Mid-year union dues increase: Hudson notice required, opt-in not opt-out
June 21, 2012 by Ross Runkel at LawMemo

The US Supreme Court this morning held 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."

Knox v. Service Employees Intl Union (US Supreme Ct 06/21/2012)

This is a remarkable decision for two reasons.

First, the Court has never before held that unions must issue a Hudson notice before changing the amount of dues. Hudson notices have always been based on an after-the-fact look-back based on the previous year's audited accounts.

Second, the Court has never before held that unions cannot collect fees from nonmembers unless they affirmatively opt in. The Hudson notice system has always been based on the idea that nonmembers can get an after-the-fact refund.

The union representing California public sector employees has an agency shop agreement which requires nonmembers to pay an annual fee for "chargeable" expenses - nonpolitical costs related to collective bargaining. In June 2005 the union sent out its annual Hudson notice which estimated that chargeable expenses would be 56.35% of its total expenditures. After the 30-day period that nonmembers had to object, the union announced a 25% increase to fund a broad range of political expenses, but nonmembers were given no choice as to whether they would pay into this fund.

The US Supreme Court held (7-2) 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."

The Court described this case as one involving compelled funding of the speech of other private speakers or groups, which is akin to compelled speech and compelled association. Therefore, it is subject to "exacting First Amendment scrutiny." In order to prevent the union from extracting a loan from unwilling nonmembers, the union must issue a fresh Hudson notice and must exempt nonmembers unless they opt in.

Two Justices, CONCURRING in the judgment, criticized the majority for adopting an opt-in system of fee collection which was "not contained in the questions presented, briefed, or argued."

Two Justices, DISSENTING, pointed out that unions have always been allowed to calculate each year's fee based on its expenses during the previous year. Although an imperfect system, it is not unconstitutional.