SCOTUS Rules Agency Shop Fees Are Unconstitutional

The U.S. Supreme Court dealt a crushing blow to the country’s public unions in Janus v. American Federation of State, County, and Municipal Employees, Council 31. By a vote of 5-4, the Court held that public-sector “agency shop” arrangements run afoul of the First Amendment. The Court also expressly overruled its decision in Abood v. Detroit Board of Education, 431 U.S. 209 (1977). SCOTUS Rules Agency Shop Fees Are Unconstitutional

Precedent Established Under Abood

In Abood, the U.S. Supreme Court held that the First Amendment to the U.S. Constitution does not prohibit governments from requiring non-union public employees to pay their “fair share” of dues for collective bargaining, contract administration, and grievance adjustment. The Court made a clear distinction between funds for the expression of political views and funds used to further the union’s duties as collective-bargaining representative. As Justice Stewart’s opinion explained:

We do not hold that a union cannot constitutionally spend funds for the expression of political views, on behalf of political candidates, or toward the advancement of other ideological causes not germane to its duties as collective bargaining representative. Rather, the Constitution requires only that such expenditures be financed from charges, dues, or assessments paid by employees who do not object to advancing those ideas and who are not coerced into doing so against their will by the threat of loss of governmental employment.

Over the past several years, members of the Court have questioned whether Aboodwas wrongly decided. In 2014, a slim 5-4 majority held that the First Amendment prohibited the collection of an agency fee from home healthcare providers because they were not “full-fledged” public employees. The ruling stopped short of overruling Abood.Last term, the justices split 4-4 regarding the same issue in Friedrichs v. California Teachers Assn.

Facts of Janus v. AFSCME

Under the Illinois Public Relations Act, a union representing public employees collects dues from its members, but only “fair share” fees (a proportionate share of the costs of collective bargaining and contract administration) from non-member employees on whose behalf the union also negotiates. In 2015, the governor of Illinois filed suit in federal district court to halt the unions’ collecting these fees, arguing that the statute violates the First Amendment by compelling employees who disapprove of the union to contribute money to it. While the district court found that the governor lacked standing, it allowed two Illinois public employees to intervene. Nonetheless, the district court and the U.S. Court of Appeals for the 7th Circuit rejected the claims, concluding that the lower courts did not have the power to overrule Abood.

Court Rules Agency Fees Unconstitutional

A divided Supreme Court reversed. “The state of Illinois’ extraction of agency fees from nonconsenting public-sector employees violates the First Amendment,” Justice Samuel Alito wrote on behalf of the majority. He further explained:

States and public-sector unions may no longer extract agency fees from nonconsenting employees. . . . 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.

In reaching its decision, the majority reasoned that such a scheme “violates the free speech rights of nonmembers by compelling them to subsidize private speech on matters of substantial public concern.”

The Court further held that “Abood’s holding is inconsistent with standard First Amendment principles” and must be overruled. In reaching its decision, the majority rejected the state interests asserted in Abood, which included promoting “labor peace” and avoiding free riders. As Justice Alito explained:

TheAbood Court’s fears of conflict and disruption if employees were represented by more than one union have proved to be unfounded: Exclusive representation of all the employees in a unit and the exaction of agency fees are not inextricably linked. 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. 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 further held that States can avoid free riders through less restrictive means than the imposition of agency fees. In non-agency-fee jurisdictions, which include the federal government and 28 States, unions are quite willing to represent nonmembers in the absence of agency fees. In these jurisdictions, unions are not compelled to seek the designation of “exclusive representative.” Rather, this designation is avidly sought by the union based on the many benefits it confers.

Implications for New Jersey Public Unions and Local Governments

In her dissenting opinion, Justice Elena Kagan expressed concern that the majority’s decision could disrupt “thousands of ongoing contracts involving millions of employees.” As a practical matter, public unions may not make any deductions from nonmembers’ wages unless workers provide their affirmative assent. In other words, public unions must allow non-members to “opt-in” rather than making deductions from wages until they “opt-out.”

“In addition, as Justice Alito instructed in the majority Opinion, “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.”

The Court’s decision may also impact the New Jersey Workforce Democracy Enhancement Act.As detailed in greater depth in a prior article, the new law, which was enacted in response to Janus, aims to ensure that public unions are able to carry out their statutory duties by having access to and being able to communicate with the employees they represent.

Most notably, theWorkforce Democracy Enhancement Act allows for the authorization of payroll deductions for union dues and fees, which may run afoul of the Supreme Court’s recent decision.A provision of the new law specifically provides that an employee may revoke such an authorization by providing written notice to their public employer during the 10 days following each anniversary date of the employee’s employment. The public employer is then required to inform the union of the withdrawal, with the withdrawal taking effect on the 30th day after the anniversary date. It is unclear if the courts would view the short window to revoke as insufficient in light of the Supreme Court’s decision in Janus.

For more information about the Supreme Court’s decision or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.

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