Supreme Court: State Need Only Rational Basis for Refusing to Subsidize Union Political Speech Through Payroll Deductions.

Yesterday, the United States Supreme Court reversed the Ninth Circuit and upheld an Idaho state law which precluded payroll deductions by state and local governments to support political speech and political activities by unions. (Payroll deductions for regular union wages were permitted). The unions sued, arguing that the prohibition violated their First Amendment rights. The Supreme Court noted that the state law did not prohibit the unions from engaging in political activities or speech; it merely refused to promote those activities through payroll deductions. Therefore, only a rational basis analysis applied; not strict scrutiny. Idaho's interest in avoiding the reality or appearance of government favoritism or entanglement with partisan politics was sufficiently rationale to support the legislative ban. Ysursa v. Pocatello Education Ass’n, No. 07-869.

As described by the Court, “[u]nder Idaho law, a public employee may elect to have a portion of his wages deducted by his employer and remitted to his union to pay union dues. He may not, however, choose to have an amount deducted and remitted to the union's political action committee, because Idaho law prohibits payroll deductions for political activities. In particular, “ Idaho's Right to Work Act declares that the ‘right to work shall not be infringed or restricted in any way based on membership in, affiliation with, or financial support of a labor organization or on refusal to join, affiliate with, or financially or otherwise support a labor organization.’ . . . “The First Amendment prohibits government from "abridging the freedom of speech"; it does not confer an affirmative right to use government payroll mechanisms for the purpose of obtaining funds for expression. Idaho's law does not restrict political speech, but rather declines to promote that speech by allowing public employee checkoffs for political activities. Such a decision is reasonable in light of the State's interest in avoiding the appearance that carrying out the public's business is tainted by partisan political activity. That interest extends to government at the local as well as state level, and nothing in the First Amendment prevents a State from determining that its political subdivisions may not provide payroll deductions for political activities.”

“Restrictions on speech based on its content are ‘presumptively invalid’ and subject to strict scrutiny . . . The First Amendment, however, protects the right to be free from government abridgment of speech. While in some contexts the government must accommodate expression, it is not required to assist others in funding the expression of particular ideas, including political ones. ‘[A] legislature's decision not to subsidize the exercise of a fundamental right does not infringe the right, and thus is not subject to strict scrutiny.’. . . Given that the State has not infringed the unions' First Amendment rights, the State need only demonstrate a rational basis to justify the ban on political payroll deductions. The prohibition is not ‘aim[ed] at the suppression of dangerous ideas,’ but is instead justified by the State's interest in avoiding the reality or appearance of government favoritism or entanglement with partisan politics. We have previously recognized such a purpose in upholding limitations on public employee political activities.”

“The question remains whether the ban is valid at the local level. The unions abandoned their challenge to the restriction at the state level, but contend that strict scrutiny is still warranted when the ban is applied to local government employers. In that context, the unions argue, the State is no longer declining to facilitate speech through its own payroll system, but is obstructing speech in the local governments' payroll systems. We find that distinction unpersuasive, and hold that the same deferential review applies whether the prohibition on payroll deductions for political speech is directed at state or local governmental entities. ‘Political subdivisions of States--counties, cities, or whatever--never were and never have been considered as sovereign entities.’ They are instead ‘subordinate governmental instrumentalities created by the State to assist in the carrying out of state governmental functions.’ State political subdivisions are ‘merely ... department[s] of the State, and the State may withhold, grant or withdraw powers and privileges as it sees fit. Here, the Idaho Legislature has elected to withhold from all public employers the power to provide payroll deductions for political activities.”

“The State's legislative action is of course subject to First Amendment and other constitutional scrutiny whether that action is applicable at the state level, the local level, both, or some subpart of either. But we are aware of no case suggesting that a different analysis applies under the First Amendment depending on the level of government affected, and the unions have cited none. The ban on political payroll deductions furthers Idaho's interest in separating the operation of government from partisan politics. That interest extends to all public employers at whatever level of government.”

Insomniacs can read the full opinion at http://www.supremecourtus.gov/opinions/08pdf/07-869.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.

Sixth Circuit: Union’s Waiver of 30-Year Retired Employee’s Benefits Without Notice or Consent Protected Assets of Bankrupt Employer.

Today, the Sixth Circuit issued a decision in which it held that the statutory and severance claims of a 30-year retired employee of bankrupt LTV Steel had been waived by the employee’s former union even though he received no notice of the waiver, never consented to it, and had been explicitly excluded from receiving compensation under the waiver agreement. McMillan v. LTV Steel, Inc., No. 07-4370. Although federal law is pretty clear that unions no longer represent retired employees in negotiations, the employee was deemed to have waived that compelling legal argument when he failed to raise it in support of his claims before the bankruptcy or district courts. The Sixth Circuit also refused to disturb the district court’s conclusion that the employee’s actual claim for pension and 401(k) benefits was with the Pension Benefit Guaranty Corporation (PBGC) since it had assumed control of the employer’s retirement benefits when it filed for bankruptcy.

According to the court’s opinion, the plaintiff retiree worked for 30 years in a UWSA unit for LTV Steel. The UWSA and LTV had negotiated both a defined contribution plan (i.e., a 401(k) plan to which both the employee and employer contributed) and a defined benefit plan (i.e., pension). In 1999, the UWSA and LTV reorganized the retirement benefits to eliminate future pension contributions (and limit future payouts to a $10,000 lump sum), and to transfer employer contributions from the 401(k) plan to the pension plan. About a year later, LTV filed for bankruptcy protection, issued a WARN notice a few months later and eventually permanently closed the retiree’s plant. The plaintiff retiree worked at reduced pay at other LTV plants, but remained out of work beginning in August 2001. Under a USWA negotiated agreement, he had the option to transfer (without seniority) to another plant, to remain on layoff status, to accept retirement or to take severance. The plaintiff elected to retire in December 2001 and take his $10,000 pension lump sum. While the opinion is ambiguous on this point, this amount was apparently never paid.

In the meantime, LTV eventually sold all of its assets in December 2001, but the sale proceeds were only sufficient to pay secured creditors and not to pay administrative claims or unsecured creditors, such as the plaintiff and other retirees. Accordingly, PBGC assumed LTV’s pension obligations. The UWSA then renegotiated the CBA with LTV and eliminated, among other things, the previously promised severance pay. Nonetheless, six months later, the USWA filed an administrative claim with the bankruptcy court for LTV’s failure to pay severance pay, WARN Act liability, retiree benefits, etc. The UWSA settled its claim with LTV in December 2003 for $15M, but the settlement expressly did not benefit retirees such as the plaintiff who worked at his original plant or were laid off prior to November 2001. In the 2003 settlement, UWSA waived any and all other claims it could make arising out of any bargaining agreement. The plaintiff received no notice of the USWA administrative claim and did not receive notice of, or consent to, the 2003 settlement.

Nonetheless, the plaintiff filed his own administrative claim against LTV in 2002 for over $300,000 (for unpaid wages, pension benefits and 401(k) payment) and it was denied by the bankruptcy court. The plaintiff eventually reached an unsecured settlement with Copperweld -- one of LTV’s subsidiaries -- for the full amount, but retained his right to pursue his claim against LTV. In 2004, he filed another administrative claim for over $40,000 for his unpaid 401(k) contributions, severance pay and other benefits.

The bankruptcy court found that the 401(k) contributions were transferred to the pension fund in 1999 and were now being administered by PBGC and not LTV. The Sixth Circuit agreed that the plaintiff should be limited to asserting a claim against the PBGC. In addition, the bankruptcy court found that collateral estoppel from the Copperweld settlement estopped the plaintiff from pursuing the same amount from LTV, despite his reservation of rights to pursue claims against LTV. The Sixth Circuit found that the plaintiff’s claims were not entitled to administrative priority status because the liability arose before LTV filed for bankruptcy and did not relate to retiree healthcare benefits.

Finally, his claim for severance benefits and WARN Act payments were deemed waived by the USWA in 2003 even though he received no proceeds from that $15M settlement, received no notice of the claim or settlement, and never consented to the settlement. Indeed, the law is clear that unions cannot negotiate on behalf of retirees because they are no longer union members. However, even though the bankruptcy court erroneously concluded that the USWA was acting as his agent, the plaintiff never raised the issue of agency to the bankruptcy or district courts, but rather, focused on his lack of notice and consent to the settlement. Therefore, the Sixth Circuit determined that he could not belatedly raise the agency argument even if the lower courts had erred. Moreover, if the UWSA had been his agent, it had authority to waive his WARN Act and severance pay claims on his behalf – even without notice or consent. Therefore, those claims were also dismissed.

Insomniacs can read the full court decision at http://www.ca6.uscourts.gov/opinions.pdf/09a0040p-06.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio Court of Appeals Dismisses Supervisor’s Defamation Claims Against Union Officer.

The Trumball County Court of Appeals affirmed the dismissal of a libel suit brought by a beleaguered night-shift supervisor against a local union officer arising out of statements made about the manager in the union newsletter more than ten years ago. Jacobs v. Budak, No. 2007-T-0033 (6/9/08). In the article, the supervisor was referred to as the “midnight cowgirl” and was accused of not following the collective bargaining agreement in assigning overtime opportunities. The Court ultimately affirmed dismissal of the lawsuit because the supervisor could not show with clear and convincing evidence that she suffered actual harm from the article or that the union officer acted with actual malice (i.e., actual knowledge of the falsity, or reckless disregard for the truth, of the statements).

Following the publication of the union newsletter, the supervisor “was subjected to callow harassment by her employees and fellow co-workers. [She] testified that the harassment lasted for a period of two to three months following the publication of the article and that she was subjected to numerous cat-calls and “mooing” sounds as she walked or drove her scooter through the plant. She received prank phone calls where unidentified persons would yell such quips as “yippy-ti-yi-o,” “moo-ooo”, and “got your spurs on.” In addition, cow horns and a cowboy hat were placed on her work scooter subjecting her to further ridicule as she drove through the plant.”

Because the dispute arose out of a “labor dispute” (i.e., a dispute between management and a union over the bargaining agreement and other terms and conditions of employment), the supervisor was required to prove her claim by clear and convincing evidence (which is a higher standard of proof than the regular preponderance of the evidence or more likely than not standard used in most civil cases). She was also required to prove that the allegedly false and defamatory statements were made with actual malice without privilege to a third party and that she suffered actual damage from the statements. “A statement is published with actual malice when it is made with the ‘the knowledge that it was false or with reckless disregard of whether it was false or not.” The Ohio Supreme Court has previously noted that “[a]ctual malice ‘cannot be implied from the character and content of a publication. *** It is not sufficient for a libel plaintiff to show that an interpretation of facts is false; rather, he must prove with convincing clarity that defendant was aware of the high probability of falsity.’”

Therefore, “[m]ere negligence is not enough to establish actual malice . . . Thus, ‘reckless conduct is not measured by whether a reasonably prudent man *** would have investigated before publishing. There must be sufficient evidence to permit the conclusion that the defendant in fact entertained serious doubts as to the truth of his publication.’” In fact, courts have been clear that the failure to investigate has been found to constitute malice only “where the defendant has serious doubts that the statement is true.”

In this case, the union officer was able to show that he conducted an investigation and there was some factual basis for his allegations against the supervisor. Although the supervisor alleged that the union officer conducted his investigation negligently, even if that were true, the court found “no evidence that [the union officer] had any serious doubts as to the veracity of the statements.”

“It is clear that access to equalization records was an ongoing debate as the issue was discussed in union-management meetings before, during, and after the article was released. Indeed, [the defendant union officer] was not even familiar with Ms. Jacobs until he was ordered to investigate [an employee’s] complaints in early May of 1997 by his supervisor. Although the statements were certainly negligently made, we cannot say that they were made with such reckless disregard or knowledge as to their falsity.”

The Court also concluded that the supervisor was required to prove actual damages from the allegedly defamatory statement because it arose out of a union dispute and that she failed to do so. “As evidenced by the numerous medical records that were entered into the record, [the supervisor] has a long history of physical and mental distress that may or may not have been exacerbated by this incident. According to her employment evaluations and her own testimony, her employment was unaffected. Indeed, following the release of the article she was given a six percent raise and has been consistently rated in her job performance as “satisfactory” or above. The testimony and medical records [the supervisor] did submit failed to evidence that the article was the proximate cause for the stress she was facing at that time. Indeed, [her] own physician, Dr. Meyers, could not differentiate between the stress that was caused by the article and the stress that resulted from the ensuing legal battle.”

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/11/2008/2008-ohio-2756.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney