Mooney, Green, Baker & Saindon, P.C.

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LEGAL REPORT

Winter (2) 2007

This is one of a continuing series of updates on recent developments in the law affecting labor rights and employee benefit plans.

DAVENPORT V. WASHINGTON EDUCATION ASSOCIATION

ONE STATE’S ATTEMPT TO MUZZLE THE POLITICAL VOICE OF UNIONS

When you think of the state of Washington the first thing that comes to mind might be images of rainy weather or a certain ubiquitous coffee shop. Depending on the outcome of a Supreme Court case, however, such associations may be quickly replaced by the image of a state on the forefront of a new movement that seeks to severely limit the rights of Unions to participate in the political process.

On January 10, 2007, the United States Supreme Court heard oral argument in the consolidated cases of Davenport v. Washington Education Association, No. 05-1589 and Washington v. Washington Education Association, No. 05-1657. A transcript of the argument can be found here.

At issue in both cases is the constitutionality of a provision of Washington state’s Fair Campaign Finances Act, which requires Unions to obtain affirmative authorization from nonmembers before using any of their “agency fees” for political contributions or expenditures. The provision’s “opt-in” requirement imposed on Unions is significantly different from Supreme Court precedent. Under Chicago Teachers Union v. Hudson, 475 U.S. 292 (1986), the Court determined that the federal Constitution required Unions in the public sector to give nonmembers the opportunity to object to the use of their fees for purposes not “germane” to collective bargaining - that is, the nonmembers must “opt out” of paying fees to the Union for purposes not related to collective bargaining.

As a practical matter, compliance with Hudson is accomplished by sending nonmembers an annual notice setting forth a percentage of a union’s expenditures related to collective bargaining, as well as the percentage of overall expenditures not related to collective bargaining. The nonmember then is provided a certain period of time (typically 30 days) to notify the Union that he/she objects to paying any more than the fees related to collective bargaining. Thus, Hudson requires that the non-member “opt-out” of paying fees to the Union that are not related to collective bargaining.

The Washington state law at issue in the Washington Education Association (“WEA”) case provides in relevant part that

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 (“Section 760").

Under Washington law, the agency fee allowed to be collected by Unions from nonmembers is set at the same amount as the dues charged to members. The Washington Education Association (“WEA”) - the Union involved in the pending case before the Supreme Court - complied with the requirements of Hudson by notifying nonmembers of the percentage of its expenditures that were related and those that were not related to collective bargaining. As part of this notification, WEA provided nonmembers an opportunity to object to their payment of fees to the Union which were not related to collective bargaining. If such an objection was received, the objecting nonmember was provided a rebate of that portion of the fee that represented the nonmember’s pro rata share of the Union’s unrelated expenditures. Agency fees received by the Union before nonmembers had been provided the opportunity to object were held in escrow. After the objection period, agency fees to which no objection was received were transferred to the Union’s general treasury fund.

The litigation that led to the Supreme Court case was based upon the use by WEA of funds from its general treasury to: make contributions relating to certain ballot initiatives; pay expenses related to internal election-related communications with WEA members; and provide in-kind contributions covering administrative costs of WEA’s political action committee. There was no evidence in the record to establish that WEA used any of its general treasury funds to make contributions or independent expenditures related to the election of specific candidates for public office.

Based upon the above facts, it was determined by the trial court that WEA had violated Section 760 of the state’s campaign finance law. Accordingly, a total civil penalty of approximately $590,000 was imposed on WEA. In addition to this monetary sanction, the trial court also imposed a permanent injunction that prospectively required WEA to reduce the agency fee paid by nonmembers by “the percentage of the WEA’s total expenditures that are analyzed to have been used for § 760 expenses in the second fiscal year prior” plus a “cushion” of 3 percent. The permanent injunction also required the Union to maintain extensive record keeping in order to permit calculation of the required reduction in the agency fee. This record keeping requirement included an obligation that the Union “[r]ecord expense and salaries associated with internal communications to enable identification and quantification of all expenses of any internal communications to support or oppose[ ] ballot propositions or candidates or [that] otherwise are made to operate a political committee or influence an election.”

WEA appealed the trial court’s ruling, including the terms of the injunction. The state court of appeals reversed the lower court’s decision. Based upon the U.S. Supreme Court’s agency fee case law, the appellate court found the statute unconstitutional. The Washington Supreme Court upheld the appellate decision, concluding that the affirmative “opt-in” requirement of the statute unconstitutionally burdened the right of WEA and its members to engage in political speech.

The United States Supreme Court granted certiorari to determine the constitutionality of an affirmative authorization (“opt-in”) requirement for union use of agency fees for political purposes. Although the oral argument tended to go in many directions, a majority of the Justices who posed questions or made comments, appeared to be skeptical of the Washington Supreme Court’s decision. For example, Justice Scalia stated that “[i]f this money is the non-union member’s money and an opt-in scheme is not much of a burden on the unions, why should the First Amendment permit anything other than an opt in scheme?”

Of course, such a question itself raises a number of issues that the Court will most likely have to consider in reaching a decision. First and foremost, does the money really belong to the nonmembers? The Union already provides the nonmember an opportunity to object to use of a portion of his agency fee for purposes unrelated to collective bargaining. If no objection is made, should the nonmember still have a say in how the portion of his agency fee (which he did not ask to be refunded) is used when the Union seeks to use the money for political purposes? Also, Justice Scalia’s question assumes little or no burden is placed on the Union in a opt-in scheme, but this assumption ignores the fact that such a scheme would place a burden on a union’s First Amendment right to free speech. In such cases, the burden imposed is subjected to strict scrutiny and must be narrowly tailored to further a compelling government interest. Finally, Justice Scalia’s question fails to acknowledge that the Supreme Court has already ruled in Hudson that the First Amendment rights of non-members are protected by the “opt-out” scheme previously approved by the Court in Hudson.

It is this last point, where the WEA case might very well turn. The Court may view this case as presenting the question of whether its Hudson decision articulates a requirement that should be considered a constitutional floor rather than a ceiling. In other words, does Hudson merely identify, at a minimum, what steps a Union must take with respect to agency fees and the required notice procedures to which nonmembers are entitled. If the answer to this question is “yes,” then Washington state’s determination to require more than the constitutional minimum might be acceptable. Such an outcome, however, would only be acceptable if the additional requirement imposed by the state did not unduly burden another party’s constitutional right. Thus, the question would then be does requiring a Union to do more than Hudson unduly burden the Union’s First Amendment rights of free speech and association?

If the Court overturns the decision of the Washington Supreme Court, the impact and reach of such a determination will greatly depend upon how it reaches its decision. A decision that permits (but does not require) a state legislature to impose a greater burden on Unions making political expenditures will have little immediate impact. Nevertheless, such a decision, would no doubt encourage other states to enact similar campaign finance laws specifically targeting unions. The greater danger, however, lies with a decision that more fully embraces the “opt-in” option set forth in the Washington statute and that effectively overrules Hudson which would place Unions in both the public and private sector at a significant disadvantage in the area of political advocacy. Indeed, because the requirements of Hudson have been substantially adopted by the NLRB for the collection of agency fees in the private sector, the outcome of the WEA case should be of great interest to any union that engages in the political process.

We will keep you informed on the outcome of this case and provide an analysis of the Court’s opinion when it is issued.

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