Executive Summary: On June 27, 2018, the U.S. Supreme Court in Janus v. American Federation of State, County, and Municipal Employees, Council 31 struck down an Illinois law requiring public employees represented by a union to pay agency fees to the union even though the employee is a non-member, objects to positions taken by the union and has not consented to payment of the fee, holding the law “violates the free speech rights of nonmembers by compelling them to subsidize private speech on matters of substantial public concern.” The Court’s decision overrules its 1977 decision in Abood v. Detroit Bd. of Ed., 431 U. S. 209 (1977).
Background:
The Illinois Public Labor Relations Act (IPLRA) permits state employees and employees of its political subdivisions to unionize. Under the IPLRA, individual employees represented by a union “may not be represented by any agent other than the designated union; nor may individual employees negotiate directly with their employer,” and the union must “provide fair representation for all employees in the unit, members and nonmembers alike.”
The IPLRA allows unions to charge represented employees who are not union members an agency fee to compensate for the costs incurred in “the collective bargaining process, contract administration” and related matters but expressly excludes “union expenditures ‘related to the election or support of any candidate for political office.’”
The Petitioner Mark Janus (Janus) refused to join the American Federation of State, County, and Municipal Employees, Council 31 (Union) because he opposes, among other things, “many of the public policy positions that [it] advocates” and the positions it takes in collective bargaining. Janus “was required to pay an agency fee of $44.58 per month.”
Janus claimed “that all ‘nonmember fee deductions are coerced political speech’ and that ‘the First Amendment forbids coercing any money from the nonmembers.’” After losing in the district and appellate courts, Janus sought review in the Supreme Court. The Court granted certiorari to consider whether it should “overrule Abood and hold that public-sector agency-fee arrangements are unconstitutional.”
The Court’s Decision:
In a lengthy opinion, the Court reviewed its prior decisions on the constitutionality of agency fees under the First Amendment and the standard of review applied, and ruled that the IPLRA was unconstitutional under the “exacting scrutiny” standard applied in Knox v. Service Employees and Harris v. Quinn. “Under ‘exacting’ scrutiny… a compelled subsidy must ‘serve a compelling state interest that cannot be achieved through means significantly less restrictive of associational freedoms.’”
The Court applied the exacting scrutiny standard of review “to the justifications for agency fees adopted by the Court in Abood” and “then to alternative rationales proffered by respondents and their amici.” First, the Court found that the “labor peace” justification cited by the Abood Court was not a compelling rationale noting, among other things, the actual experience of certain federal employees, postal service employees and the “millions of public employees in the 28 States that have laws generally prohibiting agency fees” who are represented by unions. The second justification for agency fees cited by the Abood Court, “the risk of ‘free riders,’” likewise was found not to be a compelling interest by the Court, since “the First Amendment does not permit the government to compel a person to pay for another party’s speech just because the government thinks that the speech furthers the interests of the person who does not want to pay.” The Court noted that the benefits conferred on a union as the exclusive bargaining representative “greatly outweigh any extra burden imposed by the duty of providing fair representation for nonmembers.” The Court also rejected the argument that the union’s duty of fair representation justified agency fees, since “[t]hat duty is a necessary concomitant of the authority that a union seeks when it chooses to serve as the exclusive representative of all the employees in a unit” based on the restrictions that are placed on nonmembers’ individual rights.
After rejecting the Abood Court’s justifications for agency fees, the Court examined and rejected the alternative arguments in support raised by respondents and amici including the arguments that “public employees were understood to lack free speech protections” by the framers and that the Court’s decision in Pickering v. Board of Ed. of Township High School Dist. 205, Will Cty., supported the constitutionality of agency fees. Finally, the Court determined that stare decisis did not “require” the Court to retain Abood based on “the quality of Abood’s reasoning, the workability of the rule it established, its consistency with other related decisions, developments since the decision was handed down, and reliance on the decision.” The Court concluded its analysis by holding that agency fees are unconstitutional stating:
This procedure violates 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. [citations omitted]. Rather, to be effective, the waiver must be freely given and shown by “clear and compelling” evidence. [citations omitted]. Unless employees clearly and affirmatively consent before any money is taken from them, this standard cannot be met.
Employers’ Bottom Line: The Court’s decision in Janus will have far-reaching impact on certain public-sector employers, their unionized workforce and the affected unions in states with laws that allow unions to collect agency fees. Public-sector employees who are not union members will no longer be required to pay agency fees, which no doubt will have a significant negative financial impact on public-sector unions. It is likely that agency fee payors will not agree to become full dues-paying members. Likewise, it is also likely that some full dues-paying members will now withdraw from membership. We believe the major public-sector unions could lose in excess of $100 million annually as a result of this decision. Much of that money has historically been used to fund political candidates and/or referendum issues at the state and local level. To combat the loss of these funds, we expect public-sector unions to make every effort to convert agency fee payors to full dues-paying members. Local and state governments favorable to unions may also try to legislate around the impact of Janus to the extent that is possible.
It is unlikely that this decision will directly impact private-sector unions since the case turned on the government’s inability to limit an employee’s First Amendment rights, an analysis that does not extend to private employers.
We have not heard the last of this issue. Congressional democrats have introduced the Public Service Freedom to Negotiate Act, which would allow for the deduction of union fees authorized by employees. Additionally, the National Right to Work Foundation has created the Janus Task Force to provide free legal services to employees who do not want to pay agency fees or be represented by a union.
If you have any questions regarding this decision or other labor or employment law issues, please feel free to contact the authors of this Alert, J. Gregory Grisham, ggrisham@fordharrison.com, who is a partner in our Nashville office and Michelle S. Harkavy, mharkavy@fordharrison.com, who is a partner in our New York City office. Both Greg and Michelle are members of the FordHarrison Labor Relations Practice Group. You may also contact the FordHarrison attorney with whom you usually work.