Caterpillar, Inc. v. International Union, United Automobile, Aerospace & Agricultural Implement Workers

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit

3-4-1997

Caterpillar Inc v. Intl Union United
Precedential or Non-Precedential:

Docket 96-7012

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 UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 96-7012

CATERPILLAR INC., a Delaware Corporation
doing business in Pennsylvania

v.

INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE
AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA; and
its affiliated LOCAL UNION 786,

Appellants

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
(D.C. Civil Action No. 92-01854)

Argued August 8, 1996

Before: NYGAARD, LEWIS and McKEE, Circuit Judges.

Reargued December 2, 1996

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

(Opinion filed March 4, 1997)

DAVID M. SILBERMAN, ESQUIRE
(Argued)
Bredhoff & Kaiser
1000 Connecticut
Avenue, N.W.
Suite 1300
Washington, DC 20036

DANIEL W. SHERRICK, ESQUIRE
International Union of
United Auto Workers
8000 East Jefferson
Detroit, MI 48214
 WENDY L. KAHN, ESQUIRE
Zwerdling, Paul, Leibig,
Kahn,
Thompson & Driesen
1025 Connecticut Avenue,
N.W. Suite 712
Washington, DC 20036

Attorneys for Appellants

GERALD C. PETERSON, ESQUIRE
COLUMBUS R. GANGEMI, Jr.,
ESQUIRE
(Argued)
Winston & Strawm
35 West Wacker Drive
Suite 4200
Chicago, IL 60601

Attorneys for Appellee

JAMES B. COPPESS, ESQUIRE
815 16th Street, N.W.
Washington, DC 20006

Attorney for Amicus-Appelant,
American Federation of Labor
& Congress of Industrial
Organizations (AFL-CIO)

ALLEN H. FELDMAN, ESQUIRE
EDWARD D. SIEGER, ESQUIRE
United States Dep't of
Labor 200 Constitution
Avenue, N.W. Washington, DC
20210

Attorneys for Amicus Curiae
United States of America

COUNCIL ON LABOR LAW EQUALITY
Proposed Amicus-Appellee

OPINION OF THE COURT

2
NYGAARD, Circuit Judge.

In this appeal, we must decide whether an employer

granting paid leaves of absence to employees who then become the

union's full-time grievance chairmen violates § 302 of the Labor

Management Relations Act, 29 U.S.C. § 186. The district court

held that this practice is illegal, relying on our decision in

Trailways Lines, Inc. v. Trailways, Inc. Joint Council,

Amalgamated Transit Union, 785 F.2d 101 (3d Cir. 1986). We will

reverse, and in doing so, overrule significant portions of

Trailways.

I.

The facts are stated comprehensively in the district

court's opinion, Caterpillar, Inc. v. International Union, United

Automobile Workers, 909 F. Supp. 254 (M.D. Pa. 1995). For our

purposes it suffices to recount that the United Auto Workers, its

Local 786 and Caterpillar have been parties to a collective

bargaining agreement since 1954. Until 1973, the agreement

contained a "no-docking" provision allowing employees who were

also union stewards and committeemen to devote part of their work

days to processing employee grievances without losing pay,

benefits or full-time status. In 1973, this agreement was

expanded to allow the union's full-time union committeemen and

grievance chairmen to devote their entire work week to union

business without losing pay. These employees are placed on leave

3
of absence and are paid at the same rate as when they last worked

on the factory floor. They conduct that business from the union

hall, perform no duties directly for Caterpillar, and are not

under the control of Caterpillar except for time-reporting

purposes.

In 1991, a nationwide labor dispute erupted between

Caterpillar and the union, which resulted in the employees

returning to work without a contract. A year later, Caterpillar

unilaterally informed the union that it would cease paying the

grievance chairmen and questioned the legality of such payments,

notwithstanding that it had paid them without complaint for

eighteen years. The union filed an unfair labor practice charge

with the National Labor Relations Board, alleging that, by

unilaterally rescinding the payments, Caterpillar refused to

bargain in good faith. A month later, Caterpillar filed this

suit seeking a declaratory judgment that those payments violate §

302 of the LMRA.

The district court stayed its proceedings pending the

decision of the NLRB. An administrative law judge later issued a

recommended decision and order dismissing the union's charges,

finding that the payments violated § 8 of the National Labor

Relations Act.1 The district court then lifted the stay and

1. The ALJ, while questioning the validity of the payments under
§ 302 of the LMRA, did not reach that issue in his proposed
holding.

4
held that Caterpillar's payments to the union's full-time

grievance chairmen violated § 302. The union now appeals.

II.

A.

Section 302(a) of the LMRA provides:
It shall be unlawful for any employer . . . to pay,
lend, deliver, or agree to pay, lend, or
deliver, any money or other thing of value--

(1) to any representative of any of his employees who are
employed in an industry affecting commerce; or

(2) to any labor organization, or any officer or employee
thereof, which represents . . . any of the employees of
such employer who are employed in an industry affecting
commerce[.]

29 U.S.C. § 186(a). Caterpillar is an employer in an industry

that affects commerce and the grievance chairmen are

representatives of Caterpillar's employees. On the face of §

302(a), then, Caterpillar's wage payments to them would appear to

be unlawful. Section 302(c), however, provides that
[t]he provisions of this section shall not be applicable (1) in
respect to any money or other thing of value payable by
an employer . . . to any representative of his
employees, . . . who is also an employee or former
employee of such employer, as compensation for, or by
reason of, his service as an employee of such
employer[.]

29 U.S.C. § 186(c)(1). Thus, if the grievance chairmen receive

their compensation "by reason of" their "service as employees,"

then Caterpillar's wage payments are lawful.

5
 In Trailways, the employer agreed to continue making

contributions to a joint union-management trust fund on behalf of

employees who had taken leaves of absence to devote their time to

full-time union positions.2 There, the union argued that those

payments could pass muster under § 302(c)(1), which permits

payments to former employees "as compensation for, or by reason

of, [their] service as . . . employee[s.]" The Trailways court

rejected that possibility as a matter of statutory construction,

opining:
To the Union, the pension fund contributions made on
behalf of former employees currently on leave
to serve as union officials were earned
solely "by reason" of their past service to
Trailways. But for their past employment by
Trailways, the Union contends, these
officials would not be eligible for pension
fund contributions; therefore, these
payments are "by reason of their service as
an employee of" Trailways.

A logical reading of the statute makes clear
that the "payments to former employees'
exemption" of § 302(c)(1) applies solely to
payments made as "compensation or by reason
of" the former employees past service to the
employer. While the Union is correct in
asserting that had these individuals never
been Trailways' employees they would not be
eligible for pension contributions made on
their behalf, it does not therefore follow
that the pension fund contributions made by
Trailways pursuant to the collective
2. One issue before the court was whether the payments were
lawful under § 302(c)(5), which grants an exception for payments
to pension trust funds. The Trailways court concluded, however,
that the § 302(c)(5) exception applies only to current employees
and held that the union officials did not fit that description
because Trailways did not have sufficient control over their work
and because their work was solely for the benefit of the union.
785 F.2d at 104-07.

6
 bargaining agreement were made "in
compensation for, or by reason of," their
former service to Trailways so as to fall
within the § 302(c)(1) exception. Clearly,
the statute contemplates payments to former
employees for past services actually rendered
by those former employees while they were
employees of the company. Just as clearly,
however, the pension fund benefits paid on
behalf of former employees serving as union
officials while on leave from Trailways are
not compensation for their past service to
Trailways.

Id. at 105-06 (emphasis in original).3

Were we to follow Trailways, its holding would control

our decision in this case. The grievance chairmen cannot be

considered current employees of Caterpillar who are being

compensated for their current services. The chairmen perform no

services directly for Caterpillar. Instead, they handle

grievances and other labor matters for the union, a situation

that often places them in a position adverse to Caterpillar's.

Section 302(c)(1) legalizes payments to current or former

employees based on their "services" as employees, not their

"status" as such. Thus, the mere fact that the chairmen remain

on the Caterpillar payroll and fill out the appropriate forms and

time sheets to get paid is legally irrelevant.

The union argues that, unlike the situation under

subsection (c)(5) in Trailways, under subsection (c)(1) the

3. In a footnote, the court noted that the pension contributions
were based on the employees' current union salary, indicating
that the payments were "geared to their contemporaneous services
to the Union." Id. at 106 n.5 (emphasis deleted).

7
chairmen can be employees of both the union and the employer. It

relies especially on NLRB v. Town & Country Electric, 116 S. Ct.

450, 456 (1995), in which the Supreme Court held that a paid

union organizer who obtained a job in order to "salt" the

workforce and organize for the union was still an employee within

the meaning of the National Labor Relations Act. But there, the

Court noted that the employee still performed services for the

benefit and under the control of the employer, even though part

of his time was spent organizing for the union. That situation

is different from ours. Here the chairmen do nothing for

Caterpillar's benefit.

Moreover, under Trailways we cannot conclude that the

chairmen's salaries were payments to former employees "as

compensation for" their past services as employees. The chairmen

were already compensated for their production line work long ago

in the form of wages and vested benefits. A fair reading of

Trailways does not support a finding that the payments at issue

here somehow "related back" to these former employees' services

on the factory floor.

B.

Nevertheless, after careful consideration and

reargument before the in banc court, we believe that Trailways
was wrongly decided and tends to subject innocuous, bargained-for

8
and fully disclosed payments to the criminal sanctions of the

LMRA.

We have no difficulty with the Trailways holding

regarding "current employee" status. See 785 F.2d at 106-07. We

also believe that the salary payments to these union officials

were not in compensation for their past services rendered as

production employees. Our disagreement is with the Trailways

court's conclusion that the "by reason of" language in §

302(c)(1) exempts only those payments for past services actually

rendered while the former employee was still employed by the

company. We think that statement misinterprets the text of §

302(c)(1) and does nothing to further the policy objectives

Congress had when it enacted the LMRA half a century ago.

The Trailways test would be quite appropriate if §

302(c)(1) referred only to payments as compensation for past

services. It is difficult indeed to comprehend how years, even

decades, of paid union leave can realistically be thought of as

compensation for time spent on the factory floor. The Trailways

court, however, applied the same test to the statute's "by reason

of" language; with that we can no longer agree.

First of all, Congress chose specifically to exempt

payments in "compensation for" or "by reason of" an employee's
service. By so doing, it must be presumed to have intended that

certain payments would be legal, even though they were not, as

Trailways recites, "for past services actually rendered by those

9
former employees while they were employees of the company." Id.

at 106 (emphasis deleted). Nevertheless, the Trailways court,

without any explanation, conflated the two phrases and developed

a unitary test for whether former employee compensation is

permissible.

Under the Trailways test, there are three requirements

for a "former employee" payment to qualify for the § 302(c)(1)

exemption:
(1) It must be for past, not present, services;

(2) the services must be actually rendered; and

(3) the services must have been rendered while the
payee was still an employee.

Under this standard, the chairmen's wages fail the Trailways

test, because the payments are not for services actually rendered

to the company while they were still employees. Indeed, under

Trailways, it appears that pay or continuation of benefits for

time spent serving on a jury or in the National Guard would be

illegal.

Likewise, even the "no docking" provisions of many

collective bargaining agreements, including the Caterpillar-UAW

contract here, fail to meet the Trailways standard. Under a no-

docking clause, the employer agrees that shop stewards may leave

their assigned work areas for portions of a day to process

employee grievances without loss of pay. By paying production

workers for the part-time hours when they leave their regular

duties , the company is paying for services not actually rendered

10
for it, since those employees are already receiving their regular

hourly wages and benefits for their production line work. Yet,

no-docking arrangements have been consistently upheld by the

courts as not in violation of § 302, see NLRB v. BASF Wyandotte

Corp., 798 F.2d 849, 854-56 (5th Cir. 1986); BASF Wyandotte Corp.

v. Local 227, 791 F.2d 1046 (2d Cir. 1986); Herrera v.

International Union, UAW, 73 F.3d 1056 (10th Cir. 1996), aff'g &

adopting dist. ct. analysis, 858 F. Supp. 1529, 1546 (D. Kan.

1994); Communications Workers v. Bell Atlantic Network Servs.,

Inc., 670 F. Supp. 416, 423-24 (D.D.C. 1987); Employees'

Independent Union v. Wyman Gordon Co., 314 F. Supp. 458, 461

(N.D. Ill. 1970), and Caterpillar does not even seek to have the

contract's no-docking clause declared illegal. Moreover, as the

union points out, it would be strange indeed if Congress intended

that granting four employees two hours per day of paid union

leave is permissible, while granting a single employee eight

hours per day of that same leave is a federal crime.

We believe that the payments at issue here, while they

were not compensation for hours worked in the past, certainly

were "by reason of" that service. We reach this conclusion

because the payments arose, not out of some "back-door deal" with

the union, but out of the collective bargaining agreement itself.

Caterpillar was willing to put that costly benefit on the table,

which strongly implies that the employees had to give up

something in the bargaining process that they otherwise could

11
have received. Thus, every employee implicitly gave up a small

amount in current wages and benefits in exchange for a promise

that, if he or she should someday be elected grievance

chairperson, Caterpillar would continue to pay his or her

salary.4 As our colleague Judge Becker pointed out, dissenting in

Trailways:
The collective bargaining agreement contains
the terms of workers' employment with
Trailways; each of the benefits the workers
receive under that collective bargaining
agreement are part of the consideration for
their services at Trailways. In addition to
the standard terms for wages, overtime pay,
and insurance, the collective bargaining
agreement provides that persons who take a
leave of absence to work as union officials
have a right to reinstatement at Trailways
after their union service and retain their
seniority during their absence. The
collective bargaining agreement also provides
that the employer will make payments into the
union's pension fund while the employee is on
leave. Although these contributions are made
during the leaves of absence, the employer's
promise to pay them is nonetheless a term of
the collective bargaining agreement and
therefore a part of the consideration for
work performed as a Trailways employee.
There is no reason for distinguishing the
pension fund payments from any of the other
terms of the collective bargaining agreement.
Like wages, overtime, insurance, or accrued
seniority, the pension fund payments are
consideration for services rendered and, as
such, are permissible under § 302(c)(1).

Trailways, 785 F.2d at 109 (Becker, J., dissenting).

4. We do not mean to imply that an employee hired after a
collective bargaining agreement could not be elected chairperson
because he or she never "agreed" to an implicit wage reduction.
Rather, like any other term of a labor agreement, it would be
binding on all employees, whenever hired, until the expiration of
the contract.

12
 We find this line of reasoning persuasive. Indeed, it

has been taken by a number of decisions reached after Trailways.

See United States v. Phillips, 19 F.3d 1565, 1575 (11th Cir.

1994) (§ 302(c)(1) satisfied when former employee's entitlement

to payments vests before he or she goes out on leave, but not

after); Toth v. USX Corp., 883 F.2d 1297, 1301-04 (7th Cir. 1989)

(criticizing Trailways and opining that "[o]ne obvious instance

in which continuing payments constitute recompense for past

services is when those continuing payments were bargained for and

formed part of a collective bargaining agreement."); IBEW v.

National Fuel Gas Dist. Corp., 16 Employee Benefits Cases 2018,

2020-21 (W.D.N.Y. 1993) (same); Bell Atlantic, 670 F. Supp. at

421-22 (same). We are aware of no currently valid opinion that

follows the Trailways holding.

Caterpillar maintains that, under the reasoning we have

utilized, employers and unions can themselves decide what is

legal regardless of federal law by agreeing in a labor contract

to a particular course of conduct. Our point, however, is not

that a collective bargaining agreement can immunize unlawful

conduct, but that: (1) under § 302(c)(1), the lawfulness of the

conduct ab initio turns on whether the payment is "owed because
of . . . service as an employee"; and (2) what is "owed" depends

on the terms of the contract. Put differently, the contract does

not immunize otherwise unlawful subjects but, by defining the

basis for the payments, speaks directly to the question posed by

13
the statute as to whether the payments are "compensation for, or

by reason of . . . service as an employee."

We also believe that any attempt to distinguish "no

docking" provisions from the payments at issue here is

unpersuasive. We perceive no distinction between union officials

who spend part of their time (which may be quite substantial) in

adjusting grievances from the type of employees who are involved

here. Instead, “the nature of the absences and the payments made

by the employer owning them is the same.” Trailways, 785 F.2d at

111.

III.

In sum, we simply do not view the payments at issue

here as posing the kind of harm to the collective bargaining

process that Congress contemplated when it enacted the LMRA.

Section 302 of that statute was passed to address bribery,

extortion and other corrupt practices conducted in secret. See

Trailways, 785 F.2d at 110 (Becker, J., dissenting). These

expanded "no-docking" provisions, in contrast, are contained in

the collective bargaining agreement on which each rank-and-file

employee has the opportunity to vote. Thus, the officials

receiving the payments can be held accountable to the membership.

See Toth, 883 F.2d at 1304. Without explicit statutory

direction from Congress, we cannot condemn these payments as

criminal. Accordingly, we will reverse.

14
 Circuit
JudgeCaterpillar, Inc. v. International Union
No. 96-7012

MANSMANN, J., dissenting, with whom Judge Greenberg joins.

In suggesting that "innocuous, bargained for and fully

disclosed payments" from an employer to an employee

representative should be lawful, the majority has placed its own

policy objectives above plain language. By its own terms, the

"by reason of" exception of 29 U.S.C. § 186(c)(1) simply does not

include payments made to an employee representative merely

because the payment is included in a collective bargaining

agreement and the representative worked for the employer at one

time. The plain language of the section 186(c)(1) exception is

supported by the legislative history and purpose of the

exception, and the majority's conclusion is at odds with

important federal policy. Because I believe that the payments at

issue in this case do not fall within the exception of section

186(c)(1), I respectfully dissent.

I.

Where statutory language is plain, we must enforce that

language according to its terms. Appalachian States Low-Level

Radioactive Waste Comm'n v. O'Leary, 93 F.3d 103, 108 (3d Cir.

1996); see also United States v. Ron Pair Enters., Inc., 489 U.S.

15
235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989); New Rock

Asset Partners, L.P. v. Preferred Entity Advancements, Inc., ___

F.3d ___, ___, 1996 WL 708610, at *5 (3d Cir. Dec. 10, 1996)

(unless literal application will produce absurd result, plain

meaning is conclusive). It is for Congress, not the courts, to

create exceptions or qualifications at odds with the LMRA's plain

terms. Packard Motor Car Co. v. NLRB, 330 U.S. 485, 490, 67

S.Ct. 789, 792, 91 L.Ed. 1040 (1947).

Section 302(a) of the LMRA, 29 U.S.C. § 186(a), on its

face, makes it unlawful for any employer to pay any money or

thing of value to any representative of its employees. As the

majority recognizes, section 302(a), standing alone, prohibits

the payments at issue in this case. Maj. Op., at 4-5.

Section 302(a) contains several exceptions. Section

302(c)(1), 29 U.S.C. § 186(c)(1), renders section 302(a)

inapplicable in respect to any money or other thing of value

payable by an employer "to any representative of his employees,

who is also an employee or former employee of such employer, as

compensation for, or by reason of, his services as an employee of

such employer."

The majority concedes that the payments at issue in

this case are not payments to a current or former employee "as

compensation for . . . his services." Maj. Op., at 8. The sole

issue, then, is whether the payments to a former employee, who

presently works as a grievance chairperson for the union, are

16
made "by reason of . . . his services as an employee of such

employer." Contrary to the position of the majority, I must

conclude that the language of section 302(c)(1) is plain and does

not encompass the payments at issue here.

The "by reason of" exception of section 302(c)(1)

simply recognizes that current and former employees might have a

right to receive payments from their employers that arise from

their services for their employers but that are not properly

classified as "compensation." The "by reason of" exception

includes pensions, 401(k) plans, life and health insurance, sick

pay, vacation pay, jury and military leave pay, and other fringe

benefits to which all employees may be entitled "by reason of"

their service. See United States v. Phillips, 19 F.3d 1565, 1575

(11th Cir. 1994) ("by reason of" exception applies to fringe

benefits "such as vacation pay, sick pay, and pension benefits"),

cert. denied, ___ U.S. ___, 115 S.Ct. 1312, 131 L.Ed.2d 194

(1995); BASF Wyandotte Corp. v. Local 227, Int'l Chem. Workers

Union, AFL-CIO, 791 F.2d 1046, 1049 (2d Cir. 1986) ("by reason

of" payments include "vacation pay, sick pay, paid leave for jury

duty or military service, pension benefits, and the like"); see
also Toth v. USX Corp., 883 F.2d 1297, 1303 n.8 (7th Cir.)

(severance pay and payments to disabled employees are "by reason

of" former employment), cert. denied, 493 U.S. 994, 110 S.Ct.

544, 107 L.Ed.2d 541 (1989). Although not properly called

17
compensation, "by reason of" payments "arise from" the employee's

services for the employer.

Without the section 302(c)(1) exception, these payments

would be illegal if paid to any employee or former employee who

also worked for the union. Thus, an employee who worked full

time for the company, but who held a part-time position with the

union (a practice permitted by the Supreme Court's decision in

NLRB v. Town & Country Elec., Inc., ___ U.S. ___, 116 S.Ct. 450,

133 L.Ed.2d 371 (1995)), would be unable to be paid his salary

and could not receive fringe benefits -- despite working full

time. Section 302(c)(1) plainly exists to enable company

employees to obtain what is rightfully theirs. In other words,

the section 302(c)(1) exception does not entitle union

representatives to receive payments because of their service for

the union; the exception allows union representatives to receive

payments in spite of their current service for the union.

The key, however, is that the employee must receive the

compensation or other payment because of his or her service for

the employer. See, e.g., Phillips, 19 F.3d at 1575 ("by reason

of" payments "from an employer to a union official must relate to

services actually rendered by the employee"); id. (under plain
meaning of exception, "payment given to former employee must be

for services he rendered while he was an employee"); BASF

Wyandotte Corp. v. Local 227, 791 F.2d at 1049 ("by reason of"

payments are those "occasioned by the fact that the employee has

18
performed or will perform work for the employer, but which is not

payment directly for that work"); Reinforcing Iron Workers Local

Union 426 v. Bechtel Power Corp., 634 F.2d 258, 261 (6th Cir.

1981) (under "literal construction" of section 302, payment to

industry steward who performs services for union, not employer,

are unlawful). The payments at issue in this case are entirely

unrelated to the representatives' services for the employer. I

believe that the plain language of the section 302(c)(1)

exception does not encompass the payments at issue here and that

we must affirm the judgment of the district court.5

5. The majority overstates the effect of our decision in
Trailways Lines, Inc. v. Trailways, Inc. Joint Council,
Amalgamated Transit Union, 785 F.2d 101 (3d Cir.), cert. denied,
479 U.S. 932, 107 S.Ct. 403, 93 L.Ed.2d 356 (1986).
Section 302(c)(1) states that all payments made to
union representatives -- whether they are in direct compensation
for services (wages) or merely by reason of those services
(vacation pay, jury pay, et cetera) -- must somehow relate to
those individuals' services for the employer. The Trailways
opinion did not merge "compensation for" and "by reason of" as
the majority suggests; it does not dispute the fact that
"compensation for" and "by reason of" complement each other and
that the "by reason of" exception covers certain payments that
are not truly compensation. Instead, in Trailways we recognized
that certain payments to former employees may no longer be
justified once the individual stops performing services for the
employer.
This makes sense. For example, it is apparent that
jury-duty pay is "by reason of" an employee's services to the
employer. It would be strange indeed if a former employee who
retired five years ago could demand to be paid by the employer
for his upcoming jury duty. As Trailways recognizes, payments to
former employees, whether as compensation for or by reason of
their former services, must be related to that former service.
Just as former employees are no longer entitled to "by reason of"
pay such as jury-duty pay, they should not be entitled to
payments for performance of union work that is entirely unrelated
to their former service. Accordingly, I see no reason to reverse
our decision in Trailways.

19
 II.

Because the plain language of the "by reason of"

exception of section 302(c)(1) does not contemplate the payments

at issue here, I would affirm the judgment of the district court

without further discussion. Nonetheless, as I now digress

briefly to relate, the legislative history and the purpose of

section 302 support my conclusion that the payments at issue are

unlawful.

As the majority recognizes, section 302 is a conflict-

of-interest statute that is designed to eliminate practices that

have the potential for corrupting the labor movement. Maj. Op.,

at 13; see Phillips, 19 F.3d at 1574. As the majority also

recognizes, Congress was concerned about, inter alia, bribery and

other secret, back-room agreements between employers and employee

representatives. See Toth, 883 F.2d at 1300.

The majority does not go far enough, however.

Recognizing that "any person in a position of trust" must not

"enter into transactions in which self-interest may conflict with

complete loyalty to those whom they serve," Congress stated that

"no responsible trade union official should have a personal

financial interest which conflicts with the full performance of

his fiduciary duties as a workers' representative." S. Rep. No.

187, 86th Cong. 1st Sess., reprinted in 1959 U.S.C.C.A.N. 2318,
2330-31 (quoting ethical practices code of American Federation of

20
Labor and Congress of Industrial Organizations).6 Congress

desired to close the loopholes "which both employer

representatives and union officials turned to advantage at the

expense of employees." Id. at 2330.

When he introduced section 302 in 1947, Senator Ball

expressed a concern that even negotiated payments from employers

might "degenerate into bribes." 93 Cong. Rec. 4805 (1947),

reprinted in II NLRB Legislative History of the Labor Management

Relations Act, 1947, at 1305 (1948) (discussing welfare funds).

Senator Ball stated that absent section 302, "there is a very

grave danger that the funds will be used for the personal gain of

union leaders." Id. Senator Byrd echoed the concerns of Senator

Ball, noting that funds from the employer should not be "paid

into the treasuries of the labor unions." Id. According to

Senator Pepper, unless authorized in writing by each individual

employee (in the form of dues check-off), "union leaders should

not be permitted . . . to direct funds paid by the company . . .

to the union treasury or union officers." Id. (quoting committee

report).
6. I rely on the legislative history of the Labor-Management
Reporting and Disclosure Act of 1959 (an act that strengthened
section 302), instead of the official history of the Labor
Management Relations Act of 1947 (the act that contained section
302), because the Congressional Comments to the Labor Management
Relations Act do not include a discussion of the provisions at
issue here. See H.R. Conf. Rep. No. 510, 80th Cong., 1st Sess.
66-67, reprinted in 1947 U.S.C.C.A.N. 1135, 1173. In the text, I
include the comments of three senators made prior to the passage
of section 302 that were not included in the official conference
report.

21
 Section 302 therefore exists to prohibit "all forms of

extortion and bribery in labor-management relations." BASF

Wyandotte Corp. v. Local 227, 791 F.2d at 1053 (emphasis

supplied) (quoting S. Rep. No. 187, 86th Cong. 1st Sess. 13,

reprinted in 1959 U.S.C.C.A.N. 2318, 2329). Congress was

concerned with corruption through both (1) bribery of employee

representatives by employers and (2) extortion by those

representatives. Toth, 883 F.2d at 1300 (citing legislative

history and cases). Congress explained:
The national labor policy is founded upon collective
bargaining through strong and vigorous
unions. Playing both sides of the street,
using union office for personal financial
advantage, undercover deals, and other
conflicts of interest corrupt, and thereby
undermine and weaken the labor movement. . .
. The Government . . . must make sure that
the power [to act as exclusive bargaining
representative] is used for the benefit of
workers and not for personal profit.

S. Rep. No. 187, 86th Cong. 1st Sess., reprinted in 1959

U.S.C.C.A.N. 2318, 2331.

Thus, Congress was not merely concerned about secret,

back-room deals. Congress was concerned about any form of

payment that could upset the balance between labor and

management. The payments at issue in this case do exactly that.

They create a conflict of interest for union negotiators who may

agree to reduced benefits for the employees in exchange for

financial support for the union.

22
 For example, let us assume that ABC Corporation and the

union are engaged in difficult negotiations over a pension plan.

Also assume that the employer was stonewalling on this issue,

that the union had the "correct" position, and that the company

could have accepted the union's proposal without suffering

noticeable financial impact. Assume ABC said to the union

negotiator: "I know your local is having financial trouble. We

will pay the salaries of the grievance chairmen if you stop

pushing for this pension plan." The negotiator, who knows that

her local can no longer pay the full salaries of all the

grievance chairmen, agrees, and the pension plan is dropped in

favor of the financial security of the union. The agreement is

included in the bargaining agreement, and both the union and ABC

effectively "sell" the agreement to the employees, who ratify it

(not aware that the pension plan was sacrificed in this way).

According to the majority, this scenario is perfectly lawful

because it was included in the agreement. According to the

language, legislative history and purpose of section 302,

however, this scenario represents just what Congress sought to

avoid.

III.

As the majority concedes, the grievance chairmen in

this case do not perform any services whatsoever for Caterpillar.

Maj. Op., at 7. Instead, the chairmen perform services

23
exclusively for the union. The majority concludes, however, that

payments to such union employees are "by reason of" the

employees' services to the employer. First, the majority reasons

that such payments were negotiated and appear in the collective

bargaining agreement. Second, the majority states that, because

each employee must "give up something" in negotiations with the

employer so that these payments may be included in the agreement,

such payments are somehow "by reason of" the employees' service

for the employer. Finally, the majority contends that the

payments at issue in this case are no different than so-called

"no-docking" payments made to current employees who process

employee grievances during working hours. I do not believe that

the majority's reasoning withstands scrutiny.

The majority first relies on the fact that the payments

were negotiated and included in the collective bargaining

agreement. Maj. Op., at 11-13. Simply including a payment

provision in a collective bargaining agreement does not, however,

make the payment "by reason of" an employee's prior service.

Section 302(a)(1) provides that it shall be unlawful

for any employer to "agree to pay" any money to any

representative of any of his employees. 29 U.S.C. § 186(a)(1).

Thus, actual payments to union representatives are prohibited,

but so are agreements to pay union representatives. The majority

places special emphasis on the fact that the payments in this

case were negotiated and were not, in effect, secret agreements.

24
 Congress, on the other hand, was not concerned about the secrecy

of these agreements. If an agreement to pay is unlawful under

section 302(a)(1), it is illogical to use that same agreement as

a basis for finding that the resultant payment is lawful under

section 302(c)(1). Congress could easily have written an

exception for payments by employers to union representatives

pursuant to a collective bargaining agreement. Instead, Congress

limited its section 302(c)(1) exception to payments in

compensation for or by reason of a representative's services for

the employer.7

The majority does not find support in the statute (and

indeed there is none) for its conclusion that bargained-for

payments should be any more legal than secret agreements.

Without support, the majority asserts that an open agreement

makes a payment "by reason of" services for the employer. In so

doing, the majority expands the exception such that the rule is

rendered a nullity.8

7. Senator Ball stated that the section 302(c)(1) exception
allows payment of "money due a representative who is an employee
or a former employee of the employer, on account of wages
actually earned by him." 93 Cong. Rec. 4805 (1947), reprinted in
II NLRB Legislative History of the Labor Management Relations
Act, 1947, at 1304 (1948) (emphasis supplied). It is apparent
that Senator Ball did not contemplate that the narrow exception
of section 302(c)(1) would someday encompass payments to a former
employee that are entirely unrelated to the employee's services.

8. I am also concerned that by placing so much emphasis on the
fact that the payments were negotiated and included in the
collective bargaining agreement, the majority effectively permits
employers and unions to negotiate over otherwise unlawful
subjects of bargaining. It is beyond dispute that employers and
unions cannot bargain over illegal subjects of bargaining.

25
 The majority next reasons that since current employees

must surely "give up something" during negotiations in exchange

for an agreement by the employer to pay former employees to

perform union work, then those payments must be "by reason of"

their services. Maj. Op., at 11. The majority contends that

"the employees had to give up something in the bargaining process

that they otherwise could have received . . . in exchange for a

promise that, if he or she should someday be elected grievance

chairperson, Caterpillar would continue to pay his or her

salary." Id.

Under the majority's reasoning, the union and the

company could also agree to have the employer pay the salary of

the international union's president and subsidize the pension

fund of the union's permanent staff -- all because the company's

employees might "give up something" during negotiations in the

hopes that they too might someday receive those payments if

elected to serve the union in the proper capacity. In deciding

that "giv[ing] up something" is sufficient to bring the payments

at issue in this case within the "by reason of" exception

contained in section 302(c)(1), the majority has embarked on a

slippery slope that will legitimize virtually any type of payment

from the employer to the union so long as the payment is

negotiated and included in the collective bargaining agreement.

(..continued)
Nonetheless, the majority uses the bargaining process to
legitimize a payment that is otherwise prohibited by statute.

26
 The majority's reasoning violates the plain language of

section 302(c)(1) in yet another way. This section allows an

employer to make payments to a current or former employee by

reason of "his" services as an employee. 29 U.S.C. § 186(c)(1).

The majority reasons that the payments at issue in this case are

lawful by reason of all of the employees' collective service.

This is contrary to the plain meaning of the statute. If a union

official is to be paid by the employer, it must be by reason of

that official's service to the employer -- not because of the

service of others who might aspire to his position. Indeed, if

the collective bargaining agreement allowed, but did not require,

that the grievance chairperson be a former employee of the

company, then the company might find itself paying an individual

who was never an employee of the company by reason of other

employees' services for the company -- a result clearly not

permitted by section 302(c)(1). By relying on the collective

service of the employees, the majority ignores the plain language

of the statute.

I also fear that the majority's reasoning could be

construed to apply to several situations which would defy logic.

For example, let us assume that an individual applies for (and

obtains) a job with the employer. One day after beginning work,

the individual is elected grievance chairperson. For the next

thirty years,9 the individual serves as grievance chairperson and
9. While the agreement in this case may contain a time
restriction, that restriction did not play any part in the

27
performs no services for the employer. Thus, the individual

performed eight hours' worth of services for the employer, but

was paid by the employer for thirty years. The majority's claim

that this individual is being paid for thirty years "by reason

of" his one-day service for the employer is illogical.

In another example, let us assume that two grievance

chairpersons are elected on the same day. One ("Michael") worked

for the employer for twenty years. The other ("Mary") was active

in the union but never worked for the employer. Under the

collective bargaining agreement in this case, the employer is

required to pay Michael, but is prohibited from paying Mary. At

present, both Michael and Mary perform exactly the same services,

but Michael's prior employment (for which he was already fully

compensated) entitles him to continued payment from the

employer.10

The majority's reasoning also fails as a matter of

logic in "open shops." In an open shop, not all employees

(..continued)
majority's reasoning. Therefore, I presume that an agreement
that does not contain a time restriction will not be unlawful
under the majority's decision.

10. Altering this example somewhat, let us assume that Michael
worked for twenty years before being elected grievance
chairperson, but that Mary worked one day. In this situation,
the employer would be required to pay both Michael and Mary.
Michael, however, "gave up" significantly more than Mary, as
Michael worked for twenty years at reduced wages, while Mary only
worked one day. The employer does not take into account what
each individual gave up -- the employer considers what the
collective group gave up. I contend that the employer may not do
that under the plain terms of section 302(c)(1).

28
governed by the collective bargaining agreement will necessarily

be members of the union. An employee who is not a member of the

union (and who therefore cannot aspire to become a grievance

chairperson) will nonetheless be forced to endure a lower salary

or reduced benefits due to his co-workers' decision to "give up

something." In addition, unions will be able to circumvent the

problems that arise when some employees elect not to join the

union or pay union dues -- they will seek agreements from the

employer to subsidize representatives' salaries in exchange for

reductions in pay or benefits. These agreements will be

negotiated and ratified without the input of the non-union

employees. Thus, an employee who elects not to pay union dues

may nonetheless face reductions in salary or benefits so that the

union (which he or she does not support) may prosper. The

payments at issue here are surely not "by reason of" the non-

union employees' services -- yet those same payments are made

possible by the non-union employees' reduced salary and benefits.

IV.

Finally, the majority contends that since no-docking

provisions are lawful under section 302, the payments at issue

here should also be lawful. The majority writes that "it would

be strange indeed if Congress intended that granting four

employees two hours per day of paid union leave is permissible,

29
while granting a single employee eight hours per day of that same

leave is a federal crime." Maj. Op., at 10-11.

In reasoning that the payments at issue here are

analogous to no-docking payments, the majority assumes (without

deciding) that no-docking provisions are lawful. While some

courts have so held, we have not yet addressed the lawfulness of

no-docking payments. Until we do so (and until we explain our

reasons for finding such payments lawful), the majority should

not analogize such payments to those at issue here.

Assuming that no-docking provisions are lawful,

however, we are still not required to reach the conclusion that

the payments at issue in this case must also be lawful. Indeed,

there are substantial differences between no-docking payments and

the payments at issue here. The primary difference is that no-

docking payments are made to individuals who are current

employees of the company currently performing services for the

company. In contrast, the payments at issue here are made to

former employees of the company not performing any services for

the company.

In BASF Wyandotte Corp. v. Local 227, 791 F.2d 1046,
the Second Circuit observed that payments made to current

employees for short absences (such as vacation pay, sick pay, or

military leave pay) are all made to current employees "by reason

of" their current, ongoing services for their employer. The

court then reasoned that payment to current employees for short

30
absences to perform union work is no different from vacation pay,

sick pay, and military leave pay. Id. at 1049. Thus, no-docking

payments made to current employees who occasionally performed

union work during working hours should be treated the same as

other payments for short term absences.

Importantly, the court recognized that each of these

payments were made to persons whose entitlement to the payments

was "by reason of" current service. As the court noted, "no-

docking provisions have relevance only to persons who are

currently serving as employees." Id. at 1049 n.1. The common

element linking sick pay and no-docking pay "is simply that the

person to whom the employer makes payment is one who performs

services as an employee." Id. at 1049 (footnote omitted). If we

assume that no-docking payments are analogous to sick pay, we

must conclude that they can only be made to current employees who

perform services to their employers. This makes sense -- former

employees do not accrue sick pay or vacation pay. Likewise, they

should not accrue "union-work-time pay." See also Phillips, 19

F.3d at 1575 n.18 (recognizing difference between no-docking

provision and payments to non-employees who perform no work for

company).

The majority cites several cases from our sister courts

of appeals where courts concluded that no-docking provisions are

lawful. In several of those cases, however, the courts carefully

distinguished no-docking payments from payments made to union

31
officials who did not perform work for the company. In BASF

Wyandotte Corp. v. Local 227, Int'l Chem. Workers Union, AFL-CIO,

791 F.2d 1046 (2d Cir. 1986), for example, the court stated:
[W]e do not suggest that section [302(c)(1)] would
allow an employer simply to put a union
official on its payroll while assigning him
no work. . . . [A] union official who,
though on an employer's payroll, performed no
service as an employee, would not be within §
302(c)(1)'s exception.

Id. at 1050. In another case cited by the majority, the court

agreed that payments to a union official put on an employee

payroll but not assigned any meaningful work would violate

section 302. NLRB v. BASF Wyandotte Corp., 798 F.2d 849, 856 n.4

(5th Cir. 1986).

The majority also cites Toth v. USX Corp., 883 F.2d

1297 (7th Cir.), cert. denied, 493 U.S. 994, 110 S.Ct. 544, 107

L.Ed.2d 541 (1989). There the court of appeals stated:
At some point, it is conceivable that a bargain struck
by the union and the employer might yet
violate section 302 -- if, for example, the
terms of compensation for former employment
were clearly so incommensurate with that
former employment as not to qualify as
payments "in compensation for or by reason
of" that employment . . . .

Id. at 1305. As an example of a case that would violate section

302, the court stated that "fulltime pay for no service cannot

reasonably be said to be compensation 'by reason of' service as

an employee." Id. (citing BASF Wyandotte Corp. v. Local 227, 791

F.2d at 1050).

32
 Indeed, the distinction between no-docking payments and

the payments at issue here is reinforced elsewhere in the labor

laws. For example, 29 U.S.C. § 158(a)(2) provides that it shall

be an unfair labor practice for an employer to contribute

financial support to any labor organization. This rule contains

one exception: "an employer shall not be prohibited from

permitting employees to confer with him during working hours

without loss of time or pay." Id. Thus, while employers may

allow employees to confer with their employer during working

hours without loss of pay, the employer may not contribute

financial support to the labor organization. The rule bans the

payments at issue here; the exception allows no-docking

provisions.

Other realities dictate that no-docking payments are

simply not analogous to the payments at issue here. For example,

employees subject to no-docking payments are more likely to do

union work on an "as needed" basis. They are also more likely to

be able to schedule grievance meetings and other union work at

the mutual convenience of the employees and the employer. In

contrast, the grievance chairmen in this case are paid full time

regardless of whether there is any union work to be done. They

are never available to perform services for the employer. Thus,

the four individuals who spend two hours per day performing union

work (from the majority's hypothetical) are less of a burden for

the employer than one employee's absence all day every day.

33
 V.

While the majority emphasizes its policy determination

that bargained-for payments should not be unlawful, it does not

discuss several compelling policy reasons why we should affirm

the judgment of the district court. These policy considerations

go far beyond the need to avoid conflict of interest among union

negotiators, a policy that is clear on the face of the statute

and in the legislative history.

Initially, as the majority recognizes, the grievance

chairperson will often take a position at odds with the position

of management. Maj. Op., at 7. Indeed, the grievance

chairperson is most needed when the employee's position is

adverse to the employer's. In order to be effective, the

grievance chairperson often will fight zealously for the

aggrieved employee and against the employer. Meanwhile, the

employer must pay the chairperson's salary. It seems illogical

to me to force the employer to pay the salary of an individual

whose sole function is to oppose the employer.11

11. I recognize that the word "force" may be strong since the
employer need not agree to pay the grievance chairperson during
negotiations. Assuming that this pay practice is not unlawful,
however, the practice undoubtedly constitutes a mandatory subject
of bargaining. NLRB v. BASF Wyandotte Corp., 798 F.2d 849, 852-
54 (5th Cir. 1986). Thus, if the employer refused to accede to
such a pay provision, the employees could strike over this issue.
Indeed, those employees who may have the most influence
in swaying other employees' opinions regarding strike decisions
are probably the same individuals who are most likely to be
elected to the position of grievance chairmen. I envision the
situation where an employee who seeks the position of grievance

34
 Next, by sanctioning an agreement whereby the company

pays grievance chairmen to perform services for the union, the

majority unnecessarily creates uncertainty over whether the

chairmen are employees of the union or employees of the company.

In NLRB v. Town & Country Elec., Inc., ___ U.S. ___, 116 S.Ct.

450, 133 L.Ed.2d 371 (1995), the Supreme Court addressed the

question of who is an employee under the NLRA. The Court

favorably cited several common definitions of "employee" --

including "person in the service of another . . . where the

employer has the power or right to control and direct the

employee . . . ." Id. at ___, 116 S.Ct. at 454 (citation

omitted). Under this definition, a grievance chairperson appears

to be an employee of the union. Citing an excerpt from the

NLRA's legislative history, however, the Court noted that

"employee" includes "every man on a payroll." Id. at ___, 116

S.Ct. at 454 (citation omitted). Since grievance chairmen remain

on the company's payroll, perhaps they remain employees of the

company. The majority does not decide whether the company or the

union is the chairmen's employer.12
(..continued)
chairperson may seek to insure that his or her desired position
is fully funded by the employer before he or she accepts the
position -- even if that means encouraging a strike. Even the
possibility that this might occur demonstrates the conflict of
interest that will surely arise among those individuals who may
seek the funded positions.

12. This uncertainty will extend beyond cases arising under
the NLRA. The Supreme Court recently held that, under Title VII
of the Civil Rights Act of 1964, the test for deciding whether an
employer "has" a particular employee is whether the employer has
"an employment relationship" with the individual. Walters v.

35
 The failure of the majority to decide whether the

grievance chairmen are employees of the union or the employer may

lead to numerous problems: Is a grievance chairperson considered

part of the bargaining unit while on leave? Who will be liable

if a grievance chairperson injures a third party while performing

union work? Who will be responsible for providing a reasonable

accommodation to a grievance chairperson with a disability who

needs assistance performing her union job on the employer's

premises? What if a grievance chairperson decides to take FMLA

leave -- will his eligibility depend on whether the union is an

(..continued)
Metropolitan Educ. Enters., Inc., ___ U.S. ___, 117 S.Ct. 660,
___ (1997). The Court noted, however, that "the employment
relationship is most readily demonstrated by the individual's
appearance on the employer's payroll." Id. at ___, 117 S.Ct. at
___; see also Equal Employment Opportunity Commission Notice No.
N-915-052, Policy Guidance: Whether Part-Time Employees Are
Employees (Apr. 1990), at 24, reprinted in 3 EEOC Compl. Man.
(BNA), at N:3311 (interpreting both Title VII and ADEA; while
one's status as an employee is defined by examining the
employment relationship, "[t]he payroll is a reliable indicator
of those individuals who have an employment relationship with the
employer and therefore are employees."). While grievance
chairmen have an employment relationship with the union
(indicating that the employer is the union), their relationship
with the company is not completely severed, and they continue to
appear on the company's payroll (indicating that the employer is
the company).

I would note also that this is not a traditional dual-
employer case where both the union and the company may be
considered employers of the grievance chairmen. In the
traditional dual-employer case, the individual performs services
for both the company and the union and is paid by both the
company and the union for the services performed for the
respective payor. In this case, in contrast, the individuals
perform services exclusively for one entity and are paid
exclusively by another.

36
FMLA employer or whether the company is an FMLA employer?13 If a

grievance chairperson is injured while performing union duties,

will she nevertheless be entitled to disability or workers'

compensation from the company? May the company terminate,

suspend or discipline a grievance chairperson if he engages in

activity that would qualify for termination, suspension or

discipline for other employees? These questions are admittedly

outside the scope of the narrow issue before us, but the

majority's decision will assuredly lead to innumerable disputes

about the proper classification of individuals who remain on the

company's payroll without performing any services for the

company. If we affirm the judgment of the district court,

however, it is clear that individuals who leave the company to

work for the union are union employees, and the above questions

resolve themselves.

The final and most important policy consideration not

addressed by the majority is that federal labor policy demands

that labor organizations and employers remain separate and

13. The Senate Report accompanying the Family and Medical
Leave Act of 1993 states that the term "employ" means "maintain
on the payroll." S. Rep. No. 103-3, 103d Cong. 1st Sess. 22,
reprinted in 1993 U.S.C.C.A.N. 3, 24 (individuals on leaves of
absence are considered employees "so long as they are on the
employer's payroll."). It would seem, therefore, that grievance
chairmen are employees of the company for purposes of the FMLA.
The Report also states, however, that Congress desired that
"employ" under the FMLA mean the same as "employ" under Title
VII. As noted supra note 8, it is not clear whether the union or
the company employs grievance chairmen for the purposes of Title
VII.

37
distinct from one another. The majority would sanction a pay

practice that violates this important policy.

By enacting the labor laws as written, Congress

insisted that the NLRB and the courts observe a sharp line

between management and labor. NLRB v. Hendricks County Rural

Elec. Membership Corp., 454 U.S. 170, 192-93, 102 S.Ct. 216, 230,

70 L.Ed.2d 323 (1981) (Powell, J., concurring in part and

dissenting in part). Indeed, the dividing line between

management and labor is "fundamental to the industrial philosophy

of the labor laws in this country." Id. at 193, 102 S.Ct. at

230; see also NLRB v. Bell Aerospace Co., Div. of Textron, Inc.,

416 U.S. 267, 284-85 n.13, 94 S.Ct. 1757, 1767 n.13, 40 L.Ed.2d

134 (1974) (recognizing "traditional distinction between labor

and management"); Packard Motor Car Co. v. NLRB, 330 U.S. 485,

494-95, 67 S.Ct. 789, 794-95, 91 L.Ed.2d 1040 (1947) (Douglas,

J., dissenting) ("industrial philosophy" recognizes that

management and labor are "basic opposing forces"); Cedars-Sinai

Medical Center v. Cedars-Sinai Housestaff Assoc., 223 NLRB 251,

254 (1976) (Fanning, member, dissenting) ("underlying Federal

labor policy . . . seeks to draw a line between labor and

management"). Congress' desire to preserve the distinction

between labor and management is evinced throughout the labor

laws. See, e.g., 29 U.S.C. § 158(a). I believe that allowing an

employer to provide financial support to a union, as the majority

does here, blurs the important line between labor and management

38
and creates the potential for conflict that our labor laws do not

tolerate.

VI.

I recognize that labor organizations and employers have

begun to embrace a more cooperative method of negotiating and

dispute resolution, and I applaud labor-management efforts to

retreat from the adversarial approach that has often marred the

labor landscape in this country. I believe, however, that the

payments sanctioned by the majority go too far. The financial

support sought by the United Auto Workers in this case

contravenes the longstanding tradition of separation of labor and

management. I accept and encourage arm's length cooperation

between labor and management. I cannot condone payments that

threaten the independence of labor, create conflicts of interest

for union negotiators, and violate the plain language of our

laws. It is for Congress, not the courts, to determine if and

when to permit labor organizations and employers to blur the line

between them.

Accordingly, I respectfully dissent.

Caterpillar, Inc. v. International Union, et al.
No. 96-7012

ALITO, Circuit Judge, dissenting:

If I were a legislator, I would not vote to criminalize

the payments to grievance chairmen that are at issue here. I

39
agree with the majority that these payments differ from the

corrupt practices that usually figure in prosecutions under

Section 302 of the Labor Management Relations Act, 29 U.S.C. §

186. Moreover, I am not certain that the Congress that enacted

Section 302 would have chosen to outlaw such payments if it had

focused specifically on that question.

Our job, however, is to interpret Section 302 as it is

written. "The plain meaning of legislation should be conclusive,

except in the `rare cases [in which] the literal application of a

statute will produce a result demonstrably at odds with the

intentions of its drafters.'" United States v. Ron Pair Enters.,

Inc., 489 U.S. 235, 242 (1989) (quoting Griffin v. Oceanic

Contractors, Inc., 458 U.S. 564, 571 (1982)). Here, the majority

has not heeded the plain meaning of Section 302 and has not shown

that the literal application of the statutory language would lead

to a result that is "demonstrably at odds" with congressional

intent. I therefore dissent.

As the majority acknowledges, Section 302 prohibits

Caterpillar from paying the grievance chairmen unless those

payments fall within one of the exceptions set out in Section

302(c), 29 U.S.C. §186(c). See Maj. Op. at 4-5. The exception

at issue here is that contained in subsection (c)(1), which

applies to "any money or other thing of value payable by an

employer . . . to any representative of his employees, . . . who

is also an employee or former employee of such employer, as

40
compensation for, or by reason of, his service as an employee of

such employer." 29 U.S.C. § 186(c)(1). The union argues that

these payments fall within this exception for three separate

reasons: (1) they are compensation for the grievance chairmen's

current service as Caterpillar employees; (2) they are

compensation for the grievance chairmen's former service as

Caterpillar employees; and (3) they are made "by reason of" the

grievance chairmen's former service as Caterpillar employees. I

briefly discuss each of these theories below.

I.

"As Compensation For" Current Service as a Caterpillar Employee

Although the union's primary arguments appear to be

that the payments are made "as compensation for" or "by reason

of" the grievance chairmen's past service as regular Caterpillar

employees, the union also maintains that these payments are legal

because they may be viewed "as compensation for" the grievance

chairmen's work as current Caterpillar employees. The union

contends that the grievance chairmen, who are officially on

leaves of absence from Caterpillar, are joint employees of

Caterpillar and the union. Among other things, the union notes

that Section 302(c)(1) seems to contemplate such joint

employment, since it permits an employer, under certain

circumstances, to make payments to "any representative of his

employees . . . who is also an employee . . . of such employer."

41
 And the union argues that under National Labor Relations Board

decisions the grievance chairmen qualify as joint employees.

I find it unnecessary to reach the question whether the

grievance chairmen may be considered joint employees. Assuming

that they are, I am convinced that Caterpillar's payments to them

are not made "as compensation for" their service as current

Caterpillar employees. In their capacity as grievance chairmen,

they owe their complete loyalty to the workers they represent.

See Dist. Ct. Op. at 14-15. They plainly work for the union and

not for Caterpillar, and as the majority notes, their

representation of the workers "often places them in a position

adverse to Caterpillar's." Maj. Op. at 7.14

It is noteworthy that the union's excellent brief,

while arguing strenuously that the chairmen are joint employees,

makes little effort to show that the pay and benefits they

receive are compensation for services performed for Caterpillar.

The union's brief merely states:
Caterpillar . . . realizes substantial benefit from the
chairman's work. As the record shows, the chairman's
job . . . is "to make sure that contract works" and if
he succeeds, "everyone benefits -- the workers, the
Company and its production needs, and the Union." App.
260.

Appellant's Br. at 48.

14. I note that the union's brief acknowledges that "the
Union certainly exercises primary control over the chairman and
derives the primary benefit from his work." Appellant's Br. at
45.

42
 This argument seems to me to obliterate the

distinction, which is surely significant in the real world,

between services performed for an employer and services performed

for a union. I do not question the proposition that "everyone

benefits" if the contract works; nor do I question the

proposition that the grievance chairmen can help to make the

contract work; but I do not think that it follows that the work

that they do should be regarded under Section 302(c)(1) as

services performed for Caterpillar. By this reasoning, everyone

who helps to make the contract work, including presumably the

union officers, could be viewed as working for Caterpillar. And

since the union, as well as Caterpillar, benefits when the

contract works, everyone who helps to make the contract work,

including Caterpillar officers and supervisors, could be viewed

as working for the union. Thus, the union's logic leads to

preposterous results. Therefore, regardless of whether or not

the chairmen may be technically considered to be joint employees

of both Caterpillar and the union, I reject the argument that the

payments in question here can be permitted on the theory that

they constitute payments made to the chairmen "as compensation

for" current services performed by them for Caterpillar. See

Dist. Ct. Op. at 16 n.14 (because chairmen perform no functions

on behalf of Caterpillar, payments are not for services rendered

by chairmen to Caterpillar whether or not they can be considered

current Caterpillar employees).

43
 II.

"As Compensation For" Past Service as a Caterpillar Employee

I agree with the majority that the payments made to a

grievance chairman do not constitute "compensation for . . . his

service" as a company employee prior to his selection for a

grievance position. This point can be demonstrated by

considering the following situation. Suppose that an employee

works for a number of years in a certain job category and

receives during that period the same wages and other benefits as

all the other employees in the same job category with the same

seniority. Suppose that the employee is then selected to serve

as a grievance chairman, and that he then entirely ceases his

prior work and devotes his full time to grievance work, but

continues to receive wages and benefits from the employer. It is

plain that the wages and benefits that this employee receives

after becoming a grievance chairman are compensation for his

grievance work, not for the work that he did prior to his

selection as a grievance chairman. If these payments were

compensation for his prior work, then his compensation for that

work would exceed that of the other employees with equal

seniority who had labored in the same job category. Moreover, if

the payments were compensation for previously completed work (in

other words, if the payments had been fully earned before the

employee's selection as a grievance chairman), the employee would

44
presumably be entitled to receive those payments if, instead of

serving as a grievance chairman, he went fishing. But of course

that is not the case.

Accordingly, I agree with the majority that the

payments at issue here are not compensation for a grievance

chairman's work prior to his selection for that position. As the

majority states: "[t]he chairmen were already compensated for

their production line work long ago in the form of wages and

vested benefits." Maj. Op. at 7-8. "It is difficult indeed to

comprehend how years, even decades, of paid union leave can

realistically be thought of as compensation for time spent on the

factory floor." Maj. Op. at 8-9.

III.

"By Reason Of" Past Service as a Caterpillar Employee

While the majority holds that the payments to the

grievance chairmen are not "compensation" for their past service,

the majority concludes that the payments are "payable . . . by

reason of" the grievance chairmen's former service as Caterpillar

employees. In reaching this conclusion, however, the majority

does not explain with any specificity what it understands the

phrase "by reason of" to mean. Nor does the majority take note

of the clear meaning of that phrase in common parlance. If the

majority paid more attention to the meaning of this language, it

would be forced to recognize that the payments in dispute here

45
are not made "by reason of" the grievance chairmen's past service

as Caterpillar employees.

A. Dictionaries define the phrase "by reason of" to

mean "because of" or "on account of." See The Random House

Dictionary of the English Language 1197 (1967); 2 The Compact

Edition of the Oxford English Dictionary 2431 (1971). When x is

said to have occurred "by reason of" y, what is usually meant is

that y was, if not the sole cause of x, at least the or a major

cause. If y was simply a "but-for" cause but not a major cause

of y, x is not said to have occurred "by reason of" y.

This pattern of usage can be demonstrated by

constructing sentences that use the phrase "by reason of" to

refer to weak "but-for" causes. Such sentences invariably seem

inapt and make it apparent that this use of the phrase "by reason

of" is inappropriate. Here are some examples.

President Clinton could not have become President had

he not reached the age of 35, but it would be ridiculous to say

that he became President "by reason of" having attained his

thirty-fifth birthday.

The Green Bay Packers could not have won Super Bowl

XXXI without defeating the San Francisco Forty-Niners in the

first round of the playoffs. However, it would seem quite odd to

say that the Packers won the Super Bowl "by reason of" defeating

the Forty-Niners.

46
 The judges of this court almost certainly would not

have been appointed if they had not graduated from law school.

Yet it would seem very strange to say that the judges of this

court were appointed "by reason of" having obtained law degrees.

I believe that these examples show that the phrase "by

reason of x" refers at a minimum to a major reason for x, not

simply a relatively minor "but-for" cause, and it therefore seems

clear that Caterpillar's payments to the grievance chairmen are

not made "by reason of" their prior service as Caterpillar

employees. Such past service may be necessary for election as a

grievance chairman (perhaps because Section 302 is thought to

require this) and thus to the receipt of the payments at issue,

but past service as a regular Caterpillar employee is certainly

not the or a major cause for the payments.15 One way to see this

is to consider the fact that Caterpillar has thousands of former

employees, but only a very few of them are ever selected as

grievance chairmen. Since all have prior service for the company

in common, yet only a handful become chairmen, factors other than

prior service for the company must be much more important in

influencing their selection.

15. In Trailways Lines, Inc. v. Trailways, Inc. Joint Council,
Amalgamated Transit Union, 785 F.2d 101, 106 (3d Cir.), cert.
denied, 479 U.S. 932 (1986), we noted that "[w]hile the Union is
correct in asserting that had these individuals never been
Trailways' employees they would not be eligible for pension
contributions made on their behalf, it does not therefore follow
that the pension fund contributions made by Trailways . . . were
made 'in compensation for, or by reason of,' their former service
to Trailways . . . ."

47
 B. It should be noted that nowhere in its briefs does

the union urge that the phrase "by reason of" should be

interpreted as requiring merely "but-for" causation. In fact,

the government's brief supporting the union agrees with my

interpretation of "by reason of". Gov't Br. at 12 (discussing

"common understanding of 'by reason of,' as synonymous with

'because,' 'on account of,' owing to,' 'due to' etc."). See also

Appellant's Reply to Suppl. Br. at 3 ("there is no question" that

"an employer may pay a former employee who is also a union

official what he is owed because of his service as an employee

and not one cent more") (emphasis in original) (quotation

omitted).

Rather, the union's argument is that "the most natural

reading [of `by reason of'] is that this phrase refers to

payments which an individual earns the right to receive by

serving as an employee but which are not, strictly speaking,

remuneration for particular hours of work." Appellant's Br. at

21 (emphasis added). Accord id. at 34 ("so long as the right to

such payments is earned by previously having performed `service

to the employer'"); Appellant's Reply Br. at 18-19 ("`preexisting

wage and benefit payments' for an employee elected to a full-time

union position qualify as `payments by reason of' service as an

employee, at least where the right to such payments has been
collectively bargained and accrued as a result of the employee's

work for the employer.") (emphasis added) (other emphasis

48
omitted); id. at 21 (the "by reason of" exception "leaves no room

for payments which were not earned by prior service"). The union

contends that the Eleventh Circuit's opinion in United States v.

Phillips, 19 F.3d 1565 (11th Cir. 1994), cert. denied, 115 S. Ct.

1312 (1995), supports its position that Caterpillar's payments to

the chairmen were "by reason of" their service as Caterpillar

employees. Phillips held that payments by a company to a union

official were illegal if the union official "did not have a right

to such payment before he severed his employment relationship

with the company." Id. at 1575. The union relies (Br. at 37) on

the court's explanation that "[w]hen an employee's right to a

benefit has fully vested before the leave of absence begins,

there is no danger of corruption when the employer delivers the

benefit after that employee leaves the company to work for the

union . . . ." Id. at 1576.

I agree that a payment from Caterpillar to a former

employee now working as a grievance chairman would be legal under

Section 302 if the chairman's right to that payment vested before

he became a former employee. This interpretation of the "by

reason of" exception has been adopted by several other courts of

appeals. See Phillips, 19 F.3d at 1575; Toth v. USX Corp., 883
F.2d 1297, 1303 n.8 (7th Cir.), cert. denied, 493 U.S. 994

(1989). Cf. BASF Wyandotte Corp. v. Local 227, Int'l Chem.

Workers Union, 791 F.2d 1046, 1049 (2d Cir. 1986).

49
 But the union's argument fails on its own terms here,

because it is simply not true that the chairmen's rights to

receive the payments at issue vested before they left

Caterpillar's employ. On the contrary, their rights to receive

these payments are conditioned upon their performance of certain

duties in their current positions as grievance chairmen. If, as

the union argues, the chairmen's rights to these payments were

earned before their employment with Caterpillar terminated, then

the chairmen could go fishing all day, every day, instead of

processing grievances. Here, contrary to the government's

argument, see Gov't Br. at 16, the payments made by Caterpillar

are measured by the chairmen's current services for another

employer, i.e., the union; they can earn as much as 46 hours' pay

if they perform sufficient work, but if they perform less work

they receive less and if they perform no work -- if they just go

fishing -- they get nothing at all. In this respect, then, this

case is identical to Trailways, and the union fails completely in

its attempt to distinguish it on the ground that the chairmen are

paid at a rate set by Caterpillar rather than by the union.

The basic problem with the union's argument is that it

confuses an employee's eligibility for a payment with his right
to it. The chairmen's prior service as employees of Caterpillar

rendered them eligible to receive their Caterpillar salaries if

they were elected as chairmen, but their prior service in no way

gave them any right to receive any amount of money. In my view,

50
it is obvious that their prior service is not the sole or even a

major reason for their receipt of the disputed payments. It thus

cannot be said -- absent outright linguistic torture -- that the

payments are made "by reason of" their prior service.

C. The majority's main argument in support of its "by

reason of" holding is that under the collective bargaining

agreement "every employee implicitly gave up a small amount in

current wages and benefits in exchange for a promise that, if he

or she should someday be elected grievance chairperson,

Caterpillar would continue to pay his or her salary." Maj. Op.

at 11. In other words, the majority views the collective

bargaining agreement as providing each employee with the

contingent right to receive future payments from the company

after that employee's regular service has terminated (the

contingencies being the employee's selection and subsequent work

as a grievance chairperson). Moreover, the majority appears to

argue that a bit of each employee's work under the collective

bargaining agreement goes to pay for this contingent right, and

the majority therefore reasons that if an employee is later

selected as a grievance chairman and receives salary and benefits

from Caterpillar, those payments are received "by reason of" the

bit of that employee's past service that went to pay for this

contingent right.

This argument is inventive -- but wrong. At the

outset, it should be noted that the majority's argument logically

51
leads to strange results that the majority does not seem to

contemplate. The majority's argument is dependent on a grievance

chairman's having "paid," while working as a regular employee,

for the contingent right to receive future payments from the

employer. Thus, the argument cannot justify the initial

negotiation of a collective bargaining agreement containing a

provision such as the one in question here. Suppose that a

particular company and union had never before agreed on an

arrangement under which the company would pay the grievance

chairmen but that the company and the union then enter into such

an arrangement. The first group of employees chosen as grievance

chairmen would not have previously made any "payments" to the

employer in exchange for the contingent right to receive future

wages and benefits from the employer. Therefore, even under the

majority's theory, the company's payments to the initial group of

grievance chairmen would be illegal. In other words, the

majority's theory leads logically to the weird result that the

company and the initial group of grievance chairmen would have to

commit federal felonies in order to set in motion the type of

arrangement that the majority sanctions.16

Moreover, although the majority postulates that regular

employees "pay" for the contingent right to receive future

compensation from the employer, it is by no means clear that this

16. I would assume that the same would be true every time a new
collective bargaining agreement took effect.

52
is true in most cases. Obviously, each regular employee gives up

wages and/or other benefits in exchange for the employer's

payments to the grievance chairmen, but what each regular

employee is chiefly "paying" for is not the contingent right to

receive future payments from the employer but rather the current

improvement in the handling of grievances that presumably results

from the work of the grievance chairmen. Indeed, under most

circumstances, I suspect that virtually all, if not all, of the

"payments" made by a regular employee in any particular year go

to fund the employer's payments to the grievance chairmen in that

year and not in future years when that employee might himself be

a grievance chairman.17

17. It makes sense that a regular employee should pay little if
anything for the contingent right discussed in the text (as
distinct from a current improvement in grievance handling)
because, from the standpoint of a wealth-maximizing regular
employee, this contingent right has little if any value. This is
so for two reasons. First, this contingent right carries little
prospect of financial gain. A regular employee, if selected as a
grievance chairman, will have to make future contributions of
labor (performing the work of a grievance chairman) that are
fully worth the wages and benefits that the employer will
provide. (Indeed, under the collective bargaining agreement
before us here, a regular employee selected as a grievance
chairman does not realize any gain in wages or benefits; he
continues to receive the same wages and benefits as he did
before.) Second, this contingent right probably does little to
increase an employee's chances of obtaining whatever non-monetary
gratification may flow from doing the work of a grievance
chairman as opposed to the work of a regular employee. Assuming
that employees in a particular bargaining unit who are willing to
forgo $x per year in exchange for their employer's payments to
the grievance chairmen would be willing to pay the same amount
per year in increased union dues so that the union could make
these payments, there will be approximately the same number of
grievance chairman positions (and therefore approximately an
equal chance of performing the work of a grievance chairman)
whether or not the grievance chairmen are paid by the employer.

53
 Finally and most importantly, postulating that each

regular employee "pays" something for the contingent right to

future compensation by the employer does not obviate the problem

that past service as a regular employee is not the sole or even a

major cause of this future compensation. Assuming that each

regular employee makes such "payments" and that the payments are

a but-for cause of any compensation that this employee may

receive in the future as a grievance chairman, there are two

other, more important causes of that compensation: selection as

a grievance chairman and the satisfactory performance of the work

of a grievance chairman on a daily basis. Thus, to say that a

grievance chairman is paid year after year after year "by reason

of" his past service as a regular employee makes no more sense

than to say that a regular employee is paid year after year after

year "by reason of" his having acquired the qualifications that

were necessary for his original hiring.

For these reasons, it seems clear to me that the

payments at issue in this case are made "by reason of" the

chairmen's grievance work and not "by reason of" their prior

service as regular employees. Consequently, these payments

cannot be squeezed into the "by reason of" exception in Section

302(c)(1), 29 U.S.C. §186(c)(1), and I am therefore constrained

to conclude that these payments are prohibited by the plain

language of Section 302.

54
 D. The majority also argues that by exempting payments

made "by reason of" a former employee's past service in addition

to payments made "as compensation for" that service, Congress

must have intended that the two phrases refer to different

things. I have no quarrel with this elementary principle of

statutory interpretation, but I do not agree with the majority's

application of it. The majority fails to acknowledge that three

courts of appeals have construed "by reason of" to refer to a

class of payments distinct from those covered by the "as

compensation for" exemption, and that those courts have not

adopted anything like the interpretation espoused by the

majority. Because the Eleventh Circuit's discussion in Phillips

precisely answers the majority's contention, I quote it at

length:
Congress, in using the alternative formulations of "as
compensation for" and "by reason of" in that provision,
intended to remove from the statute's prohibitions two
general categories of payments to employees: (1) wages,
i.e., sums paid to an employee specifically "as
compensation for" work performed; and (2) payments not
made specifically for work performed that are
occasioned "by reason of" the fact that the employee
has performed (or will perform, in the case of a
current employee) work for the employer. The latter
category includes employee "fringe" benefits, such as
vacation pay, sick pay, and pension benefits. Whether
"as compensation for" or "by reason of" service to an
employer, all payments from an employer to a union
official must relate to services actually rendered by
the employee for the section 186(c)(1) exception to
apply. * * *

An employee's "right" to receive a "benefit" while on leave with
the union has been upheld when it vested before the
employee began the leave of absence . . . . In
contrast, the section 186(c)(1) exception does not
apply when a company pays a union official who was a

55
 former employee, but who did not have a right to such
payment before he severed his employment relationship
with the company.

19 F.3d at 1575 (first and third emphases added) (citations

omitted). BASF Wyandotte Corp., on which Phillips principally

relied, deemed "fring[e] benefits" such as "vacation pay, sick

pay, paid leave for jury duty or military service, pension

benefits, and the like" to be within the "by reason of"

exception. 791 F.2d at 1049. Accord Toth, 883 F.2d at 1303 n.8

(severance payments are "by reason of" former employee's past

service). These decisions are consistent with Trailways' holding

that the payments to former employees contemplated by section

302(c)(1) are those that relate to "past services actually

rendered by those former employees while they were employees of

the company." Trailways, 785 F.2d at 106 (emphases in original).

Thus, the distinction between the "alternative

formulations" is that "compensation" refers to wages paid for

specific work performed, while "by reason of" refers to non-wage

payments made after an employee becomes a former employee but

earned while he or she was still an employee.18 In contrast to

18. In Toth, the Seventh Circuit interpreted our decision in
Trailways as resting on the proposition that "any compensation
continuing beyond the time of an employee's 'past' employment
could not be 'by reason of' [that] employment." 883 F.2d at
1302. While I am less confident than the Toth court that
Trailways should be read so to hold, I agree with the Toth court
that some payments made after the termination of the recipient's
employment with the company can be made "by reason of" his or her
prior employment. What is important is whether the recipient has
a right to the payment before he or she leaves the company, not
the date on which the payment is actually made or received. See

56
the Second, Seventh, and Eleventh Circuits, the majority here

holds that the "by reason of" exception refers to wage payments

that would not be made but for the recipient's prior service as

an employee.

E. The only justification for disregarding the plain

meaning of the "by reason of" exception would be that it would

produce "a result demonstrably at odds" with congressional intent

or "would thwart the obvious purpose of the statute." Griffin v.

Oceanic Contractors, Inc., 458 U.S. 564, 571 (1982) (quotation

omitted), but the majority does not even attempt to make such a

showing. I see nothing that demonstrates that following the

plain meaning of the statutory language would produce a result

that is demonstrably at odds with Congress' intent. I find

nothing conclusive in the legislative history, and while I agree

with the majority that the payments in question here are quite

different from "bribery and extortion," Maj. Op. at 13, there are

reasons, many of which are set out in Judge Mansmann's opinion,

why Congress might have wished to preclude such employer

payments. I will simply note that this very case serves as an

example of why Congress might have wanted to prohibit the

payments at issue. The majority's description of these payments

as "innocuous" (Maj. Op. at 8) ignores the fact that

Caterpillar's decision to stop paying the chairmen's salaries was

(..continued)
Toth, 883 F.2d at 1302 (criticizing Trailways for this reason).

57
designed to "put economic pressure on the Union" during the

strike. (App. 144) Prohibiting company control over such

payments furthers the goal of union independence by removing this

weapon from the company's arsenal. In short, while I am unsure

whether this prohibition is on balance desirable or undesirable,

I am certain that it is far from absurd. The "explicit statutory

direction" that the majority purports to find wanting (Maj. op.

at 14) is plainly contained in the text of Section 302.

The history of "no docking" provisions, which seems to

form the centerpiece of the union's submission, also does not

persuade me to disregard the plain statutory language. "No

docking" provisions differ, at least in degree, from the type of

arrangement that is before us, and there are times in the law

when differences in degree are dispositive. In any event, the

legality of "no docking" provisions is unsettled; that question

is not before us; and, like Judge Mansmann, I would not reach it

here.

Since Section 302 is a criminal statute, I would apply

the rule of lenity if I thought that the statutory language was

ambiguous, see, e.g., Crandon v. United States, 494 U.S. 152, 158

(1990), but since I see no ambiguity, I find that rule

inapplicable. See Reno v. Koray, 115 S. Ct. 2021, 2029 (1995)),

(rule of lenity applies only "if, `after seizing everything from

which aid can be derived,' we can make `no more than a guess as

to what Congress intended'") (citations omitted). I would

58
therefore affirm the decision of the district court. If this

result is not desirable as a matter of public policy, the union

and its amicus, the United States, surely understand how to seek

correction in Congress.19

19. Indeed, the government's amicus brief seems at places to
amount to a request that we craft a legislative solution to the
problem of collective bargaining agreements that call for
employers to make payments to former employees who become union
officials. According to the government's brief, such payments
may violate Section 302 if they are "incommensurate" with the
recipient's former compensation as a regular employee, if the
recipient negotiated the right to receive those payments, or if
the recipient has not worked for the employer in his or her
regular job for an extended period and is unlikely ever to return
to such work. U.S. Amicus Br. at 26-28. These may be sensible
rules, but I am unable to tease them out of the current language
of Section 302. They provide material for legislative, not
judicial, consideration.

59