Jackson Purchase Rural Electric Cooperative Association v. Local Union 816, International Brotherhood of Electrical Workers , 646 F.2d 264 ( 1981 )

CORNELIA G. KENNEDY, Circuit Judge.

Local 816 appeals the order of the District Court setting aside a labor arbitration award in its favor. The facts are undisputed, and the case was decided on cross-motions for summary judgment. The issues on appeal are 1) whether it is a violation of Section 302(a)(1) and (c)(4) of the Labor Management Relations Act, 29 U.S.C. § 186(a)(1) and (c)(4), for an employer to check off, or agree to check off, union dues from employee paychecks without written authorization from the employees where there is no intent to violate federal law, and 2) if so, whether a long-continued practice of checking off union dues in violation of those sections may nonetheless be enforced by an arbitrator as part of a collective bargaining agreement. We answer yes to the first question and no to the second, and affirm the judgment of the District Court.

Local 816 is the authorized bargaining representative for Jackson Purchase employees. The written collective bargaining agreement is silent on the issue of checking off union dues, but for 16 years prior to 1978 Jackson Purchase deducted dues from employee paychecks and paid them over to Local 816 without written authorization from the affected employees. Jackson Purchase unilaterally terminated this practice in 1978. Local 816 protested and the matter was submitted to arbitration. The arbitrator found that the practice violated federal law. However, he concluded that the illegality was relevant only between “the federal government and each of the parties separately and should not affect [the] consensual relationship between [employer and union].” As between the parties the arbitrator concluded that the fact that the practice had continued for 16 years created an implied agreement to check off union dues between Jackson Purchase and Local 816, which had become a part of the collective bargaining agreement and was therefore not subject to unilateral termination. He ordered Jackson Purchase to continue to check off union dues upon receipt of proper authorization cards from the employees. The District Court set this arbitration award aside, holding that since the check off violated section 302(a) it could not be enforced.

Section 302(a)(1) of the Labor Management Relations Act, 29 U.S.C. § 186(a)(1), states that

[i]t shall be unlawful for any employer ... to pay, lend, or deliver, or agree to pay, lend, or deliver, any money or any other thing of value to any representative of any of his employees who are employed in an industry affecting commerce.

Subsection (c)(4) creates an exception

with respect to money deducted from the wages of employees in payment of membership dues in a labor organization: Provided, That the employer has received from each employee, on whose account such deductions are made, a written assignment which shall not be irrevocable for a period of more than one year, or beyond the termination date of the applicable collective bargaining agreement, whichever occurs sooner. (Emphasis in the statute)

Subsection (d) makes it a misdemeanor willfully to violate the above provisions.

Local 816 first argues that because subsection (d) makes it a crime willfully to violate § 302, a willful violation is the only violation that Congress contemplated. Because the District Court found that Jackson Purchase and Local 816 did not intend to violate § 302, Local 816 claims that it erred in finding that the Local did violate that section. This argument is devoid of merit. The fact that willful violations of § 302 are to be met with a criminal sanction does not render an unwitting violation lawful. Congress need not prescribe a criminal penalty, or any penalty for that matter, to make an action illegal. As noted above, subsection (a) expresses Congress’ intent that an agreement to check off union dues without written employee authorization “shall be unlawful.” Local 816 has not brought to our attention any legislative history or other evidence that indicates that § 302 does not mean what it so clearly says.¹ Thus, the arbitrator and the United States District Court were correct in holding that the past practice in this case violated federal law.

Local 816 next observes that the long-continued practice of checking off union dues necessarily implies an underlying agreement to cheek off union dues. It argues that although the implementation of the agreement in this case was unlawful, the agreement itself is not, because the agreement does not specify that unlawful means shall be used to accomplish its ends. Thus, Local 816 contends that we should sever the agreement to check off from the manner in which the checking off was accomplished, and enforce only the agreement to check off through the past practice doctrine. The distinction that the Union is making may have merit in the appropriate case, where there is evidence of a lawful agreement which is independent of the illegal act. However, that is not the case here. The only implied agreement that could be said to have become, by long-continued practice, a part of the contract is the agreement to check off without written authorizations from the employees. Such agreement to check off without written authorizations, although not willful and therefore not criminal, is clearly unlawful under the terms of the applicable statute.

The next question is what effect, if any, should be given the illegal past practice and past agreement. The Restatement (Second) of Contracts § 320(1) (Tent. Draft No. 12, 1977) states the rule that a promise is unenforceable if legislation so provides, or if the interest in enforcement is clearly outweighed by the public policy against enforcement. Generally, one who has himself participated in an illegal act cannot be permitted to assert in a court of justice any right founded upon or growing out of the illegal transaction. Weil v. Neary, 278 U.S. 160, 174, 49 S.Ct. 144, 149, 73 L.Ed. 243 (1929) (enforcement of an illegal contract is contrary to public policy); Gibbs and Sterrett Mfg. Co. v. Brucker, 111 U.S. 597, 601, 4 S.Ct. 572, 574, 28 L.Ed. 534 (1884); Boatland, Inc. v. Brunswick Corp., 558 F.2d 818, 823 (6th Cir. 1977) (on grounds of public policy clauses in a contract which violate statutory provisions are without legal effect); N.L.R.B. v. Martin Building Material Co., 431 F.2d 1246 (5th Cir. 1970) (the court enforced an NLRB order which did not permit an existing collective bargaining agreement to act as a bar to a new representation election, where the agreement contained a check off provision that violated § 302(c)(4)); Botany Industries, Inc. v. New York Joint Board Amalgamated Clothing Workers of America, 375 F.Supp. 485 (S.D.N.Y.1974), vacated and dismissed as moot, 506 F.2d 1246 (2d Cir. 1974) (a court cannot enforce an invalid collective bargaining agreement, either directly through a declaratory judgment action, or indirectly, by enforcement of an arbitration award).

However, it is not the case that all unlawful agreements are ipso facto void. If the denial of relief is disproportionately inequitable the right to recover will not be denied. 14 Williston on Contracts § 1630A (3d ed. 1972). Factors a court should consider in performing this balancing include: the justified expectations of the parties; the forfeiture that would result from non-enforcement of the agreement; any special public interest in enforcement; the strength of the public policy that the agreement violates, as shown by legislation or court decision; the likelihood that refusal to enforce will further that policy; and the seriousness of the misconduct. Restatement (Second) of Contracts § 320(1) (Tent. Draft No. 12, 1977).

As the authorities cited above make clear, there is a strong presumption that agreements in violation of a statute will not be sanctioned by the courts. That presumption is stronger than usual in this case, as Congress not only made the act of unauthorized checking off of union dues illegal, it also made the agreement to do that act illegal. This is not a case where a party is trying to have an entire contract declared illegal on the basis that a minor provision violates the law, as was the case, for example, in Alston Studios, Inc. v. Lloyd V. Gress & Associates, 492 F.2d 279, 285 (4th Cir. 1974). Local 816 is trying to enforce the illegal agreement itself. There is no specific public interest in enforcing this agreement. Rather, the public’s interest is promoted by non-enforcement. The public policy advanced by § 302 is to protect employees in dealings between the union and employer. The relief ordered by the arbitrator is prospective and there is no contention that any employee was actually injured by this past practice. However, enforcement of an illegal agreement on the ground that the evil concerned did not follow would destroy the safeguards of law and lessen the prevention of abuses. Weil v. Neary, 278 U.S. at 174, 49 S.Ct. at 149. Local 816 had no justified expectation that its agreement with Jackson Purchase was lawful, nor was it misled in any way by Jackson Purchase. No forfeiture or unjust enrichment will result to any party if this past practice or agreement is not made a part of future collective bargaining agreements. Although the misconduct in this case was not serious, that factor by itself is entitled to little weight. In short, Local 816 has given us no reason to disregard the presumption that courts will not give legal effect to illegal acts.

Arbitration of labor disputes is favored. United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 578-583, 80 S.Ct. 1347, 1350-1353, 4 L.Ed.2d 1409 (1960). Judicial review of an arbitrator’s decision is very limited so long as the arbitrator’s award is drawn from the collective bargaining agreement. United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597-599, 80 S.Ct. 1358, 1361-1362, 4 L.Ed.2d 1424 (1960). An arbitrator may properly incorporate the past practices of the parties or the “common law of the shop” into the written collective bargaining agreement where that document is silent or ambiguous on a matter, Detroit Coil Co. v. International Ass’n of Machinists & Aerospace Workers, Lodge No. 82, 594 F.2d 575, 579 (6th Cir.), cert. denied, 444 U.S. 840, 100 S.Ct. 79, 62 L.Ed.2d 52 (1979), but an illegal collective bargaining agreement will not be en forced. Hairston v. McLean Trucking Co., 520 F.2d 226, 235 (4th Cir. 1975); cf. Chattanooga Mailers Union, Local No. 92 v. Chattanooga News-Free Press Co., 524 F.2d 1305 (6th Cir. 1975) (illegality of one clause in a collective bargaining agreement did not render the whole agreement invalid). Because the practice of checking off union dues without written authorization and the implied agreement to check off are illegal, and the Union has not overcome the presumption that illegal acts are without legal effect, the arbitrator exceeded his authority by incorporating the practice or the agreement into the collective bargaining agreement here. The arbitrator’s award depended on the illegal past practice, thus was not based on the collective bargaining agreement, and the District Court was correct in setting it aside.

For the foregoing reasons, the order of the District Court is affirmed.

1 . For the general proposition that Section 302 was designed to prevent more than deliberate or willful violations, see e. g., International Longshoremen’s Ass’n v. Seatrain Lines, Inc., 326 F.2d 916, 919 (2d Cir. 1964); Employee’s Independent Union v. Wyman Gordon Co., 314 F.Supp. 458, 460 (N.D.Ill.1970).