The Legal and Economic Issues of Agency Fees

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The Legal and Economic Issues of Agency Fees

Abstract

The First Amendment of the constitution upholds our right to freely express our ideologies, within reason. The topic of review for this composition is the legality of agency fees, the effect they place on society, and their effect on society. Worker unions have played a major role in the United States since the industrial era. Their role in creating a means of negotiation for many of the general body of labor workers during the time, along with employees of other industries as time continued. Unions were also responsible for a number of negotiated safety measures that are now considered common in the general American workforce. These feats were and are truly commendable and notable; however, they come at a cost. The cost of the benefits provided by a union are accounted for by union dues and agency fees. agency fees are costs passed down from the expenditures of a union onto all possible benefactors of the workforce that the union represents, specifically nonunion employees. Though, in its simplest observation, the reasoned method used to pass down costs of a union to its benefactors may seem optimal, it is far from being without fault. Agency fees have several social and legal issues that have lead to many confrontations in protest against the fees in a court of law. Since 1977, the Supreme Court of the United States has now heard three separate arguments against agency fees, with the decision yet to be delivered on the latest of the three arguments presented.

Legality of Agency Fees

 In 1977 the supreme court case of Abood v. Detroit Board of Education presented arguments for and against agency fees. The plaintiff of the case was a collection of non-union employees working in the industry for (Abood v. Board el. Et., 1977). The issue presented to the court was that a Michigan state statute had allowed employers to force non-union members to pay a service charge to the educator’s union in equivalence to the union’s costs. The plaintiffs argued that they did not approve of the process of collective bargaining within the public sector and of the political and ideological activities which they were using the funding to conduct (Abood v. Board el. Et., 1977). This then makes the forced contribution to the union a violation of the plaintiffs’ freedom of association derived from their First Amendment and their Fourteenth Amendment. The justices of the supreme court gave a decision in favor of the defendant, Detroit Board of Education, stating that as long as the finances were used for expenses relating to mutually beneficial actions such as: grievance adjustment purposes, collective bargaining, and contract administration (Abood v. Board el. Et., 1977). The reasoning that was given was that the First Amendment rights given to the plaintiffs only pertain to the costs associated with actions taken in support of a given ideology; however, that does not exempt contribution to costs such as collective bargaining because it is not in support of specified ideology, rather it is in support of the industry.

With the holding that agency shop agreements, as well as required agency fees for non-union members, are constitutional, the case resulted in changes that would allow employees to withhold from contributing to any nonessential costs of a union yet not all (Abood v. Board el. Et., 1977). Though the holding of this case may be logical, it is difficult to agree with. Requiring a fee from all employees to pay for the benefits they gain as a result of the actions is a simple solution to a far too complex problem. In a capitalist country such as the United States, upholding a citizen’s freedom of choice, especially in regards to financial decisions, is one of the most vital concepts that has been a prevalent cause for action since the creation of this nation. The holding of this case seems to disregard such freedoms in favor of a method that allows only for negotiation by a specified group. Collective bargaining should be made an option, not a legislatively supported method of negotiation.

The practice of agency fees by unions was again brought into question in 1985 as another issue of the legality for agency fees. A second supreme court case brought forth the issue of agency fees again. In the case of Chicago Teachers Union v. Hudson. The plaintiff of the case were non-union members that had objected against the agency fees requested of them. The defendant in the case was the Chicago Teachers Union.  The issue in the case was that non-union employees had a method of objecting agency fees; however, the fees were taken out prior to the objection process, there was not a clear method of understanding the the method of calculation for the fees charged, and the method of objection was managed by the union themselves (Chicago Teachers Union v. Hudson, 1985).

These issues gave cause to question whether the First Amendment rights of expression and association, along with the Fourteenth Amendment rights of the non-union employees to due process. In this case the supreme court held that both of these rights were violated by the union (Chicago Teachers Union v, Hudson,1985). The procedure for objection was not found to be impartial towards the objector, therefore violating the non-union employees Fourteenth Amendment right to due process. The union was also in violation of the non-union employee’s First Amendment due to the lack of clear explanation as to the origin of the agency fees, therefore making it difficult to understand if the fee impacts their freedom of association and expression by financially supporting certain political views (Chicago Teachers Union v. Hudson,1985). This holding was a great success in that it placed a standard of liability on unions which requires them to ensure that the rights of the employees are considered to be the first priority. Yet an equally important result of this case was how it pointed out the difficulty associated with separating the costs associated with a union’s political actions and non-political actions.

Now, 32 years later, the same issue of agency fees is heard by the United States Supreme Court for a third time in the court case of Janus v. AFSCME. In the case the plaintiff, Mark Janus, is a government employee arguing against the defendant, American Federation of State, County, and Municipal Employees, as to required payment of agency fees by non-union members is constitutional under the First Amendment (Janus v. AFCME, 2018).

The plaintiff argues for the court to overturn their decision in Abood v. Detroit Board of Education under the belief that collective bargaining with a government can be considered lobbying, as well as that agency fees are a form of compelled speech and association which require more scrutiny (Janus v. AFCME, 2018). The defendant argues that Janus is misunderstanding and misinterpreting the framework for which collective bargaining and the limitations of First Amendment rights of a government employee (Janus v. AFCME, 2018). It is difficult to assume which side will rise victorious while still awaiting ruling from the Supreme Court of the United States; however, holding that Abood v. Detroit Board of Education should be overturned is the most logical result. The reason for such a result to occur is that the supreme court has already given great notice to the difficulties regarding agency fees’ infringement on an employee’s First Amendment rights on multiple occasions. There could be incredible changes to society if such as decision is rendered.

Economic Effects of Agency fees

 In theory agency fees should have minimal effect on the economy of the United States because the nonpolitically related costs are supposed to counteract the agency fees collected by a union. Yet similar to many theories, in practice it is much more difficult to ensure that agency fees are properly applied and do not allow unions to gravely effect an economy.

One major issue associated with agency fees is that they deter individuals from wanting to join a union. The estimated difference between weekly earnings of union members versus those represented by a union yet are not members is less than two percent (Table1). Yet in correlation the average amount of agency fees totals to be roughly three-fourths of the those that a member would pay. This leads employees in unionized industries to then choose not to join. The decrease of union members in the United States workforce from roughly twenty-five percent of public employees to roughly eleven percent clearly demonstrates this drop in membership additions (Bureau of Labor Statistics, 2018). A fourteen percent decrease in membership nationwide is a clear sign that unions should not take lightly. If the Janus v. AFSCME case receives an overturning decision, unions can expect an even greater drop in memberships because the difference percent of union fees paid would be much greater than simply seventy-five percent.

 Another economic issue that agency fees have currently been debating and might soon have to face is the concept of paycheck protection (Crampton et al., 2002).  Paycheck protection in this case is in reference to the ability given two unions through agreements with the employer to simply withdraw agency fees from employees’ paycheck whether they are member of the union or not (Crampton et al., 2002). This issue has been conversed about in presidential elections as of early back as 2002. If the decision in your court case being heard by the Supreme Court currently resolves in favor of the plaintiff, unions will no longer have a right to simply take agency fees out of an employee’s paycheck (Crampton et al., 2002).

This event becomes an economic issue for the unions as well as the employer because the turnover for which they expect to have the funds from agency fees available to them would greatly increased. Intern, this would also increase the cost of employer in relation to the required liability over agency fees that are to be expected from his/her employees to the union, as per the agreement made between the employer and the union.

Unions are seen as a major economic force in politics. Though federal laws prohibit unions use provided funds from non-union employees, oftentimes unions will negotiate with government entities in a process of contract bargaining, which can be funded by agency fees. This is one of many methods in which unions can make non-union employees’ funds available to them for political action (Masters, 1998). Though most of the context for which contract bargaining occurs is that of nonpolitical Association, the results of a contract negotiation with the union can often be a major influence on a politician’s career. For example, if a politician is forced to spend a large amount of funds to complete the contract-negotiation their political stature will decrease due to inability to fulfil their promises, and in turn a rivaling political with similar views as the union may be considered for a more critical position.Though this may seem far-fetched, it occurs often within politics of the United States. It is not that unions who take part in such behavior are inherently bad; rather, they are economically inefficient. The manner in which they use their funds, especially from nonunion employees to take part in these political games can rapidly waste funding.

The funds wasted can and should be used in order to continue to provide benefits for those within their industry (Masters, 1998). If the funds are not used to directly for the employees in the industry, it will not re-enter into the economy of that in industry and will represent the union as a detriment to the economic wellbeing of that industry. The defendant in Janus v. AFSCME is well-known for being one of the largest political unions.  Intern, this means that a decision against them would effect their ability to partake in political affairs and will eventually turn the union into a detriment to the industries it represents (Masters, 1998).

One major industry that sees unions in such a way is that of construction. Union agreements with construction contractors are often viewed as being inefficient and ineffective in the 21st century (Tuerck, 2010). The detriment that means produce within the industry construction can be seen primarily through project labor agreements. The project labor agreements are made between the owners of the project and the construction unions (Tuerck, 2010). Within the agreements the union set the hourly wages and benefits for the project. It does not prevent nonunion contractors from bidding on the project; however, it does standard for the majority of the costs associated with the project that are within negotiation (Tuerck, 2010). This action greatly limits the economic growth of the industry by regulating many aspects of costs associated to a project, effectively decreasing the quantity and quality of bids for construction projects.

Alternative Option to Unions

There many possible alternatives to unions, which require agency fees, that are often limited by the existence of the unions an industry in which they could be prevalent. One alternative to unions is a democratic worker organization (Fisck,2016). These organizations essentially complete the same function as a union, yet they do not force any agency fees onto the nonparticipating fellow employees of their industries. Though they still partake in collective bargaining, it is a democratic approach which allows for the opinion of each member to be heard equally(Fisck,2016). This allows for greater say of an individual and for increased flexibility in what terms may be negotiated. The increase in terms that can be negotiated derives from the lack of a need to avoid sensitive topics that many unions hold strict opinions on, such as birth control.

Conclusion

Agency fees are a crippling aspect of unions that in origin are inherently complex and possibly illegal. These fees are collected and improperly applied into the economy from which they are taken and then used indirectly in a method that only limits the economy. They are not the only option and should not be treated as such.

Tables

Table 1, (Bureau of Labor Statistics, 2018).

References

  • Abood v. Detroit Bd. of Education, 431 U.S. 209 (1977)
  • (January, 2018). Bureau of Labor Statistics: Union Members 2017. Retrieved from https://www.bls.gov/news.release/pdf/union2.pdf.
  • Chicago Teachers Union v. Hudson, 475 U.S. 292 (1986)
  • Crampton, S. M., Hodge, J. W., & Mishra, J. M. (2002). The use of union dues for political activity – current status. Public Personnel Management, 31(1), 121-129. Retrieved from http://online.library.marist.edu/login?url=https://searchproquestcom.online.library.marist.edu/docview/215930653?accountid=28549.
  • Fisk, C. L. (2016). Workplace democracy and democratic worker organizations: Notes on worker centers. Theoretical Inquiries in Law, 17(1), 101-130.
  • doi:http://dx.doi.org.online.library.marist.edu/10.1515/til-2016-0005.
  • Mark Janus v. American Federation of State, County, and Municipal Employees, Council 31.(2018).
  • Masters, M. F. (1998). AFSCME as a political union. Journal of Labor Research, 19(2), 313-349. Retrieved from http://online.library.marist.edu/login?url=https://search-proquest-com.online.library.marist.edu/docview/214013037?accountid=28549.
  • Tuerck, D. G. (2010). Why project labor agreements are not in the public interest. Cato Journal, 30, 45. http://heinonline.org/HOL/LandingPage?handle=hein.journals/catoj30&div=6&id=&page=.

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