Supreme Court Rules Public Sector NonMember Union Dues Are Unconstitutional

Q: Can public employees, who are not members of a union, be forced to pay union dues?

A: No. On June 27, 2018, in a 5-4 opinion, the United States Supreme Court overturned more than 40 years of precedent, ruling that it is unconstitutional to force public employees to pay agency fees.

In Janus v. AFSCME, Council 31, Mark Janus, a state employee of Illinois, refused to join AFSCME (the “Union”).  Mr. Janus strongly objected to several of the public policy positions taken by the Union.  Despite his refusal to join the Union, however, he was still required to pay a portion of the Union’s fees.  Under the Illinois Public Labor Relations Act, employees who do not wish to join the union are not required to pay full union dues, but rather must pay a percentage of the dues.  These fees, commonly referred to as agency fees, are automatically deducted from nonmembers’ wages in order to compensate the union for the costs of the collective bargaining process and related activities.

The central point of Mr. Janus’ argument was that the nonmember fee deductions are coerced political speech, violating the First Amendment. The Court held that since unions take positions on matters of public importance, requiring public employees to provide financial support to a union would infringe upon their First Amendment rights.  By acting as the exclusive representative of the employees, a union is essentially speaking for all of the employees.  Thus, when a union speaks about matters of public concern, it violates employees’ First Amendment rights, because the union is forcing individuals to endorse views that they find objectionable.

AFSCME argued that agency fees are necessary to prevent nonmembers from taking advantage of the benefits of union representation without bearing the cost. The Court explained that unions receive several benefits simply from being designated as the exclusive representative of the employees.  For example, unions are given a privileged place in negotiations with employers over wages, benefits, and working conditions.  Therefore, it is in the union’s best interest to represent even nonmembers because it allows them to retain their power and control over the administration of the collective-bargaining agreement.  In addition, the union argued that the nonmembers’ First Amendment rights were not restricted because the fees collected by unions only cover collective bargaining, and not political and ideological activities.

The Court found in favor of the nonmembers, stating that it is unconstitutional to force those nonmember employees to pay agency fees. The majority opinion, written by Justice Samuel Alito, ruled that states and public-sector unions “may no longer extract agency fees from nonconsenting employees … The procedure violates the First Amendment and cannot continue.”

Although this decision applies directly to public-sector unions, it could result in a decline in the labor movement generally. Twenty-eight states already have “right to work” statutes in place, banning unions from requiring nonmembers to pay agency fees.  However, unions are steadfast in many of the remaining states, including Pennsylvania.  The elimination of mandatory agency fees for nonmembers may reduce membership across the country, and thus, weaken unions generally.  Justice Alito seemed to recognize this, stating:  “We recognize that the loss of payments from nonmembers may cause unions to experience unpleasant transition costs in the short term, and may require unions to make adjustments in order to attract and retain members.”

— Tracey E. Diamond and Lula T. Weldekidan, Law Clerk


United States Supreme Court Revises Standard for Review of Exempt Classification

Q.  I heard that the U.S. Supreme Court just issued a ruling finding that auto service workers are exempt from overtime pay. My company is not in the automobile industry. Will this opinion apply to us?

A.  The U.S. Supreme Court issued an opinion this week in Encino Motorcars, LLC v. Navarro, finding that auto service workers – those employees who interact with customers and sell them services for their vehicles – are exempt from overtime pay under the Fair Labor Standards Act (FLSA). While the decision directly impacts this small category of jobs, the opinion will have a much more far-reaching impact, since the Court rejected long-standing precedent that exemptions must be construed narrowly against the employer.

In a 5-4 opinion overturning the Ninth Circuit’s decision finding that auto service advisors were non-exempt, the Court expressly rejected the principle invoked by the Ninth Circuit and many courts before it that exemptions to the FLSA should be construed narrowly.  Instead, the Court observed that “[b]ecause the FLSA gives no textual indication that its exemptions should be construed narrowly, there is no reason to give them anything other than a fair (rather than a narrow) interpretation.” (internal quotations omitted).  The Court concluded that “exemptions are as much a part of the FLSA’s purpose as the overtime-pay requirement.  We thus have no license to give the exemption anything but a fair reading.”  Finally, the Court remarked, “even if Congress did not foresee all of the applications of the statute, that is no reason not to give the statutory text a fair reading.”

The dissent criticized the Court for rejecting the narrow construction principle for FLSA exemptions “[i]n a single paragraph . . . without even acknowledging that it unsettles more than half a century of our precedent.”

This is the second time that the Supreme Court ruled in this case. In 2016, the Court rejected a 2011 Department of Labor (DOL) regulation relied on by the Ninth Circuit in finding that service advisors were not exempt.  The Court noted in that opinion that the DOL had flip-flopped on the issue several times over the years.  In 1970, the DOL interpreted an exemption in the FLSA for automobile salesmen to exclude service workers.  The federal courts rejected this interpretation, however, and in 1978, the DOL issued an opinion letter agreeing with the courts that service advisors indeed were exempt.  In 2011, the DOL changed course again, issuing the regulation relied on by the Ninth Circuit that service advisors were not included in the exemption for salesmen.

In its 2016 opinion, the Supreme Court found that the 2011 regulation was not entitled to any deference because the DOL had issued it without a sufficiently reasoned explanation. The Court remanded the matter to the Ninth Circuit to consider the meaning of the statutory language without the regulation.  On remand, the Ninth Circuit again held that the service advisors were not exempt, and the case went back up to the Supreme Court, where it was overturned in last week’s opinion.

What This Means for Employers

This new standard – that exemptions should be given a “fair reading” – is a win for employers, as it should now be easier for companies to persuade courts that an employee’s job duties fall within one of the categories for exempt status under federal law. Prior to this ruling, an employer was unable to overturn the presumption of non-exempt status unless it could demonstrate that an exemption “plainly and unmistakably” applied.  Now, it is more likely that employers will be able to convince a federal court that the exemption applies if it is supported by a fair reading of the text.

Employers must continue to be mindful of state court interpretations of their overtime laws, however, which may construe their corresponding overtime exemption more narrowly than the SCOTUS interpretation.

–Tracey E. Diamond