¶ 1.
The issue in this appeal involves whether Wisconsin's "right-to-work law," 2015 Wisconsin Act 1 (Act 1), effectuates an unconstitutional taking of the property of labor organizations
¶ 2. Employees are permitted to unionize and elect exclusive representation. A benefit to unions of
BACKGROUND
f 3. Prior to Act 1 becoming effective on March 11, 2015, the International Association of Machinists District 10 and its Local Lodge 1061, United Steelworkers District 2, and the Wisconsin State AFL-CIO
f 4. The Unions alleged they collectively represent the interests of every Wisconsin worker in the bargaining units for which they have been elected the
f 5. The Unions alleged Act 1 imposed a costly and ongoing duty to represent non-member employees in collective bargaining and grievance adjustments, while depriving the Unions of their right to negotiate contracts that would allow them to compel those nonmember employees to pay the cost of the services the Unions were obligated to provide for that representation. According to the Unions, Act 1 thus violated the Wisconsin Constitution's Takings Clause, which states "[t]he property of no person shall be taken for public use without just compensation therefor." See Wis. Const., art. I, § 13.
f 6. Following the denial of the State's motion to dismiss, the circuit court granted the Unions' motion for summary judgment. The court determined the Unions had a legally protectable property interest in the money and services expended to fulfill their duty of fair representation to non-members. The court held that Act 1 constituted a taking because the Unions were required to represent all persons in the bargaining unit fairly and equally, including employees who
¶ 7. The circuit court therefore declared the challenged provisions of Act 1 "null and void." The court also noted Act 1 "makes it a crime for the union to require someone to pay for the services he or she receives from the union," and it determined that "[e]n-joining the Attorney General and the State from pursuing criminal prosecution is appropriate relief." The court also enjoined the WERC defendants, on the basis that "Act 1 renders an employer's collection of dues or assessments without an employee's individual order an unfair labor practice." The State now appeals.
STANDARDS OF REVIEW
f 8. The constitutionality of a statute is a question of law that we review de novo. Madison Teachers, Inc. v. Walker,
f 9. We also review summary judgments independently. Green Spring Farms v. Kersten,
DISCUSSION
I. Statutory Background
¶ 10. In order to interpret Act 1, an understanding of its legislative background is helpful.
A. The National Labor Relations Act
¶ 11. Modern labor law in America began in 1935, with the passage of the National Labor Relations Act (NRLA), also known as the Wagner Act. See Sweeney v. Pence,
¶ 12. After World War II, however, "there was a feeling by some in Congress that the pendulum had swung too far in the direction of unionization." Sweeney,
¶ 13. The NLRA—as amended by Taft-Hartley— outlawed closed-shop agreements. See, e.g., NLRB v. Local Union No. 55,
B. The Duty of Fair Representation
f 14. The NRLA relies upon a system of exclusive representation of bargaining-unit employees. See 29 U.S.C. § 159(a). Under both federal and Wisconsin law, employees have the right to choose representatives "for the purpose of collective bargaining." 29 U.S.C. § 157; Wis. Stat. § 111.04(1). Representatives may be any person or group of persons, including a labor organization. 29 U.S.C. § 152(4); Wis. Stat. § 111.05(10)-(11). Representatives are selected by a majority of employees in a bargaining unit. 29 U.S.C. 159(a), (c); Wis. Stat. § 111.05(1), (3). The chosen representatives become the exclusive representatives of all employees in the bargaining unit when engaging in collective bargaining. 29 U.S.C. § 159(a); Wis. Stat. § 111.05(1).
¶ 16. Other consequences flow from the Unions' status as the exclusive representative of all members of the bargaining unit. The most significant consequence is what is known as the duty of fair representation. See Sweeney,
C. Right-to-Work Laws and Act 1
f 17. Right-to-work laws are not a new phenomenon, and twelve states had right-to-work laws in effect when Taft-Hartley was enacted in 1947. Sweeney,
¶ 18. Act 1 provides as follows, in relevant part:
No person may require, as a condition of obtaining or continuing employment, an individual to do any of the following:
1. Refrain or resign from membership in, voluntary affiliation with, or voluntary financial support of a labor organization.
2. Become or remain a member of a labor organization.
3. Pay any dues, fees, assessments, or other charges or expenses of any kind or amount, or provide anything of value, to a labor organization.
4. Pay to any 3rd party an amount that is in place of, equivalent to, or any portion of dues, fees, assessments, or other charges or expenses required of members of, or employees represented by, a labor organization.
Wis. Stat. § 111.04(3)(a).
¶ 19. Act 1 also provides that if a provision of a contract violates the above subsection, "that provision is void." Wis. Stat. § 111.04(3)(b). Furthermore, Act 1 imposes a specific crime against public peace and order, stating any person violating these prohibitions "is guilty of a Class A misdemeanor." Wis. Stat. § 947.20.
f 20. At the outset, it is necessary to ascertain the scope of the Unions' constitutional challenge to Act 1. Facial challenges seek to invalidate challenged statutory provisions in all of their applications. See State v. Wood,
¶ 21. The Unions alleged in their complaint that Act 1 "upon its face takes the property of Plaintiffs without just compensation . . . ." Moreover, they argue on appeal that the circuit court "correctly enjoined the enforcement of Act 1 statewide, not only for the Unions below, but for all affected labor organizations." The Unions further assert there are "no circumstances where the government can constitutionally impose such a taking of private property to benefit other private actors, without just compensation."
f 22. However, the label attached to a constitutional challenge is not determinative of whether it is a facial or as-applied challenge. See Citizens United v. FEC,
¶ 23. We therefore first address whether Act 1 is unconstitutional as applied, since a facial challenge should generally not be entertained when an as-applied challenge could resolve the case. See Society Ins. v. LIRC,
A. Act 1 Does Not Take the Unions' Money or Services
¶ 24. The Unions contend the combined effect of Act 1 and the duty of fair representation compels labor organizations to spend monies in their treasuries to provide services for non-member employees in bargaining units when those non-members do not pay representative fees or dues to the labor organization.
¶ 25. An unconstitutional taking occurs under the Wisconsin Constitution when: (1) a property interest exists; (2) the property interest has been taken; (3) the taking was for public use; and (4) the taking was without just compensation. See Morgan,
¶ 26. In Eastern Enterprises v. Apfel,
The Coal Act imposes a staggering financial burden on the petitioner, Eastern Enterprises, but it regulates the former mine owner without regard to property. It does not operate upon or alter an identified property interest, and it is not applicable to or measured by a property interest. The Coal Act does not appropriate, transfer, or encumber an estate in land (e.g., a lien on a particular piece of property), a valuable interest in an intangible (e.g., intellectual property), or even a bank account or accrued interest. The law simply imposes an obligation to perform an act, the payment of benefits. The statute is indifferent as to how the regulated entity elects to comply or the property it uses to do so.
Id. at 540. The four dissenters in Eastern Enterprises agreed that the Takings Clause was not implicated because "the 'private property' upon which the [Takings] Clause traditionally has focused is a specific interest in physical or intellectual property .... This case involves not an interest in physical or intellectual property, but an ordinary liability to pay money, and not to the Government, but to third parties." Id. at 554.
¶ 28. The Unions insist this is a distinction without a difference because Wisconsin's duty of fair representation also originates from Act 1 itself. The Unions contend "[o]ur state clearly and deliberately imposed the duty of fair representation in Act 1 when it defined unions to be exclusive majority collective representatives in [Wis. Stat.] § 111.02(9g)." The Unions further contend this duty of fair representation is imposed because the statute added a definition of "labor organization" to Act 1. According to the Unions, the legislature enacted this definition "knowing that it would require exclusive representation, including representation of non-members." We reject these contentions.
¶ 30. Furthermore, the duty of fair representation is optional, carrying with it attendant benefits and costs. To become the exclusive representative of employees in a bargaining unit, the prospective exclusive representative generally must voluntarily file or authorize a petition, and then stand for election. See 29 C.F.R. § 102.60 (2016);
B. Act 1 Does Not Impose a Regulatory Taking
| 31. The Unions insist their property has been taken under the regulatory takings theory of Penn Central Transportation Co. v. City of New York,
f 33. The Unions also argue Act 1 interferes with their reasonable investment-backed expectations in property—i.e., the money contained in their respective union treasuries—by requiring the Unions to spend their treasuries to represent employees in a bargaining unit who do not pay fees or dues to the Unions. However, labor organizations have long been subject to federal and state regulation, and they had no "reasonable basis to expect" that those regulations would remain static. See Concrete Pipe & Prod. of Cal., Inc. v. Construction Laborers Pension Trust for S. Cal.,
f 34. Nevertheless, the Unions analogize themselves to regulated utilities, arguing that Act 1 imposes an unconstitutional confiscatory rate. The Unions note that utility rates change over time, and if a particular rate is deemed confiscatory and unconstitutional, the utility has a right to challenge it under art. 1, § 13. This right endures even though the requirement that
¶ 35. Regulated utilities operate under a legislative grant. As a condition of being permitted to provide utility services under the legislative grant, a utility must charge its customers reasonable rates. Madison v. Madison Gas & Elec. Co.,
¶ 36. By contrast, labor organizations have broad discretion to set the dues they charge members. See 29 U.S.C. § 411(a)(3).
¶ 37. Regarding the third Penn Central factor— the character of the government action—the Unions assert they "cannot exit the 'representation' market without ceasing to exist. The regulation is therefore severe, and has the character of a physical occupation by the State." However, this factor looks to whether the claimed "interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good." Penn Cent,
By the Court.—Judgment reversed and cause remanded with directions.
Notes
The term "labor organization" has a specific statutory definition under federal and Wisconsin law. See 29 U.S.C. § 152(5) (2012); Wis. Stat. § 111.02(9g) (2015-16). All references to the United States Code are to the 2012 version unless noted. All references to the Wisconsin Statutes are to the 2015-16 version unless otherwise noted.
Unlike the other parties challenging the constitutionality of Act 1, the Wisconsin State AFL-CIO is not itself a labor organization. Rather, it is a federation of labor organizations.
In contrast to a "union-shop" agreement, employees are not required to formally become members of a labor union after being hired under an "agency-shop" agreement. See Florida Educ. Ass'n v. Public Emp. Relations Comm'n,
However, the United States Supreme Court has held that even under a union-shop agreement, an employee's membership in a labor union may "be conditioned only upon payment of fees and dues." NLRB v. GMC,
See National Conference of State Legislatures, Right-To-Work Resources, http://www.ncsl.org/research/labor-and-employment/right-to-work-laws-and-bills.aspx (last visited Sept. 13, 2017) (compiling twenty-eight states with right-to-work laws).
See Commonwealth Edison Co. v. United States,
On the face of Act 1, there is no "State" demand for services. Act 1 also defines "employer" to exclude "the state or any political subdivision." Wis. Stat. § 111.02(7)(b)l.
The most recent revision to this particular regulatory provision occurred on December 15, 2014. Therefore, all references to the Code of Federal Regulations are to the 2016 version—which is the most recent.
All references to Wis. Admin. Code § ERC ch. 3 are to the June 2010 version—which is the most recent.
The Unions' argument in this regard fails to account for the fact that they are not prohibited from attempting to raise revenue by other lawful means.
