UPDATE: IP 62’s supporters did not submit the necessary signatures in time to qualify the measure for the 2016 ballot. The politicized ballot title dictated by the Oregon State Supreme Court likely helped dissuade the initiative’s backers from proceeding.
Recent years have seen multiple attempts to place labor reform initiatives on the ballot in Oregon start and sputter. In 2014, then-Gov. John Kitzhaber brokered a deal between the state’s public-sector unions and labor reform activists to withdraw a series of competing ballot measures, including right-to-work. While two workers’ rights initiatives were submitted this year, one—IP 69—has already been withdrawn after a protracted dispute over the ballot title. Another labor reform initiative, however, remains in play, at least for the moment.
IP 62, the “No Politics from My Pay, Without My Say” act, has been widely denounced by Oregon’s public-sector labor unions. Labor group Keep Oregon Working claimed if IP 62 passed, it “would make it much, much harder for working people to advocate for themselves in the workplace—meaning it’ll be harder to fight for better wages, benefits, or workplace safety.”
Keep Oregon Working and other labor groups often simply denounce the measure as an attack on Oregon workers by out-of-state billionaires and leave it at that.
A more nuanced examination, however, indicates that the changes made to current law by IP 62 are far more modest than implied. At its core, IP 62 would prevent labor unions from withholding from public employees’ pay dues and fees that are used primarily for political and ideological activity without obtaining employees’ consent first.
As with similar initiative attempts, labor unions have argued that IP 62 would allow public employees to become “free riders” and benefit from unions’ representational activity without having to pay.
These arguments have played out in court challenges over the initiative’s ballot title, with the Oregon State Supreme Court ultimately deciding the ballot title should include prominent language about the alleged “free rider” issue. Whether the unfavorable ballot title will prevent the measure’s backers from proceeding to the ballot is not yet clear. Regardless, concerns over IP 62 creating an opening for “free-riding” are significantly overstated, if not unfounded.
Current law and practice
While no public employee may be forced to join a union as a member in good standing, current law in Oregon requires public employees who refuse to join a union to continue to be represented by the union and pay a fee equaling regular membership dues. Typically, nonmembers are prevented from participating in internal union affairs, like attending union meetings or participating in contract ratification votes, despite the fact that they continue to pay for the union’s representational services.
ORS 243.650(10) authorizes unions and public employers to agree to contracts including so-called “fair share agreements” that obligate “employees who are not members of the employee organization” to make “an in-lieu-of-dues payment to an employee organization…”
ORS 243.650(18) specifies that such “payment-in-lieu-of-dues… must be equivalent to regular union dues and assessments…”
Labor unions representing public employees regularly spend large percentages of the dues they collect on political and ideological activity unrelated to representing public employees in collective bargaining.
However, existing Oregon law is not fully enforceable, as the U.S. Supreme Court has repeatedly recognized that requiring public employees to pay for the explicitly political activity of their union violates the First Amendment’s free speech protections.
In Abood v. Detroit Board of Education(1977), the court recognized,
“To compel employees financially to support their collective-bargaining representative has an impact upon their First Amendment interests. An employee may very well have ideological objections to a wide variety of activities undertaken by the union in its role as exclusive representative…”
Nevertheless, the court pointed to previous rulings upholding various mandatory union dues/fees requirements in the private-sector and determined that an agency fee requirement for public employees was valid “insofar as the service charge is used to finance expenditures by the Union for the purposes of collective bargaining, contract administration, and grievance adjustment…”
But the court also recognized that the First Amendment protects public employees from having to subsidize political speech through their union dues and fees and found “meritorious” the plaintiff’s argument “that they may constitutionally prevent the Union’s spending a part of their required service fees to contribute to political candidates and to express political views unrelated to its duties as exclusive bargaining representative.”
Since Abood, public-sector unions’ expenses have been divided into two categories: (1) “chargeable” expenses that are “germane” to collective bargaining, contract administration and grievance adjustment; and (2) “nonchargeable” expenses that include everything else, including political and ideological activity.
The court acknowledged that there would be “difficult problems in drawing lines between collective-bargaining activities, for which contributions may be compelled, and ideological activities unrelated to collective bargaining, for which such compulsion is prohibited.” However, the court did not attempt to exhaustively define which types of specific expenditures fall into each category, but left it to subsequent decisions and lower court rulings to develop a body of case law governing what constitutes chargeable and nonchargeable expenses.
A decade later, in Chicago Teachers Union v. Hudson (1986), the U.S. Supreme Court established some procedural safeguards for the rights of union nonmembers, specifically finding,
“…that the constitutional requirements for the Union’s collection of agency fees include an adequate explanation of the basis for the fee, a reasonably prompt opportunity to challenge the amount of the fee before an impartial decisionmaker, and an escrow for the amounts reasonably in dispute while such challenges are pending.”
Twenty years following Hudson, the court reaffirmed and summarized its jurisprudence on agency fee requirements for public employees in another labor case, Davenport v. Washington Education Association (2006):
“The National Labor Relations Act leaves States free to regulate their labor relationships with their public employees. See 49 Stat. 450, as amended, 29 U. S. C. §152(2). The labor laws of many States authorize a union and a government employer to enter into what is commonly known as an agency-shop agreement. This arrangement entitles the union to levy a fee on employees who are not union members but who are nevertheless represented by the union in collective bargaining. See, e.g., Lehnert v. Ferris Faculty Assn., 500 U. S. 507, 511 (1991). The primary purpose of such arrangements 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. See, e.g., Machinists v. Street, 367 U. S. 740, 760–764 (1961). However, agency-shop arrangements in the public sector raise First Amendment concerns because they force individuals to contribute money to unions as a condition of government employment. Thus, in Abood v. Detroit Bd. of Ed., 431 U. S. 209, 235–236 (1977), we 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. And in Teachers v. Hudson, 475 U. S. 292, 302, 304–310 (1986), we set forth various procedural requirements that public-sector unions collecting agency fees must observe in order to ensure that an objecting nonmember can prevent the use of his fees for impermissible purposes.”
The court also recognized in Davenport that “…unions have no constitutional entitlement to the fees of nonmember-employees” and determined that the protections guaranteed to public employees by Abood and Hudson constituted “the constitutional floor” for protecting the rights of nonmember employees, not a “a constitutional ceiling for state-imposed restrictions” that go further than the court’s jurisprudence.
Indeed, the court noted that it would be constitutional for states to “[restrict] public-sector agency fees to the portion of union dues devoted to collective bargaining,” as IP 62 seeks to do, or to simply “eliminate agency fees entirely,” as many states have already done.
Lastly, in its 2012 decision in Knox v. SEIU Local 1000, the court reaffirmed that the First Amendment prevents a public-sector union from “[requiring] nonmembers to fund its political and ideological projects” and “does not permit a public-sector union to adopt procedures that have the effect of requiring objecting nonmembers to lend the union money to be used for political, ideological, and other purposes not germane to collective bargaining.”
Additionally, while the legal questions presented in Knox did not permit the court to strike down the typical union practice of requiring nonmembers to opt out of paying the nonchargeable portion of their dues, rather than allowing them to opt in to paying full dues, the court’s language clearly cast doubt upon its constitutionality.
Writing for the majority, Justice Samuel Alito observed:
“‘The primary purpose’ of permitting unions to collect fees from nonmembers, we have said, 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.’ Davenport, 551 U. S., at 181. Such free-rider arguments, however, are generally insufficient to overcome First Amendment objections…
Acceptance of the free-rider argument as a justification for compelling nonmembers to pay a portion of union dues represents something of an anomaly—one that we have found to be justified by the interest in furthering ‘labor peace.’ Hudson, 475 U. S., at 303. But it is an anomaly nevertheless.
Similarly, requiring objecting nonmembers to opt out of paying the nonchargeable portion of union dues—as opposed to exempting them from making such payments unless they opt in—represents a remarkable boon for unions… Once it is recognized, as our cases have, that a nonmember cannot be forced to fund a union’s political or ideological activities, what is the justification for putting the burden on the nonmember to opt out of making such a payment?
Shouldn’t the default rule comport with the probable preferences of most nonmembers? And isn’t it likely that most employees who choose not to join the union that represents their bargaining unit prefer not to pay the full amount of union dues? An opt-out system creates a risk that the fees paid by nonmembers will be used to further political and ideological ends with which they do not agree…”
Most recently, the court deadlocked 4-4 in Friedrichs v. California Teachers Association, a case in which the plaintiffs asked the court to overturn its precedent in Abood and find that the requirement for public employees to pay agency fees violated the First Amendment. Similar legal challenges will likely find their way to the Supreme Court after a replacement for Justice Scalia is confirmed.
The results of these decisions, combined with Oregon law, mean that current practice is to require union-represented public employees in bargaining units covered by a contract containing a “fair share agreement” to pay an amount equal to full union dues by default, though nonmember public employees may opt out of paying full union dues and instead pay only the chargeable agency fee amount.
Despite the court’s rulings, many unions have implemented procedural hurdles designed to make it more difficult for public employees to avoid supporting the union’s political and ideological activity. Some unions restrict public employees’ ability to resign and pay only the chargeable percentage of their dues to narrow, annual window periods, sometimes as short as 15 days. Effectively, such limitations arbitrarily prevent public employees from exercising their constitutional rights for much of the year. Other unions, such as the Oregon Education Association, require objecting public employees to seek a refund of their nonchargeable dues on an annual basis.
What may nonmembers be charged for?
In addition to the above cases, further litigation has clarified the types of chargeable expenses that nonmembers agency fee payers may be required to subsidize, as well as the nonchargeable types of union activity nonmembers cannot be constitutionally required to fund.
The National Right to Work Legal Defense Foundation lists the following examples of non-chargeable expenses:
- “Political activities, including activities related to ballot and bond issues.
- Ideological activities.
- Lobbying, unless necessary to ratify or fund the collective bargaining agreement in the nonmember public employee’s bargaining unit.
- Public relations activities.
- Litigation unrelated to collective bargaining and bargaining-related litigation solely for other bargaining units where the union does not show a reasonable expectation that other locals will similarly fund litigation for the nonmember’s bargaining unit.
- Engaging in illegal strikes.
- Organizing by public employee, railway and airline unions, and, absent a concrete showing of a positive correlation between wages and union density in the same competitive market as the nonmember’s employer, by other private-sector unions.
- Union “members only” benefits.
- Portions of union publications reporting on the foregoing activities.“
The Foundation notes, however, that,
“The Courts are still sorting out what types of expenses are chargeable and which are not chargeable. No union expense is chargeable to an objecting nonmember unless the union proves it is related to collective bargaining, contract administration and grievance adjustment before a neutral decisionmaker.”
It is important to bear in mind that the union, not the objecting employee, calculates the agency fee and classifies individual expenditures as chargeable and nonchargeable, though nonmembers can challenge the calculation. As some observers have noted, the process leaves the door open for unions to overestimate their chargeable expenses. There is certainly a financial incentive for them to do so, as the vast majority of nonmembers will never challenge the calculation. If a public employee does challenge the union’s calculation and proves it wrong, the union faces no penalty and simply adjusts the calculation accordingly.
What IP62 would do
IP 62 fits squarely into the legal framework developed over the years by the U.S. Supreme Court. The initiative makes three primary changes to Oregon law:
1. “Opt out” becomes “opt in”: Section 3(a) recognizes public employees’ “right to refrain from financially supporting or subsidizing any political or ideological activity or expenditure” their union engages in “that is not necessarily or reasonably incurred for the purpose or representation and collective bargaining with their employer on matters concerning employment relations.”
Section 8(2) defines the phrase “necessarily and reasonably incurred for the purpose of representation and collective bargaining” as “a term of legal art intended to refer, depending on context, to activities and expenditures that either are or are not germane to collective bargaining.”
As recognized in Abood, public employees already have such a right, but section 3(a) explicitly codifies it for purposes of state law.
Section 6(1)(c) further establishes that a union must obtain a “public employee’s affirmative written consent” before withholding the nonchargeable percentage of dues, reversing the current system in which public employees pay the nonchargeable amount until they object.
2. Protecting the participation of agency fee payers: Section 3(b) recognizes the right of public employees who refuse to pay the nonchargeable portion of their dues to still,
“…join and participate as a member in all activities and expenditures of an exclusive representative that are necessarily or reasonable incurred for the purpose of representation and collective bargaining…”
In practical terms, this means public employees paying the reduced agency fee would be permitted to participate in union elections and decisions related to ratifying contracts, going on strike or other similar activity. Current law allows unions to deny such employees a voice in these representational proceedings, even though the employees still pay for the union’s representation and are bound by the union-negotiated contract.
3. Ending resignation restrictions: Section 3(c) of the initiative would enshrine public employees’ “right to cancel membership in a labor organization… and discontinue paying all member dues or other money required as a condition of membership, at any time.”
The initiative does not eliminate the requirement that public employees pay the chargeable agency fee as a condition of employment, but this section provides that any public employee paying full dues (both the chargeable and nonchargeable percentages) could resign their membership and begin paying only the chargeable agency fee any time they wish instead of being limited to annual window periods.
Would IP 62 Permit “Free Riders?”
Due to their length and complexity, it is likely that many voters are unlikely to read the full text of and fully understand the key issues involved in many ballot measures, which makes the accuracy of the ballot title and summary prepared by the state Attorney General’s Office extremely important. The drafting of an initiative’s ballot title can have a significant impact on how the measure is viewed by voters.
The draft ballot title for IP 62 created by the Attorney General in October 2015 read:
“…prohibits public employee union from collective dues from any member to fund activities unrelated to representation or collective bargaining, unless authorized by member.”
Labor unions—including SEIU 503, the Oregon Education Association and the American Federation of Teachers—took issue with the accuracy of the ballot title. The unions raised multiple technical arguments against the draft, but their primary contention was that “the caption fails to alert voters to a ‘free-rider’ effect caused by the measure.” According to the unions,
“…IP 62 gives all covered employees the right to not be a member or pay any money required to be a member at any time, but does not otherwise change current law requiring unions to represent all bargaining unit members.”
However, the Attorney General dismissed this fairly generalized argument, finding that, “by its plain terms,” the initiative “would not create the free-rider effect suggested” because objecting nonmembers would still “be required to make payments in lieu of dues” for the union’s chargeable activities.
The unions’ also made a more nuanced argument that IP 62 would permit “free riders” by going further than the U.S. Supreme Court’s current jurisprudence and allowing public employees who object to union membership to avoid paying for some limited union activity that could be deemed chargeable.
As drafted, Section 3(2)(a) of the initiative protects public employees’
“…right to refrain from financially supporting or subsidizing any political or ideological activity or any expenditure by or through an exclusive representative that is not necessarily or reasonably incurred for the purpose of representation and collective bargaining with their employer on matters concerning employment relations.”
Section 8(2) defines the phrase “necessarily and reasonably incurred for the purpose of representation and collective bargaining” as “a term of legal art intended to refer, depending on context, to activities and expenditures that either are or are not germane to collective bargaining,” clearly linking the initiative to the body of case law enunciating the differences between chargeable and nonchargeable expenses.
The definition of “employment relations” is the focal point of the dispute. ORS 243.650(7) defines the term in the following manner:
“‘Employment relations’ includes, but is not limited to, matters concerning direct or indirect monetary benefits, hours, vacations, sick leave, grievance procedures and other conditions of employment… ‘Employment relations’ does not include subjects that have an insubstantial or de minimis effect on public employee wages, hours, and other terms and conditions of employment.”
The statute goes on to further define what does and does not constitute “employment relations” in different contexts. Effectively, the statute defines the scope of subjects over which public employers must bargain with unions representing public employees, commonly referred to as “mandatory subjects of bargaining.” Other items may or may not be subject to bargaining at the discretion of the public employers and unions in specific cases.
Thus, the U.S. Supreme Court has established that public employees may not be required to subsidize a union’s nonchargeable activity, but IP 62 would establish that public employees can only be required to pay for the chargeable portion of a union’s activity relating to mandatory subjects of bargaining.
Taken together, then, IP 62 would mesh with existing case law and Oregon statutes to create a situation in which public employees may be required to pay only the portion of their dues that go to support their unions’ activity in “collective bargaining, contract administration and grievance adjustment” that relate to “matters concerning direct or indirect monetary benefits, hours, vacations, sick leave, grievance procedures and other conditions of employment.”
All of this leads the unions to contend in their comments on the draft ballot title that, (1) because unions and employers may bargain over permissive subjects, (2) IP 62 would only allow public employees to be required to pay the chargeable portion of their dues that go to support the union’s bargaining over the mandatory subjects of bargaining covered by the term “employment relations,” and (3) whatever terms the union negotiates in its contract will apply to the entire bargaining unit (ORS 243.666(1)); it is therefore possible that unions will be placed in the position of have to provide representation related to permissive subjects of bargaining to public employees not paying for such services.
The Attorney General agreed that the technicalities involved merited a change in the ballot title language, but did not agree that the measure “legally requires unions to allow free riders.” State law allows unions to act as the exclusive bargaining representative for all members of a bargaining unit “with respect to employment relations.” In other words, current law authorizes unions to act as the exclusive representative for the same issues that IP 62 permits public employees to be required to pay for. The Attorney General concluded,
“Consequently, it appears that unions retain the legal authority to require employees to make payments reflecting all of the work that unions are legally required to perform for them. It is possible that, were IP 62 to pass, unions would continue to negotiate and otherwise represent employees with respect to matters that are not ‘employment relations,’ as that term is defined by statute and interpreted by the Employment Relations Board. If that were to occur, unions could find themselves doing work for which they could not charge public employees who benefit – whether those employees are members of the union or not. On the other hand, it would be legally permissible for unions to simply refuse to bargain on matters that are not ‘employment relations.’ In that case it does not appear that the unions would be undertaking any activities that would benefit a person not paying for the work. Consequently, it appears that any free-rider effect is both speculative and ultimately within the control of the union.”
Accordingly, the ballot title certified by the Attorney General in December 2015 read:
“…prohibits public employee unions from requiring dues/fees for union activities unrelated to limited representation/bargaining; employee may authorize additional payments. Authorizes lawsuits.”
Unsatisfied, the unions appealed the ballot title to the Oregon State Supreme Court. In their challenge, the unions contended,
“Neither member employees who pay baseline membership dues nor nonmember employees who make payment-in-lieu-of-dues would be required to pay the cost of a union’s bargaining on permissive subjects. The only employees who would pay those costs would be those who make voluntary payments to the union. Others would obtain the benefit of bargaining on those subjects without paying for it.”
In its March 2016 decision, the court agreed with the unions’ arguments:
“Under IP 62, if a union were to bargain on permissive subjects and obtain contractual benefits, those benefits would be available to all bargaining unit members, but the union would be prohibited from recovering those expenses as required dues. An employee who paid only baseline union dues would obtain those contractual benefits for free… a measure that precludes a union from requiring payment of the costs that the union incurs in bargaining for such a benefit creates a potential free-rider effect that must be disclosed to voters.”
Nevertheless, the court was forced to acknowledge that “the extent to which IP 62 would permit free-riders is uncertain” and that “a union has no duty to bargain on permissive subjects.”
In response to the State Supreme Court’s ruling, the Attorney General revised the ballot title a second time to read:
“Limits public employee union members’ obligations; employees might benefit without sharing bargaining costs. Authorizes lawsuits.”
Still unsatisfied, SEIU 503 appealed the title to the State Supreme Court for a second time, contending that the modified language acknowledging the possibility of a “free rider” effect did not go far enough. The court ultimately agreed with the union’s argument that,
“…the use of ‘might’ is inaccurate and misleading because it improperly conveys to voters that the ‘free rider’ effect is speculative… It may not be a certainty that there will be ‘free riders,’ but it is a certainty that IP 62 will permit ‘free riders.'”
Consequently, the Attorney General’s office revised the ballot title a third time to read:
“Limits public union membership terms, dues/fees. Permits employees to benefit without sharing costs. Authorizes lawsuits.”
No further objections were filed and the title was certified on June 14.
Unquestionably, the various iterations of the caption increasingly emphasized the “free rider” issue to the point that the final version featured it in its purest form. There is a strong case to be made that the final ballot title does not accurately reflect the substance of the initiative and dramatically overstates the potential for “free riders” under IP 62.
First, the scope of chargeable representational activity that nonmembers could potentially avoid paying for under IP 62 is quite small. The expansive definition of “employment relations” covers the vast majority of subjects a union would provide bargaining and representational services for. By definition, permissive subjects of bargaining fall outside the scope of “employment relations” only if they have “an insubstantial or deminimis effect on public employee wage, hours, and other terms and conditions of employment.”
Second, as the Attorney General noted, unions have no legal obligation to provide bargaining and representational services on permissive subjects of bargaining that fall outside the scope of “employment relations.” If unions are concerned about “free riders,” they may choose to refrain from bargaining over permissive subjects.
Third, it is not even clear that unions are, in fact, legally required to represent nonmembers regarding permissive subjects of bargaining. Citing ORS 243.666, the State Supreme Court noted that Oregon law “requires the union to represent all bargaining unit employees, including nonmembers.”
But the actual text of the statute reads:
“A labor organization certified by the Employment Relations Board or recognized by the public employer is the exclusive representative of the employees of a public employer for the purposes of collective bargaining with respect to employment relations.” (Emphasis added)
In other words, the statute only authorizes unions to act as the exclusive representative in matters falling under the definition of “employment relations.” Nowhere does this or any other statute specify that unions must act as the exclusive representative for all employees when it comes to permissive subjects of bargaining that fall outside the scope of “employment relations.” At least theoretically, a union could avoid the alleged “free rider” problem by applying the terms of any contract that exceeded the scope of “employment relations” only to union members.
In sum, unions have multiple options for preventing the “free rider” problem from existing at all under IP 62 and, even if they did not, the extent to which union nonmembers could conceivably benefit from union services without paying is inconsequential.
Given its relative insignificance in light of the full initiative, the Oregon Supreme Court’s revisions to the ballot title placing such emphasis on the “free rider” issue are difficult to justify.
In its first review of the Attorney General’s ballot title, the Supreme Court referenced its previous decision in Towers v. Rosenblum, in which the court noted:
“ORS 250.035(2)(a) requires that a ballot title for a proposed state measure contain a caption of not more than 15 words that reasonably identifies the ‘subject matter’ of the proposed measure. The caption is the ‘headline’ of the ballot title; it ‘provides the context for the reader’s consideration of the other information in the ballot title’ and must describe the proposed measure’s subject matter accurately. Greene v. Kulongoski, 322 Or 169, 175, 903 P2d 366 (1995). For the purposes of this court’s review, the ‘subject matter’ of a ballot title is ‘the “actual major effect” of a measure or, if the measure has more than one major effect, all such effects (to the limit of the available words).'” Whitsett v. Kroger, 348 Or 243, 247, 230 P3d 545 (2010).”
Rather than explaining how IP 62 would prevent unions from collecting nonchargeable dues and fees—which are used primarily for political and ideological purposes—from public employees without their consent, the court inexplicably discarded the relatively balanced ballot title language proposed by the Attorney General and determined that somehow the alleged “free rider” problem was the “actual major effect” of the initiative and warranted taking up half of the ballot title. While the argument can be made that the potential for limited “free-riding” may exist in a narrow technical sense, the court’s excessive focus on this one issue at the expense of IP 62’s actual primary purpose was more of a political decision than a legal one.
Conclusion
IP 62 is not a right-to-work initiative. It does not free public employees from the obligation to pay for their union’s representational activity and collective bargaining. Rather, it builds on existing case law recognizing that public employees cannot be constitutionally required to support a union’s political and ideological activity and simply establishes that employees be given the ability to opt in to paying for their unions’ nonchargeable activity rather than being required to opt out.
Unfortunately, by dramatically overstating potential “free rider” concerns, the ballot title assigned to IP 62 by the Oregon State Supreme Court fails to accurately and fairly reflect the measure’s purpose and effects. It will be up to Oregon voters to do their homework and discern the measure’s actual policy implications.
