Academic journal article Vanderbilt Law Review

The Other Janus and the Future of Labor's Capital

Academic journal article Vanderbilt Law Review

The Other Janus and the Future of Labor's Capital

Article excerpt

Introduction

When corporate lawyers and scholars discuss "the Janus case," they usually mean Janus Capital Group v. First Derivative Traders, a 2011 U.S. Supreme Court opinion that limited who could be sued for making false statements in violation of Rule 10b-5^ But another Janus, a labor case, may have greater implications for the corporate world than its more familiar namesake.2 In the 2017 decision Janus v. American Federation of State, County, and Municipal Employees, Council 31, the Court overturned more than forty years of precedent to strike down "fair share fees" on First Amendment grounds.3 "Fair share fees," or "agency fees," were required fees public employees paid to public-sector unions to compensate the unions for the benefits they secured for workers via collective bargaining.4 Long-standing precedent held that workers could not be forced to join public-sector unions, or to support union political activities, but they could be required to pay "fair share fees."5 Under collective bargaining rules, unions were required to represent all workers in a unionized workplace, even those who chose not to join them.6 In the absence of fair share fees, the requirement that unions represent all workers could have led to worker free riding, one of the express rationales for upholding such fees under long-standing Supreme Court precedent in 1977's Abood v. Detroit Board of Education.7

Forty years later, Mark Janus brought suit to directly challenge Abood after Justice Alito invited such a challenge in Harris v. Quinn, asking whether it was time to revisit that holding.8 Janus was a childsupport specialist who worked for the Illinois Department of Healthcare and Family Services.9 He was not a member of the local American Federation of State, County, and Municipal Employees ("AFSCME") union that represented him and workers like him in negotiating wages, benefits, and workplace conditions with the State of Illinois.10 He objected to the forty-five-dollar-per-month "fair share fee" he was required to pay to the AFSCME local to compensate it for negotiating on his behalf, arguing that the fee violated his First Amendment rights.11 Janus characterized union negotiations with the government over salaries, pensions and benefits as speech.12 The Supreme Court agreed.13 Writing for the 5-4 majority, Justice Alito stated: "In simple terms, the First Amendment does not permit the government to compel a person to pay for another party's speech just because the government thinks that the speech furthers the interests of the person who does not want to pay."14 Mark Janus's negative-value legal claim was financed by the Liberty Justice Center (part of the conservative think tank Illinois Policy Institute) and funded by organizations like Donors Trust, the Charles Koch Institute, and the Ed Uihlein Family Foundation.15

The Janus holding has both direct and indirect implications for labor as a shareholder. The direct implication is that the reasoning in Janus might apply directly to public pension funds themselves. Just as public-sector workers were once required to pay fair share fees, so they are required to contribute to public pension plans.16 Could the reasoning in Janus apply to these plans? In an era in which environmental, social, and governance investing has risen to prominence, at what point do a public pension's investment choices implicate the First Amendment, thereby mandating opt-out rights to dissenters?17 And if so, will Janus hasten the demise of the traditional defined-benefit pension in favor of the 401(k), following the path taken in the private sector decades ago?18

Even if the Janus holding does not directly apply to the financing and structure of public pension funds-and there are good reasons to believe it does not-the case is likely to have indirect effects on labor's shareholder activism.19 To the extent that the Janus holding reduces funding for public-sector unions, those unions will have fewer resources to deploy for shareholder activism and to defend public pensions from the unrelenting legal and political attacks they face from the same forces that financed Janus. …

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