The Future of Right-to-Work Depends on the Result of Pending Appeals

November 16, 2016

Wisconsin enacted its “right-to-work” law in 2015. The law prohibits unions or companies from requiring private-sector workers to join a union or to pay mandatory union dues. Various unions joined to file two lawsuits in Wisconsin challenging the new law. The first round of decisions split, one in favor of upholding the law and one striking it down as unconstitutional. This means that the future of right-to-work legislation in Wisconsin depends on the votes at the appellate courts, which may be close. 

What Is Right-to-Work? 

Last year, Wisconsin enacted its right-to-work law. Under this law, no person in Wisconsin may require, as a condition of obtaining or continuing employment, an individual to do any of the following:

  • Become or remain a member of a union;
  • Pay dues, fees, assessments, or other charges or expenses of any kind or any amount, or provide anything of value to a union; or
  • Pay the equivalent, or any portion, of dues, fees, assessments, or other charges or expenses required of members of a union to a third party in place of a union.

In other words, an individual cannot be forced to join a union or pay dues as a condition of employment. This law, however, makes it difficult for unions to raise money to fund their core activities, such as collective bargaining, contract administration, and handling grievances. The union has exclusive bargaining rights with the employer and, therefore, is required by law to represent all workers within the bargaining unit, whether they are members or not. This creates a “free rider” problem, where union members pay for services but nonunion members get the benefits without having to pay for them.

The law has long recognized that unions can charge nonunion members their “fair share” for representation services. Wisconsin’s right-to-work law takes away the ability to charge nonunion members for services.

Various unions joined to file a lawsuit in state court and a lawsuit in federal court challenging the right-to-work law as an unconstitutional “taking” of property. In short, the unions argue that they are stuck: They are legally required to provide services to nonmembers but are prohibited from charging them for those services. They argue that forcing them to represent nonmembers for free is the same as taking their property without just law unconstitutional and unenforceable.

This article provides an overview of how this argument has played out so far in the first round of federal and state court decisions. The first two decisions have split in favor of the unions and the state, which is defending the law. The ultimate resolution will require counting the votes in the appellate courts.

Federal Court Litigation 

The International Union of Operating Engineers, Local 139 and Local 420, filed a lawsuit challenging the constitutionality of Wisconsin’s right-to-work law in Wisconsin federal district court. The district court seemed sympathetic to the union’s case but dismissed the lawsuit based on controlling law from the 7th Circuit. Some background is necessary to explain why the district court dismissed the lawsuit.

Indiana passed a similar right-to-work law before Wisconsin. Its law was challenged in a similar lawsuit, Sweeney v. Pence, which was decided by a three-judge panel in the 7th Circuit. In that case, the unions challenging the law did not push a “takings” argument. Nonetheless, two of the judges on the panel concluded that there was no unconstitutional taking because the union is compensated for representing nonunion members with the right to bargain exclusively with the employer.

Chief Judge Diane Wood disagreed. She explained that Indiana’s right-to-work law requires one private party (fee-paying union members) to give property (representation services) to another private party (nonmembers who receive representation services without paying fees) but prohibits them from charging for that service. She wrote that this was a taking without compensation and, thus, was unconstitutional.

Despite Chief Judge Wood’s dissent, Indiana’s right-to-work law was upheld as constitutional by a 2-1 vote. The unions asked the entire 7th Circuit to hear the case en banc, meaning that all 10 judges would hear the case and cast votes. The judges voted 5-5 to rehear the case; a tie meant that the case would not be reheard. Notably, five judges indicated their agreement with Chief Judge Wood’s decision. Nonetheless, the 7th Circuit’s 2-1 decision in Sweeney was the controlling law in Indiana, Illinois, and Wisconsin.

The Wisconsin federal district court acknowledged this fact and wrote that “the Court concludes that the majority opinion in Sweeney compels the Court to grant [the state’s] motion for judgment on the pleadings.” In other words, the Sweeney decision tied the court’s hands, and only the 7th Circuit or the U. S. Supreme Court can change or overrule the result. Not surprisingly, the unions have appealed to the 7th Circuit.

State Court Litigation 

The state courts of Wisconsin, however, are not bound by decisions of federal courts, other than the U. S. Supreme Court. Perhaps with that in mind, the International Association of Machinists, the United Steel Workers, and the Wisconsin State AFL-CIO filed a similar lawsuit in the circuit court for Dane County, Wisconsin. The court there agreed with the unions and Chief Judge Wood that Wisconsin’s right-to-work law unconstitutionally takes the union’s property—its representation services—without compensation.

First, the circuit court wrote that representation services are property: “Labor is a commodity that can be bought and sold. A doctor, a telephone company, a mechanic—all would be shocked to find they do not own the services they perform. . . . Unions are no different; they have a legally protected property interest in the services they perform for their members and non-members.”

The court then went on to list the reasons why “exclusive representation” is not compensation:

  • Wisconsin law has always equated “just compensation” with the payment of money, not a grant of special privileges. Allowing “just compensation” in a form other than money would require the courts to value the nonmonetary privilege allegedly given to determine whether it is “just compensation.”
  • The idea that exclusive representation is just compensation “fundamentally misunderstands” how a union obtains its exclusive bargaining seat: It earns the right by convincing a majority of employees in the bargaining unit to elect a union.
  • Employers, too, obtain benefits from union representation in the form of no-strike clauses, management-right clauses, and a grievance procedure, “all of which are a win-win for both labor and management.”
  • The idea that “exclusive representation” at the bargaining table is compensation does not address the contract administration and grievance procedure services that a union provides to members and nonmembers.

The circuit court struck down Wisconsin’s right-to-work law as unconstitutional. The state has appealed the case to Wisconsin’s court of appeals.

Count the Votes 

The two cases are now pending in the respective appellate courts. In the 7th Circuit, there were at least five judges out of 10 who agreed with Chief Judge Wood’s takings analysis and who would presumably vote to strike the law as an unconstitutional taking. A majority of the 10 judges would have to vote in favor of overruling Sweeney in order to strike down right-to-work laws as unconstitutional under federal law.

The state court case is pending before the three judges that make up District 3 of the Wisconsin Court of Appeals. Presiding Judge Lisa Stark wrote earlier this year that “the State has established there is a sufficient likelihood of success on appeal.” This means that the circuit court’s decision striking the law as unconstitutional is on hold while the appeal is pending. Other than this statement, there is little evidence indicating which way the panel will vote.

Ultimately, both cases will likely be decided by the respective supreme courts. The U. S. Supreme Court is interested in these issues. In fact, it recently attempted to decide a case on a similar union issue. The liberal-leaning Justices and the conservative Justices deadlocked in a 4-4 tie and were unable to render a decision because the Court has been operating with only eight members since Justice Antonin Scalia’s death in February 2016 and the U.S. Senate has not yet held confirmation hearings on President Barack Obama’s nominee to replace Justice Scalia. Obviously, the makeup of the Supreme Court could change dramatically, depending on President-Elect Donald Trump’s Supreme Court pick. A liberal-leaning Supreme Court seems likely to strike down the right-to-work law as unconstitutional. On the other hand, the Wisconsin Supreme Court has a solid conservative majority and is likely to uphold the law.

Bottom Line 

Both the state and the unions challenging the law have raised compelling arguments. We will have to count the votes to see which side will prevail in this ongoing national debate.

For more information about "The Future of Right-to-Work Depends on the Result of Pending Appeals," contact Tyler K. Wilkinson at twilkinson@axley.com or 608.283.6783.