‘Reliance’ argument may be focus in wave of post-Janus suits

A growing number of lawsuits nationwide seeking to claw back fees charged to union nonmembers, recently ruled unconstitutional by the U.S. Supreme Court, will likely be argued on the basis of whether the defendants rightly relied on past case law, according to labor and employment attorneys.

Called “agency fees,” the involuntary paycheck deductions are a reduced union charge applied to nonmember employees in union shops with the promise their contribution will not be used for political actions such as candidate donations.

On June 27, the Supreme Court ruled 5-4 in Janus v. AFSCME Council 31 that the fees violate the First Amendment when charged by public sector unions.

Forcing the plaintiff to financially support union positions contrary to his or her personal speech amounts to compelled speech, Justice Samuel Alito wrote. All actions by public sector unions are inherently political, Alito wrote.

On July 2, a proposed class of nonunion teachers sued California school districts and teachers’ unions to recover fees retroactively with interest. Wilford et al. v. National Education Association of the United States et al., 18-CV1169 (C.D. Cal., filed July 2, 2018).

That suit joins a growing number of actions nationally, and ongoing suits at varying court levels into which the Janus ruling has breathed new life.

In a case in Illinois, Riffey v. Rauner, the U.S. 7th Circuit Court of Appeals ruled fees were unconstitutional but not retroactively recoverable. It was appealed to the U.S. Supreme Court on that issue, and now has been ordered back for re-evaluation in light of Janus.

“Generally speaking, the rule is that a finding that as statute is unconstitutional means the idea is it has always been unconstitutional, particularly if it pertains to a fundamental right, which this does,” said Gina Roccanova of Meyers Nave Riback Silver & Wilson PLC.

Stephen F. Diamond, associate professor at Santa Clara Law, disagreed.

“I would point out that when the court wants to say that an original decision was wrong at the outset they have a way of doing that,” he said.

Agency fees were codified in Abood v. Detroit Board of Education in 1977, becoming a commonplace element in state labor laws nationwide.

“In my view, the Janus decision, though wrongheaded in law and logic and with very deleterious social consequences, doesn’t suggest that when Abood was decided the court was engaged in some radical misapplication of the Constitution,” Diamond said.

A key factor in that decision, Roccanova said, is determining reliance under a test laid down in Chevron Oil Co. v. Huson (1971). In that case, the plaintiff’s attempt to apply a new decision to recover a retroactive award was denied, as the court decided it would be unfair due to the defendant’s reliance on previous law in its actions. That means unions’ success in guarding against retroactive loss of agency fees hinges on whether the courts find they were right to rely on Abood to justify the takings as a general policy.

“The question will be, were you wrong to rely on the Supreme Court in acting this way?” she said.

Another factor coming into play is that Abood happened in the earlier stages of public sector unions’ existence, so the organizations relied on it for rulemaking while they found their footing, Diamond said.

“I don’t see any basis for trying to relitigate 40 years of precedent,” he said.

According to National Right to Work Foundation Legal Defense Fund Vice President Patrick Semmens, Janus lent the organization increased confidence in current and upcoming suits seeking retroactive recovery.

Alito’s opinion in Janus directly refutes two common defenses for agency fees, Semmens said.

One of the foundation’s cases, Hamidi et al. v. SEIU Local 1000, could recover over $100 million for a 40,000 member class after Janus, he said. The suit challenges a union’s policy requiring workers to affirmatively opt out of agency fees, the use of which is a typical defense for agency fees’ legality.

In Knox v. SEIU (2012), the Supreme Court ruled that opt-outs are not sufficient; rather, members should be given opt-ins. Alito’s opinion also places the reliance defense on shaky ground, per Knox, according to Semmens.

“In Alito’s response to the dissent he talks about reliance, and he says, ever since the Knox case in 2012, basically every public union in the country has to know that the constitutionality of forced fees was questionable and something they could not count on,” he said.

“The standard here is it has to be a very explicit opt-in where they’re making it clear you’re waiving your First Amendment rights, and anything less doesn’t meet the standard,” he continued.

The Janus ruling, and retroactive application, would have a disruptive effect on unions, Diamond said, but called the assertion that clawback suits could bankrupt them “absurd.”

“I do believe the post-Janus environment will be challenging and the labor movement as a whole will have to rethink the structure of their approach. They will have to be more membership facing, but I don’t think its going to be a challenge for them to turn to their members and reproduce their financial position with opt-in members,” he said.