U.S. Supreme Court Upholds State Limitations on Public-Sector Unions' Agency Fee Spending

Bryan O'Connor
June 5, 2008 — 1,239 views  

The U.S. Supreme Court, in a unanimous decision, has held that states do not violate the First Amendment of the Federal Constitution by requiring public-sector unions to obtain authorization from nonmember agency fees payers prior to using their money for political purposes. The June 14 ruling came in cases arising from a teachers' union challenge to a Washington State voter initiative.  Davenport v. Washington Education Association, Nos. 05-1589, -1657.

Many states, including Washington, authorize unions and government employers to enter into so-called "agency-shop" agreements. Under these arrangements, a union can levy an agency fee on employees who object to becoming union members but who are nevertheless represented by the union in collective bargaining.

In the public sector, agency fee arrangements raise First Amendment concerns because they force individuals to contribute money to unions as a condition of their government employment. In Abood v. Detroit Board of Education, 431 U.S. 209 (1977), the U.S. Supreme Court held that public-sector unions are constitutionally prohibited from using the fees of objecting nonmembers for ideological purposes that are not germane to the union's collective-bargaining duties. Later, in Teachers v. Hudson, 475 U.S. 292 (1986), the U.S. Supreme Court set forth various procedural requirements that public-sector unions must observe to ensure that an objecting nonmember can prevent the use of his or her money for impermissible purposes. 

Under the Hudson procedures, nonmembers are allowed to affirmatively "opt out" from having their money used for purposes that are not germane to the union's collective-bargaining duties, which include supporting a union's political and election objectives.  However, under Hudson, the obligation to act affirmatively falls upon the nonmember worker. In Davenport, the U.S. Supreme Court considered whether a state can require a public-sector union to do more.  In particular, the court addressed whether the state could shift the burden to the union by insisting that it affirmatively obtain nonmembers' consent (or "opt in" authority) before spending their money for the union's political purposes. Under this second scenario, the obligation to affirmatively act falls upon the union to obtain the nonmembers' consent.

Washington's Fair Campaign Practice Act
Responding to a promise to put the average voter on even ground with special interests, 72 % of the state of Washington voters who went to the polls in November 1992 enacted Initiative 134, the Fair Campaign Practice Act. Washington thus became the first state in the nation to pass a comprehensive reform initiative, which, among other things, imposed political contribution caps and required annual, written authorization from workers before deducting funds for political use from their paychecks. A result of the initiative, known as "Section 760", provided, in part, "A labor organization may not use agency shop fees paid by an individual who is not a member of the organization to make contributions or expenditures to influence an election or to operate a political committee, unless affirmatively authorized by the individual."  (Wash. Rev. Code § 42.17.760)

The Union's Opt Out Procedures and State Court Litigation
The Washington Education Association is the exclusive bargaining representative for approximately 70,000 Washington State educational employees. Pursuant to Washington statute, WEA members pay dues to the union, while nonmembers pay agency shop fees that are equivalent to member dues. Nonmembers who do not support the WEA's political and ideological causes may obtain a rebate of that portion of their fees that was used for non-chargeable activities.

Twice a year, the WEA mailed a so-called "Hudson packet" to each nonmember explaining their rights and offering three choices: (1) pay agency fees equivalent to 100 percent of union dues; (2) object to paying 100 percent and receive a rebate for non-chargeable expenditures, as calculated by the WEA; or (3) object to paying 100 percent and challenge the WEA's calculations. If they failed to object or "opt out," nonmembers' money was used for all purposes, including funding the WEA's political expenditures. 

This WEA process spawned multiple lawsuits, which later were consolidated. Finding that nonmembers' failure to object did not constitute affirmative authorization to use their money for political purposes, a state trial court found that the WEA intentionally violated Section 760. The court assessed $590,375 in penalties and costs against the union. 

An intermediate appellate court, however, reversed. It held that Section 760 was unconstitutional because its affirmative-authorization requirement unduly burdened unions. A divided State Supreme Court agreed. While finding that the WEA's "Hudsonpacket" did not satisfy Section 760's affirmative-authorization requirement, it held that the statute's imposition of such a requirement violated the First Amendment of the Federal Constitution.  The Washington Supreme Court reasoned that Section 760 impermissibly shifted the burden of asserting First Amendment rights from dissenting members to the union, and, further, that it significantly burdened the union's expressive rights.  

The Supreme Court's Reasoning
Finding no violation of the First Amendment, the U.S. Supreme Court stated that Section 760 was simply a minor condition on the union's exercise of an extraordinary power, in essence, the authority to tax government employees. Writing for the court, Justice Antonin Scalia noted, "The notion that this modest limitation upon an extraordinary benefit violates the First Amendment is, to say the least, counter-intuitive." 

The court further concluded that Hudson's "opt out" procedures are simply a constitutional minimum. If they wish, states can require that unions do more. As the court stated, "The mere fact that Washington required more than the Hudson minimum does not trigger First Amendment scrutiny. The constitutional floor for unions' collection and spending of agency fees is not also a constitutional ceiling for state-imposed restrictions."

The court rejected WEA's argument that Section 760 is a limitation on how it may spend "its" money. That the statute restricted use of these funds after they were in the union's possession was entirely immaterial, the court stated. Instead, it found, Section 760 simply is "a condition placed upon the union's extraordinary state entitlement to acquire and spend other people's money." While not raised in the state court proceedings below, the court further concluded that the content-based nature of Section 760 does not violate the First Amendment "given the unique context of public-sector agency-shop arrangements."

While Section 760 applies on its face to both public- and private-sector unions in Washington, the U.S. Supreme Court emphasized that it upheld Section 760 only as it applied to public-sector unions. However, the court said it was not suggesting that the answer must be different in the private sector, but simply that it was unnecessary to reach the issue in this case. 

The Effect on Current Washington Law May Be Minimal
In Washington, the effect of the Supreme Court's decision may be limited. While  Davenport was pending, the WEA and other unions successfully lobbied the Washington legislature to amend Section 760. 

On May 11, 2007, Washington Governor Christine Gregoire signed into law House Bill 2079 containing an "emergency clause," which meant that it took effect immediately and could not be overturned by a voter referendum. This law amended Section 760 by adding the following language: "A labor organization does not use agency shop fees when it uses its general treasury funds to make such contributions or expenditures if it has sufficient revenues from sources other than agency shop fees in its general treasury to fund such contributions and expenditures." 

As a result of House Bill 2079, a union in Washington no longer needs its nonmembers' affirmative authorization prior to making political expenditures so long as the union has sufficient general treasury revenues to cover such expenditures from sources other than nonmembers' agency shop fees. For unions with substantial resources such as the WEA, this new law makes it unlikely that they will ever again need to seek nonmembers' affirmative authorizations. Nonmembers who may be concerned that their money is going to political causes they do not support will be forced to object affirmatively and seek a refund – a burden that runs directly counter to Washington voters' intent in enacting Section 760.

For More Information Contact:

Wayne W. Hansen
Managing Partner
Seattle Office

Bryan P. O'Connor
Seattle Office

© 2007 Jackson Lewis LLP.  Reprinted with permission.  Originally published at www.jacksonlewis.com.  Jackson Lewis LLP is a national workplace law firm with offices nationwide."

Bryan O'Connor

Jackson Lewis LLP