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U.S. Supreme Court Decides Janus v. AFSCME Agency Fee Case

Janus v AFSCME The Supreme Court of the United States building - Buelow Vetter Buikema Olson & Vliet

Today, the United States Supreme Court issued a decision in Janus v. American Federation, et al., concluding that public sector employees cannot be required to pay so-called “fair share” union fees. This decision is likely to cause a significant decrease in union revenue and may result in further decline of union membership.

The petitioner in Janus challenged the precedent set forth in Abood v. Detroit Board of Education. Under Abood, if a majority of employees in a bargaining unit vote to be represented by a union, that union is designated as the exclusive representative of all the employees, even those who do not join the union. Non-union member employees within the bargaining unit were required to pay an “agency fee” to the union because they benefited from the union’s collective bargaining activities with the employer. Importantly, the agency fees could only be used to cover the cost of the union’s activities that benefited the individual employee. The union could not use the agency fees for activities such as political expression. In other words, non-union employees did not have to fund the union’s political activities but were required to pay their so-called “fair share” for the activities that benefited the employee.

In Janus, a public sector employee, Janus, challenged a provision of the Illinois Public Relations Act, which allowed unions representing public employees to collect agency fees from non-member employees. In this case, the agency fee was 78% of full union dues. Janus sought to halt the union’s collection of agency fees because he believed the practice violated the First Amendment by requiring employees who disapprove of the union to contribute money to it. He argued the union’s bargaining over matters such as government employee benefits and salaries is inherently political, and thus requiring non-union members to pay union fees is a free speech violation.

The Supreme Court found in favor of Janus, using an “exacting scrutiny” standard to conclude the First Amendment is violated when money is taken from non-consenting employees for a public-sector union, and that employees must affirmatively choose to support the union before anything is taken from them. The Court reasoned there is a significant impingement on First Amendment rights when public employees are required to provide financial support for a union that takes positions during collective bargaining that have powerful political consequences. In overruling Abood, the majority cited the fact that “Abood’s proponents have abandoned its reasoning, that the precedent has proven unworkable, that it conflicts with other First Amendment decisions, and that subsequent developments have eroded its underpinnings.”

As a result of the Supreme Court’s decision, unions are likely to see a drop in dues-paying membership as public sector employees find that they can benefit from union negotiations without paying dues. Union revenues are also likely to take a substantial hit. Additionally, under Act 10, most public sector employees in Wisconsin cannot be required to join a union or pay agency fees. However, an exception exists for police and fire employees, and many police and fire contracts require the payment of agency fees by non-union members. The Janus decision conflicts with such contract provisions. Therefore, police and fire employers must review their existing collective bargaining contracts to identify any provisions providing for agency fees. Employers should also review the “savings” clause to determine the necessary steps to take when a portion of the contract conflicts with the law.

If you have any questions about this Legal Update, or require assistance in reviewing your collective bargaining contracts, please contact Matt Flanary at mflanary@buelowvetter.com or 262-364-0253, Joel Aziere at jaziere@buelowvetter.com or 262-364-0250 or your Buelow Vetter attorney.

This Legal Update is intended to provide information only on general compliance issues and should not be construed as legal advice. Please consult an attorney if you have any questions concerning the information discussed in this Legal Update.

In order to comply with Treasury Circular 230, we are required to inform you that any advice we provide in this Legal Update concerning federal tax issues is not intended or written to be used, and cannot be used, to avoid federal tax penalties or to promote, market, or recommend to another person any tax advice addressed herein.

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