The justices could have overturned an earlier precedent that allows public-sector employers to force workers to pay mandatory union dues.
Instead, a narrow 5-4 majority said the precedent didn't apply in the Harris case and let it stand.
The ruling was nevertheless a victory for eight home caregivers who sued the state of Illinois for declaring that they were public employees eligible for unionization.
The plaintiffs argued that being forced to pay union dues violated their First Amendment rights.
Illinois officials argued the caregivers were state employees by virtue of their accepting subsidies, no matter that most of the caregivers private individuals caring for immediate family members at home.
The court sided with the caregivers: "If we accepted Illinois' argument, we would approve an unprecedented violation of the principle that ... no person in this country may be compelled to subsidize speech by a third party that he or she does not wish to support."
The National Right to Work Legal Defense Foundation, which represented the caregivers, declared victory.
"We applaud these home care providers' effort to convince the Supreme Court to strike down this constitutionally-dubious scheme, thus freeing thousands of home care providers from unwanted union control," said NRTW President Mark Mix.
The Illinois careers who cared for the physically disabled were organized as part of the Service Employees International Union under dubious circumstances in 2003.
"Those workers now have the legal right to quit the union if they want. Caregivers for the mentally disabled are not represented by a union since they rejected collective bargaining in a 2009 vote."
Monday's ruling applies only to the Illinois caregivers. It could have been much more sweeping. Labor law experts had speculated that the court might completely overturn the 1977 case of Abood v. Detroit Board of Education.
In that case, the court said government entities can enter into labor contracts requiring all employees to join a union or at least pay dues to one.
Nearly half of all rank and file union members nationally -- about seven million people -- work for the government at some level.
It is not clear how many of those workers would freely choose union membership since most never had a choice. They joined already-unionized workplaces and had to either pay dues or not work at all.
Nullifying the Abood precedent could have cost Big Labor severely in terms of money and manpower, which would in turn have harmed union political allies, especially the Democratic Party.
The majority's ruling turned on the argument that the caregivers were not really public sector employees after all because they are answerable to care recipients, not the state. The caregivers also lacked most state employee benefits and protections.
"Even collective bargaining on their behalf is sharply limited," the majority noted.
Since they were not really state employees "Abood does not control here" the majority said and instead "generally applicable First Amendment standards apply."
Justice Samuel Alito wrote the opinion, which was joined by Chief Justice John Roberts, as well as Justices Antonin Scalia, Clarence Thomas and Anthony Kennedy.
In the dissenting opinion, Justice Elena Kagan argued the workers were state employees. Nevertheless, she said the majority opinion gave "satisfaction, though hardly applause" because it affirmed that the "Abood rule is deeply entrenched."
Kagan was joined by Justices Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor.
SEIU President Mary Kay Henry issued a defiant statement after the ruling: "No court case is going to stand in the way of home care workers coming together to have a strong voice for good jobs and quality home care."
The court had previously signaled that it would reconsider Abood. In the 2012 case Knox v. SEIU, the majority opinion by Justice Alito said that compulsory union fees "constitute a form of compelled speech and association that imposes a significant impingement on First Amendment rights."
During January’s oral arguments in the case, Justice Scalia, normally the court’s most conservative member, threw a curveball by seemingly taking labor’s side in the case.
He pointed out that some private employers favor letting unions have exclusive rights to represent workers because that gives them a single employee representative to deal with.
“They do this as private employers because they think it is in their interest as an employer,” Scalia said. “Why can’t the government have the same interest?”
The history of Illinois’ attempts to get the caregivers into a union illustrates many of the problems with public sector unions, particularly how politics distorts the process.