The Michigan Supreme Court, in an opinion that has the effect of making state employees subject to Michigan's 2012 right-to-work law, ruled Wednesday that Michigan's Civil Service Commission never had the authority to impose union fees on state workers, even before the controversial law was passed.
The 4-3 ruling is a blow to the United Auto Workers and other unions representing about 36,000 state employees, who argued only the bipartisan Civil Service Commission -- not the Legislature -- can set the conditions of employment for civil servants.
In another setback for state employee unions, the court also upheld Wednesday a 2011 law requiring employees in the state's defined benefit pension plan to either contribute 4% of their pay toward retirement costs or move to a 401(k)style plan, in which future retirement benefits are not defined. That ruling overturned a decision by the Michigan Court of Appeals.
In the right-to-work case, Michigan Supreme Court Justice Robert Young Jr. wrote the majority opinion, joined by Justices Stephen Markman, Brian Zahra and David Viviano. One Republican-nominated justice, Mary Beth Kelly, joined the two Democratic nominees -- Justices Bridget McCormack and Richard Bernstein -- and wrote a dissent.
Before the right-to-work law, union members had the option of opting out of paying union dues. But they were still subject to the agency fees that unions say support the cost of negotiating labor agreements that benefit all workers. Under right-to-work, workers can't be required to pay those fees, either.
The effect of Wednesday's ruling is consistent with a 2-1 decision from the Michigan Court of Appeals in 2013, in that it makes clear that state employees are subject to the right-to-work law despite the existence of the Michigan Civil Service Commission.
However, the Michigan Supreme Court set out an entirely different reasoning than the appeals court did, saying the Civil Service Commission never had the constitutional power to impose agency fees on workers, even before the right-to-work law existed.
Although the fees are paid by state workers to the union, not the commission, the court said the fees are, in effect, a way of subsidizing the commission's cost of regulating employer-employee relations in state government.
Having allowed collective bargaining as a way of regulating the conditions of employment, "what the commission cannot do is foist the administrative costs of that choice onto anyone else," Young said in his opinion.
"This principle remains true regardless of who pays whom. What matters is who authorizes and receives the benefit. Illustratively, had the commission chosen another method by which to regulate conditions of employment -- for example, by hiring a panel of consultant labor economists -- no one would assert that the labor economists could then submit their invoice to the affected civil servants."
The Court of Appeals ruling had followed a different rationale, saying, "Michigan case law fully supports the principle that the Legislature as the policy-making branch of government has the power to pass labor laws of general applicability that also apply to classified civil service employees."
In her dissent, Kelly said the civil service rule allowing agency fees is "consistent with the commission's authority to regulate all conditions of employment in the classified (civil) service."
Kelly also said that state employees pay agency fees not to the commission, but to the union, and "there has been no finding -- not even an allegation -- that agency fees fund these regulatory efforts" of the Civil Service Commission.
A coalition of state employee unions filed suit in February 2013, challenging the constitutionality of one of Michigan's two right-to-work laws: Public Act 349 of 2012, which governs public employees.
Nick Ciaramitaro, legislative director of Michigan AFSMCE Council 25, which represents state employees and other public employees, said given the 5-2 majority of Republican-nominated justices on the court, "I don't think anyone is going to be shocked," by the decision. However, "I think it's disappointing," and "it's an undermining of the civil service system."
Terri Reid, president of the Michigan Freedom Fund, which backed the law, issued a news release that said "today is a great day for workers in Michigan," and "individuals' freedoms shouldn't end when they take a job working on behalf of taxpayers." She said "today's ruling ensures that they won't."
The unions argued the Michigan Constitution gave the Michigan Civil Service Commission exclusive jurisdiction over the conditions of employment of civil servants and the Legislature can't interfere with that.
Attorney General Bill Schuette's office, arguing on behalf of the state, said state courts and state laws have both consistently recognized limits on the powers of the Civil Service Commission.
The right-to-work law, passed in the final days of the Legislature's lame-duck session in December 2012, makes it illegal to require employees to contribute financially to a union as a condition of employment. The right-to-work battle was waged over a five-day period with no committee hearings or public input, and inspired thousands of people to descend on the Capitol to protest the impending law, as much smaller numbers demonstrated in favor of the measure.
Gov. Rick Snyder said Wednesday's decision "ensures that state employees will enjoy the same rights and protections as private sector workers across Michigan." He added: "I respect that the freedom-to-work laws inspired passionate debate on both sides, and appreciate that the state's highest court has now brought this issue to a close."
State employee unions and the State Office of the Employer began initial negotiations on new collective bargaining agreements last week.
The laws took effect in March 2013, at the time making Michigan the 24th right-to-work state.
In the pension case Wednesday, Justices Young, Markman, Zahra and Viviano ruled that the 2011 amendment to the State Employees' Retirement Act did not impinge on the powers of the Civil Service Commission.
The majority opinion said the drafters of Michigan's 1963 constitution did not consider pensions and other fringe benefits as the "compensation" the commission is responsible for setting, only salaries and wages. It also said the commission had "acquiesced" to the Legislature's partial infringement on its sphere of authority through the State Employees' Retirement Act.
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