Public Sector Unions Cannot Compel Nonmembers To Pay Agency Fees, High Court Rules

June 28, 2018Alerts Labor & Employment Alert

On the last day of its term, by a 5-4 vote, the U.S. Supreme Court held that compelling nonmember agency fees for public sector employees is impermissible because it violates the First Amendment. The landmark decision in Janus v. AFSCME overrules 40 years of precedent.

“Agency fees” are fees charged to a bargaining unit employee who is not a full dues paying member to cover the cost of a union’s collective bargaining and related activities. Prior to Janus, public sector unions in certain states could compel nonunion members to pay these fees as a condition of employment even if the employee did not wish to join the union. The agency fee is a percentage of the full dues unions charge their members and does not include the cost of union political and other nonrepresentational activities.

In Janus, the Court held that taking money from nonconsenting employees for a public-sector union violated the First Amendment by forcing individuals to endorse ideas they find objectionable.

Specifically, the Court held that:

States and public-sector unions may no longer extract agency fees from nonconsenting employees. … Neither an agency fee nor any other payment to a public-sector union may be deducted from a nonmember [employee’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.

For the collection to be valid, the Court said, the employer or union must show that the employee freely waived the right to oppose payment. Such a waiver must be shown by “clear and compelling” evidence, the Court said, and the employee must give the waiver prior to the employer or union withholding the money.

In striking down an Illinois law requiring mandatory agency fees, the Court applied an exacting scrutiny standard because the Illinois law burdened public sector employees’ First Amendment free speech rights. As such, Illinois and the Union needed to show that mandatory agency fees served a compelling interest and do so in the least restrictive means possible. The Court found that Illinois and the Union failed to meet that burden.

The Court majority rejected the view that agency fees are necessary to ensure labor peace and avoid conflict that would likely result from employees in a bargaining unit being represented by more than one union. Additionally, there is no requirement that for a union to act as exclusive representative of a group of employees, that union must be able to collect agency fees. The Court noted that, under federal labor law, unions act as exclusive bargaining representatives without the ability to collect agency fees. Additionally, in the 28 states that do not permit agency fees, public sector unions effectively serve as the exclusive bargaining representative of all the public sector employees in the bargaining unit. Consequently, agency fees are unnecessary to ensure labor peace.

The majority also rejected the concern that mandatory agency fees are necessary to combat a perceived “free rider” problem in which nonunion bargaining unit members unfairly enjoying the benefits of union representation without sharing the costs. The Court rejected this justification noting that the First Amendment does not permit the government to compel a person to pay for another party’s speech just because the government thinks that the speech furthers the interest of persons who do not wish to pay for the speech. Moreover, there are less restrictive ways to deal with burdens associated with providing benefits to nonmembers, such as possibly charging nonmembers for representation in disciplinary proceedings with the employer.

The Janus decision will make it harder for public sector unions to continue to influence federal, state and local elections as well as the drafting of laws because public sector unions will likely suffer reduced revenues as nonunion unit employees choose not to pay agency fees. Additionally, current union members may choose to resign their membership in public sector unions once they learn that they are not obligated to pay any union or agency fee if they resign their membership consistent with the law and union procedure. This reduced revenue will necessitate unions spending a larger percentage of their total revenue to pay for union overhead, bargaining, and contract maintenance. Only excess funds from full dues paying union members can be earmarked for political or other activities unrelated to collective bargaining and contract maintenance.

While Janus is a blockbuster decision, it is unlikely to be a death blow to unions that represent public employees. It will make public sector unions responsible for earning the support of dues paying members after losing the crutch of required agency fees. In the 28 states with right-to-work laws and in the federal government where mandatory agency fees are banned, unions continue to represent workers and have not disappeared. The battleground will now shift to states over union obligations to workers who choose not to pay union dues and whether unions will need to get a majority of workers to pay union dues in order to continue to represent employees. There also will be an attempt to expand this decision to cover private sector employers.

Recommendations For Public Employers

  • The Janus decision does not affect dues collection from employees in the private sector, from employees in the public sector in states that did not permit compulsory agency fees, and from employees in the public sector that are already union members. Therefore, employers still collect dues from union members consistent with any dues checkoff agreement.
  • States and other public sector employers, including colleges, hospitals, public school systems (that are local agencies or departments of the States or their political subdivisions) should immediately stop withholding agency fees from nonunion bargaining unit employees and return any fees that have not previously been remitted to a union to the employees. Consider a brief communication to agency fee payers advising of this action.
  • We believe this decision is likely to be prospective in nature. Consequently, neither public sector employees, nor the unions representing public sector employees, will likely need to return any fees that have already been remitted to a union.
  • Public sector employers should not withhold or deduct any agency fees from a nonmember bargaining unit employee until the employee affirmatively and in writing agree to the deduction of such fees from their paychecks.

If you have any questions about the Janus decision, please contact Steven Ludwig at [email protected] at (215) 299-2164 or any member of Fox Rothschild’s Labor and Employment Department.