Health Care Alert: Supreme Court Limits Agency Fees to Full-Fledged Public Employees

by FordHarrison

Executive Summary: In a decision that could have a significant financial impact on many labor unions, the U.S. Supreme Court has held that personal care providers, who are considered state employees only for limited collective bargaining purposes under Illinois law, cannot be required to pay agency fees.  In Harris v. Quinn (June 30, 2014), the Court refused to apply its 1977 decision in Abood v. Detroit Board of Education, which upheld the imposition of agency fees on non-union state employees, to these individuals because they are not "full-fledged" public employees. The Court further held that the agency fee provision violates the personal care providers' First Amendment rights, and that they cannot be compelled "to subsidize speech on matters of public concern by a union that they do not wish to join or support."


The case was brought by a group of personal assistants who are employed by disabled individuals to provide care for them, but are paid by the state through funds subsidized by the federal Medicaid program.  Although Illinois law generally treats these workers as employees of the person for whom they provide care, the law specifically states that they are considered employees of the state solely "for the purpose of coverage under the Illinois Public Labor Relations Act." The SEIU and the state of Illinois have entered into collective bargaining agreements that require all personal assistants who are not union members to pay a "fair share" of union dues, which is deducted directly from the personal assistant's Medicaid payment. The Supreme Court noted that personal assistants in Illinois pay the SEIU-HII more than $3.6 million in fees each year. The personal assistants, who are not union members, challenged the "fair share" payment requirement, claiming it violates their First Amendment rights.

The Seventh Circuit, relying on Abood, upheld the fair share requirement. The Supreme Court granted certiorari in light of the "important First Amendment questions" raised by agency fee cases.

Supreme Court Decision

In Abood, the Supreme Court held that state employees who choose not to join a public-sector union may nevertheless be required to pay an agency fee to support union work related to the collective bargaining process.  In arguments before the Supreme Court, the state of Illinois urged the Court to expand Abood to cover the personal assistants. 

The Court refused to do this, noting that the Abood decision is questionable "on several grounds," including: its analysis of the constitutionality of compulsory payments to a public-sector union; the practical administrative problems that have resulted from the decision's distinction between "chargeable" and "non-chargeable" union expenditures; the heavy burden placed on employees who challenge a union's designation of an expenditure as chargeable; and its reliance on the "unwarranted" "empirical assumption" that that the principle of exclusive representation in the public sector is dependent on a union or agency shop.

The Court also held that the employees in this case, who are treated as state employees only for collective bargaining purposes, are in a different situation than the full-fledged public employees in Abood. For example, the person receiving care, not the state, controls the crucial aspects of the personal assistants' employment, such as hiring, establishing work duties and hours, supervising, evaluating and firing them. Additionally, personal assistants are excluded from most benefits and rights provided to state employees. Furthermore, the scope of collective bargaining that the union can conduct on behalf of personal assistants is sharply limited.  The Court pointed out that the union has no authority to bargain over issues such as hours of work, breaks, holidays, vacation, termination, and changes of job duties, all of which are considered mandatory subjects of bargaining under federal law. The Court found these differences important because Abood's rationale is based on the assumption that the union possesses the full scope of powers and duties generally available under American labor law. However, in this case, the Court found "the union's powers and duties are sharply circumscribed, and as a result, even the best argument for the ‘extraordinary power' that Abood allows a union to wield . . . is a poor fit."

Thus, in light of Abood's "questionable foundations" and the difference between Abood's full-fledged public employees and the personal assistants in this case, the Court refused to extend Abood to cover the personal assistants. The Court held that Abood has clear boundaries – it applies to public employees. The Court noted that if it were to extend Abood's coverage, "a host of workers who receive payments from a governmental entity for some sort of service would be candidates for inclusion within Abood's reach," noting that "Medicare-funded home health employees may be one such group." The Court held that if it allowed Abood to be extended to those who are not full-fledged public employees, "it would be hard to see just where to draw the line." 

The Court then evaluated the agency fee provision under the First Amendment and held that it did not meet the First Amendment's requirement that it serve a compelling state interest that cannot be achieved through a significantly less restrictive means.

Employers' Bottom Line:

Although the Court's ruling is more limited than some had anticipated (and the parties had urged), it will undoubtedly have a significant financial impact on the SEIU, which faces a loss of revenue going forward as well as potential lawsuits seeking to recover improperly collected fees, as well as other unions who receive agency fees from similarly situated employees. Additionally, although it did not overrule Abood, the majority's characterization of the decision's analysis as "questionable" may set the framework for an argument for overruling that decision and invalidating agency fees at some later point.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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