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NLRB again finds union failed to provide sufficiently verified expenditure info to Beck objector

By Ronald Miller, J.D.

On a motion for reconsideration, a three-member panel of the NLRB again found that a union violated its duty of fair representation by failing to provide sufficiently verified expenditure information to a Beck objector. In this instance, the union’s accountant only reviewed expenditure information provided by the union’s officials, and did not verify that the claimed expenditures were in fact made, as required by the Board’s audit requirement. The Board granted the union’s motion only to clarify the order’s wording; otherwise, the motion was denied (United Food and Commercial Workers Union, Local 4, aw United Food and Commercial Workers Union (Safeway, Inc.), February 13, 2017).

On remand from the Ninth Circuit, the Board reviewed an administrative law judge’s decision. The underlying case involved application of the Supreme Court’s decision in Communication Workers of America v. Beck. Specifically, the sufficiency of the financial information a union must provide to dues objectors, who object to paying dues for nonrepresentational activities, to satisfy its duty of fair representation. Applying California Saw & Knife Works, and Television Artists AFTRA (KGW Radio), the Board reversed the ALJ and found that the employer violated its duty of fair representation and therefore Section 8(b)(1)(A) by its failure to provide sufficiently verified expenditure information to a Beck objector.

The Board explained that a union satisfies its verification requirements so long as an auditor—who may be an in-house auditor and need not be a certified public accountant—independently verifies that the expenditures claimed by the union were in fact made. In this instance, the union’s accountant only reviewed expenditure information provided by the union’s officials, and did not verify that the claimed expenditures were in fact made. Accordingly, the Board found that the union failed to satisfy the Board’s expenditure verification requirements and thus violated Section 8(b)(1)(A).

Variance request. The Board also denied the union’s request that it depart from existing law and permit expenditure verification similar to that provided by union officials on the Department of Labor’s Form LM-2. The union filed a motion for reconsideration. Here, the Board granted the union’s motion only to clarify the order wording. The motion was denied in all other respects.

The union first argued that the underlying decision effectively overruled Board precedent by failing to prescribe defined audit procedures and by providing that the required audit may be performed by someone within a union’s organization who need not be a certified public accountant. In rejecting this argument, the Board observed that it has consistently held that, in the NLRA context, no particular type of audit is mandated and that only the usual functions of an auditor need to be performed. Thus, Board precedent requires “an audit within the generally accepted meaning of the term, in which the auditor independently verifies that the expenditures claimed were actually made rather than accepts the representations of the union[.]” Further, Board precedent makes clear that the individual performing the audit need not be a CPA or an auditor from outside a union’s organization; an in-house auditor may be used.

The important component of the Board’s verification requirements is that the person conducting the audit independently verifies that the expenditures claimed were in fact made. The underlying decision faithfully applied those principles.

Disclosure form. Next, the union asserted that it was inconsistent for the Board to permit an audit performed by a union’s in-house auditor, but not permit unions to rely on information in DOL Form LM-2 as evidence of expenditure verification. Here, the Board observed that an audit performed by an in-house auditor was not a lesser form of verification than an official’s LM-2 disclosures. Rather, in an audit the auditor independently verifies that the expenditures claimed were in fact made. Thus, the Board’s audit requirement differed from the LM-2 reporting requirement, and involves expenditure verification not necessarily required as part of the LM-2 reporting requirement.

Order clarified. Finally, the union asserted that the language of the order created confusion because it requires both that the information provided to the objector be “sufficiently verified” and that the information be “verified by an independent auditor.” The Board conceded that the order language requiring that the expenditure information be “verified by an independent auditor” is arguably unclear in light of cases allowing that an audit may be conducted by an in-house auditor. Accordingly, the Board granted the union’s motion in part and revised its order to make clear that the union’s obligation is to provide expenditure information that is sufficiently verified in accordance with well-established precedent.