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A Turning Point For Public Sector Unions?

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Janus v. American Federation of State, County and Municipal Employees, Council 31 (June 27, 2018).

Concluding its 2017 term with several landmark decisions on First Amendment free speech rights and protections, the United States Supreme Court discarded its own precedent of more than forty years by overruling Abood v. Detroit Board of Education, 431 U.S. 209 (1977) (Abood).  The Abood decision sanctioned agreements between public employers and unions to mandate “agency fees” as a condition of employment for employees in represented positions who chose not to join the union.  On June 27, 2018, in Janus v. American Federation of State, County and Municipal Employees, Council 31 (Janus), the Court ruled in a 5-4 decision that this type of mandatory fee violated employees’ First Amendment free speech protections against coerced speech.  The Court accepted the argument that mandatory fees subsidize political speech with which employees may disagree, and rejected the position that states have a compelling interest that justifies abrogation of First Amendment protections against compelled speech.  The immediate result is that states which have sanctioned this type of mandatory fee must immediately terminate all involuntary fee agreements and practices.

The Janus decision immediately impacts the more than twenty states that authorize mandatory agency fees (of which Delaware is one); it does not affect the status of union members and the withholding of their periodic union dues.  Those states that maintain regular automatic payroll deductions of agency fees will see the greatest short-term impact.  As of now, public sector employers may no longer withhold a union agency fee payment (also commonly referred to as “fair share” or “service” fees) without first confirming that each employee affirmatively and voluntarily authorizes the payment.  This will be a complex challenge for leadership, human resource and labor relations professionals, and counsel.  Critically, because of laws that prohibit unauthorized deductions from employee wages – which typically include enforcement and penalty provisions (See e.g., 19 Del. C., Chp. 11) – it is also important for employers to move quickly to suspend all fee withholding practices until each employee’s affirmative, individual, and voluntary agreement to pay a fee can be confirmed.

As a brief overview, Abood clarified that a state has (had!) a compelling interest in promoting “labor peace” and avoiding “free riders.”  That compelling interest in turn justified agreements – and laws authorizing such agreements – with unions for securing compulsory union agency fees from employees who were represented by a union but chose not to join the union.  “Labor peace” referred to the presumptive benefit of uniform and consistent representation a government employer would realize by recognizing only one union as the exclusive designated representative of a bargaining unit.  “Free riders” referred to employees who choose not to join the union but nonetheless are entitled to all of the rights and benefits of representation.  The elimination of free riders was thought to relate back to the preservation of labor peace and supporting the efficient administration of government services, i.e., a compelling interest.

Under the National Labor Relations Act, the Federal Labor Relations Act, and analogous state laws, unions are obligated to represent all employees in a bargaining unit, regardless of membership in the union.  Represented employees, even non-members, are entitled to all of the terms and conditions of employment secured by the union through the collective bargaining process, such as wages, premium pay standards, benefits, promotional opportunities, and grievance procedures and representation.  The only rights or benefits a non-member employee typically lacks is the authority to vote on a contract or union leadership, and participation in union-sponsored programs and plans.

In a line of cases that will not be cited here, the Court established that public employees may not be compelled to join a union since this violated First Amendment protections against compelled speech, and forcing employees to subsidize speech – particularly political speech – with which they may disagree.  Further, because of the close association between public employees, unions, and elected officials who are considered to be the employer in fact, it was thought that any interaction between unions and government employers may inherently be political speech.  Janus has now closed this circle with the determination that all union and representation activity with a public employer is inherently political, rejecting the premise that collective bargaining with public employers can be separated into component, non-political parts.

Following Abood, the Court sought to strike a balance with separating a union’s political activity from its administrative services, and the obligations of non-member employees to pay for those services.  Unions were directed to identify those portions of their fees that directly supported their political activities vs. their administrative services, and to establish a rebate process for returning the amount of an agency fee that was apportioned to the union’s political activities.  The rebate process is often referred to as a Hudson notice, from Teachers v. Hudson, 475 U.S. 292 (1986).  Unsurprisingly, representational activities comprise the bulk of union fee structures.  Time will tell whether unions will attempt to retain a reduced service-only fee structure to entice continued support for their collective bargaining and representation efforts, or perhaps take an “all-in” approach since a voluntary fee payment process resolves political speech objections, i.e., renewed membership drives and development.

Even before Janus, the Court harbored considerable skepticism for the reasoning used in Abood to justify compulsory agency fees.  (See, e.g., Harris v. Quinn, 573 U.S. ___ (2014)).  In Janus, the Court has now stated without equivocation that Abood was “wrongly decided,” that states do not have a compelling interest in mandating compelled speech and compulsory fees, and that Abood served to provide unions with a “windfall” of billions of dollars in violation of the First Amendment’s protections against compulsory subsidized speech.  The majority concluded that there was no evidence to support the reasoning that mandatory fees are necessary to preserve the efficient administration of government services, since the designation of an exclusive representative and reservation of all bargaining authority to that representative could not be tied to the availability of mandatory fees.  The majority also concluded that there was no inherent link in the structure of the relevant state collective bargaining laws between the designation and authority of an exclusive representative, and the availability of an agency fee – compulsory or otherwise.  Finally, the Court was not persuaded that unions in fact require and are dependent upon agency fees to provide representation services, because, as one example, there is no mandatory fee requirement in the federal sector where there is a significant union presence.  The majority reasoned that unions have any number of motives for designation as an exclusive representative, even in an environment where employees who receive the fruits of the representation do not provide any financial support.

Moving forward, employers must now eliminate their involuntary agency / service / fair share fee withholding practices.  Employers should recognize their independent obligation to avoid involuntary wage deductions, regardless of whether there is presently an established plan to solicit, confirm, and memorialize individual employee choice.  However, this step only applies to the employer’s internal payroll mechanisms for withholding agency fees.  Care must be taken with respect to communicating with employees and implementing new processes, because unions retain representation rights and protections under the respective state laws.   Although the new landscape may be ill-defined at the moment, unions still have protected legal interests in the methods and contents of communications to represented employees.

As a general framework, employers should engage with designated representatives to develop the methods and the contents of notices by which employees are notified of their right to join or refrain from joining a union, their right to decline an agency fee in lieu of membership, and for maintaining clear records of each employee’s notice and election to voluntarily pay a fee in lieu of union membership, or not pay a fee.  Also, employers may need to establish mechanisms to credit employees for fees withheld by mistake during the transitional process for confirming every fee-payer’s individual authorization.

In the wake of this transition, it is unclear whether public sector unions truly face long-term dire consequences from the expected short-term decline in financial support.  It is to be expected that employees are unlikely to choose to pay a fee if they do not have to, while still receiving all of the benefits and protections of representation.  Unionized workforce’s have long been on the decline in the United States, except for the public sector.  This change may propel that decline at a faster rate, even causing unions to disclaim representation if there are insufficient resources to sustain the activity.  If that result comes to pass, employees may well decide that they will fare better with membership supported representation than without.

The structure and vibrancy of post-Janus public sector union representation will be the subject of much study and speculation.  What is clear at the moment is that unions will not disappear overnight, and the Janus decision has not eliminated collective bargaining or the desire of employees to seek representation.  While this turn may well set the stage for the relegation of unions in the United States to a position of impotency, it may also invigorate internal union restructuring, streamlining, and membership drives that could propel increased voluntary participation.

** Note:  This article is a brief overview of the Supreme Court’s decision in Janus v. AFSCME, Council 31, and provides general guidance that public employers and unions should consider.  It does not address all of the potential impacts of the decision on collective bargaining in the public sector. Employers and bargaining representatives should consult experienced counsel for guidance specific to their agreements and jurisdiction.

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