COUNSEL: Raymond J. LaJeunesse, Jr.
argued the cause and filed the briefs for petitioner.
Richard Cohen, Senior Attorney, National Labor Relations Board, argued the cause
for respondent, with whom Linda Sher, Associate General Counsel, and Aileen A.
Armstrong, Deputy Associate General Counsel, were on the brief.
James B. Coppess argued the cause for intervenors, with whom Laurence S. Gold
and Peter E. Mitchell were on the brief. James G. Mauro, Jr. and Sheldon
Engelhard entered appearances.
JUDGES: Before: WALD, WILLIAMS and
GINSBURG, Circuit Judges. Opinion for the Court filed by Circuit Judge WALD.
OPINIONBY: WALD
OPINION: [*866]
WALD,
Circuit Judge: Lawrence R. Ferriso ("Ferriso"),
although not a member of the International Union of Electronic, Electrical,
[**2] Salaried, Machine and Furniture Workers,
or its Local 444 (respectively, the "International" and the
"Local"; collectively, the "Unions"), is required to pay
fees to the Unions by virtue of an "agency-shop" agreement between the
Unions and Ferriso's employer, Paramax Systems Corporation. Agency-shop
agreements require all of a bargaining unit's employees, whether or not they are
union members, to pay fees (termed "agency fees") to a union for the
benefits that the union confers on them, including collective bargaining and
other forms of representation. When Ferriso requested that the International
reduce his agency fees to reflect only those expenses properly chargeable to
him, the International did so, but without providing any explanation of its
calculations other than a list of what percentage of the expenses of each of its
affiliates it believed was chargeable to Ferriso. Believing that the Unions were
obliged to justify their calculations of his agency fees with a breakdown of
their major categories of expenditures, verified by an independent audit,
Ferriso filed an unfair labor practice charge with the National Labor Relations
Board ("the NLRB" or "the Board"). The NLRB found
[**3]
that the Unions were required to provide Ferriso with data on their major
categories of expenditures, but that no independent audit was necessary. On
appeal, Ferriso argues that the latter finding was erroneous.
The Unions have intervened, and argue, with the Board, that this ruling should
be upheld.
We conclude that Ferriso is correct, and that the Unions are required to provide
him with an independent audit of their major categories of expenditures. We also
find that the Board's apparent methodology for ascertaining what constitutes an
appropriate audit is incorrect, and that such audits must, in general, conform
to the ordinary norms for audits of comparable entities.
I. BACKGROUND
Ferriso joined the Local in 1974; in 1976, he resigned, but continued to pay
dues to the Unions because of the agencyshop agreement. In March 1991, he read a
notice in the union newsletter about procedures for reducing nonmembers' agency
fees to eliminate charges for nonrepresentational activities. The notice said
that objectors would receive a "detailed explanation" of the basis of
the reduction and that any challenges would be resolved by an impartial
arbitrator.
Ferriso sent a letter
[**4] seeking a
reduction. In June, he received a letter that said that the Union had reviewed
its records and had reduced Ferriso's agency fee so that it only reflected
collective-bargaining or representational costs. The letter listed the amounts
of Ferriso's fees that went to the Local, to District Council 3 (a regional
affiliate of the Unions), and to the International. It also indicated the
percentage of the fees paid to each that were chargeable to Ferriso: 58.1
[*867]
percent for the International, 65 percent for the District, and 98.9 percent for
the Local. Ferriso's dues subsequently dropped in accordance with the
calculations set forth in the letter.
The letter did not provide any of the expense information underlying the Unions'
calculations, and did not indicate that these calculations had been verified by
any third party. It did describe the procedure by which Ferriso could challenge
the calculations before an arbitrator. Ferriso elected not to invoke this
procedure, and instead filed an unfair labor practice charge with the NLRB
against the International and the Local, claiming that they had failed to
provide him with sufficient information to allow him to decide whether to
challenge
[**5] their calculations. The NLRB
General Counsel issued a complaint, and the case was tried before an
administrative law judge ("ALJ").
On December 2, 1992, the ALJ issued an opinion finding that the unions had
violated section 8(b)(1)(A) of the National Labor Relations Act ("NLRA"),
29
U.S.C. § 158(b)(1)(A) (1994), by (i) failing to give Ferriso a breakdown of
their major categories of expenses, and (ii) failing to have this breakdown
verified by an independent auditor.
International Union of Electronic,
Electrical, Machine and Furniture Workers, Case No. 29-CB-8055 (Dec. 2,
1992). The Unions filed exceptions to this decision. On August 27, 1996, the
Board issued a decision in which it adopted the ALJ's first finding, but
declined to adopt the second, finding that verification by an independent
auditor was not necessary.
International
Union of Electronic, Electrical, Machine and Furniture Workers, 322 N.L.R.B.
1, 1996 WL 501580 (1996) (hereinafter "
IUE"). Ferriso now
appeals the latter ruling.
II. ANALYSIS
In
Communications
Workers of America v. Beck, 487 U.S. 735, 101 L. Ed. 2d 634, 108 S. Ct.
2641 (1988), the Supreme Court explained the purpose of section 8(a)(3) of
the NLRA,
29
[**6] U.S.C. § 158(a)(3) (1994), which
permits unions and employers to enter into agencyshop agreements. The Court
found that,
in
enacting this provision of the NLRA, Congress "authorized compulsory
unionism only to the extent necessary to ensure that those who enjoy
union-negotiated benefits contribute to their cost."
Beck,
487 U.S. at 746. The Court accordingly concluded that section 8(a)(3)
"authorizes the exaction of only those fees and dues necessary to
'performing the duties of an exclusive representative of the employees in
dealing with the employer on labor-management issues,' "
Id.
at 762-63 (quoting
Ellis
v. Brotherhood of Railway, Airline & Steamship Clerks, 466 U.S. 435,
448, 80 L. Ed. 2d 428, 104 S. Ct. 1883 (1984)). The Court described
activities
"ger-
mane to collective bargaining, contract administration, and grievance
adjustment" as the "financial core" of union activities, which
nonmembers may appropriately be compelled to support.
487
U.S. at 745.
A
union's status as an exclusive bargaining representative gives rise to "a
statutory obligation to serve the interests of all members [of the bargaining
unit] without hostility or discrimination toward any, to exercise its discretion
with complete
[**7] good faith and honesty, and
to avoid arbitrary conduct."
Vaca
v. Sipes, 386 U.S. 171, 177, 17 L. Ed. 2d 842, 87 S. Ct. 903 (1967).
This obligation is also called the duty of fair representation; actions for
breach of this duty may be brought under section 8(b) of the NLRA,
29
U.S.C. § 158(b) (1994).
See Vaca,
386 U.S. at 176. In
Beck, the Court explained that
nonmembers
can bring a claim for improperly charged agency fees as a breach of the duty of
fair representation, as the claim amounts to one that the union "failed to
represent their interests fairly and without hostility by negotiating and
enforcing an agreement that allows the exaction of funds for purposes that do
not serve their interests and in some cases are contrary to their personal
beliefs."
487
U.S. at 743.
A.
The Independent-Auditor Requirement
Beck did not address how unions were to verify their calculations of
the proportion of expenses attributable to representational activities. However,
the Court considered a
[*868] related issue
in
Chicago
Teachers Union v. Hudson, 475 U.S. 292, 89 L. Ed. 2d 232, 106 S. Ct. 1066
(1986). Hudson involved an agency-shop arrangement negotiated by
the Chicago Teachers Union and the Chicago Board of Education. Because this
[**8] arrangement was the result of state
action, the First Amendment barred the union from including expenditures for
"ideological activities unrelated to collective bargaining" in the
agency fees it charged to nonmembers.
Hudson,
475 U.S. at 305 (quoting
Abood
v. Detroit Board of Education, 431 U.S. 209, 244, 52 L. Ed. 2d 261, 97 S.
Ct. 1782 (1977) (Stevens, J., concurring)). The union had established a
procedure under which nonmembers who objected to the amount of their fees could
challenge them through a procedure that culminated in arbitration; those who
prevailed would then be issued a rebate of any excess charges. The
Hudson
Court found that this procedure fell short of constitutional standards in three
respects: it did not provide sufficient assurance that funds would not be
temporarily misused before a rebate was issued; it did not provide enough
information about the basis of the union's calculations to allow nonmembers to
make an informed decision about whether to bring a challenge; and it did not
provide an adequately prompt opportunity for review by an impartial
decisionmaker.
475
U.S. at 305-07. In discussing the second of these requirements, the Court
observed that
"the
Union need not provide nonmembers
[**9] 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."
Id.
at 307 n.18.
Hudson does not apply directly to this case, because of the lack of
state action.
See Kolinske
v. Lubbers, 229 U.S. App. D.C. 157, 712 F.2d 471 (D.C. Cir. 1983)
(finding that the NLRA's provision permitting agency-shop agreements does not
suffice to render such agreements state action). But this circuit has found that
the content of the NLRA's duty of fair representation is guided by the standards
of
Hudson. In
Abrams
v. Communications Workers of America, 313 U.S. App. D.C. 385, 59 F.3d 1373
(D.C. Cir. 1995), we noted that the holding of
Hudson was rooted in
" 'basic considerations of fairness, as well as concern for the First
Amendment rights at stake,' " and so "applies equally to the statutory
duty of fair representation."
59
F.3d at 1379 n.7 (quoting
Hudson,
475 U.S. at 306). We accordingly adopted
Hudson's standard for the
nature of the disclosure that unions must make under the NLRA to nonmembers of
the right to opt out and pay less than full union dues.
See also Miller
v. Air Line [**10] Pilots Ass'n, 323 U.S. App. D.C.
386, 108 F.3d 1415, 1420 (D.C. Cir. 1997) (finding
that
Hudson and
Beck impose similar procedural obligations on
unions, and therefore applying, in a case governed by
Hudson, the
holding of
Abrams that employees may not be compelled to arbitrate
agency-fee disputes).
Here, the NLRB found that
Hudson's "major categories of
expenditures" requirement is applicable under the NLRA, but that its
"independent auditor" requirement is not. The NLRB based this
conclusion on its previous decision in
California
Saw & Knife Works v. International Association of Machinists and Aerospace
Workers, 320 N.L.R.B. 224 (1995) (hereinafter "
California Saw").
Citing
Abrams, California Saw had found that, because
Hudson
was based in part on "basic considerations of fairness," its
conclusions were applicable under the
NLRA.
320 N.L.R.B. at 232-33. But the Board concluded in
California Saw
that the Court's "basic considerations of fairness" rationale
"expressly extended only to the notice requirement."
Id.
at 233 n.48. Because, with the exception of this requirement, the standards
of
Hudson "were not formulated to comport with a union's
obligations
[**11] under
Beck to
represent its employees fairly," the Board concluded that
Hudson's
"independent auditor" requirement did not apply to actions brought
under the NLRA.
Id.
at 240-41. The Board apparently believed that "the more exacting
accounting standards in
Hudson derive from first amendment intolerance
of any compulsory subsidization of fees under a state-authorized agency
shop,"
id.
at 240 n.82, and therefore should not apply to a case in which there is no
question of state action. Although the Board rejected
Hudson's
"independent auditor" formula, it did find that some form of
verification was required, stating
[*869]
that it would examine whether the verification arrangement before it satisfied
the union's duty of fair representation under
Beck. Id.
at 241. n1
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n1 The Board's decision in the present case said that the standards of
California
Saw would apply to whatever verification arrangement the Unions adopted.
See
IUE,
322 N.L.R.B. No. 1 at 2 n.7 ("We note, however, that under
California
Saw the Board will examine whether a union's method of verifying its
calculations satisfies the union's duty of fair representation.").
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
[**12]
The NLRA does not speak directly to the question of whether an independent audit
is required in these circumstances.
In
cases in which the NLRA is "silent or ambiguous as to the specific
issue" before us,
Chevron
U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843,
81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984), "we have traditionally
accorded the Board deference with regard to its interpretation of the NLRA as
long as its interpretation is rational and consistent with the statute."
NLRB
v. United Food & Commercial Workers Union, 484 U.S. 112, 123, 98 L. Ed.
2d 429, 108 S. Ct. 413 (1987). Ferriso points out that the Supreme Court has
said that "fair representation claims often involve matters not normally
within the Board's unfair labor practice jurisdiction, which is typically aimed
at effectuating the policies of the federal labor laws, not redressing the wrong
done the individual employee," and expressed doubts as to "whether the
Board brings substantially greater expertise to bear on these problems than do
the courts."
Breininger
v. Sheet Metal Workers International, 493 U.S. 67, 74, 107 L. Ed. 2d 388,
110 S. Ct. 424 (1989) (citations and internal quotations omitted). But in
this passage the Court was considering only whether the NLRB's jurisdiction
[**13] over fair representation claims should
be exclusive, not whether the Board's decisions were entitled to
Chevron
deference. It is one thing to say, as the Court did in
Breininger, that
the Board's expertise in this area does not so dwarf that of the courts as to
justify depriving the courts of jurisdiction to hear fair representation claims,
and quite another to deny that the Board has any special expertise in this area
at all. This circuit has heretofore accorded the NLRB the usual measure of
Chevron
deference in matters relating to the duty of fair representation,
see Finerty
v. NLRB, 324 U.S. App. D.C. 346, 113 F.3d 1288, 1291 (D.C. Cir. 1997),
and
Breininger does not justify a significant departure from this
practice.
We nevertheless find that the Board's rejection of the "independent
auditor" requirement was not rational, because any rational interpretation
of the NLRA's duty of fair representation will necessarily include an
independent-auditor requirement. First, the Board was mistaken in finding that
Hudson's
"basic considerations of fairness" language did not extend to its
"independent auditor" requirement.
Hudson found that
"basic
considerations of fairness" required
[**14]
that "potential objectors be given sufficient information to gauge the
propriety of the union's fee."
475
U.S. at 306. The Court then explained in a footnote what it meant by
"sufficient information," saying that "adequate disclosure surely
would include the major categories of expenses, as well as verification by an
independent auditor."
475
U.S. at 307 n.18. It follows that everything encompassed by the latter
phrase, including "verification by an independent auditor," is
required by "basic considerations of fairness."
California Saw suggested that the independent-auditor requirement might
be peculiar to cases involving state action, observing that
Hudson's
"more exacting accounting standards" derived from "first
amendment intolerance of any compulsory subsidization of fees under a
state-authorized agency shop."
California
Saw, 320 N.L.R.B. at 240 n.82. We do not agree.
Hudson
grounded its discussion of information disclosure in both "basic
considerations of fairness" and "concern for the First Amendment
rights at stake,"
475
U.S. at 306, indicating that its disclosure requirements were not
exclusively the product of First Amendment concerns. It is, of course,
conceivable
[**15] in the abstract that the
content of the duty of fair representation under the NLRA might not coincide
with that of the "basic considerations of fairness" discussed in
Hudson.
But we are persuaded that
nonmembers
cannot make a reliable decision as
[*870] to
whether to contest their agency fees without trustworthy information about the
basis of the union's fee calculations,
cf. Hudson,
475 U.S. at 306, and that an independent audit is the minimal guarantee of
trustworthiness.
See Miller,
108 F.3d at 1420 (holding that similar procedural obligations apply under
NLRA and
Hudson );
Abrams,
59 F.3d at 1379 n.7 (same).
California Saw cited legislative history in support of its rejection of
an independent-audit requirement, observing that, in the process of deliberating
on what was to become the Labor-Management Reporting and Disclosure Act of 1959
("LMRDA"), the House considered but did not adopt proposals requiring
unions to obtain independent audits.
320
N.L.R.B. at 241 n.87. It is true that one of the bills that the House
considered, H.R. 4473, would have required the financial records of unions to be
independently audited, and that these provisions did not appear in
[**16]
the bill ultimately adopted by the House.
See H.R. 4473 §§
102(b)(10), 211(b), 86th Cong. (1959),
reprinted in 1 NLRB,
Legislative
History of the Labor-Management Reporting and Disclosure Act of 1959 at
193, 237 (1959) (hereinafter "Leg. Hist."). n2 The
Beck
Court, however, rejected a similar argument based on the LMRDA's legislative
history, noting that the House bill in question "did not purport to set out
the rights of
nonmembers who are compelled to pay union dues, but
rather sought to establish 'a bill of rights for union
members.' "
487
U.S. at 758 (quoting H.R. REP. NO. 245, 80th Cong., 1st Sess. at 322
(1947)). The title and provisions of H.R. 4473 make clear that it, too, was
addressed exclusively to the rights of union members.
See, e.g., Title,
1 Leg. Hist. at 166 (referring to rights of union members); § 101(a), 1 Leg.
Hist. at 174-75 (same). We therefore do not find this argument persuasive.
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n2 In what seems to have been an error,
California Saw also cited in
support of its reading of the LMRDA's legislative history a portion of the LMRDA
Conference Report that addressed a minor, unrelated change made by the
conference committee.
See H.R. CONF. REP. NO. 86-1147 at 31-32 (1959),
reprinted
in 1 Leg. Hist. at 935-36 (1959). The Board has not attempted to explain
this citation.
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
[**17]
B.
Who Counts as an "Independent Auditor"?
The question remains of what suffices to satisfy the requirement of an
"independent auditor" under the NLRA-what qualifications and what
degree of independence the auditor must have. The Board and the Unions argue
that we should not reach these issues, as they were not properly raised below.
As to the question of what form of professional certification or license is
required, the Board concedes that the General Counsel argued both before it and
before the ALJ that verification by an independent auditor meant verification by
an "independent accounting firm," and that Ferriso argued before the
Board that it meant verification by a "certified public accountant,"
i.e.,
a CPA. NLRB Brief at 56. This issue was therefore adequately raised.
As to the meaning of "independent," it is appropriate to reach this
question in order to correct an error in the methodology the Board applied in
California
Saw. Although
California Saw rejected the "independent
auditor" formula, it did require some form of verification of a union's
financial data. In the absence of any counterindications from us, the Board
might choose to draw on the methodology
[**18]
it applied in
California Saw for analyzing unions' data-verification
arrangements in giving content to the "independent auditor" standard
on remand. Some discussion of the reasoning of
California Saw is
therefore necessary. n3
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n3 Indeed, although
California Saw rejected the "independent
auditor" formula, it also seemed to conclude, somewhat confusingly, that
the auditors in the arrangement before it qualified as "independent,"
saying, for instance, that "we do not accept the premise advanced by the
General Counsel that the independence necessary to prepare
verification-of-expense audits of District and Local Lodges consistent with a
union's obligations under
Beck can never be assured when there is an
employer-employee relationship between the auditors and the [union]."
320
N.L.R.B. at 241. It is therefore possible that the Board may view
California
Saw as having some weight as to the meaning of the term
"independent."
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
[*871] California Saw found that
Beck
was satisfied by an arrangement
[**19] under
which the international union was audited by outside CPAs, but the audits of the
district and local unions were conducted by employees of the international union
who were not CPAs. The Board found that because the auditors had accounting
training, had served as Local or District treasurers, and applied an audit
protocol developed by the union with an outside consultant, "the General
Counsel has not demonstrated that the verification of expenses tasks at issue
here are beyond the skills of the [union] auditors."
California
Saw, 320 N.L.R.B. at 241. As to auditor independence, the Board found
that the union took "significant steps to assure objectivity" because
auditors were not permitted to audit affiliates for which they currently or
formerly worked or of which they were members.
Id.
at 241-42. The Board also observed that there had been no allegations that
audits had been performed "in a less than honest, unbiased, or objective
manner," and that the international union had an independent interest in
obtaining objective audits of the books of its affiliates.
Id.
at 242.
The Board's methodology contained two errors. First, it imposed very little
scrutiny on the
[**20] verification
arrangement before it, finding it sufficient that the audit had not been
demonstrated to be "beyond the skills" of the auditors, and that the
union had taken "significant steps" towards assuring objectivity.
Second, and more seriously, it made no reference to the accepted norms of the
accounting profession in analyzing the expertise and independence of the
auditors. Federal and state authorities and professional associations have
devoted considerable effort to developing standards of independence and
professionalism for audits of businesses, employee benefit plans, and the like;
potential
objectors to agency fees should not be required to rely on an audit that does
not meet the prevailing standards for audits of other comparable entities. n4
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n4 A "comparable" entity is one that, because of its size and the
nature of its activities, presents an auditing task that is similar in
difficulty and scope to the task at hand (which will in some cases be an audit
of a single union, and in others an audit of a union and its affiliates).
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[**21]
The Court emphasized in
Hudson that
"absolute
precision" in the calculation of agency fees "cannot be expected or
required,"
Hudson,
475 U.S. at 292 n.18 (quoting
Abood,
431 U.S. at 239-40, n.40). Similarly, an audit under the NLRA need only
conform to the prevailing norms for an adequate audit.
See Gwirtz
v. Ohio Education Ass'n, 887 F.2d 678, 680-82 (6th Cir. 1989)
(approving use of an "adequate" auditing standard that falls short of
the "highest level of audit service available");
see also Abrams,
59 F.3d at 1381 (approving a procedure under which union employees keep
records of their time for only one week out of thirteen). The nature of an
adequate audit may vary depending on the size and complexity of the auditing
task, as this may affect the types of entities with which the union may
appropriately be compared. The following is a summary of some of the relevant
norms that we have identified, and of their likely implications, to guide the
Board's decision on remand.
1.
"Independent"
The American Institute of Certified Public Accountants ("AICPA") has
promulgated a wide range of standards of accounting and auditing practice. This
includes a set of ten
[**22] Generally
Accepted Auditing Standards, the second of which addresses
"independence." See Codification of Statements on Auditing Standards,
Statement on Auditing Standards No. 1, § 150 at 21 (AICPA 1995) (hereinafter
"
Auditing Standards"). AICPA's official interpretation of
this standard requires that the auditor be "in public practice (as distinct
from being in private practice)," and states in part:
It is of utmost importance to the profession that the general public maintain
confidence in the independence of independent auditors. Public confidence would
be impaired by evidence that independence was actually lacking, and it might
also be impaired by the existence of circumstances which reasonable people might
believe likely to influence independence. To be [*872]
independent, the auditor must be intellectually honest; to be recognized
as independent, he must be free from any obligation to or interest in the
client, its management, or its owners.... Independent auditors should not only
be independent in fact; they should avoid situations that might lead outsiders
to doubt their independence.
Auditing Standards, Statement on Auditing Standards No. 1, §
[**23]
220 at 31. n5 The Securities and Exchange Commission has also adopted a
regulation setting forth the necessary qualifications of an accountant issuing a
report on the financial statement of a publicly traded company. That
regulation's independence requirement bars an accountant from auditing a firm or
its affiliates if that firm has employed him or anyone else from his office
during the period covered by his report.
17
C.F.R. § 210.2-01 (1996). Based on these authorities, we think that it is
unlikely that an arrangement like that at issue in
California Saw would
be consistent with the ordinary norms for the independence of an audit.
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n5 The AICPA has also adopted a Code of Professional Conduct, of which the first
rule, Rule 101, is Independence.
See Code of Professional Conduct, reprinted
in Larry P. Bailey,
GAAS Guide at 44.05 (1995);
see also id.
at 44.08--44.20 (reprinting official AICPA interpretations of this rule).
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -
2.
"Auditor"
The most prevalent category of professional qualification
[**24]
in the accounting profession is a license to practice as a certified public
accountant, or CPA. "Some states have additional categories of accounting
practitioners, such as public accountants or registered accountants, who are not
certified but who are otherwise licensed to offer certain types of services to
the general public." D. Edward Martin,
Attorney's Handbook of
Accounting, Auditing and Financial Reporting § 1.01[1] at 1-4 (1996).
Federal law permits audits of employee benefit plans and publicly traded firms
to be performed either by certified public accountants or by licensed public
accountants. n6 Audits of unions should in general conform to a similar
standard.
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - -
n6
See 17
C.F.R. § 210.2-01 (referring to "certified public accountants"
and "public accountants");
29
U.S.C. § 1023(a)(3)(D) (defining a "qualified public accountant"
permitted to audit an employee benefit plan to mean: "(i) a person who is a
certified public accountant, certified by a regulatory authority of a State;
(ii) a person who is a licensed public accountant, licensed by a regulatory
authority of a State; or (iii) a person certified by the Secretary ... for a
person who practices in States where there is no certification or licensing
procedure for accountants").
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[**25]
Ferriso asserts that
Hudson should be read to require that all audits
be performed by CPAs.
Hudson did say, in discussing whether the
contributions of nonmembers must be escrowed in full while a challenge to an
agency fee is pending, that "if, for example, the original disclosure by
the Union had included a certified public accountant's verified breakdown of
expenditures, including some categories that no dissenter could reasonably
challenge, there would be no reason to escrow" fees in these categories.
475
U.S. at 310. The context makes clear, however, that this reference to a
certified public accountant was intended as an example, and that it is the term
"independent auditor" that governs. n7
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n7 A review of the briefs of the parties in
Hudson confirms this
conclusion. Neither party referred to a "certified public accountant"
in its brief. The brief of the Chicago Teachers Union did, however, discuss the
possibility that a union could avoid the need to escrow the full agency fees of
objectors pending a challenge if it escrowed the maximum amount that could
conceivably be in dispute, and asserted that "the risk of miscalculation
[of this sum] can also be minimized if a union retains a neutral (such as an
independent auditor or impartial labor arbitrator) to make the
calculations." Brief for the Chicago Teachers Union at 27 n.19,
Hudson
(No. 84-1503).
The Court's decision only to approve the use of an "independent
auditor," and not an "impartial labor arbitrator," suggests that
the Court believed that some professional qualifications were required to
perform an audit. In failing to approve the use of an "impartial labor
arbitrator," the Court seemingly declined to approve a procedure that was
already in use by the National Education Association ("NEA"), and that
was described in great detail in a brief that the NEA filed as an
amicus.
The NEA's procedure relied on a calculation made by an arbitrator with
"experience in public sector labor relations," but not necessarily in
accounting.
See Brief for the NEA as Amicus Curiae in Support of
Petitioners at 10-17,
Hudson, (No. 84-1503).
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[**26]
[*873] III. CONCLUSION
For the foregoing reasons, we grant Ferriso's petition for review, and remand
this cause to the NLRB for further proceedings consistent with this opinion. On
remand, the NLRB shall order that the Unions provide Ferriso with an independent
audit of their financial data, and that the independence and qualifications of
the auditors conform to prevailing norms for audits of comparable entities.
So ordered.
Labor
& Employment Law : Collective Bargaining & Labor Relations : Fair
Representation