June 28, 2018

U.S. Supreme Court Overturns Public Sector “Agency Fees” Rule, Overruling 40-Year Precedent

The U.S. Supreme Court on June 27th issued its long-awaited decision in Janus v. AFSCME, ruling that public sector employees are no longer required to pay “agency fees” to a union which has the right of exclusive representation under the law, even when the employee chooses not to join the union.  This holding overruled a 40-year precedent set by the Supreme Court’s decision in Abood v. Detroit Board of Education (1977), which permitted such fee arrangements.

Agency fees (also known as “shop fees” or “fair share” fees) are pro-rated portions of a union member’s dues, assessed on non-members.  Such fees are calculated to represent the cost of union expenditures related to the union’s collective bargaining efforts, but are not supposed to be related to the cost of a union’s political efforts.

The challenge to agency fees was brought by an Illinois government employee, who argued that these payroll deductions were impermissible forced speech, in violation of his First Amendment right.  Mark Janus refused to join a public sector union because he opposed many of their positions, including their position during collective bargaining, which he believed failed to recognize the fiscal challenges facing the State of Illinois.  The Court noted that for Janus, the agency fees amounted to approximately $45 per month, and represented 78.06% of the amount of the dues charged to union members.

The Court held that the automatic deduction of agency fees from non-consenting public employee wages violates the First Amendment and could not continue.  The Court noted that forcing free and independent individuals to endorse ideas they find objectionable (i.e., through the use of agency fee arrangements) raised serious First Amendment concerns.  In so ruling, the Court expressly overruled Abood v. Detroit Board of Education decided by the Court in 1977, noting that Abood’s holding is inconsistent with standard First Amendment principles, and found agency fees to be unconstitutional in the public sector.

Going forward, unions are immediately prohibited from collecting agency fees or any other payments to the union from non-members of unions.  For employers, this will mean adjusting payroll to ensure that deductions for agency fees or other payments to the union are not being made for non-union employees, unless the employee affirmatively consents to pay the fee.  An agency fee provision in a collective bargaining agreement is insufficient employee affirmative consent.  By affirmatively agreeing to pay, employees are waiving their First Amendment rights.  According to the Court, such a waiver cannot be presumed and the employee must clearly and affirmatively consent before any money is taken from them.

In anticipation of the Janus decision, the California Legislature enacted SB 866 which was signed by Governor Brown the day Janus was issued and became effective immediately.  Among other requirements and prohibitions on public employers, SB 866 requires a public employer to honor employee authorizations for dues deduction provided by the union, and the public employer must direct all employee requests to cancel or change deductions to the employee organization.  A public employer cannot request a copy of an employee authorization from the union unless a dispute arises regarding its existence or terms.  It remains to be seen how all the provisions of SB 866 will fare against Janus in the event of a legal challenge, but for now it is California law.

Finally, it is important to note that Janus applies only to public sector context.  In the private sector, the Court last considered agency fees in Communications Workers of America v. Beck (1988).  In that case, the Court found that the NLRA prohibits agency fees if a union member chooses to opt-out.  The Court, in that case, did not have the opportunity to review whether agency fees in the private sector would violate the First Amendment (and noted so in Janus), and therefore such fees are still Constitutionally permissible in the private sector.

Category: U.S. Supreme Court,