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Published in Print: January 18, 2012, as Union Stance Gets Chilly High-Court Reception

High Court Weighs Relaxation of Union 'Agency Fees'

Oral arguments deal with 'agency fees'

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The U.S. Supreme Court appeared inclined last week to chalk up another defeat for public-employee unions by requiring that they provide nonmembers with additional opportunities to object to special assessments or dues increases to finance political goals.

But members of the court also are weighing whether the case before it is moot—a question that dominated roughly half the Jan. 10 oral arguments in Knox v. Service Employees International Union.

The case involves the intricate area of labor law involving "agency fees," or service fees that public-sector unions charge nonunion members for collective bargaining benefits and other permissible costs. Several of the Supreme Court's key precedents in this area involve teachers' unions, though the case argued last week arose from a unit of the SEIU that represents California state employees.

The high court has sided with anti-union forces on related issues in several recent cases, and the new case could be highly relevant as teachers' unions and other public-employee labor organizations gear up to respond to state legislative measures aimed at curbing their collective bargaining rights.

The 3.2 million-member National Education Association filed a friend-of-the-court briefRequires Adobe Acrobat Reader on the SEIU's side, as has the AFL-CIORequires Adobe Acrobat Reader , of which the 1.5 million-member American Federation of Teachers is affiliated.

Golden State Ballot

The SEIU case involves a 2005 special assessment—or temporary dues increase, as the union characterizes it—charged to union members and nonmembers alike for some political activities, including to fight two anti-union ballot measures backed by then-Gov. Arnold Schwarzenegger.

Fee Precedents

The U.S. Supreme Court has issued several important decisions over the past 35 years regarding public-sector unions and the service fees they extract from those who choose not to join them.

Abood v. Detroit Board of Education (1977): Teachers may be required to pay union “agency fees” as a condition of employment when those fees are used for collective bargaining and other administrative purposes. However, the union may not use the funds of objecting nonunion members for political purposes that are not directly related to collective bargaining.

Chicago Teachers Union, Local No. 1 v. Hudson (1986): Nonunion members paying agency fees are entitled to have their objections to the amount of the fee addressed in an expeditious manner. In addition, the union is required to supply nonunion members with adequate information about the method by which the agency fee was calculated.

Lehnert v. Ferris Faculty Association (1991): Nonunion members paying agency fees are not required to support political lobbying and public relations efforts. But a local teachers’ union may use such fees to cover the cost of affiliation with state and national unions, as well as to send delegates to national union meetings.

Davenport v. Washington Education Association (2007): States do not violate the first amendment rights of public-employee unions when they require the unions to seek an “affirmative authorization” from a nonmember before spending that nonmember’s agency fees on election-related purposes.

The union approved the Political Fight-Back Fund for what one union document called "a broad range of political expenses, including television and radio advertising, direct mail, voter registration, voter education, and get-out-the vote activities in our work sites and in our communities across California."

Those who refuse to join public-employee unions must still pay "fair share," or agency fees because they benefit from collective bargaining. Under a 1986 Supreme Court decision known as Chicago Teachers Union Local No. 1 v. Hudson, public-sector unions must provide an accounting to nonmembers and give them the chance to object to political spending or other nonbargaining-related costs (and thus not pay for them).

In its June 2005 "Hudson notice," the SEIU local reported that those nonmembers who objected to paying for costs that could not properly be charged to them would pay 56.35 percent of the full dues rate as their fair-share fee. The union's full dues rate was 1 percent of gross income.

In September of that year, the union increased dues to 1.25 percent of gross income. It did not provide an additional Hudson notice to nonmembers, and it continued to charge objectors the same proportion of dues as before the increase. The union knew that some of the additional money raised would go for collective bargaining and some to battle the ballot initiatives, which were defeated.

The next year's accounting under Hudson determined that only about one-quarter of the increase went for chargeable collective bargaining expenses, meaning that the objectors got back some of their money.

The objectors filed a class action backed by the National Right to Work Legal Defense Foundation, based in Springfield, Va. They argued that the dues increase was unconstitutional in the absence of a new Hudson notice and a chance to object to any political spending.

A federal district court ruled largely for the nonmembers, but a panel of the U.S. Court of Appeals for the 9th Circuit, in San Francisco, held in 2010 that the June 2005 Hudson notice was sufficient to protect nonmembers' First Amendment right of association. The panel also held that not all political expenses would automatically be nonchargeable to objectors, and that one of the California ballot propositions was sufficiently related to collective bargaining to allow the spending to fight it to be chargeable.

Union Epiphany?

After the Supreme Court granted review of that decision last year, the SEIU decided to offer nonmembers a 100 percent refund of the temporary dues increase. That meant the case was now moot, the union argued, because the class had received all the relief it had sought in its suit.

Not so fast, said the National Right to Work Foundation. The "eleventh hour" move was "a classic attempt to manipulate the [Supreme] Court's jurisdiction to insulate a favorable decision from review," the group contended in court papers.

The mootness issue was clearly on the minds of several of the justices during oral arguments.

"Why did you give up once the case was granted here?" Chief Justice John G. Roberts Jr. asked the lawyer representing the union, Jeremiah A. Collins. The Washington-based lawyer said the union's leadership, which has changed since 2005, "thought about the situation and came to the realization that they have no stake in the procedures that are at issue here. This is a local that had never done a midyear increase in the past."

William J. Young, of the National Right to Work group, says the case is not moot because "the union would be free to return to its old ways."

"The union made this wonderful and meaningful policy change" only after the Supreme Court agreed to hear the objectors' appeal, Mr. Young said.

On the merits, he said, "We believe that a new Hudson notice is required whenever there is a material alteration in the obligations that are imposed upon nonmembers."

Opting In

Several justices zeroed in on Mr. Collins, the union's lawyer.

Justice Sonia Sotomayor wondered why having to issue an extra Hudson notice would be especially burdensome.

Mr. Collins said each notice could lead to disputes and litigation and add to the union's costs.

Justice Samuel A. Alito Jr. questioned what would happen if the proponents of the anti-labor ballot initiatives came to the SEIU seeking an interest-free loan "because we want to use this money to persuade the electorate to enact these,but don't worry, because we're going to pay it back right after the election, when we've achieved our electoral ends. Would the union provide the money because it's all going to come out in the wash? … I really doubt that it would."

Justice Anthony M. Kennedy told Mr. Collins, "You're taking someone's money contrary to that person's conscience. And that's what the First Amendment stands against."

Related Blog

Justice Kennedy suggested that the high court consider requiring an "opt in"—which means nonmembers would have to affirmatively give their permission for paying dues for noncollective bargaining costs.

That idea, which some states have adopted and was the subject of one of the 2005 California ballot measures, is anathema to public-employee unions. Because the current system requires affirmative action on the part of objecting nonmembers, it is usually just a minority who object to their agency fees. (Only 10.5 percent of nonmembers objected to the SEIU local's 2006 Hudson notice.)

Justice Stephen G. Breyer appeared most sympathetic to the union's position.

"The virtue of the present system" is that while it may result in some objectors making "forced loans" to the unions, he said, "it does wash out in the wash, and it ends up being fair to the objectors. And it's simply hard to think of a better system that doesn't provide more administrative problems than the existing one."

In its brief, the NEA took no position on whether special assessments should come with an extra Hudson notice, saying that the case didn't properly present that issue. The teachers' union stressed that the justices should not accept the National Right to Work Foundation's arguments in favor of giving procedural safeguards in agency fees the highest level of constitutional scrutiny. That issue didn't come up during oral arguments.

A decision in the case (No. 10-1121) is expected by late June.

Vol. 31, Issue 17, Page 21

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