UPDATES & ANALYSIS

The State of Iowa, not employees, must pay dues owed to union, Iowa Supreme Court rules

by Rox Laird | November 2, 2023

The State of Iowa violated a collective bargaining agreement with a State employees’ union by refusing to deduct union dues from members’ paychecks as required by the agreement, the Iowa Supreme Court said in a ruling handed down Oct. 27. And the State – not the union members – must pay $1,046,835.05 in uncollected dues owed to the union.

The decision, the second time the Iowa Supreme Court has ruled in this matter, settles a fact-intensive dispute over the State’s decision to halt collection of the employees’ union dues in response to a new collective bargaining law enacted by the Legislature in 2017.

Dues for State employees belonging to the union – UE/Local 893 IUP – representing two collective bargaining units had long been collected by the State through payroll deductions until the Legislature outlawed the practice for all State employee unions in 2017. The legislation became effective in February 2017 for collective bargaining agreements, excepting those in place at the time, and the State stopped collecting dues for the union when its 2015-17 contracts expired.

In its first suit against the State on this matter in 2017, UE/Local 893 IUP argued that because it had accepted the State’s offer during the bargaining process for a 2017-19 contract in December 2016, the union had an enforceable contract with the State before the 2017 legislation became effective. The Iowa Supreme Court agreed in a 2019 ruling.

Still, the State did not resume collecting dues under the new contracts, arguing that it must first have new individually signed authorizations from the union’s members. The union disagreed, brought this second suit, and the Polk County District Court ruled in its favor.

In its appeal to the Iowa Supreme Court, the State argued that it needed new individual union member authorizations for payroll deductions for the union dues under the new contracts.

The Court disagreed in its unanimous Oct. 27 decision written by Justice David May. Based on the language of the prior collective bargaining agreement for 2015-17, the Court said the State was obligated to collect dues from members who had submitted authorizations under previous contracts.

A final question is who should pay the $1,046,835.05 in union dues not collected under the collective bargaining agreement while this litigation played out. The State argued the union should collect the dues from members retroactively; the union argued the State should pay the amount owed for dues in the form of money damages.

The Court agreed with the union, citing the legal principle that “when a contract has been breached, the nonbreaching party is generally entitled to” damages that will place that party “in as good a position as he or she would have occupied had the contracts been performed.”

“This is sometimes called ‘benefit of the bargain’ damages,” May wrote. “Here, the parties’ ‘bargain’ — their contracts — required the State to collect dues from UE’s members and then forward those collected dues to UE. So the ‘benefit’ that UE lost was the amount of money that UE would have received if the State had performed its dues-collection duty. That lost money was an appropriate remedy for the State’s breach.”

The Court also disagreed with the State’s argument that the “nature and purpose” of the union contracts was to assist UE members in paying dues and that the contracts never contemplated that the state itself would pay the dues.

While the Court agreed that had the State honored its obligations under the contracts by collecting dues from members, it could have simply passed those dues along to UE without becoming liable for money damages. “But the State chose not to honor the contracts,” May wrote. “Instead, it chose to breach them. And so it is appropriate for the State — like any other contracting party — to pay the damages caused by its breach.”

(The State, in its appeal to the Supreme Court, did not challenge the trial court’s award of back pay of $411,967.06 and overtime pay of $486,876.37 owed to employees.)

The Court did, however, side with the State on the question of whether it must pay the union’s attorney fees, affirming the district court’s finding that because there were legitimate issues for the State to litigate, its actions did not amount to bad faith.

Tags: Iowa Supreme Court 2023-24