Also called “fair share” or “service” fees, agency fees are utilization fees which are negotiated as part of a collective bargaining agreement and allow labor unions to recover a fair portion of the costs of contract administration from employees who benefit from the protections of a union contract, but do not join the union. Federal law provides an exemption from paying agency fees for employees who can demonstrate a bona fide conscientious (religious) objection to financially supporting labor unions.

In general, agency fees are less than the full rate of member dues negotiated for a bargaining unit, and include only the portion of dues that unions may use to cover the cost of contract negotiations, administration of the contract and grievance resolution. Agency fees exclude the portion of member dues that unions may use for political activities and other purposes. 

Unions and employers may negotiate different options for collecting non-member services fees, such as allowing agency fee-payers to direct their fees to an approved charity of their choice, or may completely waive the option to collect non-member fees. This aspect of union contract negotiation has faced repeated legal and legislative attacks from anti-labor legislators and organizations, culminating in the 2018 U.S. Supreme Court Janus decision prohibiting public sector unions from collecting fees from non-members who are protected by the negotiated benefits of a union contract but prefer to withhold financial support from the labor union.

State legislation that hurts unions by regulating the ability to negotiate fair share fees includes so-called “right-to-work” laws, but also includes proposals to allow non-members to direct their agency fees to a charity without having to demonstrate a valid conscientious objection and similar restrictions on negotiating the terms of non-member fees to pay for collective bargaining activities.

FOR MORE INFORMATION:

Janus and fair share fees: The organizations financing the attack on unions’ ability to represent workers
Economic Policy Institute, February 2018

“Janus is the third case to come before the Supreme Court in five years involving public-sector unions’ ability to collect “fair share” (or “agency”) fees. As this report will show, Janus, and the two fair share cases that preceded it, did not grow from an organic, grassroots challenge to union representation. Rather, the fair share cases are being financed by a small group of foundations with ties to the largest and most powerful corporate lobbies. These organizations and the policymakers they support have succeeded in advancing a policy agenda that weakens the bargaining power of workers. In Janus, these interests have focused their attack on public-sector workers—the workforce with the highest union density.”