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Tuesday, October 17, 2017

The Supreme Court Has the Chance to Fix Its Own Mistake

The Supreme Court has agreed to hear a case regarded compulsory union dues for public-sector workers, giving it the chance to correct the mistake it made on this subject in 1977.

In the 1950s, a substantially different era economically, unions represented a significant portion of the of the labor force. Many reasons for the shift away from unions exist — America was less economically diversified, automation has removed much of the manufacturing job demand despite overall increases in manufacturing, people are less likely to remain with a single employer or job their entire career, and legal reformation, among others. Since then, the peak of private sector unionization has steadily decreased from about 35% to 7%. The nationwide average of total union workers hovers around 11 to 12%, which means that the public sector, which is a smaller labor force than the private sector, is boosting this average (2013 numbers).

The Janus Case

The Supreme Court has granted a petition for certiorari — a legal document which pleads the merit of hearing a case — in which Mark Janus is seeking the right to be exempt from public sector agency fees. A similar case, Friedrich v. California Association, was before the court only a short time ago until Justice Scalia unexpectedly passed away leaving it undecided. Now, Janus argues that he should not be forced to pay dues to the public-sector union as compelled dues are an infringement on his First Amendment rights of speech and association. Currently, Janus is required to financially support a group to represent his interest and speak for him without the option to disassociate, striking at the heart of the First Amendment. Association is a key component of the First Amendment as the Supreme Court explicitly recognized in NAACP v. Alabama in 1958, and association in speech regardless of the content is no exception.

This is not the first time compulsory fees have been litigated. In 1977, in a decision known as Abood v. Detroit Board of Education, the Supreme Court determined that compulsory union dues were constitutional so long as the funds went toward job-related bargaining and not campaign contributions or like political activity. The economic reasoning sustaining the court’s decision hinged on the possibility that public sector employees could free-ride off the effort of the union and those who pay dues, gaining the financial benefit of negotiation without having to contribute to the effort.

The least productive are free-riding off the most productive. This is not the law in every state, as this establishes a low baseline in terms of free speech. There are “right to work” states which provide an exit for those who are unrepresented by the local union. But that does not change the fact that many public sector employees are forced to pay dues by their employer, the government, to a union that does not accurately reflect their views politically or even as a contract negotiator.  Nor does it change the probability that public sector unions may benefit both in contributed dollars and inflated membership from laws that compel dues as a condition of employment.

Forcing public sector employees to pay union dues, regardless of voluntary membership, may address the possible free-rider problem, but it also creates other economic problems. First, it hands bargaining power to monopolistic unions. Few alternatives to unions exist in the various states which adhere to this system of creating a government-sponsored monopoly, which is advantaged, much like the public sector jobs they claim to represent because of protection against competition due to the government favoritism. More problematic is the incentive for public sector unions to support public policies that will strengthen their position — i.e. increasing dues-paying members or preventing competitors from forming — over other preferred outcomes. These incentives helped direct the union representing prison guards in California (CCPOA) to support various bills which increase prison sizes and laws which increase the prison population, such as the infamous three-strike rule. Certainly, their motives aren’t entirely self-interested, but policies that tip the scales in favor of job creation for union members is a difficult incentive to ignore. Perhaps the market would only bear one negotiator on behalf of union workers, but the government favoritism that establishes a monopoly removes some of the competitive incentives that pressure public sector unions toward client satisfaction.

Second, the most productive subsidize the least productive, which essentially creates a similar free-rider problem that the compelled agency fees attempt to resolve. Those who receive the benefit of the negotiated wage but would receive less in a market environment are being subsidized by those who are more productive than their respective wage. In a sense, the least productive are free-riding off the most productive with an incentive to focus more on staying in the job rather than excelling in the job. This is a bit of a simplification, but the effect is there regardless.

Public sector jobs struggle to approximate equilibrium compared to their private sector counterparts, and in some instances, there are very few private sector jobs to compare wages against, such as public school jobs. Public sector unions tend to advocate pay structures which rely heavily on seniority and certain qualifications such as education. This is known as step-and-lane schedules. However, relying heavily on these two measures dismisses other relevant factors, such as quality of work, which may or may not correspond with seniority or education. Focusing on this type of pay structure, as advocated by public sector unions, tends to ignore more merit-focused alternatives and props up those who would thrive better under the step-and-lane scheme, such as those willing to endure a job rather than improve quality.

Correcting an Error

Certainly, there are no guarantees for Janus, or any other public employee, regarding pay structure or wage rate. Determining how to set wages, raises, and determine productivity is a challenge for any employer, and there is a multitude of possibilities in arranging contracts. For the public sector, this is complicated by the nature of their employee-employer relationships, which exists at a distance. But the distance is exacerbated by the implementation of a process designed to create limited access to the employer (the legislature) by endowing a single agent (the unions) with access to both parties.

Speech and association, regardless of political import or the economic nexus, should not be compelled. Even if the free-riding problem is a draw between the two options of compelled dues and voluntary dues, and no other economic problems arise, the default should simply be to allow employees to distribute their income to those they choose to represent their interests and speak on their behalf. Such is the assumption underlying the First Amendment and respective jurisprudence; speakers may speak and associate with whom and what they choose, minus few narrow exceptions, regardless of subject matter.

The last economic issue — which compounds the previously described issues of state-sponsored monopolies and subsidies — is that of the agency dilemma. Since the interest of no single agent aligns perfectly with their principal in every circumstance, there is always the possibility that an agent will be motivated to act in their own best interest, often at expense of their principal when conflicted between the two. Since the union often acts exclusively as the principal’s agent, the tendency to act in its own interest is drastically heightened. Competitive pressure, or the threat of future competition, would force unions to take extra care in their representation compared to the current conditions. The ability to exit and contribute fees to other agents plays a pivotal role in minimizing potential issues with representation and encourages attentiveness by the agent.

The Supreme Court has an opportunity to correct a past error. Speech and association, regardless of political import or the economic nexus, should not be compelled, and the economic justifications for such compelled speech fall short of the typical burden usually required when examining speech restrictions. The court was wrong in Abood. The free-rider concern is hardly persuasive grounds for speech limitations. Free speech and economic freedom are often intimately connected and inseparable. Though the courts have largely abandoned attempts at protecting economic rights — saying a rational basis is all that must be articulated by the government to justify restrictions — it is not quite so with speech, even the less protected and more regulated category of commercial speech. However, attempts to regulate economic activity often impinge on some of our most basic constitutional rights — speech and association included. When speech and other such rights are threatened the courts should protect those rights regardless of, and even because of, the economic aspect, as freedom is not so easily divided.

  • James Devereaux is an attorney. All views are his own and not representative of employers or affiliations. 

    Husband and father of four. Graduate of Brigham Young University with a B.S. in Psychology and William & Mary School of Law.