Enhancing Financial Oversight

Short of an open government employment amendment to PERA, the Legislature could subject government employee unions to stricter financial oversight. The rationale for such oversight is entirely straightforward: Since the government effectively guarantees union dues when it signs a collective bargaining agreement with an agency-fee clause, it can rightfully insist on an accounting for how those funds are used.

Making union spending information available to union members and the public should prove useful to watchdogs both inside and outside of government unions and help prevent fraud. Currently, the coverage of financial reporting laws is spotty with regard to government employee unions. Some state and international union bodies are required under the Labor Management Reporting and Disclosure Act to file financial reports known as “LM-2” or “LM-3” forms with the U.S. Department of Labor. The requirements, however, do not apply to all unions and do not apply at all to local unions that represent government employees exclusively.

At a minimum, all government employee unions should be required to file LM-2 or LM-3 forms, just as their private-sector cousins are required to do. It would be even better if union officials were required to file reports that were independently audited, something that is still not required for LM-2 reports.

Improved union reporting might also contribute to better “Hudson enforcement” law. As noted earlier, in the vast majority of unionized local government workplaces in Michigan, workers who refuse to join a union are still obligated to pay the union an agency fee. A line of U.S. Supreme Court decisions culminating in Chicago Teachers Union v. Hudson has established that government employees who pay an agency fee can have that payment limited to their pro-rata share of the costs of the union’s core workplace representation duties: collective bargaining, contract administration and grievance representation.[21] In other words, nonmembers have a right to withhold money from union political activism.

Nevertheless, the current procedure for enforcing Hudson rights leaves much to be desired. There is reason to believe that dues reductions granted by unions to Hudson objectors vastly understate the extent of union political activism. For instance, our analysis of LM-2 reports filed by the Michigan Education Association and the National Education Association indicates that less than a third of that teachers union’s dues are spent on core representation, while the MEA can insist that Hudson objectors pay more than two-thirds of regular member dues.[22] A complete and audited record of union spending might resolve that discrepancy and ensure that workers who oppose union politics are not forced to pay for them.

The rights of Hudson objectors could be more completely vindicated if the state allowed agency feepayers to appeal a union’s Hudson determinations to the Michigan Employment Relations Commission or to the state courts. Legislators should also shift the burden of proof so that the union is obligated to show by clear and convincing evidence that agency fees cover only expenditures related to representation. Because the union ultimately controls its own records and can document its own activities far better than an employee can, this is not an unreasonable legal burden.

Caution is in order, however: Whatever their legal prerogatives and privileges might be, unions remain private institutions. A complete reckoning of union political activity would require close state scrutiny of the day-to-day activities of union employees, and such scrutiny could set troubling precedents in terms of civil liberties. Furthermore, in a sense, all activities of government employee unions are “political.” When a union negotiates performance standards and working conditions for government employees, it is influencing government operations, and when it negotiates over wages and benefits, it is affecting government spending. The line between political activism and representation is likely to be especially blurry in the realm of government employee unions.

While enhancing the enforcement of employees’ Hudson rights deserves exploration, lawmakers will be on more solid ground if they prohibit agency-fee clauses outright and leave both union support and union oversight to union members.