Got Lawyers? State Elections Bureau Shoots Down Union PAC Payroll Deductions

The Michigan Secretary of State office is now headed by Democrat Jocelyn Benson, but its elections bureau recently shot down a union’s attempt to get corporations to deduct contributions to a union PAC from employee paychecks. The action came in response to a request from the AFL-CIO for a legal interpretation.

Before a 2015 change in Michigan’s campaign finance law, corporations often agreed to provisions in union labor contracts requiring them to deduct contributions to a union’s political action committee, or PAC. A PAC, known in this law as a “separate segregated fund,” pays for political activities. Unions would then reimburse corporations for the cost of making the deductions.

But that is no longer allowed, according to the Michigan Secretary of State’s chief legal director, Michael Brady, who issued a statement on Nov. 15.

“As a result of the 2015 amendments, corporations may take advantage of checkoff plans to facilitate contributions from corporate employees to corporate PACs, but unions may no longer use the same system to facilitate contributions from the same employees to union PACs,” Brady wrote. The statute, he said, prevents corporations from paying into such segregated funds.

Corporations, he went on to say, are barred from transferring money to a PAC they did not establish. Under the law, a corporation found in violation of the statute could be fined up to $10,000, with individuals subject to criminal sanctions of up to three years in prison and a fine of $5,000.

In an Aug. 14 letter to Secretary of State Jocelyn Benson, AFL-CIO attorney Andrew Nickelhoff requested a declaratory ruling or interpretive statement about such transactions.

“Historically, PAC check off has been widely used by labor organizations to facilitate voluntary contributions from their members to their SSFs,” Nickelhoff wrote.

“Payroll deduction is by far the most convenient and effective way for an employee to contribute small amounts on a regular basis to support his or her union’s political activity,” Nickelhoff said.

He argued that other payment methods, such as credit cards, electronic fund transfers, or personal checks are “more burdensome to the employee and are more expensive to administer.”

“Consequently, they are far less effective than payroll deduction,” Nickelhoff added.

The AFL-CIO argued that corporations were “not making a prohibited in-kind contribution” by sending payroll contributions to union PACs. The reason, they said, is that the labor organizations would reimburse them for the costs associated with the checkoffs.

Lansing attorney Eric Doster practices in the area and is the author of a 2013 book on the subject, “Michigan Campaign Finance.” He referred to the AFL-CIO’s analysis of the statute as “tortured.”

“The AFL-CIO is in a no-lose situation here,” Doster wrote in a Sept. 5 letter to Benson. “If its ‘analysis’ is correct, then there is no violation of the Act; however, if its ‘analysis’ is incorrect or ‘asked and answered,’ it is the corporation ... not the AFL-CIO ... which commits the felony.”

Doster, who has also represented the Mackinac Center for Public Policy which publishes Michigan Capitol Confidential, argued that the law prohibits “an agreement or arrangement between a corporation and a labor organization under which an employer provides PAC check-off for employees’ contributions to the labor organization’s SSF, and the labor organization pays the employer the cost of administering the PAC check-off.”

Benson’s office agreed.

“What the unions were doing,” Doster told Michigan Capital Confidential, “was sloughing off their responsibilities to the corporation as part of the collective bargaining process. It’s absolutely morally bankrupt for a union to get on the other side of the table from a corporation and ask them to operate a PAC for them – it’s a felony.”

Doster also noted that unions still have access to alternative, legal methods for collecting such funds from their members.

“In today’s use of cell phones and direct deposits, they can engage in donations without involving the corporations at all,” he said. “There’s a million ways to raise money. PAC payroll deduction was just one of the ways.”

Doster also expressed concerns that some corporations may still be collecting payroll deductions from employees through the collective bargaining process without realizing that the practice is now a criminal offense that leaves them – not unions – at risk.