BUS DEPARTMENT NEWS

Supreme Court Considers Company
Pay To Employees Working On Union Business

In a Jan. 20 oral argument, the Justice Department and the United Auto Workers urged the U.S. Supreme Court to rule that Caterpillar Inc. acted lawfully when it kept employees on its payroll while they took leaves of absence to work full time handling union grievances.

For some 20 years, collective bargaining agreements between Caterpillar and the UAW provided for the paid leaves, but a legal challenge to the practice arose after Caterpillar halted the payments in 1992 in the wake of a nationwide UAW strike against the company (Caterpillar Inc. v. United Auto Workers, US SupCt, No. 961925, oral argument 1/20/98).

Caterpillar told the court that the payments are unlawful under an anti-bribery provision of the LaborManagement Relations Act, or Taft-Hartley Act.

The company urged the justices to overturn a 9-3 decision of the U.S. Court of Appeals for the Third Circuit, which reversed circuit precedent and held that the payments are permissible under the LMRA (46 DLR AA-1, E-1, 3/10/97; 154 LRRM 2609).

According to the Justice Department, which sided with the UAW in a friend-of-the-court brief and presented a 10-minute oral argument, the payment practice is "common and long-standing" in certain industries, such as the auto industry.

Bottom of Slippery Slope? Columbus R. Gangemi, the Chicago attorney for Caterpillar, told the justices that over the years, the company was "lulled" into a belief that the payments were not unlawful, "but then one day you wake up," he said. "These are slippery slopes," Gangemi told the court. "The fact that we have slid down it does mean we should stay at the bottom."

Section 302(a) of the LMRA prohibits employers from paying labor officials who represent its employees. But at Section 302(c)(1) the law makes an exception for payments made to employees or former employees "as compensation for, or by reason of, [their] service as an employee of such employer."

Attorneys on both sides of the case spent much of their argument time attempting to explain to the justices where they would draw the line between the two provisions, given that one makes such payments unlawful and the other carves out an exception.

Justice Antonin Scalia questioned Gangemi whether it would be lawful for a shop steward to discuss a grievance with an employee on company time."You concede that's ok?" Scalia asked. "Yes," said Gangemi.

"He might spend the whole day" discussing the grievance, Scalia continued. Would that be lawful? "Yes," answered Gangemi.

What if the steward spent "a whole year" discussing the grievance, Scalia asked. Would that still be lawful?

"Shop stewards have regular jobs and regular job duties," Gangemi said. Their situation differs from an employee who, year after year, engages in nothing but union business and is not a regular worker at a plant, he said.

"But you pay employees when they go on vacation ... [or are temporarily or] permanently disabled," said Justice Stephen Breyer. "What's the difference between this and taking time off to consider grievances?

"The difference is the statute," said Gangemi, referring to the LMRA. "There is no statute that prohibits an employer from paying someone to go on a sabbatical."

Only Sham Payments Are Illegal. According to David M. Silberman, the Washington, D.C., attorney representing the UAW, the LMRA was not violated by Caterpillar because the employees in question had worked for the UAW for a period of time and their leaves were taken on a contingent basis.

Under those circumstances, the employees were being paid to handle grievances based upon their prior service to the company. Therefore, the practice was not prohibited by the LMRA, he said.

Justice John Paul Stevens asked Silberman whether the law would be violated if a person worked for Caterpillar for only two days and then took an extended leave to settle grievances for the company on a full-time basis.

"There is a point where a payment can be illegal," Silberman said, "if it is a sham." Silberman said employees who have worked in the plant know the facility and know the players, and therefore their prior service makes them qualified to settle grievances for the company.

Silberman said the practice of paying employees who took leaves of absence to handle grievances was brought to the attention of Congress when federal lawmakers enacted Taft-Hartley in 1947, and there was no indication from the legislative history of the law that Congress intended to outlaw the practice.

Beth S. Brinkman, assistant to the solicitor general at the Justice Department, told the court that the action of Caterpillar's employees, who were elected by bargaining unit employees to serve three-year terms settling grievances full time while on Caterpillar's payroll, were not unlawful.

By contrast, she said, DOJ might look more closely at a situation in which an employer paid an employee to take a leave of absence and work full time as a union negotiator during contract talks. Or, she said, suspicions at Justice might be aroused if an employee working on union business was being paid an "incommensurate" amount, or if there were "secret deals" struck between the union and the employer.

The Caterpillar case does not contain evidence of a sham transaction, Brinkman said.

A decision in the case is expected by the end of June. (January  21, 1998 Daily Labor Report)

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