Agency fees ruling will reshape labor relations

THIS COLUMN APPEARED IN THE 2018 LABOR AND EMPLOYMENT SUPPLEMENT

On June 27, the U.S. Supreme Court issued its long-awaited decision in Janus v. AFSCME Council 31, 2018 DJDAR 6308. In a 5-4 decision, the court held mandatory agency shop fees violated the First Amendment. In so holding, the court overruled Abood v. Detroit Board of Education, a 1977 decision which upheld the constitutionality of agency shop arrangements in the public sector. Under Abood, where an agency shop arrangement existed, public sector employees, as a condition of continued employment, had two choices: join the union as a member and pay "dues," or not join the union, and pay an "agency shop" fee (aka "service fee" or "fair share fee"), an amount intended to cover representation, grievance processing, and bargaining costs, but not the union's political activities.

In challenging Abood, Mark Janus, an Illinois state employee, claimed that by compelling him to pay this service fee, the state was effectively forcing him to financially support a union which advanced political and ideological agendas he did not support. His challenge, however, was not the first: Two earlier cases, Knox v. SEIU (2012) and Harris v. Quinn (2014) also challenged mandatory service fees, but neither resulted in the court overruling Abood, while a third, Friedrichs v. California Teachers Association (2016), resulted in a 4-4 split decision when Justice Antonin Scalia unexpectedly passed away two months after oral argument.

But because the issues in Janus mirrored those raised in Friedrichs, public sector unions and public employers with agency shop arrangements tracked the Janus decision for months. With Justice Neil Gorsuch casting the necessary fifth vote, the decision, when it came, was unsurprising. The court held "[n]either an agency fee nor any other payment to the union may be deducted from a nonmember's wages ... unless the employee affirmatively consents to pay." With those words, the Janus decision immediately altered the status quo for public sector labor relations.

The first obvious impact on public sector labor relations is that public employers must stop deducting mandatory agency fees. Doing so means identifying the agency fee payers (nonmembers) from the dues payers (union members) to ensure dues deductions continue, while agency fee deductions stop. The end result is that nonmembers pay neither service fees nor dues, yet retain the benefits of being in a represented bargaining unit.

The court recognized this potential "free rider" problem, but held that "free rider arguments ... are generally insufficient to overcome First Amendment objections." The court rationalized that when unions seek and become the exclusive representative of a bargaining unit, unions receive benefits that outweigh the potential "free rider" problem. One such benefit is having a "privileged place in negotiations over wages, benefits, and working conditions." Another benefit is the assurance that public employers must "bargain in good faith with only that union." As for any burdens the union may incur as a result of representing "free riders," the court explained that the union's duty of fair representation was a "necessary concomitant of the authority that a union seeks when it chooses to serve as the exclusive representative of all the employees in a unit."

A second obvious impact resulting from the Janus decision will involve public employers and unions negotiating not just changes to existing collective bargaining agreements that have agency shop provisions, but also any negotiable impacts resulting from the public employer's compliance with Janus. For instance, a union may argue that the entire collective bargaining agreement has to be renegotiated because it was negotiated in reliance on the union receiving service fees. But, unless the agreement actually contains language requiring renegotiation of the entire agreement if any provision was later deemed unlawful, a public employer should remind the union that Janus expressly rejected the "reliance" argument. As the court explained, "it would be unconscionable to permit free speech rights to be abridged in perpetuity in order to preserve contract provisions that will expire on their own in a few years' time." The court also noted that public sector unions have "been on notice for years regarding this Court's misgivings about Abood."

And because unions have been "on notice for years," another obvious impact is the legislative fix: state legislatures passing laws to limit any negative impact Janus may have on unions. Thus, it was hardly surprising that the California Legislature, presumably in anticipation of Janus, added Senate Bill 866 to the state budget. Neither was it surprising that, less than four hours after the Janus decision issued, Gov. Jerry Brown approved SB 866, which, as urgency legislation, became effective immediately.

SB 866 provides unions with additional protections and rights to control the dues deduction process. It requires, in part, that California public employers: (1) refer any employee wishing to cancel/change dues authorizations to speak to the union; (2) accept the union's certification as to which employees have authorized dues deductions (with no right to view the actual authorization form except in limited circumstances); and (3) meet and confer with the union before issuing any "mass communications" regarding employees' rights to join or support a union, or to refrain from doing so.

With SB 866 going into effect within hours of the Janus decision, California public employers had to instantly meet their obligations under state law, while simultaneously complying with Janus. Not surprisingly, questions have arisen as to whether certain SB 866 provisions conflict with Janus and/or are unconstitutional. For example, if a public employer must accept the union's certification that it has dues deduction or voluntary service fee authorization forms signed by employees, does that certification comply with Janus' affirmative consent requirement? Does that union certification constitute "clear and compelling" evidence that an employee waived her First Amendment rights and is voluntarily contributing to the union? At this time, the answer to both questions is "we don't know."

We do, however, know that although Janus overruled 41 years of mandatory agency fees, public employers and the unions representing public sector employees should continue to work together to achieve harmonious labor relations.