Caterpillar, Inc. v. International Union, United Auto., Aerospace and Agr. Implement Workers of America, No. 96-7012

CourtU.S. Court of Appeals — Third Circuit
Writing for the CourtNYGAARD; MANSMANN; ALITO
Citation107 F.3d 1052
Parties154 L.R.R.M. (BNA) 2609, 65 USLW 2611, 133 Lab.Cas. P 11,776 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.
Docket NumberNo. 96-7012
Decision Date04 March 1997

Page 1052

107 F.3d 1052
154 L.R.R.M. (BNA) 2609, 65 USLW 2611,
133 Lab.Cas. P 11,776
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.
No. 96-7012.
United States Court of Appeals,
Third Circuit.
Argued August 8, 1996.
Reargued Dec. 2, 1996.
Decided March 4, 1997.

Page 1053

David M. Silberman (Argued), Bredhoff & Kaiser, Washington, DC; Daniel W. Sherrick, International Union of United Auto Workers, Detroit, MI; Wendy L. Kahn, Zwerdling, Paul, Leibig, Kahn, Thompson & Driesen, Washington, DC, for Appellants.

Gerald C. Peterson, Columbus R. Gangemi, Jr. (Argued), Winston & Strawm, Chicago, IL, for Appellee.

James B. Coppess, Washington, DC, for Amicus-Appellant, American Federation of Labor & Congress of Industrial Organizations (AFL-CIO).

Allen H. Feldman, Edward D. Sieger, United States Dep't of Labor, Washington, DC, for Amicus Curiae United States of America.

Council on Labor Law Equality, Proposed Amicus-Appellee.

Before: SLOVITER, Chief Judge, and BECKER, STAPLETON, MANSMANN, GREENBERG, SCIRICA, COWEN, NYGAARD, ALITO, ROTH, LEWIS and McKEE, Circuit Judges.

OPINION OF THE COURT

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 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

Page 1054

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 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.

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'

Page 1055

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 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 chairmen can be employees of both the union and the employer. It relies especially on NLRB v. Town & Country Electric, --- U.S. ----, ----, 116 S.Ct. 450, 456, 133 L.Ed.2d 371 (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 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...

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20 practice notes
  • Part II
    • United States
    • Federal Register July 02, 2007
    • July 2, 2007
    ...negotiators who may agree to reduced benefits for the employees in exchange for financial support for the union.'' Caterpillar v. UAW, 107 F.3d 1052, 1060 (3d Cir. 1997) (Mansmann, J., dissenting). The Department noted its view that such payments should be disclosed to union members to enab......
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    • Federal Register August 29, 2005
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    ...agree to reduced benefits for the employees in exchange for financial support for the union.'' See Caterpillar v. United Auto Workers, 107 F.3d 1052 (3rd Cir. 1997) (en banc) (emphasis in original) (Mansmann, J., dissenting), cert. granted, 521 U.S. 1152, dismissed as moot, 523 U.S. 1015 (1......
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