Lareau on Titan Tire Corp. of Freeport, Inc. v. USW: Seventh Circuit Holds Employer's Payment of Union Officials' Salaries Unlawful

Lareau on Titan Tire Corp. of Freeport, Inc. v. USW: Seventh Circuit Holds Employer's Payment of Union Officials' Salaries Unlawful

 The Seventh Circuit held that an employer violated the Labor Management Relations Act (LMRA), when it paid the salaries of former employees who were serving as full-time employees of the union that represented the employer's employees. In doing so, it departed from the position generally accepted by the other federal courts of appeal. N. Peter Lareau examines, in some detail, the court's rationale for its conclusion and its reasons for rejecting the views of its sister circuits.

Excerpt:

Although Section 8(a)(2) of the National Labor Relations Act (NLRA) makes it unlawful for an employer "to dominate or interfere with the formation or administration of any labor organization or contribute financial or other support to it[,]” the proviso to that section expressly provides that: “an employer shall not be prohibited from permitting employees to confer with him during working hours without loss of time or pay[.]”

Similarly, Section 302(a) of the LMRA provides that

it shall be unlawful for any employer . . . to pay, lend, or deliver, or agree to pay, lend, or delivery, any money or other thing of value . . . to any representative of his employees who are employed in an industry affecting commerce.

However, Section 302(c) expressly exempts from that general prohibition:

any money or other thing of value payable by an employer to . . . any representative of [its] employees, or to any officer or employee of a labor organization, 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.

These two parallel, but not identical, legislative provisions have given rise to a substantial amount of litigation about whether an employer may compensate its employees, or former employees, for rendering services on behalf of a union and, if so, the circumstances in which such compensation is permissible. The services rendered by such employees/former employees may range from representing other employees of the employer in proceedings brought by those employees (or the union) against the employer to activities on behalf of the union that are wholly unrelated to the interests of the compensating employer.

In Titan Tire Corp. of Freeport, Inc. v. USW, 2013 U.S. App. LEXIS 22298 (7th Cir. Nov. 1, 2013), the Seventh Circuit held that an employer violated the LMRA, when it paid the salaries of former employees who were serving as full-time employees of the union that represented the employer's employees [an enhanced version of this opinion is available to lexis.com subscribers]. In doing so, it departed from the position generally accepted by the other federal courts of appeal that had considered the question. In this Emerging Issue Analysis, N. Peter Lareau, author of "NLRA: Law and Practice" and numerous other books and articles in the field of labor law, examines, in some detail, the court's rationale for its conclusion and its reasons for rejecting the views of its sister circuits.

Prior Precedent

In order to qualify for the exception to Section 302(a) compensation received by a union representative from an employer must be "for, or by reason of" the employee's service for such employer. In determining whether the "service" requirement has been met, courts have generally focused on "whether [the activities to be engaged in] are ... by one who is a bona fide employee of the payor." In BASF Wyandotte Corp. v. Local 227, ICWU, the Second Circuit upheld a collectively bargained contract provision pursuant to which the employer agreed to pay the union president and/or union secretary for up to four hours each day, at the employees regular straight-time rate of pay, for "the purpose of conducting union business during normal working hours on Company property"[.]

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