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Supreme Court rules non-union workers do not have to pay for collective bargaining

Decision could have ramifications for how state and local governments set pension benefits

Government employees represented by, but not members of, a union cannot be required to pay fees to cover the cost of negotiating a contract, the Supreme Court ruled Wednesday in a 5-4 decision.

The decision could change how state and local governments set employee wages and pensions, said Emily Raimes, vice president and senior credit officer at Moody's Investors Service, in a statement. "The decision may lower public union revenues, membership and bargaining power in the 22 states that can no longer allow mandatory fees," and could result in a positive long-term impact on government finances, she said.

Justice Samuel Alito wrote in the majority opinion that the fees violate the First Amendment, which would bar a state from requiring residents to "sign a document expressing support for a particular set of positions on controversial public issues," and by extension, would also apply to unions' requiring non-members to pay for their bargaining activities.

Writing the main dissent, Justice Elena Kagan said it could also disrupt "thousands of ongoing contracts involving millions of employees," and create "judicial disruption." She was joined by Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor.

The case, Janus vs. American Federation of State, County, and Municipal Employees, Council 31, was brought by an employee of the Illinois Department of Healthcare and Family Services challenging a $45 monthly fee deducted to cover the cost of collective bargaining. It violates the First Amendment, Mr. Alito said, because it finances union efforts to influence the government on salaries, pensions and other benefits for government employees.

The decision overturns a 1977 ruling that allowed unions to charge such "agency" fees. That earlier ruling should be overturned, Mr. Alito said, because it was "poorly reasoned" and had become unworkable in terms of distinguishing what expenses non-members can be required to pay. A third reason, he said, was the "mounting costs of public-employee wages, benefits and pensions," which has made collective bargaining more significant politically.

The new decision "may cause unions to experience unpleasant transition costs in the short term, and may require unions to make adjustments in order to attract and retain members," but that is offset by the "many billions of dollars" given to public-sector unions by non-members in violation of the First Amendment, he said.

In the dissent, Ms. Kagan said the 1977 ruling is workable, "and it is deeply entrenched," noting that more than 20 states have statutory schemes built on the decision.

Free speech advocates welcomed the decision, while a group of international union leaders from AFSCME, American Federation of Teachers, National Education Association and Service Employees International Union issued a statement saying that "public service workers — teachers, social workers, firefighters, 911 operators — are more determined than ever to stick together in their unions … Today's decision sends our economy in the wrong direction. But it is also a rallying point."

A 2011 study by the Center for Retirement Research at Boston College found that, despite suggestions that union power has led to higher public pension benefits, "union strength appears to have no impact on the level or growth of benefits. Because pensions are legislated, not bargained, lobbying expertise may be more important than union size," the study found.

The Supreme Court adjourned for the term Wednesday, with Associate Justice Anthony Kennedy later announcing his retirement as of July 31.