Ferriso, Lawrence R. v. NLRB

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 3, 1997 Decided September 23, 1997
No. 96-1321
Lawrence R. Ferriso,
Petitioner
v.
National Labor Relations Board,
Respondent
International Union of Electronic, Electrical, Salaried,
Machine and Furniture Workers, AFL-CIO
and Engineers Union Local 444,
Intervenors
On Petition for Review of an Order of the
National Labor Relations Board
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.
Before: Wald, Williams and Ginsburg, Circuit Judges.
Opinion for the Court filed by Circuit Judge Wald.
Wald, Circuit Judge: Lawrence R. Ferriso ("Ferriso"),
although not a member of the International Union of Elec-
tronic, Electrical, 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 Corpo-
ration. 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 bargain-
ing and other forms of representation. When Ferriso re-
quested 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 that the Unions were required to
provide Ferriso with data on their major categories of expen-
ditures, 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 consti-
tutes 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 agency-
shop agreement. In March 1991, he read a notice in the
union newsletter about procedures for reducing nonmembers'
agency fees to eliminate charges for nonrepresentational ac-
tivities. The notice said that objectors would receive a "de-
tailed explanation" of the basis of the reduction and that any
challenges would be resolved by an impartial arbitrator.
Ferriso sent a letter 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
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 prac-
tice 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 their calculations. The NLRB General Counsel
issued a complaint, and the case was tried before an adminis-
trative 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. s 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. Internation-
al 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 verifi-
cation by an independent auditor was not necessary. Inter-
national Union of Electronic, Electrical, Machine and Fur-
niture Workers, 322 N.L.R.B. No. 1, 1996 WL 501580 (Aug.
27, 1996) (hereinafter "IUE"). Ferriso now appeals the latter
ruling.
II. Analysis
In Communications Workers of America v. Beck, 487 U.S.
735 (1988), the Supreme Court explained the purpose of
section 8(a)(3) of the NLRA, 29 U.S.C. s 158(a)(3) (1994),
which permits unions and employers to enter into agency-
shop 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 (1984)). The Court described activities "ger-
mane to collective bargaining, contract administration, and
grievance adjustment" as the "financial core" of union activi-
ties, which nonmembers may appropriately be compelled to
support. Id. 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 good faith and honesty, and to avoid arbitrary
conduct." Vaca v. Sipes, 386 U.S. 171, 177 (1967). This
obligation is also called the duty of fair representation; ac-
tions for breach of this duty may be brought under section
8(b) of the NLRA, 29 U.S.C. s 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 en-
forcing 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
related issue in Chicago Teachers Union v. Hudson, 475 U.S.
292 (1986). Hudson involved an agency-shop arrangement
negotiated by the Chicago Teachers Union and the Chicago
Board of Education. Because this arrangement was the
result of state action, the First Amendment barred the union
from including expenditures for "ideological activities unrelat-
ed 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 (1977) (Ste-
vens, 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 stan-
dards in three respects: it did not provide sufficient assur-
ance 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 nonmem-
bers 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. Id. at
305-07. In discussing the second of these requirements, the
Court observed that "[t]he Union need not provide nonmem-
bers with an exhaustive and detailed list of all its expendi-
tures, but adequate disclosure surely would include the major
categories of expenses, as well as verification by an indepen-
dent 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, 712 F.2d 471(D.C. Cir. 1983) (finding that the NLRA's provision permit-
ting 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, 59 F.3d 1373 (D.C. Cir. 1995), we noted
that the holding of Hudson was rooted in " '[b]asic consider-
ations of fairness, as well as concern for the First Amend-
ment rights at stake,' " and so "applies equally to the statuto-
ry 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
Pilots Ass'n, 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, Cali-
fornia 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 extend-
ed 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 under Beck to represent its employees fairly," the
Board concluded that Hudson's "independent auditor" re-
quirement 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 Hud-
son's "independent auditor" formula, it did find that some
form of verification was required, stating that it would exam-
ine whether the verification arrangement before it satisfied
the union's duty of fair representation under Beck. Id. at
241.1
The NLRA does not speak directly to the question of
whether an independent audit is required in these circum-
stances. 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
(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."
__________
1 The Board's decision in the present case said that the standards
of California Saw would apply to whatever verification arrange-
ment 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.").
NLRB v. United Food & Commercial Workers Union, 484
U.S. 112, 123 (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 poli-
cies of the federal labor laws, not redressing the wrong done
the individual employee," and expressed doubts as to "wheth-
er 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 (1989) (citations
and internal quotations omitted). But in this passage the
Court was considering only whether the NLRB's jurisdiction
over fair representation claims should be exclusive, not
whether the Board's decisions were entitled to Chevron defer-
ence. 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, 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 repre-
sentation will necessarily include an independent-auditor re-
quirement. 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 "[b]asic considerations of fairness" required 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 verifica-
tion 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 stan-
dards" 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 infor-
mation 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 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 nonmem-
bers cannot make a reliable decision as 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 Hud-
son ); 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 propos-
als 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 finan-
cial records of unions to be independently audited, and that
these provisions did not appear in the bill ultimately adopted
by the House. See H.R. 4473 ss 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.").2 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 non-
members 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); s 101(a), 1 Leg. Hist. at 174-75
(same). We therefore do not find this argument persuasive.
B.Who Counts as an "Independent Auditor"?
The question remains of what suffices to satisfy the re-
quirement 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 verifi-
cation 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 5-
6. 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
__________
2 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 cita-
tion.
data. In the absence of any counterindications from us, the
Board might choose to draw on the methodology it applied in
California Saw for analyzing unions' data-verification ar-
rangements in giving content to the "independent auditor"
standard on remand. Some discussion of the reasoning of
California Saw is therefore necessary.3
California Saw found that Beck was satisfied by an ar-
rangement 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 indepen-
dence, 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 verification arrangement
__________
3 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 "indepen-
dent," saying, for instance, that "[w]e 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 be-
tween 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."
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 analyz-
ing the expertise and independence of the auditors. Federal
and state authorities and professional associations have devot-
ed considerable effort to developing standards of indepen-
dence 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 enti-
ties.4
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" audit-
ing standard that falls short of the "highest level of audit
service available"); see also Abrams, 59 F.3d at 1381 (approv-
ing 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 com-
pared. 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
__________
4 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).
accounting and auditing practice. This includes a set of ten
Generally Accepted Auditing Standards, the second of which
addresses "independence." See Codification of Statements
on Auditing Standards, Statement on Auditing Standards
No. 1, s 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 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 outsid-
ers to doubt their independence.
Auditing Standards, Statement on Auditing Standards No. 1,
s 220 at 31.5 The Securities and Exchange Commission has
also adopted a regulation setting forth the necessary qualifi-
cations 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. s 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.
__________
5 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).
2. "Auditor"
The most prevalent category of professional qualification 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 accoun-
tants 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 s 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 accoun-
tants.6 Audits of unions should in general conform to a
similar standard.
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 "[i]f, for example, the original disclosure by the Union
had included a certified public accountant's verified break-
down of expenditures, including some categories that no
dissenter could reasonably challenge, there would be no rea-
son 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.7
__________
6 See 17 C.F.R. s 210.2-01 (referring to "certified public accoun-
tants" and "public accountants"); 29 U.S.C. s 1023(a)(3)(D) (defin-
ing 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").
7 A review of the briefs of the parties in Hudson confirms this
conclusion. Neither party referred to a "certified public accoun-
tant" in its brief. The brief of the Chicago Teachers Union did,
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 inde-
pendence and qualifications of the auditors conform to pre-
vailing norms for audits of comparable entities.
So ordered.
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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 dis-
pute, and asserted that "the risk of miscalculation [of this sum] can
also be minimized if a union retains a neutral (such as an indepen-
dent 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 proce-
dure 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).