SCOTUS: Service Fees Can Cover National Union Litigation

The Supreme Court has issued a decision about the rights of non-union employees in unionized jobs.

See, even if a bargaining unit chooses to be represented by a union, individual employees have the right (usually) to not be in the union.  But the Court decided long ago that unions can collect “service fees” from these employees to cover the expense of representing them.

Since then, there have been numerous fights over just what service fees can cover.  The prevailing rule has been that service fees must be “necessarily or reasonably incurred for the purpose of performing the duties of an exclusive representative…dealing with the employer on labor-management issues.”  Ellis v. Railway Clerks, 466 U.S. 435 (1984).  In other words, service fees can be collected for negotiating the collective bargaining agreement or otherwise representing the workers with the employer, but they can’t be used for political purposes like fundraising or lobbying to which the workers might be opposed.

In a rare unanimous decision (a unanimous labor case?  Is that possible?) the Court held in Locke v. Karass (07-610) that unions can collect service fees that go to the union’s national affiliate to help pay for national litigation.

In the case, Maine state employees argued that using service fees for national union litigation violated their 1st Amendment right of free association by requiring them to fund lawsuits that they didn’t believe were right.

Citing and extensively quoting its prior case law on service fees, the Supreme Court disagreed, saying

[U]nder our precedent the Constitution permits including [national litigation] in the local’s charge to nonmembers as long as (1) the subject matter of the (extra-local) litigation is of a kind that would be chargeable if the litigation were local, e.g. litigation appropriately related to collective bargaining rather than political activities, and (2) the litigation charge is reciprocal in nature, i.e., the contributing local reasonably expects other locals to contribute similarly to the national’s resources used for costs of similar litigation on behalf of the contributing local if and when it takes place.

Other than showing a textbook-worthy example of the difference between e.g. and i.e. (it would behoove most lawyers to pay attention to just that), the reasoning stands up for the most part.  I will admit, I was skeptical of the union’s chances up until I read the opinion.  But this makes sense:  if the litigation advances the interests of the employee (part 1) and isn’t unfairly weighted against the local, such that other unions are receiving a greater benefit from the pooling (part 2), then paying for national litigation actually fits straight into the acceptable line of charges delineated by the Court’s prior rulings.

Indeed, the Court pointed out that in Ellis, which set the standard for what was or was not chargeable, it approved the union’s charge to cover the expense of a national convention.  It said:

We can find no sound basis for holding that national social activities, national convention activities, and activities involvedin producing the nonpolitical portions of national union publications all are chargeable but national litigation activities are not.

This language is a suprising, stark statement from a unanimous Supreme Court.

Usually 9-0 decisions are either easy or vague.  Chalk this one up to the first column, I guess.

Supreme Court Takes Key Discrimination Case

On Monday the Supreme Court agreed to hear arguments in Gross v. FBL Financial Services, Inc., a case which should settle a long-held debate over how so-called “mixed motive” claims are handled.

A little background: Congress passed a civil rights bill in 1991, conveniently titled “The Civil Rights Act of 1991,” which overturned some of the Supreme Court’s decisions relating to the way lawsuits are brought under Title VII of the earlier Civil Rights Act of 1964. Title VII is the main anti-discrimination law, protecting people because of color, race, gender, national origin or religion.

The problem this caused, which the Court will probably address in Gross, is that lower courts have limited the CRA’91 to Title VII, using the old rules for other anti-discrimination laws, like the Americans with Disabilities Act (ADA) and the Age Discrimination in Employment Act (ADEA), where the suits allege employers had “mixed motives” or partially legal and partially discriminatory reasons for firing the plaintiff/employee.

In other words, if you bring a lawsuit under Title VII, and you allege that your employer had mixed motives for firing you, you have to prove it differently than if you bring it under the ADA or ADEA. Seems like a very small thing outside of employment law circles, but since most cases are mixed motive, the Supreme Court’s decision could have very real, long-lasting effects.

Hat Tip: Workplace Prof Blog

More on Gross v. FBL @ Ross Runkel’s Law Memo

Will Supreme Court’s Reduction of Exxon’s Damages Effect Employment Suits?

A while back, Exxon lost a lawsuit over the notorious Valdez spill (shocker), and a jury said they had to pay $500 million to compensate the plaintiffs, and $5 billion in punitive damages. Yesterday, the Supreme Court said that award was excessive, and reduced the punitive damages to $500 million, equal to the actual damages.

Richard Bales at Workplace Prof Blog has a brief commentary on the effect yesterday’s decision could have on employment suits.

He quotes Lyle Denniston at SCOTUSblog to point out the underlying importance of the Exxon decision:

To look at it only [in maritime and common law cases] is to miss the signal that the Court is giving – that is, it has grown highly skeptical that it can spell out, in words rather than numbers, workable guidelines that could bring some sense – some consistency – to punitive damages awards.

And in numerical terms, as Denniston points out, the Court has fixed that ratio at 1:1.

In other words, if you have $500 million in ACTUAL damages (like, what it costs to clean up Alaska), the maximum PUNITIVE damage award will be $500 million – and that’s for a case where the captain was drunk.

Bales thinks this could have an awful effect on employment cases. His argument is: since damages in employment cases are usually determined by lost wages, and lost wages are (obv) low for low-income workers (or those unlucky enough to find another job), the actual damages won’t cover the cost of trying the case. So an attorneys’ only real incentive for taking these cases is the potential recovery of hefty punitive damages. If the punitive damages are capped at 1:1, then the recoveries would be so small that lawyers would stop taking the cases altogether. And then none of us would have anything to do.

But I think it’s a little premature to be sounding the end of high-punitive employment cases. First, the Court wasn’t making a constitutional decision here, so the 1:1 ratio isn’t binding on lower courts. Denniston’s argument was that the Court is tired of trying to explain punitive damages, and is going to push other cases to use Exxon math, but that misses Souter’s point.

Denniston focuses on a note at the end of the case in which Justice Souter says the 1:1 ratio “may be the constitutional limit.” But what he doesn’t mention is that this idea comes from the Court’s previous decision in State Farm v. Campbell, which said that a single digit ratio (i.e., 9:1 or less), not a 1:1 ratio, is reasonable for punitive damages. State Farm only mentions the 1:1 ratio when ACTUAL damages are really, really big on their own.

In other words, let’s say you work in BigBox USA in the Cheap Crap department, and they fire you. You sue, and your lost wages add up to $15,000. Under State Farm, I think, the court will be much less concerned about holding you to an equal ratio for punitive damages than in cases like Exxon or Phillip Morris where the actual damages were 50 to 500 times that much. Under State Farm, you could be looking at punitives at a 9:1 or 8:1 ratio, depending on the severity of the employer’s actions. That’s $135,000 in punitives, $150,000 total. And I think you could find a lawyer for that kind of return.

If you can’t, actually, give me a call.