In an August 28, 2020, opinion, a sharply divided panel of the U.S. Court of Appeals for the Third Circuit joined a growing consensus of federal appellate courts in recognizing the good-faith defense to claims of restitution from unions for fair-share fees in the wake of Janus v. AFSCME Council 31, 138 S. Ct. 2448 (2018). In ruling on consolidated appeals, the Third Circuit affirmed the judgments of two federal district courts in Pennsylvania and held that Pennsylvania public employees who declined to join unions may not assert federal civil rights claims seeking damages from the unions for fair-share fees that their employers deducted and paid to the unions prior to the Supreme Court’s decision in Janus. The decision brings the Third Circuit, covering Pennsylvania, New Jersey, and Delaware as well as the U.S. Virgin Islands, in line with the other federal courts of appeal that have rejected such claims.
In Janus, the Supreme Court upended decades of labor policy and overruled its 30-year-old precedent in Abood v. Detroit Bd. of Educ., 431 U.S. 209 (1977). Under Abood, states were permitted to require public employees to pay a “fair-share” fee for union representation when employees did not desire to become union members. These agency fees were supposed to cover the cost of providing representation to the employee. Historically, employees had challenged the constitutionality of the arrangement on First Amendment grounds, arguing that the state-sanctioned deductions amounted to compelled speech in support of unions because the fees supported a range of activities and positions they did not in fact support. The Abood Court had ruled that any minor infringement of a free speech interest was justified by the state’s legitimate interest in preventing so-called “free riders” from undermining a union’s ability to represent the bargaining unit and thus cause labor strife. The Janus Court found the arrangement unconstitutional, invalidating agency fee laws in more than 20 states that had enacted such laws.
Following Janus, non-union employees filed class action lawsuits in numerous state and federal courts demanding that public employers and unions reimburse them for their fair-share fees. Among other claims, such employees have alleged that, as state-actors and private parties, respectively, public employers and unions should be liable under 42 U.S.C. § 1983 for the unconstitutional fair-share fees taken under the color of the state laws that the Supreme Court struck down in Janus. In separate decisions rejecting the viability of such claims, the Second, Sixth, Seventh, and Ninth Circuits held that unions are entitled to a “good-faith defense” in light of the state statutes and judicial decisions permitting the arrangements. Similarly, courts have found that state actors are entitled to immunity from such claims.
In its consolidated opinions in Diamond et al. v. PSEA et al. and Wenzig et al. v. SEIU Local 668 et al., the Third Circuit has joined the ranks of these other federal courts of appeals. Judge Rendell’s narrow majority opinion prohibits “monetary liability when a private-party defendant acted in good faith reliance on a statute enacted in accordance with binding Supreme Court precedent in a situation that has no exact analogue at common law.” Notably, Judge Fisher disagreed with the reasoning in Judge Rendell’s majority opinion, but nonetheless concurred in affirming the district courts’ dismissals. Judge Phipps’ dissenting opinion found neither support for a good-faith defense to claims against private parties under 42 U.S.C. § 1983, nor any other basis for affirming the lower courts’ decisions.