Executive Summary: Calling the SEIU’s “aggressive use of power to collect fees from nonmembers indefensible,” the U.S. Supreme Court, in a 7-2 decision, has held that the union violated the First Amendment by not sending a new Hudson notice when it levied a special assessment to meet expenses that were not disclosed when the amount of the regular assessment was set. SEIU v. Knox (June 21, 2012). A Hudson notice provides nonunion employees the opportunity to object to the use of their dues for political purposes and the opportunity to opt out of the contribution of the funds. The Court held that “when a public-sector union imposes a special assessment or dues increase, the union must provide a fresh Hudson notice and may not exact any funds from nonmembers without their affirmative consent.”
Under California law, public-sector employees in a bargaining unit may decide by majority vote to create an “agency shop” arrangement under which all the employees are represented by a union selected by the majority. While employees in the unit are not required to join the union, they must nevertheless pay the union an annual fee to cover the cost of union services related to collective bargaining (chargeable expenses). The Supreme Court has recognized that such arrangements impinge on nonmembers’ First Amendment rights. While public sector unions can bill nonmembers for chargeable expenses, they may not require nonmembers to fund their political and ideological projects. In Teachers v. Hudson, 475 U.S. 292 (1986), the Court identified procedural requirements unions must meet in order to collect fees from nonmembers without violating their First Amendment rights.
In this case, the SEIU sent out a regular Hudson notice informing employees what the agency fee would be for the year ahead and estimated that 56.35% of its total expenditures in the coming year would be dedicated to chargeable expenses. Thus, if a nonunion employee objected within 30 days to payment of the full amount of union dues, the objecting employee was required to pay only 56.35% of total dues. The notice also stated that the agency fee was subject to increase at any time without further notice. Subsequently, the SEIU levied a special assessment to pay for the funding of a coalition of public sector unions opposing two ballot propositions (75 and 76). Proposition 75 would have required unions to obtain employees’ affirmative consent before charging them fees to be used for political purposes. Proposition 76 would have limited state spending and would have given the Governor the ability under some circumstances to reduce state appropriations for public-employee compensation.
In finding that the union should have sent a new Hudson notice with the special assessment, the Court noted that “closely related to compelled speech and compelled association is compelled funding of the speech of other private speakers or groups.” The Court acknowledged that the primary purpose of permitting unions to collect fees from nonmembers is to “prevent nonmembers from free-riding on the union’s efforts, sharing the employment benefits obtained by the union’s collective bargaining without sharing the costs incurred.” The Court noted, however, that the free-rider argument generally is insufficient to overcome First Amendment objections. The free-rider justification is permitted in the context of union dues as an “anomaly” that is justified by the interest in furthering labor peace – “it is an anomaly nevertheless.”