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Janus v. American Federation of State

United States Court of Appeals, Seventh Circuit

November 5, 2019

Mark Janus, Plaintiff-Appellant,
American Federation of State, County and Municipal Employees, Council 31; AFL-CIO, et al., Defendants-Appellees, and Kwame Raoul, in his official capacity as Attorney General of the State of Illinois, Intervenor-Defendant-Appellee.

          Argued September 20, 2019

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. l:15-cv-01235 - Robert W. Gettleman, Judge.

          Before WOOD, Chief Judge, and Manion and ROVNER, Circuit Judges.

          WOOD, CHIEF JUDGE.

         For 41 years, explicit Supreme Court precedent authorized state-government entities and unions to enter into agreements under which the unions could receive fair-share fees from nonmembers to cover the costs incurred when the union negotiated or acted on their behalf over terms of employment. Abood v. Detroit Bd. of Educ, 431 U.S. 209 (1977). To protect nonmembers' First Amendment rights, fair-share fees could not support any of the union's political or ideological activities. Relying on Abood, more than 20 states created statutory schemes that allowed the collection of fair-share fees, and public-sector employers and unions in those jurisdictions entered into collective bargaining agreements pursuant to these laws.

         In 2018, the Supreme Court reversed its prior position and held that compulsory fair-share or agency fee arrangements impermissibly infringe on employees' First Amendment rights. Janus v. AFSCME, Council 31, 138 S.Ct. 2448, 2461 (2018). The question before us now is whether Mark Janus, an employee who paid fair-share fees under protest, is entitled to a refund of some or all of that money. We hold that he is not, and so we affirm the judgment of the district court.


         A. History of Agency Fees

         Before turning to the specifics of the case before us, we think it useful to take a brief tour of the history behind agency fees. This provides useful context for our consideration of Mr. Janus's claim and the system he challenged.

         The principle of exclusive union representation lies at the heart of our system of industrial relations; it is reflected in both the Railway Labor Act ("RLA"), 45 U.S.C. §§ 151-165 (first enacted in 1926), and the National Labor Relations Act ("NLRA"), 29 U.S.C. §§ 151-169 (first enacted in 1935). In its quest to provide for "industrial peace and stabilized labor-management relations/' Congress authorized employers and labor organizations to enter into agreements under which employees could be required either to be union members or to contribute to the costs of representation-so-called "agency-shop" arrangements. See 29 U.S.C. §§ 157, 158(a)(3); 45 U.S.C. § 152 Eleventh. Unions designated as exclusive representatives were (and still are) obligated to represent all employees, union members or not, "fairly, equitably, and in good faith." H.R. Rep. No. 2811, 81st Cong., 2d Sess., p. 4.

         In Railway Employment Dep't v. Hanson, 351 U.S. 225 (1956), a case involving the RLA, the Supreme Court held that "the requirement for financial support of the collective-bargaining agency by all who receive the benefits of its work is within the power of Congress under the Commerce Clause and does not violate either the First or the Fifth Amendments." Id. at 231. In approving agency-shop arrangements, the Court said, "Congress endeavored to safeguard against [the possibility that compulsory union membership would impair freedom of expression] by making explicit that no conditions to membership may be imposed except as respects 'periodic dues, initiation fees, and assessments."' Id. Hanson thus held that the compulsory payment of fair-share fees did not contravene the First Amendment.

         Several years later, in Int'l Ass'n of Machinists v. Street, 367 U.S. 740 (1961), the Court discussed the careful balancing of interests reflected in the RLA, observing that "Congress did not completely abandon the policy of full freedom of choice embodied in the [RLA], but rather made inroads on it for the limited purposes of eliminating the problems created by the 'free rider.'" Id. at 767. The Court reaffirmed the lawfulness of agency-shop arrangements while cautioning that unions could receive and spend nonmembers' fees only in accordance with the terms "advanced by the unions and accepted by Congress [to show] why authority to make union shop agreements was justified." Id. at 768. Legitimate expenditures were limited to those designed to cover "the expenses of the negotiation or administration of collective agreements, or the expenses entailed in the adjustment of grievances and disputes." Id. The Court left the question whether state public agencies were similarly empowered under state law to enter into agency-shop arrangements for another day.

         That day came on May 23, 1977, when the Supreme Court issued its opinion in Abood. 431 U.S. 209. There, a group of public-school teachers challenged Michigan's labor relations laws, which were broadly modeled on federal law. Id. at 223. Michigan law established an exclusive representation scheme and authorized agency-shop clauses in collective bargaining agreements between public-sector employers and unions. Id. at 224. The Court upheld that system, stating that "[t]he desirability of labor peace is no less important in the public sector, nor is the risk of 'free riders' any smaller," id., and that "[t]he same important government interests recognized in the Hanson and Street cases presumptively support the impingement upon associational freedom created by the agency shop here at issue." Id. at 225. It recognized that "government may not require an individual to relinquish rights guaranteed him by the First Amendment as a condition of public employment." Id. at 233-34. Nonetheless, it said that a public employee has no "weightier First Amendment interest than a private employee in not being compelled to contribute to the costs of exclusive union representation/' id. at 229, and thus concluded that "[t]he differences between public- and private-sector collective bargaining simply do not translate into differences in First Amendment rights." Id. at 232.

         The correct balance, according to Abood, was to "prevent[] compulsory subsidization of ideological activities by employees who object thereto without restricting the Union's ability to require every employee to contribute to the cost of collective-bargaining activities." Id. at 237. And for four decades following Abood, courts, state public-sector employers, and unions followed this path. See, e.g., Locke v. Karass, 555 U.S. 207 (2009); Lehnert v. Ferris Faculty Ass% 500 U.S. 507 (1991); Chicago Teachers Union v. Hudson, 475 U.S. 292 (1986); Ellis v. Railway Clerks, 466 U.S. 435 (1984). Agency-shop arrangements, the Court repeatedly held, were consistent with the First Amendment and validly addressed the risk of free riding. See Comm'cns Workers of America v. Beck, 487 U.S. 735, 762 (1988) ("Congress enacted the two provisions for the same purpose, eliminating 'free riders,' and that purpose dictates our construction of § 8(a)(3) ... ."); Ellis, 466 U.S. at 447, 452, 456 (referring in three places to the free-rider concern); see also Lehnert, 500 U.S. at 556 (Scalia, J., concurring).

         In time, however, the consensus on the Court began to fracture. Beginning in Knox v. Sew. Emps. Int'l Union, 567 U.S. 298 (2012), the rhetoric changed. Abood began to be characterized as an "anomaly," and the Court started paying more attention to the "significant impingement on First Amendment rights" Abood allowed and less to the balancing of employees' rights and unions' obligations. Id. at 310-11. Building on Knox, Harris v. Quinn criticized the reasoning in Hanson and Abood as "thin," "questionable," and "troubling." 573 U.S. 616, 631-35 (2014). Harris worried that Abood had "failed to appreciate the conceptual difficulty of distinguishing between union expenditures that are made for collective-bargaining purposes and those that are made to achieve political ends" and to anticipate "the practical administrative problems that would result." Id. at 637. The Harris Court also suggested that "[a] union's status as exclusive bargaining agent and the right to collect an agency fee from non-members are not inextricably linked." Id. at 649.

         Nonetheless, and critically for present purposes, these observations did not lead the Court in Harris to overrule Abood. Informed observers thought that Abood was on shaky ground, but it was unclear whether it would weather the storm, be restricted, or be overturned in its entirety. That uncertainty continued after the Court signaled its intention to revisit the issue in Friedrichs v. California Teachers Ass'n, 135 S.Ct. 2933 (2015), which wound up being affirmed by an equally divided Court. 136 S.Ct. 1083 (2016).

         B. Janus's Case

         Plaintiff Mark Janus was formerly a child-support specialist employed by the Illinois Department of Healthcare and Family Services. Through a collective bargaining agreement between Illinois's Department of Central Management Services ("CMS") (which handles human resources tasks for Illinois's state agencies) and defendant American Federation of State, County and Municipal Employees ("AFSCME"), Council 31, AFSCME was designated as the exclusive representative of Mr. Janus's employee unit. Mr. Janus exercised his right not to join the union. He also objected to CMS's withholding $44.58 from his paycheck each month to compensate AFSCME for representing the employee unit in collective bargaining, grievance processing, and other employment-related functions.

         Initially, however, Mr. Janus was not involved in this litigation. The case began instead when the then-governor of Illinois challenged the Illinois Public Labor Relations Act ("IPLRA"), which established an exclusive representation scheme and authorized public employers and unions to enter into collective bargaining agreements that include a fair-share fee provision. 5 ILCS § 315/6. Under that law, a union designated as the exclusive representative of an employee unit was "responsible for representing the interests of all public employees in the unit," whether union members or not, § 315/6(d). Fair-share fees were earmarked to compensate the union for costs incurred in "the collective bargaining process, contract administration and pursuing matters affecting wages, hours and conditions of employment." § 315/6(e).

         The district court dismissed the governor for lack of standing, but at the same time it permitted Mr. Janus (and some others) to intervene as plaintiffs. Mr. Janus asserted that the state's compulsory fair-share scheme violated the First Amendment. He recognized that Abood stood in his way, but he argued that Abood was wrongly decided and should be overturned by the high court. Although the lower courts that first considered his case rejected his position on the ground that they were bound by Abood, see Janus v. AFSCME, Council 31, 851 F.3d 746, 747-48 (7th Cir. 2017) ("Janus I"), Janus preserved his arguments and then, as he had hoped, the Supreme Court took the case.

         This time, the Court overruled Abood. Janus, 138 S.Ct. at 2486 ("Janus II"). It held that agency-shop arrangements that require nonmembers to pay fair-share fees and thereby "subsidize private speech on matters of substantial public concern/' are inconsistent with the First Amendment rights of objectors, no matter what interest the state identifies in its authorizing legislation. 138 S.Ct. at 2460. This is so, the Court explained, because "the First Amendment does not permit the government to compel a person to pay for another party's speech just because the government thinks that the speech furthers the interests of the person who does not want to pay." Id. at 2467.

         Several aspects of the Court's opinion are relevant to Mr. Janus's current claim for damages. First, the Court characterized the harm inflicted by the agency-fee arrangement as "compelled subsidization of private speech," 138 S.Ct. at 2464, whereby "individuals are coerced into betraying their convictions," id. It was not concerned in the abstract with the deduction of money from employees' paychecks pursuant to an employment contract. Rather, the problem was the lack of consent (where it existed) to the use of that money-i.e. to support the union's representation work. In other words, the case presented a First Amendment speech issue, not one under the Fifth Amendment's Takings clause.

         The Court found that any legitimate interest AFSCME had in those fees had to yield to the objecting employees' First Amendment rights. In so doing, it rejected the approach to free riding that earlier opinions had taken, holding to the contrary that "avoiding free riders is not a compelling interest" and thus Illinois's statute could not withstand "exacting scrutiny." 138 S.Ct. at 2466. Yet it came to that conclusion only after weighing the costs and benefits to a union of having exclusive representative status: on the one hand, the union incurs the financial burden attendant to the requirement to provide fair representation even for nonmembers who decline to contribute anything to the cost of its services; on the other hand, even with payments of zero from objectors, the union still enjoys the power and attendant privileges of being the exclusive representative of an employee unit. The Court's analysis focused on the union rather than the nonmembers: the question was whether requiring a union to continue to represent those who do not pay even a fair-share fee would be sufficiently inequitable to establish a compelling interest, not whether requiring nonmembers to contribute to the unions would be inequitable.

         Nor did the Court hold that Mr. Janus has an unqualified constitutional right to accept the benefits of union representation without paying. Its focus was instead on freedom of expression. That is why it said only that the state may not force a person to pay fees to a union with which she does not wish to associate. But if those unions were not designated as exclusive representatives (as they are under 5 ILCS §§ 315/6 and 315/9), there would be no obligation to act in the interests of nonmembers. The only right the Janus II decision recognized is that of an objector not to pay any union fees. This is not the same as a right to a free ride. Free-riding is simply a consequence of exclusivity; drop the duty of fair representation, and the union would be free to cut off all services to the non-members.

         Finally, the Court did not specify whether its decision was to have retroactive effect. The language it used, to the extent that it points any way, suggests that it was thinking prospectively: "Those unconstitutional exactions cannot be allowed to continue indefinitely," 138 S.Ct. at 2486; "States and public-sector unions may no longer extract agency fees from nonconsenting employees/' id; "This procedure violates the First Amendment and cannot continue/' id. In the end, however, the Court remanded the case to the district court for further proceedings, in particular those related to remedy. Id. at 2486.

         C. District Court Proceedings

         The most immediate effect of the Court's Janus II opinion was CMS's prompt cessation of its collection of fees from Mr. Janus and all other nonmembers of the union, and thus the end of AFSCME's receipt of those monies. That relief was undoubtedly welcome for those such as Mr. Janus who fundamentally disagree with the union's mission, but matters did not stop there. Still relying on 42 U.S.C. ยง 1983 for his right of action, Mr. Janus followed up on the Court's decision with a request for damages from ...

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