Titan Tire Corp. of Freeport, Inc. v. United Steel, Paper & Forestry, Rubber, Manufacturing, Energy, Allied Industrial & Service Workers International Union

In the

United States Court of Appeals
For the Seventh Circuit
No. 12-1152

TITAN TIRE CORPORATION OF
FREEPORT, INC.,
Plaintiff-Counter Defendant-Appellant,

v.

UNITED STEEL, PAPER AND FORESTRY,
RUBBER, MANUFACTURING, ENERGY,
ALLIED INDUSTRIAL AND SERVICE
WORKERS INTERNATIONAL UNION, et
al.,
Defendants-Counter Plaintiffs-Appellees.

Appeal from the United States District Court for the
Northern District of Illinois, Western Division.
No. 10 C 50296 — Frederick J. Kapala, Judge.

ARGUED DECEMBER 5, 2012 — DECIDED NOVEMBER 1, 2013
2 No. 12-1152

Before MANION and SYKES, Circuit Judges, and DARROW,
District Judge.*
MANION, Circuit Judge. Titan Tire Corporation of Freeport,
Inc. (“Titan”), purchased a tire manufacturing facility in
Freeport, Illinois, in late December 2005. In January 2006, Titan
entered into a series of labor agreements with Local 745, the
union which represented the Titan workers. After taking over
the Freeport facility, Titan paid the full union salaries of Local
745's President and Benefit Representative even though they
were on leave of absence from Titan and primarily working
away from the Titan facility. But in October 2008, Titan
informed the union that for two reasons it concluded such
payments violated Section 302(a) of the Labor Management
Relations Act (“LMRA”), which prohibits an employer from
paying money to union representatives.1 First, Titan concluded
the payments were illegal because Local 745 also represented
a bargaining unit at the Freeport School District but the
President’s full-time salary was being paid solely by Titan.
And second, it believed the payments illegal because the union
representatives were not working full-time from the Titan
facility and were not subject to Titan’s control.

*
The Honorable Sara Darrow, U.S. District Court for the Central District of
Illinois, sitting by designation.

1
Section 302(a) of the LMRA provides that “[i]t 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.” 29 U.S.C. § 186(a).
No. 12-1152 3

The union filed a grievance against Titan, arguing that
Titan violated the various labor agreements when it stopped
paying the President’s and Benefit Representative’s full-time
salaries. It argued that such payments were exempt from the
general prohibition of Section 302(a) by Section 302(c), because
the President and Benefit Representative were current or
former employees of Titan and the payments were “by reason
of” their service as employees of Titan.2 An arbitrator found
that Titan made these payments “by reason of their former
employment” at Titan, and thus that the payments were lawful
under Section 302(c). The arbitrator ordered Titan to resume
paying the President’s and Benefit Representative’s full-time
salaries. Titan filed suit in federal district court to vacate the
arbitrator’s award and the union counterclaimed for enforce-
ment of the award. The district court granted the union’s
motion, denied Titan’s motion, and enforced the arbitrator’s
decision. Titan appeals.
This appeal presents an issue of first impression in this
circuit, namely whether a company may legally pay the full-
time salaries of the President and Benefit Representative of the
union representing the company’s employees. The Third
Circuit, in a divided en banc decision, in Caterpillar, Inc. v. Int’l
Union, United Auto. Aerospace & Agric. Implements Workers of
Am., 107 F.3d 1052 (3d Cir. 1997), held that paying the full-time

2
Section 302(c) exempts from the 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.” 29 U.S.C.
§ 186(c).
4 No. 12-1152

salaries of the union’s grievance chairmen did not violate
Section 302 of the LMRA because such payments were “by
reason of” the union representatives’ former employment at
Caterpillar. Conversely, the dissents in Caterpillar concluded
that the plain language of Section 302 barred the company
from paying the full-time salaries of the union grievance
chairmen, reasoning that such payments were not “because of”
the grievance chairmen’s prior service to Caterpillar, but rather
because of their current work for the union. Id. at 1059
(Mansmann, J., dissenting); id. at 1069 (Alito, J., dissenting).3
The Ninth Circuit in Int’l Ass’n of Machinists & Aerospace
Workers, Local Lodge 964 v. BF Goodrich Aerospace Aerostructures
Grp., 387 F.3d 1046 (9th Cir. 2004), also disagreed with the
majority’s reasoning in Caterpillar, but nonetheless concluded
that a company could legally pay a union’s full-time “Chief
Shop Steward” where the steward was subject to the em-
ployer’s control and thereby still an employee of the company.
The Second Circuit in BASF Wyandotte Corp. v. Local 227,
International Chem. Workers Union, 791 F.2d 1046, 1049 (2d Cir.
1986), in upholding a no-docking provision, also indicated that
an employer could not legally pay the full-time salary of a
union employee, stating: “we 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.”

3
The Supreme Court granted certiorari in Caterpillar. Caterpillar, Inc., v.
Int’l Union, United Auto. Aerospace & Agric. Implement Workers of AM., et al.,
521 U.S. 1152 (1997). However, following briefing and oral argument, the
parties settled and the Supreme Court dismissed the case. 523 U.S. 1015
(1998).
No. 12-1152 5

This circuit’s closest precedent comes from Toth v. USX
Corp., 883 F.2d 1297 (7th Cir. 1989). In Toth, we held that former
employees could accrue pension credit while working for a
union, but we also recognized that at some point “the terms of
compensation for former employment” could become “so
incommensurate with that former employment as not to
qualify as payments ‘in compensation for or by reason of’ that
employment.” Id. at 1305.
Such is the case before us today. Paying the full-time union
salaries of Local 745's President and Benefit Representative is
“so incommensurate with [their] former employment [at Titan]
as not to qualify as payments ‘in compensation for or by reason
of’ that employment.” Id. Rather, these payments are “by
reason of” the union’s President’s and Benefit Representative’s
service to Local 745 members, and those members include both
employees working for Titan and employees working for the
Freeport School District. We reach this conclusion based on the
plain meaning of Section 302, although our holding also
furthers the statutory purpose of preventing conflicts of
interest. Because such payments are illegal, the arbitrator’s
decision violates explicit public policy and thus “we are
obliged to refrain from enforcing it.” W.R. Grace & Co. v. Local
Union 759, Int’l Union of United Rubber, 461 U.S. 757, 766 (1983).
Accordingly, we reverse the district court's decision and vacate
the arbitrator's award.4

4
The Second and Ninth Circuits have both held that the payment of the
full-time salaries of union grievance representatives does not violate Section
302 of the LMRA. However, as discussed in more detail in this opinion,
(continued...)
6 No. 12-1152

I.
BACKGROUND
Titan Tire Corporation of Freeport, Inc. (“Titan”), pur-
chased a tire manufacturing facility in Freeport, Illinois, in late
December 2005. Employees at the Freeport facility were
represented by the United Steel, Paper and Forestry, Rubber,
Manufacturing, Energy, Allied Industrial and Service Workers
International Union (“USW”), and Local 745 (collectively “the
union”). In January 2006, Titan entered into three related labor
agreements with the union: (1) a Collective Bargaining Agree-
ment (“CBA”); (2) a Benefits Agreement; and (3) an Under-
standings Outside the Agreement. (Collectively “labor agree-
ments”). The relevant portions of those agreements are
discussed shortly. See infra pp. 12–13.
Following Titan’s purchase of the Freeport facility, Titan
continued its predecessor’s practice of paying Local 745's
President and Benefit Representative their full-time salaries,
plus benefits. The President’s and Benefit Representative’s
salaries were set by Local 745's bylaws which were approved
by members of Local 745. The bylaws provided that Local 745's
“[p]resident’s salary is 60 hours at the highest base rate in the

4
(...continued)
these decisions adopt different approaches to this question of law. This
opinion has been circulated under Circuit Rule 40(e) among all judges of
this court in regular active service. A majority of the judges in active service
did not wish to rehear the case en banc. Chief Judge Wood and Circuit
Judges Rovner, Williams, and Hamilton voted to grant rehearing en banc.
Judge Wood’s dissent to the denial of rehearing follows.
No. 12-1152 7

plant,” and “[t]he benefit representative salary is 48 hours at
the highest pay rate of the plant.”
When Titan purchased the tire facility, Steve Vanderheyden
was serving as Local 745's President. Kevin Kirk took over as
President in 2009. In 2006 and throughout the underlying
litigation, Anthony Balsamo served as Local 745's Benefit
Representative.
From 2006 through October 2008, Titan paid Vanderheyden
and Balsamo their full union salaries. Then on October 31,
2008, Titan wrote to union president Vanderheyden and
informed him that Titan would no longer pay the full-time
salaries for Vanderheyden, Balsamo, and another union officer,
whose pay is not at issue on appeal. In this letter, Titan
explained that it believed that continuing to pay the salaries of
the union representatives would violate Section 302 of the
LMRA because Local 745 also represented school district
employees5 and because the President and Benefit Representa-
tive did not work out of the Titan facility and were not subject
to Titan’s control. Id.
While Titan ceased paying Vanderheyden and Balsamo
their full-time salaries, it instead paid directly to Local 745
amounts it believed due under the various labor agreements
for time the President and Benefit Representative worked on
union business. Local 745 then began paying the President’s
and Benefit Representative’s salaries; it also became responsi-

5
As discussed in more detail below, see infra pp. 11–12, Local 745 repre-
sented both workers at Titan and several classifications of employees at the
Freeport School District.
8 No. 12-1152

ble for the related federal tax withholding, unemployment
taxes, and worker’s compensation on their incomes. Titan,
though, continued to offer Vanderheyden (and later Kirk) and
Balsamo fringe benefits. Specifically, they remained eligible for
employee benefits, including health, dental, and life insurance,
and short-term disability coverage, although to participate in
those insurance plans they had to write Titan a check for their
share of the premiums and the payments did not come from
pre-tax earnings. Titan also continued to make pension
contributions and the President and Benefit Representative
maintained their seniority at Titan.6
Local 745 filed a grievance challenging Titan’s discontinua-
tion of payments to Vanderheyden and Balsamo. The griev-
ance went to arbitration. At arbitration, Local 745 argued that
under the governing labor agreements and the parties’ course
of conduct, Titan was responsible for directly paying the
President’s and Benefit Representative’s full salaries. In
making this argument, Local 745 relied on several provisions
from the governing labor agreements.
First, Local 745 relied on Article VII, Section 19 of the CBA,
which provided:
An employee who is designated Union repre-
sentative shall be compensated at his current

6
Article VIII, Section 3(e) of the CBA provided that: “An employee elected,
selected, or appointed for duty as an officer, representative or employee of
… the Local Union , … which assignment will take him from his employ-
ment with the Company, shall upon written request of the … Local Union
receive a leave of absence for the period of his service. … Seniority shall
accumulate throughout the period of his leave of absence.”
No. 12-1152 9

hourly rate for time lost from his regular shift
as a result of attending scheduled grievance
meetings with the Company. The maximum
number of hours to be paid by the Company
as provided in this paragraph shall be deter-
mined for each week on the basis of fifteen
(15) hours per week for one hundred (100)
employees.
Second, Local 745 relied on the Benefits Agreement, which
detailed the Benefit Representative’s duties7 and stated that
“the Employee designated as Benefit Representative will be
paid his current hourly rate for forty-eight (48) hours per week
plus 2% of previous year’s earnings as vacation pay. The
employee will be considered to be on a leave of absence for the
period of time he or she serves as Benefit Representative.”
Third, the union relied on provisions contained in the
Understandings Outside the Agreement. Here Local 745
pointed to provisions discussing the Benefit Representative
and “union business time.” In short, the Understandings

7
The Benefits Agreement provided that: “The Benefit Representative will
assist active bargaining unit employees, retired former employees and
spouse[s] of employees and retirees when requested by such employees,
spouses, or [Titan], in processing claims for benefits. The Benefit Represen-
tative will be involved in issues that relate to network administrators and
providers, the review of administrative changes, procedures and policies of
network administrators and provider withdrawals from a network that
affect the adequacy of the network coverage. In addition, the Benefit
Representative’s role will include education of employees, retirees,
surviving spouses and dependants on annual open enrollment, plan
designs, and efficient utilization of medical and other benefit programs.”
10 No. 12-1152

Outside the Agreement’s provision discussing the Benefit
Representative provided that Titan “will provide compensa-
tion for a Benefit Representative to be selected by the Local
Union after consultation with the Company.” The agreement
also set out the Benefit Representative’s pay, mirroring the
terms provided in the Benefits Agreement, quoted above.
The provisions in the Understandings Outside the Agree-
ment also discussed “union business time,” and, in sum, set
forth an agreement for the accounting of union business time.
It explained that hours will be “accumulated and ‘banked’ by”
Titan as provided in Article VII, Section 19 of the CBA. (As
noted above, that provision set a maximum number of hours
to be accumulated at 15 hours per 100 employees, per week.)
It also stated that deductions from the account would be made
for time spent on: union representation at a grievance meeting
or arbitration; Grievance Negotiation Committee participation
at a grievance meeting or arbitration; union investigation of a
grievance or safety violation; grievant and union witnesses’
attendance at a grievance meeting or arbitration; Union
President’s (or his replacement’s) time; “[t]ime beyond 48
hours in a week paid to the Benefit Representative (or his
replacement)”; and “[a]ny amount requested by Union for
payment to Union members.”
Titan for its part argued first that nothing in these agree-
ments required it to pay Local 745's President and Benefit
Representative their full-time salaries, but instead claimed the
labor agreements merely provided for payments to the union
for union business time. Titan further argued that if, under the
labor agreements and its past practice, it had agreed to directly
No. 12-1152 11

pay the President and the Benefit Representative, the agree-
ments were illegal and therefore could not be enforced.
At the arbitration hearing, the parties submitted as joint
exhibits, among other things, the CBA, the Benefits Agreement,
the Understandings Outside the Agreement, and the October
31, 2008, letter referenced above. The Union also presented
Local 745's bylaws and Titan presented the Agreement
between Local 745 and the Freeport School District, where
Local 745 also represented a bargaining unit.
Vanderheyden testified at length during the arbitration
proceedings on various matters. He confirmed that union
members voted on and approved the CBA, Understandings
Outside the Agreement, and the Benefits Agreement, excerpted
above. And while the documents themselves were not
“produced until after the ratification,” Local 745 held a
meeting for its members and provided a “full explanation of
the content of all three of those documents.”
Additionally, Vanderheyden testified in detail concerning
his activities on behalf of Titan employees. He explained that
under the bylaws he was a member of all committees and the
head of the Grievance and Negotiating Committee.
Vanderheyden testified that he devoted 55 to 60 hours a week
on representational activities on behalf of Titan employees,
although he explained that he was physically in the Titan plant
for designated hours only on Tuesdays and Thursdays, about
two hours in the morning and two hours in the afternoon.
Vanderheyden added that on the other days (Mondays,
Wednesdays, and Fridays), the Benefit Representative (Tony
12 No. 12-1152

Balsamo) worked out of the Titan plant for two hours in the
morning and two hours in the afternoon.
Vanderheyden also explained the structure of Local 745. He
testified that in addition to representing Titan employees,
Local 745 also, since 1999, represented four classifications of
employees working for the Freeport School District: teacher
assistants; food service workers; instructional material techni-
cians; and security monitors. There was only one collective
bargaining agreement for those four units and about 170
Freeport School District employees were represented by Local
745.
Under Local 745's bylaws, the school employees elect their
own leadership, with a unit chairperson, a separate grievance
and negotiating committee, a recording secretary, and a
separate steward structure. However, the arbitrator noted that
under “the agreement between the Freeport School District and
USW Local 745 the representational duties of the President and
Benefit Representative extend to both Titan employees and to
employees of the Freeport School District.” And both
Vanderheyden and Kirk testified at the arbitration hearing that
they assisted the school district’s unit chair, attended their
monthly membership meetings, and were involved with the
handling of some school district grievance proceedings.
Vanderheyden had also been present for the negotiations with
the Freeport School District and, in fact, had signed the
collective bargaining agreement.
Although Vanderheyden (and later Kirk), as well as
Balsamo, served both employees working for Titan and the
Freeport School District, prior to the dispute at issue in this
No. 12-1152 13

case, they were paid entirely by Titan. The Freeport School
District employees represented by Local 745 did not contribute
to their salaries and the Freeport School District did not have
an agreement with Local 745 to pay the President or Benefit
Representative for time serving the District employees.
After the hearing, the arbitrator issued an opinion sustain-
ing 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 Presi-
dent 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.”
Titan filed suit in federal district court to vacate the arbitra-
tor’s award and the union counterclaimed for enforcement of
the award. The parties then filed cross-motions for summary
judgment. The district court denied Titan’s motion for sum-
mary judgment and granted the union’s motion for summary
judgment, holding that salary payments to the President and
Benefit Representative were not in violation of § 302 of the
14 No. 12-1152

LMRA. The district court found that the payments were made
to former employees and reasoned that such payments were
legal because they “were enshrined in the CBA, are not the
product of a dangerously imbalanced bargain, and do not raise
a potential for undue influence.” Titan appeals.
II.
ANALYSIS
On appeal, Titan argues that this court should vacate the
arbitration award requiring it to pay the full-time salaries of
the union’s President and Benefit Representative because such
payments violate § 302 of the LMRA. “We review de novo a
district court’s decision on cross-motions for summary judg-
ment, meaning that we review the arbitrator’s decision as if we
were the court of first decision.” United Food & Commercial
Workers, Local 1546 v. Ill. Am. Water Co., 569 F.3d 750, 754 (7th
Cir. 2009) (internal citations omitted).
“Judicial review of arbitration awards is extremely limited.”
Prate Installations, Inc. v. Chi. Reg’l Council of Carpenters, 607
F.3d 467, 470 (7th Cir. 2010). And courts should not “review the
arbitrator’s decision on the merits despite allegations that the
decision rests on factual errors or misinterprets the parties’
agreement.” Major League Baseball Players Ass’n v. Garvey, 532
U.S. 504, 509 (2001) (per curiam). Therefore, an arbitration
award “must be enforced if it draws its essence from the
collective bargaining agreement.” Chi. Newspaper Publishers’
Ass'n v. Chi. Web Printing Pressmen's Union No. 7, 821 F.2d 390,
394 (7th Cir. 1987) (internal quotation marks omitted).
No. 12-1152 15

Nonetheless, the Supreme Court has made clear that a
reviewing court should vacate an arbitration award if the
arbitrator’s interpretation of the collective bargaining agree-
ment was “contrary to public policy.” E. Associated Coal Corp.
v. United Mine Workers of Am., 531 U.S. 57, 62 (2000). And “[i]f
the contract as interpreted by [the arbitrator] violates some
explicit public policy, we are obliged to refrain from enforcing
it.” W. R. Grace, 461 U.S. at 766. The public policy must be
“well defined and dominant, and is to be ascertained ‘by
reference to the laws and legal precedents and not from
general consideration of supposed public interests.’” Id.
(quoting Muschany v. United States, 324 U.S. 49, 66 (1945)). A
violation of a statute or some other positive law is the clearest
example of a violation of public policy and “no arbitrator is
entitled to direct a violation of positive law.” EEOC v. Ind. Bell
Tel. Co., 256 F.3d 516, 526 (7th Cir. 2001) (en banc). See also
George Watts & Son, Inc. v. Tiffany & Co., 248 F.3d 577 (7th Cir.
2001) (distinguishing between “a manifest disregard of the
law,” which does not provide a basis to overturn an arbitra-
tor’s decision, and an arbitrator’s directive to “the parties to
violate the law,” which must be overturned by a court of law).8

8
In Hall Street Assoc., LLC v. Mattel, Inc., 552 U.S. 576, 584–89 (2008), the
Supreme Court held that the grounds for vacating or modifying an
arbitration award contained in the Federal Arbitration Act, 9 U.S.C. §§
10–11, are exclusive and that contracting parties could not expand that list.
The Hall Street Court did not overrule Eastern Associated Coal or W.R. Grace,
both of which recognized a public policy exception to the general prohibi-
tion on overturning arbitrator awards. See supra at 15. Thus, Eastern
Associated Coal and W.R. Grace still control. See also Affymax, Inc. v. Ortho-
McNeil-Janssen Pharmaceuticals, Inc., 660 F.3d 281, 284–85 (7th Cir. 2011)
(continued...)
16 No. 12-1152

Moreover, “[o]nce [a] public policy question is raised, we
must answer it by taking the facts as found by the arbitrator,
but reviewing [the arbitrator’s] conclusions de novo.” Iowa
Elec. Light & Power Co. v. Local Union 204 of the Int’l Bhd. of Elec.
Workers, 834 F.2d 1424, 1427 (8th Cir. 1987). And “the question
of public policy is ultimately one for resolution by the courts.”
W.R. Grace, 461 U.S. at 766.
In this case, Titan maintains that its payment of the union’s
President’s and Benefit Representative’s full-time salaries
violated public policy as defined by Section 302(a) of the
LMRA. As noted above, Section 302(a) provides: “It shall be
unlawful for any employer … to pay, lend, or deliver, or agree
to pay, lend, or deliver, any money or other thing of value …
to any representative of any of his employees who are em-
ployed in an industry affecting commerce. ” 29 U.S.C. § 186(a).
However, Section 302(c) exempts from this 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.” 29
U.S.C. § 186(c).
Section 302 seeks to prevent employers from bribing union
officials. Toth, 883 F.3d at 1300. It also seeks to prevent those
representing employees from operating under conflicted

8
(...continued)
(explaining that the principle in George Watts, that a court may set aside an
award that directs the parties to violate the law, survives Hall Street).
No. 12-1152 17

interests and for personal profit. See United States v. Kaye, 556
F.2d 855, 865 n.12 (7th Cir. 1977).
The plain language of Section 302(a) would bar Titan’s
payment of the union’s President’s and Benefit Representa-
tive’s salaries because they “represent[] … employees who are
employed in an industry affecting commerce.” 29 U.S.C.
§ 186(a)(1).9 The union contends that Titan’s payments are
exempt from the general bar by Section 302(c) because the
payments are to a “former employee”10 “as compensation for,
or by reason of, his service as an employee” of Titan. 29 U.S.C.

9
Titan contends on appeal that “[p]ayments by Titan Tire to the Local in
lieu of keeping these full-time Union officials on the company payroll are
equally unlawful; the statute prohibits payments to ‘any labor organization’
that represents the company’s employees, as well” as payments to “any
representative of any employee.” Appellant Brief at 12 (quoting 29 U.S.C.
§ 186(a)(1)). The only issue before us, however, is whether to enforce or
vacate the arbitrator’s award and that award directed Titan to “reinstate
direct payments to the President and Benefit Representative.” Accordingly,
that is the only question we address.

10
The union also argues that the payments are exempt under Section 302(c)
because the President and Benefit Representative are “current employees”
of Titan. The arbitrator, however, found that Titan paid the President’s and
Benefit Representative’s salaries “by reason of their former employment.”
(Emphasis added.) He further found that the President and Benefit
Representative performed no services that would qualify either as an
employee of Titan. The arbitrator’s findings of fact are not subject to review.
Garvey, 532 U.S. at 509. And we could not overturn an arbitrator’s factual
findings, even if we thought them wrong. Hasbro, Inc. v. Catalyst USA, Inc.,
367 F.3d 689, 692 (7th Cir. 2004). In any event, the record, which we have
fully reviewed, confirms the arbitrator’s conclusion that the President and
Benefit Representative were not current Titan employees.
18 No. 12-1152

§ 186(c). In support of its position, Local 745 relies heavily on
Caterpillar, Inc. v. UAW, 107 F.3d 1052 (3d Cir. 1997) (en banc).
A. Caterpillar, Inc. v. UAW, 107 F.3d 1052 (3d Cir. 1997)
In Caterpillar, the Third Circuit confronted the question of
“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.” Id. at 1053. The collective bargaining
agreement in that case “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.” Id. The CBA also “allow[ed] the union’s full-time
union committeemen and grievance chairmen to devote their
entire work week to union business without losing pay. These
employees [were] placed on leave of absence and [were] paid
at the same rate as when they last worked on the factory floor.”
Id. While on leave of absence, the union committeemen and
grievance chairmen conducted “business from the union hall,
perform[ed] no duties directly for Caterpillar, and [were] not
under the control of Caterpillar except for time-reporting
purposes.” Id.
Later, in the midst of a labor dispute in which the employ-
ees had returned to work without a contract, Caterpillar
informed the union that it would no longer pay the grievance
chairmen. Id. at 1053–54. The union filed an unfair labor
practice charge with the National Labor Relations Board and
Caterpillar countered with a suit in federal court seeking a
No. 12-1152 19

declaratory judgment that its payments violated § 302 of the
LMRA. Id. at 1054.
A divided en banc court held that the payments were lawful
under Section 302(c).11 Id. at 1057. The court reasoned that
while the grievance chairmen could not be considered current
employees of Caterpillar and their salaries could not be
considered “as compensation for” their past services as
Caterpillar employees, paying the grievance chairmen their
full-time salaries was lawful because such payments were “by
reason of” their past services as employees of Caterpillar. Id. at
1055. The court:
reach[ed] this conclusion because the pay-
ments 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 have re-
ceived. Thus, every employee implicitly gave
up a small amount in current wages and
benefits in exchange for a promise that, if he

11
The court in Caterpillar overruled its earlier decision in Trailways Lines,
Inc. v. Trailways, Inc. Joint Council of the Amalgamated Transit Union, 785 F.2d
101 (3d Cir. 1986). The Third Circuit in Trailways had held that an em-
ployer’s agreement to continue making contributions to a joint union-
management trust fund on behalf of employees on leave of absence and
working full-time for the union was illegal under § 302. Id. at 108.
20 No. 12-1152

or she should someday be elected grievance
chairperson, Caterpillar would continue to
pay his or her salary.
Id. at 1056.
The court in Caterpillar further reasoned 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.” Id. at 1057. The court
further added that “we simply do not view the payments at
issue here as posing the kind of harm to the collective bargain-
ing 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.” Id.
B. By Reason Of Their Service As Former Employees
Based on Caterpillar’s analysis, the union maintains that
Titan’s payment of the full-time salaries to Local 745's Presi-
dent and Benefit Representative are exempt under Section
302(c) because those payments are “by reason of” their service
to Titan as former employees. As discussed below, we disagree
and instead find the reasoning of the Caterpillar dissents more
persuasive.12

12
The Ninth Circuit in BF Goodrich, 387 F.3d 1046, also disagreed with the
reasoning of Caterpillar. In BF Goodrich, also discussed infra pp. 38–42, the
court held that BF Goodrich could legally pay the union’s full-time “Chief
(continued...)
No. 12-1152 21

To address the union’s argument, we must first consider
the meaning of “by reason of” in Section 302(c). Initially, we
note that we agree with the majority in Caterpillar that the “by
reason of” language means something distinct from the “as
compensation for” language of Section 302(c). Caterpillar, 107
F.3d at 1055–56. The majority in Caterpillar, though, did not
inquire further on the meaning of that phrase. See Caterpillar,
107 F.3d at 1068 (Alito, J., dissenting) (“In reaching this
conclusion, however, the majority does not explain with any
specificity what it understands the phrase ‘by reason of’ to
mean.”).

12
(...continued)
Shop Steward” because he was subject to BF Goodrich’s control and thereby
an employee. But while it upheld the payments to the Chief Shop Steward,
the Ninth Circuit disagreed with Caterpillar’s reasoning, stating: “We thus
see things somewhat differently than the Third Circuit in Caterpillar,
where—without analyzing whether the full-time union grievance chairmen
whose corporate payments were at issue there qualified as employees of the
company or really served as employees of the union, see 107 F.3d at 1065–66
(Mansmann, J., dissenting)—the court sanctioned the company’s payments
to full-time representatives who worked from the union hall, outside any
meaningful corporate supervision (except for time-reporting requirements),
and who were classified as being ‘on leave of absence’ during the course of
their union work. Id. at 1053 (majority opinion).” BF Goodrich, 387 F.3d at
1059 (quoting Caterpillar, 107 F.3d at 1065–66 (Mansmann, J., dissenting)).
While BF Goodrich disagreed with Caterpillar’s reasoning, the Ninth Circuit
did uphold the payments to the Chief Shop Steward. It did so, though,
because the steward remained subject to the employer’s control and was
thereby a current employee of BF Goodrich. Conversely, in this case, the
arbitrator concluded that the President and Benefit Representative were not
employees of Titan and that finding is not subject to review. See supra p.17
n.9.
22 No. 12-1152

While the majority in Caterpillar did not explain what it
understood the “by reason of” exception to mean, the dissents
in Caterpillar did analyze this preliminary question. First, Judge
Mansmann explained:
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 “com-
pensation.” 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. … Al-
though not properly called 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., 516 U.S. 85 (1995)), would be unable to
be paid his salary and could not receive
fringe benefits— despite working full time.
No. 12-1152 23

Section 302(c)(1) plainly exists to enable
company employees to obtain what is right-
fully 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 pay-
ments in spite of their current service for the
union.
Id. at 1058–59 (Mansmann, J., dissenting) (citations omit-
ted).
Judge Mansmann stressed that the key “is that the em-
ployee must receive the compensation or other payment
because of his or her service for the employer.” Id. at 1059
(emphasis added). She then concluded: “[t]he 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 pay-
ments at issue here.” Id. at 1059.
We agree with Judge Mansmann’s analysis and similarly
conclude that the plain language of the section 302(c)(1)
exception does not encompass the payments at issue here (the
paying of Local 745's President’s and Benefit Representative’s
full-time salaries) because such payments are not “by reason
of” their service as former employees of Titan. Or in the words
of Judge Mansmann, they are not “because of” their service to
Titan. Rather, the President and Benefit Representative receive
their full-time salaries “because of” their service to Local 745,
which in this case includes not just their service to union
24 No. 12-1152

members working for Titan, but also to union members
working for the Freeport School District as teacher assistants,
food service workers, instructional material technicians, and
security monitors.13
Then-Judge Alito in his separate dissent also analyzed the
meaning of the “by reason of” language, albeit slightly differ-
ently. He explained that the majority’s interpretation of 302(c)’s
phrase “by reason of, his service as an employee of such
employer” improperly seeks only a “but-for” causation, that is,
“but-for” their status as former employees they would not be
entitled to the full-time pay. Id. at 1068–69. But the phrase “by
reason of” means “because of” or “on account of,” and usually
that means that it is a major cause. Id. He illustrated this point

13
The arbitrator in this case found that “the USW and the Teachers Union
were scrupulous in keeping their affairs separate. … It appeared to me that
the contact between offices of the USW and the Teachers Union was
minimal at best and in more of an advisory role than as a direct union
representative.” The arbitrator’s finding is questionable given that
Vanderheyden testified that they did not keep records of hours worked for
Titan employees and Freeport School District employees. It is also
questionable whether negotiating and signing a collective bargaining
agreement, as Vanderheyden did on behalf of the Freeport School District
employees, can be considered minimal contact. We must, though, accept the
arbitrator’s findings of fact, even if we think them wrong. Hasbro, 367 F.3d
at 692. However, even accepting the arbitrator’s view that the union was
scrupulous in keeping the Titan and Freeport School District affairs
separate, the undisputed fact remains that Local 745's President and Benefit
Representative served both groups of employees, but were paid solely by
Titan. This circumstance alone distinguishes this case from Caterpillar and
shows that their salaries were earned “because of” their current service to
union members and not “by reason of” their former employment with
Titan.
No. 12-1152 25

with some colorful examples, such as: “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.” Id.
at 1069.
So too here. But for the President’s and Benefit Representa-
tive’s prior service as Titan employees, they would not be
entitled to Titan paying their full-time union salaries. How-
ever, that merely establishes their “eligibility” for such pay-
ments, not their “right” to payment. See id. at 1070 (“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 majority in Caterpillar also attempted to characterize
the current payments as being “by reason of” the employees’
past service to the employer by postulating that “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.” Caterpillar, 107 F.3d at 1056
(majority opinion). Similarly, the union in this case argues,
“[b]y the same token, every Titan employee implicitly gave up
a small amount of current wages and benefits in exchange for
the promise that if he or she someday would be elected Local
Union President or appointed to serve as the Benefit Represen-
tative, Titan would continue to pay his or her wages while on
leave.”
But as then-Judge Alito explained, “[t]his argument is
inventive—but wrong.” Id. at 1070 (Alito, J., dissenting). He
26 No. 12-1152

noted that “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.” Id. at 1070. Rather, “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.” Id. Moreover,
the majority’s reasoning in Caterpillar, would mean current
employees are “paying” now for the future right to receive
their full salaries while on leave of absence to work for the
union. Id. at 1070–71. In turn, then, “[t]he 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.” Id. at 1071. Therefore, even under the
majority’s theory, “the company’s payments to the initial
group of grievance chairmen would be illegal.” Id.
Additionally, Caterpillar’s reasoning (that every employee
gave up a small amount in compensation now in exchange for
the chance to later be paid to serve as a grievance chairperson),
also wrongly equates paying fringe benefits to former employ-
ees for performing their past job with paying former employ-
ees their current salaries for working for the union. Courts
have uniformly concluded that the “by reason of” exception of
302(c) allows union workers to receive fringe benefits earned
during their prior service to an employer. 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”); Toth v. USX Corp., 883 F.2d 1297,
No. 12-1152 27

1303 n.8 (7th Cir. 1989) (severance pay and payments to
disabled employees are “by reason of” former employment);
BASF Wyandotte, 791 F.2d at 1049 (“by reason of” payments
include “vacation pay, sick pay, paid leave for jury duty or
military service, pension benefits, and the like”).
However, paying a former employee a salary to do another
job for another employer is different in both kind and degree
from paying fringe benefits to a former employee.14 First, it is
different in kind: Fringe benefits vest prior to an employee
leaving his employer’s service. As the Eleventh Circuit
explained in Phillips, 19 F.3d at 1575: “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 to work for the union as well as before the employer
delivered the benefits.” See also Caterpillar, 107 F.3d at 1072 n.5
(Alito, J., dissenting) (“[S]ome 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.”). Conversely, the
President’s and Benefit Representative’s “right” to be paid
their full-time union salaries arises only once those individuals
are no longer employed by Titan and instead are working for
the union. Thus, the right to full-time salary payments from

14
Titan does not contend that it is illegal for it to continue providing fringe
benefits or to allow the President and Benefit Representative to retain their
seniority, as required by the labor agreements, and the legality of such
provisions are not before us on appeal.
28 No. 12-1152

Titan have not vested. As such, they are not exempt under
Section 302(c)(1). See Phillips, 19 F.3d at 1575 (“[T]he section
[302(c)(1)] exception does not apply when a company pays a
union official who was a former employee, but who did not
have a right to such payment before he severed his employ-
ment relationship with the company.”).
Admittedly, some fringe benefits are dependent on what the
former employee does, such as payment for medical, military,
or jury duty leave. But the right to those benefits have vested
prior to the employee taking the leave, and the right to receive
the benefit does not depend on the quantity or quality of future
services. In other words, the “what” a former employee does
on their leave of absence, such as for sick leave or jury duty
leave, is merely a qualification for the benefit, it is not the
reason for the benefit.15 Moreover, such fringe benefits are
generally applicable to all employees, whereas here only union
members elected to office can receive such payments.16

15
The Second Circuit in BASF Wyandotte, 791 F.2d at 1049, found “no
meaningful distinction” between commonly available fringe benefits such
as sick leave, military leave, or jury leave, and leave granted current
employees pursuant to a “no-docking” provision in a collective bargaining
agreement. But as discussed infra pp. 37–42, this case is not a “no-docking”
case. And as BASF Wyandotte found, there is a distinction between a no-
docking fringe benefit and paying a former employee his full union salary.
Id. at 1049 n.1, 1050.

16
This circuit in Toth, 883 F.2d 1297, discussed infra pp. 30–34, also stated
that to qualify as a payment “by reason of” former employment, it is crucial
that the term is included in a CBA and “uniformly applicable and nondiscrim-
inatory.” Id. at 1304 (emphasis added).
No. 12-1152 29

In fact, that only union members can qualify for the
purported fringe benefit (that is, full-time paid leave to serve
as a union officer), seemingly would render such a benefit
illegal under the NLRA because it discriminates between union
and non-union members. As the Supreme Court explained in
Radio Officers’ Union of Commercial Telegraphers Union, A.F.L. v.
NLRB, 347 U.S. 17 (1954), where the union is the “exclusive
bargaining agent for both member and nonmember employees,
the employer could not, without violating § 8(a)(3), discrimi-
nate in wages solely on the basis of such membership even
though it had executed a contract with the union prescribing
such action.” Id. at 47. The Court further explained that
“[s]tatements throughout the legislative history of the National
Labor Relations Act emphasize that exclusive bargaining
agents are powerless to make agreements more favorable to
the majority than to the minority.” Id. at 47 (internal quotation
omitted). Yet, such disparate treatment served as the basis for
the Third Circuit’s reasoning in Caterpillar: “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.”17

17
Judge Mansmann in her dissent expanded on this problem and we find
her discussion particularly instructive: “In an open shop, not all employees
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
(continued...)
30 No. 12-1152

As discussed above, there is a difference in kind between
fringe benefits and paying a union official’s full-time salary.
There is also a difference in degree. Paid leave for jury duty,
military reserve duty, or sick leave, is short-term, while the
President and Benefit Representative are seeking full-time
leave pay for years of service to Local 745. Additionally, pay-
ing Local 745's President’s full-time salary totals nearly $80,000
annually, with another approximately $50,000 a year going to
the Benefit Representative. Fringe benefits may be expensive,
but not to this degree. In fact, the President’s union salary
could well exceed the salary he would have earned while
actually working for Titan because the bylaws base his salary
on 60 hours of work per week at the highest base rate at the
plant. At a certain point, the degree is so great that it would not
be reasonable to say the payment is “by reason of” past service
to the employer.
Toth, 883 F.2d 1297, made this point. In Toth, former USX
workers sought pension benefits based on time they had been
on leave of absence from USX to work for the union. Id. at 1298.

17
(...continued)
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 nonunion employees’ services
—yet those same payments are made possible by the non-union employees'
reduced salary and benefits.” 107 F.3d at 1062–63.
No. 12-1152 31

Prior to 1984, USX had allowed its employees to accrue
pension-benefit rights while on leave of absences for up to two
years. Id. at 1298. In 1984, USX changed its leave of absence
policy to permit former employees to continue accruing
pension credit until they retired, whether they worked for the
company or had left to work for the union. Id. The change in
the leave policy resulted from alleged collusion between USX
and union leaders to benefit a select few higher-ups at the
union. Id. at 1299–1300. However, shortly after the plaintiffs in
Toth applied for benefits, USX rescinded the leave of absence
policy, contending that the policy violated section 302 of the
LMRA. Id. at 1299.
After quoting the relevant statutory language, this court in
Toth focused on the meaning of “by reason of” an employee’s
past employment. We first rejected the Third Circuit’s view in
Trailways18 that the “by reason of” clause only exempts
payments made to former employees while they were employ-
ees of the company. Id. at 1303. We then explained that “[o]ne
obvious instance in which continuing payments constitute
recompense for past services is when those continuing pay-
ments were bargained for and formed part of a collective
bargaining agreement.” Id. at 1304. This is because “[e]mploy-
ees might accept lower wages now in return for future benefits;
the work they subsequently perform is as surely performed in
order to earn those future benefits as it is to earn current
wages. In those cases future benefits would be ‘in compensa-
tion for’ or ‘by reason of’ past employment.” Id. at 1304. We

18
As noted earlier, the Third Circuit in Caterpillar overruled its prior
decision in Trailways, 785 F.2d 101.
32 No. 12-1152

added that “collective bargaining and inclusion in a generally
disseminated collective bargaining agreement, whose terms are
uniformly applicable and nondiscriminatory, are crucial.” Id.
at 1304.
However, and significantly for purposes of this case, Toth
explained that, “[a]t 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. In support
of this proposition, Toth quoted from BASF Wyandotte, wherein
the Second Circuit stated, “we 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. … [T]his
would be precisely the kind of device that §§ 302(a) and (b)
were designed to prevent.” Toth, 883 F.2d at 1305 (quoting
BASF Wyandotte, 791 F.2d at 1050). Toth then added that “full-
time pay for no service cannot reasonably be said to be
compensation ‘by reason of’ service as an employee.” Toth, 883
F.2d at 1305. And Toth also explained that “given the overall
purpose of section 302 (to prevent bribery), we may not
construe the phrase ‘as compensation for, or by reason of’ too
broadly.” Id. at 1303–04.
After setting forth these general principles, Toth concluded
that the USX “policy in the case before us cannot qualify as
‘compensation for or by reason of’ former employment because
… the USX’s leave policy was not a part of the bargained-for
collective bargaining agreement. It was a unilateral change—
under the plaintiffs’ own allegations, a bribe.” Id. at 1305.
No. 12-1152 33

The facts of this case clearly differ from Toth. There is no
allegation that the payments were bribes. Rather, the arbitrator
found, based on the labor agreements and past practices, that
Titan was contractually obligated to pay the union President’s
and Benefit Representative’s full-time salaries. And those labor
agreements were approved by union members. Local 745 relies
on these facts to claim that the payments are “by reason of” the
President’s and Benefit Representative’s former service as
Titan employees. In making this argument, Local 745 asserts
that Toth stands for the proposition that “payments pass
muster under Section 302(c)(1) where the obligations are
established in a collective bargaining agreement.”
This argument misreads Toth. As Titan correctly points out,
Toth does not stand for the proposition that any payments
authorized by a CBA are “by reason of” the former service of
the employee. In fact, such a reading of Section 302(c)(1) would
render the general prohibition contained in Section 302(a) a
nullity. Caterpillar, 107 F.3d at 1061 (Mansmann, J., dissenting)
(concluding that “the majority expands the exception such that
the rule is rendered a nullity”). It would also allow parties to
contract away the criminal prohibition Congress established in
Section 302(a). Further, such an argument cannot be squared
with the plain language of Section 302(a) because that section
prohibits not merely the paying of money to a union represen-
tative, but the agreeing to pay such a representative, which of
course is what a CBA is: an agreement to pay. 29 U.S.C.
§ 186(a) (“It shall be unlawful for any employer … to pay, lend,
or deliver, or agree to pay, lend, or deliver, any money or other
thing of value … to any representative of any of his employees
who are employed in an industry affecting commerce.”
34 No. 12-1152

(emphasis added)). Or as Judge Mansmann aptly put it: “If an
agreement to pay is unlawful under section 302(a)(1), it is
illogical to use the same agreement as a basis for finding that
the resultant payment is lawful under section 302(c)(1).”
Catperillar, 107 F.3d at 1061 (Mansmann, J., dissenting).
Moreover, while Toth stated that inclusion in a collective
bargaining agreement was crucial to the legality of a payment
to a union representative, 883 F.2d at 1305, this court also noted
the need for there to be “a firm connection” between the
bargained-for term and “the terms of prior employment.”Toth,
883 F.2d at 1305. This means that, at some point, “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.
That is what we have here. Paying Local 745's President
and Benefit Representative their full-time union salaries has no
firm connection to their prior service as Titan employees. Such
payments are also different in kind from other fringe benefits.
And they are different in degree because it is “so incommensu-
rate with that former employment. ” Accordingly, it is not “by
reason of” that former employment.
C. Statutory Purpose
Our conclusion above that Titan’s agreement with the
union to pay Local 745's President’s and Benefit Representa-
tive’s full-time salaries is illegal under Section 302 is also
consistent with the statutory purpose of that Section. Initially,
we note that where the statutory language is clear, we need not
No. 12-1152 35

consider the statutory purpose. Five Points Rd. Joint Venture v.
Johanns, 542 F.3d 1121, 1128 (7th Cir. 2008). And we believe the
statutory language in this case is clear. However, we address
the statutory purpose here because the majority opinion in
Caterpillar relied on the underlying purpose of Section 302 to
uphold the payments at issue in that case.
Specifically, in Caterpillar, the majority noted: “[W]e 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.” Caterpillar, 107 F.3d at
1057.
We acknowledged in Toth that “[i]t is fairly universally
acknowledged that a central purpose of section 302 as a whole
was to prevent employers from bribing union officials.” Toth,
883 F.3d at 1300. But another central purpose of section 302 is
to prevent conflicts of interest. See Kaye, 556 F.2d 855. In Kaye,
we observed that Section 302
condemns union employees and representa-
tives who act to further self-interest or per-
sonal profit: For centuries the law has forbid-
den any person in a position of trust to hold
interests or enter into transactions in which
self-interest may conflict with complete
loyalty to those whom they serve. … [N]o
responsible trade union official should have
a personal financial interest which conflicts
with the full performance of his fiduciary
36 No. 12-1152

duties as a workers’ representative. … Play-
ing 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 which vests
in labor unions the power to act as exclusive
bargaining representative must make sure
that the power is used for the benefit of
workers and not for personal profit.
Kaye, 556 F.2d at 865 n.12 (quoting United States Code
Congressional and Administrative News, 86th Cong., 1st Sess.,
P.L. 86-257, pp. 2330–31); see also Phillips, 19 F.3d at 1574 (“The
Taft-Hartley Act, 29 U.S.C. §§ 141–187, is, in part, a conflict-of-
interest statute designed to eliminate practices that have the
potential for corrupting the labor movement. To achieve this
goal, Congress prohibited all payments from employers to
representatives of their employees and union officials [in
Section 302(a)]” (citation omitted)).
Thus, preventing bribery is not the sole purpose of Section
302. And prohibiting an employer from paying the full-time
salaries of the union’s President and Benefit Representative
serves the statute’s goal of preventing conflicts of interest. In
this case, the union’s President was also head of the Grievance
and Negotiating Committee. Thus, he was negotiating the very
labor agreements that provided for his full-time salary, as well
as the full-time salary of another union official, both at the
highest factory rate for 60 and 48 hours respectively. While
their salaries were approved by the union membership in the
union bylaws, that membership has no way of knowing
No. 12-1152 37

whether Titan’s agreement to pay the union salaries came at
the expense of lower salaries or benefits for plant workers.
That is not to say that the payments were bribes or backroom
deals—there is no evidence of that kind. But the President has
an incentive to preserve his own salary and to make his
generous salary appear cost-free to union members by having
it covered by Titan, rather than union dues. It is this conflicted
interest and diversion of employee wages to union leaders
which Section 302(a) seeks to address. See Caterpillar, 107 F.3d
at 1060 (Mansmann, J., dissenting) (such an arrangement
“create[s] a conflict of interest for union negotiators who may
agree to reduced benefits for the employees in exchange for
financial support for the union”); see also, 92 Cong. Rec. 5428
(1946) (“It prohibits taking money that has been earned by the
employees themselves and paying it to a union.” (Statement of
Senator Taft)).
D. No-Docking Provisions
Before closing, we pause to stress that our holding in no
way calls into question the validity of no-docking clauses.
“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.”
Caterpillar, 107 F.3d at 1056. As the Second Circuit recognized,
no-docking arrangements have been consis-
tently 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. Int’l Union, UAW, 73
38 No. 12-1152

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).
Id.
The Third Circuit in Caterpillar believed the legality of no-
docking clauses meant that a CBA provision providing for full-
time pay for union committeemen and grievance chairmen was
likewise exempt under 302(c)(1). The court thought “any
attempt to distinguish ‘no docking’ provisions from the
payments at issue here is unpersuasive.” 107 F.3d at 1057. And
it “perceive[d] 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.” Id. The court also noted “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.” Id. at 1056.
Again, we disagree with Caterpillar. Here we find the
reasoning of the Ninth Circuit in BF Goodrich, which also
rejected this line of reasoning, more persuasive. In BF Goodrich,
the court held that BF Goodrich could legally pay the union’s
full-time “Chief Shop Steward” because he was subject to BF
Goodrich’s control and thereby an employee. But in reaching
this conclusion, the Ninth Circuit rejected the union’s argu-
No. 12-1152 39

ment that paying the salary and benefits of a full-time union
representative is permissible under a contractual “no-docking”
provision, because such payments are authorized by Section
8(a)(2) of the National Labor Relations Act (“NLRA”). 29 U.S.C.
§ 158(a)(2); BF Goodrich, 387 F.3d at 1052. Specifically, Section
8(a)(2) provides “[t]hat subject to rules and regulations made
and published by the [NLRB], an employer shall not be
prohibited from permitting employees to confer with him
during working hours without loss of time or pay.” (Emphasis
added.) 29 U.S.C. § 158(a)(2). As the Ninth Circuit explained,
that language has been unchanged for nearly 70 years and
there are similar provisions in the Railway Labor Act and the
Federal Service Labor-Management Relations Statute. BF
Goodrich, 387 F.3d at 1052–53.
In addressing this argument, the Ninth Circuit in BF
Goodrich first noted that harmonizing the seemingly contradic-
tory provisions found in Sections 8(a)(2) and 302(a) “may seem
a daunting task.” Id. at 1053. But the court then concluded
there was no need to do so because “[t]he provisions of the
agreement requiring Goodrich to compensate a full-time union
representative differ from typical no-docking provisions—at
least as [the] NLRA contemplates them.” Id. The court ex-
plained that the “without loss of time” language of Section
8(a)(2) was a “key linguistic signal” and that “if an employee’s
only responsibility is to represent union employees in the
grievance process, no ‘working hours’ could be ‘los[t] by his
doing just that.” Id. Thus, [t]he company would have no reason
to ‘dock’ the employee’s pay; he would simply be doing what
his contract provides.” Id. The Ninth Circuit also explicitly
rejected the Third Circuit’s reasoning in Caterpillar that there is
40 No. 12-1152

no difference between a part-time no-docking provision and a
full-time one, stating: “[I]t is not inconceivable that Congress
might treat these different arrangements differently. Quite
simply, the potential for corporate payments to undermine the
independence of a union representative may be considerably
greater when the employee’s entire salary and benefits are
attributable to his conduct as a representative.” Id. at 1056
n.13.19
We agree with the Ninth Circuit that Section 8(a)(2) does
not apply to full-time union employees and that “this case
differ[s] from the no-docking provisions contemplated by the
NLRA.” Id. at 1054. In this case there is “no loss of time”
because Local 745's President and Benefit Representative are
not working for Titan at all. See also BASF Wyandotte, 791 F.2d
at 1049 n.1 (“[N]o-docking provisions have relevance only to
persons who are currently serving as employees.”). Moreover,
as the Ninth Circuit recognized, Congress could have reason-
ably decided to treat part-time no-docking provisions differ-
ently than full-time pay to union employees, namely the desire

19
See also Caterpillar, 107 F.3d at 1064 (Mansmann, J., dissenting) (distin-
guishing payments to full-time union “grievance chairmen” and no-docking
provisions, in part, because “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.”); id. at 1073 (Alito, J., dissenting) (“‘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.”).
No. 12-1152 41

to prevent “corporate payments [from] undermin[ing] the
independence of a union representative.” BF Goodrich, 387 F.3d
at 1056 n.13. Whatever Congress’s intent, though, we must
consider the statutory language and must read the statutory
language, if possible, to give effect to both Section 8(a)(2) and
Section 302. Section 8(a)(2) permits no-docking provisions for
employees and thus we read Section 302 as allowing the same.
Nothing in the statutory language, however, permits full-time
pay for former employees—even if they are doing all of the
same things an employee might do part-time pursuant to a no-
docking provision. Had Congress intended to authorize such
payments, it could have so provided. It is for Congress and not
the courts to create exceptions within the LMRA’s plain
language. Packard Motor Car Co. v. NLRB, 330 U.S. 485, 490
(1947); Caterpillar, 107 F.3d at 1058 (Mansmann, J., dissenting).
Furthermore, the facts of this case distinguish the situation
before us even more from typical “no-docking” provisions
because Local 745's President and Benefit Representative are
not “‘confer[ring] with [the employer]’ or otherwise represent-
ing union interests in connection with the grievance process,”
on a full-time basis. BF Goodrich, 387 F.3d at 1053 (quoting 29
U.S.C. § 158(a)(2)). Rather, the President and Benefit Represen-
tative are doing many other things, including assisting retirees
with health and life insurance benefits and aiding individuals
laid off in obtaining unemployment and other benefits, as well
as representing four classes of workers in the Freeport School
District. The President and the Benefit Representative in this
case are just not equivalent to the full-time committeemen or
grievance chairmen whose pay was at issue Caterpillar. In
42 No. 12-1152

short, as in BF Goodrich, “[t]he legality of no-docking provi-
sions is not before us.” Id.
III.
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 employ-
ment 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 Represen-
tative 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.
No. 12‐1152  43 

WOOD, Chief Judge, with whom WILLIAMS and HAMILTON, 
Circuit Judges, join, dissenting from the denial of rehearing en 
banc.  The  majority  has  chosen  to  create  a  conflict  with  the 
Third  Circuit  in  this  case  over  the  proper  interpretation  of 
section 302 of the Labor Management Relations Act (LMRA), 
29 U.S.C. § 186. The question, briefly, involves when an em‐
ployer is entitled to pay money or any other thing of value to 
a union representative who is a present or former employee. 
See section 302(c)(1), 29 U.S.C. § 186(c)(1). The importance of 
the question is attested by the Supreme Court’s grant of certi‐
orari in Caterpillar, Inc. v. Int’l Union, United Auto. Aerospace & 
Agric. Implements  Workers  of Am., et al., 521 U.S. 1152 (1997). 
Although  that  case  was  settled  before  the  Court  issued  an 
opinion,  that  happenstance  says  nothing  about  the  signifi‐
cance  of  the  issue.  Moreover,  for  the  reasons  I  sketch  out 
here, I believe that the majority has adopted a position that is 
inconsistent with  the  LMRA and  that  disregards the  proper 
standard of review for arbitral awards. I would set this case 
for argument before the en banc court, because I believe that 
there are powerful reasons to affirm the district court. 
I begin with the fact that this court is being asked to over‐
turn an arbitral award. Despite the fact that arbitral awards 
must be upheld even if a court disagrees with the outcome, 
Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013), 
and  even  if  a  court  thinks  that  a  mistake  of  law  has  been 
made,  Stolt‐Nielsen  S.A.  v.  AnimalFeeds  Int’l  Corp.,  559  U.S. 
662, 671 (2010), the panel here has engaged in de novo review 
of  the  arbitrator’s  conclusion  that  Titan  made  payments  to 
the  president  and  benefit  representative  of  the  Union  “by 
reason of their former employment” with Titan. That finding 
of  the  arbitrator  is  a  classic  application  of  the  law  to  facts. 
The  question  before  this  court  is  therefore  not  whether  we 
44  No. 12‐1152 

would have made the same finding; it is whether the parties 
agreed  to  commit  that  issue  to  arbitration,  and  whether  the 
arbitrator’s  decision  is  tied  to  the  collective  bargaining 
agreement.  
The  panel  has  tried  to  shoehorn  its  decision  into  the 
narrow space created by the doctrine that arbitrators are not 
authorized to order parties to take an illegal act, recognized 
in EEOC v. Ind. Bell Tel. Co., 256 F.3d 516, 524 (7th Cir. 2001) 
(en banc), and based on the Supreme Court’s cases explaining 
that  a  reviewing  court  should  not  enforce  an  arbitration 
award  that  is  contrary  to  “well  defined  and  dominant” 
public policy. W.R. Grace & Co. v. Local Union 759, Int’l Union 
of  United  Rubber,  461  U.S.  757,  766  (1983).  But  I  am  not 
persuaded that this case can be forced into that exception. I 
am  especially  struck  by  the  breadth  of  the  panel’s  phrasing 
of  the  question  presented,  as  it  appears  on  page  3  of  the 
opinion: “This appeal presents an issue of first impression in 
this circuit, namely whether a company may legally pay the 
full‐time salaries of the President and Benefit Representative 
of the union representing the company’s employees.” Op. at 
3.  The  Third  Circuit’s  decision  in  Caterpillar,  Inc.  v.  Int’l 
Union, United Auto. Aerospace & Agric. Implements Workers of 
Am., 107 F.3d 1052 (3d Cir. 1997), held that the answer to this 
question  is  yes.  The  panel,  with  the  acquiescence  of  a 
majority of the active judges, has decided to follow the views 
of one of the dissenting judges in that case. This is a mistake, 
in my view.  
In  order  to  explain  why  that  step  is  unwarranted  and 
why the Third Circuit’s majority had the better of the argu‐
ment, I begin with the language of section 302 of the LMRA, 
No. 12‐1152  45 

29  U.S.C.  §  186.  Section  302(a)  opens  with  a  broad  prohibi‐
tion:  
It shall be unlawful for any employer or as‐
sociation of employers or any person who acts 
as a labor relations expert, adviser, or consult‐
ant  to  an  employer  or  who  acts  in  the  interest 
of  an  employer  to  pay,  lend,  or  deliver,  or 
agree  to  pay,  lend,  or  deliver,  any  money  or 
other thing of value— 
(1) to any representative of any of his employ‐
ees who are employed in an industry affect‐
ing commerce; … 
Subsection  (c)  of  the  statute  then  sets  out  a  long  list  of 
exceptions to that general prohibition. The exception that is 
applicable  here  is  found  in  section  302(c)(1)  (emphasis 
added): 
The  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 
of  his  employees  whose  established  duties  in‐
clude acting openly for such employer in mat‐
ters of labor relations or personnel administra‐
tion or to any representative of his employees, 
or to any officer or employee of a labor organi‐
zation,  who  is  also  an  employee  or  former  em‐
ployee of such employer, as compensation for, 
or  by  reason  of,  his  service  as  an  employee  of 
such employer; …  
The  arbitrator  in  the  present  case  found  as  a  fact  that 
Union  President  Steve  Vanderheyden  and  Union  Benefit 
46  No. 12‐1152 

Representative Kevin Kirk were former full‐time employees 
of  Titan,  that  they  were  receiving  money  from  Titan  in  the 
amount  of  their  full  salaries  (as  specified  in  the  CBA),  and 
that  they  were  receiving  those  salaries  by  reason  of  their 
service  as  former  employees  of  Titan.  They  were  also 
receiving  an  array  of  fringe  benefits,  including  health  care 
and  pension  contributions.  Oddly,  the  majority  either  does 
not seem to think that those fringe benefits were a “thing of 
value,”  or  perhaps  it  thinks  that  former  employees  who  do 
not  become  union  representatives  nonetheless  retain  sick 
leave and comparable fringe benefits (though I do not know 
why  this  would  be  so).  Alternatively,  the  majority  tries  to 
characterize  benefits  as  something  different  “in  degree” 
from  salary,  but  nothing  in  the  statutory  language  shaves 
things so finely. One way or the other, the majority appears 
willing to  allow the employer to cover those costs. See, e.g., 
op.  at  26–27.  It  seems  to  me  that  if  these  benefits  are 
permissible under sections 302(a) and (c), then salary is too. 
It  would  come  as  news  to  most  people  that  fringe  benefits 
like health care are not a “thing of value.”  
I recognize the concern that there is an embedded conflict 
of  interest  when  an  employer  pays  the  salary  of  a  union 
representative—or  indeed,  as  section  302(a)  says,  when  an 
employer  gives  a  union  member  any  “thing  of  value.”  But 
Congress  was  well  aware  of  this  conflict  and  resolved  it 
expressly through the combination of the general prohibition 
of section 302(a) and the exceptions of 302(c). It is not up to 
us  to  decide  whether  Congress  struck  the  right  balance;  we 
have only to apply the law as it is written.  
Because it is undisputed that Vanderheyden and Kirk are 
both former employees of Titan, the question boils down to 
No. 12‐1152  47 

this:  was  Titan  paying  their  salaries  “by  reason  of”  their 
service as former employees? The majority first endorses the 
position  taken  in  Judge  Mansmann’s  dissent  in  the  Third 
Circuit’s decision in Caterpillar, in which she argued that the 
“by  reason  of”  exception  simply  does  not  apply  to  salaries. 
Instead,  she  suggested,  that  exception  does  no  more  than 
“recognize[] 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.’”  Op.  at  22.  The  only, 
but  fatal,  problem  with  that  position  is  that  neither  section 
302(a)  nor section  302(c)(1)  contains  any  such  limitation.  To 
the  contrary,  both  sections  use  the  broadest  possible 
language; they speak identically of “any money or other thing 
of  value.”  If  Congress  had  wanted  to  draw  the  line  Judge 
Mansmann proposed, it easily could have done so. But it did 
not. 
Judge  Mansmann’s  conclusion  that  the  employer’s 
decision  in  Caterpillar  to  cover  the  union  representatives’ 
salaries must have been unrelated to (that  is, not  “by  reason 
of”)  their  former  work  for  the  employer  is  doubly  flawed. 
Not  only  does  that  position  rest  on  a  limitation  that  the 
statute  does not recognize;  it also fails to  recognize that the 
coverage  of  the  salaries  of  certain  union  members  can  be 
explained  only  by  the  former  relationship  with  the 
employer.  When  a  collective  bargaining  agreement  is  in 
place,  that  agreement  helps  to  keep  labor  peace,  through 
mechanisms  such  as  a  smoothly  functioning  seniority 
system,  well  understood  responsibilities  in  each  job,  and, 
most  importantly,  a  grievance  procedure.  Union 
representatives play a critical role in the smooth functioning 
of the workplace. Although it is possible that having a union 
48  No. 12‐1152 

representative  who  knows  nothing  about  the  particular 
employer, the particular workplace, and applicable industry 
norms might work, it is normally preferable to have a union 
representative  with  a  thorough  understanding  of  the 
employer’s  business—in  other  words,  to  use  a  former  (and 
potentially  future)  employee.  That  is  undoubtedly  why 
Congress chose to include this exception in section 302(c)(1). 
Not  a  word  in  the  statute  indicates  that  this  exception  is 
available only to part‐time union representatives. 
Then‐Judge Alito’s dissent similarly inserts language into 
the statute that is not there. He divined that the phrase “by 
reason of” must imply that the identified characteristic (here, 
former employee status) can only be a major cause, not just a 
motivating  factor.  As  support,  he  notes  that  the  Green  Bay 
Packers  could  not  have  won  Super  Bowl  XXXI  without  de‐
feating  the  San  Francisco  49ers  in  the  first  round  of  the 
playoffs,  but  that  it  would  be  odd  to  say  that  the  Packers 
won the Super Bowl “by reason of” defeating the 49ers. 107 
F.3d  at  1069.  At  one  level,  however,  his  example  simply  il‐
lustrates  one  of  thousands  of  possible  instances  of  the  post 
hoc,  ergo  propter  hoc  fallacy;  at  another  level,  what  is  really 
worrying him is not the causal chain, which certainly exists, 
but remoteness: one necessary (but not sufficient) step along 
the way to the Packers’ Super Bowl victory was to eliminate 
the 49ers. Neither the logical fallacy nor the causation prob‐
lem  exists  here.  The  arbitrator  found  that  Titan  was  paying 
Vanderheyden and Kirk precisely because they were the two 
former employees with responsibility to make the collective 
bargaining  agreement  work.  There  is  a  clear  line  of  logic, 
motivation, and causation. At a minimum, the point is not so 
unclear  that  the  arbitrator’s  factual  finding  should  be  over‐
turned. 
No. 12‐1152  49 

I  would  set  this  case  for  en  banc  consideration  for  two 
reasons.  First,  and  most  importantly,  I  believe  that  the 
majority has taken an action that is inconsistent with a long 
line of Supreme Court decisions instructing courts to accept 
the  results  of  consensual  arbitration,  even  if  we  think  those 
results  are  mistaken  or  ill‐advised.  See  Oxford  Health  Plans 
LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013); Stolt‐Nielsen S.A. v. 
AnimalFeeds Int’l Corp., 559 U.S. 662, 671 (2010); E. Associated 
Coal Corp. v. United Mine Workers of Am., Dist. 17, 531 U.S. 57, 
62  (2000);  United  Paperworks  Int’l  Union,  AFL‐CIO  v.  Misco, 
Inc.,  484  U.S.  29,  38  (1987)  (“[A]s  long  as  the  arbitrator  is 
even  arguably  construing  or  applying  the  contract  and 
acting  within  the  scope  of  his  authority,  that  a  court  is 
convinced  he  committed  serious  error  does  not  suffice  to 
overturn  his  decision.”).  Second,  looking  particularly  to 
labor  law,  I  see  nothing  in  this  arbitral  result  that  is  either 
inconsistent with section 302 of the LMRA or that commands 
the  parties  to  take  an  illegal  action.  To  the  contrary,  the 
majority has upset the balance that Congress wrote into the 
statute,  by  engrafting  its  own  limitations  onto  the  existing 
structure. The case is thus important both for what it does to 
arbitration,  and  for  what  it  does  to  labor  law.  I  respectfully 
dissent.