High Court Raises Standards for Dues In Agency Shop

By Tom Mirga — July 03, 2019 7 min read


The U.S. Supreme Court has struck down the procedure used by the Chicago Teachers Union to calculate the fees it charges nonmembers and to review challenges to those fees.

In a unanimous decision last week, the Court said the procedure adopted in 1982 violated nonmembers’ First Amendment rights ''because it failed to minimize the risk that nonunion employees’ contributions might be used for impermissible purposes, because It failed to provide adequate justification for the advance reduction of dues, and because it failed to offer a reasonably prompt decision by an impartial decisionmaker” in cases where nonmembers disputed the amounts.

The Court’s ruling in the case, Chicago Teachers Union v. Hudson (Case No. 841503), could affect union finances nationwide by forcing changes in similar “agency-shop” contracts in the 17 states with laws that permit or require such arrangements. But exactly how the decision will affect those provisions—and union budgets—remains unclear.

Under such contracts, union and nonunion teachers alike must pay for the benefits won by the union for all teachers in its bargaining unit. Previous rulings by the Court, however, had exempted nonmembers from having to support union-organizing efforts, lawsuits unrelated to contract enforcement and negotiation, and political causes that they do not subscribe to.

Critics of agency-fee provisions contend that they amount to “coerced unionism” in violation of nonmembers’ First Amendment rights to freedom of speech and association. But union officials argue that the arrangements ensure the government’s Interest in maintaining labor peace by preventing nonmembers from getting a “free ride” on the backs of dues-paying members. (See Education Week, April 24, 1985.)

Unions Minimize Effects

Lawyers for the American Federation of Teachers and the National Education Association played down the decision’s impact, saying agency fees represent only a small fraction of the unions’ revenues.

They also contended that most of the unions’ locals already have procedures in place that comply with the Court’s dictates.

And although they found themselves on the losing side of the dispute, the union lawyers commended the decision for, as one of them put it, “clearing up the confusion over what we can and cannot do.”

“The new system probably won’t give us problems in most states,” said Robert H. Chanin, the N.E.A.'S general counsel. “We already do a full budget analysis, but we only send it to teachers who object to the fee. The Court is telling us to send the information to all potential objectors.”

“Also, the Court is telling us we have to provide for an impartial hearing,” Mr. Chanin continued. “Well, we already have that mechanism in states that have labor-relations boards. We’ll have problems in those states that either don’t have such boards, or that have boards that don’t have jurisdiction in such matters. In the states without boards, it looks as if the union will end up paying for the hearing.”

Otherwise, he concluded, “it’s a decision that we can live with.”

Victory Savored

Meanwhile, leaders of the National Right to Work Legal Defense Foundation—which represented the nonunion teachers who filed the suit—hailed the ruling as “a victory that workers will savor for decades to come.”

One lawyer for the group also predicted that current union members might be encouraged to quit the A.F.T. and the N.E.A. “once word gets out that a significant percentage of their dues are not germane to collective bargaining.”

“In Michigan, for example, it’s my understanding that less than 1 percent of the teachers are nonmembers,” said the lawyer, Milton Chappell. “But how many would continue to be true voluntary members if they knew what their options were?”

Mr. Chappell also challenged the union lawyers’ assertions that their clients’ local affiliates are already largely in compliance with the ruling.

“They do not have a rebate procedure anywhere that I know of where they do not control the selection of the final decisionmaker,” he said. “When you control that person, the outcome is pretty much assured.”

Rebate Procedure

At issue in the Hudson case was the method employed by the Chicago union, an A.F.T. affiliate, for determining nonmembers’ proportionate-share fees, as they are known in Illinois. Under the procedure, which was outlined in a 1982 contract with the city’s school board, union officials calculated the amount of the nonmembers’ fees and required them to make payments or face dismissal. The fee set by the union in the first year of the contract .was equal to 95 percent of union dues.

The contract allowed dissenting nonmembers to appeal the amount of their fee-first to internal union review panels, next to an arbitrator selected by the union president from a list kept by the state board of education, and finally to the state courts. The nonmembers’ fees were kept in an interest-bearing escrow account until all appeals were exhausted.

Appeals Court’s Ruling

Shortly after the contract was ratified, several nonunion teachers filed suit in federal district court, contending that the procedure violated their rights to freedom of speech and due process of law. The district court held against them, but the U.S. Court of Appeals for the Seventh Circuit reversed that decision.

The appeals court ruled that the process used by the union violated nonmembers’ First Amendment rights, because it “made it likely that some of the money collected from them [would] be used to support political objectives not germane” to the union’s collective-bargaining functions.

In addition, the appeals court held that the union had deprived nonmembers of their right to abstain from association with a group within the meaning of the 14th Amendment. Therefore, it said, the nonunion teachers had to be afforded due process oflaw before that right could be taken away from them.

At a minimum, the appeals court suggested, the union would have to devise a new system that provided nonmembers “with fair notice, a prompt administrative hearing before the board of education or some other state or local agency, and a right of judicial review of the agency’s decision.”

Justices’ Opinion

Writing for the Supreme Court, Associate Justice John Paul Stevens slightly modified the requirements outlined by the Seventh Circuit Court. According to his opinion, the constitutional requirements for the collection of agency fees must include “an adequate explanation for the basis of the fee, a reasonably prompt opportunity to challenge the amount of the fee before an impartial decisionmaker, and an escrow for the amounts reasonably in dispute while such challenges are pending.”

“Leaving the nonunion employees in the dark about the source of the figure for the agency fee—and requiring them to object in order to receive information—does not adequately protect” such employees’ rights, Justice Stevens wrote.

In a footnote to the decision, he noted that unions need not determine the amount of the fee with “absolute precision.” Elsewhere in the opinion, he suggested that a union could meet the requirement by providing nonmembers with “a certified public accountant’s verified breakdown of [its] expenditures” before collecting the fees.

On the issue of prompt hearings of nonmembers’ appeals, Justice Stevens said the requirement could be satisfied through “expenditious arbitration ... so long as the arbitrator’s selection did not represent the union’s unrestricted choice.”

“Full-dress administrative hearings” are not required under the Constitution, he wrote.

The Court also noted that unions need not place 100 percent of nonmembers’ fees in escrow during appeals, provided that they “carefully justify the limited escrow on the basis of [an] independent audit.”

State and National Payments

In another footnote to the decision, the Justices noted that local unions must be able to verify for nonmembers that the portions of their fees that are forwarded to affiliated state and national organizations are not used for unauthorized purposes. In Chicago, about half of the $4 million collected by the local in 1982 from both members and non-members was paid to the A.F.T.'s state and national offices.

Payments to state and national unions have been a particularly sore point for many nonunion teachers. Many contend that they are willing to finance local union affairs, but not those of state and national groups, which they argue use their fees for objectionable political purposes.

Local union officials, meanwhile, maintain that their organizations cannot survive without the backing of the state and national groups. It is unclear how detailed an analysis of state and national expenditures local officials will have to provide to nonunion teachers.

Associate Justice Byron R. White wrote a two-paragraph concurring opinion in the case that was joined by Chief Justice Warren E. Burger.

A version of this article appeared in the March 12, 1986 edition of Education Week

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