State Funds May Not be Used to Fight Union Organizing

October 12, 2006 by Beeson Tayer & Bodine

After many years of litigation and multiple decisions striking down California’s neutrality law, the Ninth Circuit Court of Appeals in September reversed its previous decision and upheld the law that bars employ- ers from using state funding to assist, promote or deter union organizing. In Chamber of Commerce v. Lockyer, 463F.3d 1076, the Court ruled that the law is not preempted by the federal National Labor Relations Act and does not violate employers’ First Amendment, free-speech rights. In other words, the California law is not blocked by conflicting or superior federal law. At press time, it was not clear whether the employers who challenged the law will appeal to the Supreme Court, and if so whether the Supreme Court will accept the case on appeal.

California enacted Government Code §16645 in 2000 to ensure state neutrality in union organizing. The law is designed to prevent the state from “tipping the scale” in favor of employers by forbidding employers from using any state funds to influ- ence the decision of its employees to support or oppose a labor organization or to become a member of any labor organization. The law further requires that employers certify that no state funds will be used to assist, promote or deter union organizing, and requires employers to maintain records which demonstrate compliance with the law. An employer who makes such expenditures and who commingles state funds and other monies is presumed to have used state funds to assist, promote or deter union organ- izing. Employers that violate this law are subject to fines and penalties, which includes the return of state funds used for prohibited purposes and a stiff civil penalty. The Chamber of Commerce v. Lockyer decision is a major victory for California unions. Any private employer that receives any state grant of funds or at least $10,000 in annual state funding on account of its participation in a state program will have to segregate and account for such money, or take a position of neutrality in labor disputes. Employers that receive state funds will have to choose between complying with burdensome accounting and reporting requirements or remaining neutral in union organizing campaigns.

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