All Commentary
Sunday, November 1, 1998

Paycheck Protection in California: What Went Wrong?

Union Workers May Seek Refunds of Dues and Fees Used for Politics

Proposition 226, which was on the primary ballot in California last June, would have required unions to get annual written permission from workers before spending their dues and agency fees on politics. The proposition lost 53 to 47 percent. In January, just after the initiative qualified for the ballot, polls indicated that over 70 percent of likely voters and a similar percentage of union households planned to vote for it. Exit polls on June 2 showed that 69 percent of the voters supported the idea of protecting paychecks against involuntary deductions for politics. John Sweeney, president of the AFL-CIO, called the outcome “a modern political miracle.” As a proponent of the initiative, I have to ask what went wrong?

Opponents of 226, mainly unions, spent $30 million to defeat it, while supporters could muster only $3.5 million. Unions could take their money from dues and fee payers across the country. Supporters had to ask for donations. The opposition ran an intensive TV ad campaign three months before the first “Yes on 226″ ad appeared. Early lies that went unanswered became established truths before the pro-initiative TV campaign began. In the final month before election day, opposition ads outnumbered proponents’ ads by over 2 to 1.

The California business community gave almost nothing to support the “Yes on 226″ campaign. Why? Two threats and one temptation. First, the unions collected signatures to put three initiatives on a later ballot that would increase the tax and regulatory burdens on businesses. Then they promised not to submit the signatures if the business community did not support 226. The unions proposed a Faustian bargain: let us continue to tax workers for politics and we will not increase your government-based headaches. This amounted to blackmail by ballot initiative, and too many businesses succumbed. It wouldn’t surprise me if the unions submitted their signatures anyway.

Second, the unions threatened businesses with negative publicity campaigns asserting that employers who support 226 are anti-employee. Unions have discovered the efficacy of such efforts in their “corporate cam paigns” against firms they seek to organize and firms they seek to punish for continuing to do business with strike targets. Well-intentioned but ill-informed members of the caring class—including clergymen, academics, and journalists—are often complicit in these efforts. And there are far too few business people, like T.J. Rodgers of Cypress Semiconductor, who dare to stand up and defend themselves against such unjustifiable attacks.

Third, many businesses believed they could get a free ride. They interpreted the 70 percent support in the early polls as a guarantee that the measure would pass without their help. By the time it became clear that the vote would be close, it was too late. The good news, perhaps, is that when such measures are undertaken in other states, fewer businesses will fall prey to the free-rider temptation. Sweeney’s political miracle clearly proves the power of forced dues to change minds.

Unnecessary Provision

Proposition 226 also included a section that required employers to get annual written permission before they deduct any money from paychecks for political contributions and expenditures. I believe that this section was totally unnecessary, and it caused major problems. The authors included it to insulate themselves from the charge that the initiative was anti-union. The unions made that charge anyway, claiming they were the only membership organizations affected. More important, the employer section created an opportunity for unions to scare charitable organizations, health-insurance providers, and other groups that receive payroll deductions into believing that they would be hurt by passage of 226.

The union arguments about this provision were disingenuous. First, the initiative applied only to “employers” and “labor organizations” as already defined in California law. No health-insurance provider, except in its role as employer, would be affected. Second, payroll deductions in exchange for something of value, such as health- insurance coverage, would have been excluded according to a previous law. Nevertheless, because this big lie went unanswered in the mass media until the very end of the campaign, many voters believed it was true.

The unions also used this argument with respect to charities; and here, because charitable contributions are not for “consideration,” they may have had a point. It is easy to imagine a judge deciding that an employer who deducts voluntary charitable contributions from employee paychecks would be liable for the political expenditures and contributions made by charitable organizations such as the American Cancer Society. If so, many employers would stop gathering charitable contributions that way, and there would be less charitable giving.

That argument convinced some major charities to oppose 226, but they may come to regret their concession. Most people give to support charitable activities, not political causes. The charities’ support of the unions seemed to imply that they are involved in politics.

In any case, the exit polls indicated that if the proposition had been written to apply only to unions, it would have passed. The unions were unable effectively to use any part of the section that applied directly to them in their campaign. They argued that it was an effort to silence working people in the political process, but everyone, including most union members, saw through that claim. Workers would have been free to authorize unions to use their dues and fees for political purposes. No limits on voluntary political spending through unions would have been imposed. In fact, by giving workers a choice, the initiative would have amplified the political voice of working people.

There was at least one happy outcome of the campaign. Most California workers are now fully aware of their right, under the Supreme Court decisions in the Hudson (public-sector) and Beck (private-sector) cases, not to have their union dues spent on politics against their will. Until the campaign, unions had tried to keep those decisions a secret. At their behest, President Clinton had rescinded an executive order that would have required federal contractors to post notice of their employees’ Beck rights at job sites. During the campaign the unions argued that the Hudson and Beck decisions made 226 unnecessary. Of course, that’s untrue, because those decisions are not adequately enforced and they impose a heavy burden on employees to prove that unions spend more money on politics than they admit. But California unions have now informed all their members that these decisions exist and that they all may seek refunds of dues and fees used for politics. I predict a substantial increase in the number of California workers who try to do so in spite of the threats, intimidation, and hurdles the unions will put in their way.

One more thing. The initiative will be back on the primary ballot in 2000.

  • Charles Baird is a professor of economics emeritus at California State University at East Bay.

    He specializes in the law and economics of labor relations, a subject on which he has published several articles in refereed journals and numerous shorter pieces with FEE.