San Ramon Valley Education Association CTA/NEA (Abbot/Cameron) (PERB 0802E)

STATE 	OF 	CALIFORNIA
DECISION OF 	THE
PUBLIC 	EMPLOYMENT RELATIONS 	BOARD
...
BARBARA C. 	ABBOT,
Charging 	Party,
v.
SAN 	RAMON VALLEY 	EDUCATION
ASSOCIATION, 	CTA/NEA,
Respondent.
Case No. 	SF-CO-304
PERB Decision No. 	802
March 29, 	1990
YVONNE M. 	CAMERON,
Charging 	Party,
v.
SAN 	RAMON VALLEY 	EDUCATION
ASSOCIATION, 	CTA/NEA,
Respondent.
Case No. 	SF-CO-309
Appearances:- National Right to Work Legal Defense 	Foundation,
Inc. 	by Milton L. 	Chappell, 	Attorney, 	for Barbara C. 	Abbot and
Yvonne M. 	Cameron; 	California Teachers Association by Diane Ross,
Attorney, 	for the 	San Ramon Valley Education Association,
CTA/NEA.
Before Hesse, 	Chairperson; 	Craib, 	Shank, Camilli, 	and Cunningham,
Members.
DECISION
HESSE, 	Chairperson: 	This 	case is before the Public
Employment 	Relations 	Board 	(PERB or 	Board) 	on exceptions 	filed by
Barbara C. 	Abbot 	(Abbot) 	and Yvonne M. 	Cameron 	(Cameron) 	to a
proposed decision, 	issued by a 	PERB 	administrative 	law 	judge
(ALJ). 	Abbot and Cameron filed two unfair practice 	charges
against 	the 	San Ramon Valley Education Association, 	CTA/NEA
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(SRVEA) 	alleging, 	inter alia, 	that SRVEA interfered with the
right 	of Abbot 	and Cameron to 	refrain 	from organizational
activity, 	thereby violating 	section 	3543.6(b) 	of the 	Educational
Employment Relations Act 	(EERA).1 Specifically, 	SRVEA is 	alleged
to 	have 	deducted 	agency 	fee payments 	from 	nonmembers 	without
following 	the 	constitutional 	requirements 	set 	out 	by 	the 	United
States 	Supreme Court 	in Chicago Teachers 	Union v. 	Hudson 	(1986)
475 	U.S. 	292 	(Hudson).
The 	Board, 	based on a review of the 	entire record, 	including
the 	stipulated 	issues, 	the 	exceptions 	filed by Abbot 	and Cameron
and 	SRVEA's 	response thereto, 	affirms 	in part and reverses 	in
part 	the proposed decision, 	in accordance with 	the discussion
below.
SUMMARY OF 	THE 	FACTS
SRVEA 	is 	an affiliated 	local 	of 	California 	Teachers
Association 	(CTA) 	and National Education Association 	(NEA),
serving 	as 	the 	exclusive 	representative 	of 	certificated 	employees
EERA 	is 	codified at Government 	Code 	section 	3540 	et 	seq.
Unless 	otherwise 	indicated, 	all 	statutory 	references 	herein are
to the Government Code. 	Section 3543.6 	states, 	in pertinent
part:
It 	shall 	be unlawful 	for an employee
organization to:
(b) 	Impose or threaten to 	impose reprisals
on employees, 	to discriminate or threaten to
discriminate against employees, 	or otherwise
to interfere with, 	restrain, 	or coerce
employees 	because of 	their 	exercise of 	rights
guaranteed by this 	chapter.
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in the San Ramon Unified School District 	(District). 	As 	the
result 	of 	a bargaining agreement between 	SRVEA and 	the 	District,
SRVEA was permitted to 	collect nonmember, 	agency 	fees 	(or
organizational 	security 	fees) 	through a payroll deduction
mechanism.2 For the 	1986-87 	school 	year, 	the time period 	for
2EERA section 3540.1(i)(1)(2) 	states:
(i) 	"Organizational 	security" 	means 	either
of the following:
(1) 	An arrangement pursuant to which a
public 	school 	employee may decide whether or
not to 	join an employee organization, 	but
which requires him or her, 	as 	a condition of
continued employment, 	if he or she does 	join,
to maintain his 	or her membership 	in good
standing 	for the duration of 	the written
agreement. 	However, 	no such arrangement
shall deprive 	the 	employee of the right 	to
terminate his 	or her obligation to the
employee 	organization within a period of 	30
days 	following the 	expiration of 	a written
agreement.
(2) 	An arrangement that requires 	an
employee, 	as a condition of continued
employment, 	either to 	join the 	recognized or
certified employee organization, 	or to pay
the 	organization a 	service 	fee 	in an amount
not to 	exceed 	the 	standard 	initiation 	fee,
periodic dues, 	and general assessments 	of the
organization for 	the duration of 	the
agreement, 	or a period of three years 	from
the 	effective date of the 	agreement,
whichever comes 	first.
California Education Code 	section 45061 	states, 	in pertinent
part:
The governing board of 	each 	school 	district
when drawing an order 	for 	the 	salary 	or wage
payment due to 	a 	certificated employee of 	the
district 	shall, 	with or without charge,
reduce the 	order 	for the payment of 	service
fees 	to 	the 	certified or recognized
organization as 	required by 	an 	organizational
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which the collection procedures 	are at 	issue, 	SRVEA collected
agency 	fees 	from approximately 	100 	nonmembers. 	The 	agency 	fee
amounts 	obtained 	through 	the payroll 	deductions 	were 	equal 	to
SRVEA membership dues 	and amounted 	to 	$411 	per person. 	SRVEA
allocated the dues 	and fees 	as 	follows: 	(1) 	$90 per year to
SRVEA; 	(2) 	$2 50 per year to CTA; 	and 	(3) 	$71 per year to NEA.
Following the 	United 	States 	Supreme 	Court 	decision 	in
Hudson, 	CTA 	implemented new agency 	fee 	collection procedures,
which provided 	for 	an annual 	notice 	to 	nonmembers 	describing:
(1) 	an outline of CTA's collection and refund procedure; 	(2) 	the
estimated 	amounts 	of 	chargeable 	and 	nonchargeable 	expenditures;3
security 	arrangement 	between 	the 	exclusive
representative 	and 	a 	public 	school 	employer
as 	provided under Chapter 	10.7 	(commencing
with Section 3540) 	of Division 4 of Title 	1
of the Government Code. 	However, 	the
organizational 	security 	arrangement 	shall
provide 	that 	any 	employee 	may pay 	service
fees 	directly to 	the 	certified 	or recognized
employee 	organization 	in 	lieu 	of 	having 	such
service 	fees 	deducted 	from the 	salary or wage
order.
3"Chargeable 	expenditures" 	are 	those 	fair-share 	fees 	that
must be paid by public 	employees who decline 	to become members 	of
their 	designated 	exclusive 	bargaining 	representative 	that
. 	. 	. 	include not only the direct costs of
negotiating 	and 	administering 	a 	collective
bargaining 	contract 	and 	settling 	grievances
and disputes, 	but also the expenses of
activities 	or undertakings 	normally 	or
reasonably 	employed 	to 	implement 	or
effectuate the duties 	of 	the union as 	the
exclusive 	representative of 	employees 	in the
bargaining unit.
(Cumero v. 	Public 	Employment Relations 	Board
(1989) 	49 Cal.3d 575, 	588, 	citing Ellis v. 	Railway
Clerks 	(1984) 	466 U.S. 	435, 	448.)
4

(3) 	the procedure 	for obtaining a 	reduction for the 	nonchargeable
amounts; 	and 	(4) 	the procedure for challenging CTA's 	estimated
amounts 	before a 	neutral 	arbitrator. 	The 	collection procedures
also 	included 	an option 	for 	local 	affiliates 	to 	adopt 	CTA's
chargeable percentages 	as 	their own. 	Any 	local 	that did not 	use
the 	CTA 	chargeable percentage was 	required to provide 	its 	own
notices 	and hearings 	relating to 	local 	fees. 	For the 	1986-87
school year, 	SRVEA chose to use CTA's 	chargeable percentage 	as
its 	own. 	Thus, 	CTA would provide 	for the 	entire hearing 	should
any 	nonmember 	from the 	District 	challenge 	SRVEA's 	agency 	fee
estimation. 	Additionally, 	the plan provided for 	100 	percent of
the 	nonmember 	fees 	collected to be 	set 	aside 	in an 	independently
managed, 	interest-bearing 	escrow account pending 	resolution of
fee payers' 	objections by an impartial decision maker.
In order to 	comply with Hudson, 	CTA provided 	an audit 	report
of 	its 	agency 	fee 	calculations. 	The 	audit performed by the
accounting 	firm of 	Ernst 	& 	Whinney was 	a 	review based 	on CTA's
own allocation of 	its 	estimated 	costs, 	which in turn was based
upon 	staff 	activity 	reports 	using 	a 	computerized 	coding 	system.
Staff 	timesheets 	were 	filled 	out 	and 	coded 	according 	to 	a 	list,
predetermined by CTA, 	of 	staff's 	chargeable 	and nonchargeable
activities. 	A 	separate 	calculation was 	made of 	expenditures 	for
managerial, 	clerical 	and 	support operations 	because these
functions 	generally 	served departments 	throughout 	CTA. 	These
calculations 	were 	then allocated 	according 	to 	the percentages
55

within 	each department 	in proportion to 	the 	chargeable 	and
nonchargeable categories 	as 	adopted by 	each department.
Prior to 	compiling the review of 	agency 	fee 	expenditures,
CTA's 	underlying 	financial 	statements 	were 	also 	audited by 	Ernst
& Whinney. 	However, 	even though 	sample reliability testing was
performed 	by 	the 	auditors 	on the 	underlying 	activity 	reports
submitted by CTA, 	a 	formal 	audit 	of 	the 	estimated 	chargeable
expenditures was 	not 	accomplished. 	This was because of 	the many
legal 	uncertainties 	regarding determination of what 	is 	chargeable
and, 	thus, 	retainable by the exclusive representatives. 	The
review, 	instead, 	determined whether or not the historical 	costs
incurred by CTA, 	and 	the 	time-tracking 	information obtained 	from
selected employees, 	provided a reasonable basis 	for CTA's
calculation of 	the percentages 	of 	chargeable and 	nonchargeable
expenditures.
On October 	13, 	1986, 	CTA distributed its notice and
accompanying 	supporting documents 	to 	agency 	fee payers 	throughout
the 	state. 	In that notice, 	agency 	fee payers were 	informed that
all 	participating 	local 	CTA 	chapters would 	adopt 	the 	chargeable
percentage figure 	(84.9%) 	of CTA as 	their own. 	The documentation
included: 	(1) 	both CTA's and NEA's 	explanations 	of the method
used 	for 	calculating 	chargeable 	and 	nonchargeable 	expenditures;
(2) 	estimates of the budgets 	for the 	1986-87 	school year; 	and 	(3)
copies 	of NEA's 	(but not CTA's) 	audited expenditures 	for the
1984-85 	school year. 	SRVEA, 	in electing to utilize the 	local
presumption option of CTA's procedures, 	provided no 	supporting
6
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financial 	information of 	its 	own local 	expenditures. 	In mid-
December 	1986, 	CTA mailed 	the 	auditor's 	review of 	CTA's
chargeable 	and 	nonchargeable 	expenditures 	for 	the 	1985-86 	year
and the 	estimated 	expenditures 	for the 	1986-87 	year to 	fee payers
who 	had 	requested 	arbitration.
Between November 	13 	and December 	12, 	1986, 	CTA sent a refund
payment 	of 	approximately 	$73 	to 	the majority of 	all 	those 	fee
payers 	requesting a refund, 	but not arbitration. 	For the
employees 	of 	the San Ramon Valley Unified 	School 	District, 	out of
the $441 	for the 	1986-87 	school year, 	the refund equated to
approximately $14 	from SRVEA, 	$43 	from CTA, 	and $16 	from NEA.4
Fee payers, 	including Abbot and Cameron, 	who challenged the
estimated percentage 	by 	requesting 	a 	refund 	and 	an 	arbitration
hearing 	received 	no 	amount 	from CTA until 	the 	conclusion of 	the
arbitration 	in June 	1987. 	Although CTA deposited all 	fees
collected 	in 	segregated bank accounts, 	these 	accounts were 	not
independently managed. 	The 	accounts were 	controlled 	exclusively
by CTA. 	Additionally, 	CTA withheld and deposited the 	fees
designated 	for both 	itself 	and NEA. 	SRVEA utilized 	the 	same 	type
of 	banking 	arrangement, 	but had merged 	its 	regular operational
account with 	its 	agency 	fee 	account 	from August 	1986 	until
February 	1987. 	In February 	1987, 	SRVEA established a 	separate
fund at CTA's 	direction.
4These 	figures 	represented the 	amount 	of 	refund due 	an
objecting fee payer for the entire 	school year. 	Thus, 	objectors
were 	provided 	a 	future advanced reduction 	on monthly 	amounts 	yet
to be 	collected.
7

The parties 	stipulated 	in the hearing before 	the ALJ 	that
Abbot 	and Cameron had received the 	October 	13 	notice with
accompanying materials, 	as well 	as 	the 	"audited" 	materials 	that
were 	distributed 	in December. 	Abbot 	and 	Cameron had 	filed 	timely
objections with CTA, 	and 	subsequently received 	notification 	of
arbitration procedures 	and hearing 	schedules 	as 	outlined by 	the
American Arbitration Association 	(AAA) 	Special 	Rules 	for
Resolving Agency Fee 	Disputes. 	Abbot 	and Cameron did not
participate in the arbitration hearing, 	however, 	such personal
participation was 	not necessary under AAA rules.
Under the AAA rules, 	agency 	fee 	arbitrators were 	selected by
AAA, 	but were paid by CTA. 	Other AAA rules permitted: 	(1)
representation of 	individual objectors by counsel; 	(2) 	hearing
date notices provided to all objectors; 	(3) 	the right to a
stenographic 	record; 	and 	(4) 	the opportunity to challenge 	the
arbitrator 	for bias. 	The arbitration, 	which consolidated all
objections 	in a 	single hearing, 	was 	conducted over 	13 	days
between January and April 	1987. 	The 	arbitrator's 	decision 	issued
in June 	1987. 	Before and during the arbitration hearing, 	the
participants 	raised objections 	to the hearing 	schedule, 	the
arbitration location at CTA headquarters 	in Burlingame, 	and
alleged bias 	of AAA in general.5
5The 	arbitrator 	eventually 	scheduled 	the 	entire 	hearing 	on
normal workdays. 	He had attempted to get the parties 	to agree to
some weekend and holiday hearing dates 	early in the process, 	but,
due 	to a 	number of protests 	from some 	agency fee challengers, 	he
was 	unsuccessful.
8

The 	arbitrator's 	decision 	included 	a 	review of 	chargeable
expenditures for NEA, 	CTA,, and seven local affiliates, 	including
SRVEA. 	In his 	decision, 	the arbitrator approved the procedures
utilized by CTA and NEA, 	including 	the use of 	the 	local
presumption. 	Even though the actual proof of 	SRVEA's
expenditures 	showed 	a higher 	chargeable percentage 	than the
percentage used by CTA, 	SRVEA was 	not permitted to use 	the higher
figure 	later as 	that would, 	in the arbitrator's 	opinion, 	work as
a penalty against objecting 	fee payers. 	However, 	he made 	slight
adjustments 	to NEA's projected figures 	for 	1986-87, 	from the 	81.6
percent 	estimated 	chargeable 	expenses 	to 	75.53 	percent properly
chargeable to 	objecting 	fee payers.
Prior to 	the presentation of 	evidence 	in the hearing before
the ALJ, 	the parties 	stipulated to the 	issues 	to be 	tried 	in
accordance with the 	complaints. 	The 	stipulated 	issues were
outlined as 	follows:
A. 	Does 	the 	initial 	collection of 	agency 	fees 	in an amount
equivalent to members' 	dues violate EERA?
B. 	Did 	SRVEA 	fail 	to provide 	adequate 	financial 	disclosure
and 	supporting 	information to 	nonmember 	fee payers?
1. 	Was 	there 	a 	lack of verification by an auditor?
2. 	Were the 	categories 	for expenditures 	incorrect?
3. 	Was 	CTA required to provide 	information as 	to 	the
expenditures 	by CTA 	specifically 	for 	SRVEA?
4. 	Was 	SRVEA required to provide 	financial
information regarding 	its 	own 	local 	expenditures?
C. 	Was 	there a 	failure to provide 	for a prompt and
impartial 	mechanism 	for 	objecting 	fee payers?
. . .
9
9

1. 	Does 	the use of AAA procedures meet 	the 	impartial
standard?
2. 	Was 	the 	arbitration hearing held promptly?
D. 	Was 	there a 	failure to 	escrow agency 	fee monies 	into an
independently 	managed 	escrow 	account?
The ALJ 	found that, 	with the 	exception of 	a temporary
integration of 	fee payer 	funds 	into 	SRVEA's 	regular operational
bank account, 	the procedures 	used 	complied with the 	Hudson
requirements.6 He concluded that: 	(1) 	It was not improper 	for
CTA to 	adopt 	a procedure 	in which 	initial 	fee deductions 	were
equal 	to member dues 	and then deposited 	in an escrow account; 	(2)
the 	verification process 	utilized by CTA did 	not 	require 	an
actual 	certified audit 	so 	long 	as 	the auditor's 	opinion was
premised on an 	"independent verification"; 	(3) 	the documents
provided 	to 	fee payers 	and 	the 	methodology used by CTA and 	NEA
provided adequate disclosure as required by Hudson: 	(4) 	SRVEA's
adoption of 	CTA's 	chargeable percentage 	figures 	based 	on a
presumption 	that 	the 	local 	association's 	expenditures 	would 	be 	at
least as 	great as, 	if not greater than, 	CTA's 	chargeable
expenditures, 	was permissible; 	(5) 	the use of arbitrators
selected by the AAA as 	impartial 	reviewers 	of 	objections 	filed by
fee payers was proper; 	and 	(6) 	the failure of both CTA and SRVEA
to 	establish 	escrow accounts 	under 	the 	independent 	management 	of
a 	third party was 	not 	in violation of 	the 	requirements 	of 	Hudson.
6The ALJ 	addressed 	the 	merits 	of 	both 	CTA's 	and 	the 	NEA's
procedures 	because 	SRVEA had 	adopted 	and 	utilized 	both procedures
to 	collect 	those 	agency 	fee 	funds 	going to 	the 	state and national
organizations, respectively.
o . ... .. ..
10

DISCUSSION
Abbot 	and Cameron's 	Exceptions
Abbot 	and Cameron's 	main 	focus 	of 	concern was 	that 	SRVEA
violated 	EERA because 	the procedures 	used 	to 	collect 	and 	retain
money 	from agency 	fee payers 	did 	not 	meet 	the 	minimal 	due 	process
protections 	as 	set 	forth 	in the Hudson decision. 	The 	exceptions
filed by Abbot 	and Cameron can be 	summarized as 	follows:
A. 	SRVEA 	failed 	to provide 	notice 	of 	financial 	information
prior to the 	initial 	deductions.
B. 	The 	financial 	information provided by 	SRVEA did 	not
meet the 	Hudson criteria 	in that:
1. 	There was 	no 	financial 	information relating to
SRVEA;
2. 	The CTA information was 	based on a 	review rather
than a verification by an independent 	audit; 	and
3. 	There was 	no verification by an 	independent
auditor of 	the NEA 	information.
C. 	There was 	no 	advanced reduction based upon verification
by an independent 	audit.
D. 	There was 	no 	independent escrow account.
E. 	There was 	no mechanism for 	a 	fair and prompt decision
by an 	independent decision maker 	in that:
1. 	CTA unilaterally 	selected AAA;
2. 	AAA is biased against 	fee payers;
3. 	AAA rules 	do not protect 	fee payers;
4. 	The decision did not 	come until 	the 	end of 	the
school year; 	and
5. 	The 	location and timing of 	the hearing did 	not
give Abbot 	and Cameron an opportunity 	to
participate.
F. 	The 	cease 	and desist 	remedy is 	inadequate and, 	instead,
the 	Board 	should 	grant 	restitution of 	all 	money 	taken
11

along with 	an order 	to prevent 	future 	collections 	until
SRVEA 	institutes 	a 	constitutional procedure.
In 	sum, 	the 	issue before the Board 	in this 	case 	is whether
SRVEA's 	procedures 	for the 	collection of 	agency 	fees 	meet 	the
constitutional 	requirements as 	set 	forth in Hudson. 	There, 	the
Supreme 	Court 	stated:
The objective must be to devise a way of
preventing 	compulsory 	subsidization 	of
ideological 	activity by 	employees 	who 	object
thereto without 	restricting 	the 	Union's
ability 	to 	require 	every 	employee 	to
contribute 	to 	the 	cost 	of 	collective
bargaining 	activities.
(Hudson, 	supra. 	475 U.S. 	292, 	302, citing Abood v.
Detroit Board of Education 	(1977) 	431 U.S. 	209,
p. 	237.)
In Hudson, 	the 	Supreme Court 	enunciated a 	three-part
constitutional 	test 	that 	must 	be 	satisfied by 	an 	exclusive
representative 	in the 	collection of 	agency 	fees 	from nonmembers.
The 	court 	required an adequate 	explanation of 	the bases 	for the
fee, 	a reasonably prompt opportunity to challenge the amount of
the 	fee before 	an 	impartial decision maker, 	and an escrow for the
amounts 	reasonably 	in dispute while 	such 	challenges 	are pending.
(Id. 	at p. 	310.)
The 	Board's 	review in this 	case 	is 	framed by not 	only 	the
mandates 	set out 	in Hudson, 	but also by the 	litigated 	issues 	and
the 	exceptions 	filed by Abbot 	and Cameron.7 Other 	than the
7"It 	is 	a well 	established rule 	of 	administrative 	appellate
procedure 	that 	a 	matter never raised before 	the 	trial 	judge 	is
not 	properly 	reviewed by 	the 	appellate 	tribunal 	on appeal."
(Colusa Unified School District 	(1983) 	PERB Decision No. 	296,
citing Fresno 	Unified School 	District 	(1982) 	PERB 	Decision
No. 	208, at p. 	23. 	See, also, PERB Reg. 	32300(c), which provides
"an 	exception not 	specifically urged 	shall 	be waived." 	PERB
12

requirement 	that 	an agency 	fee 	arrangement 	must be 	agreed 	to 	by
both 	the 	employer and the union and voted upon by all 	members 	of
the bargaining unit 	(EERA, 	sec. 	3546(a)), 	there were no PERB
regulations 	in place to protect nonmembers' 	constitutional
rights, 	at the time the proposed decision was 	issued.8 As 	a
result, 	this 	case was 	litigated on the basis of whether SRVEA's
procedures 	(or CTA's procedures, 	as utilized by SRVEA) 	satisfy
the 	standards 	established by Hudson, 	and whether the procedures
violated 	section 3543.6(b) 	by 	interfering with, 	restraining or
coercing 	employees 	with 	regard 	to 	their 	right 	to 	refrain 	from
participation in the 	activities 	of 	employee organizations 	as 	set
forth 	in 	section 	3543. 	PERB agency 	fee 	regulations 	played no
part 	in the 	litigation.
A. 	Did SRVEA Fail 	to 	Provide Adequate Notice 	Prior to
Initial 	Deduction of Agency 	Fees?
In discussing whether or not 	the 	initial 	deduction of 	agency
fees 	in an amount 	equal 	to union member dues was 	constitutionally
improper, 	the ALJ noted that, 	even if 	it might be 	ideal to have
the 	notice 	and objection period precede 	any 	fee deduction, 	the
Hudson decision 	confirmed 	that 	a 	100-percent 	escrow guarded
against 	a problem of 	involuntary 	loans. 	Abbot 	and Cameron argue
that this 	statement of the ALJ 	is 	a decision on the 	issue of
Regs. are codified at Cal. 	Admin. 	Code, 	tit. 	8, 	sec. 	31001 et
seq. )
8On April 	1, 	1989, 	PERB regulations 	governing agency fee
agreements were put into effect 	(32990 through .32997). 	These
regulations 	set 	forth detailed 	requirements 	for 	exclusive
representatives 	and appeal procedures 	for agency 	fee payers.
13

timing 	of 	the 	initial agency 	fee notice. 	We do not 	read that
portion of 	the ALJ's 	proposed decision as 	a 	conclusion on the
issue of 	timing of the notice. 	Further, 	that 	issue was 	not
stipulated to by the parties 	at 	the 	inception of 	the hearing
below.
The 	Board will 	entertain unalleged 	violations 	only when
adequate 	notice 	and 	the 	opportunity 	to 	defend has 	been provided
to 	respondent; 	where 	such acts 	are 	intimately related to the
subject matter of the complaint; 	are part of the 	same course of
conduct 	and have been fully 	litigated; 	and the parties 	have 	had
an opportunity 	to 	examine 	and be 	cross-examined 	on the 	issue.
(Santa 	Clara 	Unified 	School 	District 	(1979) 	PERB Decision
No. 	104, 	pp. 	18-19.) 	In this case, 	timing of notice to
nonmembers 	is, 	indeed, 	intimately related to the 	subject matter
of the complaint, 	and is part of the 	same course of 	conduct.
However, 	the 	Board 	stated 	in Tahoe-Truckee 	Unified School
District 	(1988) 	PERB Decision No. 	668, at page 6, 	". 	. 	. 	failure
to 	meet 	any 	of 	the 	above-listed 	requirements will 	prevent 	the
Board 	from 	considering 	unalleged 	conduct 	as 	violative 	of 	the Act
[EERA]."
In this 	case, 	SRVEA could not have had adequate notice 	and
an opportunity to defend, 	inasmuch as this 	issue was, neither
stipulated to nor presented 	in the 	underlying 	complaint. 	The
Board pointed out 	in Tahoe-Truckee. 	supra. 	that notice 	is
required 	in 	all 	circumstances 	regardless 	of whether 	the 	unalleged
violation 	is 	distinctly 	separate 	from the 	charged unfair
14

practice. 	(Id.. 	at p. 	8.)9 This issue is, 	therefore, 	not
properly before 	the 	Board.
B. 	Did 	the 	Financial 	Information Supplied by 	SRVEA Meet 	the
Hudson 	Criteria?
1. 	SRVEA's Financial 	Information
At 	the heart of 	the 	standards 	set 	forth by the 	Supreme Court
in Hudson is 	the right of the 	nonunion employee to 	"have a 	fair
opportunity to 	identify 	the 	impact 	of 	the 	governmental 	action on
his 	interest. 	. . . " 	(Hudson, 	supra, 	at p. 	303.) 	The court went
on to 	state:
Basic 	considerations of fairness, 	as well as
concern for the First Amendment rights 	at
stake, 	also dictate that the potential
objectors 	be given 	sufficient 	information to
9Although we do not 	reach the 	question of 	the 	timing of
notice 	to 	agency 	fee payers 	in connection with 	actual 	collection
of 	agency fees, 	the 	subsequently 	enacted 	agency 	fee 	regulations,
see 	footnote 	8, 	do provide 	for time 	limitations with regard to
notification of nonmembers. 	Regulation 32992 	states, 	in
pertinent part:
(c) 	Such written notice 	shall be
sent/distributed 	to 	the 	nonmember 	either:
(1) 	At least 30 days prior to collection of
the agency fee, 	after which the exclusive
representative 	shall place 	those 	fees 	subject
to objection in escrow, 	pursuant to 	section
32995 of these regulations; 	. 	. 	.
The agency 	fee regulations 	also provide 	for 	concurrent 	notice.
The Board notes 	that the 	current 	agency 	fee regulations 	are
subject 	to 	a 	ruling by the 	Sacramento 	County 	Superior Court 	as 	to
the 	constitutionality of 	various 	portions 	of 	the 	regulations.
(See 	the 	intended decision on Motion 	for 	Summary 	Judgment 	and
Summary Adjudication of 	Issues 	in Johnson, 	et al v. 	Public
Employment Relations Board 	(March 26, 	1990) 	Sacramento Superior
Court No. 	507208.) 	The 	judgment is not yet final.
15

gauge the propriety of the union's 	fee.
Leaving the nonunion employees 	in the dark
about the 	source of 	the 	figure 	for the agency
fee--and requiring 	them 	to 	object 	in order 	to
receive 	information—does 	not 	adequately
protect the careful distinctions 	drawn 	in
Abood.
(Id.. 	at p. 	306; 	emphasis added.)
In Hudson, 	the court was 	dealing with a 	situation where 	the
financial 	information provided by 	the 	union 	simply 	identified 	the
amount 	that 	the 	union had 	expended 	for nonchargeable purposes,
then divided this 	amount by the union's 	income, 	which produced 	a
percentage 	figure that was 	rounded off 	to the 	nearest whole
percent to 	"cushion" 	any inadvertent errors.
Both parties 	in the 	case before us 	rely on 	language 	in the
footnote 	following 	the 	court's 	determination that 	the 	Chicago
Teachers 	Union did 	not provide 	adequate disclosure 	of 	the 	reasons
nonmembers were required to pay 	95 percent of the union dues.
The court 	states:
We 	continue to recognize 	that 	there 	are
practical 	reasons why 	"[a]bsolute precision"
in the 	calculation of 	the 	charge 	to
nonmembers 	cannot be 	"expected 	or 	required."
[Citations.] 	Thus, 	for instance, 	the Union
cannot be 	faulted 	for 	calculating 	its 	fee 	on
the basis 	of 	its 	expenses during the
preceding year. 	The 	Union need not provide
nonmembers 	with 	an exhaustive 	and detailed
list of all 	its expenditures, 	but adequate
disclosure 	surely would 	include 	the 	major
categories of expenses, 	as well as
verification by an 	independent 	auditor. 	With
respect 	to 	an 	item 	such as 	the 	Union's
payment of 	$2,167,000 	to 	its 	affiliated 	state
and national labor organizations, 	. 	. 	. 	for
instance, 	either a 	showing that none of 	it
was 	used to 	subsidize 	activities 	for which
nonmembers may not be charged, 	or an
explanation of the 	share 	that was 	so used was
surely 	required.
16

(Hudson-----, 	supra. at p. 	307, 	fn. 	18.)
- - -. - 	--
This 	language 	is 	the 	source 	of dispute 	over precisely what
methods 	and 	to what 	extent 	unions 	must provide 	nonmembers
information which would 	allow them 	to determine whether 	or 	not 	to
object to the amount of 	fees 	collected. 	Several 	federal 	court
decisions 	have 	interpreted 	Hudson's 	guidelines 	for 	adequacy 	of
information.
In Andrews 	v. 	Education Association of Cheshire 	(D.Conn.
1987) 	653 F.Sup. 	1373, 	affirmed 	(2d Cir. 	1987) 	829 F.2d 335, 	the
court 	approved the 	use 	of 	a 	statewide union's 	financial
information to determine 	the percentage of 	the 	local 	unions'
expenditures 	for chargeable 	activities. 	The 	court 	found that
local 	associations 	are much 	less 	likely to 	engage 	in extensive
political 	activities 	than the 	state 	and 	national 	organizations
and, 	therefore, 	it is 	less 	likely that the monies 	they receive
from fee payers will be used for those purposes. 	Andrews 	held
that the unions' 	use of the 	evidentiary 	"local" 	presumption
satisfied the 	constitutional requirement of Hudson even 	if, 	in
rare 	instances, 	there may arise 	situations 	in which this
presumption 	is 	incorrect.10 	Other courts 	have also 	upheld the
10Although the 	issue 	of 	the use 	of 	the presumption was 	not
raised on appeal, 	Andrews v. 	Education Association of Cheshire.
supra, 829 	F.2d 	335, 	338 	footnote 	1, 	the Court of Appeal 	for the
Second 	Circuit 	described 	an 	agency 	fee plan that 	" . . . 	provides
a 	variety 	of 	information be 	given to 	nonmembers 	to 	allow them to
determine the propriety of 	the 	fee 	that 	the union 	is 	seeking 	to
charge. 	This 	information 	includes 	the 	end-of-year 	financial
reports 	of 	each LEA(a collection of three 	local associations),
CEA 	(Connecticut 	Education Association) 	and the 	NEA which 	show
their 	actual 	expenses 	for 	the previous 	year verified by 	an
independent 	auditor 	'or 	authorized 	association 	representative.'"
17

use of 	the 	local presumption: 	Lowary v. 	Lexington Board of
Education 	(N.D. 	Ohio 	1988) 	704 F.Supp. 	1456; Gillespie v. 	Willard
Board of Education 	(N.D. 	Ohio 	1987) 	700 F.Supp. 	898; 	and Hohe v.
Casey 	(M.D. 	Pa. 	1988) 	695 F.Supp. 	814, 	aff'd. 	(3d Cir. 	1989) 	868
F.2d 	69.
In the Hohe case, 	the nonmember plaintiffs 	argued that 	the
local presumption 	is 	insufficient 	in that Hudson required
detailed 	financial 	information be 	provided 	for 	each 	affiliate
that received money. 	There, 	the district court agreed with the
assessment 	in Andrews 	that:
There 	is 	little basis 	for the 	conclusion that
every 	document 	made part 	of 	every disclosure
process 	employed by 	every union 	is 	to be
subjected to an independent audit, 	regardless
of 	the 	size of 	the union and the
circumstances under which it operates. 	. 	.
[W]hen 	considering 	the 	disclosure provisions
of the plan as a whole, 	this court cannot
find, 	on the basis of one clause, 	of one
sentence, 	of one 	footnote in Hudson that the
failure 	to provide 	an audit 	of 	the
explanatory memorandum 	itself, 	or the 	failure
to 	require 	independent audit 	for the 	[local
unions'] 	expenditures, 	renders the proposed
system 	constitutionally 	deficient.
(Hohe. 	supra, at p. 	819, 	citing Andrews, 	supra. 	653	. - -
F.Supp. 	at 	1377.)
However, 	even though the Hoh	- 	e court was 	concerned, 	as was
the 	court 	in Lowary. 	that it had no evidence that the 	local
expenditures 	are 	in fact 	less 	than that of 	the 	statewide
percentage, 	it approved the use of 	the 	local presumption in the
initial notice to nonmembers. 	In the case before us, 	the
arbitrator received 	evidence 	and made 	a 	determination that 	six 	of
the 	seven 	local 	associations 	presenting 	evidence 	of 	their 	agency
1
. . .
8

fee expenditures, 	including SRVEA, 	had expenditures 	ranging 	from
92 	to 98 percent chargeable fees.11
Therefore, 	the Board finds 	the utilization of 	a 	"local
presumption" 	(adopting the 	statewide 	association's 	percentages)
adequately protects 	nonmember 	fee payers when the 	fee payers 	are
provided 	financial 	statements 	of 	the 	local 	association's 	yearly
expenditures 	showing 	chargeable 	amounts 	incurred 	in performing
SRVEA's 	representational 	obligations. 	The 	Board agrees with 	the
arbitrator that once a local elects 	to use the presumption, 	a
subsequent 	finding 	of 	a 	higher 	chargeable percentage 	than the
statewide 	figure will 	not permit 	the 	local 	to 	then use 	the higher
figure. 	In the agency fee plan before us, 	SRVEA had the burden
of 	justifying 	and proving 	its 	yearly 	expenditures 	at 	the
arbitration 	hearing.
In this 	case, 	SRVEA failed to 	supply potential 	objectors
with 	any 	information regarding 	its 	own 	financial 	budget.12
Although we 	agree 	that 	there 	are practical 	reasons 	that preclude
11Abbot and Cameron argue 	that 	they were 	not parties 	to 	the
arbitration hearing. 	Nevertheless, 	it was 	stipulated that both
Abbot 	and Cameron had requested 	the 	arbitration 	in the 	1986-87
agency 	fee dispute, 	and there was 	testimony that Abbot 	and
Cameron were 	aware 	they 	could be 	present 	at 	the 	arbitration 	and
represented by counsel and, 	at all 	times, 	be fully 	informed of
the hearing dates. 	The 	fairness 	of 	the appeal procedure provided
by CTA is discussed, 	infra.
12The ALJ 	concluded, 	at footnote 	47 	of the proposed
decision, 	that Abbot 	and Cameron abandoned the 	related 	issue 	of 	a
lack of 	financial 	information 	regarding CTA's 	expenditures
specifically 	for 	SRVEA. 	The ALJ 	is 	correct 	in his 	statement 	that
the 	issue was 	not pursued 	in the post-hearing briefs. 	More
importantly, 	Abbot 	and Cameron 	filed no 	exception regarding that
determination. 	Therefore, 	that issue 	is 	not addressed in this
decision. 	(See fn. 	7, 	ante, p. 	12.)
19

the requirement of a comprehensive, 	certified audit, 	failure of
the 	exclusive 	representative 	to provide 	any 	information relating
to 	the 	local 	association 	does 	not 	provide 	the necessary
procedural 	safeguards. 	Thus, 	for the 	local presumption to be
constitutionally permissible, 	SRVEA must provide, 	at a minimum,
an 	end-of-year 	financial 	report 	in 	its 	notice 	to nonmembers
showing 	chargeable 	expenditures 	incurred 	in performing 	its
representational 	obligations.13
2. 	Is 	Ernst 	& Whinney's 	Review of CTA 	Information
Acceptable 	as 	a 	Hudson Verification Requirement?
Abbot 	and Cameron assert 	that 	because 	of 	legal 	deficiencies
in the 	"notice" 	materials provided to nonmembers 	in October 	1986,
it was 	impossible 	for the 	fee payers 	to make a preliminary
assessment 	of 	chargeable 	and nonchargeable 	expenditures. 	Their
primary concerns 	can be 	summarized as 	follows: 	(1) 	a nonmember
could not make 	an assessment 	as 	to whether 	certain costs 	were
chargeable 	or 	nonchargeable based on the documents 	supplied 	in
the notice; 	(2) 	the review by Ernst & Whinney was 	not a
verification as 	required by Hudson, i.e., 	it was 	not 	a 	certified
audit; 	and 	(3) 	there was no audit of the 	"categories" 	of
chargeable 	expenses 	as 	opposed to verification of 	the 	actual
expenses 	themselves.
13The 	requirement of 	a 	financial 	report 	should 	not be 	an
unduly burdensome 	requirement 	for the 	local 	exclusive
representative 	in that 	section 	3546.5 	under EERA requires 	each
organization to prepare 	its 	report 	annually.
20

We 	find 	that Abbot 	and Cameron's 	reliance 	on the 	Sixth
Circuit 	Court 	of Appeal 	decision in Tierney v. 	City of 	Toledo
(6th Cir. 	1987) 	824 F. 2d 	1497, 	for the proposition that it is the
function of 	the 	auditor to determine whether a 	union's
calculation of what is chargeable, 	is misplaced. 	That 	same
circuit 	court has 	recently 	rejected 	that 	argument 	in Gwirtz 	v.
Ohio Education Association 	(6th Cir. 	1989) 	887 F.2d 678. 	There,
the 	court, 	in reviewing an appeal 	by nonmember 	fee payers who
claimed the union must use 	the 	"highest" 	level 	of 	audit 	service
available, 	stated:
On the question of 	"verification" 	by an
auditor, 	we reject the plaintiffs' 	argument
that 	the 	function of 	the 	independent 	auditor
is 	to verify the union's 	calculation of 	the
chargeable 	or nonchargeable 	nature of 	the
major categories 	of 	union 	expenditures.
Whether a union expenditure 	is 	"chargeable"
or 	"nonchargeable" 	to nonmember employees 	is
a 	legal 	determination that 	depends 	upon the
- -	type 	of 	union activity 	for which 	the
expenditure is made.
(Emphasis in original; 	id. 	at fn. 	3, p. 	681.)
The 	Board 	agrees with this 	conclusion.
The 	Second Circuit Court of Appeal, 	in Andrews. 	defined the
scope of 	an auditor's 	function in agency 	fee reviews. 	The 	court
stated:
We believe, 	however, 	that Hudson's auditor
requirement 	is 	only designed to 	insure 	that
the usual 	function of 	an auditor 	is
fulfilled. 	That usual 	function is to 	insure
that 	the 	expenditures which 	the 	union 	claims
it made 	for 	certain 	expenses were actually
made 	for those 	expenses.
(Andrews, 	supra. 	829 F.2d 335,340.)
21

In the case before us, 	the Ernst & Whinney review was 	of 	the type
that would insure that the, expenditures 	that the Association
claims 	it made 	for certain expenses were actually made. 	The
process was 	adequately described 	in the December 	12, 	1986 	Letter
of 	Transmittal 	and 	Introduction provided 	to 	SRVEA's 	agency 	fee
objectors. 	The document 	indicates 	there was 	an underlying
certified audit 	for CTA, 	and that 	the 	calculations 	for the
current year were prepared using historical 	costs. 	The 	letter
also provided 	references 	to 	accompanying detailed 	lists 	of
assumptions 	and 	a 	statement 	that 	the 	underlying 	assumptions
provided 	a 	reasonable basis 	for 	the Association's 	determination
of 	the percentage of 	retainable and 	"rebateable" 	expenditures.1414
The 	Board holds 	the Ernst & Whinney review of 	expenditures 	to be
sufficient 	to 	allow fee payers 	to 	form a basis 	for objection.
We find 	some merit, 	however, 	in Abbot and Cameron's
assertion that 	an agency 	fee payer was 	not 	able 	to discern 	from
the 	documents 	provided either 	in mid-October or mid-December
1986, 	whether 	some costs were chargeable or nonchargeable. 	The
supporting 	documents 	prepared 	by 	CTA 	and 	accompanied 	by 	the
auditor's 	December 	cover 	letter provide 	a 	more 	detailed
compilation of 	information than the October materials. 	Even when
the two groups 	of documents 	are 	combined, 	or read 	in 	support of
each other, 	they do not provide 	the 	nonmember with 	sufficient
14The terms 	"retainable" 	and 	"rebateable" 	are used
interchangeably with 	"chargeable" 	and 	"nonchargeable" 	throughout
the documents 	in evidence.
2
. .:
2

information to make 	a reasonable determination as 	to 	the
propriety 	of 	the amounts 	charged.
In CTA's 	estimated retainable 	and 	"rebateable" 	expenditures
for the 	1986-87 	school year, 	the total 	amounts 	spent are broken
down by departments within CTA. 	In the 	"Calculation of
Methodology 	in Schedule 	of Assumptions," 	CTA provided 	its
determination of which 	categories 	of 	expenditures were 	chargeable
and nonchargeable. 	Additionally, 	CTA provided a 	list of 	actual
expenses 	(ending in August 	1986). 	This document, 	however, 	listed
only 	total 	expenses 	for programs 	in each department without 	any
reference 	to 	chargeable 	or nonchargeable percentages.
An 	example 	of 	the 	difficulty 	in determining whether 	or 	not
to 	object 	to 	expenditures 	is 	seen 	in the 	category of 	Field
Service Departments. 	In the 	estimated expenditures 	for 	1986-87,
this 	department's 	expenditures were 	listed as 	follows:
Field 	Service: 	This program involves 	the
implementation of 	field 	services 	to 	CTA
affiliates, 	including development of
leadership, 	communications systems,
identification and development 	of 	local
issues, 	assistance with bargaining, 	including
contract monitoring, 	grievance representation
procedures 	and 	identification 	and 	processing
of 	unfair practice 	charges 	and 	chapter
recognition 	status 	$13,069,439
Estimated retainable expenses 	. 	. 	. 	$12,128,440
Estimated rebatable 	expenses. 	. . . 	$ 	940,999
Some 	confusion lies 	in the 	fact that CTA, 	in its
calculations 	and methodology 	explanation, 	described 	"Field
Services" 	as 	a departmental budget category, 	and went on to
describe 	services 	provided under 	that 	department 	as 	a 	chargeable
23

cost 	(retainable). 	From the 	estimated expenditures 	described
above, 	it 	is 	impossible to ascertain which 	services were 	assigned
to 	the 	chargeable 	categories 	and which 	services 	were 	assigned 	to
nonchargeable 	categories. 	Although the 	Hudson decision did not
require 	"absolute precision" 	in the calculations, 	the court did
set 	forth 	the 	following 	standard:
. 	. 	. 	either a showing that none of it was
used 	to 	subsidize 	activities 	for which
nonmembers 	may be charged, 	or an explanation
of 	the 	share that was 	so used was 	surely
required.
(Hudson, 	supra. at p. 	307, 	fn. 	18.)
C T A / i n response to the objectors' 	concerns, 	provided
further documentation during 	the 	arbitration hearing. 	These
documents 	were 	entitled 	"CTA Estimate 	of 	Rebatable 	Retainable
Expenditures 	of Agency Fees 	for 	1986-87." 	The documents 	included
a 	multi-column 	list 	of 	the 	chargeable/nonchargeable 	expenses 	by
each department 	from the previous 	year, 	and a 	corresponding
projection of 	the 	total 	budget 	for 	each department 	by 	chargeable
and 	nonchargeable 	categories 	for the 	forthcoming year.
Furthermore, 	they provided a breakdown by department 	of 	each 	type
of 	expenditure 	and an assignment 	of 	each 	service 	to 	either a
chargeable or nonchargeable 	category. 	Testimony at 	the 	hearing
before 	the ALJ 	showed that 	the 	information described 	above was
compiled 	at 	the 	same 	time 	supporting documents 	for the 	audit were
prepared. 	No 	evidence was 	presented as 	to why providing 	this
type 	of 	information would 	be 	an unmanageable burden on 	SRVEA.
With the 	exception of 	not 	including the types 	of documents
described 	immediately above, 	we 	find the 	type of 	review conducted
24

by 	Ernst 	& Whinny 	on behalf 	of 	CTA would provide 	an adequate
explanation of the bases 	for the fee. 	This 	information, 	however,
should have been 	sent with 	the 	initial 	notice 	to 	all 	fee payers.
We 	disagree with the ALJ's 	finding 	that 	the 	initial 	October
financial 	documents 	allowed 	for 	an 	intelligent 	objection by 	fee
payers. 	Therefore, 	we 	find that the 	information provided by CTA
in the 	October notice 	failed 	to 	comply with 	Hudson 	standards.
3. 	Was 	there Appropriate Verification of 	the Financial
Information 	Supplied 	by NEA?
As 	stated earlier in this decision, 	the primary 	focus 	of
this 	case 	is 	to determine whether or not 	the agency 	fee plan
utilized by 	SRVEA provides 	a procedure 	that 	meets 	the
constitutional 	requirements 	set 	forth 	in Hudson. 	The one
significant difference between NEA's 	and CTA's 	procedure 	is 	that
NEA did 	not provide 	a reliable 	indication that 	its 	expenditures
were audited. 	Instead, 	NEA's 	estimation of 	chargeable and
nonchargeable 	expenditures 	for the 	1986-87 	school 	year merely
includes 	the 	statement that 	it will 	apply an arbitrator's
analysis 	of 	its 	audited expenditures 	for 	the 	1984-85 	school 	year.
We 	note 	that 	the parties 	stipulated 	at 	the hearing below
that NEA's 	1985-86 	school 	year 	financial 	statements were 	accurate
and audited. 	The purpose 	for that 	stipulation is 	unclear. 	The
agency fee payer receiving NEA's documents, 	however, 	received no
statement 	signed by the 	auditor 	for NEA, 	nor 	from any 	individual
serving as 	an 	independent 	auditor, 	indicating 	that 	the 	expenses
were 	reviewed 	or otherwise 	verified 	as 	accurate.
25

As 	indicated 	in our discussion on CTA's 	audit procedure, 	the
statement by the auditor must. accompany the 	initial 	notice.
Several 	federal 	courts, 	in reviewing the materials 	sent to agency
fee payers, 	have recognized this requirement. 	In Andrewsf 	supra,
82 9 F.2d 	335, 	the union sent annual memoranda which included
statements 	by the 	independent 	auditor verifying 	the 	union's
reports. 	The District Court 	in Hudson v. 	Chicago Teachers 	Union
(N.D. 	I11. 	1988) 	699 F.Supp. 	1334, 	in deciding whether to release
agency 	fees 	deposited with the Clerk of 	the Court, 	reviewed
revised union procedures which 	required notices 	to 	include 	the
auditor's 	signed 	statement. 	The 	court 	found the 	auditor's
typical 	function was 	" . . . 	attesting 	that 	a 	union actually 	spent
its 	money 	in the manner represented by the 	fair 	share 	notice."
(Id.. 	at p. 	1342; 	emphasis added.)
The ALJ's 	proposed decision did not 	adequately 	address 	the
verification aspect of NEA's documents. 	In fact, 	the ALJ made
only 	a 	finding 	that NEA's 	determination of 	chargeable 	expense
categories was based on a 	"pre-Hudson" 	arbitration. 	Since the
lack of 	verification by an auditor 	is 	one 	of 	the primary
stipulated 	issues, 	we 	find there was 	not 	sufficient verification
by 	an 	independent 	auditor of 	the 	NEA 	information.
C. 	Does 	the Advanced-Reduction Method 	Utilized 	by 	SRVEA
Provide Adequate 	Constitutional 	Protections?
Abbot and Cameron object 	to 	the ALJ's 	finding that 	a 	100-
percent 	escrow of 	the amount 	collected 	from the 	nonmember 	fee
payers 	provides 	adequate 	constitutional 	protection against
26

involuntary 	loans. 	They argue that 	there must be both 	advanced
reduction 	and escrow if 	a plan is 	to 	survive constitutional
scrutiny.
The 	first deduction of agency 	fees, 	in an amount 	equal 	to
SRVEA monthly dues, 	occurred around the 	first part 	of 	October
1986. 	This 	same amount continued to be deduced on a monthly
basis 	throughout the 	school year ending 	in June 	1987. 	The plan
required that 	the 	full 	amount 	of 	the 	fees 	be 	set 	aside 	in an
"escrow" 	account.15 The plan 	further provided that 	agency 	fee
payers 	could request 	an 	immediate 	fee 	reduction by 	filing 	an
objection no later than November 	15, 	1986. 	The immediate refund
of the fees 	collected, 	however, 	was 	only available to those
objecting 	fee payers 	that did 	not 	request 	an arbitration hearing.
Those 	fee payers 	requesting arbitration had 	100 	percent 	of 	the
collected 	fees 	deposited 	in the 	escrow account 	until 	the
arbitration decision was 	issued.
We note, 	initially, 	that while other 	jurisdictions 	have
statutes 	expressly prohibiting 	the 	collection of 	agency 	fees 	that
are equal 	to the amount collected 	for dues, 	EERA does 	not.16 The
Hudson 	court 	indicated 	that 	the 	100-percent 	escrow was 	not
constitutionally required, 	but, 	with an adequate 	explanation of
the bases 	of 	the 	fee 	and a 	reasonably prompt opportunity to
15The 	efficacy of the 	"escrow" 	plan 	is 	addressed 	infra 	at
page 30.
16Section 	3540.l(i)(2) 	provides 	that 	a nonmember employee
may be required to pay a 	" . . . 	service 	fee 	in an amount 	not 	to
exceed the 	standard initiation fee, 	periodic dues, 	and general
assessments. 	. . . "
27

challenge the amount of the 	fee, 	a union had only to 	escrow an
amount 	reasonably 	in;dispute while 	the 	challenges 	were pending,
(Hudson, supra. 	475 U.S. 	292, 	at p. 	310.) 	While not addressing
the amount 	the union felt was 	clearly nonchargeable, 	i.e., 	the
remaining five percent of dues, 	the 	court warned the union that,
if 	it chose not to escrow the entire amount, 	it must carefully
justify 	the 	limited 	escrow on the basis 	of 	an independent 	audit,
and that 	the 	escrow 	figure must 	itself 	be 	independently verified,
(Id, at fn. 	23.)
Abbot and Cameron rely on Tierney v. 	City of Toledo, 	supra- 	f
(6th Cir. 	1987) 	824 	F.2d 	1497, 	for the proposition that SRVEA
could not take 	an 	initial 	deduction 	in an amount 	equal 	to dues.
However, 	although the Tierne
- y 	court viewed Hudson's 	reference 	to
100-percent 	escrow as being the 	" . . . 	100 percent of 	the
remaining, 	non-clearly 	ideological proportion of 	the 	fee which
the union may collect. 	. 	. 	.," 	the court also recognized that the
union may 	collect 	fees 	equal 	to dues where 	there 	is 	no 	objection
from a nonmember. 	The court 	stated:
We do 	not believe 	that the 	language
(referring 	to 	Hudson's 	100-percent 	escrow
protections) 	was 	intended to 	enable the union
to compel a nonconsenting. 	nonunion member to
have 	any 	sum 	collected 	. . . .
Upon making their objections, 	dissenting
nonmembers 	are 	entitled 	immediately 	to 	an
advance 	reduction of 	that portion of 	their
fees which an 	independent 	audit
unquestionably 	indicates 	would be 	spent 	for
ideological purposes.
(Tierney. 	supraf 	at p. 	1503; 	emphasis added.)
28

In its 	subsequent decision in Damiano v. 	Matish 	(6th Cir.
1:987) 	830 F . 2d 1363 ,• the Sixth Circuit reaffirmed this
proposition, 	stating:
The burden is 	upon the 	individual 	employee to
object 	to 	expenditures 	by the union 	for
political or ideological purposes, 	since
"dissent 	is 	not 	to be presumed 	[citations]
[0]nly 	employees 	who 	have 	affirmatively made
known to 	the union their opposition to
political 	uses 	of 	their 	funds 	are 	entitled to
relief. . . .
(Damiano, 	supra. 	at p. 	1369, 	fn. 	8; 	emphasis in
original.)
This 	language 	necessarily 	implies 	that 	the 	court 	recognizes 	there
must be 	a reasonable 	time 	for making an objection 	in the 	first
instance, 	and that, 	once an objection is known, 	the objector must
then 	receive 	an immediate reduction corresponding 	to 	the
percentage 	of 	expenditures 	calculated by 	the union to 	be
nonchargeable.
In 	the 	recently decided California 	Supreme 	Court 	case 	of
Cumero v. 	Public Employment Relations 	Board 	(1989) 	49 Cal.3d 	575,
a 	case 	dealing primarily with 	categories 	of 	properly 	chargeable
union expenditures, 	the 	court recognized that a union may assess
an 	initial 	agency 	fee amount 	equivalent 	to membership dues. 	The
court 	noted:
The 	fact that an expenditure of a union is
for 	a purpose 	beyond 	its 	representational
obligations 	and 	therefore 	not properly
chargeable to 	nonmember 	service 	fee by 	no
means 	precludes 	the 	expenditure 	altogether.
The 	expenditure 	may well 	be 	an appropriate
use of union funds 	received 	from members 	in
the form of fees, 	dues, 	or assessments. 	If
so, 	it may also be 	financed out of 	service
fees 	paid by nonmembers 	who were 	sufficiently
informed 	of 	the proposed 	expenditure 	and
29

given the opportunity to object, 	but 	failed
to do 	so.
(Cumero. 	supra. at p. 	589.)
Therefore, 	we 	find that where 	a plan 	initially 	collects
agency fees 	in an amount 	equal 	to membership dues 	and, 	upon
receipt 	of 	an objection filed by a nonmember, 	issues 	an immediate
refund, 	the plan is 	constitutionally permissible as 	to the amount
that may be 	collected initially. 	Here, 	SRVEA's 	use of CTA's plan
is 	flawed 	in that 	it penalizes 	those 	objectors 	who 	also 	request
arbitration. 	Those nonmembers who do 	not 	request 	arbitration are
given the benefit 	of 	an 	immediate 	refund 	and 	an 	equivalent
advance 	reduction for the remaining months 	of 	the 	school 	year.
Those nonmembers who 	challenge the union's 	calculations, 	however,
are 	penalized 	by 	having 	the 	refund 	and 	future 	advanced 	reduction
withheld pending the 	arbitrator's 	decision. 	The plan 	for
collection of 	agency 	fees 	cannot 	allow continued 	collection 	at
the 	fees-equal-dues 	rate 	after objection has 	been received.
D. 	Did the 	Segregated Savings Accounts 	Used by CTA and
SRVEA Meet 	the 	Escrow Requirements 	of 	Hudson?
The ALJ 	found 	that 	the 	separate 	accounts 	utilized 	by CTA and
SRVEA were not 	insufficient, 	and that the agency fee 	funds 	in
those 	accounts 	had not been 	improperly used. 	While we 	agree 	this
factual 	finding 	is 	accurate, 	we disagree with the ALJ's
conclusion that 	these 	accounts 	conformed with 	Hudson's 	escrow
requirement. 	Abbot 	and Cameron argue that Hudson requires 	that
escrow 	accounts 	be 	independently 	controlled 	and 	interest-bearing.
30

Not 	only were 	CTA's 	and 	SRVEA's 	accounts 	controlled
exclusively by 	the 	executive 	officers 	of 	the 	respective
organizations, but, 	from August 	1986 to February 	1987, 	SRVEA
merged 	its 	regular 	operational 	account with 	its 	agency 	fee
monies.
Although 	the 	Hudson 	court did 	not 	specifically define 	the
term 	"escrow," 	it did indicate, 	in reference to the requirement
of 	a prompt decision by an impartial decision maker, 	that 	a
procedure that is 	". 	. 	. 	entirely controlled by the union 	. . . "
is 	constitutionally 	inadequate 	to 	minimize 	the 	risk that
nonmembers' 	fees might be used for impermissible purposes.
(Hudson, 	supra, 	475 U.S. 	292, 	at page 308.) 	An account that is
susceptible 	to use by the 	exclusive 	representative's 	or
affiliate's 	executive officers, 	segregated or not, 	does not
provide 	the 	necessary protections. 	The dictionary defines
"escrow" as:
. . .
. 	. 	. 	a bond or deed put in the care of the
third party and not 	delivered 	or put 	in
effect until 	certain conditions 	are
fulfilled.
(Webster's 	New World Dictionary 	(1982) 	2d College 	Ed.,
p. 	477.)
With 	regard 	to 	the 	nature 	of 	the 	escrow account 	utilized by
SRVEA and CTA, 	we 	find that 	there was 	no 	independent 	escrow
account. 	Such unrestricted access 	as was possible here does 	not
sufficiently protect nonmember fee payers' 	constitutional 	rights.
Nonmembers' 	rights 	must not be dependent upon the good will 	of
the organization collecting agency 	fees. 	Therefore, 	an escrow
account 	for the deposit 	of 	agency 	fee 	funds 	must 	not 	only be
31

independent 	but 	must 	also prevent 	the 	release 	of 	contested 	funds
until the completion of 	the objection process.
E. 	Was 	there a Mechanism for a 	Fair and Prompt 	Decision by
an 	Impartial 	Decision Maker?
The 	Supreme Court, 	in responding to the union's 	unrestricted
choice of 	an arbitrator 	from a 	state 	list, 	stated:
The nonunion employee, 	whose First Amendment
rights 	are 	affected by 	the 	agency 	shop 	itself
and who bears 	the burden of objecting, 	is
entitled to have his 	objections 	addressed 	in
an expeditious, 	fair, 	and objective manner.
(Hudson, 	supra. 	475 U.S. 	292, at p. 	307.)
The court did not, 	however, 	require that there be a 	"full-dress
administrative hearing, 	with evidentiary 	safeguards" 	as part of
the constitutional minimum required. 	(Id. 	at p. 	309, 	fn. 	21.)
Here, 	the 	agency 	fee 	collection plan provided 	for objections
by agency 	fee payers 	to be heard under the AAA's 	Rules 	for
Impartial Determination of Union Fees, 	effective June 	1, 	1986.
In addition to these rules, 	the plan required that: 	(1) 	all
requests 	for hearings be 	consolidated into 	a 	single hearing; 	(2)
the hearing commence no 	later than December 	15 	of 	the 	fee year 	in
question; 	(3) 	the arbitrator issue an award within 30 days
following the close of the hearing; 	and 	(4) 	objectors be paid
within 20 days 	of receipt of 	the arbitrator's determination.17
17In fact, 	the arbitration hearing at 	issue was 	originally
scheduled for the 	first part of January 	1987. 	Due 	to motions 	by
objectors, 	challenges to the arbitrator, 	and challenges to the
timing and 	location of 	the hearing, 	along with the 	need 	for more
days 	than those originally 	scheduled, 	the hearings 	concluded 	in
early April 	1987, 	and, 	with time for closing written briefs 	filed
by the parties, 	the decision did not 	issue until mid-June 	1987.
32

Although Abbot 	and Cameron have 	alleged bias 	in 	the
selection of 	the arbitrator by AAA, 	there was 	no 	evidence
presented 	in the hearing below to 	support 	this 	claim. 	The
arbitrator 	ruled 	on 	the 	generalized 	objections 	claiming prejudice
under AAA Rule No. 	4, 	with a 	finding that none of the objections
stated any 	facts 	or 	specific 	grounds 	to 	challenge 	the 	arbitrator.
An argument was put 	forth 	in the 	case before 	the Board, 	as
it was 	in Andrews v. 	Cheshire Education Association, 	supra, 	829
F.2d 	325 	that 	the AAA procedure 	does 	not meet 	the 	Hudson
requirements 	because 	union officials 	sit 	on 	the AAA board 	of
directors. 	The 	Second Circuit 	found that 	that 	argument had 	no
merit. 	(In accord, 	the Sixth Circuit in Damiano. 	supra. 	(6th
- -
Cir. 	1987) 	830 F.2d 1363.) 	Furthermore, 	the AAA procedures, 	as a
whole, 	were approved by both courts. 	Accordingly, 	the Board
finds 	that the arbitration procedures, 	as 	utilized 	in CTA's
agency fee plan, 	are acceptable and not 	in violation of 	Hudson.
Given the number of days 	of hearing, 	the nature of
objections 	filed 	regarding 	the days 	on which hearing 	should be
held 	(i.e., 	workdays versus weekends or holidays), 	and the number
of 	objectors 	and associations 	involved, 	the Board 	finds 	that 	a
six-month period 	is 	not 	unreasonably protracted provided
challenging 	objectors 	are 	given 	refunds 	immediately 	following 	the
objection period 	and 	a 	form of 	advanced 	reduction 	thereafter.
With regard 	to 	the 	timing 	and 	location of 	the 	arbitration,
the ALJ 	found 	that 	the process 	adopted by 	the 	arbitrator was
sufficient. 	Specifically, 	he ruled that hearings 	held on
33

workdays were the most practical way to reconcile the needs 	and
desires 	of 	a 	large number of 	fee payers 	and a reasonable means 	of
reducing 	administrative 	inconvenience 	and 	expense 	for 	all
concerned. 	The ALJ 	further found that, 	had the arbitrator
responded to objecting 	fee payers' 	request to move the hearing
from 	location to 	location throughout 	the 	state, 	the hearing would
have been even 	further protracted. 	We 	agree with the ALJ's
conclusion. 	In addition, 	attempts by the arbitrator to hold
hearings 	on weekends 	or holidays 	met with 	resistance 	from other
objecting fee payers. 	As a practical matter, 	the manner in which
the hearing was 	conducted, 	with respect 	to 	timing and 	location
was 	reasonable.18
REMEDY
We 	find 	that Abbot 	and 	Cameron's 	request 	for restitution of
all money taken is 	inappropriate. 	Under EERA section 3541.5(c),
the 	Board 	is 	given
. 	. 	. 	the power to issue a decision and order
directing 	an offending party to 	cease 	and
desist 	from the 	unfair practice 	and 	to 	take
such affirmative action, 	. . . 	as will
effectuate the policies 	of 	this 	chapter.
In the present 	case, 	it has been found that 	SRVEA has
violated EERA by: 	(1) 	failing to provide any local 	financial
information to potential nonmember objectors; 	(2) 	utilizing
documentation from its 	state affiliate that did not, 	in its
18
The 	complaints 	issued 	in these 	consolidated 	cases 	included
an allegation of 	a violation of 	SRVEA's 	duty of 	fair
representation under 	section 	3544.9. 	The ALJ 	found no breach
based on a 	failure to prove there was arbitrary, 	bad faith, 	or
discriminatory 	conduct. 	This 	conclusion was 	not 	excepted to.
34

initial 	notice, 	provide 	sufficient 	supporting materials,
including the 	auditor's 	verification, 	to 	enable a nonmember to
make 	the determination as 	to whether or not to object; 	(3)
failing 	to provide 	sufficient 	indication that 	its 	national
affiliate's 	supporting 	financial 	statements 	were 	verified 	by 	an
independent auditor; 	(4) 	not providing challenging objectors with
an 	immediate 	refund and 	future 	advanced reduction; 	and 	(5)
failing 	to 	establish an 	escrow account 	that would 	restrict 	the
union's 	access 	to the 	challenged amount 	of 	agency 	fee 	funds 	prior
to 	the 	impartial decision maker's 	determination of 	the
appropriate percentages 	to 	be 	refunded to objecting nonmembers.
These actions 	interfere with the right of 	nonmembers 	to 	refrain
from participation 	in the 	activities 	of 	the 	exclusive
representative in violation of 	section 3543.6(b).
In this 	case, 	Abbot and Cameron had the opportunity to
object, 	did object and requested arbitration. 	Therefore, 	Abbot
and Cameron are 	entitled to a 	return of 	any amounts, 	with
interest, 	that 	should have 	been refunded upon the 	initial 	filing
of 	objection with SRVEA or any of 	its 	agents. 	(Breaux. 	et al v.
ALRB 	(1990) 	Cal.App.3d 	[90 Daily Journal D.A.R. 	1281,
1287].) 	Additionally, 	there 	shall be a prohibition of 	future
collections 	until 	the 	deficiencies 	found by 	this 	decision are
corrected and proper procedures 	are 	in place.
ORDER
Upon the 	foregoing 	findings 	of 	fact 	and conclusion of 	law,
and the 	entire record in this 	case, 	it 	is 	hereby ORDERED that 	the
3
. . .
5

San Ramon Valley Education Association, 	CTA/NEA, 	and 	its
representatives, shall:
A. 	CEASE AND DESIST FROM:
1. 	Failing to provide 	financial 	information 	concerning
San Ramon Valley Education Association, 	CTA/NEA 	(SRVEA) 	to
support 	use 	of 	a 	local 	presumption 	incorporating 	the 	California
Teachers Association's 	(CTA) 	calculated percentage 	of 	chargeable
and 	nonchargeable 	expenditures 	in 	its 	notice 	to 	nonmember agency
fee payers.
2. 	Failing to provide 	nonmember agency 	fee payers 	with
a 	copy of 	CTA's 	audited verification 	in the 	initial 	notice.
3. 	Failing to provide 	information 	supporting CTA's
calculation, 	which describes 	both the 	chargeable and
nonchargeable 	expenditures 	by 	major 	category within 	each
department 	listed 	in 	its 	initial 	annual 	notice.
4. 	Failing to provide 	a 	statement by an 	independent
auditor 	for 	the 	National 	Education Association's 	supporting
documentation as 	to 	its 	chargeable 	and 	nonchargeable
expenditures.
5. 	Failing to provide 	an 	immediate 	return and 	future
advanced 	reduction 	to 	challenging 	agency 	fee payers 	upon 	receipt
of 	objection.
6. 	Depositing agency fee 	funds 	into 	either its 	own or
its 	affiliates' 	escrow accounts where those accounts 	do not
provide 	for 	independent 	management 	and prevent 	the 	release 	of
contested 	funds 	until 	the 	completion of 	the 	objection process.
36

7. 	Collecting agency 	fees 	from nonmembers 	until 	such
time as 	the deficiencies 	outlined 	in 	subparagraphs 	1 	through 	6
above 	are 	corrected.
24
B. 	TAKE 	THE 	FOLLOWING AFFIRMATIVE ACTIONS 	DESIGNED TO
EFFECTUATE 	THE 	POLICIES 	OF 	THE 	EDUCATIONAL 	EMPLOYMENT
RELATIONS ACT:
1. 	Return to Barbara C. 	Abbot and Yvonne M. 	Cameron the
fee amounts 	admittedly nonchargeable, 	with interest, 	that would
have been due 	as 	a 	result of 	their 	initial 	notice 	of 	objection to
SRVEA, 	less 	those 	amounts 	actually received after the 	arbitration
as 	a result of the arbitrator's 	finding. 	The amount of 	interest
due 	to Abbot and Cameron 	shall be at the rate of 	ten 	(10) 	percent
per 	annum.
2. 	Within thirty-five 	(35) 	days 	following the date
this 	Decision is 	no 	longer 	subject to reconsideration, 	post 	at
all 	school 	sites 	and other work 	locations where notices 	to
employees 	customarily are placed, 	copies 	of 	the Notice attached
as 	an Appendix hereto, 	signed by an authorized agent of 	SRVEA.
Such posting 	shall 	be maintained 	for 	a period of 	thirty 	(30)
consecutive workdays. 	Reasonable 	steps 	shall be taken to 	ensure
that this Notice 	is 	not reduced in size, 	defaced, 	altered or
covered 	by 	any material.
3. 	Written notification of 	the actions 	taken to 	comply
with 	this 	Order 	shall be made 	to 	the 	San Francisco 	Regional
Director 	of 	the 	Public 	Employment 	Relations 	Board 	in accordance
with 	her 	instructions.
Members 	Shank, 	Camilli, 	and Cunningham joined in this 	Decision.
Member Craib's 	concurrence and dissent begins 	on page 	38.
37

Member Craib, 	concurring and dissenting: 	I 	concur in the
findings of the majority, 	with two exceptions.1 One, 	it is
inappropriate 	to 	address 	the 	issue 	of 	the 	lack of 	specificity 	in
the California Teachers Association's 	(CTA) 	listing of 	chargeable
and 	nonchargeable 	expenditures 	in the packet of 	information
provided to agency fee payers, 	because, 	like the timing of the
initial 	agency 	fee notice, 	this 	issue was 	not 	fully 	litigated.
Two, 	I 	disagree with the majority that the 	information concerning
the National 	Education Association's 	(NEA) 	expenditures 	did not
adequately 	reflect 	that 	those 	expenditures 	had been audited.2
As 	noted by the majority, 	at the outset of the hearing, 	the
parties 	stipulated to the issues 	in dispute. 	(Maj. 	Op., 	at pp.
3-4.) 	CTA's 	failure 	to 	specifically 	list which 	subcategories 	of
expenditures 	it 	considered 	chargeable 	and 	nonchargeable was 	not
one 	of 	those 	stipulated 	issues. 	The only 	stipulated 	issue 	that
possibly 	could be 	construed 	to 	encompass 	this 	matter 	is 	the 	issue
described as 	"incorrect 	categories 	for expenditures." 	However,
1I agree with 	the majority 	that 	the 	agency 	fee procedures 	at
issue 	here were deficient 	because 	no 	information was 	provided
-concerning 	the 	San 	Ramon Valley 	Education Association's 	(SRVEA)
expenditures. 	I 	agree because I 	believe 	some 	information was
required 	so 	that 	an agency 	fee payer 	could make 	an 	informed
decision 	on whether or not 	to 	challenge 	in arbitration the
validity of the use of the local presumption. 	However, 	in other
circumstances, 	it 	is possible that 	something other than a 	local's
annual 	financial 	report would 	suffice, 	particularly where 	the use
of 	the presumption has 	been upheld 	in previous 	adjudications
involving the 	same unions.
2To 	the 	extent 	that 	the majority holds 	that 	the 	initial
information 	concerning CTA that was 	sent 	to 	agency 	fee payers
suffers 	from the 	same deficiency, 	for the reasons 	discussed
infra. 	I 	also disagree with that finding.
38

from a review of 	the 	record, 	including the post-hearing briefs
and the proposed decision, 	it 	is 	apparent that the above-quoted
issue 	refers 	to 	the methodology used by CTA to determine 	its
allocation of 	expenditures 	to 	chargeable 	and nonchargeable
categories 	and, 	in particular, 	to the 	lack of an audit of that
allocation.3
The 	majority 	correctly explains why 	it 	is 	inappropriate 	to
address 	the 	issue of the timing of the agency 	fee notice. 	SRVEA
could 	not 	have had 	adequate 	notice 	and an opportunity to 	defend
that 	issue, 	because 	it was 	not one of those 	issues 	stipulated to
and was 	instead raised 	for the 	first 	time 	on appeal. 	Similarly,
the 	lack of 	specificity 	in CTA's 	listing of 	chargeable 	and
nonchargeable 	expenditures was 	not a 	stipulated issue, 	was 	not
mentioned in the 	charging parties' 	post-hearing brief, 	and was
not addressed in the ALJ's proposed decision; 	instead, 	it was
raised 	for the 	first time on appeal. 	Consequently, 	since the
specificity 	of 	CTA's 	listing 	of 	chargeable 	and 	nonchargeable
expenditures was 	not 	fully 	litigated, 	it 	is 	inappropriate to
address 	the 	issue. 	(See 	Tahoe-Truckee 	Unified 	School 	District
(1988) 	PERB Decision No. 	668, 	pp. 	5-10.)
'The 	majority 	correctly rejects 	the 	charging parties'
assertion that 	an audit 	of 	the 	allocation of 	expenditures 	is
required. 	As 	noted by the majority, 	the 	courts have rejected
this 	assertion, 	recognizing that 	such a determination is 	a 	legal
one 	that 	is 	properly within the purview of 	the 	impartial 	decision
maker and is beyond the expertise of an auditor. 	(See, 	e.g.,
Andrews v. 	Education Association of Cheshire 	(2d Cir. 	1987) 	829
F.2d 	335 	[127 	LRRM 2929, 	2933].)
39

I 	differ with 	the 	majority 	on the 	adequacy 	of 	the
information on NEA provided 	in the agency 	fee notice, 	because 	I
believe 	that 	the 	majority has 	added 	an unwarranted 	technical
requirement to the 	contents 	of 	the notice. 	The 	information
concerning NEA that was 	included 	in the 	agency 	fee 	notice 	sent 	to
agency 	fee payers 	included three documents. 	One document
reflected 	audited 	expenditures 	for 	the 	1984-85 	school 	year 	(the
most recent year for which audited 	figures were then available),
broken down 	into program areas 	with 	a 	chargeable 	and
nonchargeable 	figure 	listed 	for 	each 	area.4 The 	second 	document
was 	an 	estimate 	of 	chargeable 	and 	nonchargeable 	expenditures 	for
the 	1986-87 	school year, 	again broken down by program areas. 	The
estimates were based on 	1984-85 	audited 	figures, 	which 	roughly
mirrored the planned activities 	for the 	1986-87 	year. 	The 	third
document 	explained how NEA 	calculates 	its 	agency 	fee 	by 	listing,
based on an advisory opinion of 	an arbitrator, 	the kinds 	of
expenditures 	considered 	chargeable 	and 	nonchargeable.
While 	the 	NEA 	information 	clearly 	states 	in 	several 	places
that 	the 	expenditures 	listed were 	audited, 	the majority 	finds 	the
information 	inadequate because 	there 	is 	no 	accompanying 	statement
signed by 	an 	auditor 	attesting 	to 	the 	accuracy 	of 	the 	figures
provided. 	While 	including a 	signed 	statement might be 	in a
4While 	the 	components 	of 	each program area 	are 	listed 	in
some detail, 	it 	is 	not clear which components are considered
chargeable 	and nonchargeable. 	Reading this 	document 	together
with 	the 	others 	included 	in the 	information packet 	helps
somewhat. 	In any event, 	for the reasons discussed above, 	this
issue was not fully litigated and is, 	therefore, 	not properly
before 	the 	Board.
40

union's 	interest because 	it would 	allay the 	suspicions 	of 	agency
fee payers, 	I 	can find no authority that provides that a
representation 	that 	chargeable 	and 	nonchargeable 	expenditures
were 	audited 	is 	insufficient 	for the purposes 	of 	the 	initial
agency 	fee 	notice.5 The 	requirement 	that 	a union's 	expenditures
be verified by an independent auditor, 	in my view, 	refers 	only to
the 	fact 	that the 	expenditures 	must be 	subjected 	to 	the 	review of
an auditor; 	that requirement does 	not prescribe any 	specific
attestation that must be 	included 	in the 	notice. 	(Chicago
Teachers Union v. 	Hudson (1986) 	475 U.S. 	292, 	307, 	fn. 	18 	[106
S.Ct. 	1066] 	(Hudson).)
-
It 	is 	important to remember that the purpose of 	the
arbitration hearing 	(as well 	as 	subsequent unfair practice 	or
5In 	neither of 	the 	cases 	cited by 	the 	majority did 	the 	court
make 	a 	statement 	that 	can be 	construed to 	require 	that 	a
statement 	signed by 	the 	auditor be 	included 	in the 	initial 	agency
fee notice. 	In Andrews v. 	Education Association of Cheshire.
supra. 	829 F.2d 335, 	the court, 	in recounting the underlying- -
facts 	of 	the case, 	noted that the notice 	included 	financial
reports 	of 	the 	exclusive 	representative 	and 	its 	affiliates,
"together with 	statements 	for 	[sic] 	an 	independent 	auditor or
authorized 	association representative 	verifying 	those 	reports."
(Andrews. 	supra, 	at p. 	338.) 	There is no further mention of the
auditor's 	statement.
Similarly, 	in Hudson v. 	Chicago Teachers Union 	(N.D. 	I11.
1988) 	No. 	83C2619 	[130 LRRM 2112], 	the court discussed the proper
role of 	the 	auditor in verifying the union's 	expenditures, 	but
made 	no 	comment 	on the 	necessity of 	including 	a 	signed 	statement
from the auditor 	in the 	initial 	notice. 	More pertinent 	is 	the
court's 	rejection of 	the plaintiffs' 	argument that 	the notice
cannot 	survive 	constitutional 	scrutiny unless 	it 	incorporates
legally correct definitions 	of 	chargeable 	expenditures, 	and
unless 	the 	calculations 	are based on 	sound methodology. 	As 	the
court 	stated, 	this 	argument mistakenly 	equates 	the 	adequacy of
the notice with the accuracy of the 	fee 	calculations, 	and would
effectively 	eliminate 	the 	need 	for 	the 	impartial 	decision maker.
(Hudson, 	supra. 	130 LRRM at 2115.)
41
- -

court hearings) 	is 	to prove or disprove the representations 	in
the 	agency 	fee 	notice. 	The 	agency 	fee 	notice 	itself 	need not
contain 	such proof. 	It 	need only 	contain 	information 	sufficient
to 	allow an 	informed 	choice 	as 	to whether to 	challenge or accept
the union's calculations. 	(Hudson, 	supra. 	475 U.S. 	at 306 	[106
S.Ct, 	at 	1076].) 	If 	agency fee payers 	find reason to question
the 	methodology used 	in verifying 	expenditures, 	they may have
that 	issue 	adjudicated by 	filing 	a 	timely 	objection.
While 	there was 	extensive 	evidence 	in the 	unfair practice
hearing 	concerning 	the 	methodology 	of 	the 	review of 	CTA
expenditures, 	there was 	very little 	inquiry into the 	audit of
NEA's 	expenditures. 	The 	charging parties 	repeatedly 	claim that
there was no audit at all, 	nor even a 	"CTA-style review."
However, 	the only testimony on the 	subject revealed that, 	though
the 	underlying 	financial 	information was 	audited, 	the accounting
firm retained by NEA did 	not 	attempt 	to 	audit 	the 	allocation 	of
expenditures 	into 	chargeable 	and nonchargeable 	categories. 	This
reflects 	no deficiency, 	for such a task, 	as 	the majority points
out, 	is 	not properly within the purview of the auditor.
In 	sum, 	the 	information provided by NEA did 	indicate 	that 	it
was 	audited, 	and the 	evidence 	introduced at 	the hearing gives 	no
indication that this 	representation was 	false. 	I 	believe 	this
satisfied 	the 	requirement 	of 	Hudson that 	the 	financial
information be 	verified 	by 	an 	independent 	auditor.
42

APPENDIX
NOTICE 	TO 	EMPLOYEES
POSTED 	BY ORDER OF 	THE
PUBLIC 	EMPLOYMENT 	RELATIONS 	BOARD
An Agency of 	the 	State 	of 	California
After a hearing in Unfair Practice Case No. 	SF-CO-304,
SF-CO-309, 	Barbara C. 	Abbot, 	et al. 	v. 	San Ramon Valley Education
Association. 	CTA/NEA, 	in which all parties had the right to
participate, 	it has 	been found that 	the 	San Ramon Valley
Education Association, 	CTA/NEA 	(SRVEA) 	violated 	section 	3543.6(b)
of 	the Educational 	Employment 	Relations Act.
As 	a result of this 	conduct, 	SRVEA and its 	representatives
have been ordered to post this 	notice, 	and they will:
A. 	CEASE AND DESIST FROM:
1. 	Failing to provide 	financial 	information concerning
San Ramon Valley Education Association, 	CTA/NEA 	(SRVEA) 	to
support 	use 	of 	a 	local presumption 	incorporating the 	California
Teachers 	Association's 	(CTA) 	calculated percentage 	of 	chargeable
and nonchargeable 	expenditures 	in 	its 	notice 	to 	nonmember agency
fee payers.
2. 	Failing to provide 	nonmember 	agency 	fee payers with
a 	copy of CTA's 	audited verification 	in the 	initial 	notice.
3. 	Failing to provide 	information 	supporting CTA's
calculation, 	which describes 	both the chargeable and
nonchargeable 	expenditures 	by 	major 	category within 	each
department 	listed 	in its 	initial 	annual 	notice.
4. 	Failing to provide a 	statement by an 	independent
auditor 	for 	the 	National 	Education Association's 	supporting
documentation as 	to 	its 	chargeable 	and nonchargeable
expenditures.
5. 	Failing to provide 	an 	immediate 	return and 	future
advanced 	reduction 	to 	challenging 	agency 	fee payers 	upon 	receipt
of 	objection.
6. 	Depositing agency fee 	funds 	into either 	its 	own or
its 	affiliates' 	escrow accounts where those accounts 	do not
provide 	for 	independent management 	and prevent 	the 	release 	of
contested 	funds 	until 	the 	completion of 	the objection process.
7. 	Collecting 	agency 	fees 	from nonmembers 	until 	such
time as 	the deficiencies 	outlined 	in subparagraphs 	1 	through 	6
above 	are 	corrected.

B. 	TAKE 	THE 	FOLLOWING AFFIRMATIVE ACTIONS 	DESIGNED TO
EFFECTUATE 	THE 	POLICIES 	OF 	THE 	EDUCATIONAL 	EMPLOYMENT
RELATIONS ACT:
1. 	Return to Barbara C. 	Abbot 	(Abbot) 	and Yvonne M.
Cameron 	(Cameron) 	the fee amounts 	admittedly nonchargeable, 	with
interest, 	that would have been due as 	a result of 	their 	initial
notice of objection to 	SRVEA, 	less 	those amounts 	actually
received 	after the 	arbitration as 	a 	result 	of 	the 	arbitrator's
finding. 	The 	amount 	of 	interest due to Abbot 	and Cameron 	shall
be at the rate of ten 	(10) 	percent per annum.
Dated: 	SAN 	RAMON VALLEY 	EDUCATION
ASSOCIATION, 	CTA/NEA
By Authorized 	Agent
THIS 	IS AN OFFICIAL NOTICE. 	IT MUST REMAIN POSTED FOR AT LEAST
THIRTY 	(30) 	CONSECUTIVE WORKDAYS 	FROM THE 	DATE OF 	POSTING AND
MUST NOT BE REDUCED 	IN SIZE, 	DEFACED, 	ALTERED OR COVERED BY ANY
MATERIAL.
22