Every labor economist knows that labor unions work on an extortion model, not unlike the mafia.  When workers vote to unionize they know, as does the business owner, that the union has promised them higher wage rates, i.e., above the market price in the area for whatever work they are doing.  Economic literature puts the union premium at 10%-15%.  In major cities in blue states where unions have outsized influence, like Chicago, it is over 50%.  This can be a life or death situation for the employer and will at the very least result in layoffs.  But the employer has no real remedy.  It has been extorted by the union, but Congress has given organized labor antitrust immunity.  Occasionally, however, unions step outside their immunity and get into trouble.  That brings me to the most interesting RICO case in some time, California Primary Care Assn. et al., v. SEIU,  case 26-3311 (ED CA).

The plaintiffs are a group on non-profit health clinics operating in low income areas of California, serving mostly people who are uninsured.  SEIU, as everyone knows, is the highly politicized nationwide union organizing janitors, and other low-pay workers, a significant portion of whom are illegally present and working in this country.  It eschews the traditional union organization model of persuasion and union elections in favor of intense pressure on management to capitulate to it without an election.  The plaintiffs allege the union has done so by starting a ballot initiative, Proposition 44 on tomorrow’s ballot, which would impose costly new regulation of the industry (the clinics claim it would force 88% of them to operate at a loss) or face ruinous fines.  The real reason for the initiative, according to the clinics, is retribution for refusing to recognize the SEIU as its employees’ union and thereby capitulate to its extortionate wage demands.  SEIU’s leadership has actually made the demand explicit in communications to the clinics, saying we will withdraw the ballot initiative if you recognize us as your employees’ union.  The union has also included the demand that the clinics drop their opposition to another ballot initiative, the so- called “billionaire’s tax,” also on the ballot tomorrow.

The Complaint alleges SEIU and its President, Dave Regan, have done this repeatedly over a decade to various healthcare employers including hospitals and dialysis providers.  So there would seem to be a pattern of extortion, which violates the Hobbs Act, the federal statute and California law.  The clinics did not accede to SEIU’s demands, but they have had to spend precious resources fighting the ballot initiative.  Their theory is that this constitutes attempted extortion, which is a Hobbs Act violation, and which can be redressed by a judgment for that sum however the vote on the initiate turns out (whenever California finishes counting the mail in votes).  They claim this is millions of dollars.  It will be interesting to see if a court deems this a “direct” injury, in RICO jargon.  The union will probably argue that the diversion of money is not really a loss, an interesting question and one that has not been settled.

The other issue is the RICO enterprise, alleged to be union, its president and its “affiliates.”  Courts have not been willing to accept that a business and its owners or subsidiaries are sufficiently distinct to form an enterprise that is different from the business itself.  Does this apply to a labor union?  The Complaint might have to be amended to clarify the differences in structure of union affiliates from corporations.  But it could survive.

We can expect the union to claim its scheme is constitutionally protected speech.  This too is an area that needs clarification.  The Supreme Court has held over and over again that fraud and violent threats are not worthy of First Amendment protection.  Theoretically, any expression made to advance a scheme to violate RICO should not find protection.  It would be nice to have a federal court say so in a RICO case.

But despite its shortcomings, this is the most creative and potentially influential new RICO case to be filed in years.  It will be watched closely.