. Instead, in Trailways we recognized
that certain payments to former employees may no longer be
justified once the individual stops performing services for the
employer.
This makes sense. For example, it is apparent that
jury-duty pay is "by reason of" an employee's services to the
employer. It would be strange indeed if a former employee who
retired five years ago could demand to be paid by the employer
for his upcoming jury duty. As Trailways recognizes, payments to
former employees, whether as compensation for or by reason of
their former services, must be related to that former service.
Just as former employees are no longer entitled to "by reason of"
pay such as jury-duty pay, they should not be entitled to
payments for performance of union work that is entirely unrelated
to their former service. Accordingly, I see no reason to reverse
our decision in Trailways.
19
II.
Because the plain language of the "by reason of"
exception of section 302(c)(1) does not contemplate the payments
at issue here, I would affirm the judgment of the district court
without further discussion. Nonetheless, as I now digress
briefly to relate, the legislative history and the purpose of
section 302 support my conclusion that the payments at issue are
unlawful.
As the majority recognizes, section 302 is a conflict-
of-interest statute that is designed to eliminate practices that
have the potential for corrupting the labor movement. Maj. Op.,
at 13; see Phillips, 19 F.3d at 1574. As the majority also
recognizes, Congress was concerned about, inter alia, bribery and
other secret, back-room agreements between employers and employee
representatives. See Toth, 883 F.2d at 1300.
The majority does not go far enough, however.
Recognizing that "any person in a position of trust" must not
"enter into transactions in which self-interest may conflict with
complete loyalty to those whom they serve," Congress stated that
"no responsible trade union official should have a personal
financial interest which conflicts with the full performance of
his fiduciary duties as a workers' representative." S. Rep. No.
187, 86th Cong. 1st Sess., reprinted in 1959 U.S.C.C.A.N. 2318,
2330-31 (quoting ethical practices code of American Federation of
20
Labor and Congress of Industrial Organizations).6 Congress
desired to close the loopholes "which both employer
representatives and union officials turned to advantage at the
expense of employees." Id. at 2330.
When he introduced section 302 in 1947, Senator Ball
expressed a concern that even negotiated payments from employers
might "degenerate into bribes." 93 Cong. Rec. 4805 (1947),
reprinted in II NLRB Legislative History of the Labor Management
Relations Act, 1947, at 1305 (1948) (discussing welfare funds).
Senator Ball stated that absent section 302, "there is a very
grave danger that the funds will be used for the personal gain of
union leaders." Id. Senator Byrd echoed the concerns of Senator
Ball, noting that funds from the employer should not be "paid
into the treasuries of the labor unions." Id. According to
Senator Pepper, unless authorized in writing by each individual
employee (in the form of dues check-off), "union leaders should
not be permitted . . . to direct funds paid by the company . . .
to the union treasury or union officers." Id. (quoting committee
report).
6. I rely on the legislative history of the Labor-Management
Reporting and Disclosure Act of 1959 (an act that strengthened
section 302), instead of the official history of the Labor
Management Relations Act of 1947 (the act that contained section
302), because the Congressional Comments to the Labor Management
Relations Act do not include a discussion of the provisions at
issue here. See H.R. Conf. Rep. No. 510, 80th Cong., 1st Sess.
66-67, reprinted in 1947 U.S.C.C.A.N. 1135, 1173. In the text, I
include the comments of three senators made prior to the passage
of section 302 that were not included in the official conference
report.
21
Section 302 therefore exists to prohibit "all forms of
extortion and bribery in labor-management relations." BASF
Wyandotte Corp. v. Local 227, 791 F.2d at 1053 (emphasis
supplied) (quoting S. Rep. No. 187, 86th Cong. 1st Sess. 13,
reprinted in 1959 U.S.C.C.A.N. 2318, 2329). Congress was
concerned with corruption through both (1) bribery of employee
representatives by employers and (2) extortion by those
representatives. Toth, 883 F.2d at 1300 (citing legislative
history and cases). Congress explained:
The national labor policy is founded upon collective
bargaining through strong and vigorous
unions. Playing both sides of the street,
using union office for personal financial
advantage, undercover deals, and other
conflicts of interest corrupt, and thereby
undermine and weaken the labor movement. . .
. The Government . . . must make sure that
the power [to act as exclusive bargaining
representative] is used for the benefit of
workers and not for personal profit.
S. Rep. No. 187, 86th Cong. 1st Sess., reprinted in 1959
U.S.C.C.A.N. 2318, 2331.
Thus, Congress was not merely concerned about secret,
back-room deals. Congress was concerned about any form of
payment that could upset the balance between labor and
management. The payments at issue in this case do exactly that.
They create a conflict of interest for union negotiators who may
agree to reduced benefits for the employees in exchange for
financial support for the union.
22
For example, let us assume that ABC Corporation and the
union are engaged in difficult negotiations over a pension plan.
Also assume that the employer was stonewalling on this issue,
that the union had the "correct" position, and that the company
could have accepted the union's proposal without suffering
noticeable financial impact. Assume ABC said to the union
negotiator: "I know your local is having financial trouble. We
will pay the salaries of the grievance chairmen if you stop
pushing for this pension plan." The negotiator, who knows that
her local can no longer pay the full salaries of all the
grievance chairmen, agrees, and the pension plan is dropped in
favor of the financial security of the union. The agreement is
included in the bargaining agreement, and both the union and ABC
effectively "sell" the agreement to the employees, who ratify it
(not aware that the pension plan was sacrificed in this way).
According to the majority, this scenario is perfectly lawful
because it was included in the agreement. According to the
language, legislative history and purpose of section 302,
however, this scenario represents just what Congress sought to
avoid.
III.
As the majority concedes, the grievance chairmen in
this case do not perform any services whatsoever for Caterpillar.
Maj. Op., at 7. Instead, the chairmen perform services
23
exclusively for the union. The majority concludes, however, that
payments to such union employees are "by reason of" the
employees' services to the employer. First, the majority reasons
that such payments were negotiated and appear in the collective
bargaining agreement. Second, the majority states that, because
each employee must "give up something" in negotiations with the
employer so that these payments may be included in the agreement,
such payments are somehow "by reason of" the employees' service
for the employer. Finally, the majority contends that the
payments at issue in this case are no different than so-called
"no-docking" payments made to current employees who process
employee grievances during working hours. I do not believe that
the majority's reasoning withstands scrutiny.
The majority first relies on the fact that the payments
were negotiated and included in the collective bargaining
agreement. Maj. Op., at 11-13. Simply including a payment
provision in a collective bargaining agreement does not, however,
make the payment "by reason of" an employee's prior service.
Section 302(a)(1) provides that it shall be unlawful
for any employer to "agree to pay" any money to any
representative of any of his employees. 29 U.S.C. § 186(a)(1).
Thus, actual payments to union representatives are prohibited,
but so are agreements to pay union representatives. The majority
places special emphasis on the fact that the payments in this
case were negotiated and were not, in effect, secret agreements.
24
Congress, on the other hand, was not concerned about the secrecy
of these agreements. If an agreement to pay is unlawful under
section 302(a)(1), it is illogical to use that same agreement as
a basis for finding that the resultant payment is lawful under
section 302(c)(1). Congress could easily have written an
exception for payments by employers to union representatives
pursuant to a collective bargaining agreement. Instead, Congress
limited its section 302(c)(1) exception to payments in
compensation for or by reason of a representative's services for
the employer.7
The majority does not find support in the statute (and
indeed there is none) for its conclusion that bargained-for
payments should be any more legal than secret agreements.
Without support, the majority asserts that an open agreement
makes a payment "by reason of" services for the employer. In so
doing, the majority expands the exception such that the rule is
rendered a nullity.8
7. Senator Ball stated that the section 302(c)(1) exception
allows payment of "money due a representative who is an employee
or a former employee of the employer, on account of wages
actually earned by him." 93 Cong. Rec. 4805 (1947), reprinted in
II NLRB Legislative History of the Labor Management Relations
Act, 1947, at 1304 (1948) (emphasis supplied). It is apparent
that Senator Ball did not contemplate that the narrow exception
of section 302(c)(1) would someday encompass payments to a former
employee that are entirely unrelated to the employee's services.
8. I am also concerned that by placing so much emphasis on the
fact that the payments were negotiated and included in the
collective bargaining agreement, the majority effectively permits
employers and unions to negotiate over otherwise unlawful
subjects of bargaining. It is beyond dispute that employers and
unions cannot bargain over illegal subjects of bargaining.
25
The majority next reasons that since current employees
must surely "give up something" during negotiations in exchange
for an agreement by the employer to pay former employees to
perform union work, then those payments must be "by reason of"
their services. Maj. Op., at 11. The majority contends that
"the employees had to give up something in the bargaining process
that they otherwise could have received . . . in exchange for a
promise that, if he or she should someday be elected grievance
chairperson, Caterpillar would continue to pay his or her
salary." Id.
Under the majority's reasoning, the union and the
company could also agree to have the employer pay the salary of
the international union's president and subsidize the pension
fund of the union's permanent staff -- all because the company's
employees might "give up something" during negotiations in the
hopes that they too might someday receive those payments if
elected to serve the union in the proper capacity. In deciding
that "giv[ing] up something" is sufficient to bring the payments
at issue in this case within the "by reason of" exception
contained in section 302(c)(1), the majority has embarked on a
slippery slope that will legitimize virtually any type of payment
from the employer to the union so long as the payment is
negotiated and included in the collective bargaining agreement.
(..continued)
Nonetheless, the majority uses the bargaining process to
legitimize a payment that is otherwise prohibited by statute.
26
The majority's reasoning violates the plain language of
section 302(c)(1) in yet another way. This section allows an
employer to make payments to a current or former employee by
reason of "his" services as an employee. 29 U.S.C. § 186(c)(1).
The majority reasons that the payments at issue in this case are
lawful by reason of all of the employees' collective service.
This is contrary to the plain meaning of the statute. If a union
official is to be paid by the employer, it must be by reason of
that official's service to the employer -- not because of the
service of others who might aspire to his position. Indeed, if
the collective bargaining agreement allowed, but did not require,
that the grievance chairperson be a former employee of the
company, then the company might find itself paying an individual
who was never an employee of the company by reason of other
employees' services for the company -- a result clearly not
permitted by section 302(c)(1). By relying on the collective
service of the employees, the majority ignores the plain language
of the statute.
I also fear that the majority's reasoning could be
construed to apply to several situations which would defy logic.
For example, let us assume that an individual applies for (and
obtains) a job with the employer. One day after beginning work,
the individual is elected grievance chairperson. For the next
thirty years,9 the individual serves as grievance chairperson and
9. While the agreement in this case may contain a time
restriction, that restriction did not play any part in the
27
performs no services for the employer. Thus, the individual
performed eight hours' worth of services for the employer, but
was paid by the employer for thirty years. The majority's claim
that this individual is being paid for thirty years "by reason
of" his one-day service for the employer is illogical.
In another example, let us assume that two grievance
chairpersons are elected on the same day. One ("Michael") worked
for the employer for twenty years. The other ("Mary") was active
in the union but never worked for the employer. Under the
collective bargaining agreement in this case, the employer is
required to pay Michael, but is prohibited from paying Mary. At
present, both Michael and Mary perform exactly the same services,
but Michael's prior employment (for which he was already fully
compensated) entitles him to continued payment from the
employer.10
The majority's reasoning also fails as a matter of
logic in "open shops." In an open shop, not all employees
(..continued)
majority's reasoning. Therefore, I presume that an agreement
that does not contain a time restriction will not be unlawful
under the majority's decision.
10. Altering this example somewhat, let us assume that Michael
worked for twenty years before being elected grievance
chairperson, but that Mary worked one day. In this situation,
the employer would be required to pay both Michael and Mary.
Michael, however, "gave up" significantly more than Mary, as
Michael worked for twenty years at reduced wages, while Mary only
worked one day. The employer does not take into account what
each individual gave up -- the employer considers what the
collective group gave up. I contend that the employer may not do
that under the plain terms of section 302(c)(1).
28
governed by the collective bargaining agreement will necessarily
be members of the union. An employee who is not a member of the
union (and who therefore cannot aspire to become a grievance
chairperson) will nonetheless be forced to endure a lower salary
or reduced benefits due to his co-workers' decision to "give up
something." In addition, unions will be able to circumvent the
problems that arise when some employees elect not to join the
union or pay union dues -- they will seek agreements from the
employer to subsidize representatives' salaries in exchange for
reductions in pay or benefits. These agreements will be
negotiated and ratified without the input of the non-union
employees. Thus, an employee who elects not to pay union dues
may nonetheless face reductions in salary or benefits so that the
union (which he or she does not support) may prosper. The
payments at issue here are surely not "by reason of" the non-
union employees' services -- yet those same payments are made
possible by the non-union employees' reduced salary and benefits.
IV.
Finally, the majority contends that since no-docking
provisions are lawful under section 302, the payments at issue
here should also be lawful. The majority writes that "it would
be strange indeed if Congress intended that granting four
employees two hours per day of paid union leave is permissible,
29
while granting a single employee eight hours per day of that same
leave is a federal crime." Maj. Op., at 10-11.
In reasoning that the payments at issue here are
analogous to no-docking payments, the majority assumes (without
deciding) that no-docking provisions are lawful. While some
courts have so held, we have not yet addressed the lawfulness of
no-docking payments. Until we do so (and until we explain our
reasons for finding such payments lawful), the majority should
not analogize such payments to those at issue here.
Assuming that no-docking provisions are lawful,
however, we are still not required to reach the conclusion that
the payments at issue in this case must also be lawful. Indeed,
there are substantial differences between no-docking payments and
the payments at issue here. The primary difference is that no-
docking payments are made to individuals who are current
employees of the company currently performing services for the
company. In contrast, the payments at issue here are made to
former employees of the company not performing any services for
the company.
In BASF Wyandotte Corp. v. Local 227, 791 F.2d 1046,
the Second Circuit observed that payments made to current
employees for short absences (such as vacation pay, sick pay, or
military leave pay) are all made to current employees "by reason
of" their current, ongoing services for their employer. The
court then reasoned that payment to current employees for short
30
absences to perform union work is no different from vacation pay,
sick pay, and military leave pay. Id. at 1049. Thus, no-docking
payments made to current employees who occasionally performed
union work during working hours should be treated the same as
other payments for short term absences.
Importantly, the court recognized that each of these
payments were made to persons whose entitlement to the payments
was "by reason of" current service. As the court noted, "no-
docking provisions have relevance only to persons who are
currently serving as employees." Id. at 1049 n.1. The common
element linking sick pay and no-docking pay "is simply that the
person to whom the employer makes payment is one who performs
services as an employee." Id. at 1049 (footnote omitted). If we
assume that no-docking payments are analogous to sick pay, we
must conclude that they can only be made to current employees who
perform services to their employers. This makes sense -- former
employees do not accrue sick pay or vacation pay. Likewise, they
should not accrue "union-work-time pay." See also Phillips, 19
F.3d at 1575 n.18 (recognizing difference between no-docking
provision and payments to non-employees who perform no work for
company).
The majority cites several cases from our sister courts
of appeals where courts concluded that no-docking provisions are
lawful. In several of those cases, however, the courts carefully
distinguished no-docking payments from payments made to union
31
officials who did not perform work for the company. In BASF
Wyandotte Corp. v. Local 227, Int'l Chem. Workers Union, AFL-CIO,
791 F.2d 1046 (2d Cir. 1986), for example, the court stated:
[W]e do not suggest that section [302(c)(1)] would
allow an employer simply to put a union
official on its payroll while assigning him
no work. . . . [A] union official who,
though on an employer's payroll, performed no
service as an employee, would not be within §
302(c)(1)'s exception.
Id. at 1050. In another case cited by the majority, the court
agreed that payments to a union official put on an employee
payroll but not assigned any meaningful work would violate
section 302. NLRB v. BASF Wyandotte Corp., 798 F.2d 849, 856 n.4
(5th Cir. 1986).
The majority also cites Toth v. USX Corp., 883 F.2d
1297 (7th Cir.), cert. denied, 493 U.S. 994, 110 S. Ct. 544, 107
L. Ed. 2d 541 (1989). There the court of appeals stated:
At some point, it is conceivable that a bargain struck
by the union and the employer might yet
violate section 302 -- if, for example, the
terms of compensation for former employment
were clearly so incommensurate with that
former employment as not to qualify as
payments "in compensation for or by reason
of" that employment . . . .
Id. at 1305. As an example of a case that would violate section
302, the court stated that "fulltime pay for no service cannot
reasonably be said to be compensation 'by reason of' service as
an employee." Id. (citing BASF Wyandotte Corp. v. Local 227, 791
F.2d at 1050).
32
Indeed, the distinction between no-docking payments and
the payments at issue here is reinforced elsewhere in the labor
laws. For example, 29 U.S.C. § 158(a)(2) provides that it shall
be an unfair labor practice for an employer to contribute
financial support to any labor organization. This rule contains
one exception: "an employer shall not be prohibited from
permitting employees to confer with him during working hours
without loss of time or pay." Id. Thus, while employers may
allow employees to confer with their employer during working
hours without loss of pay, the employer may not contribute
financial support to the labor organization. The rule bans the
payments at issue here; the exception allows no-docking
provisions.
Other realities dictate that no-docking payments are
simply not analogous to the payments at issue here. For example,
employees subject to no-docking payments are more likely to do
union work on an "as needed" basis. They are also more likely to
be able to schedule grievance meetings and other union work at
the mutual convenience of the employees and the employer. In
contrast, the grievance chairmen in this case are paid full time
regardless of whether there is any union work to be done. They
are never available to perform services for the employer. Thus,
the four individuals who spend two hours per day performing union
work (from the majority's hypothetical) are less of a burden for
the employer than one employee's absence all day every day.
33
V.
While the majority emphasizes its policy determination
that bargained-for payments should not be unlawful, it does not
discuss several compelling policy reasons why we should affirm
the judgment of the district court. These policy considerations
go far beyond the need to avoid conflict of interest among union
negotiators, a policy that is clear on the face of the statute
and in the legislative history.
Initially, as the majority recognizes, the grievance
chairperson will often take a position at odds with the position
of management. Maj. Op., at 7. Indeed, the grievance
chairperson is most needed when the employee's position is
adverse to the employer's. In order to be effective, the
grievance chairperson often will fight zealously for the
aggrieved employee and against the employer. Meanwhile, the
employer must pay the chairperson's salary. It seems illogical
to me to force the employer to pay the salary of an individual
whose sole function is to oppose the employer.11
11. I recognize that the word "force" may be strong since the
employer need not agree to pay the grievance chairperson during
negotiations. Assuming that this pay practice is not unlawful,
however, the practice undoubtedly constitutes a mandatory subject
of bargaining. NLRB v. BASF Wyandotte Corp., 798 F.2d 849, 852-
54 (5th Cir. 1986). Thus, if the employer refused to accede to
such a pay provision, the employees could strike over this issue.
Indeed, those employees who may have the most influence
in swaying other employees' opinions regarding strike decisions
are probably the same individuals who are most likely to be
elected to the position of grievance chairmen. I envision the
situation where an employee who seeks the position of grievance
34
Next, by sanctioning an agreement whereby the company
pays grievance chairmen to perform services for the union, the
majority unnecessarily creates uncertainty over whether the
chairmen are employees of the union or employees of the company.
In NLRB v. Town & Country Elec., Inc., ___ U.S. ___, 116 S. Ct.
450, 133 L. Ed. 2d 371 (1995), the Supreme Court addressed the
question of who is an employee under the NLRA. The Court
favorably cited several common definitions of "employee" --
including "person in the service of another . . . where the
employer has the power or right to control and direct the
employee . . . ." Id. at ___, 116 S.Ct. at 454 (citation
omitted). Under this definition, a grievance chairperson appears
to be an employee of the union. Citing an excerpt from the
NLRA's legislative history, however, the Court noted that
"employee" includes "every man on a payroll." Id. at ___, 116
S.Ct. at 454 (citation omitted). Since grievance chairmen remain
on the company's payroll, perhaps they remain employees of the
company. The majority does not decide whether the company or the
union is the chairmen's employer.12
(..continued)
chairperson may seek to insure that his or her desired position
is fully funded by the employer before he or she accepts the
position -- even if that means encouraging a strike. Even the
possibility that this might occur demonstrates the conflict of
interest that will surely arise among those individuals who may
seek the funded positions.
12. This uncertainty will extend beyond cases arising under
the NLRA. The Supreme Court recently held that, under Title VII
of the Civil Rights Act of 1964, the test for deciding whether an
employer "has" a particular employee is whether the employer has
"an employment relationship" with the individual. Walters v.
35
The failure of the majority to decide whether the
grievance chairmen are employees of the union or the employer may
lead to numerous problems: Is a grievance chairperson considered
part of the bargaining unit while on leave? Who will be liable
if a grievance chairperson injures a third party while performing
union work? Who will be responsible for providing a reasonable
accommodation to a grievance chairperson with a disability who
needs assistance performing her union job on the employer's
premises? What if a grievance chairperson decides to take FMLA
leave -- will his eligibility depend on whether the union is an
(..continued)
Metropolitan Educ. Enters., Inc., ___ U.S. ___, 117 S. Ct. 660,
___ (1997). The Court noted, however, that "the employment
relationship is most readily demonstrated by the individual's
appearance on the employer's payroll." Id. at ___, 117 S.Ct. at
___; see also Equal Employment Opportunity Commission Notice No.
N-915-052, Policy Guidance: Whether Part-Time Employees Are
Employees (Apr. 1990), at 24, reprinted in 3 EEOC Compl. Man.
(BNA), at N:3311 (interpreting both Title VII and ADEA; while
one's status as an employee is defined by examining the
employment relationship, "[t]he payroll is a reliable indicator
of those individuals who have an employment relationship with the
employer and therefore are employees."). While grievance
chairmen have an employment relationship with the union
(indicating that the employer is the union), their relationship
with the company is not completely severed, and they continue to
appear on the company's payroll (indicating that the employer is
the company).
I would note also that this is not a traditional dual-
employer case where both the union and the company may be
considered employers of the grievance chairmen. In the
traditional dual-employer case, the individual performs services
for both the company and the union and is paid by both the
company and the union for the services performed for the
respective payor. In this case, in contrast, the individuals
perform services exclusively for one entity and are paid
exclusively by another.
36
FMLA employer or whether the company is an FMLA employer?13 If a
grievance chairperson is injured while performing union duties,
will she nevertheless be entitled to disability or workers'
compensation from the company? May the company terminate,
suspend or discipline a grievance chairperson if he engages in
activity that would qualify for termination, suspension or
discipline for other employees? These questions are admittedly
outside the scope of the narrow issue before us, but the
majority's decision will assuredly lead to innumerable disputes
about the proper classification of individuals who remain on the
company's payroll without performing any services for the
company. If we affirm the judgment of the district court,
however, it is clear that individuals who leave the company to
work for the union are union employees, and the above questions
resolve themselves.
The final and most important policy consideration not
addressed by the majority is that federal labor policy demands
that labor organizations and employers remain separate and
13. The Senate Report accompanying the Family and Medical
Leave Act of 1993 states that the term "employ" means "maintain
on the payroll." S. Rep. No. 103-3, 103d Cong. 1st Sess. 22,
reprinted in 1993 U.S.C.C.A.N. 3, 24 (individuals on leaves of
absence are considered employees "so long as they are on the
employer's payroll."). It would seem, therefore, that grievance
chairmen are employees of the company for purposes of the FMLA.
The Report also states, however, that Congress desired that
"employ" under the FMLA mean the same as "employ" under Title
VII. As noted supra note 8, it is not clear whether the union or
the company employs grievance chairmen for the purposes of Title
VII.
37
distinct from one another. The majority would sanction a pay
practice that violates this important policy.
By enacting the labor laws as written, Congress
insisted that the NLRB and the courts observe a sharp line
between management and labor. NLRB v. Hendricks County Rural
Elec. Membership Corp., 454 U.S. 170, 192-93, 102 S. Ct. 216, 230,
70 L. Ed. 2d 323 (1981) (Powell, J., concurring in part and
dissenting in part). Indeed, the dividing line between
management and labor is "fundamental to the industrial philosophy
of the labor laws in this country." Id. at 193, 102 S.Ct. at
230; see also NLRB v. Bell Aerospace Co., Div. of Textron, Inc.,
416 U.S. 267, 284-85 n.13, 94 S. Ct. 1757, 1767 n.13, 40 L. Ed. 2d
134 (1974) (recognizing "traditional distinction between labor
and management"); Packard Motor Car Co. v. NLRB, 330 U.S. 485,
494-95, 67 S. Ct. 789, 794-95, 91 L. Ed. 2d 1040 (1947) (Douglas,
J., dissenting) ("industrial philosophy" recognizes that
management and labor are "basic opposing forces"); Cedars-Sinai
Medical Center v. Cedars-Sinai Housestaff Assoc., 223 N.L.R.B. 251,
254 (1976) (Fanning, member, dissenting) ("underlying Federal
labor policy . . . seeks to draw a line between labor and
management"). Congress' desire to preserve the distinction
between labor and management is evinced throughout the labor
laws. See, e.g., 29 U.S.C. § 158(a). I believe that allowing an
employer to provide financial support to a union, as the majority
does here, blurs the important line between labor and management
38
and creates the potential for conflict that our labor laws do not
tolerate.
VI.
I recognize that labor organizations and employers have
begun to embrace a more cooperative method of negotiating and
dispute resolution, and I applaud labor-management efforts to
retreat from the adversarial approach that has often marred the
labor landscape in this country. I believe, however, that the
payments sanctioned by the majority go too far. The financial
support sought by the United Auto Workers in this case
contravenes the longstanding tradition of separation of labor and
management. I accept and encourage arm's length cooperation
between labor and management. I cannot condone payments that
threaten the independence of labor, create conflicts of interest
for union negotiators, and violate the plain language of our
laws. It is for Congress, not the courts, to determine if and
when to permit labor organizations and employers to blur the line
between them.
Accordingly, I respectfully dissent.
Caterpillar, Inc. v. International Union, et al.
No. 96-7012
ALITO, Circuit Judge, dissenting:
If I were a legislator, I would not vote to criminalize
the payments to grievance chairmen that are at issue here. I
39
agree with the majority that these payments differ from the
corrupt practices that usually figure in prosecutions under
Section 302 of the Labor Management Relations Act, 29 U.S.C. §
186. Moreover, I am not certain that the Congress that enacted
Section 302 would have chosen to outlaw such payments if it had
focused specifically on that question.
Our job, however, is to interpret Section 302 as it is
written. "The plain meaning of legislation should be conclusive,
except in the `rare cases [in which] the literal application of a
statute will produce a result demonstrably at odds with the
intentions of its drafters.'" United States v. Ron Pair Enters.,
Inc., 489 U.S. 235, 242 (1989) (quoting Griffin v. Oceanic
Contractors, Inc., 458 U.S. 564, 571 (1982)). Here, the majority
has not heeded the plain meaning of Section 302 and has not shown
that the literal application of the statutory language would lead
to a result that is "demonstrably at odds" with congressional
intent. I therefore dissent.
As the majority acknowledges, Section 302 prohibits
Caterpillar from paying the grievance chairmen unless those
payments fall within one of the exceptions set out in Section
302(c), 29 U.S.C. §186(c). See Maj. Op. at 4-5. The exception
at issue here is that contained in subsection (c)(1), which
applies to "any money or other thing of value payable by an
employer . . . to any representative of his employees, . . . who
is also an employee or former employee of such employer, as
40
compensation for, or by reason of, his service as an employee of
such employer." 29 U.S.C. § 186(c)(1). The union argues that
these payments fall within this exception for three separate
reasons: (1) they are compensation for the grievance chairmen's
current service as Caterpillar employees; (2) they are
compensation for the grievance chairmen's former service as
Caterpillar employees; and (3) they are made "by reason of" the
grievance chairmen's former service as Caterpillar employees. I
briefly discuss each of these theories below.
I.
"As Compensation For" Current Service as a Caterpillar Employee
Although the union's primary arguments appear to be
that the payments are made "as compensation for" or "by reason
of" the grievance chairmen's past service as regular Caterpillar
employees, the union also maintains that these payments are legal
because they may be viewed "as compensation for" the grievance
chairmen's work as current Caterpillar employees. The union
contends that the grievance chairmen, who are officially on
leaves of absence from Caterpillar, are joint employees of
Caterpillar and the union. Among other things, the union notes
that Section 302(c)(1) seems to contemplate such joint
employment, since it permits an employer, under certain
circumstances, to make payments to "any representative of his
employees . . . who is also an employee . . . of such employer."
41
And the union argues that under National Labor Relations Board
decisions the grievance chairmen qualify as joint employees.
I find it unnecessary to reach the question whether the
grievance chairmen may be considered joint employees. Assuming
that they are, I am convinced that Caterpillar's payments to them
are not made "as compensation for" their service as current
Caterpillar employees. In their capacity as grievance chairmen,
they owe their complete loyalty to the workers they represent.
See Dist. Ct. Op. at 14-15. They plainly work for the union and
not for Caterpillar, and as the majority notes, their
representation of the workers "often places them in a position
adverse to Caterpillar's." Maj. Op. at 7.14
It is noteworthy that the union's excellent brief,
while arguing strenuously that the chairmen are joint employees,
makes little effort to show that the pay and benefits they
receive are compensation for services performed for Caterpillar.
The union's brief merely states:
Caterpillar . . . realizes substantial benefit from the
chairman's work. As the record shows, the chairman's
job . . . is "to make sure that contract works" and if
he succeeds, "everyone benefits -- the workers, the
Company and its production needs, and the Union." App.
260.
Appellant's Br. at 48.
14. I note that the union's brief acknowledges that "the
Union certainly exercises primary control over the chairman and
derives the primary benefit from his work." Appellant's Br. at
45.
42
This argument seems to me to obliterate the
distinction, which is surely significant in the real world,
between services performed for an employer and services performed
for a union. I do not question the proposition that "everyone
benefits" if the contract works; nor do I question the
proposition that the grievance chairmen can help to make the
contract work; but I do not think that it follows that the work
that they do should be regarded under Section 302(c)(1) as
services performed for Caterpillar. By this reasoning, everyone
who helps to make the contract work, including presumably the
union officers, could be viewed as working for Caterpillar. And
since the union, as well as Caterpillar, benefits when the
contract works, everyone who helps to make the contract work,
including Caterpillar officers and supervisors, could be viewed
as working for the union. Thus, the union's logic leads to
preposterous results. Therefore, regardless of whether or not
the chairmen may be technically considered to be joint employees
of both Caterpillar and the union, I reject the argument that the
payments in question here can be permitted on the theory that
they constitute payments made to the chairmen "as compensation
for" current services performed by them for Caterpillar. See
Dist. Ct. Op. at 16 n.14 (because chairmen perform no functions
on behalf of Caterpillar, payments are not for services rendered
by chairmen to Caterpillar whether or not they can be considered
current Caterpillar employees).
43
II.
"As Compensation For" Past Service as a Caterpillar Employee
I agree with the majority that the payments made to a
grievance chairman do not constitute "compensation for . . . his
service" as a company employee prior to his selection for a
grievance position. This point can be demonstrated by
considering the following situation. Suppose that an employee
works for a number of years in a certain job category and
receives during that period the same wages and other benefits as
all the other employees in the same job category with the same
seniority. Suppose that the employee is then selected to serve
as a grievance chairman, and that he then entirely ceases his
prior work and devotes his full time to grievance work, but
continues to receive wages and benefits from the employer. It is
plain that the wages and benefits that this employee receives
after becoming a grievance chairman are compensation for his
grievance work, not for the work that he did prior to his
selection as a grievance chairman. If these payments were
compensation for his prior work, then his compensation for that
work would exceed that of the other employees with equal
seniority who had labored in the same job category. Moreover, if
the payments were compensation for previously completed work (in
other words, if the payments had been fully earned before the
employee's selection as a grievance chairman), the employee would
44
presumably be entitled to receive those payments if, instead of
serving as a grievance chairman, he went fishing. But of course
that is not the case.
Accordingly, I agree with the majority that the
payments at issue here are not compensation for a grievance
chairman's work prior to his selection for that position. As the
majority states: "[t]he chairmen were already compensated for
their production line work long ago in the form of wages and
vested benefits." Maj. Op. at 7-8. "It is difficult indeed to
comprehend how years, even decades, of paid union leave can
realistically be thought of as compensation for time spent on the
factory floor." Maj. Op. at 8-9.
III.
"By Reason Of" Past Service as a Caterpillar Employee
While the majority holds that the payments to the
grievance chairmen are not "compensation" for their past service,
the majority concludes that the payments are "payable . . . by
reason of" the grievance chairmen's former service as Caterpillar
employees. In reaching this conclusion, however, the majority
does not explain with any specificity what it understands the
phrase "by reason of" to mean. Nor does the majority take note
of the clear meaning of that phrase in common parlance. If the
majority paid more attention to the meaning of this language, it
would be forced to recognize that the payments in dispute here
45
are not made "by reason of" the grievance chairmen's past service
as Caterpillar employees.
A. Dictionaries define the phrase "by reason of" to
mean "because of" or "on account of." See The Random House
Dictionary of the English Language 1197 (1967); 2 The Compact
Edition of the Oxford English Dictionary 2431 (1971). When x is
said to have occurred "by reason of" y, what is usually meant is
that y was, if not the sole cause of x, at least the or a major
cause. If y was simply a "but-for" cause but not a major cause
of y, x is not said to have occurred "by reason of" y.
This pattern of usage can be demonstrated by
constructing sentences that use the phrase "by reason of" to
refer to weak "but-for" causes. Such sentences invariably seem
inapt and make it apparent that this use of the phrase "by reason
of" is inappropriate. Here are some examples.
President Clinton could not have become President had
he not reached the age of 35, but it would be ridiculous to say
that he became President "by reason of" having attained his
thirty-fifth birthday.
The Green Bay Packers could not have won Super Bowl
XXXI without defeating the San Francisco Forty-Niners in the
first round of the playoffs. However, it would seem quite odd to
say that the Packers won the Super Bowl "by reason of" defeating
the Forty-Niners.
46
The judges of this court almost certainly would not
have been appointed if they had not graduated from law school.
Yet it would seem very strange to say that the judges of this
court were appointed "by reason of" having obtained law degrees.
I believe that these examples show that the phrase "by
reason of x" refers at a minimum to a major reason for x, not
simply a relatively minor "but-for" cause, and it therefore seems
clear that Caterpillar's payments to the grievance chairmen are
not made "by reason of" their prior service as Caterpillar
employees. Such past service may be necessary for election as a
grievance chairman (perhaps because Section 302 is thought to
require this) and thus to the receipt of the payments at issue,
but past service as a regular Caterpillar employee is certainly
not the or a major cause for the payments.15 One way to see this
is to consider the fact that Caterpillar has thousands of former
employees, but only a very few of them are ever selected as
grievance chairmen. Since all have prior service for the company
in common, yet only a handful become chairmen, factors other than
prior service for the company must be much more important in
influencing their selection.
15. In Trailways Lines, Inc. v. Trailways, Inc. Joint Council,
Amalgamated Transit Union, 785 F.2d 101, 106 (3d Cir.), cert.
denied, 479 U.S. 932 (1986), we noted that "[w]hile the Union is
correct in asserting that had these individuals never been
Trailways' employees they would not be eligible for pension
contributions made on their behalf, it does not therefore follow
that the pension fund contributions made by Trailways . . . were
made 'in compensation for, or by reason of,' their former service
to Trailways . . . ."
47
B. It should be noted that nowhere in its briefs does
the union urge that the phrase "by reason of" should be
interpreted as requiring merely "but-for" causation. In fact,
the government's brief supporting the union agrees with my
interpretation of "by reason of". Gov't Br. at 12 (discussing
"common understanding of 'by reason of,' as synonymous with
'because,' 'on account of,' owing to,' 'due to' etc."). See also
Appellant's Reply to Suppl. Br. at 3 ("there is no question" that
"an employer may pay a former employee who is also a union
official what he is owed because of his service as an employee
and not one cent more") (emphasis in original) (quotation
omitted).
Rather, the union's argument is that "the most natural
reading [of `by reason of'] is that this phrase refers to
payments which an individual earns the right to receive by
serving as an employee but which are not, strictly speaking,
remuneration for particular hours of work." Appellant's Br. at
21 (emphasis added). Accord id. at 34 ("so long as the right to
such payments is earned by previously having performed `service
to the employer'"); Appellant's Reply Br. at 18-19 ("`preexisting
wage and benefit payments' for an employee elected to a full-time
union position qualify as `payments by reason of' service as an
employee, at least where the right to such payments has been
collectively bargained and accrued as a result of the employee's
work for the employer.") (emphasis added) (other emphasis
48
omitted); id. at 21 (the "by reason of" exception "leaves no room
for payments which were not earned by prior service"). The union
contends that the Eleventh Circuit's opinion in United States v.
Phillips, 19 F.3d 1565 (11th Cir. 1994), cert. denied, 115 S. Ct.
1312 (1995), supports its position that Caterpillar's payments to
the chairmen were "by reason of" their service as Caterpillar
employees. Phillips held that payments by a company to a union
official were illegal if the union official "did not have a right
to such payment before he severed his employment relationship
with the company." Id. at 1575. The union relies (Br. at 37) on
the court's explanation that "[w]hen an employee's right to a
benefit has fully vested before the leave of absence begins,
there is no danger of corruption when the employer delivers the
benefit after that employee leaves the company to work for the
union . . . ." Id. at 1576.
I agree that a payment from Caterpillar to a former
employee now working as a grievance chairman would be legal under
Section 302 if the chairman's right to that payment vested before
he became a former employee. This interpretation of the "by
reason of" exception has been adopted by several other courts of
appeals. See Phillips, 19 F.3d at 1575; Toth v. USX Corp., 883
F.2d 1297, 1303 n.8 (7th Cir.), cert. denied, 493 U.S. 994
(1989). Cf. BASF Wyandotte Corp. v. Local 227, Int'l Chem.
Workers Union, 791 F.2d 1046, 1049 (2d Cir. 1986).
49
But the union's argument fails on its own terms here,
because it is simply not true that the chairmen's rights to
receive the payments at issue vested before they left
Caterpillar's employ. On the contrary, their rights to receive
these payments are conditioned upon their performance of certain
duties in their current positions as grievance chairmen. If, as
the union argues, the chairmen's rights to these payments were
earned before their employment with Caterpillar terminated, then
the chairmen could go fishing all day, every day, instead of
processing grievances. Here, contrary to the government's
argument, see Gov't Br. at 16, the payments made by Caterpillar
are measured by the chairmen's current services for another
employer, i.e., the union; they can earn as much as 46 hours' pay
if they perform sufficient work, but if they perform less work
they receive less and if they perform no work -- if they just go
fishing -- they get nothing at all. In this respect, then, this
case is identical to Trailways, and the union fails completely in
its attempt to distinguish it on the ground that the chairmen are
paid at a rate set by Caterpillar rather than by the union.
The basic problem with the union's argument is that it
confuses an employee's eligibility for a payment with his right
to it. The chairmen's prior service as employees of Caterpillar
rendered them eligible to receive their Caterpillar salaries if
they were elected as chairmen, but their prior service in no way
gave them any right to receive any amount of money. In my view,
50
it is obvious that their prior service is not the sole or even a
major reason for their receipt of the disputed payments. It thus
cannot be said -- absent outright linguistic torture -- that the
payments are made "by reason of" their prior service.
C. The majority's main argument in support of its "by
reason of" holding is that under the collective bargaining
agreement "every employee implicitly gave up a small amount in
current wages and benefits in exchange for a promise that, if he
or she should someday be elected grievance chairperson,
Caterpillar would continue to pay his or her salary." Maj. Op.
at 11. In other words, the majority views the collective
bargaining agreement as providing each employee with the
contingent right to receive future payments from the company
after that employee's regular service has terminated (the
contingencies being the employee's selection and subsequent work
as a grievance chairperson). Moreover, the majority appears to
argue that a bit of each employee's work under the collective
bargaining agreement goes to pay for this contingent right, and
the majority therefore reasons that if an employee is later
selected as a grievance chairman and receives salary and benefits
from Caterpillar, those payments are received "by reason of" the
bit of that employee's past service that went to pay for this
contingent right.
This argument is inventive -- but wrong. At the
outset, it should be noted that the majority's argument logically
51
leads to strange results that the majority does not seem to
contemplate. The majority's argument is dependent on a grievance
chairman's having "paid," while working as a regular employee,
for the contingent right to receive future payments from the
employer. Thus, the argument cannot justify the initial
negotiation of a collective bargaining agreement containing a
provision such as the one in question here. Suppose that a
particular company and union had never before agreed on an
arrangement under which the company would pay the grievance
chairmen but that the company and the union then enter into such
an arrangement. The first group of employees chosen as grievance
chairmen would not have previously made any "payments" to the
employer in exchange for the contingent right to receive future
wages and benefits from the employer. Therefore, even under the
majority's theory, the company's payments to the initial group of
grievance chairmen would be illegal. In other words, the
majority's theory leads logically to the weird result that the
company and the initial group of grievance chairmen would have to
commit federal felonies in order to set in motion the type of
arrangement that the majority sanctions.16
Moreover, although the majority postulates that regular
employees "pay" for the contingent right to receive future
compensation from the employer, it is by no means clear that this
16. I would assume that the same would be true every time a new
collective bargaining agreement took effect.
52
is true in most cases. Obviously, each regular employee gives up
wages and/or other benefits in exchange for the employer's
payments to the grievance chairmen, but what each regular
employee is chiefly "paying" for is not the contingent right to
receive future payments from the employer but rather the current
improvement in the handling of grievances that presumably results
from the work of the grievance chairmen. Indeed, under most
circumstances, I suspect that virtually all, if not all, of the
"payments" made by a regular employee in any particular year go
to fund the employer's payments to the grievance chairmen in that
year and not in future years when that employee might himself be
a grievance chairman.17
17. It makes sense that a regular employee should pay little if
anything for the contingent right discussed in the text (as
distinct from a current improvement in grievance handling)
because, from the standpoint of a wealth-maximizing regular
employee, this contingent right has little if any value. This is
so for two reasons. First, this contingent right carries little
prospect of financial gain. A regular employee, if selected as a
grievance chairman, will have to make future contributions of
labor (performing the work of a grievance chairman) that are
fully worth the wages and benefits that the employer will
provide. (Indeed, under the collective bargaining agreement
before us here, a regular employee selected as a grievance
chairman does not realize any gain in wages or benefits; he
continues to receive the same wages and benefits as he did
before.) Second, this contingent right probably does little to
increase an employee's chances of obtaining whatever non-monetary
gratification may flow from doing the work of a grievance
chairman as opposed to the work of a regular employee. Assuming
that employees in a particular bargaining unit who are willing to
forgo $x per year in exchange for their employer's payments to
the grievance chairmen would be willing to pay the same amount
per year in increased union dues so that the union could make
these payments, there will be approximately the same number of
grievance chairman positions (and therefore approximately an
equal chance of performing the work of a grievance chairman)
whether or not the grievance chairmen are paid by the employer.
53
Finally and most importantly, postulating that each
regular employee "pays" something for the contingent right to
future compensation by the employer does not obviate the problem
that past service as a regular employee is not the sole or even a
major cause of this future compensation. Assuming that each
regular employee makes such "payments" and that the payments are
a but-for cause of any compensation that this employee may
receive in the future as a grievance chairman, there are two
other, more important causes of that compensation: selection as
a grievance chairman and the satisfactory performance of the work
of a grievance chairman on a daily basis. Thus, to say that a
grievance chairman is paid year after year after year "by reason
of" his past service as a regular employee makes no more sense
than to say that a regular employee is paid year after year after
year "by reason of" his having acquired the qualifications that
were necessary for his original hiring.
For these reasons, it seems clear to me that the
payments at issue in this case are made "by reason of" the
chairmen's grievance work and not "by reason of" their prior
service as regular employees. Consequently, these payments
cannot be squeezed into the "by reason of" exception in Section
302(c)(1), 29 U.S.C. §186(c)(1), and I am therefore constrained
to conclude that these payments are prohibited by the plain
language of Section 302.
54
D. The majority also argues that by exempting payments
made "by reason of" a former employee's past service in addition
to payments made "as compensation for" that service, Congress
must have intended that the two phrases refer to different
things. I have no quarrel with this elementary principle of
statutory interpretation, but I do not agree with the majority's
application of it. The majority fails to acknowledge that three
courts of appeals have construed "by reason of" to refer to a
class of payments distinct from those covered by the "as
compensation for" exemption, and that those courts have not
adopted anything like the interpretation espoused by the
majority. Because the Eleventh Circuit's discussion in Phillips
precisely answers the majority's contention, I quote it at
length:
Congress, in using the alternative formulations of "as
compensation for" and "by reason of" in that provision,
intended to remove from the statute's prohibitions two
general categories of payments to employees: (1) wages,
i.e., sums paid to an employee specifically "as
compensation for" work performed; and (2) payments not
made specifically for work performed that are
occasioned "by reason of" the fact that the employee
has performed (or will perform, in the case of a
current employee) work for the employer. The latter
category includes employee "fringe" benefits, such as
vacation pay, sick pay, and pension benefits. Whether
"as compensation for" or "by reason of" service to an
employer, all payments from an employer to a union
official must relate to services actually rendered by
the employee for the section 186(c)(1) exception to
apply. * * *
An employee's "right" to receive a "benefit" while on leave with
the union has been upheld when it vested before the
employee began the leave of absence . . . . In
contrast, the section 186(c)(1) exception does not
apply when a company pays a union official who was a
55
former employee, but who did not have a right to such
payment before he severed his employment relationship
with the company.
19 F.3d at 1575 (first and third emphases added) (citations
omitted). BASF Wyandotte Corp., on which Phillips principally
relied, deemed "fring[e] benefits" such as "vacation pay, sick
pay, paid leave for jury duty or military service, pension
benefits, and the like" to be within the "by reason of"
exception. 791 F.2d at 1049. Accord Toth, 883 F.2d at 1303 n.8
(severance payments are "by reason of" former employee's past
service). These decisions are consistent with Trailways' holding
that the payments to former employees contemplated by section
302(c)(1) are those that relate to "past services actually
rendered by those former employees while they were employees of
the company." Trailways, 785 F.2d at 106 (emphases in original).
Thus, the distinction between the "alternative
formulations" is that "compensation" refers to wages paid for
specific work performed, while "by reason of" refers to non-wage
payments made after an employee becomes a former employee but
earned while he or she was still an employee.18 In contrast to
18. In Toth, the Seventh Circuit interpreted our decision in
Trailways as resting on the proposition that "any compensation
continuing beyond the time of an employee's 'past' employment
could not be 'by reason of' [that] employment." 883 F.2d at
1302. While I am less confident than the Toth court that
Trailways should be read so to hold, I agree with the Toth court
that some payments made after the termination of the recipient's
employment with the company can be made "by reason of" his or her
prior employment. What is important is whether the recipient has
a right to the payment before he or she leaves the company, not
the date on which the payment is actually made or received. See
56
the Second, Seventh, and Eleventh Circuits, the majority here
holds that the "by reason of" exception refers to wage payments
that would not be made but for the recipient's prior service as
an employee.
E. The only justification for disregarding the plain
meaning of the "by reason of" exception would be that it would
produce "a result demonstrably at odds" with congressional intent
or "would thwart the obvious purpose of the statute." Griffin v.
Oceanic Contractors, Inc., 458 U.S. 564, 571 (1982) (quotation
omitted), but the majority does not even attempt to make such a
showing. I see nothing that demonstrates that following the
plain meaning of the statutory language would produce a result
that is demonstrably at odds with Congress' intent. I find
nothing conclusive in the legislative history, and while I agree
with the majority that the payments in question here are quite
different from "bribery and extortion," Maj. Op. at 13, there are
reasons, many of which are set out in Judge Mansmann's opinion,
why Congress might have wished to preclude such employer
payments. I will simply note that this very case serves as an
example of why Congress might have wanted to prohibit the
payments at issue. The majority's description of these payments
as "innocuous" (Maj. Op. at 8) ignores the fact that
Caterpillar's decision to stop paying the chairmen's salaries was
(..continued)
Toth, 883 F.2d at 1302 (criticizing Trailways for this reason).
57
designed to "put economic pressure on the Union" during the
strike. (App. 144) Prohibiting company control over such
payments furthers the goal of union independence by removing this
weapon from the company's arsenal. In short, while I am unsure
whether this prohibition is on balance desirable or undesirable,
I am certain that it is far from absurd. The "explicit statutory
direction" that the majority purports to find wanting (Maj. op.
at 14) is plainly contained in the text of Section 302.
The history of "no docking" provisions, which seems to
form the centerpiece of the union's submission, also does not
persuade me to disregard the plain statutory language. "No
docking" provisions differ, at least in degree, from the type of
arrangement that is before us, and there are times in the law
when differences in degree are dispositive. In any event, the
legality of "no docking" provisions is unsettled; that question
is not before us; and, like Judge Mansmann, I would not reach it
here.
Since Section 302 is a criminal statute, I would apply
the rule of lenity if I thought that the statutory language was
ambiguous, see, e.g., Crandon v. United States, 494 U.S. 152, 158
(1990), but since I see no ambiguity, I find that rule
inapplicable. See Reno v. Koray, 115 S. Ct. 2021, 2029 (1995)),
(rule of lenity applies only "if, `after seizing everything from
which aid can be derived,' we can make `no more than a guess as
to what Congress intended'") (citations omitted). I would
58
therefore affirm the decision of the district court. If this
result is not desirable as a matter of public policy, the union
and its amicus, the United States, surely understand how to seek
correction in Congress.19
19. Indeed, the government's amicus brief seems at places to
amount to a request that we craft a legislative solution to the
problem of collective bargaining agreements that call for
employers to make payments to former employees who become union
officials. According to the government's brief, such payments
may violate Section 302 if they are "incommensurate" with the
recipient's former compensation as a regular employee, if the
recipient negotiated the right to receive those payments, or if
the recipient has not worked for the employer in his or her
regular job for an extended period and is unlikely ever to return
to such work. U.S. Amicus Br. at 26-28. These may be sensible
rules, but I am unable to tease them out of the current language
of Section 302. They provide material for legislative, not
judicial, consideration.
59