June 28, 2018

Supreme Court Overrules Longstanding Decision Supporting Collection of Union Agency Fees

In a 5 to 4 opinion, the United States Supreme Court overruled a longstanding decision which required government employees who are represented by but do not belong to a union, to pay a fair share or agency fee to cover the union’s costs for collective bargaining activities. In Janus v. American Federation of State, County, and Municipal Employees, Council 31, 585 U.S. ___ (2018), the Supreme Court found that requiring such fees from non-consenting public sector employees violates the First Amendment: “[n]either an agency fee nor any other form of payment to a public-sector union may be deducted from an employee, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay.”

The union in this case represents state, county, and municipal employees in Illinois, which is one of 22 fair share states such as California. These states and the District of Columbia allow public employers to include fair share provisions in employment contracts that require employees represented by a union, but who do not belong to the union, to pay fees to cover the costs of collective bargaining activities. The remaining 28 states have enacted right-to-work laws which preclude employers from including such provisions in employment contracts.

The prior ruling, Abood v. Detroit Board of Education, 431 U. S. 209 (1977), was based on protecting the state’s interest in labor peace and in avoiding the problem of employees reaping the benefits of union representation without paying for them. Janus found that these concerns have been proven wrong in the 41 years since Abood was decided. For example, the federal government and 28 states do not allow such fees, yet millions of public employees are represented by unions that effectively serve as the exclusive representatives of all the employees. Abood‘s fears of conflict and disruption were proven unfounded. Unions in non-agency fee states have shown they are willing to represent nonmembers in the absence of such fees. Thus, Janus concluded that the concerns raised in Abood can be addressed, if necessary, through less restrictive means.

Key Takeaways

This decision is directly applicable only to public sector unions, but should not be ignored by the private sector.  Agency fees are often 75% to 80% of the amount of union dues; therefore, in the short term, this decision deals a substantial blow to revenue streams of public sector unions, and may also result in a drop in membership now that agency fees are not required. In the long term, public sector unions that thrive are likely to be those that become more competitive by utilizing technology to develop and deliver programs that create immediate value for members, and by focusing on initiatives that attract and impact potential members. Public sector unions that are able to adapt and thrive may become models for leaner and more modern and relevant unions in the private sector.