On June 27, 2018, the Supreme Court of the United States issued a 5-4 decision in Janus v. American Federation of State, County, and Municipal Employees, which held that public-sector unions can no longer require “agency” or “fair share” fees from non-union members. The Supreme Court found that agency fees violate the First Amendment of the United States Constitution because they infringe on employee free speech rights. This decision overturns Abood v. Detroit Bd. of Ed (1977) 431 U. S. 209, and 40 years of Supreme Court precedent.

Agency Fees

California is one of 22 states that allows unions to require public employees, who are not members of the union, to pay agency fees, which are a percentage of the full union dues charged to union members. Under the Supreme Court’s decision in Abood, a union was allowed to require nonmembers to pay only the “chargeable” portion of dues – those expenses related to representation of the bargaining unit. Typically, these activities include collective bargaining, contract administration and processing grievances. However, the Abood Court held that the union may not require payment for “non-chargeable” activities, typically the union’s ideological and political activities.

The agency fees were collected from employees, regardless of whether the employee chose to join the union, on the theory that every bargaining unit employee would benefit from the union’s representation, despite their membership status. The unions were, and still currently are, statutorily mandated to fairly represent all employees in the bargaining unit regardless of whether or not the employees join or financially contribute to the union. Thus, the mandatory agency fees were viewed as a way to compensate the union for their required representation and collective bargaining efforts on behalf of the employees.

Summary of Janus

The plaintiff in this case, Mark Janus, worked as a child support specialist for the Illinois Department of Healthcare and Family Services and was included in a bargaining unit represented by AFSCME.  Janus did not agree with AFSCME’s public policy positions, as evidenced by positions it took in negotiating the wages, hours, and working conditions of the bargaining unit. He felt these positions disregarded the interests of the taxpayers and the state (which was currently in a financial crisis), and thus had political consequences. He refused union membership but, under Illinois law, was legally required to pay agency fees to support the union. Janus argued that forcing government employees to pay agency fees is a violation of the First Amendment because nonmember employees are effectively compelled to financially support organizations that may take positions with which they disagree, thereby violating their free speech rights. As such, Janus argued that forcing employees to pay an agency fee is compelled speech and is, therefore, unconstitutional.

AFSCME disagreed that agency fees were unconstitutional or that bargaining was inherently political in nature. AFSCME argued that collecting agency fees is not only essential to prevent “free riders” (nonmembers who enjoy the benefits of union representation without shouldering the costs), but also to the overall existence of unions in the United States. AFSCME further argued that without the agency fees, public unions would likely cease to exist, as there is no incentive for employees to become members of the union and pay union dues if they reap the exact same benefits being a nonmember.

Justice Samuel Alito wrote the majority opinion for the Supreme Court. The majority determined that requiring nonmember public employees to pay an agency or fair share fee violates the right to free speech under the First Amendment. In overturning Abood, the Court found that collective bargaining in the public sector is inherently a political activity because the economic proposals made by the unions will always directly impact taxpayers. The Court noted that public bargaining matters also frequently address political issues such as education, child welfare, healthcare, and minority rights. The Court further noted, unlike the private sector, attempting to characterize public sector union expenditures as “chargeable” or “non-chargeable” for purposes of determining agency fees was practically impossible.

Thus, the majority held that union fees, of any kind, cannot be deducted from an employee’s paycheck “unless the employee affirmatively consents to pay.” The majority found that if a nonmember pays these fees, they are effectively waiving their First Amendment rights, and this kind of waiver cannot be presumed. As such, an employee now must clearly and affirmatively consent before any money is taken from their paycheck and paid to a public-sector union. Fees will no longer be automatically deducted.

The Supreme Court majority noted that allowing compelled agency fees is not necessary for labor peace or to keep unions from insolvency. The Court reviewed the experience of labor unions over the past 40 years in the federal government and the states which currently ban agency fees and found, instead, that the opposite is true. The unions in those jurisdictions continued to exist and millions of employees joined as dues paying members.  The Court stated that it “recognize[d] that the loss of payments from nonmembers may cause unions to experience unpleasant transition costs in the short term, and may require unions to make adjustments in order to attract and retain members;” however, the Court found that it must weigh these disadvantages against the “considerable windfall” that unions have received for the past 41 years.” Justice Alito wrote that, “It is hard to estimate how many billions of dollars have been taken from nonmembers and transferred to public-sector unions in violation of the First Amendment.”

Impact of Janus

This decision does not, as some commentators have opined, spell the end of public-sector unions but it does deal a blow to their finances, and many unions have already been preparing for this outcome. In fact, several public-sector unions in California have already been engaging in massive campaign efforts to get agency fee employees to sign up as dues paying members. Public-sector unions have also been pushing through state legislation in an attempt to undercut the impact of the Janus decision.

For example, last year the California Legislature passed AB 119 which mandated that public employers allow union access to new employees during employee orientations, presumably so that the unions could sign up employees as dues paying members. Additionally, SB 285, which was passed last year, states that public employers shall not deter or discourage public employees from becoming or remaining members of an employee organization. Also, on the same day the Janus decision was issued, Governor Jerry Brown signed into law (effective immediately) SB 866. This new law requires that public employers make payroll deductions for union dues and further requires that any employee request to cancel dues be made to the union, not to the employer. This new law also states that the unions are no longer required to provide employers with an employee’s authorization to deduct dues, unless there is a dispute. Also, the law states that if the public employer disseminates any mass communications to its employees concerning their rights to join or support an employee organization, or to refrain from joining or supporting an employee organization, the employer must first meet and confer with the union about the content of that communication.

There are numerous other bills being proposed which seek to limit or circumvent the holding in Janus by granting California public-sector unions additional rights and greater access to their bargaining unit employees.

Steps after Janus

While the Janus decision, on its face, impacts public employees and their exclusive representatives, public employers must be prepared to be caught in the cross fire and should proceed cautiously.

Pursuant to the new law discussed above (SB 866), public employers should not immediately stop payroll deductions for agency fees but should instead meet and confer with the impacted unions to discuss future compliance with Janus. Likely, the employer and union (or other exclusive representative) will need to re-negotiate and amend provisions in their memorandum of understanding, including any agency fee provisions. Moving forward, unions will have to provide the employer with a list of dues paying members for payroll deductions to be made. If an employee seeks to cancel their dues deduction, the employer should refer them to their union and avoid discussion or opinion on the matter. The employer must get the report regarding membership directly from the union. Also, any mass communication sent to any represented employees discussing union membership and/or the impacts of the Janus decision must first be negotiated with the union. In summary, California law mandates public employers work with the unions in implementing compliance with Janus.

Questions

Churchwell White will be closely monitoring the effects of this decision, as well as related legislation. We will be working with our clients to ensure compliance with this ruling and related changes in state law. If you have any questions on this issue, please contact Debra Hinshaw Vierra at debra@whitebrennerllp.com, Helane Seikaly at helane@whitebrennerllp.com, Meg Wilson at meg@whitebrennerllp.com, or Josiah Young at josiah@whitebrennerllp.com.