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Supreme Court Strikes “Knock-Down Blow” to Public Sector Unions

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Supreme Court Strikes “Knock-Down Blow” to Public Sector Unions

For about six years the writing was on the wall; the U.S. Supreme Court was anxiously awaiting the opportunity to reconsider its now 41-year old ruling allowing public sector unions to require non-union members to pay them “agency” or “fair-share” fees. Today, the Supreme Court has spoken: agency fee arrangements are allowed no more.

The Underlying Case

The question was called in Janus v. American Federation of State, County, and Municipal Employees, Council 31, No. 16-1466 (June 27, 2018). Janus was employed by the State of Illinois and, per Illinois law, was represented by AFSCME. Also per Illinois law, as a condition of employment Janus was required to either a) be a regular dues paying member of the union, or b) pay the union an agency or fair-share fee for its services relating to collective bargaining and contract administration (i.e., not for the union’s political activities). That agency fee was about 78% of the full dues amount charged to union members.

The general justification for the agency fee requirement is that, because the union is certified to be the exclusive representative for all members of the bargaining unit, i.e., all employees whether or not they are union members, all employees should at the very least pay for the union’s contract-related services. This set of options was unanimously endorsed by the Supreme Court in its 1977 decision of Abood v. Detroit Board of Education. Mr. Janus, however, believed that the political activity carve-out was not enough. He contended that since he did not agree with the union’s positions at the bargaining table, he should not be compelled by state law to financially support the union taking those positions.

The Court Reverses Itself and Holds Agency Fee Arrangements to be Unconstitutional

The Supreme Court by a 5 to 4 margin agreed and expressly overruled Abood stating that its rationale in Abood was questionable and contrary to the First Amendment’s protections against the state interfering with free speech.

While doing so, the Court rejected the argument that, due to the fact that unions exclusively represent all members of their respective bargaining units, the agency fee scheme was necessary to instill labor peace. In response, the Court stated: “Whatever may have been the case 41 years ago when Abood was decided, it is thus now undeniable that ‘labor peace’ can readily be achieved through less restrictive means than the assessment of agency fees.” The Court also rejected the other arguments raised by the union, mostly with respect to the economic impact on unions and the challenges they face by representing “free-riders.” While doing so, the Court noted that 28 states already proscribe agency fee or union shop arrangements under their right-to-work and other laws, and in those states it appears that unions are still willing and able to fulfill their legal obligations to represent all employees in their respective bargaining units.

The majority ruled that the economic interests of unions and their statutory obligations cannot override the constitutional right of a citizen to not financially support an entity against his or her will. The Court held:

For these reasons, States and public-sector unions may no longer extract agency fees from nonconsenting employees. . . . [Such arrangements] violate the First Amendment and cannot continue. Neither an agency fee nor any other payment to the union may be deducted from a nonmember’s wages, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay. By agreeing to pay, nonmembers are waiving their First Amendment rights, and such a waiver cannot be presumed. . . . Rather, to be effective, the waiver must be freely given and shown by “clear and compelling” evidence. . . .Unless employees clearly and affirmatively consent before any money is taken from them, this standard cannot be met.

What Does Janus Mean Going Forward?

For employers in the private sector and unions which focus on the private sector, this decision has little, if any, immediate consequence. The Court only struck down any form of mandatory financial support of unions representing public-sector employees.

Consequently, the major and most apparent impact of this decision is the potential, if not likely, economic blow on public sector unions. Without mandatory dues and fees, these unions will have less money to use for their traditional union activities representing employees as well as their political pursuits. In essence, under today’s decision, the 22 states which now permit agency fee arrangements have—with respect to their public sector employees—instantly become right-to-work states.

There are still issues remaining, though. In light of the holding, unions will try to limit how and when members may withdraw their memberships and no longer subsidize their unions. Fights over these limits have arisen in right-to-work states, and likely will arise in many of the 22 states now having to deal with the issue. Thus, there is still some uncertainty as to when the economic hit will be felt, particularly because in most states where agency-fee relationships are an option, only a minority of employees elect that option. In other words, most public employees in non-right-to-work states who are covered by union contracts, to the degree that state law even permits much in the way of union activity by their public employees, are full-paying union members. Experience has shown that union members do not quickly withdraw their membership; the issue arises more often as to what new employees will elect to do.

Another consequence of unions trying to minimize the number of “free-riders” when mandatory fee-charging is proscribed is that the unions often compromise less often, and when they do, they do so less willingly. Under the new Janus and right-to-work ground rules, unions have to earn each employee’s dues authorization. As result, they tend to fight harder and fight over more issues.

Also, the agency-fee scheme was designed to balance the exclusive nature of the union’s representation obligations with the employee’s rights and the desire to discourage “free riders.” Over time, unions may advocate for ways around having to represent “free riders,” and this could mean a change in the current collective bargaining paradigm under current law. Because right-to-work has been taking hold, some legislators and academics have questioned the wisdom of exclusive representation. Perhaps—over time—there will be reforms allowing individual employees within a bargaining unit to pick which unions will represent them, and thereby force employers to negotiate with multiple unions with respect to the employees in what’s currently a single bargaining unit.

The impact will take years to fully appreciate, and it may be primarily limited to being an economic setback to unions. Experience has told us that the inability to mandate fee payments may not be a fatal blow, and at least in the short-run, most employers will likely see business continuing as usual—but for the possible more intense advocacy by unions to prove to their members that dues are worth paying.

Also, this decision is not a blow to right-to-work in the private sector. That issue is still a matter of state law or Congressional action, and so that issue will remain a hot political issue in many states.

For more information, please contact Robert Boonin (rboonin@dykema.com) or your Dykema relationship attorney.