THE SMITH CENTER

for Private Enterprise Studies

Malice in Plunderland: A California Tale
by Charles W. Baird
Emeritus Professor of Economics and Director of the Smith Center
California State University, East Bay

In January 1999 the Democratic Party took control of both houses of the California State Legislature and the governor's office. Since then Governor Gray Davis and his legislative cronies have been busy paying back their union supporters for their in-kind and monetary contributions during the election process. For example, they enacted AB 931 which requires all electricians working in the state, even on residential properties, to be licensed, together with AB 921 which says electricians can only become licensed through union-run apprenticeship programs.

But it is much worse than that. Two statutes, SB 645 and SB 1960, actually force California public education employers to take money from public education employees and turn it over to teacher unions. In exchange the unions share the loot with the politicians. In any other context this would be labeled political corruption and theft. Here it is called mandatory fair share giving.

To understand what has happened it is first necessary to examine some basic principles of public choice theory and two key features of labor relations law in this country. After that the details and implications of the two California statutes will be explained, and the litigation that is underway on the issues will be reviewed.

The Political Marketplace

In California and in the rest of the country private sector unions have been losing market share. From a peak of 36 percent in 1953 it fell to 9.4 percent in 1999. Lately union-impaired firms have found it increasingly difficult to compete effectively with their union-free counterparts, so unions have increased their efforts in the political marketplace where they exchange electoral support for special privileges with politicians.

Government sector unions were almost unheard of until the early 1960s. By 1999 they represented 37.3 percent of all civilian government employees in the country. The unions' substantially larger market share in government than in private employment is explained by the fact that government employers don't have to worry about competition while private employers do. Unions are always more successful when dealing with monopolies than with employers who have to compete. A monopolist can easily pass cost increases forward to its customers, a competitive firm cannot. Moreover, in government-sector bargaining the employing agency and the union sit on the same side of the bargaining table. They both seek to extract more money from taxpayers. However, government sector unions are not content with their relatively large market share. They are just as eager as private sector unions to use the political marketplace to expand their power. With SB 645 and SB 1960 they have done exactly that.

Public choice theory is the branch of economics that explains the choices that voters, politicians, special interest groups and bureaucrats make in the political marketplace. According to that theory any individual voter recognizes that the only time when his or her vote determines an electoral outcome is when it breaks a tie. Notwithstanding the close elections of 2000, before a vote is actually taken an individual voter correctly attributes a very tiny probability to having all other voters exactly tie. Thus the voter attributes a very tiny probability to the event that his or her vote will determine the electoral outcome. Each voter has to decide whether to vote and, if so, how well informed to try to become before casting a vote. If the benefit of voting is just affecting the electoral outcome, each voter will think the benefit is small when it is discounted by the tiny probability of breaking a tie. On the other hand, the cost of voting can seem large. First a voter must register, then go to the polling place and fill out a ballot. This takes time, and time is money. Many potential voters abstain from voting because the cost seem larger than the benefit of doing so. This is called rational abstinence (from voting). In most elections well under 50 percent of potential voters vote.

Many potential voters decide to vote whether they expect to determine the electoral outcome or not simply because they consider voting their civic duty. Others might vote simply because they like to feel involved. However, many actual voters cast largely uninformed votes. A person who has decided to vote has to decide how well informed to try to become on the electoral choice to be made. Since the probability that he or she will determine the electoral outcome is tiny, the perceived benefit of becoming well informed will seem very small.. The cost of becoming well informed can be huge. It takes much time and effort carefully to weigh the pros and cons of candidates and ballot measures. Thus many voters decide not to become well informed. This is called rational ignorance. It simply does not seem worthwhile to fret about a choice that you cannot control. You can control which car you buy, but you are very unlikely to be able to control who will represent you in Congress. So you are more careful in choosing a car than in choosing a political representative.

Politicians understand the phenomena of rational abstinence and rational ignorance. They know that most voters will only pay careful attention to issues that are likely to confer large benefits or impose large costs directly on them. Politicians are like all the rest of us. They are primarily self interested. In the political marketplace they seek to be elected and reelected. Thus they will cater to organized groups who are vocal and who are capable of giving them monetary and in-kind support at election time. Because of rational ignorance, politicians expect to get away with paying only perfunctory attention to most individual, unorganized voters. So, for example, politicians will cater more to the relatively few sugar producers in the country than the millions of sugar consumers. The few sugar producers organize and lobby for restrictions on imports of foreign sugar. Such restrictions mean hundreds of thousands of dollars to each sugar producer each year, so they are keenly motivated to seek to obtain them. In contrast, the restrictions mean, perhaps, five or ten dollars a year to each consumer each year in the form of higher prices for those things made with sugar, so they have very little incentive to organize in opposition to the restrictions on sugar imports. This phenomenon is called the special interest effect. Organized interests in the political marketplace seek large focused benefits which can be paid for by imposing diffused, individually small, costs on large numbers of people. Politicians are pleased to play the game because the organized interests are willing to share the loot with the politicians and those who pay the bills don't pay attention. Dwight Lee, an economist at the University of Georgia, calls this game "malice in plunderland."

Unions are especially adept at such plunder. AFL-CIO political director, Steve Rosenthal boasts that "the money we spend [in elections] is the smallest thing we bring to the table." The biggest thing they bring to the table is in-kind support such as precinct workers and phone bank operators who are kept on the unions' payrolls while doing political work. In-kind support is as much as fifteen times the direct money donations unions make to the politicians they support. Unions can do this because the National Labor Relations Act (NLRA), which controls labor relations in the private sector, and the collective bargaining statutes for state and local government employees in the 36 states that have adopted them have been structured purposively to enable unions to do so. The principal means are exclusive representation and union security. California's SB 645 and SB 1960 directly address union security, but union security cannot exist without exclusive representation.

Exclusive Representation

Under the NLRA and its state clones, neither private sector nor government sector workers are free to select representatives of their own choosing for bargaining about the terms and conditions of their employment with their employers. Instead, the National Labor Relations Board (NLRB) and its counterparts in the states, such as California's Public Employment Relations Board (PERB) conduct elections among the employees to settle the issue of labor representation. If a majority of the workers in a bargaining unit votes in favor of representation by a particular union, that union is certified to represent all those workers. It, perforce, represents those who voted for it, those who voted against it, and those who didn't vote. Individuals are even forbidden to represent themselves. Individuals cannot designate their own representatives. A certified union becomes the exclusive (monopoly) representative.

Monopoly bargaining is justified by its proponents by appeal to democracy. After all, they argue, a representative of a congressional district in Congress is selected by a majority of voters in the district to be that district's monopoly representative in Congress. That is what democracy is all about. The majority rules. But the analogy to congressional elections is not apt. Democracy is all about the rules for governmental decisionmaking. It developed as a way of keeping government in its cage, as a way of giving the governed some voice over the decisions of the government. It has nothing to do with private decisionmaking. The authors of the Constitution drew a bright line separation between the governmental and private spheres of human action. Government decisions were to be taken by majority vote. Private decisions were to be taken by individual free choice. For example, I don't have to submit to a vote on which lawyer represents me. That is a matter of contract between me and the lawyer. In The Federalist Papers, Madison warned against allowing the government sphere to encroach on the private sphere. When people are forced to submit to the will of a majority in their private affairs, those affairs are politicized.1

There is nothing more private than the sale of one's own labor services. If we own ourselves, we own our labor services. As owners we are free to make any offers we wish to prospective employers and to accept or reject any offers we receive from prospective employers. We are free to designate individuals or groups to represent us in the sale of our labor services, or we can choose to represent ourselves. These are private, not governmental decisions. Government has no constitutional authority, at least as the Constitution was understood by those who wrote it, to politicize those decisions. The NLRA and its clones have delegated governmental authority to private groups (unions). Until 1937 the Supreme Court routinely struck down such delegations as unconstitutional. Then, under the threat of President Roosevelt's court packing plan, a majority of Supreme Court justices reinterpreted the plain meaning of the Constitution to serve the passions and prejudices of the day. Now, under the doctrine of a "living constitution" the Constitution means whatever a majority of Supreme Court justices say it means no matter what its authors understood to be its meaning. They can make it up as they go along.2

Furthermore, the proponents of exclusive representation don't take their analogy to congressional elections all the way. Every member of the House of Representatives must stand for election every two years, and every senator must stand for election every six years. Under exclusive representation a certified union is assumed to have majority support among the workers it represents indefinitely.

Thus, under exclusive representation many workers are forced by law to consume union representation services they do not want. Worse, under union security those same workers are forced to pay for the union representation services they do not want.

Union Security

Unions may obtain monopoly bargaining privileges through certification elections in all fifty states. But that brings up another question. Do all the workers who are represented by certified unions have to pay for that representation whether they want to or not? In states such as California they can be forced to pay, in other states they cannot. Clearly, unions like the security that comes with the ability to force workers to pay tribute to them. Forcing represented workers who are not union members to pay unions for representation they do not want is a form of union security called agency shop. Where union security is allowed it is usually a subject of bargaining between a union and the employer whose employees the union represents. The two sides must agree to include union security in their collective bargaining agreement, or it is not included. With California's SB 645 and SB 1960, the legislature imposed agency shop by law. No bargaining is necessary.

Unions support union security for a very simple reason. More money comes into union coffers with union security than without it. Without it unions would get money only from their voluntary members. Of course, other people who are in the representation business, like lawyers and CPAs, receive payment only from willing clients, but that is not enough for greedy union officials.

The proponents of union security excuse their greed by appeal to what is called the "free rider" problem. They argue that because of exclusive representation they must represent all the workers in a bargaining unit whether individual workers want the representation or not. Since all workers get represented, it is only fair that all workers pay their "fair share" of the unions' costs of providing the representation. Otherwise, dissenting workers would get the representation they do not want for free. Of course, the obvious and equitable solution to the free rider problem is to abolish exclusive representation ­ i.e., allow unions to represent only their voluntary members and no one else. But unions don't like that solution. They love their coercive monopoly bargaining privileges, so their solution to the free rider problem is to impose more coercion in the form of union security. Unions are like snakeoil salesmen who thrust their potion into the hands of unwilling people and demand payment because of its alleged healing powers. But not quite. Governments usually do not force people to pay for unwanted snakeoil.

SB 645

In 1978 the California legislature and governor enacted the Berman Act 3 which set up the machinery for exclusive representation unionism in both the California State University (CSU) and the University of California (UC) systems. All faculty and staff in the two systems were covered. The bargaining unit for faculty in CSU included all campuses in the system. Each campus in the UC system had its own faculty bargaining unit. There was a certification election in the CSU system, and the California Faculty Association (CFA)4 emerged with monopoly bargaining privileges over all faculty. (Staff are represented by other unions.) However, the Berman Act made no provision for union security, so although I had to allow CFA to represent me (or I would be fired), I did not have to pay any money for the representation I did not want. Approximately 30 percent of the CSU faculty became voluntary union members. The UC faculty, except on the Santa Cruz campus, were smart enough in each case to avoid union representation, but many of the staff in both systems were not.

From the beginning CFA tried to amend the Berman Act to permit union security, but they got nowhere with Republican governors and legislators. In the November 1998 election almost all opposition to union security was removed. In October 1999 SB 645 was enacted as amendments to the Berman Act. It has four key provisions of interest ­ mandatory agency shop, specification that non- members may be forced to pay for the unions' lobbying activities, a rescission mechanism, and a religious accommodation clause.

Mandatory Agency Shop

Section 3583.5(a)(1) of the amended Act states in part that "[A]ny employee of the California State University or the University of California, other than faculty of the University of California who are eligible for membership in the Academic Senate, who is in a unit for which an exclusive representative has been selected shall be required as a condition of continued employment either to join the recognized employee organization or to pay the organization a fair share service fee." Note that the "shall be required" language saves the CFA and other unions from having to bargain with the university administration over the issue of union security. Apparently the politicians think their clients in the CFA aren't capable of bargaining successfully over the issue. They are right. Note also that UC faculty are exempt from agency shop fees even if they are represented by a certified union. The politicians recognize that UC faculty are too smart and independent to put up with having to pay forced dues. Those same politicians think much less of CSU faculty, and here, too, they are largely right.

In Chicago Teachers Union v. Hudson [475 US 292 (1986)], the U. S. Supreme Court ruled that public employees who are forced to pay agency fees could not be charged fees equal to regular union dues. They could only be charged for a union's collective bargaining expenses, not anything else like a union's political activities. In the event, CFA charges me and all other non-members 73 percent of regular dues. In my case that amounts to over $55 per month. I think an accurate accounting of how much money CFA spends on things other than collective bargaining would, at most, justify an agency shop fee of only 25 percent of regular dues, but that is a matter for another day.

There are roughly 14,000 faculty in the CSU system who are not union members. The average agency fee is $35 per month. That means that CFA takes approximately $490,000 per month from us. That is a more than enough money for CFA to pay back the politicians who gave them the theft privilege. CFA and the politicians win, faculty like me lose. The Eighth Commandment says "Thou shalt not steal." It does not say "except when thou hast a majority vote."

Lobbying Expenses

Section 3583.5(a)(2) of the amended Act states that "The costs covered by the fee under this section may include, but shall not necessarily be limited to, the cost of lobbying activities designed to foster collective bargaining negotiations and contract administration, or to secure for the represented employees advantages in wages, hours, and other terms and conditions of employment in addition to those secured through meeting and conferring with the higher education employer." Note here the broad language that permits almost any lobbying activity to be charged to non-members. It is not just lobbying connected with trying to get collective bargaining agreements ratified. It is lobbying that could have any impact on terms and conditions of employment such as lobbying in favor of legislative enactment of fringe benefits for unmarried domestic partners.

In Lehnert v. Ferris Faculty Association [500 US 507 (1991)], the U. S. Supreme Court, in developing the implications of its Hudson decision, declared that non-members cannot be charged for a union's lobbying activities except if they are narrowly tailored to support specific collective bargaining agreements. The California legislature and governor apparently think they are immune to Supreme Court rulings they do not like. Lawyers for CFA were aware of the Lehnert ruling, for they convinced CFA not to charge non-members for lobbying other than the narrow type permitted by Lehnert. What CFA does in the future is another question.

Rescission Elections

Most agency shop legislation provides for union security to be rescinded by a majority vote of all the workers in the bargaining unit. AB 645 stipulates that if 30 percent of the faculty (or staff with their unions) in the bargaining unit sign a petition requesting a rescission election, the Public Employment Relations Board (PERB) will hold a secret ballot election on the question. To win either the union or the faculty requesting the election must get a majority of the eligible votes. Thus abstaining from the election is a vote against rescission. If agency shop is rescinded the union can later petition for an election to reinstate it under the same rules

However unfair, there is nothing unusual about these rules. What is unusual is the statute's provision that "The cost of conducting an election under this subdivision [3583.5(a)(4)] to rescind or reinstate the organizational agreement shall be borne by the petitioning party." When SB 645 was enacted, in all other cases of union security in California government employment PERB paid the costs of the election. At the behest of their union clients the politicians here erected an additional and unprecedented obstacle to rescission. They apparently thought forced dues would be very unpopular among the faculty. They were partly right. Many faculty protested, but very few have been willing to do much about it.

Religious Accommodation

Section 3584 of the amended Act states "[A]n employee who is a member of a bona fide religion, body or sect that has historically held conscientious objections to joining or financially supporting public employee organizations, shall not be required to join or financially support any public employee organization as a condition of employment." Instead, the money that the union otherwise would take would be given to a nonlabor and nonreligious charity of the employees' choice from a list of charities approved by the union and the university. Why shouldn't we be able to pick any charity we like? Because unions are collectivist organizations that abhor individualism and free choice.

The statute also gives the CFA the sole right to decide whether to grant a religious accommodation to a faculty member who requests one. There is no appeal process involving a neutral third party. The only recourse a professor who has been denied a religious accommodation is to bring legal action against CFA.

I and hundreds of other CSU faculty requested religious accommodation from the CFA. To my knowledge only members of the Seventh-day Adventist Church were granted accommodation. The rest of us were denied in a form letter from the CFA that said "In reviewing your request, we considered whether any statements contained therein about how CFA conducts itself are accurate. We also considered whether the proffered belief is in fact religious, or instead merely personal and philosophical. Finally, we considered whether the proffered belief is sincerely held. Based upon your letter, and in light of the above-enumerated principles, your request for religious accommodation is denied."

I am a Catholic, and I requested religious accommodation on the grounds that it is my sincerely held religious belief based on Christian doctrine that I am forbidden to support any organization that promotes strife and conflict and resorts to coercion to get its way. Agency shop itself is an example of that coercion. American labor relations law assumes that employers are natural enemies and all its procedures are adversarial. Moreover, the historical record is clear. Unions and violence go together like right and left shoes.5 Without any hearing CFA asserted I am not sincere in my religious belief. I doubt any CFA decisionmakers in the case are smart enough to know the difference between personal philosophy and religious belief. By what right, other than naked political power, do they get to define religion? I had no recourse other than sue CFA.

There have been two lines of legal cases involving religious accommodation in union security situations.6 One is based on 1974 and 1980 amendments to the NLRA. These have not been successful. For example, in 1990 the Sixth Federal Circuit Court of Appeals held, paradoxically, that the amendment's attempt to protect religious liberty actually violate the First Amendment because the religious accommodation is a benefit granted on the basis of religious affiliation.7 A much more promising line of cases where many plaintiffs have won involves Title VII of the 1964 Civil Rights Act which forbids discrimination in employment based on, race, color, national origin, sex, age, disability and religion. Workers begin this process by filing a complaint with the Federal Equal Employment Opportunity Commission (EEOC).

Our Litigation Against SB 645

In February 2000 I and two other CSU professors filed suit in Federal District Court in San Francisco against SB 645. We are represented, pro bono, by Milton Chappell and Dylan Carp, attorneys with the National Right to Work Legal Defense Foundation. Originally our case was assigned to Judge Vaughn Walker in San Francisco. CFA didn't like that because Judge Walker has a reputation as a judicial conservative with libertarian leanings. CFA sought to get the case reassigned to Judge William Shubb in Sacramento, and Judge Walker agreed on the grounds that similar cases were in process in Sacramento and this would represent a more efficient allocation of judicial resources. On July 13, 2000 Judge Shubb certified our suit as a class action involving all CSU faculty who were not CFA members.

We argued that SB 645 is unconstitutional on three grounds as it affected nonmembers of CFA. First, on the basis of the Lehnert decision, the provision in SB 645 that allows CFA to charge us for its lobbying expenses is obviously unconstitutional. Second, the religious accommodation provisions of SB 645 violate our freedom of association under the First Amendment. The statute tells us we have to belong to a particular sect or religion of which CFA approves for granting religious accommodation. We claim that CFA cannot compel us to affiliate with a particular sect or religion as a condition of granting us the benefit of religious accommodation. Moreover, we claim that our sincerely held religious beliefs that are based on our own understanding of the obligations of our individual religions, whatever they may be, are sufficient and nondiscriminatory grounds for religious accommodation. Third, we argued that the fact that SB 645 mandated agency shop rather than making it a subject of bargaining and forced those who wanted a rescission election to pay for it violate our Fourteenth Amendment guarantee of equal protection of the laws. No other statute covering California public employee unionism mandated agency shop and forced employees to pay for rescission elections. We were singled out for abusive treatment.

SB 1960

Our Fourteenth Amendment equal protection argument caught the immediate attention of the unions and the politicians in their thrall. In March 2000 SB 1960 was submitted to the legislature by state Senator John Burton. It was signed by Governor Davis on September 28, 2000. It takes effect on January 1, 2001. It amends the 1975 Rodda Act8 that sets labor relations regulations in California K-12 public education and community colleges. The Rodda Act made agency shop a matter of bargaining. SB 1960 changed that to mandatory agency shop for all California public education. In other words, to avoid the claim that we were singled out for discriminatory treatment, the politicians, at the behest of the unions, imposed the same burden on K-12 and community college teachers as it imposed on us. That restores equal protection of the laws. Now both the laws are equally unprotective of the rights of educators who wish to be union-free.

The unions and some politicians also wanted to impose the burden of having to pay for rescission elections on those teachers who requested them just like SB 645 did to us. Someone must have had a bit of a guilty conscience or wanted to appear reasonable to the courts because in the end SB 1960 changed SB 645 to remove that burden on us. Now in all California public education PERB will pay for all rescission elections that take place. At least we won in the Legislature on that one. But as yet we haven't won anything else.

Judge Shubb's Summary Judgment

On November 16, 2000 Judge Shubb granted summary judgment to the CFA on all the issues. On our Fourteenth Amendment equal protection of the laws issue the judge said that SB 1960 took care of both the unequal treatment claims we made. Now all education employees suffer under mandatory agency shop, and we no longer have to pay for rescission elections. SB 1960 would never have been passed if it were not for our suit, but I am unhappy that our suit resulted in harm to K-12 and community college teachers.

The judge decided that although SB 645 was unconstitutional on the lobbying issue due to the Lehnert case, we do not have standing to challenge the statute here because in fact CFA has not yet tried to do what the statute tells it it can do. So far CFA charges us only for lobbying expenses connected with the "negotiation, ratification or implementation of a collective bargaining agreement" as Lehnert allows. In a sense, then, we won on this issue because the CFA's lawyers knew better than to take full advantage of the statute. But the victory may be temporary because CFA will exploit the statute when and if it thinks no one will bother to take the issue to court. To paraphrase Henry George, those who assert that CFA or any other union cares about the law when it is not in their interest to do so are like those who tell us that tigers live on oranges.

On the religious accommodation issue the judge said "that CFA has not used as a factor, and disavows any future intention to use as a factor, whether a fee payer is a member of a bona fide religion, body, or sect, when it determines whether to grant an exemption based on religious accommodation. CFA denied plaintiffs' applications because it determined that their beliefs were not 'sincerely held'." Here again the judge let CFA off the hook because, in his view, CFA did not do what the statute allows it to do. But the judge is wrong here. Why did all the Seventh-day Adventists get their requests granted? I am delighted that they succeeded, but why did CFA discriminate against adherents to other religions? Moreover, the judge didn't address the fact that SB 645 gives sole discretion to CFA to grant or deny requests for religious accommodation. There is no appeal without going to the courts or the EEOC.

In fact, on November 13, 2000 I filed a charge of discrimination on the basis of religion against the CFA with the EEOC. Consistent with EEOC precedent I base my claim on my sincerely held religious belief that as a Christian I cannot support organizations based on coercion conflict, violence and strife. Moreover, CFA has been a cheerleader for unrestricted abortion rights including partial birth abortion. That is clearly contrary to Catholic teaching.

Our attorneys have decided to appeal only the religious accommodation portion of Judge Shubb's decision. The equal protection claim is moot because of SB 1960. The lobbying issue will be addressed in another suit, Friedman v. California State Employees Association, where the union actually has gone beyond the Lehnert limits with its lobbying charges. When that portion of SB 645 is declared unconstitutional in that suit we will have won the point.

In Conclusion

For now CFA will continue to impose its agency shop tax on us. If we win our narrow appeal on religious accommodation and/or if those of us who have filed charges with the EEOC win there, CFA will have to turn over all the money they have taken from us to the charities we individually designate from the list approved by CFA and CSU. But there are larger questions. Why should unions be given the power to tax? If the answer is because of the free rider problem, why not abolish exclusive representation? If the answer to that question is because the special interest effect in the political marketplace is too strong, what if politicians did not have the power to grant privileges to special interests? In other words, what if we started again to obey the Constitution as it was understood by those who wrote it? In the end, that is the only solution that will work.

ENDNOTES

1 Of course, we are always free to choose to affiliate with private groups that use majority rule in their decisionmaking. But we always have the option of penalty-free exit from any private group whose decisions we do not like. With exclusive representation government forces us to abide by the will of a majority. If we refuse we loose our job. That is not penalty-free exit.

2 Walter Williams, at George Mason University, likes to ask whether you would like to play poker with others who had a "living constitution" view of the rules of the game.

3 Named for Howard Berman its principal proponent in the Legislature. The official name of the statute is the Higher Education Employer Employee Relations Act (HEEERA).

4 I prefer to identify CFA as the Cabal of Feckless Academics.

5 Armand J. Thieblot, Thomas R. Haggard, and Herbert R. Northrup, Union Violence: The Record and the Response by Courts, Legislatures, and the NLRB, Olin Institute for Employment Practice and Policy, George Mason University, 1999.

6 Mark L. Fischer and Robert P. Hunter, Religious Liberty and Compulsory Unionism: A Worker's Guide to Using Union Dues for Charity, Mackinac Center for Public Policy, Midland, MI, June 2000.

7 Wilson v. NLRB 920 F2d 1282 (CA6, 1990).

8 The Rodda Act is officially known as the Education Employee Relations Act (EERA).