SCOTUS breaks from New Deal mode with unions ruling

Justice Anthony Kennedy has retired from the United States Supreme Court the day on which he was in the five-member majority in what may turn out to be the most consequential decision of the term — Janus v. American Federation of State, County and Municipal Employees.

In Janus, Justice Samuel Alito completed a multiyear campaign by unceremoniously overruling the Supreme Court’s 1977 decision in Abood v. Detroit Board of Education, which was notable for how it sought to perform an all-too-typical New Deal balancing act.

{mosads}The key feature of all systems of compulsory unionization is that they allow a majority of workers within any state-designated union to set the terms and conditions that bind all other individuals within the bargaining, whether they have supported the union or not during the prior election.

The current system imposes a duty on the union to “fairly represent” all its members, but in light of the inevitable differences in attitudes and preferences among workers, there is no way that any union, no matter how conscientious, can satisfy all its workers simultaneously.

This system has been in place for private unions since the passage of the National Labor Relations Act of 1935 and for public unions since the states in droves adopted a similar system for public employees in the early 1960s.

It is hard therefore to realize what a huge departure that this system is from any regime that recognizes the importance of freedom of contract and association as indispensable principles of social organization.

Under a contractual regime, there is no majority that can bind any minority without its consent. That one condition means that the only contracts that do form are those from which all parties expect to gain more than they lose.

There is no forced representation and no inevitable conflicts of interest. There is no duty to bargain in good faith imposed on resistant employers that upsets the operation of any competitive market.

The level of growth and productivity that takes place in a competitive system far outstrips the productivity that is obtainable under any system of collective bargaining, either public or private.

The demise of the earlier system of competitive labor markets took place because the Supreme Court in the New Deal period took the position that public coercion for certain workers trumped the need for voluntary organization.

I have opposed that position for my entire academic career, and in the recent Janus decision, we have seen for the first time the Supreme Court take a huge step back from collective bargaining toward the restoration of competitive markets in public relations.

The impact of Janus is that unions cannot take for granted the compensation that they receive from employees but have to go out an earn their trust if they wish to get their dollars.

There is no doubt that when a union occupies a monopoly position, its leadership is always in a position to line its own pockets and to forge alliances with compliant state governments for contracts that offer too much compensation for too little work.

The overall rigidities of seniority systems and the risk of unauthorized strikes complete the litany of unfortunate consequences that flow from that system.

What Janus has done has emphatically rejected the type of bargaining arrangements that were so congenial to the New Deal mindset. 

In her impassioned dissent, Justice Elena Kagan takes on the five-member conservative majority by noting its scant respect for stare decisis — the general principle that precedents should be respected unless there are powerful reasons to overthrow them.

She then lists two of the consequences that Janus will bring in its wake: “Public employee unions will lose a secure source of financial support. State and local governments that thought fair-share provisions furthered their interests will need to find new ways of managing their work-forces.”

What she fails to mention is that both of these changes are unambiguously for the better. No union, public or private, should ever have a secure base of financial support, any more than any business should be able to count on the loyalty of its employees, customers, suppliers unless it represents them well every day of the year.

The problem with these guarantees is that they lead to a level of complacency in which union leaders can put themselves first, which they are less able to do these workers are free to defect.

Nor is it wise to let governments that made cozy deals with unions get fair-share arrangements that put an enormous stress on other public resources, given the regrettable reality that state pension obligations for union employees threaten the stability of government finances in many states, including Illinois, where Mark Janus works.

If the breakdown of this system leads to, as it should, the introduction of sensible reforms for public unions, so much the better.

The decision in Janus is far from ideal. In my own view, the first-best solution holds that it is a flat violation of the public trust doctrine for any government to commit itself in advance to negotiate with any monopoly union.

Even though Janus clips the wings of public unions, it still allows these unions too much influence in public affairs. What is needed now is the political recognition that competitive markets do a better job in the public sector just as they do in the private one.

States, counties and municipal governments should refuse to bargain with public unions.

Richard A. Epstein is currently the Laurence A. Tisch professor of law and director of the Classical Liberal Institute at New York University, the Peter and Kirsten Bedford senior fellow at the Hoover Institution, and the James Parker Hall Distinguished Service professor of law emeritus and a senior lecturer at the University of Chicago.