Wednesday, May 15, 2019

Janus v AFSCME

Unions, the Supreme Court and the Ruling in Janus versus AFSCME

After I read and studied the new Janus v AFSCME Supreme Court opinion of June 27, 2018, I thought of a law review article from the Connecticut Law Review by George Schatzki entitled “It’s Simple Judges Just Don’t Like Labor Unions.” [Volume 30, 1998, p 1365-1370] Some believe in reason as the explanatory force of law, but Schatzki finds in his law career that “By their nature, judges in general, and Supreme Court Justices in particular, are elitists, individualists, overachievers, meritocrats and fierce competitors; by their legal training and experience judges have ingrained in them the value of individual rights.”

In the Supreme Court Case of Janus v AFSCME a disgruntled Illinois employee named Mark Janus agreed to be the petitioner in a lawsuit intended to overturn legal doctrine last established 41 years ago in the case of Abood v. Detroit Board of Education [431 U. S. 209]. In the Abood case several public school teachers objected to the requirement in the Detroit Public School's collective bargaining agreement that made non-union members pay an agency fee as a service charge in lieu of union dues. Appellants complained among other things the union engaged in “political and other ideological activities” that deprived them of “freedom of association protected by the First and Fourteenth Amendments.”

Some Background
The labor movement has endured 150 years of free speech attacks; nothing is new in Janus v AFSCME. In the 19th century business owners blamed strikes on outside agitators who would come in and stir up the benevolent owner’s happy and contented employees and cause a strike. Owners responded to unions by refusing to meet or bargain with any union or union representatives; owners felt virtuous by claiming they protected America’s liberty and free speech for his loyal employees who did not want to join a union.

These same employers paid stool pigeons and hired spies to listen for anyone who spoke about unions or attempts to organize a union. Those discovered were immediately fired and put on a “blacklist” of those never to be rehired. During the 1930’s Ford Motor Company employees were not permitted to speak during the few minutes allotted as a lunch period on pain of dismissal. These restrictions on speech did not concern the courts or the Supreme Court.

Following the “Ludlow Massacre” in Colorado in 1913 John D. Rockefeller and his new advisor William Lyon MacKenzie King developed a plan for a company union known as the Employee Representation Plan. Neither business nor the courts worried about the right of free speech when businesses made company union membership and dues checkoff mandatory for all.

Back in 1933 in the first hundred days of Franklin Roosevelt’s New Deal the Congress passed the National Industrial Recovery Act with section 7(a): that employees shall have the right to organize and bargain collectively through representatives of their own choosing. Section 7(a) did not come with even a hint of operational rules, which made it necessary for the government to play a more active role in labor relations. The New Deal friends of FDR brought into government service wrestled with a method to determine appropriate representation. They decided a democratic election of eligible employees would make up a bargaining unit to determine what representative should represent all employees.
Congress accepted this view when it debated and passed the National Labor Relations Act, a.k.a. the Wagner Act, in 1935. Section 9(a) of the National Labor Relations Act of 1935 as amended and administered by the National Labor Relations Board requires the union to represent all employees in the bargaining unit not just members. A majority vote in a democratic certification election administered by the National Labor Relations Board continues as the method to establish exclusive union representation.

When President Roosevelt signed the National Labor Relations Act (NLRA) into law July 5, 1935, corporate America large and small expected the Supreme Court would declare it an unconstitutional violation of liberty of contract, the method Supreme Court majorities had used for decades to eliminate unions. Justice Charles Evans Hughes wrote the majority opinion in the case of NLRB v Jones & Laughlin Steel Company announced April 12, 1937. Justice Hughes declared the Commerce Clause of the Constitution allowed Congress to regulate relations between business and labor in order to prevent strikes and disruptions to the flow of commerce. He noted “we are dealing with the power of Congress, not with a particular policy or with the extent to which policy should go.” Occasionally judicial voices like Justice Hughes cry out, usually in dissent, that the Supreme Court should not substitute their policy opinions in place of an elected Congress.

Group decisions made by democratic means always have objectors who don’t get their way. The Supreme Court has addressed repeated requests to accommodate disgruntled employees and organized union haters who claim constitutional violations of free speech and free association. Union objectors have always hated that Congress wrote a law that expected them to offer financial support to a union they voted against.

Precedent from 1956 to 2018

In the 1977 case Abood v. Board of Education of Detroit the justices cited two cases as precedent for deciding if an agency shop in a collective bargaining agreement can be constitutionally valid. In the first case of the Railway Employees' Dept. v. Hanson (351 U. S. 225) from 1956 non-union employees of the Union Pacific Railroad brought suit in a Nebraska Court to prevent collecting union dues from non-members as part of a union shop agreement. The union defended their union shop clause by citing 1951 amendments to the Railyway Labor Act that specifically allow it.

A Nebraska trial court issued an injunction to prevent collection of dues as a source of irreparable harm and the Nebraska Supreme Court affirmed by holding that a union shop agreement violates the First Amendment and Fifth Amendment to the Constitution in that it deprives employees their “freedom of conscience, freedom of association, and freedom of thought protected by the Bill of Rights.”

Justice William O. Douglas writing for the court addressed “Wide ranged problems” appellants “tendered under the first amendment.” … “It is argued that, once a man becomes a member of these unions, he is subject to vast disciplinary control, and that, by force of the federal [Railway Labor] Act, unions now can make him conform to their ideology.”
Justice Douglas replied “there is no more an infringement or impairment of First Amendment rights than there would be in the case of a lawyer who, by state law, is required to be a member of an integrated bar. It is argued that compulsory membership will be used to impair freedom of expression.” … “We only hold that the requirement for financial support of the collective bargaining agency by all who receive the benefits of its work is within the power of Congress under the Commerce Clause, and does not violate either the First or the Fifth Amendments.”

In the second case Machinists v. Street (367 U. S. 740) from 1961 the Southern Railway System entered a union shop agreement using authority from the 1951 amendments to the Railway Labor Act exactly as in the Hanson case. Non-union employees brought suit in a Georgia State Court complaining the union used their dues to “finance the campaigns” of people they opposed and “promote the propagation of political and economic doctrines, concepts and ideologies with which [they] disagreed.” The trial judge found the allegations fully proved and issued an injunction to prevent enforcement of the union shop agreement on the grounds the relevant section of the Railway Labor Act violates the First, Fifth, Ninth and Tenth Amendments to the Federal Constitution. The Supreme Court of Georgia affirmed. Appeal was taken that ended in United States Supreme Court

The case of Machinists v. Street raises the identical issues from Hanson, but the justices decided to find a difference that allows them to modify precedent. In Street the justices looked at the Hanson opinion and found no evidence that union dues had forced “ideological conformity” that impaired the “free expression of employees.” Instead the justices concluded Hanson only sustained the relevant sections of the Railway Labor Act as “constitutional in its bare authorization of union shop contracts requiring workers to give ‘financial support’ to unions legally authorized to act as their collective bargaining agents.” . . . “Clearly, [the Hanson court] passed neither upon forced association in any other aspect nor upon the issue of the use of exacted money for political causes which were opposed by the employment.” The justices decided this failure to pass on “forced association” in the Hanson opinion left “questions of utmost gravity” for the Street case then before the Supreme Court.

In the Street case the Supreme Court found that money had been drawn from the union treasury to make political contributions, which they defined as a “forced association.” The Court decided the use of compulsory union dues for political purposes violated the Railway Labor Act, not the Federal Constitution.

The majority opinion in Street included a lengthy history of Congressional debate for the 73rd Congress of 1934 discussing amendments to the Railway Labor Act. In the debate and discussions the justices admit “It was made explicit that the representative selected by a majority of any class or craft of employees should be the exclusive bargaining representative of all the employees of that craft or class.” … Further they wrote, “Performance of these functions entails the expenditure of considerable funds. Moreover, this [Supreme] Court has held that, under the statutory scheme, a union's status as exclusive bargaining representative carries with it the duty fairly and equitably to represent all employees of the craft or class, union and nonunion.” … Unions the justices admitted “advanced as their purpose the elimination of the "free riders" -- those employees who obtained the benefits of the unions' participation in the machinery of the [Railway Labor] Act without financially supporting the unions.” However, they cautioned “One looks in vain for any suggestion that Congress also meant Section Two of the Railway Labor Act to provide the unions with a means for forcing employees, over their objection, to support political causes which they oppose.”
In their Section III of the opinion, safeguarding the rights of dissent, the justices explain how Congress incorporated safeguards to protect dissenters. Here the justices quoted debate from congressional hearings and cited the original proposal to authorize a union shop. Phrasing in the revised law prevents a union shop agreement that would force the discharge of any employee for any cause except non-payment of dues. In the hearings, testimony included worry employees could be discharged from criticizing their union. Organized labor officials then agreed to wording that made it explicit that dues collected from non-union employees in a union shop were to prevent the “free rider” problem, but with the proviso a union contract could not require discharge of an employee for any reason except non-payment of dues.
The discussion and inclusion of a free rider proviso brought a judicial conclusion in Street that “A congressional concern over possible impingements on the interests of individual dissenters from union policies is therefore discernible.” From that decision the justices decided unions do not have “unlimited power to spend exacted money” which requires the justices to “delineate the precise limits of that power in this [Machinists v Street] case.
In their section IV, the appropriate remedy, the justices declare “the union shop agreement itself is not unlawful.” Objectors “remain obliged, as a condition of continued employment, to make the payments to their respective unions called for by the agreement.” . . . Their “grievance stems from the spending of their funds for purposes not authorized by the Act in the face of their objection, not from the enforcement of the union shop agreement by the mere collection of funds.” However, “dissent is not to be presumed -- it must affirmatively be made known to the union by the dissenting employee.” For those who make their dissent as occurred in the Street case, “a remedy would be restitution to each individual employee of that portion of his money which the union expended, despite his notification, for the political causes to which he had advised the union he was opposed.” If funds cannot be traced or come from general funds then “the portion of his money the employee would be entitled to recover would be in the same proportion that the expenditures for political purposes which he had advised the union he disapproved bore to the total union budget.”
And so ended the case of Machinists v. Street on June 19, 1961. Notice the justices interpreted the intentions of Congress to evaluate a statute; they looked in vain to find that Congress intended to allow agency shop fees to go for political support, but they did not find an unconstitutional limit on free speech.
Jump forward to May 23, 1977 and the decision in Abood v Board of Education of Detroit after another group of union objectors made another attack on the union and agency shop, a right specifically granted by a Michigan statute. The U.S. Supreme Court took the case after Abood exhausted appeals in the Michigan Courts without relief. Appellant Abood claimed to the U.S. Supreme Court that collective bargaining in the public sector is inherently “political,” and that to require them to give financial support to it is to require “ideological conformity.” The justices disagreed but wrote “The differences between public and private sector collective bargaining simply do not translate into differences in First Amendment rights.” . . . “We conclude that the Michigan Court of Appeals was correct in viewing this Court's decisions in Hanson and Street as controlling in the present case insofar as the service charges are applied to collective bargaining, contract administration, and grievance adjustment purposes.”
However “We [the justices] do not hold that a union cannot constitutionally spend funds for the expression of political views, on behalf of political candidates, or toward the advancement of other ideological causes not germane to its duties as collective bargaining representative. Rather the Constitution requires only that such expenditures be financed from charges, dues, or assessments paid by employees who do not object to advancing those ideas and who are not coerced into doing so against their will by the threat of loss of governmental employment.”
Like the Hanson case, however, the justices found no evidence to determine appropriate relief as the “complaints were only general ones.” The remanded the case with instructions to use the Street method of determining relief.

For 62 years from 1956 to 2018 different majorities of different Supreme Courts found it constitutional for unions to operate union or agency shops and collect agency fees from non-members under the Railway Labor Act and the National Labor Relations Act. Notice in these Hanson, Street and Abood opinions the justices did not find it necessary to make constitutional claims. They merely ruled the Commerce Clause of the U.S. Constitution allows Congress the necessary authority to make national policy for unions as it did in the Jones and Laughlin case of 1937. They respected the wishes of a democratically elected Congress to create a method for exclusive union representation and eliminate free riders. In 2018 in the case of Janus v. AFSCME five justices voted to wipe that away with broad constitutional claims.

Janus v AFSCME

In Janus v AFSCME the five Supreme Court justices voting to overrule Abood, Street and Hanson were appointed by a Republican President; the four voting to uphold were appointed by a Democrat President. The opening lines of the majority opinion declared the Abood “arrangement violates the free speech rights of nonmembers by compelling them to subsidize private speech on matters of substantial public concern.” … “We recognize the importance of following precedent unless there are strong reasons for not doing so. But there are very strong reasons in this case.” . . . “Abood was poorly reasoned.”

The majority opinion written by Justice Alito concludes in Section III “In Abood, the Court upheld the constitutionality of an agency-shop arrangement like the one now before us, but in more recent cases we have recognized that this holding is ‘something of an anomaly.’” It can be noted the “recent cases” that make Abood something of an anomaly are Harris v Quinn and Knox v SEIU, both Alito opinions; Alito cites himself as authority for Janus v AFSCME.

Here is the Alito response to the “poorly reasoned” Abood opinion. Quoting from Alito in Section III he declares the “First Amendment forbids abridgement of freedom of speech.” . . . “Compelling individuals to mouth support for views they find objectionable violates that cardinal constitutional command, and in most contexts, any such effort would be universally condemned. Suppose, for example, that the State of Illinois required all residents to sign a document expressing support for a particular set of positions on controversial public issues—say, the platform of one of the major political parties. No one, we trust, would seriously argue that the First Amendment permits this.”

“Perhaps because such compulsion so plainly violates the Constitution, most of our free speech cases have involved restrictions on what can be said, rather than laws compelling speech. But measures compelling speech are at least as threatening.”

“We have therefore recognized that a ‘significant impingement on First Amendment rights’ occurs when public employees are required to provide financial support for a union that takes many positions during collective bargaining that have powerful political and civic consequences.” . . . “Because compelled subsidization of private speech seriously impinges on First Amendment rights, it cannot be casually allowed.”

Read the phrases again but pare away the surplus verbiage and you will find a tautology, true by its own terms. First, he declares first amendment rights prevents abridging free speech. Second, he defines agency fees as compulsory speech. Then he declares compulsory speech violates first amendment rights. It’s a perfect circle, empty of reasoning, legal or otherwise. Unions have only Alito’s personal decision to define agency fees as a violation of the first amendment.

From here Alito tells readers he “will give standard reasons for agency fees and alternative rationales proffered by respondents and their amici,” but as Justice Kagen complained in her dissent the majority just dismissed them. Alito writes the agency shop is unnecessary because postal workers have exclusive representation, but “employees are not required to pay an agency fee and about 400,000 are union members.” Section 14(b) of the National Labor Relations Act as amended gives the state legislatures authority to eliminate dues check off and hence eliminate the union and agency shop. Many states have done that and so the justices claim “millions of public employees in the 28 States that have laws generally prohibiting agency fees are represented by unions that serve as the exclusive representatives of all the employees.”

The democratically elected legislatures of 28 states have chosen a policy by majority vote to apply section 14(b), but it’s one thing to argue agency fees are unnecessary and another to declare them unconstitutional as no other Supreme Court majority has ever done. The other 22 legislatures made the democratic decision to allow the agency shop, but what’s democracy if judges don’t like unions as George Schatzki warned us.

Union organizing requires a majority vote of a government defined bargaining unit in order to be a union. Not once in any of these majority opinions do I find the justices mention, much less defend, interfering in a democratic election. In the three cases – Hanson, Street, Abood – the justices did not address constitutional questions, which allowed them to avoid interfering with democratic votes. They did not find wording in the law that allowed using dues for political purposes and so filled in a policy they thought consistent with the law passed by Congress. They show respect for a democratically elected Congress to adjust public policy consistent with the constitution and will of the people.

Alito makes no attempt to justify taking up the cause of disgruntled losers angry with the results of a democratic election. Around the country many states and localities require a voter referendum to pass bond funding for public projects like streets and highways. If a majority votes yea, I am unaware disgruntled losers can deduct their share of project costs from their property taxes. I am unaware in democratic votes for bond funding that objectors can claim a violation of free speech. I find no mention of examples of democratic elections where Supreme Court justices protect the losers from the normal process of majority rule.

Alito paid homage to precedent – stare decisis - in his opening lines but it was a patronizing reference. In Janus the majority ignores precedent entirely and responds as politicians to the union hating right wing constituency they were appointed to please and protect. Federal judges take an oath to hear cases without regard to persons, which suggests in Janus v AFSCME five of them in this 5 to 4 ruling violated their oath.

Tuesday, May 7, 2019

Trump and the Federal Reserve

Trump and the Federal Reserve

Trump keeps complaining the economy should do better. [as in “Trump frustrated on Fed, oil as he tries to juice economy” Washington Post, May 3, 2019] He thinks lower interest rates than the already low interest rates would pep up the economy and so he nominates two incompetents for Federal Reserve Board posts.

There are many ironies here. First, presidents do not manage the economy, the Federal Reserve does that. Congress sets government spending and taxes and business creates jobs. Presidents can be cheerleaders but remain on the sidelines to a remarkable degree.

Second, work in applied economics at the Federal Reserve requires more study of macro and monetary economics and more experience in application of these specialties than any other jobs in economics. In truth no one should be nominated for the Federal Reserve Board that does not have prior experience in banking and experience as professional staff before moving up through the ranks at headquarters in Washington or the regional banks.

Third, the economy continues to do extremely well by any standards, but especially so given the inequality of income and the dulling effect of two years of Trump tariffs. An economy is nothing but a flow of transactions and interest rates are a policy tool to help maintain that flow and avoid fluctuations in production, income and employment. Since inflation remains remarkably low at less than two percent with an expanding economy and rising employment, we can easily recognize interest rates are at the perfect rate.

Fourth, the two incompetents withdrew after enough Republicans signaled a NO vote. These same Republicans remain silent on Russian Interference in United States Democracy, but they draw the line at incompetents taking over the economy. It’s good to learn a few Senators will not always slobber on Trump; pandering has limits, even for Republicans.

Fifth, in a digital age with excellent economic information and just in time inventory management recessions do not occur by accident. The natural business cycle resulting from fluctuations in production and spending will continue to be mild and the Federal Reserve can deal with business cycles to keep economic fluctuations mild and barely noticeable as the last decade shows.

The 2008-2010 recession was not part of a natural business cycle. The economy collapsed after the banking industry looted the nation’s loanable funds for gambling in home mortgages. By selling and reselling mortgage loans packed as collaterized debt obligations they built a speculative bubble, which collapsed in a rush. It all happened after Congress and Bill Clinton repealed the regulations of the Glass Steagall Banking Act of 1934, thereby eliminating bank and banker restrictions on the use of loanable funds for their own speculative purposes.

Severe recessions like the one in 2008-2010 only occur because those with the power to make the right decision have their own agenda and choose to make the wrong decision. Given the rogues and scoundrels of 2019 it seems quite possible to occur again.