Supreme Court Rules on Agency Fees

Certain public employees cannot be required to pay any union fees.

The Supreme Court recently decided that home healthcare providers can’t be required to pay any money to the union that represents them in dealing with the state. Although the Court’s opinion applies only to certain “quasi-public” employees – those who are employees both of the state and of the clients they serve – it portends a significant shift in labor law. The decision, called Harris v. Quinn, lays the groundwork for the Court to deal a major blow to public unions in coming years.

Union Dues and Agency Fees

Years ago, unions and employers could negotiate for a “closed shop,” in which all employees had to join the union within a short time after being hired. Employees who refused to join were fired.

Congress outlawed closed-shop agreements in 1947. Since then, unions and employers in some states have been free to negotiate union-security agreements, in which employees must either join the union or pay the union an agency fee. Again, employees who refuse to join or pay the fee must be fired.

There are two significant restrictions on union-security agreements:

  • Right-to-work laws. Currently, about half of the states have right-to-work laws. (See the full list in Right to Work, Union Shops, and Union Dues.) In these states, employees may not be required to join a union or to support it in any way, including by paying dues or fees. In these states, union-security agreements are illegal.
  • Union objectors. Even in states that don’t have a right-to-work law, employees may not be required to pay for the union’s political and other activities that aren’t related to representing employees, if the employees object. Instead, employees may be required to pay only the costs associated with collective bargaining, processing grievances, and similar representational activities.

The Purpose of Agency Fees

Requiring employees to pay agency fees – even if they object to the union – is intended to address the problem of free riders. Once a union is recognized as the bargaining representative of a group of employees, it must represent all employees in the bargaining unit. For example, a union can’t negotiate that only full union members will receive benefits or raises, nor can a union refuse to bring grievances for employees who aren’t union members.

Because the union’s work benefits all employees in the unit, courts and legislatures have found that it would be unfair to allow some employees not to pay for that work. The compromise between the employee’s objections and the union’s obligations has been agency fees. These fees are set to cover the cost of bargaining, grievances and other contractual issues the union takes on; they are not supposed to include the union’s lobbying and other political activities.

No Agency Fees for Quasi-Public Employees

Until the recently decided Harris case, the Supreme Court had consistently held that employees could be required to pay agency fees, whether they worked for a public or private employer, unless they were in a right-to-work state. In Harris, however, the Court created a new exception for certain public employees: those who are jointly employed by private and public employers, and are therefore not “full-fledged” public employees.

The employees in the Harris case were home healthcare workers, paid by the state (through Medicaid) to provide in-home care. Although their compensation comes from the state, these employees are hired by the people for whom they provide care. They enjoy few of the rights of regular public employees, and the state exercises very little control over them.

The Court decided that, in this limited situation, the union didn’t have much of a bargaining role to play on behalf of employees whose pay was set by statute and whose other working conditions were set by their private employers. Therefore, the Court found that these employees could not be required to pay agency fees.

Because the situation of the employees in this case is unusual, some commentators have argued that this case won’t have much of an impact. However, even though the Court’s decision was limited to these employees, its reasoning was not. The Court was very skeptical of its precedent allowing the imposition of agency fees on public employees. The Court called this previous decision “an anomaly,” and criticized it for failing to sufficiently consider the First Amendment rights of employees who argue that they are being required to support a union with which they fundamentally disagree. Does this mean the Court will take a future opportunity to disallow agency fees for regular public employees? We’ll have to wait and see.

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