Mandatory Agency Shop Fees Ruled Unconstitutional in Janus v. AFSCME

Category: Special Bulletins
Date: Jun 27, 2018 06:08 PM
Mandatory Agency Shop Fees Ruled Unconstitutional in <i>Janus v. AFSCME</i>

This post was authored by Kevin J. Chicas.

The United States Supreme Court today, on Wednesday June 27, 2018, reversed the Seventh Circuit Court of Appeals in Janus v. AFSCME, and held that mandatory agency shop service fees are unconstitutional under the First Amendment of the U.S. Constitution.

Under an agency shop arrangement, employees within a designated bargaining unit who decline membership in a labor organization (i.e., a union or local labor association) must pay a proportionate “fair share” agency shop fee to the labor organization. These agency shop fees are different from dues, which are voluntarily deducted typically through an employee authorization form.  In theory, the agency shop fees are meant to cover the labor organization’s  representation costs for collective bargaining activities conducted on unit members' behalf.

Mark Janus challenged this theory, claiming he was being compelled to pay agency shop fees, which labor organizations could use to advance political speech to which he disagreed.  The U.S. Supreme Court ruled against AFSCME 5-4, and specifically held that public agencies and “public-sector unions may no longer extract agency fees from nonconsenting employees.”  The Court also held that compelling employees to pay agency fees “violates the First Amendment and cannot continue.  Neither an agency fee nor any other payment to the union may be deducted from a nonmember’s wages, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay. By agreeing to pay, nonmembers are waiving their First Amendment rights, and such a waiver cannot be presumed … Rather, to be effective, the waiver must be freely given and shown by ‘clear and compelling’ evidence.”

How does Janus affect your agency and how to address its impacts?

Public agencies should first understand that Janus is now the prevailing law in the country.  The U.S. Supreme Court made clear that public agencies are immediately prohibited from mandating and collecting agency shop fees from employees.  Given the Court's holding, public agencies will likely need to account for various competing obligations when implementing Janus.

Additionally, the following are some key steps agencies should consider and plan to implement to address the Janus decision.

  1. The first step to address the immediate impacts of Janus is to determine if your public agency has an agency shop arrangement with a local labor organization.

For local public agencies governed by the Meyers-Milias-Brown Act (MMBA), agency shop arrangements are established by agreement with the labor organization or by a vote of the applicable bargaining unit. (Government Code section 3502.5)  For public school agencies governed by the Educational Employment Relations Act (EERA), agency shop arrangements are set up after the labor organization provides notice to the employer to deduct the agency shop fees.  (Government Code section 3546.)

Therefore, your agency should review your payroll systems and each collective bargaining agreement, paying particular attention to provisions related to processing service fee (i.e., agency shop fees) wage deductions.

If your collective bargaining agreement has a severability or savings provision which identifies what happens if a provision of the agreement is determined to be unlawful, you need to follow that provision. Many agency shop arrangements are contained in collective bargaining agreements.  As of today, since agency shop has been declared unconstitutional, agency shop provisions will likely trigger your severability or savings provisions.

  1. Public agencies should then identify employees who are dues payers, service fee and religious or conscientious objector payers, and discontinue service fee and religious objector deductions. Janus does not directly impact labor organization member employees because they are voluntarily paying dues to be a member of the labor organization.  The U.S. Supreme Court ruled, however, that mandatory agency shop fees are unconstitutional.  Therefore, Janus directly impacts the agency’s service fee payers and any bargaining unit members who have a religious objection, but are required to donate their wage deductions to a charitable organization.

To determine which category each bargaining unit member falls within, public agencies should review the election forms on file for each employee. In conjunction with this, employers can also review payroll records that use separate deduction codes to help identify who, historically, has been a dues, service fee and religious/conscientious objector payer.

As described further below, S.B. 866 (signed by Governor Brown today this morning and signed into law as urgency legislation, meaning it goes into effect immediately) may impact this process if, for example, an agency cannot determine the categories of unit employees, and will need to rely on certifications from labor organizations regarding which employees have authorized dues deductions.

While Janus may impact labor organizations on a greater scale, agencies with an agency shop may be required to make administrative changes to their payroll practices as soon as possible.  Once you identify your employee categories, agencies should develop an action plan with the appropriate departments to identify payroll cutoff deadlines for cessation of specific deductions.  Your agency should take steps to both immediately implement changes mandated by Janus, and to notify and meet and confer with any labor organizations regarding negotiable effects of the changes as soon as possible.  Regardless of the meet and confer obligations, effective immediately, your agency is precluded from making a deduction from the wages of any employee who has been a service fee payer or religious objector. This means today, June 27, 2018, regardless of whether today is in the middle of your pay period. 

  1. Public agencies should then notify the impacted labor organizations regarding the planned changes to the deduction of service fees, and then plan to meet and confer over the negotiable impacts of those changes. Public agencies may receive push-back in implementing Janus, but they should understand complying with the requirements of the law is their legal obligation.  Regardless, public agencies need to meet and confer over the negotiable effects of the decision.

After notifying the labor organization and/or during negotiations, the labor organizations may identify various effects in discontinuing service fee deductions.  The obligation to negotiate over effects includes the obligation to consider the proposals in good faith within the parameters of the law.

  1. In a post-Janus world, public agencies will need to be ready to address inquiries from employees and labor organizations regarding issues, such as how to withdraw from the labor organization or how to revoke dues authorizations.  As discussed above, Janus does not prohibit voluntary dues deductions, so this practice should continue consistent with applicable law, the agency's collective bargaining agreements and employer relations rules. You should review this information right away so that you know the answers.  In responding to employee inquiries, employers may provide factual information to employees, but they cannot do so in a manner that would discourage employees from joining or remaining labor organization members.  (Government Code section 3550.)  Additionally, S.B. 866 provides for additional substantial restrictions on issuing “mass communications” to multiple employees and requirements to direct labor organization membership inquiries to the labor organization. Public agencies should no longer send employees any mass communication about the Janus decision without meeting and conferring with exclusively recognized representatives about the content of such communications.  Public agencies should also defer membership inquiries to labor organizations.

Janus is a landmark decision, with far-reaching impacts. So is S.B. 866.  Based on the current state of the law and the considerations above, public agencies should coordinate internally to develop action/contingency plans to address any and all legal obligations.  LCW is available to assist and has been following Janus and actively advising public agencies on how to best prepare and handle the decision the day it comes out. That day has come! As part of LCW's coverage of the Janus decision and related state legislation, LCW will be providing the following services to our clients:

LCW's Special Bulletin discussing CA’s new legislation, S.B. 866 is available here.

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