An employee who paid “fair share” union fees under protest is not entitled to damages to refund any of the money he paid the union, the U.S. Court of Appeals for the Seventh Circuit has held. Janus v. Am. Fed’n of State, No. 19-1553 (Nov. 4, 2019). The Court explained fair share fees were “an exchange of money for services” that was permitted under the law in effect at the time they were deducted from the employee.

The Court also applied its reasoning to Mooney v. Ill. Educ. Ass’n, No. 19-1774 (Nov. 5, 2019), a case in which the employee sought restitution, rather than damages. It concluded, in substance, that claim also was for damages.

Background

Mark Janus was a Child-Support Specialist at the Illinois Department of Healthcare and Family Services. American Federation of State, County and Municipal Employees, Council 31, AFSCME was the exclusive representative of Janus’s employee unit. Janus exercised his right not to join the union and objected to the $44.58 in fair share fees that was deducted from his paycheck each month.

Janus brought a case arguing that the National Labor Relations Act’s compulsory fair share scheme violated the First Amendment and that the Supreme Court’s Abood v. Detroit Board of Educ., 431 U.S. 209 (1977), should be overturned. The Supreme Court agreed and overruled Abood. Janus v. AFSCME, Council 31, 138 S. Ct. 2448 (2018). In Abood, the Supreme Court upheld a Michigan law authorizing public sector unions and government employers to use agency-shop agreements (which allowed charging employees a fee for union representation even though they objected to becoming union members). The high court in 2018 held these “fair share fees” were constitutional “insofar as [they] are applied to collective-bargaining, contract administration, and grievance-adjustment purposes.” (For more on that decision, see our article, Supreme Court Rules Unconstitutional Mandatory Fees Imposed on Non-Union, Public Sector Employees.)

7^th Circuit Decision

Janus followed up on the Supreme Court’s 2018 decision with a request for damages from AFSCME pursuant to 42 U.S.C. § 1983. Section 1983 supports a civil claim against “every person who, under color of any statute … of any State … subjects, or causes to be subjected, any citizen of the United States … to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws.” The District Court granted summary judgment to AFSCME and the Seventh Circuit upheld its decision.

The Seventh Circuit Court considered several issues in reaching its conclusion, including whether the Supreme Court’s Janus decision was retroactive, if the requirements under § 1983 were met, and whether AFSCME had a good-faith defense. The Court concluded that § 1983 was satisfied, finding AFSCME was a “person” that could be sued and that it acted under the color of state law. In addition, the Circuit Court explained that the Supreme Court did not specify whether its decision was retroactive, noting that retroactivity “poses some knotty problems.” Ultimately, the Circuit Court decided to assume retroactivity “for the sake of argument.”

Finally, the Court analyzed “to what remedy or remedies” was Janus entitled. It clarified the retroactive application was not determinative of what, if any, remedy could be obtained. The Court explained that the Supreme Court has acknowledged the retroactive application of a new rule of law does not foreclose the opportunity to raise “reliance interests entitled to consideration in determining the nature of the remedy that must be provided.” Accordingly, the Court considered whether AFSCME was entitled to a good-faith defense to the relief sought by Janus.

The Seventh Circuit, joining its sister circuits, concluded there was a good-faith defense in § 1983 actions when the defendant reasonably relied on established law. The Court held AFSCME had a legal right to receive and spend fair share fees collected from nonmembers if it complied with state law and Abood and it did not demonstrate bad faith when it followed these rules.

Implications

This decision demonstrates the current trend on the fair share fees damages issue. According to the Seventh Circuit, every district court that has considered the question whether there is a good-faith defense to liability for payments collected prior to the Supreme Court’s decision overruling Abood has answered affirmatively.