Minnesota Cities Magazine
More from Nov-Dec 2018 issue

From the Bench: U.S. Supreme Court Finds Union ‘Fair Share’ Fees Unconstitutional


Fair share union fees
Mark Janus, a child support specialist for the Illinois Department of Healthcare and Family Services, is not a union member but has been charged a fee of $45 per month that is deducted from his paycheck to go to the American Federation of State, County, and Municipal Employees, the union that represents the employees in his office. Such fees, often known as “fair share” or “agency” fees, are reduced fees paid by employees who are covered by a collective bargaining agreement, but who do not wish to be union members. Generally, fair share fees are meant to compensate unions for the work they do on behalf of all individuals in a bargaining unit, members and nonmembers, such as negotiating wages and benefit increases. Janus challenged the fair share fees and argued that requiring him to pay even reduced fees to cover the cost of collective bargaining violates his First Amendment free-speech rights, by requiring him to finance speech by the union intended to influence the government on issues like salaries, pension, and benefits for government employees.

The lower courts upheld the fees under precedent from Abood v. Detroit Board of Education, a 1977 United States Supreme Court ruling that concluded that unions were constitutionally authorized to charge fair share fees because it promoted “labor peace” and avoided the problem of “free riders”— people who reap the benefits of union representation without paying for them. The United States Supreme Court overturned the Abood decision, noting that it was poorly reasoned, and held in a 5-4 decision that it is unconstitutional for public employees to be required to pay fair share fees. The Supreme Court reasoned that compelling a person to subsidize the speech of other private speakers raises serious First Amendment concerns and that the state’s justifications for charging such fees are not sufficient to pass the constitutional test applicable to them under either an exacting strict scrutiny standard of review or the more traditional strict scrutiny standard of review. Janus v. American Federation of State, County, and Municipal Employees, Council 31, 138 S. Ct. 2488 (2018). Note: State labor law, Minnesota Statutes, section 179A.06, subdivision 3, currently requires fair share fees. This Supreme Court opinion invalidates application of that portion of Minnesota law. For more information on this topic, listen to a League of Minnesota Cities recorded webinar at www.lmc.org/fairsharefees.


Infrastructure fees
The City of Woodbury has conditioned its approval of subdivision applications on the applicant’s payment of an infrastructure fee, called a major roadway assessment (MRA), that has been negotiated and incorporated as a condition in a development contract. The city has placed these infrastructure fees in a dedicated account used to pay for the future construction of offsite road improvements needed to support new development. Developer Martin Harstad and his companies, Harstad Hills Inc. and Creative Capital Holdings, LP, sued, seeking a declaratory judgment that the city does not have statutory authority to require the payment of infrastructure fees for future road improvement projects under its MRA program. The city argued that the subdivision statute, Minnesota Statutes, section 462.358, subdivision 2a, provides cities with express authority to require the payment of infrastructure fees when approving subdivision applications. The lower courts ruled against the city, holding that it did not have authority to collect MRA fees.

The Minnesota Supreme Court affirmed, reasoning that the subdivision statute does not provide statutory cities with express authority to condition the approval of a subdivision application on the payment of an infrastructure charge that is used to finance future road improvement projects. The Supreme Court noted, however, that the subdivision statute authorizes a city to condition approval of a subdivision application on one of two things: the “developer (a) constructing or installing the improvements or (b) providing a form of ‘financial security’ that is sufficient to assure the city that the ‘improvements will be constructed or installed according to the specifications’ of the city.” Butthe Supreme Court expressly declined to decide whether this authority is limited to only those improvements located within the proposed subdivision or whether off-site improvements may be required. In addition, the Supreme Court noted that it is undisputed that cities have authority to assess property for road and street improvements under chapter 429 of the Minnesota Statutes, and that the city’s ordinance provides that applications deemed premature for development—for several different reasons, including the lack of funding for needed street improvements— must be denied. Harstad v. City of Woodbury, N.W.2d (Minn. 2018). Note: The League of Minnesota Cities Insurance Trust represented the city, and the League of Minnesota Cities filed an amicus curiae brief in the city’s support.


Forfeiture of office
Several city residents brought three separate complaints against Victoria Mayor Thomas O’Connor and three councilmembers, James Crowley, Lani Basa, and Thomas Strigel, claiming multiple violations of the Open Meeting Law, and seeking the imposition of monetary penalties and an order requiring the forfeiture of their public offices. The violations alleged included failures to provide public notice of committee meetings, participation in meetings that were not properly closed or recorded, and serial violations through email communication. The district court ordered the three complaints consolidated into one court action. After a six-day bench trial, the district court found that 38 intentional Open Meeting Law violations had occurred, but did not order the forfeiture of any offices, holding that the Open Meeting Law’s forfeiture penalty is not triggered unless there are findings of intentional violations in three or more separate court actions. The residents appealed, primarily seeking an order requiring the remaining public officials to forfeit their offices. The Minnesota Court of Appeals ruled against the residents and refused to order the forfeiture of any offices. The Minnesota Supreme Court affirmed the Court of Appeals’ decision and held that the forfeiture penalty is not triggered unless intentional Open Meeting Law violations are proved in three separate, sequential court adjudications. Funk v. O’Connor, N.W.2d (Minn. 2018). Note: The League filed an amicus curiae brief in the city’s support.


Appearance of bias
The City of Rochester provides fixed-route public transit services. In 2011, the Federal Transit Administration (FTA) informed the city that, to continue receiving federal funding, it must use a competitive process to award future contracts for the operation of these public transit services. The city decided to use a best-value contracting process consistent with FTA regulations. As a result, the city issued a request for proposals (RFP) for public transit services for the period from July 1, 2012, to Dec. 31, 2016 (2012 RFP). The city awarded the contract to First Transit, Inc., but Rochester City Lines (RCL), a company that had submitted a proposal that was not selected, sued, claiming the contracting process was “unreasonable, arbitrary, or capricious” in violation of law.

Litigation regarding the 2012 contracting process was still ongoing in 2016, when the city issued a second RFP (2016 RFP) for the period from Jan. 1, 2017, to Dec. 31, 2021. Five of the eight members of the 2016 evaluation committee had previously served as members of the evaluation committee for the 2012 RFP. The 2016 RFP provided a process for potential bidders to protest RFP provisions before submitting a bid and designated a special assistant attorney to make final decisions on any pre-bid protests. RCL filed a pre-bid protest challenging several provisions of the 2016 RFP, including the designation of members from the 2012 evaluation committee on the 2016 evaluation committee.

The special assistant attorney denied RCL’s pre-bid protest. RCL appealed by filing a writ of certiorari, and the Minnesota Court of Appeals reversed the special assistant attorney’s decision, holding that the 2016 RFP provision designating members of the 2012 evaluation committee on the 2016 evaluation committee creates an impermissible appearance of bias, which makes the contracting process unreasonable, arbitrary, or capricious in violation of law.

The Court of Appeals also held that the contract awarded through the 2016 process was invalid. The Minnesota Supreme Court reversed the Court of Appeals’ decision, concluding that RCL had forfeited the appearance-of-bias claim by failing to raise it earlier in the appeal. The Supreme Court also remanded the case, so that the Court of Appeals could address RCL’s additional legal arguments challenging the contracting process’s validity. Rochester City Lines Co. v. City of Rochester, 913 N.W.2d 443 (Minn. 2018). Note: LMC filed an amicus curiae brief in the city’s support.

Written by Susan Naughton, research attorney with the League of Minnesota Cities. Contact: snaughto@lmc.org or (651) 281-1232.

Read the Nov-Dec 2018 issue of Minnesota Cities magazine

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