[NOTE: This document was re-keyed by WERC. Original pagination has been
MARY E. JAEGER, REGINA S. KARPOWITZ,
CAROLYN LOHMILLER, KENNETH E. MULTHAUF,
MILDRED NOFFZ, TERESA PATZKE,
CAROL S. PETERS, DOROTHY E. RIEDEL,
CYNTHIA SCHNEIDER, RUTH CHERYL THOMPSON,
IONE TRACHSEL AND DOLORES V. WINTER,
THE AMERICAN FEDERATION OF STATE,
COUNTY AND MUNICIPAL EMPLOYEES, AFL-CIO,
DISTRICT COUNCIL 48, AMERICAN
FEDERATION OF STATE, COUNTY AND
MUNICIPAL EMPLOYEES, AFL-CIO,
JOHN PARR, Director of District Council 48,
LOCAL 1053, AMERICAN FEDERATION OF STATE,
COUNTY AND MUNICIPAL EMPLOYEES, AFL-CIO,
MARGARET SILKEY, as President of Local 1053,
FLORENCE TEFELSKE, as Treasurer of Local 1053,
LOCAL 594, AFSCME, affiliated with
District Council 48,
Local 645, AFSCME,
Local 882, AFSCME,
Local 1055, AFSCME,
Local 1654, AFSCME,
Local 1656, AFSCME, all affiliated with
District Council 48,
Before Moser, P.J. Sullivan and Fine, J.J.
Pursuant to sec. 809.61, Stats., this court certifies this appeal to the Wisconsin
for its review and determination.
This consolidated appeal seeks review of a judgment of the circuit court on a petition
review under ch. 227, Stats., affirming a final decision of the Wisconsin Employment
Commission regarding constitutional and statutory claims arising out of "fair-share"
This appeal presents significant policy matters of first impression in Wisconsin
in the following 12 issues.
(1) Whether the courts are required to give deference to the Wisconsin Employment
Relations Commission's determinations concerning the purposes for which union fair share
be lawfully collected, the procedures
prerequisite to collection of those fees, and the appropriate remedies if those fees are
(2) Whether the constitutional procedural safeguards for fair-share employees
Chicago Teachers Union v. Hudson, 475 U.S. 292
(1986), should be applied retroactively.
(3) Whether the WERC acted beyond its authority by ordering 100% escrow of all
fees deducted from all fair-share payors, including those employees who did not challenge
the fair-share deductions.
(4) Whether a union is entitled to retain compulsory fair-share fees from nonunion
unless there has been full compliance with Hudson's procedural safeguards.
(5) Whether the WERC properly vacated the arbitration award based on "technical
in the unions' notice and procedures where the suing nonunion employees were ordered
as a matter of law under the unions' procedures, and where the suing nonunion employees
to participate in the arbitration.
(6) Whether the WERC's order requiring verification by an independent auditor of
unions' expenditures, and its rejection of a "local presumption" in the absence of an audit, is
with Hudson's requirement that there be financial
disclosure of the unions' expenditures.
(7) Whether nonunion employees of a public employer can be compelled to pay for
directed at the public instead of the bargaining unit, organizing efforts, representation of
bargaining units, as well as general lobbying and litigation expenses.
(8) Whether nonunion employees must affirmatively object to the unions'
sec. 111.70(1)(f)'s "proportionate share" limitation can be applied.
(9) Whether the WERC properly held four features of the unions' procedures to be
constitutional where the WERC found that: 1) the breakdown of the unions' expenses as
or non-chargeable was not verified by an independent auditor; 2) the American Federation of
County and Municipal Employees (AFSCME) International's financial disclosures were
constitutionally sufficient; 3) it was reasonable to require that nonunion employees be
charged a fee
equal to full union dues unless the nonunion employee
objects annually, within 30 days after the date o£ the notice; and 4) that the
arbitration process is
limited to those employees who take formal steps to "challenge" the unions' fair-share
(10) Whether an employer commits a prohibited practice under the Municipal
Employment Relations Act, and violates the First Amendment rights of its nonunion
it does not ensure or establish adequate fair-share procedures before it deducts union dues
the wages of the nonunion employees.
(11) Whether the WERC properly found that the District Council 48's account was
"true escrow" because it was not independently controlled by neutral third parties.
(12) Whether, in the absence of full compliance with Hudson's
restitution and a cease-and-desist order is the appropriate remedy rather than escrow of the
111.70 Municipal employment.
(2) RIGHTS OF MUNICIPAL EMPLOYES. Municipal employes sha11
have the right of self-organization, and the right to form, join or assist labor
organizations, to bargain collectively through representatives of their own choosing,
and to engage in lawful, concerted activities for the purpose of collective bargaining
or other mutual aid or protection, and such employes shall have the right to refrain
from any and all such activities except that employes may be required to pay dues in
the manner provided in a fair-share agreement....
111.70 Municipal employment. (1) DEFINITIONS.
f) "Fair-share agreement" means an agreement between a municipal employer
and a labor organization under which all or any of the employes in the collective
bargaining unit are required to pay their proportionate share of the cost of the
collective bargaining process and contract administration measured by the amount of
dues uniformly required of all members. Such an agreement shall contain a provision
requiring the employer to deduct the amount of dues as certified by the labor
organization from the earnings of the employes affected by said agreement and to pay
the amount so deducted to the labor organization.
In the early 1970's, the Milwaukee Board of School Directors and Milwaukee
into fair-share agreements with Milwaukee District Council 48 of the American Federation of
County and Municipal Employees
- 7 -
and its affiliated locals that required all nonunion employees to make a monthly
payment to the unions
for the cost of collective bargaining and contract administration. This fair-share fee was
equal to the
dues paid by union members. Subsequently, the nonunion employees filed two separate
challenging the constitutionality of sec. 111.70(l)(f) [formerly (h) under the 1972-73 statutes]
Stats., which permits the collection of fair-share fees from nonunion
In 1978, the Wisconsin Supreme Court held that sec. 111.70 was
constitutional.2 The cases
were remanded to the WERC to make findings of fact and conclusions of law, and to
much of the fair-share fees had been used for purposes unrelated to collective bargaining or
In April, 1986, the nonunion employees requested the WERC to review the
agreements in light of Chicago Teachers Union v. Hudson,
475 U.S. 292 (1986), in which
1Browne v. Milwaukee Board of School
Directors, No. 410584 (Milw. Cir. Ct., filed
1973); Johnson v. County of Milwaukee, No. 411578
(Milw. Cir. Ct., filed July 10, 1973)
2Browne v. Milwaukee Board of School
Directors, 83 Wis.2d 316, 265 N.W.2d 559 (1978).
the United States Supreme Court announced constitutionally-required procedural
safeguards for the
collection of fair-share fees. The Supreme Court declared:
[T]he 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
the fee before an impartial decisionmaker, and an escrow for the amounts reasonably in
while such challenges are pending.
Hudson, 475U.S. at 310. Pursuant to Hudson,
the unions published a "NOTICE TO ALL
NONMEMBER FAIRSHARE PAYORS," to provide nonunion employees the opportunity to
assess the basis for the fee, and to give them the opportunity to object or to challenge the
On May 19, 1986, the WERC consolidated Browne
and Johnson. After an arbitration
the WERC determined, among other things, that the unions committed prohibited practices
sec. 111.70(3)(b), Stats., by providing only some of the procedural safeguards announced in
The WERC ordered, inter alia, that: (1) the unions refund, at a
seven percent interest rate, to
the complainants, at percentages established in the various stipulations, the fair-share fees
from the time the
complainants became subject to the fair-share deductions; (2) the unions escrow an
amount equal to
the fair-share fees deducted from January 1, 1983, through March 4, 1986, with seven
interest from the date the fees were taken until the date when the fees were placed in escrow;
unions rectify the deficiencies in the fair-share procedures to comply with
Hudson; (4)the unions
continue to rebate in advance non-chargeable sums for both objectors and challengers, and
in an interest-bearing account any and all fair-share fees deducted from all fair-share fee
the date of the Hudsondecision, plus seven percent
annual interest, until the WERC finds that the
unions are capable of providing adequate notice to all fair-share fee payors in the bargaining
have established proper procedures.
The unions and nonunion employees appealed. The circuit court upheld the
Both parties appeal the circuit court's affirmance of the WERC's decision.
I. Standard of Review. The circuit court denied the nonunion
employees' request for de novo
review of the WERC's decision. The court stated: "The facts are not in dispute.
Therefore, the issue is whether the WERC erred in applying the law." The circuit
court noted that
a reviewing court will sustain the WERC's conclusions oflaw if they are
reasonable, and "will defer
to the administrative agency's special expertise in the construction and interpretation
ofa given law"
even when "the questions raised are of issues of first impression."
The nonunion employees argue no deference should be given to the WERC's
concerning the purposes for which fair-share fees may lawfully be collected, the procedures
prerequisite to collection, and the appropriate remedies for unlawful collection, because these
involve statutory and federal constitutional issues of first impression. They point out that the
expertise lies in the area of labor-management relations and not First Amendment rights, and
The WERC states in rebuttal that "the issue of whether or not the subject of this
dispute is one
of 'first impression' is debatable," and argues that reviewing courts should defer to its
because of its "substantial expertise" in fair-share agreements, and its "more generalized
the fields of public sector
collective bargaining and statutory application." The unions did not address this issue.
II. Retroactivity of Hudson. The WERC and the
circuit court retroactively applied the
procedural safeguards announced in Hudsonto the
fair-share agreements in dispute.
Questions involving retroactivity are resolved by application of the
three-part analysis set forth in
Chevron Oil Co. v. Huson, 404 U.S. 97
First, the decision to be applied non-retroactively must establish a new
principle of law, either by
overruling clear past precedent on which litigants may have relied or by deciding an issue of
impression whose resolution was not clearly foreshadowed. Second, it has been stressed that
must ... weigh the merits and demerits in each case by looking to the prior history of the
question, its purpose and effect, and whether retrospective operation will further or retard its
operation." Finally, we have weighed the inequity imposed by retroactive application, for
"[w]here a decision of this Court could produce substantial inequitable results if applied
retroactively, there is ample basis in our cases for avoiding the 'injustice or hardship' by a
of nonretroactivity. "
Id. at 106-107 (citations omitted).
The unions argue that WERC erred in retroactively applying
requirements because Hudson's financial disclosure or
detailed notice requirement was not clearly
foreshadowed in pre-Hudson case law.
The WERC argues its retroactive application of Hudson's
constitutionally required fair-share
procedures is entitled to substantial judicial deference as an administrative act of statutory
interpretation and policy-making, and should be affirmed. WERC also argues its order
applying Hudson should be affirmed as a proper
interpretation of federal legal doctrine involving the
application of recent case law. The WERC contends Hudson
does not satisfy the "first impression"
criterion discussed in Chevron because
Hudson merely refined what was required to protect
constitutional rights of fair-share employees.
The nonunion employees argue that the procedural requirements announced in
clearly foreshadowed. They also address the two other Chevron
factors. First, they contend that
retroactive application of Hudson advances First
Amendment rights, pointing out that restitution of
unlawfully collected fees will restore the status quo ante, and will provide
the necessary incentives
for unions to establish
necessary safeguards for nonmembers in the future. Second, they argue that
of Hudsondoes not impose any substantial inequity.
Finally, the nonunion employees claim the
majority of authority retroactively applies Hudson's procedural safeguards.
See Lehnert v. Ferris
Faculty Ass'n, 685 F. Supp. 164, 166 (W. D. Mich. 1987);
Gilpin v. American Fed'n of State,
County and Mun. Employees, 643 F. Supp. 733, 736-738 (C.D). Ill.
1986); Harrison v.
Massachusetts Soc'y of Professors/Faculty Staff Union,
537 N.E.2d 1237, 1241 n.7 (Mass. 1989);
see also Abernathy v. San Jose Teachers Ass'n, 475
U.S. 1063 (1986) (mem.) (vacating 700 P.2d
1252, 215 Cal. Rptr. 250 [Cal. 1985] and remanding in light of
Hudson); Tierney v. City of Toledo,
824 F.2d 1497, 1500 (6th Cir. 1987) (Supreme Court, 475 U.S. 1115 
[mem.], vacated earlier
appeal of this case, 785 F. 2d 310 [N.D. Ohio 1986], and remanded for consideration
in light of
Hudson); Ellis v. Western Airlines, Inc., 652 F.
Supp. 938 (S.D. Cal. 1986); McGlumphy v.
Fraternal Order of Police, 633 F. Supp. 1074, 1082-1083 (N.D. Ohio
1986); contra Lowary v.
Lexington Local Bd. of Educ., 704 Supp. 1476, 1477-1480 (N.D. Ohio
III. WERC's "Jurisdiction" to Order 100% Escrow of Fair-Share Fees Paid
by All Nonunion
Members. The WERC ordered the unions to escrow all fair-share fees deducted
from all fair-
share payors in the bargaining units represented by the unions, including those
employees who did
not challenge the fair-share fees, until the WERC determined that the unions were prepared
provide adequate notice to all fair-share payors and established proper fair-share procedures.
The unions argue that the WERC acted beyond its "jurisdiction" by
creating a "class" consisting
of all nonunion-member fee payors, and not just those who challenged the deductions. The
unions further contend that this "defacto certification" is outside the WERC's jurisdiction
the circuit court certified only a limited class in Browne,
and denied certification in
unions also argue the WERC acted beyond its power and contrary to law by expanding the
authorized by the circuit court in Browne, and by
affording relief to non-parties. Additionally, the
unions argue that the 100% grant of relief to all fair-share payors ignores a potential conflict
interest within the "class" between nonunion employees who are hostile to unionism on
and ideological grounds, and those employees who are not hostile toward unions but just do
want to pay more than their "fair-share." See Gilpin v.
AFSCME, 875 F.2d 1310, 1313 (7th Cir.
1989), cert. denied, 110 S. Ct. 278.
The WERC argues that, in the absence of a specific statute that applies judicial class
procedures to the WERC, the WERC is given substantial powers to remedy situations where
prohibited practices have taken place.
The nonunion employees argue the WERC has authority to order relief for employees
not parties in a proceeding when their statutory rights have been violated. They contend that
is a form of injunctive relief, and that the scope of injunctive relief is dictated by the extent
violation and not by the plaintiff class, and thus can benefit those employees who did not
IV. 100% Escrow as a Deprivation of
Fair--Share Fees Unions Entitled to Retain. The unions
argue that the WERC's order requiring 100% escrow of all fair-share fees denies them
they are entitled to retain as compensation for the statutorily-mandated chargeable services
are required to provide to all members of the bargaining unit, including nonunion members.
unions argue that relief should have been confined to only those fair-share payers who
affirmatively challenged the unions' expenditures of their fair-share fees. The unions,
Hudson, argue the WERC's order requiring 100%
escrow is inconsistent with the
objective of "'preventing compulsory subsidization of ideological activity by employees
thereto without restricting the Union's ability to require every employee to contribute to the
[chargeable] activities. '" Id., 475 U.S. at 302,
(emphasis added) (quoting Abood v. Detroit Bd. of
Educ., 431 U.S. 209, 237 ).
The WERC argues that while the unions are entitled to receive fair-share fees from
employees for the costs of collective bargaining, they "'should not be permitted to exact a
from nonmembers without first establishing a procedure which will avoid the
risk that their funds will
be used, even temporarily, to finance ideological activities unrelated to collective
475 U.S. at 305, (emphasis added) (quoting Abood,
431 U.S.at 244 [Stevens, J.,
WERC contends that absent review of the unions' expenditures by an independent auditor,
escrow is required. SeeHudson at
310 & n.23.
The nonunion employees argue that the unions are not entitled to retain any of the
fees because the unions failed to have constitutionally adequate procedures in place prior to
deductions. The employees further contend that 100% escrow is proper since the union
rights of all nonunion fair-share payers, and not just those who sued, when any of
constitutionally-required safeguards are absent.
V. Vacation of Arbitration Based on "Technical Defects" in the Unions'
Notice, and the Challengers' Failure to Participate in the Arbitration.The WERC vacated the
earlier arbitration award and ordered that a new arbitration be held, in part, due to "technical
in the in the unions' notice and procedures. Although the WERC found that the AFSCME
International and District Council 48 (but not the local affiliate) had provided sufficient
information to permit fair-share payors to assert a claim, the WERC ordered that all of the
Brown class and all of the complainants in the
Johnson case were to be treated as "objectors and
challengers." The WERC ruled that the notice was unclear as to the consequences of
rather than "challenging," and that the notice imposed various "unwarranted obstacles," such
$5.00 filing fee and certified mail requirement. No objectors or challengers participated in
The unions argue that because the complaining nonunion employees were ordered
as a matter of law, the nonunion employees could not be prejudiced by the defects it
objection procedures or notice. They argue that none of the "technical defects" could have
or detracted from the nonunion members' ability to challenge the accuracy of the fair-share
an impartial decision-maker. The unions also argue that the new arbitration should have
only if the arbitration process itself was defective. Additionally, the unions claim that the
complainants are estopped from challenging the arbitration by their refusal to participate in
The nonunion employees argue that, in Hudson,
the Supreme Court implicitly held that the
failure to use the union's objection procedure does not estop employees from obtaining relief
the rights of all plaintiffs, including potential objectors, were violated.
Seeid., 475 U.S. 296-7,
304-11 & n.22; Hudson, 743 F.2d 1187, 1194
(7th Cir. 1984). They claim that they did not participate
in the arbitration because of procedural defects, and therefore the arbitration was "ex parte"
an "adversary" proceeding.
The WERC argues that ineffective participation in the arbitration process, because of
defective notice, taints the entire arbitration process. Thus, it submits, the non-union
should not be held to the results of an arbitration process that was defective from the start.
VI. Verification of Local Union Expenditures by Independent
Auditor and the Local
Presumption." The unions' notice did not contain specific financial data for the
disbursements. The notice stated: "Council 48 has determined that the percentage of
activities of these local unions is at least as great as the percentage of chargeable activities of
Council 48." Although the WERC determined that the financial information in the notice for
AFSCME International and District Council 48 met the
Hudsonrequirements, the WERC
ordered the local unions to have their financial information audited by an independent
The WERC also stated that it would accept a presumption that the chargeable expenses of the
local unions is at least as great as District Council 48, provided an independent auditor were
take a random sampling of a representative number of the local unions and audit their
if such sampling established to the auditor's satisfaction that the local expenditures always
lesser percentage of non-chargeable expenses.
The unions argue that requiring verification ofthe expenses
ofeach local union by an
independent auditor is burdensome and unnecessary. The unions argue that the Supreme
not require "absolute precision" in financial disclosures. SeeHudson, 475 U.S.at 307 n.18. They
further assert that Hudson held that the unions were
not required to provide nonunion employees
with an "exhaustive and detailed list of all its expenditures" and that disclosure of "major
of expenditures" is adequate. See ibid.
The WERC argues that inconvenience is not a valid ground for avoiding
constitutionally-required procedures. The WERC further asserts that requiring a verified
audit of the local unions'
expenditures is within the WERC's broad remedial authority, and is consistent with
The nonunion employees argue that Hudson
requires the "burden of objection,"
id., 475 U.S.
at 309, be minimized, but that the burden here would be increased because, without
information about local union expenditures, the potential objectors will lack a basis from
determine whether they should challenge the chargeable fees. They also
argue that the calculation of the fee must not only be disclosed, but must also be
justified" and "narrowly drawn" to minimize the impingement on nonunion employees' First
Amendment rights. Finally, the nonunion employees argue that the WERC and circuit court
correctly rejected use of the local presumption because, in reviewing the local unions' actual
expenditure, eleven of thirteen locals had smaller percentages of chargeable expenditures than
District Council 48.
VII. Chargeability of Various Union Activities. In
Abood, 431 U.S. 209, the United States
Supreme Court upheld the constitutionality of an agency shop agreement between a
a teacher's union that required every employee in the bargaining unit to pay a "fair-share"
defray the costs of collective bargaining, contract administration, and grievance adjustment.
Supreme Court also stated that a union could not collect fees from dissenting employees for
expenditures not germane to the union's duties as exclusive bargaining representatives.
Id., 431 U.S.
The nonunion employees argue that the WERC and circuit court erred in concluding
public advertising, organizing efforts, representation of other bargaining units, general
litigation expenses not incident to the nonunion employees' bargaining unit were properly
as a fair-share expense.
A. PublicAdvertising. The
nonunion employees admit that coerced support of information
directed to their bargaining units is a chargeable fair-share expense, but argue that
aimed at the public " is speech on matters of public concern" and does not relate to collective
bargaining or contract administration.
B. Organizing. The circuit court sustained the
WERC's holding that organizing in the
nonmembers' units, organizing in and seeking recognition as bargaining agent for other units,
including units where another union is already certified, and defending against decertification
displacement efforts, can all be charged to the nonunion employees because, as the circuit
concluded, organizing "increases the union's overall size and therefore, enhances the union's
ability to be more effective and provide better services on behalf of all employees."
original). The nonunion employees argue that in Ellis v. Railway
Clerks, 466U.S. 435 (1984),
the United States Supreme Court rejected the
theory that organizing should be chargeable because "a stronger union ... would be
at the bargaining table." See id., 466 U.S. at 451.
C. Exclusive Representation of OtherBargaining Units. The WERC and circuit court
concluded that nonunion members could be charged costs of representing other units. The
nonunion employees contest the "ultimate benefit" rationale, and argue that the only benefits
justify fair-share fee compulsion are those the bargaining unit's exclusive agent must,
statutory mandate, perform on behalf of "'all employees .... union and nonunion,'
relevant unit" and that "necessarily accrue to all employees."
Abood, 431 U.S. at 221-22
(emphasis added) (quoting International Ass'n of Machinists v.
Street, 367 U.S. 740, 761
D. Lobbying. The WERC and the circuit court ruled
that lobbying "for collective bargaining
legislation or regulations or to effect changes therein" or "for legislation or regulations
wages, hours and working conditions of employees generally before Congress, state
and state and federal agencies" is a chargeable fair-share assessment. The nonunion
reply that in bargaining and contract administration, the exclusive bargaining
representative deals with the employer regarding the terms and conditions of
employment that are
within the employer's control. They argue that lobbying is primarily a political activity
directed to the
legislature, other governmental agency, or the public, on matters of public concern not
employer's control. They assert the coerced subsidization of lobbying lacks statutory basis
constitutes a substantial interference with the First Amendment rights of nonunion workers.
E. Litigation. The WERC and circuit court ruled that AFL-CIO
proceedings, impasse mechanisms, and litigation "relating to concerted activity and collective
bargaining" are chargeable, even if the nonmembers' units are not involved. The nonunion
assert that this is contrary to Ellis, which held that
nonunion members can only be charged for
litigation, including "jurisdictional disputes with other unions, ... that concerns bargaining
employees and is normally conducted by the exclusive representative."
Ellis, 466 U.S.at 453. They
argue that unless the bargaining unit is directly concerned, objecting employees need not
costs of union litigation. See ibid.
The WERC argues that Aboodand
Hudsonare the only Supreme Court decisions to deal
public sector labor relations and neither decision clearly defines exactly what constitutes a
expense. The WERC contends that a substantial dichotomy exists between public sector and
sector collective bargaining, thus distinguishing the
Ellis' chargeability test,3 and that "in
sector the line may be somewhat hazier" between what is a chargeable versus nonchargeable
expenditure. Abood, 431 U.S. at
236. The WERC also asserts that a broad definition ofchangeability is "essential" as public employees are often dependent on politically
of public funding, and because many public-sector labor issues are non-bargainable. It
chargeability of political expenses should be liberally construed so as to allow public-sector
units access to their employer -- the legislature.
The unions do not seek review of the WERC's determination on the chargeability of
3 "[T]he test must be whether the challenged expenditures are necessarily or
reasonably incurred for
the purpose of performing the duties ofan exclusive representative of the
employees in dealing with
the employer on labor-management issues." Ellis,
466 U.S. at 448.
to say that we should defer to the WERC because the chargeability of these categories
is "within the
expertise of the WERC due to extensive knowledge in the area of public sector exclusive
representation and contract administration."
VIII. Collection of Fair-Share Fee Equal to Full Union Dues
from Nonmember Fee Payor.
Section 111.70(2) and (1)(f), Stats., requires that nonunion employees pay their
share" of collective bargaining costs measured by the "amount of dues uniformly required of
members." The WERC held that Hudson, sec.
111.70(1)(f), and sec. 111.70(2) "permit a union
to collect and spend a fair-share fee equal to regular dues from the nonmember employes
represents as the exclusive collective bargaining representative if those nonmembers have not
made their dissent known to the union in a manner in time the union may lawfully require."
circuit court affirmed, holding that "[n]either 111.70 nor
Browne restrict the fair-share fee
deduction to an amount less than full union dues." The WERC and circuit court also relied
proposed amendment to the fair-share statute that was never adopted that would have limited,
without objection from nonunion employees, the amounts a union could deduct from
The nonunion employees argue that the failure of a legislature to explicitly state a
does not, by itself, establish that the restriction was not imposed by the more general,
language. The nonunion employees also argue that Browne
held that the Municipal Employment
Relations Act implicitly limited the fair-share fee that could be collected. See
id., 83Wis.2d at 330-334, 265 N.W.2d
565-567. The nonunion employees also argue that under the fair-share statute all
nonunion employees need pay only the "proportionate share," sec. 111.70(1)(f), and that the
of an objection is to challenge the unions' calculation of the fee, not to trigger the statute's
The WERC argues a nonunion member, fair-share payor must affirmatively object to
political expenditures before the "proportionate share" limitation is required. The WERC
the Supreme Court's statement that "the objective must be to devise a way of preventing
subsidization of ideological activity by employees whoobjectthereto ...." Abood,
431 U.S. at 237
(emphasis added), quoted in Hudson, 475 U.S. at
The unions did not address this issue separately but presumably rely on their
supporting the applicability of the arbitration decision to "challengers" - that nonunion
payors must affirmatively object to the collection of fair-share fees equal to fu11 union dues.
IX. Additional Challenges to Union Procedures Approved by the WERC
and Circuit Court.
The WERC and circuit court concluded that the unions'
post-Hudsonprocedures did not fully
meet the constitutional requirements for the collection of fair-share fees. The nonunion
employees also allege that four features of the unions' procedures that were approved are
unconstitutional and fail to "minimize the infringement" on their First Amendment rights.
Hudson, 475U.S. at 303.
A. Adequacy of the Advance Disclosure. In
Hudson, the United States Supreme Court
Basic considerations of fairness, as well as concern for the First Amendment rights
at stake, also dictate that the potential objectors be given sufficient information to
gauge the propriety of the union's fee. Leaving the nonunion employees in the
dark about the source of the figure for the agency fee -- and requiring them to
object in order to receive information -- does not adequately protect the careful
distinctions drawn in Abood.
Id. at 306. The Court, however,
We continue to recognize that there are practical reasons why "[a]bsolute
precision" in the calculation of the charge to nonmembers cannot be "expected or
required." ... The Union need not provide nonmembers with an exhaustive and
detailed list of all its expenditures, but adequate disclosure surely would include the
major categories of expenses, as well as verification by an independent auditor.
Id. at 307 n.18 (quoting
Railway Clerks v. Allen, 373 U.S. 113, 122 [l963]).
1. Calculation of the Fair-Share Fee Not Audited. The
breakdown of union expenses as
chargeable or nonchargeable in the fair-share fee calculations was not verified by an
audit. The WERC and circuit court concluded that an independent audit was unnecessary as
the unions escrowed 100% of the fair-share deductions while challenges were pending before
The nonunion employees argue this is contrary to Hudson,
which held that 100% escrow of
the fair-share deduction was an inadequate remedy because the union failed to provide an
justification" of the deduction. Id., 475 U.S. at 309.
The nonunion employees contend that
"adequate disclosure surely would include the major
categories of expenses, as well as verification by an independent auditor."
Id., 475 U.S. at 107 n.18.
Although Hudson stated than an independent audit of
the expenditures might relieve the imposition
of a 100% requirement,4 the nonunion employees argue that the 100%
escrow requirement does not
remove the requirement that a deduction must be "appropriately justified." The nonunion
also argue that verification would improve the quality and quantity of information, and thus
employees to make more informed decisions on whether to object. This, they submit, would
The WERC argues that the role of the independent auditor should be restricted to a
accounting function, i.e., how the unions spend their funds. The WERC argues that the role
auditor should not be expanded to include making legal judgments about the characterization
expenditures that might be charged to an objector.
4 If "the original disclosure by the Union had included a certified public accountant's
breakdown of expenditures, including some categories that no dissenter could reasonably
there would be no reason to escrow the portion of the nonmember's fees that would be
by those categories." Hudson, 175 U.S. at 310.
The unions argue that the impartial arbitrator is the proper person to decide
expenditures, but only after the unions' calculation of the fair-share fee has been challenged.
2.Sufficiency of the AFSCME lnternational's Disclosures.
The WERC concluded that AFSCME
International's financial information was "the minimum of what is required." The disclosure
categories of chargeable and nonchargeable activities, but without corresponding amounts. A
schedule, however, lists eighteen different general line-item expenses.
The nonunion employees contend that most items in AFSCME's
disclosures are "neither
explained nor sub-divided sufficiently." The nonunion employees also argue that this violates
Hudson since the purpose of notice is not to require
employees to object in order to get the
information that they should receive as a matter of right.
In addition to arguing that Hudson
does not require a union's fair-share procedures be "least
restrictive," the WERC submits that the courts should defer to its conclusion that the
disclosure was satisfactory.
The unions argue that Hudsononly requires "adequate explanation of the basis for the fee,"
475U.S. at 310, and that it does not have to provide the
nonunion employees with an "exhaustive
and detailed list of all its expenditures," id., 475
U.S. at 307 n.18.
B. Unions' Objection Scheme and Protection of Employees'
Rights. Hudsonrequires that
unions provide agency shop procedures that minimize the impingement of nonunion
First Amendment rights, and that facilitate a nonunion employee's ability to protect his
Id., 475U.S. at 307-308 n.20.
1. Objection Requirements as Burdensome. The
WERC and circuit court determined that
nonunion employees could be charged a fee equal to dues unless they object annually within
days after the date of the notice.
The nonunion employees argue the annual objection requirement and
the limited period within
which objections and challenge must be made are impermissible under both the Municipal
Employment Relations Act and the First Amendment. They argue that the Municipal
Employment Relations Act limits collection for all nonunion employees to an
amount less than the
amount of dues, and, thus, an objection cannot be a
condition to their paying only their "fair share." See sec. 111.70(i)(f)
(Nonunion employees "are
required to pay their proportionate share of the cost of the collective bargaining process and
administration measured by the amount of dues uniformly required of all members."). They
argue that the requirement for annual objection renewal, and the 30-day limit on the time for
an objection and challenge, contravene Hudson's
"least restrictive means standard." They contend
that the time limitation is unconstitutional because the nonmembers cannot know on what the
spent fair-share fees until the end of the year.
The WERC argues that the annual renewal requirement for objection/challenges to
expenditures is reasonable, since Hudson
acknowledged that nonunion employees would be making
objections based upon inexact information. SeeHudson,
475 U.S. at 307 n.18 ("[T]he Union cannot
be faulted for calculating its fee on the basis of its expenses during the preceding year.").
The unions reply to the nonunion employees' argument that the objection
unduly burdensome by noting "[t]he nonmember's 'burden' is simply the obligation to make
objection known." Hudson, 475 U.S. at 306 n.16.
2. Applicability of an Arbitration Decision to only "Challengers"
under, the Unions'
Procedures. The WERC and the circuit court held that the unions may restrict the
benefit of an
arbitration to those nonunion employees who dissent and challenge the
unions' computations ("the
challengers" under the unions' notice and procedures), as opposed to those fair-share fee
dissent but agree to accept the unions' computations ("objectors"). A11 other nonunion
including "objectors," could continue to be charged a fee equal to dues if the nonunion
payor failed to timely challenge the unions' collection of full dues. The WERC also justified
the effect of the arbitration by reasoning that the "objectors" would have made a "knowing
voluntary waiver" of the right to "challenge."
The nonunion employees argue that the Municipal Relations Act statutorily limits
be collected from all nonunion employees to their proportionate share of
collective bargaining costs.
They also argue that waiver of arbitration should occur only if a nonunion employee
that he or she wishes to pay full dues or the fee calculated by the unions.
The WERC and the unions argue that nonunion employees must affirmatively make
dissent known to the union and that dissent may not be presumed. SeeHudson, 475U.S. at 306
("the nonunion employee has the burden of raising an objection");
Abood, 431U.S. at
WERC contendsthat it is a "long-standing constitutional principle that a
non-union member must
object in order to trigger the protections of fair share fee procedures doctrine." The unions
Hudsonestablish[es] this procedure as the way that
the constitution demands for settlement of
disputes involving fair share fees."
X. Employer Collection of Fair-Share Fees Absent Full Compliance with
Procedural Safeguards. The WERC found that the employers did not provide or
require the Hudsonsafeguards prior to the deduction of compulsory fees from nonunion employees'
wages. Yet, the
WERC and the circuit court held that, despite its findings that the unions
committed a prohibited
practice for noncompliance with Hudson, the
employers did not commit any prohibited practices by
deducting, over nonmembers' objections, and giving the unions fair-share fees equal to dues.
WERC concluded, and the circuit court affirmed, that: "[T]here is no evidence or argument
[employers] have taken any action other
than to comply with the terms of a provision of their respective collective bargaining
as required by law, by acting as a conduit for the Respondent Unions."
The nonunion employees argue that an employer "acting as a conduit"
sustains liability under
Wis. Stat. sec. 111.70(3)(a)l, Stats., Browne, and
Hudson. Sec. 111.70(3)(a)1 provides: "It is a
prohibited practice for a municipal employer individually or in concert with others [t]o
interfere with, restrain or coerce municipal employees in the exercise of their rights
83Wis.2d at 334, 265 N.W.2d at 567, the Wisconsin
Supreme Court quoted sec.
111.70(3)(a)1, Stats., but did not specifically discuss employer obligations. A footnote to the
court's discussion, however, states in pertinent part: "Moreover, we interpret the Wisconsin
Statutes as providing that it is an unfair labor practice to require a municipal employee to pay
anything more than their [sic] proportionate share of the cost of collective bargaining and
administration." Id. 83 Wis.2d at 334-335 n.9, 265
N.W.2d at 567 n.9. The nonunion employees
argue that Browne,read in context, holds that any employer commits a prohibited practice
deducting a fee that will in part be used by a union for nonchargeable purposes.
The nonunion employees also argue that Hudsonsupports public employer "conduit" liability.
There, the Supreme Court rejected the unions' suggestion of sufficient available ordinary
remedies, and noted: "Since the agency shop is 'a significant impingement on first
the government and union have a responsibility to provide procedures that minimize that
and that facilitate a nonunion employee's ability to protect his rights."
Hudson, 475 U.S. at 307-308
n.20 (quoting Ellis, 466 U.S. at 455). The nonunion
employees maintain that subsequent case law
has consistently read Hudsonto impose a duty on
The WERC's only argument in this regard is that the nonunion employees' argument
be rejected in deference to its policymaking function.
XI. Third-Party Independently Controlled Escrow Accounts.
District Council 48 established
an "escrow" account for 1000 of the fair-share fees paid by challengers, minus the rebate
paid to the
challengers by the union. The WERC determined that the District Council 48's
interest-bearing and adequately verifiable through bank statements, does not constitute a true
'escrow,' because it does not
remove the fund from Respondent District Counci1 48's control."
The unions argue that there were no findings that the escrow account was a
the unions' use of the fee, nor was there any finding that the fees were not being deposited
incapable of being independently verified. The unions also argue that escrow of funds in a
account is burdensome, expensive, and unnecessary.
The WERC and the nonunion employees argue generally accepted meaning and
support the WERC's ruling that the escrow account must be independently controlled by a
third party. They contend that a finding of "subterfuge" was not required, but only that the
scheme did "not avoid the risk that dissenters' funds may be used
temporarily for an improper
purpose." Hudson, 475 U.S. at 305. (emphasis
added). The nonunion employees argue that such
a risk is present, based on the Executive Director of Council 48's testimony that the terms of
Unions' savings accounts for the dissenters' fees require the bank to release the funds to the
upon its unilateral demand.
XII. Alternative Remedies Urged by Nonunion Employees. The
WERC concluded that the
unions committed prohibited
practices by deducting fair-share fees in the absence of all of
Hudson's procedural safeguards. The
only remedy ordered for the period beginning January 1, 1983, however, was the escrow of
pending the establishment, and WERC's approval, of revised procedures and an impartial
determination of the portion that should be refunded as nonchargeable. The WERC denied
restitution, concluding that the unions were entitled to the costs of exclusive representation
therefore, full restitution would "result in a 'windfall' to Complainants and would be the
of awarding 'punitive damages' against the Respondent Unions." The WERC also denied the
nonunion employees' request for a cease-and-desist order because it believed that the unions
a substantial and good faith effort to satisfy the requirements of Hudson
after that decision was
The nonunion employees assert this escrow remedy is "woefully inadequate." They
the WERC should have ordered restitution of compulsory fees collected for improper
petitioned for a cease-and-desist order. The nonunion employees maintain that under
bargaining representative is entitled to nothing, not even bargaining costs, from a nonunion
unless it first implements the
necessary procedural safeguards. See id., 475
U.S. at 305-306, 310. The employees argue the
unions violate the rights of all nonunion members in the unit it represents, not just those who
sued, when it fails to fully comply with Hudson's
procedural safeguards. SeeHudson, 475 U.S. at
306 ("potential objectors" must be given sufficient financial disclosure).
The nonunion employees also argue that the unions did not substantially comply with
Hudson.They allege theunions'
post-Hudson procedures provided neither "an adequate
explanation of the
basis or the fee" nor "a reasonably prompt opportunity to challenge the amount of the fee
impartial decisionmaker," Hudson, 475 U.S. at 310,
because the notice provided no information as
to the local unions and was designed to discourage challenges.
The WERC did not specifically address this issue. The unions, however, argue that
sought by the nonunion employees is punitive and contrary to
Hudson. They argue that the WERC
has erred by extending the 100% escrow to people who have not objected, challenged, or
made their dissent known to the unions.
We find no Wisconsin case law that addresses the issues raised in this appeal. All of
issues turn on policy analyses under sec. 111.70, Stats., Hudson, Abood,
Ellis, and Browne. They
require balancing the First Amendment rights of nonunion employees, the unions' right to
compensation for the statutorily-mandated services it renders as the exclusive representation
employees in the bargaining unit it represents, and the states interest in stable and peaceful
relations, as well as in protecting the rights of its citizens. The resolution of these issues
beyond the limited, error-correcting function of this court. These issues are of statewide
will no doubt continue to arise. Therefore, we respectfully certify them to the Wisconsin
Court for its review and determination, pursuant to Rule 809.61, Stats.