Supreme Court Takes Aim at Public-Sector Unions

August 2, 2012
By Larry Cary, Cary Kane LLP
This June the United States Supreme Court issued its decision in Knox v. SEIU, which will financially weaken public sector unions.
Governor Arnold Schwarzenegger called for a special election in 2005. On the ballot were two referendums intended to attack public sector unions and workers. 

The first, Proposition 75 required unions to obtain employees’ affirmative consent before charging them fees to be used for political purposes.  The second, Proposition 76 limited state spending and gave Schwarzenegger the ability to reduce state appropriations for public-employee compensation. Service Employees International Union, Local 1000, a large California public sector union, imposed a temporary 25 percent increase in union membership dues for an “Emergency Temporary Assessment to Build a Political Fight-Back Fund.” The union said the money was needed to achieve the union’s political objectives, both in the special election that year and in following general election.  The money in the Fight-Back Fund would be used by the union “for 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.” Agency fee payers objected to being forced to pay the assessment and sued.

 An agency fee payer under the law in most states is an employee who receives the benefits of being represented by the union, e.g., he or she gets the wages, benefits and protections that a union contract provides, but they are not a member of the union. Instead of paying “dues” they pay an agency fee either equal to the union’s dues or a lesser amount representing the percentage of the union’s dues that are spent on collective bargaining and related representational purposes. Agency fee payers do not have to pay for the political expenses of a union, because this is viewed as infringing on their First Amendment right not to support particular political causes against their will.  For many years the law has required a public-sector union to allow an agency fee payer to object to paying full dues and once they have timely objected they are charged the lesser amount.

In Knox, the Supreme Court reversed the relationship between agency fee payers and the union. Now non-members must consent to the increase instead of being allowed to opt out.  The Court said, “when a public-sector union imposes a special assessment or dues increase, the union must provide a … notice [about their right not to pay the increase] and may not exact any funds from nonmembers without their affirmative consent.”  This new rule will tend to eliminate a union’s ability to obtain agency fees from non-members for political purposes.  Unfortunately, it may mean much worse.
Justice Sotomayor criticized the Court’s majority and complained that the decision in Knox creates big problems for unions in the future. “After today,” wrote Justice Sotomayor, “must a union undertaking a special assessment or dues increase obtain affirmative consent to collect ‘any funds’ or solely to collect funds for [political] activities? May a nonmember opt out to contribute to a special assessment, even if the assessment is levied to fund incontestably [collective bargaining] activities? Does the majority’s new rule allow for any distinction between non-members who had earlier objected to the payment of non-chargeable expenses and those who had not? What procedures govern this new world of fee collection?”
Perhaps even more significant, Justice Sotomayor wrote that she worries about what it will really mean for unions: “while the majority’s novel rule is, on its face, limited to special assessments and dues increases, the majority strongly hints that this line may not long endure.” In other words, the new rule could be applied in the future to cover the usual situation where dues and agency fees are increased, namely, when the amount of the dues is automatically increased pursuant to a formula found in the union’s constitution or is increased when the union’s membership votes to authorize an increase.
Political expenditures by unions in both the public and private sectors are legally often a tricky affair filled with seemingly contradictory restrictions.  Procedures for handling agency fee payers and objectors also differ in the public and private sectors. The Supreme Court’s decision in Knox makes it even more important than ever that any union contemplating a dues increase or a special assessment first discuss the matter with counsel in order to make sure that the union is minimizing the risk of violating the law.

Larry Cary is a managing partner at Cary Kane LLP and has practiced labor law for nearly 30 years.


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