Why Business Is Glued to High Court’s Public Sector Labor Case

Feb. 23, 2018, 11:30 AM

Private businesses will be absorbed in a high-stakes labor law debate next week, even though the case is aimed at public sector unions.

As the U.S. Supreme Court hears oral arguments in Janus v. AFSCME Feb. 26, it might seem odd at first glance that business representatives are involved in a case that turns on the First Amendment rights of government workers. The justices are considering whether public unions can force nonmembers to finance the costs of bargaining for agreements that cover them.

Some of the biggest management-side law firms in the country filed briefs, and business lobbyists are actively tracking the case. They’re all hoping for a union loss, which became the widely expected outcome once conservative Justice Neil Gorsuch joined the bench.

A ruling for fees objector Mark Janus, an Illinois state employee, could hit unions hard in their collective pocketbook, severely weaken their political influence, and rein in organizing campaigns such as Fight for $15. Plus, the arguments used in the Janus ruling could spill over into private sector court decisions, law professors say.

“On the surface, people say, ‘It’s a public sector issue. Who cares?’” Randy Johnson, who ran the labor policy shop at the U.S. Chamber of Commerce for 20 years, told Bloomberg Law. Johnson recently left the nation’s largest business association to head up government affairs at management-side firm Seyfarth Shaw.

“Whether it’s money from the public sector or the private sector, it’s money that goes into political war chests that are often used on Capitol Hill to oppose candidates or policy initiatives that the business community supports,” he said.

In the 2016 election cycle, public sector unions combined to spend $17.7 million on candidates, 90 percent of which went to Democrats, according to the Center for Responsive Politics. The latest Labor Department data shows that about 7.2 million workers belong to public sector unions, nearly half of the nation’s overall union members,

Unions point out that these “fair share” or “agency” fees, separate from dues, only cover the union’s work in negotiating for the wages, benefits, and job security clauses that the contract provides for nonmembers. Unions also fear that a ruling for Janus would lead more members to opt out once they realize they could get representation for free.

NRTW’s Business Ties

Amicus briefs flowed into the Supreme Court last fall in support of the National Right to Work Foundation, which is providing free legal defense to Janus. Some of the briefs filed by limited-government think tanks, conservative coalitions, and individuals were written by attorneys from heavy-hitter management firms like Littler Mendelson, Jones Day, and Baker Hostetler—all of which typically represent private businesses.

The Janus outcome won’t affect the 28 states that have already adopted right-to-work laws, prohibiting forced fee collection at both government and private workplaces. But unions still depend on agency fees in the 22 remaining states, including strong public sector membership bases in California and New York.

To labor supporters, it’s hardly surprising that business representatives are monitoring the case considering the source of the NRTW’s financing. The NRTW’s defense of Janus is funded in part by nonprofit organizations founded or helmed by executives from Walmart Inc., Koch Industries, and pharmaceutical maker G.D. Searle LLC.

“There are several reasons why private employers care about the case—and none of it has to do with their interest in the First Amendment rights of workers,” Adam Pulver, an attorney with the Public Citizen Litigation Group, which supports AFSCME, told Bloomberg Law. “Rather, they want to see a further weakening of unionism in America.”

But Patrick Semmens, a vice president at NRTW, said it’s the unions who have supporters with questionable motivations. He noted that a few attorneys general from right-to-work states, including in Kentucky and Iowa, filed amicus briefs to the Supreme Court supporting the union. It’s curious why those state AGs would be interested in Janus, “unless it’s union political spending that they feel is bolstered by their forced dues powers,” Semmens told Bloomberg Law.

Fight for $15 Influence

The attentiveness from management attorneys and business lobbyists comes at least partly in response to the traction unions such as the Service Employees International Union have gained at state and local legislatures.

SEIU, through its high-profile Fight for $15 campaign, has successfully pushed multiple jurisdictions—from Seattle to Minneapolis to New York state—to enact laws that gradually raise pay floors to $15 per hour, among other policies that worker advocates cheer and businesses say forces them to cut jobs.

Many large multistate companies argue that such initiatives create undue burdens for employers, which must comply with a maze of state and local policies.

“I think the Fight for $15 has made it more obvious for people in the private sector,” said Johnson of Janus’ importance.

SEIU, whose 2 million members span public and private sectors, along with AFSCME, the American Federation of Teachers, and the National Education Association, also help Democratic candidates by mobilizing voters to turn up at the polls.

State, Local Lobbying

Besides the union funds issue, a ruling for Janus might also tempt members to turn in their union cards once they realized they can get representation without paying for it. That could translate to major reductions in a long reliable revenue stream for unions representing teachers, firefighters, home care employees, and police officers.

Although unions can’t use fair share fees to fund political activity, a hit to those fees means a smaller pot of money to operate from generally. To keep their budgets afloat, public unions might then need to divert resources away from lobbying state and local assembly members to pass minimum wage hikes, paid leave bills, and other legislation.

Roger King, a retired Jones Day partner, said in an interview last fall that he’s been tracking Janus closely because of its ultimate result on policy. He now serves as labor counsel to the HR Policy Association, a trade group exclusively devoted to large corporations such as Target Corp., Verizon, and American Express.

A ruling that decreases the financial resources of public sector unions would prove valuable for private sector businesses, King said.

“In turn, we may have a less aggressive approach on state and local labor and employment initiatives, which is a major issue for the companies we represent,” King told Bloomberg Law. “They’re having to deal with a myriad of ever-increasing number of governmental local ordinances and state legislative enactments on paid leave, scheduling, family leave, and sick leave.”

Some labor advocates argue it’s not safe to assume that unions’ political influence will wane if the Supreme Court rules against them. Gabe Morgan, an SEIU 32BJ vice president representing some 21,000 workers in Pennsylvania and Delaware, is among the labor officials who believe Janus is already making unions stronger.

“The goal and the hope is to try to defund us,” Morgan told Bloomberg Law. “I don’t think that’s what will happen here, but I do think it’s an important wake-up call.”

Private Sector Spillover

Samuel Estreicher, a labor professor at New York University Law School, says there’s another long game that businesses might be playing. If the high court rules for Janus, “I think there will be a spillover to the National Labor Relations Act,” he said. That could mean a renewed push to ban fair share fees in the private sector.

The prohibition of fair share fees at government workplaces could lead courts to make similar interpretations under the Railway Labor Act “and ultimately influence how union security clauses in the NLRA context are interpreted,” Estreicher told Bloomberg Law. The RLA, which has some overlap with the NLRA, governs labor relations for air carriers and railroads.

Kate Andrias, a labor professor at the University of Michigan Law School, sees an “outside possibility” of a Janus precedent bleeding into the NLRA. But the more likely effect on businesses is in the legislative, not judicial, arena, she told Bloomberg Law.

The NRTW already has right-to-work campaigns in some of the 22 remaining states that lack such statutes and also urges Congress to codify right to work into federal law. “Right-to-work” generally refers to laws that prohibit fair share fees on workers covered by a collective bargaining agreement who choose not to join a union.

“I think a ruling against unions and local governments” in Janus “could be useful rhetorically—once agency fees are deemed unconstitutional in the public sector, it becomes easier to argue against them in the private sector,” said Andrias, who counseled the Obama White House on labor law.

NRTW Weighs In

For its part, the NRTW is attributing the broad business-side interest to the fact that Janus is simply a monumental case for labor law in general. But the longer-term consequences are undeniable.

NRTW’s Semmens agreed with Andrias that a favorable ruling for Mark Janus would arm his organization with a new talking point that applies squarely to businesses.

“Having the Supreme Court recognize that what’s done in the public sector is a First Amendment violation I think can only reinforce the fundamental unfairness in the private sector,” Semmens said.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editor responsible for this story: Chris Opfer at copfer@bloomberglaw.com

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