Appellate Court Rules that MMBA Permits Modified Agency Shop Arrangement Applying Only to New Employees

02.08.2017

In a February 1, 2017 decision, the California Court of Appeal held that Section 3502.5 of the Meyers-Milias-Brown Act ("MMBA") permits employees to vote on a modified agency shop provision. Specifically, it affirmed the ruling of the Public Employment Relations Board ("PERB" or "Board") that the Orange County Water District ("District") should have permitted an election regarding the adoption of a modified agency shop provision applicable only to future employees. (Orange County Water District v. Public Employment Relations Board (Feb. 1, 2017, G052725) _ Cal.App.5th _, 2017 WL 432862.)

Procedural Background
In May 2011, during negotiations between the District and the Orange County Employees Association ("Union") for a successor memorandum of understanding. the Union proposed a "modified" agency shop arrangement. Ordinarily, an agency shop arrangement requires an employee as a condition of employment to either join the recognized union or pay the union a service fee. The "modified" agency shop proposal would apply prospectively to future hires, but not to current District employees. The District rejected the Union’s proposal, arguing that Section 3502.5 of the MMBA does not authorize such an arrangement.

In November 2012, the Union served the District and the State Mediation and Conciliation Service ("SMCS") with a petition and request for an agency shop election, containing proof of support signed by approximately 98% of the bargaining unit members. The petition specified that the undersigned employees wished to implement a modified agency shop agreement in which new employees hired after March 1, 2013 would be required to join the Union or pay a service fee.

The District advised SMCS that it would not agree to schedule the election until SMCS verified the legality of the arrangement under Section 3502.5 of the MMBA. After SMCS declined to state a position, the District refused to consent to the election.

The Union filed an unfair practice charge against the District. An Administrative Law Judge decided the issue, calling it "one of first impression for PERB." The judge found the District violated Section 3502.5 by refusing to participate in a properly-petitioned agency shop election. The Board adopted the proposed decision in full. The District filed a petition for writ of extraordinary relief with the California Court of Appeal.

Court of Appeal Decision
The Court of Appeal agreed with PERB that the Union properly requested an agency shop election under MMBA section 3502.5. Section 3502.5(a) defines "agency shop" as "an arrangement that requires an employee, as a condition of employment, either to join the recognized 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." Section 3502.5(b) allows an agency shop arrangement between a public agency and an employee organization’s bargaining agency, without a negotiated agreement, upon (1) a petition signed by 30% of the employees in the bargaining unit and (2) majority approval from the employees voting in a secret ballot election.

The Court rejected the District’s assertion that the proposed arrangement violated Section 3502.5 because it applied only to future hires rather than the entire bargaining unit. The Court highlighted that Section 3502.5(a) defined an "agency shop" as a condition placed on individual employees rather than entire bargaining units. It held that "there is nothing in the statute that implies that an agency shop must apply uniformly to a bargaining unit, or not at all."

The Court acknowledged that "[n]either the California Supreme Court nor any appellate court has addressed whether Section 3502.5 authorizes an agency shop that applies to anything less than the entire bargaining unit." However, it found persuasive a 2003 California Attorney General opinion letter concluding that Section 3502.5 authorizes an agency shop that applies to fewer than all employees in the bargaining unit. The appellate court noted that Section 3502.5(c)’s religious exemption from an agency shop agreement further undermined the District’s position that agency shop arrangements must apply uniformly to all employees.

The Court found that the Board’s interpretation of Section 3502.5 did not conflict with the statute’s underlying legislative purpose, as it prevented some (if not all) "free-rider" employees. Finally, the appellate court rejected constitutional challenges. It acknowledged that the Supreme Court had recently expressed "great concern" over the agency shop doctrine, but emphasized that the doctrine remained constitutional. Consequently, the Court rejected the District’s writ request.