Nature of Union Funds
Union funds are the money, property, credits, and other assets collected, received, or held by a labor organization for union purposes. They may belong to the union as a juridical organization, but they are impressed with a trust character because they are raised from workers for collective representation, internal administration, mutual aid, and other purposes authorized by law and the union constitution and by-laws.
Union officers, agents, committee members, and employees who handle union money are fiduciaries. They hold and spend the funds as custodians of the organization and its members, not as owners. The controlling idea is democratic accountability: members who supply the funds must be able to know how the funds are raised, where they are kept, why they are spent, and who benefits from the expenditure.
The Labor Code rules on rights and conditions of union membership treat financial transparency as a substantive membership right. The right is not limited to the right to vote on officers; it includes protection against unauthorized collections, excessive charges, secret disbursements, and deductions from wages without the authority required by law.
Sources of Union Funds
Union funds commonly come from regular dues, initiation fees, special assessments, agency fees, fines validly imposed under the constitution and by-laws, income from union property or activities, donations that do not impair union independence, and allocations from a federation or national union. The legality of the source depends on both the general law and the internal rules of the labor organization.
- Regular dues are periodic contributions required of members for ordinary union operations, such as administration, representation, meetings, communication, grievance handling, and affiliation expenses.
- Initiation fees are charges for admission to membership. They must not be arbitrary, oppressive, or excessive because access to union membership is tied to the worker's right to self-organization and, in union-security settings, to continued employment.
- Special assessments are extraordinary charges imposed for a specific purpose outside ordinary dues. They require stricter approval because they place an additional burden on members beyond the usual cost of membership.
- Agency fees may be assessed against non-members in the bargaining unit who accept the benefits of a collective bargaining agreement negotiated by the exclusive bargaining representative. The purpose is to prevent free-riding by employees who receive representation benefits without sharing representation costs.
- Fines and penalties may become union funds only when they are imposed under valid internal rules, for legitimate union purposes, and with observance of due process.
Authority to Collect
No union officer, agent, or member may collect fees, dues, assessments, or other contributions in the name of the union unless authorized by the union constitution and by-laws or by a valid act of the membership under those rules. Authority to hold office is not automatically authority to collect money; the collection must be traceable to a lawful union rule, a valid membership action, or a recognized union function.
Every payment made by a member to the union should be covered by an official receipt or equivalent written acknowledgment identifying the payer, amount, date, and nature of the payment. The collection must be entered in the union's books because the receipt protects the member, while the entry protects the integrity of the union's financial records.
A collection made without authority remains vulnerable even if the money was later turned over to the union. Unauthorized collection violates the member's right to know and approve the financial burdens attached to membership. If the collector keeps or diverts the money, the act may give rise to internal discipline, restitution, civil liability, and, when the facts warrant, criminal liability under general law.
Authorized Purposes and Limits on Use
Union funds may be used only for purposes expressly provided in the union constitution and by-laws or expressly authorized by the membership through the procedure required by law and the internal rules. Common legitimate purposes include union administration, collective bargaining, grievance processing, labor education, lawful organizing, member welfare programs, litigation involving union interests, affiliation dues, and other activities connected with representation and mutual aid.
Money collected for a particular purpose must be used for that purpose. A fund raised for legal expenses, strike assistance, education, or welfare benefits cannot be silently shifted to officer allowances, factional activities, personal loans, entertainment, or unrelated projects. A change in purpose requires the same democratic authorization that would have been necessary had the new purpose been proposed from the beginning.
Union funds cannot be treated as a private reserve of incumbent officers. Personal advances, unliquidated reimbursements, unexplained cash withdrawals, excessive allowances, payments to relatives without legitimate services, and expenditures unsupported by receipts are inconsistent with fiduciary control. Even when the amount is small, the defect is serious because the law protects the process of accountability as much as the money itself.
Officer compensation, honoraria, allowances, and similar payments from union funds must rest on the constitution and by-laws or on valid membership authorization. The mere fact that an officer performed union work does not justify self-fixed compensation, because the conflict between custody of funds and personal benefit requires clear prior authority.
Records, Reports, and Inspection
Members are entitled to full and detailed reports of financial transactions involving union funds. This right includes meaningful information on income, sources of income, disbursements, recipients, balances, and the purpose of material expenditures. A vague statement that funds were used for union activities is not enough when the member seeks an accounting of specific receipts and expenses.
The union's books of account and records of financial activities should be kept in a manner that permits verification. Receipts, vouchers, bank records, minutes approving expenditures, payrolls for union staff, liquidation reports, and contracts entered into by the union are the usual documents that connect money received to money spent.
Inspection rights belong to members as incidents of membership. They must be exercised reasonably, during appropriate office hours or reasonable times, and for legitimate union purposes. Union officers may regulate the manner of inspection to protect records from loss or disruption, but they may not defeat the right by indefinite postponement, selective disclosure, or requiring the member to prove a factional or litigation interest.
The treasurer and every officer responsible for union accounts must render a true and correct accounting at the times required by law and internal rules, including periodic accounting, accounting demanded by valid membership action, and accounting upon leaving office. Turnover of office includes turnover of books, money, bank access, property records, and documents needed by the incoming officers to continue union administration.
Dues, Check-Off, and Wage Deduction
A check-off is the deduction of union dues, fees, or assessments from amounts due to an employee, usually wages or collectively bargained benefits, for remittance to the union. Because wages are protected by law, check-off is not merely an internal union matter; it also involves the employer's authority to deduct from compensation.
Regular union dues may be checked off when the requirements of wage-deduction law and the applicable bargaining arrangement are satisfied. The employer should deduct only the amount authorized and remit it to the proper union recipient. A check-off clause does not permit the employer or union to enlarge the deduction beyond the legal and contractual authority for it.
For special assessments, attorney's fees, negotiation fees, or other extraordinary charges, individual written authorization is generally required before the amount may be deducted from what is due to the employee. The authorization must identify the amount, purpose, and beneficiary. A general signature on an attendance sheet, a vote in favor of a resolution, or silence after notice does not perform the same function as a written check-off authorization.
The distinction between the validity of an assessment and the validity of a deduction is critical. A special assessment may be approved by the required membership vote, yet still be undeductible from wages or benefits if the individual written authorizations for check-off are absent. Conversely, an individual authorization cannot cure an assessment that was never validly approved by the membership when such approval is required.
An employer that deducts union money without the required authority risks liability for unlawful wage deduction. The employer is not expected to resolve every internal union dispute, but it should not act on a deduction request that is facially unsupported by the required authorization, exceeds the authorized amount, or covers a charge that the law does not allow to be imposed on the employee.
Special Assessments and Extraordinary Fees
A special assessment is an additional financial burden imposed on members for a particular undertaking, such as litigation expenses, bargaining-related costs, building funds, education programs, emergency assistance, or other non-routine projects. Because it is extraordinary, the law requires democratic approval before the obligation may be imposed.
The required approval is a written resolution of the membership adopted at a general membership meeting duly called for that purpose, by the majority required by law. The notice and meeting must make the financial proposal understandable: members should know the amount or manner of computation, the purpose, the intended beneficiary, and the reason the fund is needed.
The secretary's minutes and records should show the call for the meeting, the members present, the votes cast, the resolution approved, and the attestation required by the union's rules. These records matter because the legality of the assessment depends on proof that members were allowed to decide on a defined financial obligation, not on after-the-fact officer certification.
Attorney's fees and negotiation fees connected with collective bargaining require particular care. The law protects individual members from having CBA-related legal or negotiation charges imposed directly on them contrary to statutory limits. If such fees are payable from union funds, they must be authorized as a union obligation and must not be converted into unauthorized deductions from employees' wages or benefits.
Agency Fees and Non-Members
Agency fees are different from union dues because they are charged to non-members in the bargaining unit who benefit from the collective bargaining agreement negotiated by the exclusive bargaining representative. They are justified by the representative's duty to serve the entire bargaining unit, including employees who did not join the union.
A proper agency fee is tied to the benefits accepted by the non-member and is generally equivalent to the dues and fees paid by members for representation. It should not be used to compel union membership, punish non-membership, or finance activities unrelated to collective bargaining representation. The charge is a cost of representation, not a substitute initiation fee.
Individual written authorization is not required for the deduction of a lawful agency fee from non-members who accept CBA benefits, because the obligation arises from the statutory policy against free-riding in the bargaining unit. The union must still observe the limits of reasonableness, proper computation, and proper remittance, and the employer should deduct only in favor of the recognized bargaining representative.
Financial Rights of Members
| Right or Protection | Practical Effect |
|---|---|
| Protection against excessive initiation fees | Membership cannot be burdened by charges that defeat the right to self-organization or operate as an exclusionary device. |
| Receipt for payments | The member can prove payment, and the union must account for the money in its books. |
| Inspection of financial records | Members may verify collections, disbursements, balances, and compliance with authorized purposes. |
| Periodic and demanded accounting | Officers handling funds must report and explain the financial condition of the union. |
| Approval of special assessments | Extraordinary charges cannot be imposed by officers alone and must pass through membership decision. |
| Written authorization for extraordinary check-off | Amounts due to employees cannot be reduced for special charges without the employee's specific written consent, except where the law itself supplies the authority. |
Discipline, Good Standing, and Union Security
Payment of lawful dues and assessments may be made a condition of good standing under the constitution and by-laws. A member who refuses to pay valid and properly imposed obligations may be subject to internal discipline if the union observes its rules and due process.
Discipline for non-payment cannot rest on an unlawful or unapproved charge. A member may not be expelled, suspended, deprived of voting rights, or reported for termination under a union-security clause for refusing to pay an assessment that was not validly adopted or cannot lawfully be deducted.
Where union security is invoked, the financial ground must be genuine, lawful, and supported by fair procedure. The union must give the member notice, an opportunity to explain or settle the valid obligation, and action by the proper union body. The employer, although bound to respect a valid union-security clause, should still observe employment due process before termination.
Misuse and Remedies
Misuse of union funds includes unauthorized collection, failure to issue receipts, concealment of records, false reporting, diversion to personal use, expenditure for unauthorized purposes, unsupported reimbursement, and refusal to account. The wrong is both financial and democratic because it prevents members from exercising informed control over their organization.
Members may seek remedies through internal union processes, including demands for inspection, accounting, audit, liquidation, refund, discipline, recall, or removal of responsible officers when the constitution and by-laws provide such remedies. Internal remedies are important because unions are self-governing organizations, but they cannot be used to shield officers from accountability or to make the member's statutory rights illusory.
When internal remedies are unavailable, futile, or insufficient, disputes over rights and conditions of membership, including union funds and accounting, may be brought before the labor authorities with jurisdiction over intra-union disputes. Appropriate relief may include recognition of the member's inspection right, nullification of an unauthorized assessment, refund of illegal deductions, accounting, turnover of records, and other measures necessary to protect membership rights.
Serious or repeated financial violations may also affect the union's standing under labor law when they involve fraudulent reporting, non-submission of required financial reports, or conduct showing disregard of statutory membership rights. The remedy should correspond to the wrong: not every accounting defect justifies drastic action against the union, but every defect that impairs member control calls for correction.
Federations, Locals, and Affiliation Dues
A local or chapter may be affiliated with a federation or national union, but affiliation does not erase the financial rights of the local membership. Per capita dues, affiliation fees, and remittances to the federation must be grounded in the affiliation arrangement, constitution and by-laws, charter, collective bargaining arrangement, or other valid authorization.
Federation officers cannot treat the local's funds as freely transferable federation money. Conversely, local officers cannot withhold validly authorized federation dues while continuing to claim benefits of affiliation. The controlling documents and valid membership actions determine which funds belong to the local, which must be remitted, and which expenses may be charged against shared union resources.
Disaffiliation or a change in bargaining representation does not automatically settle ownership of accumulated funds. The proper inquiry is the source of the funds, the entity for which they were collected, the terms of affiliation, the union rules governing property, and the rights of the employees who contributed to the fund.
Controlling Principles
The law permits unions to raise and use funds because effective collective representation requires resources. The same law subjects union money to member control because a labor organization derives its legitimacy from the employees it represents.
Regular dues support the ordinary life of the union; special assessments require special approval; check-off affects protected wages and therefore requires legal authority; agency fees prevent non-member free-riding; and every collection or disbursement must be capable of explanation from records. These rules make union funds a continuing test of union democracy, fiduciary duty, and lawful representation.