In a victory for unions, the U.S. Ninth Circuit Court of Appeals has upheld California’s “union neutrality” law that curtails the right of certain employers receiving state funds to use this money to deter union organizing.
Broad Restrictions
The law, passed in 2000, forbids employers from using state grants or funds to “assist, promote, or deter union organizing.” Any employer that intends to oppose an organizing drive must segregate all state funds and maintain records documenting that its efforts are not funded by state money. Unions or the state attorney general can sue an employer that violates the prohibition on using state funds. An employer found to have spent state funds for such efforts, or to have mixed state funds with private funds for these efforts, will have to return the expended state funds and pay a 200 percent penalty. Depending on the circumstances, the penalty can be up to $1,000 per employee.
The union neutrality law affects a wide range of employers, including:
- state contractors who receive reimbursement from the state;
- recipients of state grants;
- state contractors performing services under a state service contract, including a public works contract;
- state contractors receiving more than $50,000 in state funds under a state contract;
- employers conducting business on state property;
- public employers receiving state funds; and
- private employers who receive more than $10,000 from any state program.
The law prohibits these employers from using state funds for virtually any expense that is even tangentially related to assisting, promoting, or deterring union organizing. This could include money spent on anything from producing leaflets to holding a meeting to explain management’s position on the organizing effort. What’s more, the statute specifies that expenses include legal and consulting fees and salaries of supervisors and employees incurred for research, preparation, planning, coordination of, or carrying out, an activity to assist, promote, or deter union organizing.
Law Upheld
Employer groups argued the law impermissibly interfered with the National Labor Relations Act and employers’ free speech rights by essentially requiring that employers remain neutral on organizing matters. The Ninth Circuit twice agreed, concluding the law was invalid. But now, in the third go-round, the full 15-judge panel of the Ninth Circuit has upheld the California statute.
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The Ninth Circuit explained that the statute reasonably restricts the use of state and taxpayer dollars and doesn’t fundamentally restrict employers’ communication in organizing matters. The court pointed out that the law doesn’t “prevent an employer from using nonstate funds to assist, promote, or deter organizing; it only restricts a recipient’s use of state grant and program funds (in excess of $10,000) for that purpose. Consequently, the California statute does not impede the flow of information to employees by regulating employers’ speech. Employers remain free to convey their views regarding unionization, and thus to exercise their First Amendment rights, provided only that they do not use state grant and program funds to do so.”
Be Prepared
The Ninth Circuit’s decision could be appealed to the U.S. Supreme Court. But while this is being sorted out and lawsuits for violations under the statute can be filed, covered employers should scrutinize their accounting systems to ensure that state funds are in no way used to respond to or deter union organizing efforts. This should include a system to track all expenses related to an organizing campaign. Even if an organizing effort isn’t currently under way, you should take steps now to ensure no mixing of funds–because even a small misstep in response to a new organizing campaign could subject you to steep penalties.
Additional Resource
Chamber of Commerce of the U.S. v. Lockyer, U.S.C.A. 9th Cir. No. 03-55166, 2006