US Supreme Court Requires Unions to Receive Consent from Non-Members for Special Fee Assessments and to Provide Extra ‘Hudson Notice’ for Special Fees

In Knox v. Service Employees International Union, Local 1000 the United States Supreme Court held that California unions must receive "opt-in" consent of non-members before charging special fees for political purposes expenses, instead of the regular "opt out" practice. The Supreme Court also held that unions must provide an additional "Hudson notice" (a notice to service fee payers of the "fair share" amount and means of challenging the amount) -regarding the special assessment or dues increase.

The suit began in 2005 when former Governor Schwarzenegger requested a special election to consider several propositions, including Proposition 75, which required unions to obtain employees' affirmative consent before charging them fees to be used for political purposes. California unions, including SEIU Local 1000 (SEIU), opposed Proposition 75, and imposed a special assessment on its bargaining unit members to fight the proposition. The special assessment, named the "Emergency Temporary Assessment to Build a Political Fight-Back Fund," increased due and fees to 1.25% of gross salary (from 1%) and eliminated the existing fees and dues cap of $45 per month.

Non-members objected to the assessment stating that it was for political purposes and that they should not be required to pay the assessment. They also argued that SEIU did not send out a Hudson notice with its special assessment but instead relied on the regular Hudson notice it previously sent. Certain non-members filed objections and were allowed to pay only a percentage of the assessment. Subsequently, the members filed a suit in federal court and the District court found in favor of the members and ordered that a new Hudson notice be sent and that those who previously paid receive a full refund. The Ninth Circuit reversed, finding that the procedure utilized by SEIU reasonably accommodated the interests of the union, the employer, and the nonmembers.

However, the Supreme Court in reversing the Ninth Court decision addressed both the requirement of consent from non-members for the special assessment fees and the additional Hudson notice. In the Supreme Court's majority opinion, Justice Samuel A. Alito Jr. stated that:

"When a public-sector union imposes a special assessment or dues increase, the union must provide a fresh Hudson notice and may not exact any funds from nonmembers without their affirmative consent."

Justice Alito further stated that:

"By allowing unions to collect any fees from nonmembers and by permitting unions to use opt-out rather than opt-in schemes when annual dues are billed, our cases have substantially impinged upon the First Amendment rights of nonmembers. In the new situation presented here, we see no justification for any further impingement. The general rule, individuals should not be compelled to subsidize private groups or private speech, should prevail."

The Supreme Court’s decision will make it more difficult for public sector unions to raise dues midyear or issue a special assessment to help fund expenses for political purposes. The decision also requires a union to issue a new Hudson notice when attempting to impose a special assessment or dues increase.

For school districts, the Supreme Court's decision will have a minimal impact on their relationship with unions. However, the decision is extremely significant to California's public sector labor organizations because it puts a spotlight on these internal notice requirements at a time when the resources they expend are already subject to an increasing level of external criticism. Most labor organizations have seen their ranks diminish as California's fiscal crisis has forced government employers to conduct massive layoffs. If the funds they attempt to collect through mandatory dues deductions are also reduced, it may have an overwhelming impact on their finances.

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