Charging Union Dues for Politcs may Violate Free Speech Rights of Non-Members -- Knox v. SEIU

In Knox v. Service Employees Int' Union, Local 1000, the SEIU imposed a special assessment on all employees which it represented -- union members and non-members alike -- in order to fund a special campaign to defeat  Propositions 75 and 76, which were part of Arnold Schwarzenegger's 2005 attempt at public finance reform. 

The non-members brought a class action alleging that this violated prior Supreme Court precedent holding that a public sector union cannot charge non-member employees for the cost of its political activities without first giving them prior written notice and an opportunity to opt out of the payments (i.e., so-called "Hudson Notice").  The Court agreed.

The result itself was pretty obvious.  But what was really interesting about the decision is the extent to which the Supreme Court laid the groundwork for a future decision that might strip unions of the right to make coerced political contributions from non-members. For example, the Court first explained that imposing mandatory charges for political purposes inevitably raises serious First Amendment concerns:

When a State establishes an “agency shop” that exacts compulsory union fees as a condition of public employment, the dissenting employee is forced to support financially an organization with whose principles and demands he may disagree. Because a public-sector union takes many positions during collective bargaining that have powerful political and civic consequences the compulsory fees constitute a form of compelled speech and association that imposes a “significant impingement on First Amendment rights.”

In contrast with this impingement on employee constitutional free speech rights, the Court noted that "“unions have no constitutional entitlement to the fees of nonmember-employees” and their “collection of fees from nonmembers is authorized by an act of legislative grace . . . that we have termed “unusual” and “extraordinary.”  Interestingly the Court then cast doubt on the continuing validity of the precedents allowing such political deductions under certain circumstances as an "anomaly" that may violate the First Amendment. 

By authorizing a union to collect fees from nonmembers and permitting the use of an opt-out system for the collection of fees levied to cover nonchargeable expenses, our prior decisions approach, if they do not cross, the limit of what the First Amendment can tolerate.

(emphasis added). 

Thus, while the SEIU's political charges were easily struck down because they were not preceded by notice and a right to opt-out, the Court clearly implied that even these procedural protections may not be enough to justify such deductions in the future.





Court Clarifies When Commissions Are "Earned" or "Vested" -- Sciborski v. Pacific Bell Directory

Most commission plans contain some sort of caveat to the effect that the employer reserves the right to change or modify the commission calculation at any time before the commission is earned or paid out.  This can be problematic in California, as commissions are a form of "wages" which are fully protected by the Labor Code.  And the Labor Code generally prohibits the reduction of any wage once it has become earned and vested.        

Determing when a commission is vested (and thus no longer subject to reduction) is a tricky business that involves an interplay between private contract terms and public wage protection statutes.  The recent opinion of the Fourth District Court of Appeals in Sciborski v. Pac. Bell Directory contains some very useful guidance, however.

Sciborski had been paid a commission on an account that the Company claimed she had been assigned only due to a "clerical error."  The Company claimed that proper assignment of the account was a threshold condition that had not been satisfied and that no commission had been properly earned.  The Court disagreed.  It found that the parties' commission agreement did not expressly address this scenario.  More importantly, the Court also found that any implied contract term that would deny a commission under these circumstances would be unenforceable under California law in any event. 

[A]n employer's right to define an “earned” commission in the employment contract is not unlimited. Generally, the essence of an advance is that at the time of payment the employer cannot determine whether the commission will eventually be earned because a condition to the employee's right to the commission has yet to occur or its occurrence as yet is otherwise unascertainable.  Thus, for example, an employer may expressly condition an earned sales commission on the sale becoming final (e.g., no returns within a specified time or final payment received) or on the employee completing work in providing follow-up services to the customer.  But an employer may not require an employee to agree to a wage deduction in the guise of recouping an advance based on conditions that are unrelated to the sale and/or that merely reflect the employer's attempt to shift the cost of doing business to an employee.  Where a deduction is unpredictable, and is taken without regard to whether the losses were due to factors beyond the employee's control, an employer cannot avoid a finding that its sales commission policy is unlawful simply by asserting that the deduction is just a step in its calculation of commission income.

(Internal citations and punctuation omitted)

     The message of Sciborski is that one-sided conditions on an employee's right to finally "earn" a commission are likely unenforceable.   If the employee has done all of the work necessary to make the sale and the revenue is received by the employer, then a court may reject attempts to impose additional conditions -- especially where these conditions are  "unrelated to the sale," "unpredictable," or "beyond the employee's control."