There’s a Simple Way To Neutralize Janus—If State Legislators Have the Will

Aaron Tang June 27, 2018

Members of the Service Employees International Union (SEIU) hold a rally in support of the American Federation of State County and Municipal Employees (AFSCME) union at the Richard J. Daley Center plaza on February 26, 2018 in Chicago, Illinois. (Photo by Scott Olson/Getty Images)

The guil­lo­tine has final­ly fall­en. After years of uncer­tain­ty, the Supreme Court has inval­i­dat­ed fair share fee arrange­ments in thou­sands of pub­lic sec­tor col­lec­tive bar­gain­ing agree­ments across the coun­try through its 5 – 4 deci­sion in Janus v. AFSCME, Coun­cil 31. The result is clear: pub­lic-sec­tor work­ers can choose not to share in the costs of their unions’ col­lec­tive bar­gain­ing. Janus thus jeop­ar­dizes the finan­cial vital­i­ty of pub­lic sec­tor unions. And it does so just as a wave of teacher walk­outs in right-to-work states reveals the polit­i­cal risks of poli­cies that give pub­lic sec­tor work­ers lit­tle voice in their wages and con­di­tions of employment.

What’s next? It is time for law­mak­ers in pro­gres­sive, pro-labor states to get to work. (Note that these are essen­tial­ly the only states affect­ed by Janus, since red states have already over­whelm­ing­ly for­bid­den fair share fees as a mat­ter of leg­isla­tive pol­i­cy.) As I explain in How To Undo Janus: A User-Friend­ly Guide”, law­mak­ers have the pow­er to reduce Janus to a mere foot­note in the long arc of his­to­ry for orga­nized labor. To see how, con­sid­er the fol­low­ing thought exercise.

Imag­ine you are a state leg­is­la­tor in a pro­gres­sive state in the 1950s, before pub­lic sec­tor unions are even rec­og­nized. You believe that pub­lic work­ers will be more sat­is­fied and pro­duc­tive, and that the qual­i­ty of pub­lic ser­vices will improve, if work­ers have a mean­ing­ful voice in their wages and terms and con­di­tions of employ­ment. You believe that the best way to empow­er this voice is to require pub­lic employ­ers to bar­gain on a range of issues with unions that are account­able to their mem­bers and that fair­ly rep­re­sent all work­ers. And you rec­og­nize that unions must have ade­quate finan­cial resources in order to advo­cate effectively. 

So here is the mil­lion-dol­lar ques­tion: How should the gov­ern­ment ensure the unions’ finan­cial security? 

One option would be for pub­lic employ­ers to pay an extra sum of mon­ey to their work­ers and then to force all work­ers to send that mon­ey on to the union. Any work­er who refus­es would be fired. The ratio­nale is that because the union will be legal­ly oblig­at­ed to rep­re­sent all work­ers fair­ly, all work­ers must pay their fair share” of the union’s bar­gain­ing costs. This approach would achieve the basic goal of union finan­cial secu­ri­ty, since most work­ers will nat­u­ral­ly pre­fer to keep their job than lose it over a mod­est com­pul­so­ry union payment.

Yet the fair share approach has a hid­den down­side. By chan­nel­ing the unions’ mon­ey through work­er pay­checks, the pub­lic employ­er impos­es an extra tax on work­ers. Work­ers are taxed, after all, on their income. But the por­tion of work­er pay­checks that must be turned over to the union would be more imag­i­nary income than real. Work­ers would pay tax­es on that income with­out ever see­ing it in their bank accounts. Depend­ing on the worker’s salary and cir­cum­stances, the net loss from this arrange­ment would be upwards of $200 to $300 each year.

You quick­ly come up with a sec­ond option. Rather than pay­ing work­ers an extra sum of mon­ey and forc­ing them to turn it over to the union, pub­lic employ­ers can just send the same sum straight to the union, reim­burs­ing unions for their bar­gain­ing costs direct­ly. Remov­ing the work­ers from the equa­tion would elim­i­nate the extra tax bur­den cre­at­ed by the fair share approach. Under direct reim­burse­ment, work­ers would have more mon­ey at the end of the day, the union would enjoy the same finan­cial resources, and state and local bud­gets would be unaf­fect­ed. What‘s more, direct reim­burse­ment would be more respect­ful of the objec­tions of a work­er like Mark Janus who does not want to pay fair share fees: With the reim­burse­ment approach, no work­er must send mon­ey from their pay­check to an orga­ni­za­tion to which they are opposed.

Which option would you choose as a 1950s law­mak­er: the fair share approach or the direct reim­burse­ment approach?

In real life, of course, pro-labor states chose the fair share approach when draft­ing their pub­lic sec­tor labor laws in the 1960s and 70s. Much of the expla­na­tion is his­tor­i­cal. Pub­lic sec­tor labor law was mod­eled on the 1935 Nation­al Labor Rela­tions Act’s approach to fund­ing pri­vate sec­tor unions: fair share fees.

To the extent there is a prin­ci­pled expla­na­tion, it is an argu­ment based on union inde­pen­dence. The direct reim­burse­ment approach, the argu­ment goes, would make unions depen­dent upon pub­lic employ­ers — the very enti­ty against whom they are sup­posed to bar­gain — for their finances. As a result, unions might feel pres­sured to sub­vert work­er inter­ests in order to max­i­mize their own finan­cial wellbeing.

This is an impor­tant con­cern. Yet it is one impli­cat­ed by fair share fees, too. In the immor­tal words of Jack Larkin, a union rep­re­sen­ta­tive who tes­ti­fied dur­ing the 1935 debates over the NLRA, any argu­ment that fair share fees are more con­ducive to union inde­pen­dence than direct reim­burse­ment is absurd” because “[t]he ulti­mate source of the mon­ey paid in by the mem­bers of a labor orga­ni­za­tion is from the employ­er and I can­not see what dif­fer­ence it makes whether the [employ­er] turns over a lump sum each year, accord­ing to a fixed arrange­ment, or whether the men pay a check-off.”

In any case, union inde­pen­dence can eas­i­ly be pre­served under a reim­burse­ment sys­tem through wise leg­isla­tive draft­ing. The key is that pub­lic employ­ers not be giv­en the uni­lat­er­al pow­er to reduce reim­burse­ment pay­ments as a way of coerc­ing unions into agree­ing to wage or ben­e­fit cuts. Instead, pub­lic employ­ers should be required to reim­burse unions for all bar­gain­ing-relat­ed costs. Unions would then keep track of their expen­di­tures and sub­mit them for reim­burse­ment peri­od­i­cal­ly. If an employ­er believes that cer­tain expen­di­tures are not suf­fi­cient­ly relat­ed to bar­gain­ing to mer­it reim­burse­ment (for exam­ple, per­haps an expen­di­ture is for some polit­i­cal cam­paign con­tri­bu­tion), the employ­er could chal­lenge those expens­es before an inde­pen­dent body of labor law experts. All oth­er expens­es would need to be paid promptly.

If this kind of a sys­tem seems com­pli­cat­ed, it shouldn’t. It is essen­tial­ly the same process that unions fol­lowed before Janus. Under the fair share mod­el, unions cal­cu­lat­ed their bar­gain­ing-relat­ed bud­gets and sub­mit­ted them for pay­ment, with chal­lenges to indi­vid­ual union expens­es often adju­di­cat­ed by inde­pen­dent bod­ies known as state Pub­lic Employ­ment Rela­tions Boards (PERBs). To be sure, pub­lic employ­ers would pay the union direct­ly (rather than through manda­to­ry deduc­tions from work­er pay­checks) under the reim­burse­ment sys­tem, and employ­ers would have the right to chal­lenge whether cer­tain union expens­es are ger­mane to col­lec­tive bar­gain­ing (rather than object­ing workers).

But two impor­tant real­i­ties will lim­it pub­lic employ­ers’ abil­i­ty and incen­tive to use such chal­lenges as a threat to union bud­gets. First, there is already a sig­nif­i­cant body of judi­cial and admin­is­tra­tive law gov­ern­ing whether cer­tain kinds of union expen­di­tures are ger­mane to bar­gain­ing (and thus reim­bursable). So this long-set­tled prece­dent will pre­vent pub­lic employ­ers from chal­leng­ing the vast major­i­ty of rou­tine union expen­di­tures on day-to-day bar­gain­ing, con­tract admin­is­tra­tion and griev­ances. Sec­ond, lit­i­ga­tion is cost­ly. It is unlike­ly to be worth­while for pub­lic employ­ers to expend tens or even hun­dreds of thou­sands of dol­lars quib­bling with unions over the reim­bursabil­i­ty of union expens­es, the vast major­i­ty of which are unques­tion­ably per­mis­si­ble under decades-old precedent.

For those inter­est­ed in a deep­er dive into these and oth­er leg­isla­tive design and imple­men­ta­tion issues, I explore them at length in Life After Janus”, which includes a mod­el direct reim­burse­ment bill for state law­mak­ers to consider.

Had they designed pub­lic sec­tor labor law from scratch, state law­mak­ers might have been wis­er to choose a direct reim­burse­ment sys­tem rather than a fair share sys­tem to pro­tect union finan­cial secu­ri­ty. But even if you think it’s a close call, that is exact­ly the point: Reim­burse­ment serves essen­tial­ly every goal that fair share fees serve, with the added bonus of increas­ing wages for a sig­nif­i­cant por­tion of the mid­dle class. So now that Janus has tak­en the fair share option off the table, the cor­rect answer for pro­gres­sive law­mak­ers is obvi­ous. Here’s hop­ing they get it right.

Aaron Tang 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 U.S. Supreme Court Jus­tice Sonia Sotomay­or. He is the author of How to Undo Janus: A User Friend­ly Guide, a short white paper that includes mod­el leg­is­la­tion for state law­mak­ers. Fol­low him at @AaronTangLaw.
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