HR REPORT: Agency Fees, Fair Share and the Janus Decision

Mark T. Broth

The information contained in this article is not intended as legal advice and may no longer be accurate due to changes in the law. Consult NHMA's legal services or your municipal attorney.

On June 27, 2018, in Janus v. American Federation of State, County, and Municipal Employees, Council 31, the US Supreme Court, by a 5-4 decision, held that requiring non-consenting public employees to pay “agency” or “fair share” fees violates the First Amendment to the US Constitution.  In reaching this decision, the Court overruled a 40 year old decision in Abood v. Detroit Board of Education, 431 US 209 (1977) which held that agency fees were permissible as long as they did not include costs associated with a union’s political or ideological agenda. 

Labor unions are service businesses.  They offer the services of professional labor negotiators, lawyers, and support staff to employees who believe that they are unable to effectively communicate with their employers.  Like any other business, labor unions need to pay their employees.  This obligation requires a revenue stream.  That revenue stream has traditionally been in the form of dues paid by union members.  In addition to paying its employees, labor unions use dues payments to support lobbying activities and other functions that they believe will benefit workers.

In the private sector, it is common for collective bargaining agreements to contain “union security” clauses that require, as a condition of employment, that employees become and remain dues paying union members.  This type of union security clause is not permitted in states that have enacted “right to work” laws.  In those states, collective bargaining agreements often contain modified union security clauses, which provide that employees must either pay union dues or a fee in lieu of union dues (commonly called an “agency fee” or a “fair share fee”) to cover the cost of core labor union services, such as negotiations and grievance processing.  A series of US Supreme Court decisions have defined and limited the types of services for which an agency fee may be imposed.

In the public sector, compulsory union membership has always been considered unlawful.  Under the First Amendment, all citizens enjoy freedom of association.  This means that no governmental entity can require a citizen to join any organization, such as a political party or a fraternal or service organization or prevent a citizen from doing so.  As a result, a governmental entity cannot be party to a collective bargaining agreement that requires employees to join a labor union.  Nonetheless, unions are required to act as the exclusive representative for all positions within their designated bargaining unit – regardless of whether the employees in those positions have in fact elected to join the union.  As a result, labor unions often bargain for language requiring all covered public employees to either pay union dues or an agency fees to cover the cost of union services.  This practice has been in effect from the onset of public sector collective bargaining until the Janus decision. 

In Janus, the plaintiff, a member of a municipal bargaining unit represented by AFSCME, claimed that the agency fee requirement violated his First Amendment rights.  A bare majority of the Court agreed.  The Court held that all activities of public sector labor organizations are inherently political, in that the union takes positions adverse to the employing governmental body.  Accordingly, the Court held that a compulsory agency fee requirement essentially requires an employee to support those political activities, which violates the First Amendment protection for freedom of association absent each employee’s consent. 

What does this mean for public employers and public sector labor unions?  First, public employers should review their collective bargaining agreements to see if they contain mandatory provisions requiring members of the bargaining unit who do not join the union (i.e., who do not pay union dues) to pay an agency or fair share fee.  If your CBAs have those provisions, employers should immediately notify affected employees and their labor representatives that you will no longer withhold agency fees from employee paychecks.  For some labor unions, the Janus decision will thus mean a decline in revenue.  The extent of that decline largely depends on the affinity between employees and their labor representatives.  Police and fire bargaining units tend to have high union membership and few employees who pay agency fees, so the impact on those labor organizations will be minimal.  Teachers, white collar, and clerical units tend to have more employees who are ambivalent about union representation, so the unions that traditionally represent those employees (NEA, SEA, AFSCME) may see a greater impact.

Janus may be a victory for Republicans who wish to weaken the labor unions traditional support of Democrat candidates.  But it is no victory for public employers whose employees are represented by labor organizations.  The Janus decision is an interpretation of citizen rights under the First Amendment.  It is not a labor law decision.  Nothing in Janus changes any of the rights and responsibilities of public employers or public sector labor organizations under New Hampshire RSA 273-A.  Public employers must continue to bargain in good faith with their employees’ certified bargaining representatives and those bargaining representatives remain obligated to represent all members of a bargaining unit, regardless of the number of dues paying members.  A decline in funding may mean that labor unions will be trying to perform those functions with reduced staff, which could slow the pace of labor negotiations and grievance processing, resulting in increased cost and inconvenience for public employers.

In Janus, the Court suggested that labor unions could offer services to non-members on a “fee for service basis”; essentially, that employees purchase union services a la carte.  Neither the PELRB nor the New Hampshire Supreme Court have opined on whether RSA 273-A allows certified bargaining representatives to withhold services to bargaining unit members who refuse to pay for those services.  However, it is likely that labor organizations will ask public employers to withhold voluntary agency fee or a la carte services payments from employee paychecks. Like dues deductions, any withholding from employee pay is a subject for bargaining and not an automatic employer obligation.

Mark Broth is a member of DrummondWoodsum’s Labor and Employment Group.  His practice focuses on the representation of private and public employers in all aspects of the employer-employee relationship.  This is not a legal document nor is it intended to serve as legal advice or a legal opinion.  Drummond Woodsum & MacMahon, P.A. makes no representations that this is a complete or final description or procedure that would ensure legal compliance and does not intend that the reader should rely on it as such. “Copyright 2018 Drummond Woodsum.  These materials may not be reproduced without prior written permission.”