Financial core

The Supreme Court's 1963 Financial Core decision was one chapter in a series of ongoing corporate challenges to discount and even break Labor Unions since the 1930s rise of workers' rights in the Labor Movement.

Specifically, the case grew out of General Motors Corporation's (GM) refusal to recognize and negotiate with the United Auto Workers (UAW) in Indiana.

GM claimed it would not recognize the UAW since that union was violating labor law by compelling workers to join the UAW as a condition of employment with GM.[5]

GM's argument followed several states including Indiana's emerging right-to-work laws which said workers could not be compelled to join a union and pay union dues.[6] The motivation was seen by legal observers as a bid to limit and even eliminate unions and Collective Bargaining.

GM's bid to weaken the UAW was largely unsuccessful. Even with the court's Ficore carve out, as of December 2020 a mere .24% of workers affiliated with the UAW have elected FiCore status.[7]

The fees paid by FiCore are equal to the amount a union member pays in initiation fees and ongoing dues, but in keeping with the anti-union stance of the Non Member the payments are called "agency fees" as opposed to "member dues." In subsequent years, ongoing challenges to unions before the Supreme Court resulted slight reductions to agency fees when compared to member dues in some cases. [8]

The Financial Core agency fees amount to the non-member's portion of the actual costs to staff and manage union operations including contract negotiations that protect workers interests and improve the working conditions.

FiCore surrender their union membership and card, cannot claim to be a union member, cannot run or vote for union office, cannot vote on contracts, and are not subject to any rules regulations set forth by the union.

Since the 1963 Supreme Court decision, corporations continue to work to weaken and eliminate unions and issues surrounding the Financial Core ruling continue to be litigated.

In 1988, the Supreme Court again addressed the financial core issue in Communications Workers of America v. Beck.[9] The question this time was whether an employee who is Ficore and not a union member can be required to pay a fee equal to full union dues, if a portion of those fees are used for purposes beyond collective bargaining: contract negotiations, contract administration, grievance adjustment, and the like. The court ruled in a 5 to 3 decision, with Justice William Brennan writing for the majority, that the financial core obligation does not include "the obligation to support union activities beyond those germane to collective bargaining, contract administration, and grievance adjustment."[9]

This adjustment related to the Financial Core ruling came out of a 1988 Supreme Court decision and are known as Beck Rights.[10] This additional carve out to the Financial Core ruling determined workers can opt out of paying toward union spending on "non-representational" activities.[11] In most unions a so-called "Beck Objector" is required to claim Financial Core status before that worker can benefit from the fee reduction offered by Beck Rights.[12]

This Supreme Court Case grew out of a complaint by FiCore employee Harry E. Beck and who protested the Communication Workers of America's support of 1968 Democratic Presidential Candidate Hubert Humphrey. Beck and a few additional FiCore workers who joined him wanted refunds of the portion of their agency fees that went to supporting the Democrat, because Humphrey was a Gun Control supporter.[13]

Beck Rights state the FiCore worker cannot be required to pay toward a union's support of non-representational activities such as contributions to political candidates, political agendas, political lobbying, and money spent on union organizing endeavors.[10]

Since unions have decades of history supporting Democratic candidates and agendas, the 1988 decision has been seen as a slight win for often Republican-leaning corporate interests.

The discount in fees for these non-representational activities is minimal since unions generally only spend between 1%-4% of their budget for political activities and organizing. The savings for FiCore workers, therefore, is generally 1%-4% when compared to a union member paying full union dues.

More recently, agency fees have been litigated as "Fair Share Fees."[14] With the exception of the above-mentioned Beck Rights, the fundamental rulings of the Supreme Court's 1963 decision remain the same.

The process to claim FiCore status requires the worker to first meet the threshold for joining a specific union, join that union paying all initiation fees, then legally notifying that union they will be withdrawing and surrendering their union card in favor of electing Financial Core Status.

Since FiCore workers have chosen to quit the union and undermine the strength of solidarity at the bargaining table, union workers often use negative slang terms to refer to FiCore. The most common slang term for FiCore historically is "scab." FiCore workers are generally seen by union members as siding with management and corporate interests instead of supporting the employees they work beside and the union that represents and protects them.[15]

Controversy continues as to the definition of financial core, the impact it has in the workplace.[16]

Under the National Labor Relations Act (Sec. 8 (a) (3)) an employer and a labor organization may agree to condition employment upon membership in the union.[17] The 1963 ruling limited the burdens of membership upon which employment may be conditioned to the payment of initiation fees and monthly dues. In the words of the court, "Membership as a condition of employment is whittled down to its financial core."[1] Or, in other words, "If an employee in a union shop unit refuses to respect any union-imposed obligations other than the duty to pay dues and fees, and membership in the union is therefore denied or terminated, the condition of membership for 8 (a) (3) purposes is nevertheless satisfied and the employee may not be discharged for nonmembership even though he is not a formal member."

In every union the percentage of workers who elect Financial Core status is minimal.

The workers who do elect FiCore status cannot run for union elected office, cannot vote in union elections, cannot claim to be union members, and are not entitled to union perks that vary depending on the industry. FiCore are entitled to the same wages and benefits as union workers in a union workplace. Finally, the FiCore worker cannot be held accountable to any union guidelines, rules, and regulations since they are no longer union members. Being a worker who operates outside union rules has greater impact in some industries than in others.

A unique impact of the FiCore ruling can be seen in the entertainment industry unions including the American Professional Actors' Union, SAG-AFTRA, Professional Writers' Union Writers Guild of America (WGA), and the professional Film Directors Union Directors Guild of America (DGA). The entertainment industry is primarily composed of unionized Gig Workers who pledge to only work for union productions, forming a virtual strike line. However, the Supreme Court's ruling allows union-eligible workers to declare as Fee Paying Non-Members or FiCore, allowing them to work in both union and nonunion productions, weakening the collective bargaining power of the unions.

SAG-AFTRA members, for example, agree to adhere to Global Rule One which states, "No member shall render any services or make an agreement to perform services for any employer who has not executed a basic minimum agreement with the union, which is in full force and effect, in any jurisdiction in which there is a SAG-AFTRA national collective bargaining agreement in place. This provision applies worldwide."[18] Simply put, a SAG-AFTRA member must always work under a union contract around the globe. The FiCore, viewed as anti-union or "scabs" by the union,[19] makes a choice not to honor this pledge.

Occasions when an entertainment union worker accepts work in a nonunion project against union regulation is known as working "off the card." Unions take disciplinary action against members reported or otherwise found to be working off the card. However, workers who have claimed FiCore status are not subject to any union disciplinary action, and cannot be prohibited from accepting work in union productions.

Despite the heavy union busting push by some production companies and brands an extremely small percentage of talent guild members choose to leave their unions to claim FiCore status. The most recent numbers available show performers affiliated with SAG-AFTRA (4/30/2021) who choose FiCore status is 1.6%,[20] Directors affiliated with the DGA (12/31/2020) who choose FiCore status is 1.29% [21] and Writers affiliated with the WGA East (3/31/2021) is 0.2% [22] and WGA West (3/31/2021) is 0.15%.[23]

In recent years some ad agencies and brands that produce TV commercials have conflicted with the professional performers union, SAG-AFTRA, in an effort to pay less than union contracts provide.

Professional Talent Agents representing performers in commercials in Los Angeles claim SAG-AFTRA has lost ground in what was a 90% union foothold in 1999 to a mere 50% and possibly only 30% of commercials produced under union contracts in 2020.[24] Those numbers are estimates since SAG-AFTRA does not publicly release commercial production figures and nonunion production figures are not compiled.

The efforts by Advertisers and Ad Agencies to produce nonunion commercials at less expense by paying performers less than union minimums. SAG-AFTRA commercials contract sets minimum day rates, reuse rates, and provides protections, and benefits through mutual bargaining with the Joint Policy Committee (JPC). The JPC represents advertisers and ad agencies, collectively bargaining on their behalf with SAG-AFTRA.[25]

Nonunion commercial productions are produced outside the JPC's agreements with SAG-AFTRA. Nonunion shoots for performers in some platforms pay nothing, instead offering the performer "exposure."[26] Nonunion commercials may also pay a one-time buyout to performers waiving their Personality Rights. Personality Rights provide a person control over commercial use of their identity, name, likeness, and image.

When performers join SAG-AFTRA they take a pledge they will not perform in any nonunion projects within the union's jurisdiction. Workers who cross this de facto strike line are referred to as "union busters" or "scabs."

Performers wishing to work on nonunion project can legally claim FiCore status and avoid any union ramifications. This legal option allows performers to circumvent any SAG-AFTRA obligations, rules, guidelines, and discipline including union actors' pledge to refuse to work nonunion jobs.

The nonunion commercial route comes with downsides for most performers. Nonunion TV commercials offer a much lower one-time payment rather than as long as the spot runs in a union commercial.[27]

Every state recognizes Personality Rights, which regard a person's name, likeness and image as their property. As such, SAG-AFTRA contracts require ongoing payments whenever a performers image airs in a TV spot.[28] The payment schedule, known as residuals, is spelled out in the union contract where performs are paid per use or for blocks of use of their image and performance.[29]

FiCore working in nonunion commercials do not receive residuals, and often face the ire of union members who consider FiCore actors union busters and scabs.[30]

As ad agencies hire talent through talent agencies, union busting tactics needed to be set up between ad agencies, talent agencies, and professional actors willing to work for less compensation.

Since the professional performers union was founded in the 1930s, the actors' union (at that time, Screen Actors Guild) had a collectively bargained franchise agreement with the Association of Talent Agents (ATA) who representeded most union performers. The franchise agreement, known as "Rule 16(g)," prohibited agents from taking commissions in excess of 10% and strictly regulated talent agents' fiduciary duties to their union clients.[31]

In 2002, however, negotiations between SAG and the ATA broke down and the Rule 16(g) contract between the two expired. Without union regulations, talent agents have been able keep more of the money paid toward the actors' performance via much higher nonunion commissions and nonunion fees talent agents collect. The larger nonunion commissions and fees incentivized them to grow deportments representing FiCore actors. Although the actor earns much less, talent agents generally take 40% of the money budgeted for the actors' performance.

Offering FiCore actors to ad agencies and brands for much lower wages than performers working union contracts wasn't possible under Rule 16(g).[32]

Talent agents are not permitted to take more than 10% commissions from SAG-AFTRA performers due to provisions in the standard union contract. But where a performer is FiCore and not represented by the union, talent agents were free to collect 20% commissions, the maximum allowed by California Labor Law.

This allowed talent agents a new found freedom to undercut their union clients. Some of the top talent agencies representing top commercial talent began to either accept or encourage their SAG-AFTRA clients to enlist FiCore status fostering a growth in nonunion TV commercials.[33]

These two 20% payments are known in the industry as "double-dipping." In nonunion TV commercials talent agents' double-dipping allows a 40% take when compared to the money paid to a performer. Double dipping in California is illegal and performers who are victims of this scam have received restitution and penalties filing claims with the California Department of Industrial Relations. [34]

Some nonunion performers have pushed back against double dipping talent agents filing charges with the California Department of Industrial Relations where the 40% commission has been found to be a violation of California Labor Code. Since Labor Code limits agent commissions to 20%, some actors filing charges have received restitution and monetary penalties from offending talent agents.[34] In the nonunion arena, however, FiCore performers don't have access to the union's contract enforcement or the union's legal team meaning all attorney costs and legal fees are their own responsibility. Whatever the reason, few FiCore and nonunion actors protest the often illegal 40% commissions.

With these downsides for performers, most professional performers stick with the union for fair wages, benefits, and protections that go with it. In fact, as of 2020 only 1.56% of performers affiliated with SAG-AFTRA elected FiCore status.[35]

In recent years, SAG-AFTRA has stepped up its educational campaign to share the upside of union work and the pitfalls of working in commercials without union protections. Part of the educational outreach was the launch of the Ads Go Union[36] campaign that visits improv comedy houses and nonunion commercial sets.[37]

A grassroots group of SAG-AFTRA performers calling themselves Union Working—many members recognizable from memorable union TV campaigns—banded together to educate performers on the drawbacks of FiCore nonunion ads. Union Working has produced videos highlighting the advantages and importance of union work and the downside of FiCore. The videos have included some high-profile SAG-AFTRA members. Some of the pro union videos include proud SAG-AFTRA members; Jon Hamm, Allison Janney, J.K. Simmons, Eric Stonestreet, George Lopez, Marion Ross, Nick Offerman, Mindy Sterling, Zoey Deutch, Mayim Bialik, Dermot Mulroney, and more.[38]

The Writers Guild of America takes an aggressive stance against writers who choose Financial Core status to help corporations in their effort to weaken the WGA.[39]

At one time, then-WGA West president Patric Verrone and his then-WGA East counterpart, Michael Winship, put out a joint statement naming members who chose to break solidarity by claiming Financial Core status as writers "who consciously and selfishly decided to place their own narrow interests over the greater good.” [40]

• Global Rule One: SAG-AFTRA
• Answers and Questions About Financial Core
• Double Dipping Lawsuit: Court Requires Agent to Refund Illegal 40% Commissions
• Writers Guild of America, West Non-Member "Financial Core Status" Policy Statement
• How SAG's Failed Negotiations with Talent Agents Left Rank & File on the Cutting Room Floor