For the first time in 41 years, unions can no longer collect mandatory “agency fees” from public sector workers who are not union members. In Janus v. AFSCME, the U.S. Supreme Court held that the First Amendment is violated when money is taken from non-consenting employees of a public agency and paid to a union. Janus overruled the Court’s 1977 decision in Abood v. Detroit Board of Education. The express overruling of Abood deals a financial blow to organized labor in the public sector.

Under Abood, public employers could require employees who declined to join a union to pay a percentage of the union dues known as “agency fees.” Abood held that this was constitutionally permissible to prevent the so-called “free rider” problem, i.e., employees who received the benefits of collective bargaining without bearing the costs, and to promote “labor peace.” Agency fees were supposed to encompass the costs attributable to collective bargaining, but not cover any of the union’s political or governmental activities and advocacy, the cost of which was supposed to be deducted from the agency fee. Nonetheless, non-members were often charged for many governmental advocacy activities that bore directly or indirectly on wages and working conditions of public employees that a union represented.

In recent years, the Court has moved away from the standards established in Abood. In Janus, the Court concluded that the mandatory exaction of fees necessarily required employees who were not union members to subsidize political speech e.g., union lobbying and advocacy directed at government employers concerning issues that necessarily implicate matters of public policy, such as government budgeting, fiscal policy, taxation and allocation of public resources.

Impact of the Decision

Public employees, unions and public agencies in the 23 states that allow public sector union contracts to require that mandatory agency fees be paid by non-members as a condition of employment. These states include Oregon, Washington, California and Alaska.

The decision, issued on June 27, is effective immediately, and public employers must immediately cease deduction of agency fees. Neither an agency fee nor any other similar payment to the union may be deducted from a non-member’s wages, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay.

The decision deals a financial blow to unions in the public sector. For example, in those states that previously eliminated mandatory fee payment through state legislation, the percentage of fee payers declined by as much as 40 percent. In apparent anticipation of this impending shortfall, many public sector unions have made significant staff reductions.

Impact of the Decision

In the long term, the political impact of Janus is likely to be significant. Because of the broad definition of “collective bargaining services” that were chargeable to fee payers, unions have been able to create alliances with politicians in state and local government that were facilitated by these financial resources. Additionally, a number of political and social advocacy organizations, largely left-leaning in their orientation, have been funded by public sector unions from fees collected by agency fee payers.

Key takeaways and Action Items for Employers

Public Sector Employers

  • The decision does not affect the deduction of dues from the pay of employees who are union members, provided that these requirements are properly spelled out in the collective bargaining agreement.
  • Employers should consult with their legal counsel concerning their rights and obligations under Janus.
  • Public sector employers should take steps immediately to ensure that union agency fees are not deducted from the pay of employees who are agency fee payers only.
  • Employers should promptly review its records and confirm which employees are agency fee payers only, and act accordingly.
  • In the event of questions about the status of an employee as an agency fee payer, employers should promptly confirm the employee’s status.
  • Employers may have a duty to bargain with a union over the effects of the Janus decision. Among the proposals we may expect to see from unions are:
    • Requiring the presence of union representatives at employee orientation meetings to allow the union to promote union membership,
    • Placing the responsibility for policing compliance with Janus exclusively in the hands of the union, and
    • Prohibitions on employees communicating with the public agency employer concerning dues deductions, except through the union.
  • Employers should review their collective bargaining agreements and policies and determine whether changes may be necessary to comply with the Janus decision.

Private Sector Employers

  • Janus has no direct application to union security agreements (union shop, agency shop, maintenance of membership) between an employer and a union in the private sector. Although some commentators have suggested that Janus may have application to private sector agreements, a section in the Janus opinion in fact confirms the constitutional validity of such private sector agreements.
  • To avoid the impact of Janus, we may see efforts by unions to promote privatizing some public sector services, thereby possibly creating opportunities for private sector employers, primarily in fields such as health care and social services.
  • Janus may invalidate provisions in “labor-peace” agreements associated with large public works projects that have sometimes required payment of “fair share” payments by employees of contractors.