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Agency Fee Calculations: Frequently Asked Questions

Agency Fee Calculations: Frequently Asked Questions

Many questions may arise while preparing the agency fee calculation. Certain expenditures may be chargeable one time and non-chargeable the next time the labor organization incurs the expense. The determining factor is the underlying purpose of the expense. 

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Was the expense incurred to further the purpose of the labor organization and was it germane to the representation of all employees working in the bargaining unit? Some common questions we have received from our labor organization clients include:

  • Our labor organization prepares and distributes a calendar that highlights certain events and important dates in our industry’s history. The calendar also documents important dates in the calendar year for our labor organization, such as the dates of membership meetings. Are the expenses for producing this calendar chargeable? Answer: The chargeability depends on whether the calendar is available to all employees working in the bargaining unit. If it is provided to all employees, regardless of membership status, the expenses incurred may be chargeable.
     
  • We make a yearly donation to the Los Angeles Boys & Girls Club. Is this considered chargeable? Answer: No, a donation to any charity, political organization or other labor organization would normally be considered non-chargeable as it is not germane to the labor organization’s purpose.
     
  • Our labor organization holds an annual picnic in the summer. We post flyers at the job sites inviting all employees performing work covered by our collective bargaining agreement (CBA). Are the expenses related to the picnic chargeable? Answer: If the activity is made available to all employees covered by the CBA, then it may be considered a chargeable activity.
     
  • Our labor organization has our employees complete a staff activity report for one month a quarter. Is this sufficient? Answer: Maybe. If an employee’s work is repetitive and has little fluctuation from month to month, then this may be considered appropriate. However, if an employee’s job duties fluctuate significantly, the employee should complete activity reports monthly.
     
  • We are unsure of the chargeable nature of the services our legal counsel provides. What should we do?  Answer:  It is common for the legal counsel to provide an estimate of their chargeable and non-chargeable services during the year. This estimate should be in writing to provide documentation to support the calculation.
     
  • Are the expenses the labor organization incurs in connection with the agency fee calculation considered chargeable? Answer: Yes, a labor organization is required by law to calculate the agency fee chargeable and non-chargeable activity, to send notices to all employees covered under the collective bargaining unit and to hold an arbitration hearing if the calculation is challenged. All expenses associated with the agency fee calculation are chargeable.
     
  • We have discount tickets to various attractions in the area that we make available to our members at cost, plus a small administrative fee to cover the expense of running the program. Should we consider the cost of the tickets a non-chargeable activity since the program is for members only? Answer: No, the members are paying a separate cost to purchase the tickets. Union dues are not being used to support the program; therefore, the revenue received should be netted against the expense. The program expenses and revenue should net to zero and not affect the report as being chargeable or non-chargeable.    

If at any time while you are preparing the agency fee report a question arises as to whether an expense is chargeable or non-chargeable, we recommend that you consult with your legal counsel or auditor. At Lindquist LLP, we have extensive experience helping labor organizations meet their agency fee obligations and would be happy to help you with any questions you might have in preparing your labor organizations’ agency fee report.

This article is the last in a four-part series on agency fee calculations. 

Rich Thiermann, CPA, is the partner-in-charge of Lindquist LLP’s Orange, California, office.  He has specialized expertise in audit and accounting services for labor organizations.  His labor organization clients span local unions with $4 million in total assets to regional councils with more than $200 million in total assets. 
Rich also has extensive experience with agency fee calculations.  Contact him at
(714) 257-0100 or rthiermann@lindquistcpa.com.

Our firm provides the information in this e-newsletter for general guidance only.  It does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind.  The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers.  Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation.  Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer.  The information is provided "as is," with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.

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