WASHINGTON – The Supreme Court’s Janus decision that invalidated part of public sector union labor laws in many states will force new contract negotiations.

One national union official who asked to not be identified said Wednesday's ruling will trigger the renegotiation of almost all public sector contracts, although those contracts have severability clauses that prevent provisions such as wages and benefits from being changed.

“Most of these agreements will go on as they have in the past,” said Lisa Soronen, executive director of the State and Local Legal Center. “This is not going to be a free fall.”

Lisa Soronen
"This is not going to be a freefall," said Lisa Soronen, executive director of the State and Local Legal Center. Brian Tumulty, The Bond Buyer

“This is a very small part of collective bargaining,” Soronen added.

The 5-4 decision in Janus v. AFCSME invalidated union agency fees, also known as “fair share” fees non-union members pay to their bargaining unit for the cost of contract negotiations and grievance representation.

Illinois and Northeast states such as New York are among the 22 states have laws requiring agency fees. The District of Columbia and Puerto Rico also are affected.

Justice Elena Kagan, who wrote the 28 page dissenting opinion, said fair share laws also apply to police and firefighter unions in two other states. “Many of those states have multiple statutory provisions, with variations for different categories of public employees,” Kagan said in her dissent, predicting the ruling will cause disruption in those states.

“Those laws underpin thousands of ongoing contracts involving millions of employees,” Kagan wrote, adding that “judicial disruption does not get any greater than what the court does today.”

New York City, for instance, has contractually agreed to agency fees in 144 contracts with 97 public-sector unions, according to Kagan.

Moody’s Investors Service said the ruling would result “in a positive long-term impact on government finances” while public finance analysts at S&P Global Rating and Fitch Ratings downplayed the impact.

"These developments could change how state and local governments set employee wages and pensions," Emily Raimes, vice president and senior credit officer at Moody’s said in a press release. "We expect the Supreme Court decision may lower public union revenues, membership and bargaining power in the 22 states that can no longer allow mandatory fees."

S&P said the long-term effect of the ruling “shifts the negotiating dynamic between labor and management in favor of government employers.”

“The ability of employees to push back on benefit changes or negotiate for future benefits could be weakened without union clout,” S&P said, adding that “in many cases, we don’t expect the ruling to largely alter previously agreed upon pension benefits for government employees which in many cases are also supported by constitutional and contract law.”

Amy Laskey, managing director of Fitch Ratings, said, "Despite the landmark Janus ruling, state and local governments will remain limited in their ability to control labor spending."

Going forward, public sector unions will be required to get the workers they represent to “opt in” to paying dues rather than “opting out” of paying them, Soronen said.

Lee H. Adler, lecturer on public sector collective bargaining and labor law at the Cornell University School of Industrial Labor Relations, also said it would be difficult for states and local governments to cut wages or benefits agreed to in existing union contracts.

Some states have protections written into the constitutions that say pension benefits cannot be diminished, Adler said, although others don’t have those guarantees.
Adler described the court ruling as “kind of like a blow to the midsection.”

“It might double you over for a while,” he said. “They are going to have to do what their sisters and brothers do in the South, which is to make more a centerpiece of their work connecting to their members and showing them why they are relevant which they haven’t had to do.”

Adler predicts the Right to Work Foundation and other conservative groups will get public sector union member lists and notify them of their right to opt out of paying their dues.

Union leaders joined with member of Congress Thursday to announce the introduction of legislation that would bar states from prohibiting collective bargaining among public sector employees, as several right-to-work states now do. The lead sponsors of the Public Service Freedom to Negotiate Act include Sens. Patty Murray, D-Wash., and Mazie Hinoro, D-Hawaii, and Reps. Matt Cartwright, D-Pa. and Bobbie Scott, D-Va.

The Janus majority opinion written by Justice Samuel Alito made clear that “employees must choose to support the union before anything is taken from them.”

“Accordingly, neither an agency fee nor any other form of payment to a public-sector union may be deducted from an employee, nor may any other attempt be made to collect such a payment, unless the employee affirmatively consents to pay,” Alito wrote.

The ruling is effective immediately in theory, according to Soronen, who added, “I don’t know as a practical matter how soon that will work.”

Up until now, public sector unions in fair share states have sent annual notices to the workers they represent to inform them they had the option of not paying full dues that include the cost of political activity.

That’s been the practice since 1977 when the Supreme Court ruled unanimously in Abood v. Detroit Board of Education that non-union members could opt out of paying for political activity by their union while being required to pay agency fees.

Only some workers would opt out of paying full dues and reducing their paycheck deduction to the agency fee level. In the case of Mark Janus, the Illinois child care specialist who has worked for the state for about 11 years, the agency fee amounted to 78% of full union dues for his local council of the American Federation of State County and Municipal Employees.

Illinois Gov. Bruce Rauner, who supported the lawsuit by state employee Mark Janus, announced Wednesday the state will stop withholding the agency fees or fair share fees from non-union member paychecks and notify other state employees of their opportunity to withdraw from their union.

The average Illinois state employee pays more than $900 in annual union fees, according to Rauner.

Public sector labor unions were expecting Wednesday’s ruling and have been formulating plans for increasing member outreach.

But at least in the short term the ruling is expected to lead to a significant loss in public sector union membership.

“Without a fair-share agreement, the class of union non-members spirals upward,” wrote Kagan in her dissent. “Employees (including those who love the union) realize that they can get the same benefits even if they let their memberships expire. And as more and more stop paying dues, those left must take up the financial slack (and anyway, begin to feel like suckers)—so they too quit the union.”

“It’s obviously not a surprise and you will see unions will have to have more contact with members and try to be more responsive,” said Dean Baker, senior economist at the Center for Economic Policy Research. “I don’t think they will be necessarily weaker if they are more engaged.”

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