No Evidence? No Problem! National Labor Relations Board’s General Counsel Memorandum Eases Burden On Beck Objectors Following Board’s Decision in Kent Hospital

Sheppard Mullin Richter & Hampton LLP

Sheppard Mullin Richter & Hampton LLP

On April 29, 2019, the General Counsel of the National Labor Relations Board (“NLRB” or “Board”) issued Memorandum GC 19-06, which provides guidance to the Board’s regional offices on how to handle cases involving Beck objectors and how to allocate secondary expenses related to union lobbying activity after the Board’s March 1, 2019 decision in United Nurses & Allied Professionals (Kent Hospital), 367 NLRB No. 94 (2019). In Communications Workers of America v. Beck, the Supreme Court held that a union cannot use agency fees collected from a non-member employee—that is, an employee subject to a union security clause but who chooses not to be represented by the union—on activities unrelated to collective bargaining, contract administration, or grievance adjustment if the non-member employee objects to such an expenditure (a so-called “Beck objector”). 487 U.S. 735 (1998). As we recently explained in our March 2019 post covering Kent Hospital, the Board further limited the permissible uses of agency fees by ruling that lobbying costs incurred by a union fall outside the scope of a union’s statutory duties as the exclusive bargaining representative of non-member employees.

In Memorandum GC 19-06, General Counsel Peter B. Robb criticizes the approach mandated by prior General Counsels in Beck objector cases, which approach required employees who choose to dispute a union’s expense allocation through filing a charge with the Board to explain why the expenditure was not chargeable and provide, or at least point to, evidence in support of their position. The General Counsel explained that this approach “improperly forecloses Beck objectors from utilizing the Board as a viable forum for their chargeability challenges[,] is inconsistent with decisions placing the burden of proving union expenses are chargeable on the union,” and ends up requiring employees to participate in a union’s internal challenge procedure before filing a Board charge to obtain the evidence needed to show that the expenditures were improperly charged. According to the General Counsel, Beck objectors are no longer required “to explain why a particular expenditure is nonchargeable and to provide evidence or promising leads to support that contention.” Rather, Board investigators are now instructed to look to the union to obtain information about the union’s chargeability decisions for each major category of expenses and the union’s rationale for allocating expenses chargeable to non-member employees in mixed expenditure categories. The General Counsel did, however, note that “it would still be prudent to inquire as to a charging party’s particular objections and evidence” and that some union expenditures may be facially valid (such as, for example, the costs of an arbitration involving contract interpretation).

GC Memo 19-06 also places unions on notice to properly allocate secondary expenses connected to lobbying activities. As cautioned by the General Counsel, this does not mean simply deducting a lobbyist’s salary and benefits from the expenditures chargeable to Beck objectors, as “lobbying necessarily entails at least some spillover costs, such as overhead expenses, preparation of lobbying literature, reporting on lobbying efforts in union publications, and so forth.” Although unions are permitted to “reasonably prorate a percentage of its overhead costs as nonchargeable based on the overall percentage of nonchargeable expenses” and “absolute precision” is not required, unions must nonetheless make a good faith effort to identify these secondary expenses to avoid violating their duty of fair representation. Lest a union think that it can avoid proration of its overhead expenses when its lobbying activities are handled by an outside lobbyist, GC Memo 19-06 reminds unions of the likely secondary costs that must be taken into consideration even when an outside lobbyist is used, such as expenses related to hiring and overseeing the work of the lobbyist. Accordingly, the Memorandum makes clear that unions who fail to allocate some portion of secondary expenses to lobbying will be closely scrutinized. Finally, the regional offices were advised to fully investigate charges brought by Beck objectors, regardless of the amount of the expense at issue or the alleged overcharge.

When Kent Hospital was issued, we predicted that it would result in an uptick of unfair labor practice charges filed against unions by Beck objectors. Now, this result seems even more likely, given that Beck objectors no longer need to gather evidence for the Board prior to challenging the chargeability of a union expenditure and that the regional officers have been instructed to investigate all charges—regardless of their magnitude—brought by Beck objectors.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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