The Supreme Court Limits Unions’ Sources of Financing

In a new, exemplary ruling in re “Unión Personal de Fábricas de Pintura y Afines de la R.A. v Colorín Industria de Materiales Sintéticos S.A. on tax foreclosure” (September 27, 2018), the Supreme Court decided on the appeal filed by the Defendant and found that the Union is not entitled to collect agency fees by court order [apremio].

Published in El Cronista on October 10, 2018.
As a matter of fact, the Supreme Court has already rendered a similar judgment (dated June 17, 2014) indicating that agency fees could not be collected by court order, and referred the case for a new decision accordingly. Panel VII ignored the Supreme Court decision and ruled again along similar lines as the Highest Court had rejected.

Remember that a court order for enforced recovery allows the Union to issue a debt certificate and orders the seizure of the property of the Employer who fails to pay union dues, a proceeding that also gives little chance of defense for the debtor Company.

The rationale lies in Act No. 24642, whereby unions’ debts arising out of the Employers’ duty to act as withholding agents for unions dues to be paid by union member workers only can be claimed by court order for enforced recovery.

Consequently, agency fees are not governed by this Act. Curiously enough, Panel VII of the Labor Court of Appeals, who should have rendered judgment along the lines of the Supreme Court ruling, used the very same criterion that was questioned and rejected by the Highest Court. While hearing a new appeal, the Court ratified that agency fees cannot be the object of a special proceeding for debt collection.

There are precedents that rejected agency fees. For example, Section 53 of Collective Bargaining Agreement 168/75 is the only clause establishing retention from workers’ monthly pay, and so it can be concluded that the signatory parties were willing to stipulate the union dues to be paid by union members, because otherwise it would mean that an amount was to be retained from union and non-union members alike, clearly to the detriment of workers’ freedom of association because it would be deemed “compulsory union membership”. (National Labor Court of Appeals, Panel IX, October 31, 2014 Sindicato Obreros Ladrilleros a Máquina v Later Cer S.A. on collection of union dues, DT 2015 (February), 356 AR/JUR/66320/2014).

Other judgments went further. In fact, agency fees under Section 41.2 of Collective Bargaining Agreement 462/06 were deemed to be unreasonable because there was not enough evidence to support that these fees were intended to compensate for services alien to the mere benefit received thanks for the union’s bargaining, and their amount was not different from the fees paid by those who voluntarily became members of the union with other expectations, means, rights and/or benefits. (National Labor Court of Appeals, Panel II, May 13, 2014, Vaccaro, Maximiliano Gabriel et al v Unión Trabajadores de Entidades Deportivas y Civiles U.T.E.D.Y.C on Declaratory Relief, DT 2014 (September), DJ October 1, 2014, 69 AR/JUR/30427/2014).

Even though this is a procedural issue in connection with the right to intervene in litigation, it is actually a question of law. In fact, the law ensures workers’ freedom of association. Union dues must be retained from union member workers only, and employers must act as withholding agents. As such, the Employer is the debtor to the Union, who collects through the withholding of union dues from workers’ salaries.

For many people, agency fees established under an agreement between the Union and the Business Management Representatives imply that a withholding for non-union member workers is a constitutional breach of the fundamental freedom of association. For others, agency fees are intended to replace union dues with a lower amount and a pre-determined term because workers benefit from the collective bargaining promoted by the representative Union.

In other words, those who do not want to become union members are under the obligation to pay a fee equal to the amount withheld to union members when it is clear that they do not wish to belong to the Union or make payments.

This latest judgment is in keeping with a reasonable framework of legal security that should exist as against the systematic and increasingly frequent claims by the union sector seeking higher union dues and contributions to social health care, at a time when union representation and services are facing a serious crisis.

By Julian A. de Diego
Director of the postgraduate course on Human Resources at the School of Business at UCA.