Ninth Circuit Clarifies Appropriate Remedy for Union’s Failure
to Provide Fee Paying Non-Members with Legally Sufficient
Explanation of Union Expenditures

In a decision filed on January 14, 2004, the Ninth Circuit Court of Appeals held that the proper remedy for a union’s defective notices, which failed to adequately explain how union fees were being spent, is for the union to prepare a corrected notice and give fee payers the opportunity to object to those portions of the fees that are not legitimately related to the union’s collective bargaining function. The case is Wagner v. Professional Engineers in California Government.

Although, the plaintiffs in Wagner were not members of the defendant union, they nevertheless were required to pay union fees by reason of a union security clause in a collective bargaining agreement covering their employment. Such compulsory fees are recognized under both federal and state labor laws; however, the first amendment accords nonmembers the right to demand that their fees not be used for political or “expressive” activities unrelated to the union’s function as collective bargaining representative. To insure that nonmembers could meaningfully exercise their first amendment right to object to union expenditures, the Supreme Court, in 1986, ruled that unions must provide fee payers with “an adequate explanation of the basis for the fees.” This explanation has come to be known as the “Hudson notice,” named after the case in which the Supreme Court issued this ruling. A Hudson notice must set forth each major category of expenditures, and classify each as chargeable, nonchargeable, or partly chargeable to objecting fee payers. The notice also must provide fee payers with the opportunity to object to paying for nonchargeable expenditures, as well as an opportunity to challenge before an impartial decisionmaker the union’s calculation of the amount of the fairshare fee.

The union in the Wagner case conceded that its Hudson’s notice was defective; however, the union argued that the remedy was for it to merely issue a corrected notice, resulting in a new opportunity for fee payers to object and obtain a refund of the nonchargeable portion of the fee, with interest. The plaintiffs’ counsel argued that the appropriate remedy for a defective notice was for the union to refund all fees paid for the period covered by the notice under the theory that any fees paid under an invalid Hudson’s notice is legally not collectible. The court agreed with the union’s position. In reaching this determination, the court observed that “the purpose of the Hudson notice is to provide fee payers with adequate information so that they may decide whether to object or to challenge the union’s calculation.” Since an inadequate notice gives fee payers insufficient information with which to make that decision, and since a new, conforming notice will remedy that situation, the court reasoned that any objecting fee payers were adequately protected because they would be entitled to a refund of the nonchargeable portion of their fees, with interest.

While not breaking new legal ground, the Wagner case sets forth a useful analysis and explanation of the financial rights of employees who, although not members of a union, must pay union fees under a labor contract, Undoubtedly these issues will become more significant as labor tensions continue to develop, and as unions become more aggressive in their campaigns in this election year.