Andy Stern Announces Resignation From SEIU, Successors Likely To Continue Campaign Against NUHW

In a move that has taken the labor world by surprise, Andy Stern yesterday announced his resignation from his position as president of the Service Employees International Union (“SEIU”) before his term officially ends in 2012. In a brief video statement, Stern said “[s]hortly will be my time to retire... and end my SEIU journey.”

Speculation has run rampant as to his motives for resigning at this time. Some commentators have hypothesized that Stern, nearly 60 years old and tired of the daily grind of running one of the nation’s most influential — yet turbulent — unions, is simply retiring after achieving one of his primary goals: the passage of health care legislation. Others have concluded that some unknown negative factor is the cause. Still others attribute the timing to repercussions from the Serv. Employees Int’l Union v. Rosselli verdict (see below), especially given that he failed to pave the way for a clear-cut successor. Stern indirectly addressed such rumors, stating that “I've never been healthier. I've been vetted before being named to the president's fiscal commission, and I leave the job I love by choice.”

Following his departure, Stern will be succeeded by his second-in-command, Anna Burger. Burger is presently the secretary-treasurer of SEIU and president of Change To Win, a coalition of labor unions that disaffiliated from the AFL-CIO in 2005. Burger will act as president of the SEIU for 30 days, at which point SEIU will hold an election to formally select Stern’s replacement. The new president will then finish out Stern’s term, which ends in 2012. Burger is expected to vie for the union’s presidency. Another candidate expected to challenge Burger for the presidency is Mary Kay Henry, the international executive vice president of SEIU and a prominent union leader.

While there is some speculation that the succession of either to the union’s presidency increases the likelihood of reconciliation with former allies UNITE HERE and AFL-CIO, neither appears to have any intentions of, or inclinations towards, reconciling with the National Union of Healthcare Workers (“NUHW”), the rival union formed by former SEIU local president Sal Rosselli and his allies. In fact, both Burger and Henry were reported as being strong supporters of placing that local, the United Healthcare Workers-West (“UHW”), in trusteeship while it was under the leadership of Rosselli and other current NUHW leaders.

Henry, in particular, is not likely to extend an olive branch to NUHW. More than merely supporting imposition of the trusteeship, Henry is reputed to have been a central figure in making that decision. Moreover, Henry delivered a scathing diatribe against Rosselli during a debate in March 2008 (while Rosselli was still a part of the SEIU-UHW team), and testified against him during the trial (see below). She also oversees SEIU’s long-term division, the disputed direction of which led to the trusteeship and the formation of NUHW. Therefore, it is unlikely that any reconciliation between NUHW and SEIU-UHW will occur upon Stern’s resignation, especially if Henry is the one to take the helm of SEIU’s leadership.

Jury Verdict Significant Victory For SEIU But Unlikely To Be Knockout Blow to NUHW

A nine-member federal jury in California delivered a $1.5 million verdict1 in favor of the SEIU in the matter of Serv. Employees Int’l Union v. Rosselli, N.D. Cal., No. 3:09-cv-00404 on Friday, April 9. The jury found Sal Rosselli and 15 other former leaders of UHW liable for breach of fiduciary duty and for spending SEIU and UHW resources to plan the formation of a rival union and disaffiliation effort. The jury also determined that 12 other former leaders were not liable for any damages. Although the co-defendants escaped liability on many of the allegations, it is likely that the verdict will have a significant impact on California health care employers facing a campaign by either or both of the SEIU and the NUHW, the rival union formed by Rosselli and his allies.

The Background of the SEIU-NUHW Struggle

The origins of this litigation trace their roots to the formation of UHW from the merger of Local 250 from Northern California and Local 399 from Southern California of SEIU in 2005. This new “super local” represented over 150,000 health care workers, of which approximately 65,000 were long-term health care workers, with the remainder being acute health care workers.

In 2007, a dispute arose between UHW’s leadership and SEIU’s leadership concerning the future of the local union. SEIU, determining that the interests of the acute and long-term care workers were sufficiently different, directed UHW to release the 65,000 or so long-term workers for purposes of forming a new local union. UHW leadership, led by Sal Rosselli, opposed this division on the grounds that it should be a decision democratically agreed to by the membership of the local. Rosselli, president of UHW and a vice president on the executive committee of SEIU, resigned his executive committee position with SEIU in February 2008 primarily because of this dispute.

SEIU then accused UHW leadership of diverting millions of dollars in membership dues to a secret fund for purposes of opposing SEIU’s attempt to send the 65,000 members away from UHW. In September 2008, SEIU scheduled a hearing before former Labor Secretary Ray Marshall, the purpose of which was to determine whether UHW’s alleged financial breaches were sufficiently egregious to justify placing the local in trusteeship. Marshall found that UHW had engaged in serious financial wrongdoing. However, he recommended imposing a trusteeship only if UHW refused to comply with SEIU’s decision regarding the creation of the statewide local for long-term care workers that would include the 65,000 UHW workers. UHW complied with most of the conditions of Marshall’s recommendations, but refused to comply with the transfer of its members unless the members had a chance to vote on it themselves. According to UHW, the issue was one of “democracy:” that union members should have a say in the decision-making, especially when those decisions directly affect and pertain to them.

Based on this refusal, Andy Stern, president of SEIU, ordered that UHW’s leadership be removed and that UHW be placed in trusteeship. The very next day, Rosselli and other ousted leaders formed a new union—the National Union of Healthcare Workers, or NUHW. Within five days, NUHW filed petitions with NLRB regional offices in Oakland and San Francisco for elections at 62 institutions – 11 hospitals and 51 nursing homes – where UHW had been representing workers, seeking to represent the approximately 9,000 health care workers at those institutions. Under federal labor law, rival unions may file representation petitions during certain periods of time that correspond to expiring collective bargaining agreements. The 62 facilities for which NUHW filed petitions all had open contracts. Additionally, NUHW expected to file more petitions for representation, and claimed that workers at another 30 nursing homes with contracts already in place filed deauthorization petitions requesting an election on whether those employees wanted to continue paying dues to SEIU. In total, NUHW has filed petitions for elections for over 100 facilities.

All of NUHW’s petitions had been subsequently blocked by SEIU and UHW through accusations of unfair labor practices. These “blocking charges,” were brought against UHW (i.e. the former incarnation of NUHW ), where SEIU accused UHW of failing to bargain in good faith with the hospitals while under its previous leadership. SEIU further claimed that UHW’s former leaders took certain actions in their final weeks in office that rendered it impossible for the trustees to operate the local and represent employees. Moreover, SEIU-UHW claimed that, until the trustees could properly operate the local and represent employees, fair elections could not be held because the employees would hold against the union the fact that grievances were not being processed.

The NLRB has permitted elections at several of the facilities, resulting in victories for NUHW, including at nearly 100 Kaiser Permanente hospitals and clinics. As of January 2010, NUHW appears to have won seven of nine elections against SEIU, and has claimed more than 3,300 new members.

In March 2010, Regional Director of the NLRB Alan B. Reichard issued an order allowing representation elections to proceed among health care workers at 31 facilities where SEIU-UHW either withdrew blocking charges or filed requests to proceed. NUHW believed this action improper, alleging that SEIU and UHW manipulated NLRB processes by withdrawing charges and filing requests to proceed only for facilities where they believed UHW was likely to win the election. Notwithstanding these accusations, the Regional Director found no basis for not unblocking the instant 31 petitions and proceeding to elections at those facilities. The elections are occurring.

SEIU v. Rosselli

In the present litigation, initiated in the Northern District of California of the US District Court originally in January 2009, SEIU accused Rosselli and other former UHW leaders of breaching their respective fiduciary duties to the union by deliberately sabotaging UHW when they anticipated UHW being placed in trusteeship; by planning the formation of a rival union as early as 2007; by removing and/or destroying UHW documents when they were ousted in January 2009; by misappropriating UHW member lists; and by creating a patient education fund in order to fund their shadow union and litigation efforts. SEIU sought $25 million in damages from defendants for their alleged misconduct.

Jury Award

The jury issued awards against the defendants in amounts that ranged from $36,600 to $77,850 for a total of more than $850,000, which included $100,400 in salary and benefits paid to the 16 defendants found liable, and another $16,000 to Rosselli (former president of UHW), John Vellardita (former UHW nursing home division director), Mark Kipfer (former UHW nursing home division assistant director), and NUHW for lost dues. Another three defendants were order to pay $7,250 each for increased security costs. Moreover, the jury delivered an award of $724,000 against NUHW for diversion of resources.

Consequences of the Federal Jury’s Verdict

The fallout of this verdict is mixed, but it likely will not resolve the struggle between the two unions that has now been raging for more than a year. Both sides are claiming victory. From NUHW’s perspective, SEIU spent $5 million to 10 million in search of $25 million in damages, only to get an award of less than $750,000.2 From SEIU’s perspective, the verdict provides some financial retribution and also the campaign talking point that a court judgment deems NUHW a wrongdoer. As the SEIU leaders declared, “There’s no price tag on justice.” SEIU claims that its members are elated and relieved with the judgment, believing the matter resolved and that they can now “move on” with the business of their union. NUHW is appealing the verdict.

But far from resolving the matter, this verdict promises to embolden the upstart union and ratchet up the intensity of this particular inter-union contest. Commentators speculate that SEIU had three primary purposes in bringing this matter before the court, and succeeded in achieving none of them. First, SEIU, in seeking a $25 million judgment, hoped to make NUHW disappear with a knockout blow. Far from accomplishing such a task, the $750,000 award, if SEIU even sees any of it, is relatively low, and NUHW likely has the resources to withstand it.

Second, the lawsuit was intended to send a message to hospital and nursing home workers that NUHW could not be trusted. This remains to be seen. According to Rosselli, this verdict is essentially the jury “dinging” NUHW for “fighting the trusteeship, fighting for democracy, and fighting for a voice.” In other words, NUHW’s leaders were “punished” for standing up for workers against the autocratic mother union. It is unclear whether health care workers in future elections will agree with NUHW’s interpretation or SEIU’s, but NUHW does not intend to cede the “messaging battleground” concerning the verdict. With more than 100 union elections pending, and more than 100,000 healthcare workers having purportedly signed petitions requesting NUHW representation, the impact of the verdict in campaigns will soon be apparent.

Finally, SEIU purportedly hoped to make Rosselli and his allies cautionary exemplars to other locals for opposing the policies and practices of Stern’s leadership. But the relative judgments against each defendant were so small (the largest against any natural defendant was less than $74,000, while the judgment against NUHW was only $724,000) that this verdict could hardly be deemed a “deterrent.” In fact, since the lawsuit began, two other major SEIU locals in Boston and San Francisco have elected reform slates to replace Stern appointees. Presenting a more devastating effect, however, is the potential backlash against SEIU for spending millions of dollars for a limited impact. If UHW members view this lawsuit and its insignificant verdict as a not insignificant mismanagement of union funds, NUHW might persuade them to switch camps.

One outcome of this verdict that is certain is that the verdict (and corresponding finding of liability) will be appealed by the NUHW defendants, and may be appealed by the plaintiff, as well, for being insufficient.

Consequences and Recommendations for Employers

One group that is particularly vulnerable to the fallout of this verdict, and of the SEIU-NUHW labor war intensifying, is non-organized employers and facilities, especially in California. The battle will likely become a race to claim non-organized workers as both sides settle in for a long struggle. This is especially true, given NUHW’s relatively small stature as a new member of the labor universe. Consequently, one of the likely outcomes of this verdict is that non-union facilities will face increased exposure to union organizing activities. We recommend that employers with non-organized facilities evaluate the legally proper responses to any such efforts.3

For additional information, please contact:

Harry Johnson
johnson.harry@arentfox.com
213.443.7567

1 The amount of the verdict is unclear as of this writing. Reports have identified a $1.5 million verdict, while others note the verdict as being $737,850, which is approximately the amount paid to the former UHW leaders in January 2009, and to their staff during the same period, for engaging in SEIU-opposition activities.

2 According to NUHW, the jury awarded a $720,000 judgment against NUHW, plus another $4,000 for lost dues, $6,600 for salaries of union staffers that participated in opposing the SEIU’s mandate regarding the division of UHW, and $7,250 for additional private security SEIU hired, for a grand total of $737,850. SEIU, meanwhile, declares the award to be $1.5 million.

3One possible, yet particularly disconcerting, consequence of an increase in organizing activities at facilities that have historically been unorganized is implied in a recent report by the Philadelphia Inquirer. According to the report, an analysis of 50 nursing strikes throughout the state of New York over a period of 20 years revealed that in-hospital mortality rose by 19.4%, and that 30-day readmissions increased by 6.5% for patients admitted during a strike.