BILL ANALYSIS                                                                                                                                                                                                    




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          Date of Hearing:   April 21, 2004

                     ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
                                 Paul Koretz, Chair
                    AB 2052 (Haynes) - As Amended:  March 26, 2004
           
          SUBJECT  :   Employment

           SUMMARY  :   Makes a number changes to various sections of the  
          Labor Code related to employment and union-employee relations.   
          Specifically,  this bill  :  

          1)Eliminates the requirement that the headquarters of the  
            Division of Labor Standards Enforcement (DLSE) be located in  
            San Francisco.

          2)Requires employers to notify employees when deductions are  
            made from their paychecks to be used for political purposes.

          3)Prohibits any person from coercing an employee to join or  
            become a member of a labor organization as a condition of  
            employment.

          4)Prohibits a labor union from adopting or enforcing any rule,  
            regulation or policy that forbids or prevents employees from  
            engaging in politics or from becoming candidates for public  
            office, or that controls, directs or tends to control or  
            direct the political activities or affiliations of employees.

          5)Eliminates a specified declaration of public policy related to  
            the right of employees to organize and engage in collective  
            bargaining.

           FISCAL EFFECT :   Unknown

           COMMENTS  :   This bill is sponsored by the Associated Builders  
          and Contractors (ABC) of California, who argues that this  
          measure will provide much-needed improvement to the Labor Code.

          State and federal law offers broad protections to employees so  
          that they can organize into unions and take collective action to  
          improve their wages, hours, benefits and other working  
          conditions.  The federal National Labor Relations Act (NLRA) is  
          the primary source of such protection for most private sector  
          employees.  There are also a limited number of provisions of the  









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          California Labor Code related to private sector labor relations.  
           California law also sets forth similar rights for agricultural  
          workers and most public sector employees, which are excluded  
          from the NLRA.

          Several of the changes proposed in this bill necessitate  
          discussion of complicated principles of state and federal labor  
          law.  For this reason, each section of the bill will be  
          discussed in turn below. 




            A.   Division of Labor Standards Enforcement (DLSE) Headquarters
           
          Labor Code Section 80, which was enacted in 1976, specifies that  
          the DLSE headquarters is to be located in San Francisco.  In  
          addition to its headquarters, DLSE also maintains district  
          offices in 18 California cities.

          This bill would eliminate that requirement of the Labor Code.

          According to the author's office, this requirement is  
          unnecessary and inappropriately locks the state into being  
          located in an area that may not always be the most appropriate  
          or cost efficient.  This bill grants flexibility in the location  
          of that office, but does not require its location in any set  
          city.  Moreover, ABC argues that moving DLSE headquarters out of  
          San Francisco could offer tremendous savings to taxpayers during  
          a time when our state is seeking creative and proactive ways to  
          use resources wisely.

          The California Labor Federation, AFL-CIO, writing in opposition  
          to this measure, argues that this change would likely lead to  
          many seasoned labor lawyers leaving DLSE.  This would undercut  
          current efforts to increase the efficiency and the effectiveness  
          of DLSE.

           B.   Employee Notification of Deductions for Political Purposes  
           
           Under current California law, employers make a variety of  
          payroll deductions from their employees' wages, including  
          deductions for Social Security, income taxes, medical plans and  
          charitable contributions.  The Labor Code also requires  
          employers to notify employees at the time of payment of wages  









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          regarding the amount of compensation and any deductions  
          therefrom.    

          Many employees in California are represented by labor  
          organizations and pay union dues or similar fees for  
          representation to the union.  Under many collective bargaining  
          agreements, such dues or fees are automatically deducted by the  
          employer from employee wages and forwarded directly to the labor  
          organization.

          This bill would require employers to notify employees when  
          deductions are made from their wages to be used for political  
          purposes, a provision that appears aimed directly at the use of  
          union dues for political purposes.  

                1.        Union Security Agreements and the Use of Union  
                    Dues for Political Purposes

           Section 8(a)(3) of the NLRA allows employers and unions to enter  
          into union-security agreements requiring all employees in a  
          particular bargaining unit to become "members" after a 30-day  
          period following hire.  However, in a 1963 decision, the Supreme  
          Court held that the term "member" requires only the payment of  
          periodic dues and fees as opposed to full membership in the  
          union.   NLRB v. General Motors Corporation  , 373 U.S. 734 (1963).  
           Since the court noted that "the membership that is required has  
          been whittled down to its financial core," individuals choosing  
          that approach are often referred to as "financial core members."  
           This has also been termed an "agency shop" arrangement.

          Therefore, under current law, no employee is required to become  
          a member of a union in order to maintain a job, but all  
          employees subject to a union security clause can be required to  
          pay union dues and fees to defray the costs of representation.

          In  Communication Workers of America v. Beck  , 487 U.S. 735  
          (1988), the Supreme Court held that the section of the NLRA that  
          allows employers and unions to enter into union security  
          agreements does not "permit a union, over the objections of  
          dues-paying nonmember employees, to expend funds so collected  
          [pursuant to a union security clause] on activities unrelated to  
          collective bargaining, contract administration or grievance  
          adjustment."  Thus, federal labor law does not permit a union to  
          spend funds from dues-paying non-union employees on certain  
          activities unrelated to collective bargaining when those  









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          employees object to such expenditures.  At issue in  Beck  was the  
          specific use of dues for political purposes.  
           
           In  Lehnert v. Ferris Faculty Association , 500 U.S. 507 (1991),  
          the Supreme Court articulated a test for determining whether a  
          particular expenditure of union funds may be charged to  
          nonmember employees.  Chargeable uses must (1) be germane to  
          collective bargaining activities, (2) be justified by  
          governmental interest in the maintenance of labor peace and the  
          prevention of "free riders" who benefit from the union's  
          collective bargaining activities without contributing to the  
          costs of such activities; and (3) not add significantly to the  
          burdening of free speech rights.
          
          Under  Beck  and subsequent cases, a union has several general  
          obligations to ensure that employee's  Beck  rights are protected.  
           First, the union must provide notice to nonmember employees of  
          their  Beck  rights.  Second, the union must refrain from charging  
          objectors for nonrepresentational expenses.  Finally, the union  
          must provide objectors with a financial disclosure and establish  
          procedures for objectors to challenge the accuracy of the  
          union's disclosure.

          Therefore, applicable federal labor law establishes a mechanism  
          whereby employees covered under union security agreements can  
          become "financial core" nonmembers and therefore avoid having to  
          pay that portion of their dues or fees for purposes unrelated to  
          collective bargaining.
           
                2.         California Proposition 226 (1998)  

          Proposition 226 of 1998 would have, among other things, required  
          employers to obtain a signed authorization from employees on an  
          annual basis in order to deduct money from an employee's wages  
          to be used for political campaign activities.  The measure also  
          would have required that, in order for a labor organization to  
          use a portion of the dues or fees it collects for political  
          campaign activities, the union must obtain a signed form from  
          the employee each year authorizing the use of the money for  
          those activities.

          Supporters of Proposition 226 argued the measure would have  
          stopped unions and employers from taking money from members' or  
          employees' paychecks for political purposes without their prior  
          consent.  Supporters argued that it was morally wrong to take  









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          money from employee paychecks and spend it on political  
          candidates or causes that employees may oppose.

          Opponents of Proposition 226 argued that it was a measure  
          largely funded by out-of-state interests that attempted to  
          regulate union dues but not restrict how corporate interests and  
          their political allies use money on politics.  Opponents argued  
          that corporate interests contribute eleven times what employee  
          organizations contribute to political campaigns.  Therefore,  
          opponents argued that by placing new bureaucratic regulations on  
          unions, but not on corporate interests, the backers of  
          Proposition 226 were trying to "silence" unions and give an  
          unfair advantage to corporate interests. 

          Proposition 226 was defeated by voters in the June 2, 1998  
          primary election.

               3.            Arguments in Support of the Notification  
                 Provisions of this Bill

           The author's office states, "[t]his bill merely tells employees  
          how much of their money is automatically deducted for political  
          purposes without requiring an opt in or opt out of those  
          deductions."

          ABC argues that this bill would guarantee employees' rights to  
          be informed when funds are deducted from their paychecks for  
          political purposes.  "California employees are entitled to know  
          when their wages are being used for political campaigning and  
          similar political purposes."
           
                4.         Arguments in Opposition to the Notification  
               Provisions of this Bill 
           
          Opponents argue that the use of union funds is guaranteed by the  
          First Amendment of the United States Constitution and is  
          comprehensively regulated by federal labor law so as to protect  
          the rights of employees who do not wish their union dues to be  
          used for political purposes.

          The California Labor Federation, AFL-CIO (Federation) argues  
          that the California public rejected Proposition 226, realizing  
          that such measures would undermine a union's ability and  
          responsibility to be active in the public arena.  The Federation  
          also argues that this bill is unnecessary because union members  









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          already have the right to request that their dues not be used  
          for political purposes.

          Opponents also argue that this provision of the bill would be  
          unenforceable because employers would have no way of knowing in  
          advance whether any portion of the dues deducted from employee  
          wages would be used for political purposes or not.

           A.   Requirement of Union "Membership" as a Condition of  
               Employment 

          As discussed above, under current federal labor law no employee  
          is required to become a member of a union in order to maintain a  
          job, but all employees subject to a union security clause can be  
          required to pay union dues and fees to defray the costs of  
          representation.

          Prior to the enactment of the NLRA in 1935, "yellow dog"  
          contracts, whereby employees agreed not to join unions or engage  
          in union activity, were used by many employers and approved by  
          the courts.  The NLRA declared that union membership is a  
          protected right and therefore strictly forbid "yellow dog"  
          contracts.  At the same time, the original NLRA permitted a  
          "closed shop" agreement, which conditioned initial employment  
          upon union membership.

          However, the NLRA was substantially amended by the Taft-Hartley  
          Act of 1947, which significantly reduced the range of lawful  
          union security agreements.  Specifically, the NLRA was amended  
          to guarantee employees' rights to refrain from union membership  
          and activity, while permitting the union shop (which requires  
          only that employees become union "members" within a certain  
          amount of time upon being hired).

          The most controversial of the Taft-Hartley amendments permits  
          states to prohibit "agreements requiring membership in a labor  
          organization as a condition of employment."  At the time this  
          provision was enacted, 12 states already had statutes or  
          constitutional provisions that outlawed or restricted union  
          security agreements.  Currently, 22 states (in varying degrees)  
          prohibit union security agreements that would otherwise be valid  













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          under the NLRA<1>.  These measures, commonly known as  
          "right-to-work" laws, give employees the option of employment  
          without having to join or contribute financial support to any  
          union, including a union that has been selected as the  
          employees' lawful collective bargaining representative.

          All right-to-work laws prohibit the union shop.  In addition,  
          the right-to-work measures of 14 states expressly outlaw the  
          agency shop by prohibiting even the payment of union dues or  
          fees (not just full membership) as a condition of employment.   
          The right-to-work provisions of six additional states, while not  
          plainly precluding the agency shop, have been construed to have  
          the same prohibitory effect.

          This bill prohibits any person from coercing an employee to join  
          or become a member of a labor organization as a condition of  
          employment.  The author's office states, "current law prohibits  
          coercion against joining a union against someone's will; this  
          bill would prohibit coercion to join a union against a worker's  
          will."

           B.   Employee Political Activity  
           
           Under existing California law, employers are prohibited from  
          establishing rules, regulations or policies that forbid  
          employees from participating in politics or becoming candidates  
          for public office, or that controls or directs the political  
          activities or affiliations of employees.  Existing state law  
          also prohibits an employer from coercing or influencing its  
          employees to adopt or refrain from any particular course of  
          political activity. 
           
           With respect to public employees, the federal Hatch Act (5  
          U.S.C.  7321 et seq.) prohibits federal civil service employees  
          (as well as state and local employees in predominantly federally  
          funded programs) from using their official authority to  
          interfere with or affect election, receiving political  
          contributions (except in limited situations), or running for  
          partisan political office.  California has enacted a "little  
          Hatch Act" (Government Code  3201-3209), which is less  
          restrictive than its federal precursor.  It allows local  
          ---------------------------
          <1> These states are: Alabama; Arizona; Arkansas, Florida,  
          Georgia, Idaho, Iowa, Kansas, Louisiana, Oklahoma, Mississippi,  
          Nebraska, Nevada, North Carolina, North Dakota, South Carolina,  
          South Dakota, Tennessee, Texas, Utah, Virginia, and Wyoming.








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          governments to restrict their employees' political activities  
          during working hours or while in uniform.

          The author's office states that state law prohibits employers  
          from discouraging employees from being politically active in  
          causes the employer disagrees with.  "This bill will simply  
          ensure that union members will also be free of such pressures  
          from union bosses who don't want their members active in causes  
          the union boss disagrees with." 

          Opponents of this bill argue that, unlike employers, labor  
          organizations do not control the decision to hire, fire,  
          discipline or promote employees.  Therefore, it would be  
          inappropriate to apply such employer prohibitions to labor  
          organizations.



          E.    Declaration of Public Policy Related to Organizing for  
          Purposes of Collective Bargaining 
           
          Labor Code Section 923, enacted in 1937, sets forth a general  
          independent declaration of public policy in favor of the right  
          of employees to bargain collectively.  Similar language is  
          contained in the NLRA (29 U.S.C.  151).  Specifically, Labor  
          Code Section 923 provides as follows:

               Negotiation of terms and conditions of labor should result  
          from voluntary agreement
               between employer and employees.  Governmental authority has  
          permitted and
               encouraged employers to organize in the corporate and other  
          forms of capital control.
               In dealing with such employers, the individual unorganized  
          worker is helpless to
               exercise actual liberty of contract and to protect his  
          freedom of labor, and thereby
               to obtain acceptable terms and conditions of employment.   
          Therefore it is necessary
               that the individual workman have full freedom of  
          association, self-organization, and
               designation of representatives of his own choosing, to  
          negotiate the terms and
               conditions of his employment, and that he shall be free  
          from the interference, restraint,









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               or coercion of employers of labor, or their agents, in the  
               designation of such representatives or in self-organization  
               or in other concerted activities for the purpose
               of collective bargaining or other mutual aid or protection.

          This bill would eliminate that declaration of public policy. 

          The author's office states that elimination of Section 923 will  
          delete "inflammatory, extraneous and non-binding statement of  
          public policy.  This section is unneeded clutter in the code and  
          deletion will not affect state law."

          Opponents argue that this provision establishes California's  
          support for the policy that workers should have democratic  
          rights to engage in collective bargaining and that collective  
          bargaining fosters peaceful labor relations.  Opponents see no  
          reason to eliminate the long-standing provision of California  
          law.

          Writing in opposition, the California Professional Firefighters  
          states:

               Among the more damaging components of this bill is the  
          repeal of Section 923 of
               the Labor Code, which is the foundation on which California  
          allows individuals to
               organize and engage in other activities for employment  
          collective bargaining purposes.
               By striking this section, [this] bill strikes at the very  
          core of the democracy in which
               we live?Labor Code Section 923 assures a simple equity,  
          without which, a potential
               exists for employers to merely stonewall employees and in  
          certain cases, impose their
               will.  Common sense suggests that California's workers  
          deserve better and the current
               law section recognizes just that.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Associated Builders and Contractors of California (sponsor)

           Opposition 









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          American Federation of State, County and Municipal Employees
          American Federation of Television and Radio Artists
          California Conference Board of the Amalgamated Transit Union
          California Conference of Machinists
          California Labor Federation, AFL-CIO
          California Professional Firefighters
          California School Employees Association
          California State Association of Electrical Workers
          California State Pipe Trades Council
          California Teamsters Public Affairs Council
          Engineers & Scientists of California, Local 20
          Hotel Employees & Restaurant Employees International Union
          Peace Officers Research Association of California
          Professional and Technical Engineers, Local 21
          State Building and Construction Trades Council
          Western States Council of Sheet Metal Workers
           
          Analysis Prepared by  :    Ben Ebbink / L. & E. / (916) 319-2091