In Much Anticipated Janus v. AFSCME Decision, Supreme Court Rules Agency Fees Unconstitutional

06.27.2018

In a blow to unions across the nation, the Supreme Court has ruled that public sector agency fee arrangements violate the First Amendment of the United States Constitution. The decision issued today in Janus v. American Federation of State, County, and Municipal Employees, Council 31 abolishes state laws requiring the collection of agency fees from employees who decline to join a union.

Janus arose as a challenge to an Illinois law allowing unions to charge non-members a fee to cover expenses associated with collective bargaining. Mark Janus, a social worker in Illinois who is not a member of his union, argued that the compelled payment of this fee violates his First Amendment rights because the fees collected from him could be used to fund political campaigns or causes he does not agree with. By a vote of 5-4, the Supreme Court agreed with Janus. In its majority opinion, the Court ruled that states and public-sector unions may no longer extract agency fees from nonconsenting employees.

The Janus ruling reversed the Supreme Court’s 1977 decision in Abood v. Detroit Board of Education (431 U.S. 209), in which the Court concluded that agency fee arrangements are constitutional so long as certain requirements are met. Prior to Janus, the Court questioned the Abood ruling in two different cases (Harris v. Quinn (2014) 134 S.Ct. 2618; Knox v. SEIU, Local 1000 (2012) 567 U.S. 298), indicating that the precedent was unlikely to survive a direct challenge. Indeed, the same issue presented in Janus was before the Court in the 2016 Friedrichs v. California Teachers Association case, but after the unexpected death of Justice Antonin Scalia, the Court split 4-4, thereby leaving Abood intact.

Janus therefore resolves a legal dispute that has been in a state of uncertainty since at least 2012 and generated intense national interest.

In Janus, the Court overturned Abood, concluding that “public-sector agency-shop arrangements violate the First Amendment, and Abood erred in concluding otherwise.” The Court noted Abood was decided against a “very different legal and economic backdrop,” and referred to the 1977 decision as an “anomaly in our First Amendment jurisprudence.” The Court reasoned:

We recognize that the loss of payments from nonmembers may cause unions to experience unpleasant transition costs in the short term, and may require unions to make adjustments in order to attract and retain members. But we must weigh these disadvantages against the considerable windfall that unions have received under Abood for the past 41 years. It is hard to estimate how many billions of dollars have been taken from nonmembers and transferred to public-sector unions in violation of the First Amendment. Those unconstitutional exactions cannot be allowed to continue indefinitely.

In California, the Janus decision has the effect of invalidating provisions in the Government Code requiring that public sector employers collect agency fees under the Educational Employment Relations Act (Gov. Code § 3546), the Meyers-Milias-Brown Act (Gov. Code § 3502.5), and the Dills Act (Gov. Code § 3515.7), among others. Effective immediately, represented employees can no longer be required to pay agency fees, and employers must stop collecting these service fees. The Janus ruling will have a widespread and immediate impact on public sector unions and labor relations. For example, collected agency fees represent approximately one-fifth of the annual operating budget of the California School Employees Association, the largest non-teacher union in the State representing public school employees. Additionally, unions anticipate that current dues-paying membership will drop considerably as a result of the ruling, further decreasing revenue sources.

Practical Considerations in a Post-Janus World

Today’s ruling requires public sector employers to carefully consider a number of issues, including the treatment of existing agency fee deduction agreements. The most important is the fact agency fees can no longer be collected, since they are unconstitutional. Employers should immediately cease making deductions from non-union members under agency fee agreements. As a practical matter, payroll authorizations and deductions may have already been processed for future pay periods. Therefore, employers must identify which of their employees are “agency-fee payers” to ensure refunds are issued for deductions that occur or cover the period beginning June 27, 2018. Employers may need to work with their local union chapters to ensure these employees are not overlooked.

Agency fee (“organizational security”) provisions of collective bargaining agreements are likely invalid as a result of the Janus ruling. For agreements that include “severability” clauses, the invalidity of one or more provisions under a Court ruling does not affect the remainder of the agreement. Employers should immediately review their agreements to determine which provisions are invalidated and identify any that need to be renegotiated as a result of Janus.

The California Legislature has enacted a number of provisions within the last year in anticipation of today’s Janus ruling. Most recently, the Legislature approved Senate Bill 866 as part of the Budget Trailer Bill on June 18, 2018, and the Governor signed it into law this morning. SB 866 requires, among other things, that public school employers rely on unions (rather than employees) to authorize or cancel payroll deductions for union dues, and that employers meet and confer with exclusive representatives prior to issuing “mass communications” concerning the benefits or downsides to joining and supporting a union. AALRR has teamed with the Association of California School Administrators to provide responses to frequently asked questions concerning SB 866, available here. Employers should also remain cognizant of recent legislation designed to support union membership, including Assembly Bill 119 (allowing union access to new employee orientations) and SB 285 (prohibiting employer communications designed to deter or discourage union membership).

Employers may have noticed increased union activity in the past year as unions, in anticipation of Janus, made a concerted effort to demonstrate to agency fee payers that union membership is worthwhile. We anticipate this activity will intensify as unions can no longer rely on agency fees to fill their coffers, and must entice former agency fee payers to join the union.

Today’s historic ruling marks a new era in labor relations throughout the country. The new state legislation designed to lessen the impact of Janus requires careful review and cautious implementation of a potentially massive change. As employers navigate these turbulent waters, AALRR stands ready to provide assistance and guidance. We will provide additional information and specific practice tips in the coming days.