The Supreme Court held that the SEIU violated the First Amendment when it required objecting nonmembers to pay a special fee for the purposes of financing the union’s political and ideological activities. Under the First Amendment, when a public-sector union imposes a special assessment or dues increase levied to meet expenses that were not disclosed when the regular assessment was set, it must provide fresh notice and may not exact any funds from nonmembers without their affirmative consent. Knox v. SEIU, __ U.S. __, No. 10-1121 (June 21, 2012). The Court also made the following notable points:

  • The case was not moot, even though the SEIU offered all class members a full refund of the special fee, because the union would not necessarily refrain from collecting similar fees in the future.
  • First Amendment precedent subjects compulsory subsidies for private speech to exacting scrutiny and makes clear that any procedure for a union taking fees from unwilling contributors must be “carefully tailored to minimize the infringement” of free speech rights.
  • There was no justification for the SEIU’s failure to provide a fresh Hudson notice of the special fee, and thus its actions violated the First Amendment.
  • If it is not possible to accurately determine in advance the percentage of union funds that will be used for an upcoming year’s chargeable purposes, any risk should be borne by the union, whose constitutional rights are not at stake.  

This case arose when the SEIU, a public-sector union, attempted to impose on employees a special assessment of dues to help achieve the union’s political objectives. California law permits publicsector employees to vote to create an “agency shop” arrangement under which all employees are represented by a union. Employees may choose not to join the union, but nonmembers must nonetheless pay an annual fee for “chargeable expenses” – the cost of nonpolitical union services related to collective bargaining. While a public-sector union may bill nonmembers for chargeable expenses, it may not require them to fund its political or ideological projects. In Teachers v. Hudson, 475 U.S. 292 (1986), the Supreme Court set out certain requirements that a union must meet in order to collect regular fees from nonmembers without violating their rights, including sending a “Hudson notice.”

In June 2005, the SEIU sent its annual Hudson notice, setting and capping monthly dues and estimating that 56.35% of its total expenditures in the coming year would be chargeable expenses. Nonmembers had 30 days to object to full payment of dues (but would have to pay the chargeable portion regardless). The notice also warned that the fee was subject to increase without further notice. After the 30-day objection period ended, the SEIU announced a temporary 25% increase in dues and a temporary elimination of the monthly dues cap, in order to create an “Emergency Temporary Assessment to Build a Political Fight- Back Fund” to help defeat two ballot initiatives in an upcoming special election and achieve the union’s political objectives in the November 2006 election. According to the SEIU, the fund would be used “for a broad range of political expenses, including television and radio advertising, direct mail, voter registration, voter education, and get out the vote activities…” Nonunion employees were not given any choice as to whether they would pay into the fund.

Petitioners brought a class action against the SEIU on behalf of 28,000 nonunion employees who paid into the fund, alleging violation of their First Amendment rights. The Federal District Court granted the nonunion employees’ motion for summary judgment, ruling that the special assessment was for entirely political purposes, and ordered the SEIU to send a new notice giving class members an opportunity to object. The Ninth Circuit reversed and held that Hudson prescribed a balancing test under which the proper inquiry is whether the SEIU’s procedures reasonably accommodated the interests of the union, the employer, and the nonunion employees.

The Supreme Court reversed and held that the union’s actions violated nonunion members’ First Amendment rights. As a preliminary matter, the Court held that the case was not moot, even though the SEIU offered all class members a full refund after the Court granted certiorari. According to the Court, a live controversy remained because the voluntary cessation of the challenged conduct meant that the conduct could be resumed. Since the SEIU continued to defend the fund’s legality, it would not necessarily refrain from collecting similar fees in the future.

Turning then to the merits, the Court held that under the First Amendment, when a union imposes a special assessment or dues increase levied to meet expenses that were not disclosed when the regular assessment was set, it must provide fresh notice and may not exact any funds from nonmembers without their affirmative consent.

The Court observed that First Amendment precedent subjects compulsory subsidies for private speech to exacting scrutiny. They cannot be sustained unless, first, there is a comprehensive regulatory scheme involving a “mandated association” and, second, compulsory fees are levied only insofar as they are a “necessary incident” of the larger regulatory purpose which justified the required association. The Court noted that an “agency shop” that exacts compulsory union fees as a condition of public employment is a form of compelled speech and association which imposes a significant impingement on First Amendment rights, justified only to prevent nonmembers from free-riding on the union’s efforts. As a result, the Court said that Hudson does not call for a balancing of rights or interests but rather makes it clear that any procedure for exacting fees from unwilling contributors must be “carefully tailored to minimize the infringement” of free speech rights.

In this case, the Court held that there was no justification for the SEIU’s failure to provide a fresh Hudson notice, and thus its actions violated the First Amendment. According to the Court, the SEIU’s procedure did not meet Hudson’s requirement that fee-collection procedures be “carefully tailored to minimize the infringement” of free speech rights. Although the SEIU argued that nonmembers who were not given the opportunity to opt out of the special assessment would have had the chance to recover the funds by opting out when the next annual notice was sent, and that the amount of dues payable the following year by objecting nonmembers would decrease if the special assessment were later found to be for nonchargeable purposes, the Court said that this decrease would not fully recompense nonmembers who would not have paid to support the special assessment if given the choice. Further, the Court observed that even a full refund would not undo a First Amendment violation because the First Amendment does not permit a union to extract a loan form unwilling nonmembers even if the money is later paid back in full.

The Court also held that the SEIU’s treatment of those nonmembers who opted out when the initial Hudson notice was sent violated the First Amendment because those nonmembers were required to pay 56.35% of the special assessment even though the entire fund was slated for nonchargeable electoral uses. The Court was not convinced by the SEIU’s argument that the assessment was actually a windfall because chargeable expenses turned out to be 66.26%. The Court observed that, even if the SEIU’s statistics are accurate, it does not follow that it was proper to charge objecting nonmembers any particular percentage of the special assessment. The Court said that if it is not possible to accurately determine in advance the percentage of union funds that will be used for an upcoming year’s chargeable purposes, any risk should be borne by the side whose constitutional rights are not at stake – i.e., the union.

Justice Sotomayor filed an opinion concurring in the judgment, joined by Justice Ginsburg, noting that the majority, for the first time, is ruling that union members had to be given “an opt-in system” for special assessments and dues increases rather than an opportunity to opt out of such charges. Justice Breyer dissented, joined by Justice Kagan, finding that the union followed a reasonable, if “imperfect,” system that accommodated the rights of dues objectors.