U.S. Supreme Court Strikes Down Agency Fees in Public Sector Unions

Court overturns decades-old precedent in one of last decisions of term

In its last week of term, the U.S. Supreme Court released a firestorm of highly anticipated and controversial opinions. Among them came Janus v. American Federation of State, County, and Municipal Employees on June 27, and with it, the court overturned a 1977 ruling, Abood v. Detroit Board of Education. The decision allowed labor unions that represent public employees to charge “fair share” fees to nonmembers for the costs of negotiating contracts that apply to all public employees.

Plaintiff Mark Janus filed suit to challenge the constitutionality of Illinois’ state law authorizing agency fees in public-sector unions, but the district court dismissed the claim, ruling the Abood precedent precluded it. The 7th Circuit Court of Appeals affirmed the dismissal. Janus argued that allowing such compulsory fees violates his First Amendment rights to free speech because the issues public-sector labor unions negotiate, such as wages and benefits, are inherently political since they affect public policy. 

“Forcing free and independent individuals to endorse ideas they find objectionable raises serious First Amendment concerns,” wrote Justice Samuel Alito for the 5-4 majority. “That includes compelling a person to subsidize the speech of other private speakers.”

The court ruled the Abood case’s justification for agency fees by mitigating the risk of “free rider” employees who would benefit from unions’ negotiations on their behalf without paying dues is not a compelling state interest. The free-rider argument is not enough to overcome First Amendment interests, according to the majority opinion.

The court also rejected AFSCME’s argument that agency fees promote labor peace that the respondents claimed would be compromised if more than one union represented employees.

“Exclusive representation of all the employees in a unit and the exaction of agency fees are not inextricably linked,” states the opinion. “To the contrary, in the Federal Government and the 28 States with laws prohibiting agency fees, millions of public employees are represented by unions that effectively serve as the exclusive representatives of all the employees.”

Prior to Janus, the Supreme Court most recently agreed to review the possibility of overturning the Abood case in 2016 in Friedrichs v. California Teachers Association. But Justice Antonin Scalia died before the court made its decision, and the remaining justices deadlocked. 

Sentiment seemed to widely expect Justice Neil Gorsuch’s addition to the court to tip the case in favor of Janus, though he did not author the opinion. Steve Gutierrez, a partner at Holland & Hart who practices labor and employment, said he believes the current polarized political environment helped ripen the court for a reconsideration of the Abood case through the frame of whether public-sector union functions are inherently political. 

Abood upheld the authorization of agency fees, but ruled employees could not be compelled to fund a union’s political and ideological activity. But Gutierrez said public sector unions sectioning off their political spending from their operational spending is something of an “optical illusion” because all the money originates from employee fees anyway.

“It’s all a paper game, is what it becomes,” Gutierrez said. “I think that all unions are as a matter of fact inherently political, when it comes to labor relations, that is.”

Mark Nelson, vice-chair of Polsinelli’s Traditional Labor Relations practice, said the court overturning Abood seems to be an intersection of a few factors that can cause it to diverge from precedent: A change in the court’s makeup that comes with a shift in the majority’s view, and a new case comes up that presents a different legal argument than its predecessors. In Janus, the court found the Abood case did not properly consider the First Amendment implications of agency fees, deeming Abood “wrongly decided.”

Common opinion also seems to expect unions to ramp up their efforts to increase membership in order to offset the loss of agency fees from nonmember employees in the public sector. Nelson said the effect of the Janus decision will depend on how much of a union’s revenue comes from public-sector employees.

A better way for unions to adapt in the short term, Nelson said, would be to look at their efficiency and cost containment, because organizing and bargaining efforts can take years before unions see new revenue.

“The organizing activity may come, but I think it’s going to have less of an immediate impact on finances than efficiency increase or cost containment,” he said. Also from a practical perspective, Nelson said, pressure exerted on union members to stay in may mean membership does not decrease as much as employers may hope.

Jeffrey Zax, an economics professor at the University of Colorado Boulder, said he believes the Janus decision’s increase of freedom for public-sector workers will in fact ultimately work against itself. Being a member of a community means giving up some personal interests, he said, whether the community is a family or a workplace. Zax said the decision takes the stance that public-sector workers should not have to give up any of their interests because of their employment, but he believes their freedom will actually be compromised if they face exploitative employers without a union’s protection.

“Protection comes from the community,” Zax said. “The question of what freedom is is deeply embedded in this decision.”

Justice Elena Kagan wrote a dissent in Janus, joined by the court’s other three liberal justices: Justices Sonia Sotomayor, Ruth Bader Ginsburg and Stephen Breyer. She wrote Abood had “struck a stable balance” between public employees’ First Amendment rights and government bodies’ interests in operating their workforce as they see fit. Kagan elaborated that Abood provided a viable framework for the government’s ability to regulate speech in its employer capacity.

“There are no special justifications for reversing Abood. It has proved workable. No recent developments have eroded its underpinnings,” Kagan wrote. “And it is deeply entrenched, in both the law and the real world. More than 20 States have statutory schemes built on the decision. Those laws underpin thousands of ongoing contracts involving millions of employees. Reliance interests do not come any stronger than those surrounding Abood. And likewise, judicial disruption does not get any greater than what the Court does today.” 

—Julia Cardi

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