Trailways Lines, Inc. v. Trailways, Inc. Joint Council of the Amalgamated Transit Union, Afl-Cio, Clc

BECKER, Circuit Judge,

dissenting.

I agree with the majority that employees on leave of absence are not present employees of Trailways and that the challenged contributions are therefore not permissible under § 302(c)(5). However, I disagree with the majority with respect to § 302(c)(1); I believe that that section exempts the contributions at issue from the prohibition of § 302(a) because they were made “as compensation for, or by reason of” the absent employees’ services to Trailways while they were active employees. Accordingly, I respectfully dissent.

Section 302(a) of the Labor Management Relations Act, 29 U.S.C. § 186(a) provides in pertinent part:

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

As the majority correctly states, there is no dispute that Trailways’ payments to the Pension Trust Fund are prohibited by § 302(a) unless they fall within one of the express statutory exemptions provided by § 302(c).1 Section 302(c)(1) exempts the payment of:

*109money or other thing of value payable by an employer 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. (Emphasis added)

Unlike § 302(c)(5), which refers to current employees only, § 302(e)(1) covers former employees of Trailways and thus applies to the plaintiffs in this case.2 The central question, therefore, is whether the trust fund contributions are made “as compensation for, or by reason of,” services rendered by the persons now on leave when they were employees of Trailways.3

The majority summarily rejects the argument that § 302(c)(1) is applicable:

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. (Emphasis in original)

Maj.Op. at 106. I take issue with the majority because I believe that the contributions in question are compensation for services rendered to Trailways prior to the commencement of the leaves of absence.

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).

The majority ignores this point. Noting that the contributions are measured by the former employees’ union salaries, the majority concludes that the pension fund contributions are “geared to their contemporaneous services for the Union.” Maj.Op. at 106 n. 5. While the majority’s observation is correct, it does not support the majority’s conclusion. Contributions that are geared to contemporaneous union services are not necessarily paid as compensation for that union service. Obviously, Trailways needs a standard by which to measure seniority advances and pension contributions during employees’ leaves of absence. The most reasonable standard is that provided by the terms of the absentees’ employment by the Union. Just as seniority advances during leaves of ab*110sence are measured by the amount of time that the persons spend on leave, pension contributions are measured by the amount of money that these persons earn during their leave.

This conclusion is supported by analogy to the decision in Walsh v. Schlecht, 429 U.S. 401, 97 S.Ct. 679, 50 L.Ed.2d 641 (1977), in which the Supreme Court upheld the legality under § 302(a)(1) of contributions measured by the hours worked by a subcontractor’s employees that were nevertheless made on behalf of the contributor contractors own employees. In Walsh, the use of other employees’ salaries as a yardstick for determining amount of contributions was permissible under § 302(c)(5). Similarly, the use of salaries earned in another capacity — as Union employees— as a standard of measurement for contributions made as compensation for work at Trailways should be permissible under § 302(c)(1).

To bolster its conclusion that the challenged contributions are impermissible, the majority argues that the policies underlying § 302 — the prevention of the use of funds administered by unions as “war chests,” and of bribery of union officials by employers, see Arroyo v. United States, 359 U.S. 419, 425-26, 79 S.Ct. 864, 868, 3 L.Ed.2d 915 (1959) — would be threatened by a decision upholding the contributions here. The majority also relies for its decision on the fact that courts have established a rule of strict compliance with the provisions of § 302. See e.g., Arroyo, 359 U.S. at 424, 79 S.Ct. at 867; Costella v. Lipsitz, 547 F.2d 1267, 1273 (5th Cir.1977); Bricklayers, Masons and Plasterers International Union of America, Local Union No. 15 v. Stuart Plastering Co., 512 F.2d 1017, 1024 (5th Cir.1975). However, upholding the contributions in this case neither offends the policy of the act nor entails a waiver of strict compliance with the language of § 302.

Contributions made as compensation for services rendered to Trailways simply do not constitute bribery of the Union or any other kind of support of the Union by Trailways. The majority’s position that the contributions “are tantamount to direct compensation paid to [the Union’s] employees or payments to the Union” relies upon the premise that the contributions are made as compensation for service rendered to the Union, rather than service rendered to Trailways. For the reasons stated above, I disagree with this premise. For the same reasons, I believe that the contributions fall directly within the § 302(c)(1) exemption and that my position is therefore perfectly consistent with a strict construction of § 302.

The cases upholding the legality of “no-docking” provisions under § 302(c)(1) strongly support the conclusion that the payment of pension contributions in this case is legal. Under a "no-docking” provision, union officers are entitled to take time off from work, without loss of pay, to conduct union business. In upholding a “no-docking” provision under which the union officials were entitled to take four hours off from work on a given day, the court in BASF Wyandotte Corp. v. Local 227, International Chemical Workers’ Union, 591 F.Supp. 339 (N.D.N.Y.1984), stated that such an agreement “is a cooperative effort representing the product of arms-length bargaining and does not present the type of opportunity for employer interference in union affairs which § 302 is designed to prevent.” Id. at 342.4 The same is true here, for the provisions of the collective bargaining agreement in this case, like the no-docking clause in BSAF Wyandotte, are simply bargained-for terms of the employees’ employment with their companies.

*111Trailways and the majority attempt to distinguish the “no-docking” cases on the ground that the union officials were active employees who used only part of their day for union business. The distinction does not work, however. During the hours that these persons spent on union activities, they were not rendering services to their employer, and they were not under their employer’s control. The distinction between using part of the day for union business and taking leaves of absence to become full-time union officials is only one of degree: the nature of the absences and the payments made by the employer during them (or measured by them) is the same.5

Consideration of the widespread business practices of companies and unions provides further reason to believe that the pension contributions at issue here are not illegal and that the dangers the majority alleges are more ficticious than real. It was conceded at oral argument that similar arrangements are common in collective bargaining agreements and have never before been challenged on the grounds relied upon by the majority. While this fact is certainly not dispositive of the legality of such schemes, it surely suggests that they are legal. This Court should be reluctant to overturn so widespread a practice, which represents a practical accommodation agreed upon by both businesses and unions.

It is also relevant that Trailways at no point suggested that it was coerced into making the contributions. It entered the agreement it now challenges with its eyes wide open. The collective bargaining agreement is thus undeniably the product of arms-length negotiation. We should endeavor to uphold such agreements, not to substitute for them others that we might prefer.

For the foregoing reasons, I would reverse the judgment of the district court.

. There is also no dispute that a contribution to a pension fund from which the persons on leave will eventually draw retirement benefits is a "thing of value” given to these persons by Trailways. See Knauss v. Gorman, 583 F.2d 82, 89 (3d Cir.1978) (contributions to a welfare fund *109constitute payments in lieu of wages to the fund’s beneficiaries).

. Section 302(c)(1) refers only generally to a "thing of value,” while § 302(c)(5) specifically addresses payments to trust funds. However, there is nothing in the language of the statute to indicate that § 302(c)(5) is preemptive, that is, that payments to trust funds can be exempt only under § 302(c)(5).

. I agree with the majority's conclusion that, although the Union did not raise the § 302(c)(1) argument in the district court, in the interests of justice we should review this argument because the statutory arguments are integrally related and because failure to consider the issue will result in unnecessary future litigation.

. See also Employees’ Independent Union v. Wyman Gordon Co., 314 F.Supp. 458 (N.D.Ill.1970); United States v. Motzell, 199 F.Supp. 192 (D.N.J.1961). Cf. Bur. of Al, Job. and Fire. v. Fed. Lab. Rel. Auth., 464 U.S. 89. 104 S.Ct. 439. 449 n. 17. 78 L.Ed.2d 195 (1983) (stating in dictum that unions may negotiate for payment by employers of expenses and travel allowances for union negotiators).

. If anything, the provision of the collective bargaining agreement in the instant case are even less threatening to the purpose of § 302(a) than are no-docking clauses. The motivation for bribery is arguably greater where the employee representative is at the workplace some of the time, hence more aware of and involved in the conditions of employment.