In what is likely the least surprising landmark decision of the Term, the Supreme Court has finally invalidated public sector union “fair share fees,” or fees that all workers in a bargaining unit are required to pay to support the union’s bargaining costs. Labor proponents and progressive commentators have wrung their hands over Janus v. AFSCME, Council 31 in varying degrees of despair, wondering whether the decision portends the death of public sector unions as we know them or instead just a substantial weakening of union influence.
Neither outcome is inevitable. As I explain more fully in a short whitepaper, state lawmakers in the largely progressive states where fair share fees were permitted before Janus have the power to enact a simple legislative fix that would undo Janus altogether. Indeed, the workaround would not only be revenue-neutral for unions and government employers, it would actually increase net take home pay for public sector workers—a significant section of the American middle class.
To explain, start with Janus itself and the fair share fee system it invalidated. Prior to Janus, public sector unions in more than twenty pro-labor states authorized public employers to agree to what are known as “fair share fee” or “agency fee” clauses. These clauses required every worker in a given bargaining unit to pay periodic fees to support the union’s collective bargaining-related activities, which include things like contract negotiation, administering the contract, and grieving disputes with the employer. The rationale was that because state law obligates public sector unions to fairly represent every worker in the relevant bargaining unit, it is only fair to require every worker to share in its bargaining related costs. The clauses thus provided that workers who refuse to pay will be terminated as a result.
The Supreme Court upheld the fair share system in a seminal 1977 case called Abood v. Detroit Board of Education. The Court recognized that although it burdens the First Amendment rights of objecting workers to force them to pay for bargaining-related speech by unions to which they are opposed, those burdens are worthwhile in view of the benefits that unions can confer on public sector labor relations, insofar as they give workers a voice through which to channel collective concerns. On the other hand, however, Abood recognized that there are some expenditures that unions engage in—such as overt political and ideological campaign contributions—that are not sufficiently related to the union’s core bargaining duties to justify compelling contributions from objecting workers. So objecting workers could be forced to pay in support of bargaining-related activities but not political or ideological ones.
Janus holds that the distinction between bargaining-related and overt political expenses is illusory. The five-Justice majority concludes that both kinds of union activities are tantamount to political speech, and it is equally problematic to force an objecting worker to contribute financial support for either purpose. So the result is that unions cannot force objecting workers to pay for anything the union does.
As many commentators have already explained, this sets up a death spiral free rider problem for public sector unions. Because unions are obligated to represent all workers fairly, whether they join or pay fees or not, there is an enormous incentive for even ardent union supporters not to pay. After all, they’ll get the benefits of a union-negotiated contract either way. And evidence from states that have eliminated fair share fees via right-to-work legislation—as well as internal surveys conducted by major unions themselves—suggests that anywhere from 20% to 70% of workers stop paying once they are given the chance to do so. Needless to say, any major institution that suddenly loses 20% to 70% of its funding is in for a major upheaval.
All of this sounds like a pretty big problem for organized labor. But it doesn’t have to be. Progressive lawmakers can simply amend state labor law to permit public employers to do directly what they used to do indirectly. That is, rather than ensuring that unions have adequate resources by giving money to workers who are then forced to give the money over to a union, public employers can just give the same amount of money for the same basket of bargaining-related costs straight to the union.
Cutting the worker middle-person out of the equation would eliminate any First Amendment harm experienced by an objecting worker. Moreover, by receiving reimbursement for the identical set of bargaining-related activities as before, public sector unions will be no worse for the wear. And public employers can do this in a budget neutral fashion, too. Although they’ll have a new outlay for the reimbursement payments to unions, they can offset that cost by an equivalent future wage or benefit reduction. Workers wouldn’t lose money because the future wage or benefit reduction would come alongside an equivalent increase in take home pay since workers would no longer be forced to pay bargaining-related fees.
But it gets even better. Due to nuances in federal tax law (namely, the 2017 tax reform bill’s elimination of the miscellaneous itemized tax deduction), workers would actually be better off financially under a direct reimbursement regime than a fair share regime. (Hat tip to Daniel Hemel and David Louk for first recognizing this two years ago). Because the direct reimbursement regime would result in workers receiving less taxable income (but the same real take home pay), the consequence is a meaningful reduction in federal tax owed. A single filer earning $50,000 a year would receive an effective tax cut of $200 under the reimbursement model; a similar working $60,000 would receive roughly $300 more. (For a more detailed explanation, see pg. 4 of this white paper).
I don’t want to let off that there is no complexity involved with, or possible objection to, adopting a direct reimbursement fix to Janus. I consider the complexity in greater detail in this full length draft article (complete with model legislation for blue states to consider), which explains how state lawmakers can draft carefully to ensure that the direct reimbursement model incorporates all of the procedures and important state court and administrative law precedents that were established under the pre-Janus fair share system. For reasons I explain more fully in the article, existing procedures and substantive law can help ensure that moving from a fair share to a direct reimbursement model will entail relatively modest switching costs.
As to objections, there is one dominant retort to direct reimbursement. A public sector union can’t get its funding directly from the government, it is argued, because the union’s whole purpose is advocate zealously against the government on behalf of workers. Or as the State of California argued in an amicus brief in Janus itself, unions simply cannot “be funded by the employer or the State and retain the credibility and independence needed to make the system work.”
This argument—call it the union independence objection—has a great deal of superficial appeal. But once one scratches the surface, it’s clear that concerns over union independence are easily and fully addressed through smart legislative drafting. Consider two alternatives:
State X responds to Janus with a bill that permits public employers to reimburse unions for their bargaining-related costs directly. The bill provides that the amount of reimbursement shall be a subject of negotiation between the union and employer, alongside matters such as wages, benefits, and terms and conditions of employment.
State Y responds to Janus with a bill that permits direct union reimbursement as well. Rather than leaving the amount of reimbursement up to negotiation, State Y’s bill provides that employers shall be required to reimburse unions for all bargaining-related costs. Employers can contest whether certain costs are sufficiently related to bargaining by filing a challenge before the state Public Employment Relations Board, an independent body of labor law experts. Such suits are to be adjudicated using the same procedures and state law precedents that developed in response to identical challenges brought by objecting workers under the fair share system.
It should be clear that State X’s bill will lead to union independence problems. When a public employer can retaliate against a union’s demands for workers by cutting the union’s finances, the union will face inherent pressure to soft-pedal its demands on behalf of workers.
State Y’s bill obviates that concern. Because the bill would require public employers to reimburse unions for all bargaining-related costs, employers would lack the ability to engage in tit-for-tat retaliation to coerce unions into soft-pedaling their bargaining demands. To be sure, employers in State Y’s system would have the ability to argue that a union has overstated its expenses by seeking reimbursement for political or ideological expenses. But public sector unions couldn’t charge for those expenses under the fair share system, either. (And if they did, objecting workers could bring suit, just like the public employer). So the direct reimbursement system would be virtually indistinguishable from the fair share system that Janus has invalidated.
Some landmark Supreme Court decisions are incredibly weighty when it comes to their real-life impact. Think of the enormous tangible, social, and psychological advances that Obergefell brought about for a long-subordinated community. Or on the other side of the ledger, think of the pernicious effects that Citizens United has wrought for our democracy.
Seen in comparison, Janus has the potential to be incredibly . . . light. For if state lawmakers are able to enact it, the direct reimbursement alternative would make life perfectly bearable for organized labor after Janus. Indeed, for middle-class workers who would be wealthier under the reimbursement approach, the upshot of Janus may be even better than that.
Aaron Tang (@AaronTangLaw) is Acting-Professor of Law at the University of California-Davis School of Law. He is a graduate of Yale College and Stanford Law School and is a former law clerk to Associate Justice Sonia Sotomayor of the Supreme Court of the United States.