Last updated: June 21, 2012 9:40 pm - Financial Times

Supreme Court deals blow to unions

By Stephanie Kirchgaessner in Washington

The US Supreme Court dealt a blow to labour unions�f ability to fundraise for political activity when it ruled to make sweeping changes to the way dues are collected from some public sector workers.

The 7-2 decision could open unions up to a barrage of litigation and creates new legal barriers for unions�f fundraising efforts, further diminishing one of Barack Obama�fs most important Democratic allies in a difficult election year. The US president and his supporters are likely to be outspent by Mitt Romney, his Republican rival for the White House, and his supporters.

It comes in the wake of a major defeat in Wisconsin, when unions failed to unseat Scott Walker, the state�fs governor, in a recall election that was initiated by unions after Mr Walker sought to curb some collective bargaining rights of public sector unions.

Under current law, public sector workers who do not join unions still pay some union dues, because of the benefits they receive from collective bargaining. Previously, a non-unionised worker could make an objection if some of those dues were used for political purposes, and the money would be reimbursed. But under a ruling by the high court on Thursday, non-unionised workers would have to actively agree to allow the union to use a portion of the dues for political activity.

Current and former top union officials decried the decision as an attack on organised labour and said the ruling raised questions about whether the same rules would apply to corporations, which do not currently have to seek permission from investors before dedicating corporate funds to political activity.

Andy Stern, the former head of the Service Employees International Union, said the court had used a narrow case involving the SEIU to establish a new policy that turned longstanding precedent �gupside down�h.

�gThis court has an incredible propensity to be high-minded sounding hypocrites. They make these grand intellectual pronouncements, underneath which is a huge ideological bias that allows for rights for corporate institutions, but denies the same rights for workers,�h he said.

Mr Stern added that the potential impact on union coffers was �gsubstantial�h, in the same way that corporate lobby shops would be hurt if companies needed to seek permission from shareholders before making political expenditures.

But Charles Elson, a corporate governance expert at the University of Delaware, said investors were not analogous to non-union employees since shareholders elected to make investments in a company.

The case before the court centred around the use of so-called �gHudson notices�h, in which a public sector union alerts non-members who pay some dues of planned political spending. This gives the non-union employees the opportunity to decline to pay for the portion of dues related to political activity and be reimbursed.

In a 2005 incident at the heart of the case, the SEIU sent a letter to employees – after releasing a Hudson notice – that announced a 25 per cent increase in dues to fund political activity. The SEIU was sued and ultimately paid a full refund to employees who challenged the charges. The union argued before the Supreme Court that it should be allowed to reimburse non-members for fees used for political purposes after the expenditures are made.

But the majority of justices disagreed.

�gUnder the first amendment, when a union imposes a special assessment or dues increase levied to meet expenses ... it must provide a fresh notice and may not exact any funds from non-members without their affirmative consent,�h the majority of justices found.

The majority decision was written by Justice Samuel Alito, who was nominated to the court by George W. Bush. Although two liberal members of the court, Sonia Sotomayor and Ruth Bader Ginsburg, agreed with the bulk of the 7-2 decision, they said in a separate opinion that the majority went too far when it forced non-union members to �gopt-in�h to pay for political expenditures. Two other justices, Stephen Breyer and Elena Kagan, disagreed with the majority.

The decision was praised by the Romney campaign.

�gOnce upon a time, it was unions that were protecting employee rights. Sadly, employees today must turn to the Supreme Court to protect them from those same unions,�h said Oren Cass, the director of domestic policy for the Romney campaign.

Copyright The Financial Times Limited 2012.