Supreme Court Ruling Hampers Unions’ Political Speech

Guest post by Professor Benjamin Sachs

Until yesterday, it was voters and legislators who got to decide whether they wanted to live in a right-to-work state.  With Knox v. SEIU, the Supreme Court began to assume that decision-making responsibility for the rest of us.  At least when it comes to the public sector, Knox takes a giant step in the direction of holding that any rule requiring employees to pay their fair share of the collective bargaining bill is unconstitutional.  That’s a dramatic departure from prior precedent.  It’s a striking example of judicial activism.  And it’s potentially an existential threat to public sector unions.

The trouble comes primarily from two components of the Court’s opinion.  The first is the Court’s newfound skepticism about the sufficiency of free-rider arguments for First Amendment challenges in the public employment context.  The second is the Court’s new insistence – at least in certain circumstances – on “opt-in” arrangements in the union dues setting.  If there’s any good news about Knox, it’s that most of the worst parts of the opinion are dicta.  That means the case does not give lower courts the latitude to impose a right-to-work regime – one in which any and all mandatory dues payments are illegal – on the nation’s public sector workforce.

But before we get into the opinion in earnest, some brief background is in order.

A good number of states have decided that collective bargaining can be in the interests of the public.  In these states, where public employees vote to form a union, the employer has an obligation to bargain with the union.  But the union also has an obligation – namely, to represent all the workers in the bargaining unit whether or not those workers choose to become union members.  To make sure that each worker pays her fair share of the costs of representation, and to ensure that nobody gets to free ride on the dues paid by others, state governments allow employers to require everybody in the unit pay dues.

On the line: the ability of SEIU (an AFJ member organization)
to engage in political advocacy on behalf of its members.

Over the years, the Supreme Court has crafted a doctrine to structure and police these mandatory dues arrangements.  The basic rule has been this: in order to avoid the free-rider problem, public employers can require that employees pay their fair share of the union’s collective bargaining and contract administration expenses, but, to avoid a compelled political speech and association problem, employees have been given a right to opt out of funding the union’s political program.

That’s the background against which Knox is decided.  And although the Knox holding addresses a particular accounting procedure that SEIU used in California in 2005, the opinion goes far beyond dealing with the SEIU assessment. Reaching beyond what was even briefed or argued in the case, the five-justice majority casts serious doubt on whether a state’s interest in overcoming free riding can any longer justify mandatory dues payments in the public sector – even when it comes to dues payments for collective bargaining and contract administration.  As the Court put it, “free-rider arguments . . . are generally insufficient to overcome First Amendment objections.”

The Knox Court also questions whether, when it comes to the union’s political spending, it is constitutionally sufficient to allow objectors to opt out of paying dues or, instead, whether the union must secure employees’ affirmative opt-in before spending dues on politics.  The Court holds that, with respect to the particular SEIU assessment in this case, an opt-in is constitutionally required.  This is, in itself, a marked departure from the Court’s longstanding rule that opt-outs are constitutionally sufficient.  But here, too, the Court’s language goes beyond what was necessary to rule on the SEIU matter.  As the concurring and dissenting opinions point out, the Court’s reasoning on the constitutional permissibility of opt-out agreements would seem to extend to all mandatory dues arrangements.

To be clear, if opt-in arrangements are the only constitutional ones, that means that all forms of mandatory dues arrangements are unconstitutional.  So, jettisoning the free-rider rationale or striking down opt-out agreements will have the same effect – it’ll be right-to-work in the public sector.

These pieces of the Knox decision are troubling, but the Court’s increasing constitutional skepticism about mandatory union dues raises another set of concerns that demands attention.  In particular, the Court’s concern for avoiding compelled funding of union political speech stands in stark contrast to the lack of concern for compelled funding of corporate political speech.

The contrast is clearest in the public sector.  Here’s how it works:  The vast majority of people who work for the government – state, local and federal employees – are required to make contributions to a pension plan.  Public pensions, moreover, are defined benefit plans, which means that employees don’t have any say in how their mandatory contributions are invested.  Not surprisingly, pension plans invest employee contributions heavily in corporate securities: in 2008, for example, public pensions held about $1.15 trillion in corporate stock.

In Citizens United, of course, the Supreme Court held that corporations have a First Amendment right to fund electoral expenditures with general corporate treasuries, and corporations are taking ample advantage of the opportunity.  So, if you’re a public employee in California or New York or Arkansas (or nearly any other state), it is now a condition of your employment that you make pension contributions that can be used to finance corporate political advertisements.  If the Court means what it says about compelled union political speech and association, it has to see that this compelled corporate political speech and association is similarly unconstitutional.

The problem, though, isn’t restricted to the public sector.  The Supreme Court, in a case called CWA v. Beck, held that the same rules about mandatory union dues that it crafted for public employee apply to private employees.  So, private sector unions are prohibited from spending even one dime of general treasury money on politics when individual employees object to such use.  In contrast to this union rule, however, corporate law permits corporations to spend their assets on politics even in the face of individual shareholder objections.  To put it simply, the law gives employees the right to opt out of funding union political speech, but shareholders get no right to opt out of funding corporate political speech.

This kind of differential treatment of political speakers is inconsistent with the American ideal of treating political speakers equally.  Indeed, imposing stricter rules on unions than corporations may well be a constitutional problem, even in the private sector, unless there’s a valid reason for treating unions and corporations differently in this context.  And although space doesn’t permit me to make the case here, I have argued elsewhere that unions and corporations are analogous in the ways that matter most for this analysis.

In short, taking seriously the arguments in Knox and the Court’s other cases about compelled political speech and association means extending these principles beyond the union context and to the corporate one.  This kind of extension of Knox would not only be faithful to the Constitution, it would help restore some balance to a currently unbalanced compelled speech and association doctrine.

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Benjamin Sachs is a professor at Harvard Law School where he teaches labor law, and he is author, most recently, of Unions, Corporations, and Political Opt-Out Rights after Citizens United (Columbia Law Review 2012).  He formerly worked in the SEIU legal department.

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A Look Ahead: The Last Decisions of the Supreme Court's Term

Last week the Supreme Court heard the final oral argument of the term in Arizona v. United States. With little more than two months left until the term officially ends, let’s take a brief look at the cases on the Corporate Court docket in which decisions remain outstanding.

In Christopher v. SmithKline Beecham Corp., the Court will decide whether courts should defer to the Secretary of Labor’s interpretation of “outside salesman” under the Fair Labor Standards Act (“FLSA”), and whether the FLSA’s “outside sales” exemption applies to pharmaceutical sales representatives. During the oral argument on April 16, the justices seemed somewhat more inclined to side with the drug companies by holding that the sales reps fall within the “outside sales” exemption, which would mean they are not entitled to overtime pay. If the Supreme Court ultimately decides in the companies’ favor, it will not only constitute an earthquake in administrative law, it will also deny overtime to roughly 90,000 drug company employees.

In Knox v. SEIU, which was argued on January 10, the Court is considering whether unions must send a notice to workers every time they impose temporary fee increases to cover the costs of additional advocacy activities, rather than report those increases in annual notices as they already do. The Court could decide that the case is moot, as several months ago the SEIU sent all members of the class a $1 bill and a promise to pay one hundred percent of the charged fee increase. If the Court decides the case on the merits, however, and rules against the SEIU, it will erode the power of unions to fight back against new political attacks by making it harder to raise additional funds to respond.

The Court has not yet released its opinions in either of this term’s two cases arising under the Real Estate Settlement Procedures Act of 1974 (“RESPA”). Enacted to protect consumers from overpriced insurance due to abusive practices like kickbacks, RESPA outlaws payment for business referrals.

In First American Financial Corp. v. Edwards, which was argued on November 28,  the Court is considering whether RESPA allows individual plaintiffs to recover charges for title insurance when the selling corporation has violated a provision of the Act, regardless of whether the plaintiff was overcharged. If the Court sides with First American Financial, it will weaken RESPA regulations and put consumers seeking title insurance at an economic and informational disadvantage.

In Freeman v. Quicken Loans, which was argued on February 21, the Court is considering whether RESPA prohibits unearned fees, regardless of whether a third party was involved in the improper fee arrangement. In this case, petitioners were charged loan-discount fees on their mortgages but did not receive the corresponding reduced interest rates. If the Court sides with Quicken, it will allow mortgage lenders to take hundreds or thousands of dollars from homebuyers without giving them anything in return.

And last, but certainly not least, the Court is likely to release its decisions in the remaining blockbuster cases of the term – the healthcare cases, argued on March 26-28, and Arizona v. United States, argued on April 25 -- around the end of June. More details on what is at stake in these two cases can be found at earlier guest blog posts by Professor Tim Jost (on healthcare) and Professor Angela Banks (on Arizona v. United States).

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Corporate Court Hears Argument in Union Fee Case

Today, the Supreme Court will hear argument in the case of Knox v. SEIU, in which unions’ ability to engage in political advocacy on behalf of workers is at stake.

Service Employees International Union (SEIU) represents 1.8 million people in health care and public service. Non-member public employees are required by California state law to pay SEIU a “fair share fee” to defray the costs of union representation on their behalf. To that end, each year SEIU sends its non-members a notice, as required by the Supreme Court, which informs non-members of their fair share fee and of their right to object to paying non-chargeable expenditures including money spent for political advocacy. Those fees are calculated based upon expenses during the previous year and do not take into account unforeseen expenses.

In 2005, SEIU issued a valid annual notice informing non-members of the percentage of their dues which would be allocated to union representation and gave them 30 days to opt out of paying amounts associated with non-representation functions. The notice stated that dues were subject to change based on actual costs. A month later, SEIU imposed an emergency temporary assessment fee to defend against attacks on union plans and charged non-members who objected to the increase the percentage set forth in the initial notice as the amount associated with union representation. A group of nonmember state employees in California challenged this practice in a class action suit against SEIU.

Employees claim that SEIU’s failure to send out a supplemental notice when the union imposed a special assessment violated employees’ First and Fourteenth Amendments rights by forcing non-union employees to subsidize union political activities. SEIU counters that its notice was constitutionally and legally sufficient because the Supreme Court has recognized that the notice did not require an exact determination of the yearly expenditures, but merely a good prediction based upon the previous year’s audits. The Court previously recognized the impossibility of anticipating expenditures at the outset of the fee year and that once the union sent the original notice it need not send a second notice speculating how a fee increase might be spent. The district court found for the employees, but the U.S. Court of Appeals for the Ninth Circuit reversed, finding that a temporary fee increase did not require an additional notice.   

If the Supreme Court rules against the SEIU, it will erode the power of unions to fight back against new political attacks by making it harder to raise additional funds to respond.

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