Opting Out: Supreme Court Holds Public Sector Unions Cannot Force Non-Members To Pay Agency Fees Subsidizing Political Speech

On June 20, 2012, the U.S. Supreme Court issued its anticipated opinion in Knox v. Service Employees International Union, Local 1000, No. 10-1121. Building on precedent establishing that public sector union fees levied on non-members represent an "impingement" on non-members' First Amendment rights, a 5-4 majority held that public sector unions must provide non-members with the opportunity to opt out of certain special assessments and unexpected fee increases. Moreover, the majority sent strong signals that the Court could go even further and find those opt-out procedures for non-members paying union fees unconstitutional if the question comes before it.

The Court's decision in Knox grows out of its 1986 opinion in Teachers v. Hudson, 475 U.S. 292 (1986). There, the Court held that the First Amendment to the U.S. Constitution's guarantee that an individual could not be compelled to fund private speech with which he or she disagreed precluded a public sector union from requiring objecting non-members to fund a union's political and social agendas. Following Hudson, unions are required to provide non-members with annual notice of the union's agency fees via a "Hudson notice," which identifies the percentage of those fees that are attributable to "non-chargeable" expenses designed to further the union's political and social goals. Once a non-member employee receives the Hudson notice, he or she has 30 days to opt out of the full agency fee. The objecting non-member pays only the percentage of fees attributable to "chargeable" expenses related to the union's collective bargaining obligations.

In June 2005, Service Employees International Union, Local 1000 (SEIU), sent out its annual Hudson notice. SEIU calculated objecting non-members' fees at 56.35% of the full agency fees. Just after the window for objecting to the full fee closed, the union implemented a temporary 25% increase in employee fees expressly designed to further the union's political objectives in the November 2005 and November 2006 elections. On August 31, 2005, SEIU sent a letter to employees notifying them that it was implementing the special assessment, but the letter failed to provide non-members an opportunity to opt out. After non-members complained about the inability to opt out of the special assessment, the union permitted non-members who timely opted out in response to the June 2005 Hudson notice to pay the limited 56.35% of the special assessment. Employees who did not...