Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division.
No. 96 C 1417 John D. Tinder, Judge.
Before Posner, Chief Judge, and Ripple and Evans, Circuit Judges.
Petitions for Review and Cross-Application for Enforcement of an Order of the National Labor Relations Board.
We have before us cross-petitions to set aside and to enforce an order by the National Labor Relations Board specifying certain procedures that the machinists' union must or may follow in order to protect the rights of union nonmembers whom the union and its locals represent in collective bargaining with employers. A bit of history will bring the issues into focus. Section 8(a)(3) of the National Labor Relations Act contains a proviso permitting the parties to a collective bargaining agreement to include a "union shop" clause: the employer agrees to require as a condition of employment that the employees in the bargaining unit join the union within thirty days after the collective bargaining agreement goes into effect or, if the employee is hired after the agreement is already in force, within thirty days after he's hired. The Act does not say that the employee thus forced to join the union as a condition of keeping his job can either resign from the union if he objects to the union's political activities or withhold any portion of his dues that is not being used to finance the union's activities on behalf of the members of the bargaining unit. But in dealing with statutes that either regulate public employment or forbid states to ban the union shop (that is, forbid "right to work" laws), and so in either case are taken to place the power of government behind the terms of employment, the Supreme Court has long held that the First Amendment, and so the statutes themselves when interpreted to avoid violating the First Amendment, forbid the employer to require the employee either to remain a union member or to pay any part of the dues that is used to support the union's political activities. Abood v. Detroit Board of Education, 431 U.S. 209 (1977); International Ass'n of Machinists v. Street, 367 U.S. 740 (1961); see also Lehnert v. Ferris Faculty Ass'n, 500 U.S. 507 (1991); Chicago Teachers Union v. Hudson, 475 U.S. 292 (1986); Ellis v. Brotherhood of Railway, Airline & Steamship Clerks, 466 U.S. 435 (1984); Brotherhood of Railway & Steamship Clerks v. Allen, 373 U.S. 113 (1963).
Section 8(a)(3) does not regulate the labor relations of public employers or forbid states to ban the union shop. The issue of whether an employer's enforcement of a union-shop clause is nevertheless a governmental act (because of the government's role in encouraging collective bargaining), and is therefore within the purview of the First Amendment, is more difficult and remains unresolved. Wegscheid v. Local Union 2911, 117 F.3d 986, 988 (7th Cir. 1997). But in 1988 the Supreme Court, without reaching the constitutional issue, held that section 8(a)(3) of its own force precludes the employer from requiring workers in the bargaining unit who don't want to be union members to pay any portion of the union dues that is used for activities other than negotiating and administering collective bargaining agreements. All that the employer may require these workers to pay is an "agency fee" representing the portion of the dues that the union expends in its collective bargaining activities. Communications Workers v. Beck, 487 U.S. 735 (1988).
Beck left unresolved the definition of the agency function, the design of procedures necessary to allocate union dues between that function and the other activities of a union, and the methods for assuring that workers learn of and are able to exercise their Beck rights. Upon the complaint of a number of nonunion members of bargaining units represented by the 800,000-strong machinists' union, the Labor Board in the 125-page opinion that we review today attempted to answer some of the questions left open by Beck. California Saw & Knife Works, 320 N.L.R.B. 224 (1995). The nonunion machinists-- we'll call them the "dissenters"--ask us to set aside several provisions of the Board's order and the union asks us to set aside one.
The challengers to the Board's order face an uphill fight, for two reasons. The first is that under the doctrine of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the Board has broad latitude in interpreting nondirective statutory language. Holly Farms Corp. v. NLRB, 116 S. Ct. 1396, 1401 (1996); NLRB v. United Food & Commercial Workers Union, 484 U.S. 112, 123 (1987); Electromation, Inc. v. NLRB, 35 F.3d 1148, 1156 (7th Cir. 1994); Finerty v. NLRB, 113 F.3d 1288, 1291 (D.C. Cir. 1997). Less directive than section 8(a)(3), so far as agency fees is concerned at any rate, it is scarcely possible to get. The section says nothing about agency fees and so provides no guidance to the formulation of rules governing them. All we have to go on is the Court's holding in Beck that the union-shop proviso is intended to prevent workers in a bargaining unit from taking a free ride on the union's efforts in their behalf (the union being required to represent all the members of the unit equally, whether or not they are union members). The free ride is prevented by making the nonmembers pay their aliquot share of the union's cost of representing the workers in the unit--but no more. All the details necessary to make the rule of Beck operational were left to the Board, subject to the very light review authorized by Chevron. It is hard to think of a task more suitable for an administrative agency that specializes in labor relations, and less suitable for a court of general jurisdiction, than crafting the rules for translating the generalities of the Beck decision (more precisely, of the statute as authoritatively construed in Beck) into a workable system for determining and collecting agency fees.
The posture of this case, moreover, makes judicial review necessarily abstract, and as a result limited in depth. In the wake of Beck, the machinists' union adopted the procedures that were before the Board in this case. The Board evaluated these procedures not in terms of their actual operation, evidence of which was not placed before the Board, but in terms of their conformity to the general norm of reasonableness that is implicit in the concept of "fair" representation. Air Line Pilots Ass'n v. O'Neill, 499 U.S. 65, 78 (1991); Ford Motor Co. v. Huffman, 345 U.S. 330, 338 (1953); Trnka v. Local Union No. 688, 30 F.3d 60 (7th Cir. 1994); Young v. UAW-LETC, 95 F.3d 992, 996-98 (10th Cir. 1996). The briefs do not even tell us the average annual dues of a member of the machinists' union or the percentage of those dues that is represented by the agency fee, though we were told at argument that the first number is about $300 a year and the second about 85 percent. There is no evidence about actual mistakes in the calculation of the agency fee or actual confusion of workers about their rights under Beck. The challengers thus face the difficult task of persuading us without the aid of facts that the Board was unreasonable in determining that some of the union's procedures are reasonable and others (one challenged here) unreasonable, regardless of their actual administration and effect. Nothing in this opinion is intended to prejudge any challenge to the Board-approved procedures that is based on how they operate in practice rather than in the realm of hope and speculation.
The dissenters' first challenge is to the Board's allowing the union to pool all its expenditures (including litigation expenditures, treated separately by the parties but analytically identical, as far as we can see) relating to collective bargaining, and in effect divide the pool by the number of workers that the union represents, to compute the basic agency fee. The dissenters argue that this component of the fee should be limited to the expenses incurred by the union in representing their units, not other units of workers, let alone workers in another country (Canada), where the machinists' union represents some workers in collective bargaining. The argument overlooks the economic interdependence of bargaining units. Imagine two competing employers of machinists. One has a collective bargaining agreement with the machinists' union that is about to expire; the other does not yet have a collective bargaining agreement with the union although the union is the exclusive bargaining representative of the employer's machinists. The union's ability to extract higher wages from the first employer will be constrained by the competition of the second employer, who may be paying lower wages and thus incurring lower operating costs. It is therefore in the interest of the machinists in the first firm, including those who do not belong to the union, that the union succeed in negotiating an advantageous collective bargaining agreement for the competing firm's machinists. The costs that the union incurs in that effort generate benefits to the nonmember machinists and are therefore a permissible component of the agency fee, even though the union's efforts are directed at a different employer.
We made our example an easy one for the Board by stipulating that the different employers were competing. Often they will not be. They may still be competing for workers, even though their products are not competitive; but then again they may not be. And even in the easy cases, quantification of the benefits to the workers in one bargaining unit from a worker-favorable collective bargaining agreement in another would be impossible as a practical matter. Given the difficulties, aggregation is the only feasible alternative to ignoring interdependence altogether. Faced with such a choice, a classic case of having to choose the lesser of two evils on insufficient information, the Board's decision cannot be deemed unreasonable. Lehnert v. Ferris Faculty Ass'n, supra, 500 U.S. at 522-24; Finerty v. NLRB, supra, 113 F.3d at 1291-92. If, moreover, the actual interdependence of units of machinists is so slight as to make the pooling of the expenses of all the different ones unreasonable, this is something to be shown in a challenge to the application of the principle of pooling, and no issue of application was before the Board or is before us. Only the principle itself is at issue, and pooling is not unreasonable at the level of principle.
The dissenters' next complaint is about the method by which the international union audits the calculation of the agency fee by the locals and the districts (the districts being intermediate bodies between the locals and the international). Rather than hiring a certified public accountant to do the audits, the international assigns auditors who are employed by it or one of the subordinate bodies, but who are not CPAs and may have no formal training in accounting, to audit the agency-fee calculations of a local or district with which the particular auditor has no present or prior affiliation. As all the auditors are the employees of an affiliate of the audited entity, they do not have the formal ...