By: Glenn J. Smith and Jason J. Silver

Seyfarth Synopsis: Public-sector labor unions were dealt a heavy, but not unexpected, blow as the Supreme Court of the United States issued a landmark decision in Janus v. AFSCME. By a vote of 5 to 4, the Court held that fair share fees for public-sector unions are unconstitutional.   Whether the actual fallout from the decision will match the level of the pre-decision rhetoric remains to be seen. 

Janus v. AFSCME was brought by Mark Janus, a child support worker in Illinois who opted not to join the union, the American Federation of State, County and Municipal Employees (“AFSCME”), that represents Illinois state government employees. The primary issue in the case was the propriety of the $45 “agency” or “fair share” fee that was automatically deducted from Janus’ paycheck on a monthly basis. AFSCME assessed this monthly fee to Janus (and other Illinois government employees who opted out of membership in AFSCME), allegedly for services that nonunion members, like Janus, benefit from, such as negotiating and administering a collective bargaining agreement, and handling grievance procedures.

The decision overrules the prior position of the Court that a public-sector union may collect agency or fair share fees, which has been the law since the Supreme Court’s 1977 Abood v. Detroit Board of Education decision. The Janus v. AFSCME case revisited Abood and examined whether public-sector unions can continue to compel nonunion members to pay agency or fair share fees, or whether they constitute compelled speech and therefore violate First Amendment rights given that the money may also be utilized to support the union’s political speech and legislative agenda.

Janus v. AFSCME has garnered significant national interest and attention, including the filing of over fifty (50) amici briefs, including many from industry groups and labor unions. The primary legal arguments on the issue were as follows:

Janus – Janus argued that the fair share fee constitutes a violation of his First Amendment rights for two primary reasons. First, Janus argued that collectively bargaining with a government employer is akin to lobbying the government. Second, Janus argued that fair share fees are a form of compelled speech and association that deserve strict constitutional scrutiny. Janus further argued that the use of fair share fees for purposes of labor stability and to discourage “free riders” should be found unconstitutional.

AFSCME – AFSCME argued that Janus misconstrues the intent behind the First Amendment, how the Supreme Court has previously applied the First Amendment and the nature and idiosyncrasies of collective bargaining. AFSCME further argued that the Supreme Court has articulated a narrower view of First Amendment rights for public employees, limiting those rights speaking as both a citizen and on matters of public concern. AFSCME highlighted that the Supreme Court has always balanced a public-sector employee’s rights in speech with the government’s interests, as outlined in Abood. AFSCME also argued that collective bargaining primarily concerns terms and conditions of employment, are non-political in nature and have nothing to do with lobbying. AFSCME contended that if the Supreme Court accepts Janus’ arguments, it has the potential to deprive the government from making basic personnel decisions, a managerial cornerstone of collective bargaining.

The Court held that Illinois’ extraction of agency fees from nonconsenting public-sector employees violates the First Amendment. The Court concluded that forcing free and independent individuals to endorse ideas they may find objectionable raises serious First Amendment issues, which includes compelling a person to subsidize the speech of other private speakers.

In rejecting and overturning Abood, the Court reasoned that exclusive representation of all the employees in a bargaining unit and the extraction of fair share fees is not inextricably linked. The Court reasoned that the risk of free riders (nonmembers that benefit from the union’s efforts) is not a compelling state interest sufficient to overcome First Amendment rights. Importantly, the Court held that “States and public-sector unions may no longer extract agency fees from nonconsenting employees.” Specifically, the Frist Amendment is violated when money is taken from nonconsenting employees for a public-sector union. This means that “employees must affirmatively consent before fees can be withheld from their paychecks – the system must be opt-in, not opt-out.[1]

The Court also rejected AFSCME’s argument that public employees have no free speech rights as a position that would have required “overturning decades of landmark precedent.” In determining that Abood must be overruled, the Court primarily considered five factors: “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.” Each factor favored establishing new precedent.

The decision in Janus serves to further explain the current Court’s view on the treatment of compelled state speech. In NIFLA v. Beceera, decided the day before Janus, the Court found that the California Reproductive Freedom, Accountability, Comprehensive Care, and Transparency Act (“FACT ACT”) was unconstitutional. The FACT ACT required clinics that serve pregnant women to provide certain notices related to free or low-cost medical services, including abortions. The Court found the FACT ACT to be an unconstitutional content based law that that was not narrowly tailored to serve compelling state interests. In other words, the Court found that the FACT ACT impermissibly mandated speech on a political agenda (i.e. pro-choice), much like the holding in Janus finds that fair share fees used by a union for lobbying impermissibly compels a certain political agenda not narrowly tailored to serve compelling state interests.

Practically, the outcome will necessarily have some impact on the financial statements of unions that are heavily engaged in public sector representation.  Surely, there will be employees who do not work in a right-to-work state (an employee in a right-to-work state does not have to pay fair share fees if not a member of the union), and who will resign their membership based solely on the financial implications. This assumes that reclaiming $540 a year in fees that are no longer required will be meaningful to some state workers.  The magnitude of the defection could potentially determine the fate of some unions, but whether the predicted landslide of members will occur remains anyone’s guess. As noted by the Court, one also must consider the “billions of dollars” received from non-members in the past 41 years.   According to the Bureau of Labor Statistics, 10.7% of U.S. workers were union members in 2017 – down from 20.1% in 1983. Nearly a third of U.S. government employees are members of a public-sector union.

Organized labor will most certainly bemoan the potential impacts, of this decision, particularly following another recent blow to organized labor: the Supreme Court’s decision in Epic Systems holding that the maintenance of individual arbitration agreements containing class-action waivers does not violate the National Labor Relations Act.

[1] It is essential to highlight that the Court’s holding is limited to public-sector unions. It is not unlawful for private-sector unions and employers to negotiate and agree upon agency and fair share fees in collective bargaining agreements, subject to the existence of any right to work laws governing their jurisdiction.

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Howard is an associate in the Labor and Employment group in Seyfarth Shaw’s New York office. His practice includes the representation of management in employment litigation matters before state and federal courts, at trial and appellate levels, as well as federal and state…

Howard is an associate in the Labor and Employment group in Seyfarth Shaw’s New York office. His practice includes the representation of management in employment litigation matters before state and federal courts, at trial and appellate levels, as well as federal and state agencies, including the National Labor Relations Board, Equal Employment Opportunity Commission, Department of Labor, New York State Division of Human Rights, New Jersey Division on Civil Rights and the New York State Public Employment Relations Board.  In this role, Mr. Wexler has extensive experience defending both single and multi-plaintiff discrimination/harassment cases, class and/or collective actions, as well as lawsuits initiated by the EEOC.  He has represented employers in class and collective actions and multi-plaintiff claims involving discrimination/harassment on the basis of age, race, gender, national origin, and other protected classifications. His wage-and-hour experience includes the defense of major class action claims involving meal breaks, rest breaks, misclassification, and work-off-the-clock allegations.