Ferriso v. National Labor Relations Board

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.

__________

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).