STATE OF WISCONSIN
IN SUPREME COURT
PHYLLIS ANN BROWNE, DOROTHY ACKERMAN, OREBA ALEXANDER,
BARTOLI, BETTY C. BASSETT, JOANNE BECK, JOANN M. BEHLING, JEANETTE
BENNETT, DONNA J. BOROWSKI, RUTH BUENGER, RUTH BURBA, IVONA M.
BURETA, THERESE BURGER, JUDITH CAMPEAU, ROSALIE J. CHERRONE,
MARGARET CIESZYNSKI, YETTA DIETCH, LAVERNE DUGAN, BEVERLY
ENGELLAND, DOROTHY H. GAUS, DORIS A. GOHLKE, JUDITH D. GOSS,
A. GRAY, CORINNE T. GROSS, KATHERINE L. HANNA, MARY J HANSON, NORA
HERRIGES, DONNA J. HOLSTEIN, MILDRED L. HUDSON, NOREEN M. JACOBI,
L. KILES, JOYCE KNIPPEL, LINDA KOEBERT, HERMINE A. KUNDA, VIRGINIA
LEMBERGER, EVELYN E. MARKOWSKI, FLORENCE MARKWIESE, MARY
MARTINETTO, HELEN MARX, BARBARA A. MORBECK, CHRISTINE M. MUSIAL,
CHRISTINE R. NAULT, ESTHER PALSGROVE, ELEANORE PELISKA, FAYE M.
JOSEPHINE PON, LORRAINE RICHARDSON, ANNIE L. RILEY, SANDRA
ESTHER L. SCHUENEMAN, VIRGINIA A. SCHWERM ROSEMARIE
DOROTHY STRAUSS, DEBORAH J. STRELECKI, NINETTE SUNN, LORRAINE
GRACE G. VOELZ, IRENE B. WAGNER, AUDREY A. WICKERT, DOROTHY E.
DOROTHY A. KOCH, WALTER J. JOHNSON, EDWARD L. BARLOW, ERNA BYRNE,
LYNN M. KOZLOWSKI, CHERRY ANN LACKEY, GERALD LERANTH, IRVING E.
NICOLAI, DORIS M. PIPER, CHRISTINA PITTS, MILDRED PIZZINO, HELEN
MARSHALL M. SCOTT,JOHN P. SKOCIR, ANNE C. TEBO, OLIVER J.
ANNABELLE WOLTER, BARBARA BARRISH, DORIS M. CONNER, TERESE G.
KATHLEEN S. FLEURY, MARY E, JAEGER, REGINA S. KARPOWITZ, CAROLYN
LOHMILLER, KENNETH E. MULTHAUF, MILDRED NOFFZ, TERESA PATZKE,
S. PETERS, DOROTHY E. RIEDEL, CYNTHIA SCHNEIDER, RUTH CHERYL
THOMPSON, IONE TRACHSEL, AND DELORES V. WINTER,
WISCONSIN EMPLOYMENT RELATIONS COMMISSION,
THE AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL
AFL-CIO, DISTRICT COUNCIL 48, AMERICAN FEDERATION OF STATE, COUNTY
MUNICIPAL EMPLOYEES, AFL-CIO, JOHN PARR, Director of District Council 48,
1053, AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL
AFL-CIO, MARGARET SILKEY, as President of Local 1053, FLORENCE TEFELSKE, as
Treasurer of Local 1053, LOCAL 594, AFSCME, affiliated with District Council 48,
645, AFSCME, LOCAL 882, AFSCME, LOCAL 1055, AFSCME, LOCAL 1654,
AND LOCAL 1656, AFSCME, all affiliated with
District Council 48,
WISCONSIN EMPLOYMENT RELATIONS COMMISSION,
Decision Nos. 18408-H and 19545-H
APPEAL from a decision of the Circuit Court for Milwaukee County, MICHAEL P.
SULLIVAN, Circuit Judge. Affirmed in part, reversed in part, and remanded.
HEFFERNAN, CHIEF JUSTICE. This is a consolidated appeal on certification of the
appeals from a judgment of the circuit court for Milwaukee County, Michael P. Sullivan,
Judge, affirming on review pursuant to ch. 227, Stats., a final decision of the Wisconsin
Employment Relations Commission (WERC) regarding constitutional and statutory claims
out of fairshare agreements between the Milwaukee Board of School Directors, Milwaukee
and various local affiliated unions of Milwaukee District Council 48 (council 48) of the
Federation of State, County and Municipal Employees (AFSCME). WERC concluded that
unions committed prohibited practices under sec. 111.70(3)(b), Stats., by deducting fair-share
without first providing all of the procedural safeguards required by Chicago Teachers
No. 1 v. Hudson, 475 U.S. 292 (1986), and ordered a variety of retrospective and
relief. The circuit court upheld WERC's decision in its entirety.
The facts are undisputed. In the early 1970's, the Milwaukee Board of School
Milwaukee County (the employers) entered into fair-share agreements with Council 48 and
affiliated locals (collectively, the unions), as authorized by sec. 111.70(1)(f) and (2), Stats.
fair-share agreements required nonunion employees in the bargaining units represented by the
unions to pay a proportionate share of the cost of collective bargaining and contract
administration. The fair-share fee was equal to the dues paid by union members.
Two groups of nonunion employees filed actions challenging the constitutionality of
111.70(1) (f) and (2), Stats. (2) This court held
the statute constitutional in Browne v. Milwaukee
Bd. of School Directors, 83 Wis. 2d 316, 265 N.W.2d 559 (1978) (Browne
II). (3) Additional
facts in respect to this case appear in Browne II. The cases were ultimately
remanded by the
circuit court to WERC to make findings of fact and conclusions of law regarding what
the fair-share fees had been used for purposes unrelated to collective bargaining or contract
On March 4, 1986, the United States Supreme Court decided Hudson,
which set forth certain
procedural safeguards necessary for the collection of fair-share fees:
[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, 475 U.S. at 310. In response to Hudson, the unions
published a "NOTICE TO ALL
NONMEMBER FAIRSHARE PAYORS," which purported to provide nonunion employees
explanation of the basis for the fair-share fee, give them an opportunity to object to the use
fees for nonchargeable activities, and provide a mechanism by which objecting nonunion
employees could challenge the unions' calculation of the fee before an impartial
The notice first breaks down the unions' activities into 38 separate categories and
categories the unions consider "chargeable" and which categories the unions consider
"nonchargeable." (4) The notice then lists 18
of the major categories of AFSCME's audited
expenses, and the portion of each which AFSCME determined to be chargeable. Next, the
provides a detailed summary of Council 48's activities and expenses, and states the
which it determined were chargeable. The notice states that the general expenses of both
AFSCME and Council 48 were Audited.
Under the heading "AFSCME Council 48 Affiliated Locals Financial Information," the
provides that "Council 48 has determined that the percentage of chargeable activities of these
unions is at least as great as the percentage of chargeable activities of Council 48.11 The
does not indicate the basis for this "local presumption," and does not indicate whether the
unions' expenses were audited.
Next, the notice provides a procedure whereby nonunion employees, within 30 days of
can object to the unions' use of fair-share fees for nonchargeable activities, at which point
employees receive an advance rebate of the portion of the fees which the unions determined
nonchargeable. The notice then provides a procedure for objecting employees to challenge
unions' calculation of the nonchargeable amount. "Challengers" must inform the unions in
of their intent to challenge the calculation, at which point the unions will place in escrow
of the fair-share fees collected from the challengers. (5) All challenges are consolidated into a
single hearing before an impartial arbitrator, at which the unions bear the burden of proof for
accuracy of the calculation. The escrowed amounts are disbursed pursuant to and in
with the arbitrator's decision.
In April, 1986, the nonunion employees requested WERC to review the fair-share
light of Hudson. On May 9, 1986, WERC issued an order to show cause and
notice of hearing
in both Browne and Johnson, and consolidated the cases. On May
30, 1986,, WERC held a
hearing. On April 24, 1987, WERC issued an extensive decision, determining that the
committed prohibited practices under sec. 111.70 (3) (b), Stats., by providing only some of
procedural safeguards required by Hudson, and ordered extensive retrospective
WERC held that the unions' notice and procedures were legally deficient in several
legally sufficient in several others, and that the Hudson holding is to be
WERC ordered the union to: (1) refund to the complainants, at percentages established in the
various stipulations, all nonchargeable fair-share fees collected prior to December 31, 1982,
interest; (6) (2) escrow an amount equal to all
fair-share fees deducted from the complainants
between January 1, 1983 to March 4, 1986 (the date Hudson was decided), with
rectify the deficiencies in the notice to comply with Hudson; and (4) continue
the present advance
rebate, and escrow all fair-share fees deducted after March 4, 1986 from all fair-share fee
plus interest. WERC also held that the escrow amounts must be in the control of a neutral
party, and that the escrowed amounts would be disbursed in accordance with the approved
The unions and the nonunion employees both sought review of portions of WERC's
pursuant to sec. 227.52, et seq., Stats. On March 16, 1989, the circuit court
decision in its entirety. Both parties appealed the circuit court's judgment to the court of
Pursuant to sec. (Rule) 809.61, Stats., the court of appeals certified the consolidated appeal
court. We granted certification on April 3, 1990. On September 18, 1990, we granted the
parties' motion to hold this case in abeyance pending the decision of the United States
Court in Lehnert v. Ferris Faculty Ass'n, --- U.S. ---, 111 S.Ct. 1950 (1991).
decided on May 30, 1991.
The nonunion employees, represented by the National Right to Work Legal Defense
(Right to Work Foundation), raise the following issues: (1) whether the costs of public
advertising, lobbying, representation of other bargaining units, litigation or organizing are
chargeable in light of Lehnert; (2) whether AFSCME's advance disclosure
objection requirement, and the limited scope of the arbitrator's decision meet the
Hudson; (3) whether the employers committed a prohibited practice by
deducting fair share fees
without ensuring compliance with the procedures mandated in Hudson; (4)
whether restitution and
a cease-and-desist order would have been appropriate; and (5) whether full union dues may
deducted from nonunion employees.
The unions' appeal raises the following issues: (1) whether Hudson applies
whether 100% escrow of all fairshare fees of all nonunion employees is an appropriate
(3) whether WERC properly vacated the arbitrator's decision; (4) whether an independent
separate audit of local unions is required by Hudson; and (5) whether the escrow
must be under
the control of a neutral third party.
We first examine the chargeability of the costs of various types of activities in light of
Second, we consider whether the unions' notice provides the procedural safeguards required
Hudson. Third, we consider whether the employers committed a prohibited
practice in this case.
Finally, we examine the propriety of the relief ordered by WERC.
An initial consideration in this case is the proper deference due the WERC decision.
to Work Foundation argues that because WERC was merely applying the law to issues of
impression, this court should accord the agency's interpretation only "due weight."
WERC, 99 Wis. 2d 252, 261, 299 N.W.2d 248 (1980). WERC asserts that its
decision in this
case represents an interpretation of MERA, an area "in which an agency has particular
or expertise," and that its interpretation should be given substantial deference.
WERC, 43 Wis. 2d 596, 600, 168 N.W.2d 809 (1969). Additionally, WERC
"generalized expertise" in public sector collective bargaining and statutory application, and
fact that it is a policymaking body. (7)
Depending upon the nature of the issues and facts, we accord an agency's
weight, due weight, or no weight at all. Sauk County v. WERC, 165 Wis. 2d
406, 413-14, 477
N.W.2d 267 (1991). In West Bend Education Ass'n v. WERC, 121 Wis. 2d 1,
12, 357 N.W.2d
534 (1984), we explained the "great weight" standard:
[I)f the administrative agency's experience, technical
competence, and specialized
knowledge aid the agency in its interpretation and application of the statute, the agency's
conclusions are entitled to deference by the court. Where a legal question is intertwined
with factual determinations or with value or policy determinations or where an agency's
interpretation and application of the law is of long standing, a court should defer to the
agency which has primary responsibility for determination of fact and policy. (footnote
In Berns, we stated that "where the question involved is 'very nearly [one
of] first impression,'
we do not use the 'great weight' standard but, instead, accord to the interpretation due
determining what the appropriate construction should be." Berns, 99 Wis. 2d at
omitted). In Local No. 695 v. LIRC, 154 Wis. 2d 75, 84 , 452 N.W.2d 368
(1990), we further
stated that "[w]here a legal question is concerned and there is no evidence of any special
or experience, the weight to be afforded an Agency-interpretation is no weight at all."
To the extent, that WERC's decision involved the application of the principles of
Hudson to the
specific context of collective bargaining and fair-share agreements under the MERA, we
WERC's decision great weight because of its expertise in these aspects of public sector
bargaining arena. Additionally, the application of constitutional principles to specific facts in
public sector collective bargaining arena involves public policy considerations, which WERC
specifically authorized to make. Section 227.10(1), Stats. For example, WERC was
fashion an appropriate remedy for fair-share fee related prohibited practices, an area in which
has substantial expertise and which involves policy considerations.
Certain questions presented by this case, such as whether the unions' disclosure
are matters of very nearly first impression, and we accord WERC's determinations due
To the extent that WERC's decision involved purely constitutional and legal questions of first
impression, such as whether Hudson applies retroactively or whether a "local
satisfy the Hudson requirements, we accord WERC's decision no weight.
Consideration of the issues presented by this appeal must begin with a review of
States Supreme Court decisions regarding fair-share fees. The cases include Railway
Dept. v. Hanson, 351 U.S. 225 (1956); Machinists v. Street, 367 U.S.
740 (1961); Abood v.
Detroit Bd. of Education, 431 U.S. 2,09 (1977); Chicago Teachers Union v.
Hudson, 475 U.S.
292 (1986); Ellis v. Railway Clerks, 466 U.S. 435 (1984); and
v.Ferris Faculty Ass'n, --- U.S. ---, 111 S.Ct. 1950 (1991).
In Hanson, the Court upheld the constitutionality of a union shop
agreement between a railroad
and several unions. Under the union shop agreement, authorized by Sec 2, Eleventh of the
Railway Labor Act (RLA), 45 U.S.C. S 152, all railroad employees, as a condition of
employment, were required to become union members. Employees of the railroad
provision as violative of their rights under the First and Fifth Amendments. The Court
union shop agreement, reasoning that Congress's determination that it would promote labor
to require all employees benefitting from union representation to share the costs of such
representation was certainly allowable. Hanson, 351 U.S. at 233-35. While the
record in Hanson
contained no evidence that union dues were used for ideological purposes, the Court noted
"[i]f 'assessments' are in fact imposed for purposes not germane to collective bargaining, a
different problem would be presented." Id. at 235.
In Street, the union shop provision of the RLA was again challenged.
Unlike Hanson, however,
the record in Street indicated that union dues were in fact used to support
Construing the RLA to avoid constitutional infirmity, the Court held that the union shop
authorized compulsory union membership only "to share the costs of negotiating and
collective agreements, and the costs of the adjustment and settlement of disputes," and not
provide the unions with a means for forcing employees, over their objection, to support
causes which they oppose." Street, 367 U.S. at 764. Thus, the court held that
the use of union
dues for political causes, over an employee's objection, violated the RLA. Id. at 768-69.
In Abood, the Court considered for the first time the constitutionality of a
state statute authorizing
a union shop arrangement in the public sector. The Michigan statute allowed public sector
to charge nonunion employees a "service fee" equal in amount to union dues. Abood and
nonunion employees challenged the union shop provision as a violation of their freedom of
association under the First and Fourteenth Amendments. The Court recognized that
support of a union interferes with a nonunion employee's "freedom to associate for the
advancement of ideas, or to refrain from doing so, as he sees fit." Abood, 431
U.S. at 222.
However, the Court held that pursuant to Hanson and Street, such
interference is constitutionally
justified by the legislative determination that a union shop is an important component in the
structure of labor relations. The Court held that "[t]he desirability of labor peace is no less
important in the public sector, nor is the risk of 'free riders' any smaller" than in the private
sector. Id. at 224.
However, the Court limited the purposes for which compelled union fees from an
nonunion employee could be constitutionally used:
We do not hold that a union cannot constitutionally spend funds
for the expression of political
views, on behalf of political candidates, or toward the advancement of other ideological
not germane to its duties as collective-bargaining representative. Rather, the Constitution
only that such expenditures be financed from charges, dues, or assessments paid by
who do not object to advancing those ideas and who are not coerced into doing so against
will by the threat of loss of governmental employment.
Id. at 235-36. The Court noted that the line between chargeable and nonchargeable
"somewhat hazier" in the public sector than the private sector, but because there was no
evidentiary record in the case, the Court declined to "try to define such a dividing line."
The dividing line between chargeable and nonchargeable expenditures in the private
considered in Ellis. The Court, again applying the union shop provision of the
among other issues the chargeability of extra-unit litigation (8) and organizing efforts. The Court
applied two tests to the expenditures: first, whether they were "necessarily or reasonably
for the purpose of performing the duties of an exclusive representative of the employees in
with the employer on labor-management issues," Ellis, 466 U.S. at 448; and
second, whether they
"involve additional interference with the First Amendment interests of objecting employees,
if so, whether they are nonetheless adequately supported by a governmental interest." Id. at
The Court held that both extra-unit litigation expenses and organizing expenses failed the first
test-neither was sufficiently related to the unions' duties as exclusive bargaining
representative to be
chargeable.. Id. at 451-53.
In Hudson, the Court considered a question expressly left open in
safeguards are necessary to "'[prevent] compulsory subsidization of ideological activity by
employees who object thereto without restricting the Union's ability to require every
to contribute to the cost of collective-bargaining activities."' Hudson, 475 U.S.
at 302, citing
Abood, 431 U.S. at 237. The procedure at issue in Hudson involved an
automatic advance rebate
to all nonunion employees of the amount the union determined to be nonchargeable, and a
challenge procedure whereby nonunion employees could dispute the unions' computation of
nonchargeable amount. Applying the reasoning of its previous union shop decisions, the
(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
the fee before an impartial decisionmaker, and an escrow for the amounts reasonably in
while such challenges are pending.
Id. at 310. The Court stated that the nonunion employee had the burden
of objecting to the
amount of the fee, but that the union must first provide adequate information regarding the
of the fee to allow the nonunion members to object to it intelligently. Id. at 306.
union procedure before the Court involved an advance rebate of - the nonchargeable fees to
nonunion employees, the Court did not comment on the nonunion employee's burden of
in the first instance to the use of agency dues for nonchargeable purposes.
Finally, in Lehnert, the Court considered the question expressly left open
in Abood--what is the
dividing line between chargeable and nonchargeable union activities in the public sector. The
majority of the Court set forth the following test:
[C)hargeable activities must (1) be "germane" to
collective-bargaining activity; (2) be justified
by the government's vital policy interest in labor peace and avoiding "free riders"; and (3)
significantly add to the burdening of free speech that is inherent in the allowance of an
Lehnert, --- U.S. at ---, III S.Ct. at 1959. Justice Scalia, joined by three
other Justices, stated that
he would hold chargeable only "the costs of performing the union's statutory duties as
bargaining agent." Id. at ---, 111 S.Ct. at 1975 (Scalia, J., concurring in part and dissenting
part). As discussed below, the Court' s application of the test to the various categories of
expenses offers general guidelines to lower courts in determining the chargeability of public
The first issue we consider is the chargeability to nonunion employees of union
public advertising, lobbying, exclusive representation of other bargaining units, litigation and
organizing. In Lehnert, the United States Supreme Court specifically considered
four of the five
categories of expenses at issue in this case. Because Lehnert was decided after
WERC's conclusions regarding chargeability merit no deference. Lehnert
makes clear that the
determination of chargeability is a constitutional determination. Lehnert, ---
U.S. at ---, 111
S.Ct. at 1959; Hohe v. Casey, No. 91-5002, (3rd Cir. Feb. 10, 1992), slip op.
at 20. This court
owes no deference to WERC regarding constitutional questions of first impression.
695, 154 Wis. 2d at 84.
The unions' notice listed as chargeable "[t]he public advertising of positions on the
or provisions in, collective bargaining agreements, as well as on matters relating to the
representational interest in the collective bargaining process and contract administration."
held that expenditures for public advertising "on matters relating to the representational
in the collective bargaining process and contract administration" were chargeable.
In Lehnert, the Court stated:
The Court of Appeals determined that the union constitutionally
could charge petitioners for
certain public-relations expenditures. In this connection, the court said: "Public relations
expenditures designed to enhance the reputation of the teaching profession... are, in our
sufficiently related to the unions' duty to represent bargaining unit employees effectively so
be chargeable to dissenters." 881 F.2d, at 1394. We disagree. Like the challenged
conduct, the public-relations activities at issue here entailed speech of a political nature in a
forum. More important, public speech in support of the teaching profession generally is not
sufficiently related to the union's collective-bargaining functions to justify compelling
employees to support it.
Lehnert, --- U.S. at ---, 111 S.Ct. at 1964. Justice Scalia agreed that
public relations expenses
are nonchargeable because they are not "part of this collective bargaining process." Id. at ---,
S.Ct. at 1979-80.
The unions and WERC urge that we read Lehnert narrowly and hold that
specifically related to collective bargaining or contract administration is chargeable. They
that public advertising is an important negotiating tool in the public sector. We agree, and
WERC's conclusion that costs for public advertising related to collective bargaining or
administration are chargeable. Unlike the public relations expenses at issue in
public advertising expenses by definition are related to the unions' collective bargaining
See Reese v. City of Columbus, No. C2-92-268, (S.D. Ohio May 7, 1992), slip
op. at 12-13.
WERC held that lobbying "for collective bargaining legislation or regulations or to
therein" or "for legislation or regulations affecting wages, hours and working conditions of
employes generally before Congress, state legislatures, and state and federal agencies" is
chargeable, but that lobbying for "political, charitable, and ideological matters" is not
In Lehnert, Justice Blackmun stated:
[W]e hold that the state constitutionally may not compel its
employees to subsidize legislative
lobbying or other political union activities outside the limited context of contract ratification
Lehnert, --- U.S. at ---, 111 S.Ct. at 1960-61. Justice Blackmun
explained that "[t]here is no
question as to the expressive and ideological content of these activities," and therefore there
significant possibility of interference with the dissenting employees' First Amendment
Id. at ---, 111 S.Ct. at 1960. Justice Scalia concurred in the result because he concluded that
lobbying expenses are not "part of this collective bargaining process." Id. at ---, 111 S. Ct.
1979-80 (Scalia, J., concurring in part and dissenting in part).
Thus, in accordance with Lehnert, we hold that expenses for lobbying
activities are chargeable
if the lobbying is related to contract ratification or implementation.
WERC held that the costs of representing other bargaining units are chargeable.
that the wages, hours and working conditions of other units "impact on the results obtained
collective bargaining for the employees in [the] unit involved herein. These costs arise in the
context of the local unions' affiliation fees to Council 48 and AFSCME.
In Lehnert, Justice Blackmun concluded that "a local bargaining
representative may charge
objecting employees for their pro rata share of the costs associated with otherwise chargeable
activities of its state and national affiliates, even if those activities were not performed for the
direct benefit of the objecting employees' bargaining unit." Lehnert, --- U.S. at
111 S.Ct. at
1961. In this context, Justice Blackmun noted that "[t]he essence of the affiliation
is the notion that the parent will bring to bear its often considerable economic, political, and
informational resources when the local is in need of them." Id. at ---, 111 S.Ct. at 1961.
the Court concluded that such costs are chargeable so long as they "may ultimately enure to
benefit of the members of the local union by virtue of their membership in the parent
organization." Id. at ---, 111 S.Ct. at 1961-62. Justice Scalia concurred in this holding.
---, 111 S.Ct. at 1980-81 (Scalia, J., concurring in part and dissenting in part).
Because WERC has expertise in determining whether the costs of certain activities
enure to the
benefit of the local unions, we give WERC's conclusion great weight and affirm its decision
such costs benefit the local unions and are chargeable.
WERC held that jurisdictional dispute proceedings, impasse mechanisms, and litigation
to concerted activity and collective bargaining" are chargeable, even if the nonunion
units are not involved. In Lehnert, Justice Blackmun stated that where
"unrelated to an objecting employee's unit," it is "not germane to the union's duties as
bargaining representative" and is not chargeable. Lehnert, --- U.S. at ---, 111
S.Ct. at 1964.
Justice Blackmun explained that such litigation "is more akin to lobbying (than bargaining] in
kind and effect." Id. at ---, 111 S.Ct. at 1963. Justice Marshall dissented from this
and Justice Scalia did not directly address it. Thus there is no majority holding on this issue
However, we find Justice Blackmun's plurality opinion persuasive. Moreover, it may
from Justice Scalials discussion of Ellis and from other early fair-share cases that a majority
the Court would find extra-unit litigation expenses nonchargeable. In Ellis, the
whether certain costs were chargeable under the RLA. With regard to litigation expenses,
held that only litigation "incident to negotiating and administering the contract or to settling
grievances and disputes arising in the bargaining unit," and "other litigation that concerns
bargaining unit employees and is normally conducted by the exclusive representative" is
chargeable. Ellis, 466 U.S. at 453. Justice Scalia quoted this portion of
Ellis and noted that
"there is good reason to treat" Ellis and other early cases "as merely reflecting
rule suggested in Hanson and later confirmed in Abood. Lehnert,
--- U. S. at 111 S.Ct. at 1977-78 (Scalia, J., concurring in part and dissenting in part).
Therefore, we conclude that unless the litigation is directly related to the objecting
bargaining unit, it is nonchargeable. Extra-unit litigation fails the first aspect of the
Lehnert test--it is not germane to the collective bargaining activity of the local
union. See Albro v. Indianapolis
Ed. Ass'n, 585 N.E.2d 666, 672 (Ind. Ct. App. 1992). We do not decide whether
the costs of
jurisdictional dispute proceedings and impasse mechanisms are chargeable. Because this
aspect of the case was not sufficiently addressed by WERC, it must be determined on
whether or to what extent the unions' jurisdictional dispute proceedings and impasse
relate to the local unions.
WERC held that every kind of organizing activity is chargeable--organizing within the
organizing and seeking recognition as bargaining agent for other units, and defending against
efforts by other unions to supplant the union as exclusive representative.
Lehnert did not address
the chargeability of organizing costs.
Applying as we must the Lehnert test to organizing costs, it is apparent
that such costs are not
chargeable. The only possible germane connection between organizing costs and the unions'
collective bargaining duties is the theory that any time the union is strengthened, all
units benefit by increased bargaining power. This rationale was rejected in
Lehnert with respect
to political lobbying expenses, general public relations expenses and extra-unit litigation
and under the compulsion of the United States Supreme Court's determination of a
question, we also reject this rationale. Charging organizing costs may in fact significantly
the burden of free speech of a nonunion employee who is an opponent of unionism.
In Ellis, the Court explained why organizing costs should not be
[W]here a union shop provision is in place and enforced, all
employees in the relevant unit
are already organized. By definition, therefore organizing expenses are spent on employees
outside the collective-bargaining unit already represented. Using dues exacted from an
employee to recruit members among workers outside the bargaining unit can afford only the
attenuated benefits to collective bargaining on behalf of the dues-payer.
[T]he free-rider rationale does not extend this far. The image of
the smug, self-satisfied
nonmember, stirring up resentment by enjoying benefits earned through other employees'
and money, is completely out of place when it comes to the union's overall organizing
Ellis, 466 U.S. at 452. See Albro, 585 N.E.2d at 673
(neither offensive nor defensive organizing
costs are chargeable under Ellis and the second and third criteria of
The second broad issue we consider is whether the fair-share fee procedure established
unions in response to Hudson satisfies the requirements of Hudson.
The initial consideration in this respect is whether Hudson may be applied
held that under the three-part test of Chevron oil Co. v. Huson, 404 U.S. 97,
Hudson may be applied retroactively. The unions argue that WERC erred
law did not clearly foreshadow Hudson's procedural requirements. We hold
that Hudson applies
Chevron set forth a three-part test for determining retroactivity, which
may be summarized as
(1) The decision to be applied prospectively must establish a
new principle of law,
either by overruling clear past precedent on which litigants may have relied, or by deciding
issue of first impression whose resolution was not clearly foreshadowed.
(2) Whether retroactive operation will further or retard
application of the new rule.
(3) Whether retroactive application would result in
substantial injustice to the parties.
See Chevron, 404 U.S. at 106-07. Because there is a presumption in
favor of retroactive
application, all three Chevron factors must be satisfied in order for a decision to
prospectively. Lowary v. Lexington Local Bd. of Education, 903 F.2d 422,
426-27 (6th Cir.
1990), cert. denied, 111 S.Ct. 385 (1990).
The first Chevron condition, referred to as the "clear break" principle, is
"the threshold test for
determining whether or not a decision should be applied retroactively." United States
457 U.S. 537, 550 n. 12 (1982). Every court to rule on the issue, affirmatively or by
Hudson retroactively without analysis, has held that it applies retroactively.
Lowary, 903 F.2d
at 429; Gilpin v. AFSCME, 643 F.Supp. 733, 738 (C.D. Ill. 1986),
aff'd, 875 F.2d 1310 (7th
Cir. 1989); Harrison V. Massachusetts Society of Professors/Faculty Staff
Union, 405 Mass. 56,
62 n. 7, 537 N. E. 2d 1237 (1989) ; Ellis v. Western Airlines, 652 F.Supp.
938, 939-40 (S.D.
Cal. 1986); McGlumphy v. Fraternal Order of Police, 633 F.Supp. 1074,
1077-79 (N.D. Ohio
1986). As Lowary concluded:
While Hudson did not overrule any prior cases, its
procedural requirements were clearly
foreshadowed by prior agency shop decisions as well as First Amendment, due process, and
representation case law.
Lowary, 903 F.2d at 429. Thus, Hudson was not a "clear
break" from prior law. (9) We
conclude that Hudson must be given retroactive application.
The first of Hudson's three procedural safeguards for the collection of
fair-share fees is that the
union must-provide "an adequate explanation of the basis for the fee." Hudson,
475 U.S. at 310.
The Court explained the purpose of this requirement:
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
the union's fee. Leaving the nonunion employees in the dark about the source of the figure
the agency fee--and requiring them to object in order to receive information--does not
protect the careful distinctions drawn in Abood.
Id. at 306. The "careful distinctions" referred to are the differences "between
collective-bargaining activities, for which contributions may be compelled, and ideological
unrelated to collective bargaining, for which such compulsion is prohibited."
Abood, 431 U.S.
at 236. The union must identify all of its expenditures, not merely those which in its opinion
concludes are nonchargeable. Hudson, 475 U.S. at 306-07.
In a footnote, the Court added the following language, which forms the basis for the
Work Foundation's objections to the unions' disclosure:
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."
Allen, 373 U.S., at
122, quoted in Abood, 4'31 U.S., at 239-240, n. 40. Thus, for instance, the
Union cannot be
faulted for calculating its fee on the basis of its expenses during the preceding year. The
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
by an independent auditor. With respect to an item such as the Union's payment of
to its affiliated state and national labor organizations, see n. 4, supra, for
instance, either a
showing that none of it was used to subsidize activities for which nonmembers may not be
charged, or an explanation of the share that was so used was surely required.
Hudson, 475 U.S. at 307 n. 18. The Right to Work Foundation objects to
two aspects of the
unions' disclosure which were upheld by WERC: (1) the failure of the unions to
audit the breakdown of expenses; and (2) the sufficiency of AFSCME's disclosure.
AFSCME and Council 48 had their general expenses audited, and then broke them
according to the chargeable and nonchargeable criteria. The Right to Work Foundation
that note 18 of Hudson requires an independent audit to verify the unions'
breakdown of the
various expenses. WERC concluded that because the unions' procedure included 100%
of challengers, fees while challenges are pending before an impartial decisionmaker, no
audit is necessary. We agree with WERC's conclusion.
Hudson indicates that the breakdown of expenses need not be audited if
there is a 100% escrow
of all amounts reasonably in dispute. (10) The
Court stated: "If the Union chooses to escrow less
than the entire amount, however, it must carefully justify the limited escrow on the basis of
independent audit, and the escrow figure must itself be independently verified."
Hudson, 475 U.S.
at 310 n. 23. The purpose of providing the information is to give the nonunion employees
of the basis of the fee, and the purpose of the escrow is to ensure that objecting nonunion
employees' funds are not used, even temporarily, for purposes to which a nonunion
object. Without an escrow of the entire amount, a more thorough audit is required to protect
latter interest. With a 100% escrow of all fair-share fees reasonably in dispute, it is not.
The audit provided by AFSCME and Council 48 was sufficient to ensure that their
valid; the unions' detailed categories of chargeable and nonchargeable activities provided an
"adequate explanation of the basis for the fee." Id. at 310.
Whether the expenses were properly broken down according to the chargeable and
criteria may be determined later by an impartial decisionmaker. Because all of the
are placed in an interest-bearing escrow pending resolution of the challenge, there is no
of any First Amendment violation. Moreover, an auditor does not have the legal authority to
make the determination of what activities are chargeable and what are not, and it is
for notice purposes to require an auditor to determine whether a certain expense was, in fact,
"public advertising" expense or an "organizing" expense. This can be better accomplished
impartial decisionmaker. 11.
The Right to Work Foundation also argues that AFSCME's disclosure was
explanatory because its general expenses were "neither explained nor sub-divided
AFSCME provides the nonunion employees with detailed categories of which activities it
considers chargeable and nonchargeable, a list of 18 separate audited expenses, and the
of each expense which AFSCME determined is chargeable to objecting fee payors. The crux
Hudson in this respect is whether the disclosure gave the nonunion employees
information about the amount of and basis for the fee to allow them to object to it
WERC held AFSCME's disclosure to be sufficient, and we affirm that conclusion as being
appropriately reflective of the guidelines of Hudson.
WERC also upheld the unions' procedure of deducting a fairshare fee equal to full
and requiring nonunion employees object annually within thirty days after the notice is given
they want an advance rebate. The Right to Work Foundation challenges the objection
on two grounds. First, the Foundation argues that it is unduly burdensome. This argument
meritless. Abood, Hudson, Lehnert and other United
States Supreme Court decisions in this area
make clear that objection is required. "[D]issent is not to be presumed." Street,
367 U.S. at 774.
The only limitation in Hudson is that the nonunion employee must have "a
opportunity to challenge the amount of the fee before an impartial decisionmaker."
U.S. at 310. As one court stated:
Since Hudson places the burden of objection upon the
employees (as contrasted to burden of
proof), we do not consider unreasonable the plan's provision that each member be required
object each year so long as the union continues to disclose what it must before objections are
required to be made.
Tierney v. City of Toledo, 824 F.2d 1497, 1506 (6th Cir. 1987). See also
Mitchell v. Los
Angeles Unified School District, No. 9028 56180 (9th Cir. April 29, 1992). This
equally valid here; the unions' requirement of annual objection is reasonable.
Second, the Right to Work Foundation argues that the objection requirement violates
Foundation asserts that MERA requires an advance rebate of the nonchargeable amount to all
nonunion employees, regardless of any objection. The Foundation notes that sec.
Stats., defines a fair-share as the "proportionate share of the cost of the collective bargaining
process and contract administration measured by the amount of dues uniformly required of
members," and that in Browne II we stated that "it is an unfair labor practice to
municipal employee to pay for anything more than their proportionate share of the cost of
collective bargaining and contract administration" Browne II, 83 Wis. 2d at
334-35 n. 9. The
Foundation concludes that the function of an "objection" is not to object to payment of
nonchargeable expenses, but merely to challenge the unions' calculation of such expenses.
This argument of the Right to Work Foundation is also without merit.
Hudson reiterated the
principle that a nonunion employee's objection to payment of nonchargeable expenses will
The nonmember's "burden" is simply the obligation to make his
objection known. See
Machinists v. Street, 367 U.S., at 774 ("[D]issent is not to be presumed--it must
made known to the union by the dissenting employee"); Railway Clerks v.
Allen, 373 U.S., at
119; Abood, 431 U.S., at 238.
Hudson, 475 U.S. at 306 n. 16. The language in Street
indicates beyond question that the
"objection" required of the nonunion employee refers in the first instance to the
use of the funds,
not merely the calculation of the funds: "Any remedies, however, would properly be granted
to employees who have made known to the union officials that they do not desire their funds
be used for Political causes to which they object." Street, 367 U.S. at 774. To
the extent that
Browne II indicates that an advance rebate is required for all nonunion
employees, that language
is withdrawn. It is a prohibited practice under MERA only where the union exacts fair-share
absent the Hudson safeguards or where the unions use, over an employee's
fees for nonchargeable purposes. (12)
The second of Hudson's three procedural safeguards is that there must be
"a reasonably prompt
opportunity to challenge the amount of the fee before an impartial decisionmaker"
U.S. at 310. WERC upheld the unions' challenge requirement, which allows objecting
to challenge the unions' calculation of the nonchargeable amount before an impartial
The arbitrator's decision is binding only on the challenging nonunion employees.
The Right to Work Foundation argues that the arbitrator's decision should apply to all
employees, not merely the challengers. The Foundation asserts that this extra hurdle of
not only an "objection," but also a "challenge" is unwarranted, and ignores the command in
Hudson that "the procedure be carefully tailored to minimize the infringement"
employees' rights. Hudson, 475 U.S. at 303. In conformity with the teachings
of Hudson, we
reject the Foundation's position.
The fair-share scheme discussed in Hudson involved an automatic advance
rebate. The Chicago
Teachers Union (CTU) deducted only 95% of full union dues from all nonunion employees,
percentage it calculated was chargeable. The question involved in Hudson was
safeguards are required to allow nonunion employees to challenge intelligently the union's
calculation of the nonchargeable amount. The CTU procedure presumed an objection to
expenditure of fair-share fees for nonchargeable expenses. Previous cases make clear that
a presumption is not constitutionally required. See supra, p. 29-31 (concluding
that full union
dues may be deducted absent objection). Therefore the analysis in Hudson
presumes an original
objection and sets forth the requirements for protecting a nonunion employee's right to
the union's determination of the chargeable amount.
The unions' challenge procedure in this case is thus constitutionally valid as long as it
requirements of Hudson. Objection need not be presumed at either
level--objection to the use of
fees for nonchargeable activities, or objection to the unions' determination of the
amount. It is consistent with Hudson to limit the effect of the arbitrator's
decision to challengers.
Where the notice provisions are adequate, objecting nonunion employees who fail to
unions, calculation of the nonchargeable amount waive any challenge to that calculation.
Under the unions' procedures, AFSCME's and Council 48's expenditures were
audited, but the
local unions' expenditures were not. Also, the notice did not set forth the major categories
local unions' expenses. The notice explained that: "Council 48 has determined that the
of chargeable activities of these local unions is at least as great as the percentage of
activities of Council 48." This is commonly referred to as a "local presumption."
WERC rejected this presumption, and also held that the local unions must provide
information regarding their expenses:
As to the information provided in the notice for the affiliated local
unions, there is only an
unverified single amount that is alleged to represent the total expenses for all of these locals.
There is neither a sufficient breakdown and explanation of the expenses, nor an audit of such
figures. While we recognize the practical problems with requiring the unions to provide such
information as to the locals' expenditures, we cannot accept, and do not read the Court in
as accepting, a presumption as to the chargeable portion of locals' expenses based upon a
However, WERC fashioned a modified local presumption, stating:
We think that were an independent auditor to take a random
sampling of a representative
number of the local unions and audit their records, and if that sampling established to the
satisfaction that the locals' expenditures always have a lesser percentage of non-chargeable
expenses than does Respondent District Council 48, such a presumption would be established
would be sufficient for notice purposes.
The unions argue that these requirements are unnecessary under Hudson,
and also that they are
unduly burdensome. The unions stress the language in Hudson, 475 U.S. at 307
n. 18, that the
union need not provide an "exhaustive and detailed list of all its expenditures," and that
precision" is not required in calculating the chargeable amount. According to the unions,
WERC's decision erroneously overlooks the practical difficulties of such requirements on
local unions. The Right to Work Foundation responds that Hudson specifically requires a
audit, while WERC asserts that its modified presumption is constitutionally sufficient. We
with WERC that a modified presumption satisfies Hudson.
The local presumption implemented by the unions, based solely upon a union officials
experience and no statistical evidence, is clearly insufficient under Hudson. An independent
of the local unions, to some degree, is required by Hudson. The text of note 18
of Hudson refers
to the local union (Chicago Teachers Union, Local No. 1), and states that "adequate
surely would include the major categories of expenses, as well as verification by an
auditor." Hudson, 475 U.S. at 307 n. 18. Thus Hudson requires
an independent local union
audit. Other courts have also rejected a broad "local presumption." Lowary,
903 F.2d at 432,
Requiring nonmembers to contribute to the cost of collective
bargaining involves a substantial
interference with their First Amendment right of freedom of association. Although it may be
somewhat burdensome on the unions, full disclosure of financial information is a minimal
requirement in exchange for this interference. Hudson and a due regard for
values lead to this conclusion. The union must provide detailed information so that the
teachers can understand why they are being charged. Only then can they make an informed
See also Hohe v. Casey, No. 91-5002 (3rd Cir. Feb. 10, 1992), slip op.
at 23-26; Lehnert v.
Ferris Faculty Ass'n, 707 F.Supp. 1473, 1479-80 (W.D. Mich. 1988),
aff'd, 893 F.2d 111 (6th
Cir. 1989), cert. denied sub nom., Lindsay v. Ferris Faculty Ass'n,
110 S.Ct. 267 (1990).
While a broad local presumption is insufficient, we conclude that WERC's modified
presumption--auditing a random sampling of a representative number of local unions--satisfies
Hudson. It is
fairer to the local unions to allow such a presumption, and it is consistent with WERC's
authority to fashion an appropriate remedy. The language of Hudson is
unequivocal that an
independent audit is required, but it does not specify to what extent. To minimize the burden
the local unions, and because fair notice, not precision, is the goal of Hudson,
we conclude that
the independent auditor need only verify, upon a random sampling of a representative
the local unions, that the locals' expenditures always have a lesser percentage of
expenses than District Council 48. That assessment, if challenged, must be reviewed by the
Finally, the unions object to WERC's determination that the escrowed funds must be in
of a neutral third party, because WERC "has made no findings that the escrow account
by AFSCME District Council 48 is a subterfuge for AFSCME's use of the disputed fair
fees." The fact that the present arrangement is not a subterfuge is irrelevant. Escrow has an
accepted legal meaning. Black's Law Dictionary 489 (5th ed. 1979) provides in relevant
Escrow. A writing, deed, money, stock, or other property
delivered by the grantor, promisor
or obligor into the hands of a third person, to be held by the latter until the
happening of a
contingency or performance of a condition, and then by him delivered to the grantee,
or obligee. [emphasis added).
The unions must escrow the collected fees in an account controlled by a neutral third
the "escrowed" funds were in a segregated account completely in the control and ownership
the unions and did not constitute a true escrow.
WERC held that the employers did not commit a prohibited practice by deducting the
because "there is no evidence or argument that the [employers] have taken any action other
to comply with the terms of a provision of their respective collective bargaining agreements
the local unions, as required by law, by acting as a conduit for the Respondent Unions."
has substantial expertise in determining whether a prohibited practice has occurred, and we
its determination great weight. The Right to Work Foundation challenges WERC's
arguing that the employer as well as the union has an affirmative duty to ensure that adequate
safeguards are in place before fair share fees are deducted. While we agree that federal
have established a duty on behalf of the employers to ensure that Hudson is
complied with, we
affirm WERC's conclusion that the employers in this case did not commit a prohibited
Hudson provides that "the government and union have a
responsibility to provide procedures that
minimize that impingement and that facilitate a nonunion employee's ability to protect his
Hudson, 475 U.S. at 307-08 n. 20 (emphasis added). See also Gilpin v.
AFSCME, 875 F.2d
1310, 1312 (7th Cir. 1989), cert. denied, 493 U.S. 917 (1989)
("[B]oth the public employer and
the union can be held liable in a suit under 42 U.S.C. Sec. 1983 for violating the
right of free speech under the First Amendment."); Hohe v. Casey, No.
91-5002 (3rd Cir. Feb.
10, 1992), slip op. at 14 ("[B]oth the public employer and the exclusive representative shall
accountable for the constitutional violation."). Thus it is clear that the employer has an
affirmative duty under Hudson to ensure that proper procedures are established
before it deducts
fair-share amounts from a nonunion employee's paycheck.
Section 111.70(3)(a)1, Stats., provides that "it is a prohibited practice for a municipal
[t]o interfere with, restrain or coerce municipal employes in the exercise of their rights
in sub. (2)." Section 111.70(2), Stats., states that municipal employees have a right to refrain
from union activities "except that employes may be required to pay dues in the manner
in a fair-share agreement." We agree with WERC that an employer's failure to ensure that
unions' fair-share fee procedures satisfy Hudson does not constitute
"interference" with an
employee's right to refrain from union activity, and that the employer's deduction of
fees pursuant to the agreement also does not implicate a prohibited practice.
MERA is designed to facilitate peaceful employment relations in the public sector, see
111.70(6), Stats., and we conclude that requiring,oversight by the employers of the unions'
fair-share fee procedures may potentially under-mine that design. It is the union and not the
that benefits from the imposition of fair-share fees, and nothing in MERA nor the cases
interpreting MERA indicates that a municipal employer commits a prohibited practice by
to ensure that the unions' fair-share fee procedures meet constitutional muster. Indeed, sec.
111.70 (3)(a)3, Stats., provides that it is a prohibited practice for a municipal employer "[t]o
encourage or discourage a membership in any labor organization by discrimination in regard
hiring, tenure, or other terms of employment; but the prohibition shall not apply
to a fair-share
agreement." (emphasis supplied).
Finally, we consider the propriety of the relief ordered by WERC. As part of its
relief, WERC ordered the unions to place into an interest-bearing escrow account 100% of
fairshare fees deducted from all nonunion employees from the date of Hudson,
plus 7% interest
from the date of deduction, until the unions establish proper procedural safeguards.
those procedural safeguards are in place, the escrowed amounts will be disbursed in
with those procedures.
The unions first argue that WERC acted beyond its jurisdiction in fashioning this
unions assert that such an order amounts to a "defacto certification" of a class of all
employees, and that WERC has no power to certify a class or to expand an already certified
The unions cite WERC's decision in the underlying Johnson case (consolidated
with this action
in 1986 for rehearing in light of Hudson, see supra, p. 6), wherein
WERC denied a request for
certification because the action had not been certified as a class action prior to the circuit
referral to WERC. The unions also cite Gilpin, 875 F.2d at 1313, where the
affirmed the district court's refusal to certify a class because of the potential "serious
between nonunion employees hostile to the union and nonunion employees merely taking a
ride. Neither decision is controlling, however, because WERC did not certify a class in this
case--it merely fashioned a remedy which in effect enabled the unions to avoid committing a
This court has held that "[t]here is no doubt that the WERC has substantial remedial
fashion remedies to effectuate the purpose of the statute for fair employment and peaceful
negotiation and settlement of municipal labor disputes." Bd. of Education v.
WERC, 52 Wis. 2d
625, 635, 191 N.W.2d 242 (1971). See also Libby, McNeill & Libby v,
WERC, 48 Wis. 2d
272, 286-87, 179 N.W.2d 805 (1970) ; and WERC v. Evansville, 69 Wis. 2d
140, 158, 230
N.W.2d 688 (1975). These cases establish that WERC's choice of remedy should be given
substantial deference, and should not be set aside unless it is outside the legal authority of
or the "order is a patent attempt to achieve ends other than those contemplated by
Evansville, 69 Wis. 2d at 166-67.
The prospective remedial order in this case was within WERC's legal authority, and
to effectuate the purposes of MERA. The order clearly addresses and prevents a prohibited
practice--the deduction and use of fair-share fees without sufficient procedural safeguards.
unions cannot insist on continuing a prohibited practice with regard to a specific class of
individuals merely because those individuals did not object to it. In Lowary,
903 F.2d at 430, the
court held that a nonobjecting nonunion employee could not be penalized for failing to follow
constitutionally inadequate objection procedures. Because the Hudson
procedural safeguards exist
in order to allow nonunion employees to decide intelligently whether to object to the
and because even the temporary use of nonchargeable amounts from objecting fee payors
avoided, WERC properly ordered the unions to escrow all fair-share fees deducted from the
of Hudson until adequate procedures are established. (14)
The unions also argue that WERC's order to escrow 100% of all fair-share fees denies
money which they are unquestionably entitled to retain. This argument is misplaced. Until
unions comply with Hudson, they are not entitled to the use of any fair-share
The unions' argument appears to be that there are some amounts which may never be
as nonchargeable, and therefore such amounts are collectible regardless of compliance with
Hudson. The language of Hudson clearly indicates that these
categories of expenses, which no
employee could challenge as nonchargeable, arise only after proper notice and only where
is an independent audit of the breakdown of expenses:
If, for example, the original disclosure by the Union had included
a certified public
accountant's verified breakdown of expenditures, including some categories that no dissenter
reasonably challenge, there would be no reason to escrow the portion of the nonmember's
that would be represented by those categories. 23/
23/ If the Union chooses to escrow less than the entire
amount, however, it must
carefully justify the limited escrow on the basis of the independent audit, and the escrow
must itself be independently verified.
Hudson, 475 U.S. at 310. The Court was referring in this passage to the
escrow of the amounts
reasonably in dispute after proper notice was provided. WERC's order requiring 100% of
all fair-share fees collected after the date of Hudson is effective only until the
unions' procedures comply
with Hudson. The escrow ordered by WERC does not permanently deprive the
anything. Once the appropriate procedures are in place and approved, the escrowed money
be disbursed as provided in the procedures. At this point, the unions will receive the full
amount from nonobjectors, and the fair-share amount from objectors. (15) Before the appropriate
procedures are in place, the union is not entitled to retain or use anything. (16)
WERC held that the unions' notice requirements for challengers were procedurally
in the requirement of certified mail and a contribution of $5.00 to the cost of the arbitration,
in the failure to put nonunion employees on notice that failure to challenge waives the right
receive the benefits of an arbitration decision. Accordingly, WERC vacated the arbitrator's
decision in this case and held that a new objection and challenge period and a new arbitration
required. The unions appeal this decision because they claim that the objectors voluntarily
not to participate in the arbitration hearing. (17) The unions assert that because all of the
were ordered to be challengers as a matter of law, they cannot be prejudiced by the defective
notice. We disagree.
First, it is reasonable for WERC to conclude that a faulty notice provision taints the
arbitration process. The propriety and effect of arbitration procedures is a matter in which
has great expertise, and we give WERC's decision in this respect great weight.
Second, because the unions' general notice provisions were defective, i.e., the local
disclosure was inadequate and unaudited, the arbitration must necessarily be vacated because
potential objectors who failed to object because of insufficient information may now object
are entitled to challenge the unions' determination and participate in the arbitration.
is appropriate only after Hudson has been complied with. See Lucid v.
City and County of San
Francisco, 136 L.R.R.M. (BNA) 2877, 2880-81 (N.D. Cal. 1991) ("[A]rbitration as
by Hudson is limited to resolving disputes over the amount of the agency fee
adequate disclosures have been made and an objection is lodged.") (emphasis in original)
Lucid court also held that the union could not insist that nonunion employees
arbitration if the unions have not given them adequate disclosure. Id. at 2880 n.
After vacating the arbitrator's award, WERC ordered the unions to escrow in an
account an amount equal to all the fair-share fees collected from complainants between
1, 1983 (18) and March 4, 1986, the date of
Hudson, plus interest at the rate of 7% per annum
from the date the fees were deducted, and that an impartial decisionmaker would determine
properly chargeable amount for those years. The nonchargeable amount, along with the 7%
interest and any interest earned by the escrow account, are to be refunded to the
The Right to Work Foundation asserts that this retrospective remedy is "woefully
that the proper remedy is restitution to all nonunion employees of all fair-share fees collected
the unions after January 1, 1983, and issuance of a cease-and-desist order barring further
collection absent compliance with Hudson. The argument supporting such relief
is simply that
the unions are entitled to nothing absent the Hudson safeguards. WERC
rejected this argument
because "to refund all of the fees collected from Complainants would result in a 'windfall' to
Complainants and would be the equivalent of awarding 'punitive damages' against the
Unions." Additionally, WERC noted that because MERA requires the unions to represent all
employees in the bargaining unit, including the nonunion employees, such relief is
with the government's interest in labor peace and avoiding free riders.
We hold that WERC did not abuse its discretion by refusing the Right to Work
requested remedy. In the fair-share fee context, the United States Supreme Court has
two primary policy objectives: "to require every employee to contribute to the cost of
collective-bargaining activities," Abood, 431 U.S. at 237, and to protect
nonunion employees from
"compulsory subsidization of ideological activity." Id. The latter interest must
not be allowed
to eviscerate the former, for to so interpret Hudson is to exalt form over
substance. The unions'
failure to provide adequate notice concerning the basis for the fair-share fee should not be
transmuted into a loss of fees to which, upon establishment of proper procedures, it is
unquestionably entitled. Depriving unions of amounts to which they are clearly entitled is
in nature, and squares neither with the government's interest in promoting labor peace by
free riders nor with the government's interest in assuring that fair-share fee deductions
interfere with nonunion employees' First Amendment rights. The nonunion employees,
sufficiently protected by requiring the unions to refund the excess amounts deducted, plus
from the date of the deduction. See Street, 367 U.S. at 771-75.
WERC has broad authority to "order the remedy most consistent with the public
Appleton Chair Corp. v. Carpenters Local 1748, 239 Wis. 337, 343, 1 N.W.2d
188 (1941), and
it is most reasonable to conclude that it is not in the public interest to punish the unions for
technically insufficient procedural safeguards. As Judge Posner stated:
Not only would the "restitution" that the [Right to Work)
Foundation seeks confer a windfall
on the nonunion employees but it might embarrass the union financially. Yet those nonunion
employees who, while not wanting to pay more (and perhaps even wanting to pay less) than
"fair share" fees, have no desire to ruin the union or impair its ability to represent them
might not want so punitive a remedy.
Gilpin, 875 F.2d at 1313. See also Lowary, 903 F.2d at
432-33. We agree, and affirm WERC's
order regarding the fair-share fees deducted between January 1, 1983 and March 4, 1986, the
In conclusion, we hold that political and ideological lobbying, extra-unit litigation and
are nonchargeable activities. We conclude that Hudson applies retroactively,
and that the unions'
fair-share fee procedure is defective because there was no independent audit to determine
the local unions' percentage of nonchargeable expenses was in fact less than that of Council
We also conclude that while municipal employers have a duty under federal law to ensure
unions' procedure satisfies Hudson, their failure to do so is not a prohibited
practice. Finally, we
affirm WERC's prospective and retrospective relief, and reject the Right to Work
request for punitive restitution.
We remand the case to the circuit court with instructions to remand the case to WERC
determination of the chargeability of the unions' activities in light of Lehnert
and this opinion and
for a determination of whether the unions' current procedures meet the requirements of
BY THE COURT:
Affirmed in part, reversed in part, and remanded.
STATE OF WISCONSIN
IN SUPREME COURT
Phyllis Ann Browne, et al.
Wisconsin Employment Relations Commission,
Bablitch, J. (Dissenting in part). Although I agree with much of the majority opinion,
respectfully dissent to two of the majority's conclusions: 1) The majority concluded that
expenses with respect to concerted activity and collective bargaining are chargeable only if
are directly related to the objecting employee's bargaining unit; and, 2) The majority
that organizing expenses are nonchargeable to the objecting employee.
Litigation Expenses. WERC held that jurisdictional dispute proceedings,
and litigation relating to concerted activity and collective bargaining are chargeable. I would
to that holding. Alternatively, I would hold that such expenses are chargeable so long as the
benefit was direct or indirect, and would remand the case to WERC for factual findings. I
set the same standard for litigation expenses relating to jurisdictional dispute proceedings and
impasse mechanisms, and remand for appropriate findings.
Organizing Expenses. WERC held that the costs for organizing within
and outside the
nonmembers' bargaining units, the costs in seeking exclusive representation rights in other
bargaining units, and the costs for defending against efforts by other organizations to oust
unions from units they represent are chargeable. I agree with WERC. All such organizing
activities are essential to the basic strength of the union structure, and therefore, contrary to
assertion of the majority, germane to collective bargaining. The stronger the structure, the
benefits inure to all employees because of the ability of the union to bargain collectively with
employer and to serve all the employees. Lehnert did not address this issue and
does not compel
the result reached by the majority.
Accordingly, I dissent from the above two parts of the majority opinion.
I am authorized to state that Justice Shirley S. Abrahamson joins in this dissent.
1. Section 111.70(1)(f), Stats., provides:
"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
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
and to pay the amount so deducted to the labor organization.
Section-111.70(2), Stats., provides in relevant part:
Municipal employes shall 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,
engage in lawful, concerted activities for the purpose of collective bargaining or other mutual
or protection, and such employes shall have the right to refrain from any and all such
except that employes may be required to pay dues in the manner provided in a fairshare
2. Browne v. Milwaukee Bd. of School
Directors, No. 410584 (Milw. Cir. Ct., filed May
29, 1973); and Johnson v. County of Milwaukee, No. 411578 (Milw. Cir. Ct.,
filed July 10,
3. At an earlier stage of this action, this court
affirmed an order of the circuit court overruling
the demurrer of the unions to the original complaint. Browne v. Milwaukee Bd. of
Directors, 69 Wis. 2d 169, 230 N.W.2d 704 (1975) (Browne I). That
decision has no effect on
the present case.
4. For example, the unions list as chargeable
"[g]athering information in preparation for the
negotiation of collective bargaining agreements," and list as nonchargeable "[s]upporting and
contributing to charitable organizations, political organizations and candidates for public
ideological causes and international affairs."
5. We refer throughout the opinion to both
"objectors" and "challengers." Objectors (also
referred to by various courts as "dissenters") are those nonunion employees who object to the
union's use of their funds for nonchargeable activities. Challengers are those objecting
employees who go on to challenge the unions' calculation of the nonchargeable amount.
6. The parties stipulated to the nonchargeable
amounts for all fair-share fees collected prior
to January 1, 1983.
7. See Jordi v. Sauk Prarie School Bd.,
651 F.Supp. 1566, 1579 (W.D. Wis. 1987)
("(WERC] is in the process of developing Wisconsin policy on fair share agreements in light
the United States Supreme Court's decision in Hudson.").
8. "Extra-unit litigation" refers to litigation not
having any connection with the particular
bargaining unit. Ellis, 466 U.S. at 453.
9. WERC also analyzed the second and third criteria
of the Chevron test, and concluded that
Hudson satisfied neither.
10. It must be noted that the amounts "reasonably in
dispute" include all fair-share fees
collected from nonunion employees prior to the expiration of the initial objection period. As
stated, "[b]y exacting and using full dues, then refunding months later the portion that it was
allowed to exact in the first place, the union effectively charges the employees for activities
are [nonchargeable]." Ellis, 466 U.S. at 444. WERC concluded, and we
affirm its decision, that
in order to deduct a fair-share fee equal to full union dues, the unions must escrow 100% of
fair-share fees in an interest-bearing account until the expiration of the objection period, and
continue to escrow 100% of the fair-share fees exacted from challenging nonunion employees
the arbitrator determines the properly chargeable amount.
11. The Seventh Circuit noted that requiring an
audited breakdown of expenses would make
the notice prohibitively complicated, and may actually make a potential objector's decision
difficult. In Gilpin v. APSCME, 875 F.2d 1310, 1316 (7th Cir. 1989),
cert. denied, 493 U.S.
917 (1989), Judge Posner stated:
The plaintiffs complain that despite its detail the notice does not
explain the principles under
which, say, $16,788 out of a total of $17,445 for "Editorial Services" is chargeable to the
fee portion of union dues. But if it did, the notice would be as long and complicated as an
12. As we indicated supra at P. 26 n. 10,
the unions must escrow 100% of all fair-share fees
in an interest-bearing account until the expiration of the objection period to ensure that an
objector's fees are not used, even temporarily, for nonchargeable purposes. Additionally, we
that the amounts refunded to objectors and challengers must be refunded with interest. It is
equally constitutionally objectionable for the municipal employers to earn interest from
13. Of course if the independent auditor determines
that the locals' expenditures do not always
have a lesser percentage of nonchargeable expenses than District 48, an independent audit of
local union is required.
14. We note that WERC could have gone further and
ordered the unions to escrow 100% of
all fair-share fees ever collected until all nonunion employees had a proper opportunity to
or challenge the fees. WERC declined to do so, and we also decline to do so. Such an
would be nearly as punitive a remedy as the retributive restitution sought by the National
to Work Foundation.
15. If, however, the objectors challenge the unions'
determination of the nonchargeable
amount, their deductions must remain escrowed until the arbitrator determines the proper
fee. Hudson, 475 U.S. at 310.
16. Moreover, as discussed supra at pp.
25-28, the unions' procedure does not include a
certified public accountant's verification of the breakdown of expenses, and the only reason
WERC upheld that portion of the scheme is because of the 100% escrow of the challenged
amounts. Thus, even after the unions' procedures meet the requirements of
Hudson, the unions
must escrow 100% of all fees reasonably in dispute.
17. The unions do not challenge WERC'S
determination that its notice was defective.
18. The parties entered a stipulation concerning the
fairshare fees deducted prior to 1983.