Titan Tire purchased a tire manufacturing facility in late 2005. It subsequently entered into a cba with the Steelworkers. Until October of 2008, Titan paid the full union salaries of the Local's President and Benefits Representative. Starting in October, however, Titan ceased making these payments, claiming that they were in violation of Section 302(a) of the Labor Management Relations Act. Titan premised its claim on the fact that the individuals holding these positions did not work full time for it and were not subject to its control, and because the Local also represented employees of the Freeport School District. The Union filed a grievance which was sustained by an arbitrator. A District Court confirmed the award, and Titan appealed. The Seventh Circuit has now reversed and issued an extensive opinion discussing the Section 302 issue.
The Court summarized the Arbitrator's award:
After the hearing, the arbitrator issued an opinion sustaining the union's grievance and ordered Titan to reinstate direct salary payments to the President and Benefit Representative. The arbitrator reasoned that Titan's practice of directly paying the President's and Benefit Representative's salaries for two and a half years was "enough time to invoke the doctrine of past practice." The arbitrator further concluded that such payments were "by reason of their former employment" with Titan and "in accordance with the collective bargaining agreement" and as such were legal under Section 302(c). The arbitrator added that "[t]he effect of the bargained-for payment is significant," totaling nearly $80,000 annually for the President and about $50,000 for the Benefit Representative. And that "[t]his savings of expense could result in either lower Union dues or at least no raise in Union dues," and thus "[t]he payment by the Company of the President's and Benefit Representative's salaries is therefore a direct benefit to the Union membership."
Noting the limited scope of review of arbitrator's awards, and its obligation to accept the facts as found by the arbitrator, the Court nevertheless found the award contrary to the statute and therefore violative of public policy. The Court reviewed its own prior decisions in this area, and decisions of the Third, Second and Ninth Circuits addressing similar claims, with differing results. It noted that preventing bribery is not the sole purpose of the statute's prohibition of an employer providing "money or other things of value" to representatives of its employees. It further noted that the prohibition also served the statute's goal of preventing conflict of interest. The Court was careful to explain that its decision in no way called into question no-docking clauses, but determined that the facts here went well beyond that exception. The Court concluded:
The arbitrator found that the labor agreements between Titan and the union required Titan to pay the full-time salaries of Local 745's President and Benefit Representative. However, such an agreement violates the plain language of Section 302(a) of the LMRA and is not exempt by Section 302(c) because the President's and Benefit Representative's full-time salaries are not vested rights earned "by reason of" their former employment at Titan. Rather, the President and Benefit Representative earn their current salaries because of their service to Local 745 members. Because the arbitrator's order to Titan to reinstate direct salary payments to the President and Benefit Representative would require Titan to violate Section 302, its decision must be vacated. For these and the forgoing reasons, we REVERSE and REMAND for further proceedings consistent with this opinion.
The Court's opinion in Titan Tire Corp. v. United Steel Workers can be found here.