Lead Opinion
Plaintiff-Appellants, members and officers of the International Union of Operating Engineers, Local 150, AFL-CIO (“the Union”) appeal the district court’s dismissal of their suit, arguing that the Indiana Right to Work Act violates their rights under the United States Constitution and is preempted by federal labor legislation. Because the legislation is not preempted by the scheme of federal labor law and does not violate any constitutional rights, we affirm the district court’s dismissal of the suit.
I
After a “rancorous, partisan” month-long fight during which “hundreds of union members crowded, day after day, into the Statehouse halls,”
Section 8, which spells out the principal prohibitions of the Right to Work Act:
A person may not require an individual to:
(1) Become or remain a member of a labor organization;
(2) Pay dues, fees, assessments, or other charges of any kind or amount to a labor organization; or
(3) Pay to a charity or third party an amount that is equivalent to or a prorata part of dues, fees, assessments or other charges required of members of a labor organization as a condition of employment or continuation of employment.
Ind.Code § 22-6-6-8.
Section 3, which makes clear what substantive provisions of the Right to Work Act are to be construed to apply to the building and construction industry:
Nothing in this chapter is intended, or should be construed, to change or affect any law concerning collective bargaining or collective bargaining agreements in the building and construction industry other than:
(1) a law that permits agreements that would require membership in labor organization;
*658 (2) a law that permits agreements that would require the payment of dues, fees, assessments, or other charges of any kind of amount to a labor organization; or
(3) a law that permits agreements that would rеquire the payment to a charity or a third party of an amount that is equivalent to or a pro rata part of dues, fees, assessment, or other charges required of members of a labor organization;
as a condition of employment.
Ind.Code § 22-6-6-3.
And Section 13, which makes clear that Sections 8-12 of the Act apply prospectively:
Sections 8 through 12 of this chapter:
(1) apply to a written or oral contract or agreement entered into, modified, renewed, or extended after March 14, 2012; and
(2) do not apply to or abrogate a written or oral contract or agreement in effect on March 14, 2012.
Ind.Code § 22-6-6-13.
On February 22, 2012, Plaintiff-Appellants, officers and members of the International Union of Operating Engineers, Local 150, AFL-CIO (“the Union”), brought suit in federal district court against the Governor of Indiana, the Attorney General of Indiana, and the Commissioner of the Indiana Department of Labor in their official capacities, seeking declaratory relief. They alleged that the Indiana Right to Work Act violates the United States Constitution and the Indiana Constitution. They further argued that the scheme of federal labor law, specifically the National Labor Relations Act (“NLRA”), 29 U.S.C. § 151 et seq., preempts §§ 8(2)-(3) and 3(2)-(3) of the new legislation. On January 17, 2013, the federal district court granted Defendant-Appellees’ Motion to Dismiss on the preemption claim and the federal constitutional claims. Plaintiff-Appellants timely appealed.
II
On appeal, Plaintiff-Appellants raise two varieties of issues: whether the law is preempted by the federal scheme of labor law, and whether the Indiana law violates the United States Constitution. We answer in the negative to both questions.
1. Federal Preemption
Plaintiff-Appellants’ main argument asserts that the Indiana right-to-work law is preempted by federal legislation on the same topic.
The history of the federal legislation in question is important here. Congress enacted the Wаgner Act in 1935 and amended it through the Labor Management Relations Act of 1947, better known as the Taft-Hartley Act. The Taft-Hartley Act included several provisions intended to
Although Congress permitted less restrictive, post-hiring union-security agreements under federal law, it also left states free to ban them. Section 14(b) of the Act provided that Section 8(3) did not protect a union-security agreement if it was “prohibited by State or Territorial law.” By the time Section 14(b) was included in the NLRA, “twelve States had statutes or constitutional provisions outlawing or restricting the closed shop and related devices,” laws “about which Congress seems to have been well informed during the 1947 debates. ...” Retail Clerks Int’l Ass’n, Local 1625 v. Schermerhorn,
In relevant part, Section 8(a)(3) of the NLRA now reads:
It shall be an unfair labor practice for an employer ... by discrimination in regard to hire or tenure or employment or any term or condition of employment to encourage or discourage membership in any labor organization.
Provided, That nothing in this sub-chapter, or in any other statute of the United States, shall preclude an employer from making an agreement with a labor organization (not established, maintained, or assisted by any action defined in this subsection as an unfair labor practice) to require as a сondition of employment membership therein....
29 U.S.C. § 158(a)(3).
And Section 14(b) of the NLRA provides:
Nothing in this subchapter shall be construed as authorizing the execution or application of agreements requiring membership in a labor organization as a condition of employment in any State or Territory in which such execution or application is prohibited by State or Territorial law.
29 U.S.C. § 164(b).
The Supreme Court has clarified the relationship between these two provisions: § 14(b) was intended to prevent other sections in the NLRA from “completely extinguishing state power over certain union-security arrangements.” Retail Clerks Intern. Ass’n, Local 1625 v. Schermerhorn,
It is against this backdroр of states’ extensive authority, reserved to them by the language of the statute and the Supreme Court’s interpretation, that we consider Plaintiff-Appellants’ argument that provisions of the Indiana right-to-work legislation are preempted by federal labor legislation. Their primary argument is that Section 14(b) permits states to ban only union-security agreements “requiring member ship,” or else compelling workers to pay a full membership fee that serves as the functional equivalent of membership. The Indiana statute goes further by prohibiting unions from collecting any fees and dues from unwilling employees. The Plaintiff-Appellants assert that this ban is too strict because employees may still be required to pay a fee equal to their “fair share” of the collective bargaining costs— something less than the full membership fee—and not qualify as “members” of the union under Section 14(b). Section 8(a)(3), which permits such arrangements, would then, according to this argument, apply in full force and preempt any state statute barring the union’s practice.
Plaintiff-Appellants further argue that such a reading is necessary because unions are required to act on behalf of all employees in labor disputes, and may not discriminate against non-members. To compel the union to represent all employees equally using dues contributed only by some workers, they argue, creates a free-rider problem. Indeed, the Supreme Court has observed that Section (8)(3) “was designed to remedy the inequities posed by ‘free riders’ who would otherwise unfairly profit from the Taft-Hartley Act’s abolition of the closed shop.” Commc’ns Workers of Am. v. Beck,
We are not convinced that Section 8(3) preempts the Indiana statute, for several reasons.
a. Interpretations of the Term “Membership” in the NLRA Context
Plaintiff-Appellants and the dissent admit that the Supreme Cоurt has construed the term “membership” to have the same meaning in Sections 8(a)(3) and 14(b). Indeed, there is no reason to think that the term “membership” in Section 14(b) would mean something different from the term “membership” in Section 8(a)(3) of the same act. See Sorenson v. Sec’y of Treasury of U.S.,
The Supreme Court has described union membership as synonymous with paying the portion of dues germane to the union’s collective bargaining. It has held that the term “membership” in Section 8(a)(3) has been “whittled down to its financial core.” Gen. Motors,
In the alternative, we find compelling the fact that the position advanced by the Union and adopted in the dissent necessarily entails reading § 8(a)(3) as making § 14(b) superfluous. As noted above, in Beck the Supreme Court stated that “§ 8(a)(3) ... authorizes the exaction of only those fees and dues necessary to performing the duties of an exclusive representative of the employees in dealing with the employer on labor-management issues.”
Both of these points are more compelling than the alternative readings of “membership” presented to us by the Plaintiff-Appellants, who hang their interpretation on several slender branches: two contemporaneous dictionary definitions, and a federal statutory definition found in a different statute passed twelve years after the Taft-Hartley Act. See The Labor Management Reporting and Disclosure Act of 1959, 29 U.S.C. § 401 et seq. Not only are both of these sources extraneous to the stаtute we are charged to interpret in this case, but they also cannot alter the Supreme Court’s later construction of the term “membership” in the Retail Clerics cases and Beck.
b. State Statutory Schemes Concurrent with Taft-Hartley
Also compelling are the state right-to-work laws in effect at the time of the Tafl>-Hartley Act’s passage in 1947. As the Supreme Court stated in Retail Clerks II, twelve states had right-to-work laws in effect when Taft-Hartley was enacted: Arizona, Arkansas, Georgia, Iowa, Nebraska, Nevada, North Carolina, North Dakota, South Dakota, Tennessee, Texas and Virginia.
Sec. 1. It is declared to be the policy of the State of Iowa that no person within its boundaries shall be deprived of the right to work at his chosen occupation for any employer because of membership in, affiliation with, withdrawal or expulsion from, or refusal to join, any labor union, organization, or association, and any contract which contravenes this policy is illegal and void.
[•••]
Sec. 4. It shall be unlawful for any person, firm, association, labor organization or corporation, or political subdivision, either directly or indirectly, or in any manner or by means as a prerequisite to or condition of employment to require any person to pay dues, charges, fees, contributions, fines or assessments to any labor union, labor association or labor organization.
Iowa Code § 736A.1, 4 (1947), renumbered as Iowa Code § 731.1, 4 (1977).
All told, of the twelve state right-to-work statutes in effect in 1947, more than half-seven—included lаnguage similar to Indiana’s and Iowa’s statutes. ArkCode Ann. § 11-3-303 (1947); GaCode Ann. § 34-6-22 (1947); Iowa Code § 731.4 (en
Presently, twenty-four states have some form of a right-to-work law.
We also find persuasive a decision by the D.C. Circuit, the only decision from a sister circuit to squarely address the question before us.
Plaintiff-Appellants are right that Congress was concerned that banning the closed shop would create a free-rider problem, but only in those states that had no additional restriction on union-security agreements. Id. at 1260 (“[LJeaders of organized labor have stressed the fact that in the absence of [anti-union-security] provisions many employees sharing the benefits of what unions are able to accomplish by collective bargaining will refuse to pay their share of the cost.”) (quoting the Report of the Senate Committee on Labor and Public Welfare presented by Senator Taft, 80th Cong., 1st Sess. 6, April 17, 1947). On the other hand, Congress explicitly permitted states that did restrict those agreements to find their own solution to the free-rider problem, if it was a problem in those states. Indeed, unions continue to thrive and assert significant influence in several right-to-work states, including Iowa,
In sum, in reviewing this substantial body of empirical evidence, we are not persuaded by Plaintiff-Appellants’ claims that Indiana’s law is somehow an extraordinary measure distinct from the numerous state statutes that have harmoniously existed under the federal labor law framework. Nor are we persuaded by their assertions that Indiana’s law represents a mortal threat to the continuing existence of unions as provided under federal law. Section 8(2) of the Indiana right-to-work statute is thus not preempted by the NLRA.
c. Plaintiff-Appellants’ Miscellaneous Preemption Arguments
Plaintiff-Appellants assert two other preemption arguments. Both deserve only quick consideration.
The first assertion, that federal labor law preempts the Indiana law’s criminal penalties, clashes squarely with language in Retail Clerks II, where the Supreme Court stated that
In light of the wording of § 14(b) and this legislative history, we conclude that Congress in 1947 did not deprive the States of any and all power to enforce their laws restricting the execution and enforcement of union-security agreements. Since it is plain that Congress left the States free to legislate in that field, we can only assume that it intended to leave unaffected the power to enforce those laws.
Retail Clerks II,
The Union’s second argument is that the NLRA preempts § 8(3) of the statute, which bars mandatory payments of an amount equivalent to union dues to a charity. They rely on § 19 of the NLRA, which allows conscientious objectors to pay dues to a charity rather than to a union. But the applicability of that section naturally presupposes the existence of a union-security agreement that requires the payment of dues. And as we have demonstrated, states are permitted to restrict or prohibit such agreements. We agree with the district court’s assessment that “[njothing in the language of § 19 suggests or supports interpreting it as an еxemption to § 14(b) that would preempt any state attempt to outlaw the kind of provision that § 19 permits.” Sweeney v. Daniels,
2. Federal Constitutional Claims
The dissent claims that our interpretation of the federal statutory schema works an unconstitutional taking on Hoosier unions. We consider this argument first. Plaintiff-Appellants also allege violations of the Contracts, Ex Post Facto, and Equal Protection Clauses of the United States Constitution. Because both their Contracts and Ex Post Facto Clause arguments have force only if the statute applies retroactively, we consider them together.
a. Indiana’s Law Does Not Work an Unconstitutional Taking
The dissent asserts that, should we hold that the federal statutory scheme does not preempt Indiana’s right-to-work statute, that holding likely violates the Takings
Even so, we engage with the dissent’s position because we believe it overlooks the fundamental fact that distinguishes the union’s duty of representation from the other hypotheticals it presents. That is to say: we believe the union is justly compensated by federal law’s grant to the Union the right to bargain exclusively with the employer. The reason the Union must represent all employees is that the Union alone gets a seat at the negotiation table. See Int’l Ass’n of Machinists v. Street,
b. Contracts and Ex Post Facto Clause Arguments
The Contracts Clause provides that “[n]o State shall ... pass any ... law
This conclusion is relatively easy to reach because Section 13 of the Indiana statute provides that the substantive provisions of the legislation—Sections 8 through 12—apply only to contracts entered into after March 14, 2012, and “do not apply to or abrogate a written or oral contract or agreement in effect on March 14, 2012.” Ind.Code § 22-6-6-13. The main objection Plaintiff-Appellants make here is to Section 3 of the statute. They argue that Section 3 is a substantive provision not mentioned in Section 13, and that it thus has retroactive application.
In interpreting the language of a statute, we “must examine the language and design of the statute as a whole.” Wells Fargo Bank, Nat’l Ass’n v. Lake of Torches Econ. Dev. Corp.,
c. Equal Protection Clause Arguments
The Equal Protection Clause of the Fourteenth Amendment states that no state shall “deny to any person within its jurisdiction the equal protection of the laws.” U.S. Const, amend. XIV. Equal protection scrutiny is triggered “when a regulation draws distinctions among people based on a person’s membership in a ‘suspect’ class” or based on “a denial of a fundamental right.” Srail v. Vill. of Lisle, Ill.,
Plaintiff-Appellants argue that the Indiana Right to Work Act violates the Equal Protection Clause in two ways: (1) because it allows free riders to infringe on union members’ First Amendment free speech rights, and (2) because it allows free riders to infringe on the right of union membership, which is a fundamental right because it involves the exercise of First Amendment association and assembly rights. We hold that the law does not violate the equal protection clause because it does not implicate a fundamental right, and it passes the low bar of rational basis review with ease.
i. First Amendment Free Speech Rights
The stronger of Plaintiff-Appellants’ two equal protection arguments is the assertion that non-payors of Representation Fees will be free-riders who siphon valuable Union resources away from the Union’s political activities. In diminishing the financial resources available to the Union for political speech, Plaintiff-Appellants argue, the Indiana law in fringes on the Union’s First Amendment free speech rights. We agree that unions have “the right under the First Amendment to express their views on political and social issues without government interference.” Knox v. Serv. Empls. Int’l Union, Local 1000, -U.S.-,
However, Plaintiff-Appellants’ argument is undercut by three long-standing principles. First, the Supreme Court has stated that “unions have no constitutional entitlement to the fees of non-member employees.” Davenport v. Wash. Educ. Ass’n,
The Union does not assert that the Indiana state legislature has taken away an asset to which the Union was constitutionally entitled. Viewed in the best possible light, its argument is that Indiana has made it more difficult for the Union to collect as many funds as it is used to collecting. But Indiana, like the state of Idaho in Ysursa, is “under no obligation to aid the unions in their political activities. And the State’s decision not to do so is not an abridgement of the unions’ speech; they are free to engage in such speech as they see fit.” Id. at 359,
Lastly, as underscored a recent case concerning whether non-union public employees could be compelled to pay agency fees to a state-designated union, the Supreme Court has held that there is a competing First Amendment interest at play with free-rider arguments of this variety: “the First Amendment interests of those ... who do not wish to support the union.” Harris v. Quinn, — U.S.-,
In passing its right-to-work legislation, Indiana did not abridge the Union’s speech, and thus did not violate its First Amendment right to free spеech. Rational basis review is proper for this equal protection claim.
ii. Fundamental Right of Union Membership
Appellants’ weaker argument is the assertion that there exists a fundamental right .of union membership. “Collective bargaining is not a fundamental right,” and a union and its members “are not suspect classes.” Univ. Prof'ls of Ill., Local 4100 v. Edgar,
Plaintiff-Appellants claim that they never asserted that union members are a suspect class. Instead, they try to cobble a brand new fundamental right to union membership out of the fact that union membership implicates the First Amendment rights of freedom of assembly and
There cannot be wrung from a constitutional right of workers to assemble to discuss improvement of their own working standards, a further constitutional right to drive from remunerative employment all other persons who will not or can not, participate in union assemblies. The сonstitutional right of workers to assemble, to discuss and formulate plans for furthering their own self interest in jobs cannot be construed as a constitutional guarantee that none shall get and hold jobs except those who will join in the assembly or will agree to abide by the assembly’s plans. For where conduct affects the interests of other individuals and the general public, the legality of that conduct must be measured by whether the conduct conforms to valid law, even though the conduct is engaged in pursuant to plans of an assembly.
There is no doubt that union workers enjoy valuable rights of association and assembly that are protected by the First Amendment. See, e.g., Thomas v. Collins,
iii. The Statute Passes Rational Basis Review
Statutes that do not encroach on a fundamentаl right are reviewed with “considerable deference.” See United States v. Moore,
The district court’s analysis on this point is apt. As the court stated, “[a] belief that the passage of Right to Work legislation contributes to a business-friend
Ill
We noted at the outset that this legislation prompted vigorous debate, both in the general public and the Indiana Statehouse. But the legislative history and context of the Taft-Hartley Act make clear that the controversy is one that ought to be addressed and resolved at the level of legislative politics, not in the courts. The statutory question posed is whether Indiana’s new law is preempted by federal labor law, or threatens the Union’s First Amendment rights. The answer is an emphatic no. Right>-to-Work laws like Indiana’s have existed since before the passage of the Taft-Hartley Act and the inclusion of Section 14(b) of the NLRA. Congress specifically reserved to the states the power to write and enforce laws of this nature, in accordance with individual states’ needs and wisdom. It is not our province to wrest this authority, which has been intact and undisturbed for over sixty-five years, from the states and erase the distinction between right-to-work stаtes and non-right-to-work states.
For the foregoing reasons, we affirm the district court’s judgment.
Notes
. Monica Davey, "Indiana Governor Signs a Law Creating a 'Right to Work’ State,” N.Y. Times (Feb. 2, 2012) at A12, available at http:// www.nytimes. com/2012/02/02/us/ indianabecomes-right-to-work-state.html (last accessed Aug. 20, 2014).
. We briefly note that there is parallel litigation pending in the Indiana state courts. Two decisions have been issued by state trial courts in relation to the statute: in a case in Lake County Superior Court brought by, inter alia, the Plaintiff-Appellants (Order, Sweeney v. Zoeller, No. 45D01-1305-PL-52 (Lake Cnty.Super. Ct. Sep. 9, 2013), Docket No. 23), and in a separate case in Lake County Circuit Court brought by members of an-other union (Order, United Steel Paper v. Zoeller, No. 45C01-1207-PL-00071 (Lake Cnty. Cir. Ct. Jul. 17, 2014)). Both decisions have been appealed to the Indiana Supreme Court. (Docket Records of Zoeller v. Sweeney, No. 45S00-1309—PL—00596 (accessed Aug. 20, 2014); Docket Records of Zoeller v. United Steel Paper, No. 45S00—1407—PL—00492 (accessed Aug. 20, 2014)). The state trial courts’ decisions are far from final in most respects, and, moreover, have no preclusive effect on our consideration of federal questions here.
. The dissent states that Beck should be read for the proposition that the term "membership” does not extend to those who pay only Representation Fees. (We defíne Representation Fees to be those fees germane to collective bargaining, contract administration, and grievance adjustment.) That contradicts Beck's substantive holding. The Court held that § 8(a)(3) "authorizes the exaction of only” Representation Fees, an interpretation that necessarily requires that the term "membership” in that clause be read to mean Representation Fees.
. As this analysis makes clear, our conclusion is compelled in part by Beck 's holding that the term "membership” extends to those who only pay Representation Fees, not simply by the Retail Clerks decisions. And we are bound by that precedent, even if the rule that the term "membership” has been "whittled down to its financial core” to include those who pay only Representation Fees does not fit with the ordinary meaning of the term "membership,” as the dissent states.
. State Laws Regulating Union-Security Contracts,
. The legislative history demonstrates that Congress drafted Section 14(b) to preserve the right-to-work statutes already in effect in 1947. See Int’l Union of the United Ass’n of Journeymen & Apprentices of the Plumbing & Pipefitting Indus., Local Unions Nos. 141,229,-681, & 706 v. NLRB,
. National Conference of State Legislatures, "Right-to-Work Resources,” available at http://www.ncsl.org/research/Iabor-and-employment/right-to-work-laws-and-bills.aspx (last accessed Aug. 20, 2014).
.The dissent cites two circuit decisions that stand for the principle that § 14(b) does not authorize states to prohibit the use of exclusive hiring halls that do not discriminate between union members and non members. See Laborers’ Int’l Union of N. Am., Local No. 107 v. Kunco, Inc.,
. "A controversial issue to which the committee has devoted the most mature deliberation has been the problem posed by compulsory union membership.... [A]buses of compulsory membership have become so numerous there has been great public feeling against such arrangements. This has been reflected by the fact that in 12 States such agreements have been made illegal either by legislative act or constitutional amendment, and in 14 other States proposals for abolishing such contracts are now pending. Although these regulatory measures have not received authoritative interpretation by the Supreme Court (citation omitted) it is obvious that they pose important questions of accommodating Federal and State legislation touching labor relations in industries affecting commerce (citations omitted). In testifying before this committee, however, leaders of organized labor have stressed the fact that in the absence of such provisions many employees sharing the benefits of what unions are able to accomplish by collective bargaining will refuse to pay their share of the cost.” Journeymen & Apprentices,
. See, e.g., Kris Maher, "Iowa’s House of Labor is Split,” WALL ST. J. (Nov. 20, 2007) at A6 (examining the importance of "big, politically active unions” in the Iowa caucus vote); Steven Greenhouse, "Secret Weapon in Gore Camp: Unions in Iowa,” N.Y. TIMES (Jan. 17, 2000) at A14, available at http:// www.nytimes.eom/2000/01/17/us/th2000-
. See Hill v. Edmonds, 26 A.D.2d 554, 554-55,
. In support of our reading, Defendant-Ap-pellees assert the fact that the Indiana Commissioner of Labor has disclaimed any retroactive interpretation of Section 3, but this is not persuasive. While the district court was satisfied by the Commissioner’s declaration, terming it binding under the principles of judicial estoppel, it is difficult to determine what effect such declarations would have on future executive administrations or officeholders. But our reading of the statute convinces us that Section 3 is not retroactive, so we need not rely on the concept of estoppel.
Dissenting Opinion
dissenting.
Today’s decision is either incorrect or it lays bare an unconstitutional confiscation perpetuated by our current system of labor law. In my view, the better view is the former: the majority has simply misunderstoоd the federal statutory scheme, taken as a whole. The plain language of section 14(b) of the National Labor Relations Act (NLRA) does not support such sweeping force for Indiana’s Right to Work law. Ind.Code § 22-6-6. No ruling of the Supreme Court has gone this far, and the legislative history of section 14(b) (for those who consider it relevant at all) is inconclusive. Even if, however, one thought that there were some ambiguity in the NLRA, the principle of constitutional avoidance provides a powerful reason to reject the majority’s holding. I would find sections 8(2) and 8(3) of Indiana’s statute, Ind.Code § 22-6-6-8(2), (3), preempted by federal statute. I therefore respectfully dissent.
I
It is impossible to understand what is at stake and why the majority’s resolution is in error without a brief review of the labor law regime in the United States. Inaugurated in 1935 with the passage of the Wagner Act, 49 Stat. 452, the NLRA relies on a system of exclusive representation of bargaining-unit employees. See 29 U.S.C. § 159(a). That is, if a majority of the employees in a defined section of a workforce vote in favor of a particular union to represent them, that union is required by law to represent all the workers in the bargaining unit-supporters and nonsupporters, members and nonmembers, alike. Id.; see Int’l Ass’n of Machinists v. Street,
Consequences flow from the union’s status as the exclusive representative of all members of the bargaining unit. The most significant is what is known as the duty of fair representation. See Steele v. Louisville & N.R. Co.,
The designation of a union as exclusive representative carries with it great responsibilities. The tasks of negotiating and administering a collective-bargaining agreement and representing the interests of employees in settling disputes and processing grievances are continuing and difficult ones. They often entail expenditure of much time and money.... The services of lawyers, expert negotiators, economists, and a research staff, as well as general administrative personnel, may be required. Moreover, in carrying out these duties, the union is obliged fairly and equitably to represent all employees ..., union and nonunion, within the relevant unit.
Id. at 221,
As this passage acknowledges, a major part of the work assigned to most unions under collective bargaining agreements relates to the administration of the grievance procedure. Grieving and arbitrating claims is not cheap. The website of the Teamsters union informs its members that 78% of their dues “stay with your local union” for a variety of purposes, including the retention of “[attorneys to assist in negotiations, grievances, and arbitration.” See http://teamster.org/about/frequently asked-questions-faq#faq06 (this and all other websites cited in this opinion were last visited August 29, 2014). The Labor Arbitration Rules of the American Arbitration Association, available by following the links in the Rules & Procedures tab at http://www.adr.org, outline a comprehensive process that obviously costs real money. It is no stretch to estimate that the cost of pursuing many grievances from initial investigation through arbitration can reach into the thousands of dollars, representing the time of the affected employee and his union representative, witness and travel costs, arbitrator fees, and the cost of
Note the significant asymmetry embedded in this system. While the union is required to represent all persons in the bargaining unit fairly and equally, each one of these people is entitled to decide whether to become a member of the union. Those who opt to become members will pay their union dues, which cover both activities such as collective bargaining, contract administration, and grievances (to which I refer as representational activities) and a variety of ancillary political or ideological activities (to which I refer as ancillary activities). But what of those who choose not to become members? It has been established for years that they may not be compelled to pay for the ancillary activities, no matter what the label placed on that payment. See Commc’ns Workers of Am. v. Beck,
Until now, however, reimbursement for the benefits that the union must confer on the nonmember has been a different matter, and for good reason. If there is no way to compel the nonmember employee to pay the actual cost of the services the union is obligated to provide for him, a classic “free-rider” problem arises. Free-riding is a potential problem whenever a collective good (such as the union services here) is involved. If the good (or service) can be priced individually (that is, the seller can ensure that only the buyer obtains the benefit), free-riding will not be a problem. But if each person in the group obtains the benefit of the collective good whether or not she pays for it, then there is a risk that the supply of the good will diminish, or in the limiting case will disappear altogether. See generally Earl R. Burbaker, Free Ride, Free Revelation, or Golden Rule? 18 J.L. & Econ. 147, 149-150 (1975); Russell B. Korobkin & Thomas S. Ulen, Law /;and Behavioral Science: Removing the Rationality Exception from Law and Economics, 88 Calif. L.Rev. 1051, 1139 (2000). Thus, for example, the realization of the risk of free-riding by distributors who did not want to provide services that manufacturers valued led antitrust law to change from a per se prohibition of vertical restraints to a rule-of-reason approach. See Cont’l T.V., Inc. v. GTE Sylvania, Inc.,
The same problem arises in a unionized workplace (that is, a workplace in which a majority of the employees have voted to have a union represent them, in an election supervised by the National Labor Relations Board, or NLRB). Because all members of the bargaining unit benefit as a matter of right from the union’s representational activities regardless of whether they join the union, there is an incentive for employees in the bargaining unit “to refuse to contribute to the union while obtaining benefits of union representation that necessarily accrue to all employees.” Abood,
The question is therefore whether the law as it stands today includes a solution to the potential free-rider problem. If it does, by creating a way to require nonmembers to pay for actual benefits received, then all is well. If it does not, then issues of constitutional magnitude arise. As the Supreme Court has recognized, “[t]o compel employees financially to support their collective-bargaining representative has an impact upon their First Amendment interests.” Id. But to exempt employees from reimbursing a service provider for work performed creates a different constitutional issue-—one that the Supreme Court has had little to no occasion to discuss. But we can glean something from Phillips v. Washington Legal Foundation,
The lesson from the IOLTA cases for us is that a state law compelling one private party to give property to another private party must be assessed under the Takings Clause. The fact that those two cases involved money, while our case involves the compulsory provision of services, is of no moment. (This, incidentally, shows why the plaintiffs have sued the correct party: it is the Indiana law that is compelling them to donate valuable services to the nonmembers of the unions, just as it was state law in Phillips and Brown that compelled clients to donate their money to the legal foundations. Compare ante at 665.) Services cost money to provide: union representatives must be paid, union lawyers must be paid, and collective bargaining is not free. Justice Scalia flagged this problem in his separate opinion in Lehnert v. Ferris Faculty Ass’n,
Where the state imposes upon the union a duty to deliver services, it may permit the union to demand reimbursement for them; or, looked at from the other end, where the state creates in the nonmembers a legal entitlement from the union, it may compel them to pay the cost. The “compelling state interest” that justifies this constitutional rule is not simply elimination of the inequity arising from the fact that some union activity redounds to the benefit of “free-riding” non-members; private speech often furthers the interests of nonspeak-ers, and that does not alone еmpower the state to compel the speech to be paid for. What is distinctive, however, about the “free riders” who are nonunion members of the union’s own bargaining unit is that in some respects they are free riders whom the law requires the union to carry—indeed, requires the un*675 ion to go out of its way to benefit, even at the expense of its other interests. In the context of bargaining, a union must seek to further the interests of its nonmembers; it cannot, for example, negotiate particularly high wage increases for its members in exchange for accepting no increases for others. Thus, the free ridership (if it were left to be that) would be not incidental but calculated, not imposed by circumstances but mandated by government decree.
Id. at 556,
Acting wholly within the boundaries of the governing legislation, the Supreme Court has reconciled the costly duties imposed by law on unions with the rights of workers who do not wish to participate in (or pay for) that union’s nonrepresentational activities. It has done so by drawing a line between what non-union members of a bargaining unit can and cannot be compelled to pay the union. Pursuant to section 8(a)(3) of the NLRA, 29 U.S.C. § 158(a)(3), unions and employers may require all employees within a bargaining unit (union members and nonmembers alike) to pay the union for the costs associated with the union’s collective bargaining and contract administration functions. See, e.g., Beck,
My colleagues believe that Beck characterizes those objectors as union “members,” and indeed at one point the Court says that “the ‘membership’ that may be so required [by section 8(a)(3) ] has been ‘whittled down to its financial core.’ ” Id. at 745,
Today we must decide whether this provision also permits a union, over the objections of dues-paying nonmember employees, to expend funds so collected on activities unrelated to collective bargaining, contract administration, or grievance adjustment, and, if so, whether such expenditures violate the union’s duty of fair representation or the objecting employees’ First Amendment rights.
Id. at 738,
To justify its decision to assign the status of statutory “members” to nonmembers of the union, the majority seizes on the comment to which I just referred, to the effect that the 1947 amendments to the NLRA “whittled down” the term “membership” in the statute to its “financial
In so doing, Beck fine-tunes the rules governing a recognized union, on the one hand, and the nonmembers for whom the union is responsible, on the other. It does so by holding that while the collection of dues unrelated to collective bargaining (and other representational activities such as the handling of grievances) would violate the First Amendment rights of the nonmembers, federal law nevertheless entitles the union to collect fees “fixed by their underlying purpose—defraying the costs of collective bargaining.” Beck,
Before turning to the way in which these principles apply to the case before us, I add a few words about the Supreme Court’s recent decision in Harris v. Quinn, supra. The question in Harris was “whether the First Amendment permits a State to compel personal care providers to subsidize speech on matters of public concern by a union that they do not wish to join or support.”
In Harris, practically the only thing the union was doing was presenting its views to the state. It could not set wages, which were established by law, and it had no authority over grievances. In that setting, all that was left was speech. Wellestabl-ished principles entitled the objectors to refuse to pay a fee that could only be subsidizing that speech. The Court uncovered nothing of value that the union was compelled to furnish to the objectors, and so it had no occasion to worry about any compelled transfer of property or services.
The case before us does not share those distinguishing features of Harris. It concerns private employers and private employees, not state employees. The rights of employees who are not union members to refrain from subsidizing union speech are fully protected by their entitlement to give the union only a “fair share” that is capped by the costs of representational activity. The Harris Court itself recognized that the case before it lacked all of the features that have been understood to justify the agency fee:
What justifies the agency fee, the argument goes, is the fact that the State compels the union to promote and protect the interests of nonmembers. Ibid. Specifically, the union must not discriminate between members and nonmembers in “negotiating and administering a collective-bargaining agreement and representing the interests of employees in settling disputes and processing grievances.” Ibid. This means that the union “cannot, for example, negotiate particularly high wage increases for its members in exchange for accepting no increases for others.” Ibid. And it has the duty to provide equal and effective representation for nonmembers in grievance proceedings, see 111. Comp. Stat. Ann., ch. 5, §§ 315/6, 315/8, an undertaking that can be very involved. See, e.g., SEIU: Member Resources, available at www.seiu.or/a/members/disputes-and-grievances-rights-procedures-and-best-practices.php (detailing the steps involved in adjusting grievances).
II
The question before us is how these principles operate when a state chooses to adopt a so-called “right-to-work” law (either by statute or in its constitution). Indiana has passed such a law. See Ind. Code § 22-6-6. Federal law leaves some room for such state laws, pursuant to section 14(b) of the NLRA, 29 U.S.C. § 164(b). But the question is whether state law can command the union (a private organization) to perform uncompensated services for other private parties (the nonmembers). If the federal labor laws preempt this kind of state law, then the state law must yield. If the federal statute either authorizes this kind of taking or is silent, then we must move to the constitutional issues to which I have alluded.
Bearing in mind that we should always consider statutory arguments first, see, e.g., Solid Waste Agency of N. Cook Cnty. v. U.S. Army Corps of Eng’rs,
Nothing in this subchapter shall be construed as authorizing the execution or application of agreements requiring membership in a labor organization as a condition of employment in any State or Territory in which such execution or application is prohibited by State or Territorial law.
29 U.S.C. § 164(b) (emphasis added). This is the language that we must construe. The question is what it means to say that states can prohibit agreements requiring “membership” in a labor organization as a condition of employment. More particularly, we must decide whether section 14(b) authorizes the sweeping prohibitions found in Indiana’s Right to Work law. Plaintiffs challenge both section 3 and section 8 of that law, Ind.Code §§ 22-6-6-3 and 22-6-6-8, but I agree with the majority that section 3 adds nothing to the picture. I therefore focus on subparts 2 and 3 of section 8, which provide as follows in relevant part:
A person may not require an individual to:
(2) pay dues, fees, assessments, or other charges of any kind or amount to a labor organization; or
(3) pay to a charity or third party an amount that is equivalent to or a pro rata part of dues, fees, assessments, or other charges required of members of a labor organization;
as a condition of employment or continuation of employment.
Ind.Code § 22-6-6-8 (emphasis added).
“Statutory interpretation begins with the plain language of the statute.” United States v. Berkos,
The decisions known as Retail Clerks I and II marked the first time the Supreme Court addressed a state’s power under section 14(b). See Retail Clerks Int’l Ass’n, Local 1625 v. Schermerhorn,
The district court found that the state’s right-to-work law outlawed not only union shops (under which union membership could be compelled) but also agency shops. The Supreme Court affirmed, finding that “[a]t the very least, the agreements requiring ‘membership’ in a labor union which are expressly permitted by the proviso [to 8(a)(3) ] are the same ‘membership’ agreements expressly placed within the reach of state law by § 14(b).”
As the statement just highlighted demonstrates, the Court was careful in Retail Clerks I to leave for another day the status of less comprehensive arrangements. It observed that the petitioners originally had likened their case to the General Motors agency shop.
The Supreme Court rejected this last-minute attempt to distinguish General Motors. It pointed out that contrary to the petitioners’ suggestion, the clause at issue imposed “no ironclad restriction” on what the union could do with the payments it received from nonmembers, and thus there was no safeguard against the union’s use of the money for “institutional items.” Id. at 753,
If the union’s total budget is divided between collective bargaining and institutional expenses and if nonmember payments, equal to those of a member, go entirely for collective bargaining costs, the non-member will pay more of these expenses than his pro rata share. The member will pay less and to that extent a portion of his fees and dues is available to pay institutional expenses. The union’s budget is balanced. By paying a larger share of collective bargaining costs the nonmember subsidizes the union’s institutional activities.
Id. Accordingly, there was no reason why the clause should, “in the present posture of the case, be construed against respondent to raise a substantial difference between this and the General Motors case.” Id. at 752,
Retail Clerks I thus stands only for the proposition that a union may not do an end-run around section 14(b) by imposing financial éxactions on nonmembers exactly equal to the charges borne by members. As I already have noted, Retail Clerks I reserved the status of more genuine accommodations to nonmembers for another day. This is that day, for our court. Indiana’s flat prohibition against agreements between employers and unions under which a union nonmember cannot be charged even for legally required and bona fide representational activities goes well beyond the de faco membership the Supreme Court considered in Retail Clerks I.
Well-established principles of labor preemption also stand in the way of the majority’s result. While there is no express preemption clause in the NLRA, the Supreme Court has recognized that its preemptive reach is broad. See Benjamin I. Sachs, Despite Preemption: Making Labor Law in Cities and States, 124 Harv. L.Rev. 1153, 1154 (“It would be difficult to find a regime of federal preemption broader than the one grounded in the ... (NLRA)”). In Garmon, the Supreme Court held that states may not regulate activities even “arguably” protected or prohibited by federal labor law. San Diego Bldg. Trades Council, Etc. v. Garmon,
In other section 14(b) cases courts have struck down similarly restrictive state laws as outside the scope of section 14(b) and therefore preempted. For example, in N.L.R.B. v. Houston Chapter, Associated Gen. Contractors of Am., Inc.,
*681 It is true that the terms of § 14(b) as well as the legislative history suggest the intent on the part of Congress to save to the states the right to prohibit compulsory unionism. However, the long and the short of this matter is that § 14(b) contemplates only those forms of union security which are the practical equivalent of compulsory unionism. Membership in the union is not compulsory under the clause here in question .... No doubt union membership will be encouraged under the arrangement, indeed it may be a boon to the union; nevertheless such an arrangement does not constitute compulsory unionism so long as the arrangement is not employed in a discriminatory manner.
Id. at 453 (internal citations omitted). The Eighth Circuit made the same point in Laborers’ International Union, Local 107 v. Kunco, Inc.,
It is true, as my colleagues point out, that the Court of Appeals for the District of Columbia decided 32 years ago that the assessment of even representational fees against nonunion members was an unfair labor practice in a right-to-work state. See Int’l Union of the United Ass’n of Journeymen & Apprentices of the Plumbing & Pipefitting Indus. of the U.S. & Canada, Local Unions Nos. 141,229,681, & 706 v. N.L.R.B.,
As I noted at the outset, modern American labor law began with the passage of the Wagner Act in 1935. Enacted against the backdrop of significant violence between workers and employers at the beginning of the 20th century, the Wagner Act gave workers the right to organize in unions and to bargain collectively with their employers. 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. In particular, closed-shop agreements, under which an employer agreed to hire union members only, were thought by some members of Congress to be a powerful tool that union leaders were abusing. On the other hand, the very same members of Congress were sympathetic toward other union security agreements. In responsе, Congress passed the Taft-Hartley Act of 1947, 61 Stat. 151. Taft-Hartley introduced many changes to the NLRA, some administrative, some substantive. Like most legislation, it reflected a compromise,
The legislative history of section 14(b) indicates that the drafters understood it as a reaffirmation of the original NLRA:
It was never the intention of the National Labor Relations Act, as is disclosed by the legislative history of that act, to preempt the field in this regard so as to deprive the States of their powers to prevent compulsory unionism. Neither the so-called “closed shop” proviso in section 8(3) of the existing act nor the union shop and maintenance of membership proviso in section 8(a)(3) of the conference agreement could be said to authorize arrangements of this sort in States where such arrangements were contrary to the State policy. To make certain that there should be no question about this, section 13 was included in the House bill. The conference agreement, in section 14(b), contains a provision having the same effect.
Id. at 1272 (citing H.R. Conf. Rep. No. 510, 80th Cong., 1st Sess. 60 (1947), Leg. Hist, at 564). As Judge Mikva pointed out, the “predominant if not the only purpose of section 14(b) was to provide yet one more check on the abuses that could exist under compulsory unionism.” Id. at 1273. But what did that mean? Congress did not define what it meant by the key term for our purposes, “compulsory unionism.” Individual members, however, gave examples indicating that they were thinking of the closed shop or occasionally the union shop; no one breathed a word about the legitimacy of requiring nonmembers of the union to pay for services that the union was legally compelled to give them.
The majority notes that as of the time Taft-Hartley was under consideration, 12 states had right-to-work laws in effect, and that the laws of seven in that group included language similar to that found in the Indiana law before us. Ante at 661-62. From this fact, it infers that Congress must have intended to endorse all 12 of the state laws in effect. But we have no idea what Congress as a whole thought, and in the end it is beside the point. We can assume that some members who voted for Tafl>-Hartley believed, or hoped, that each one of the 12 state laws would be free to operate in the broadest possible way. Others who voted for the bill might have expected each state statute to be tested in the courts, which after all are the institution with the final authority to “say what the law is.” Marbury v. Madison, 1 Cranch (5 U.S.) 137,
As the line the Supreme Court drew between the General Motors decision and the Retail Clerks case demonstrates, section 14(b) allows states to opt out of anything resembling a union shop or an agency shop. But it does not permit them to allow any worker who wishes to free-ride on the union’s mandatory efforts on the nonmember’s behalf to do so. Without the protection of section 14(b), sections 8(2) and (3) of the Indiana statute must fall under normal preemption analysis.
If, contrary to my analysis, one were to conclude that Indiana has worked out a way to conscript the union intо providing uncompensated services to anyone who decides to opt out of union membership, it would become necessary to decide whether such a rule is permissible under the Takings Clause of the Fifth Amendment, as applied to the states under the Fourteenth Amendment. The majority is sufficiently worried about this possibility that its first response is to suggest that the plaintiffs have forfeited the point. Ante at 665-66. I disagree with them. First, we are not compelled to invoke forfeiture rules in civil cases, and given the importance of this question, I would not duck the issue on that basis. Second, plaintiffs have argued throughout that the Indiana statute is unconstitutional, and at least one Indiana court has come to the conclusion that it indeed effects a taking under the state constitution. See Sweeney v. Zoeller, No. 45D01-1305-PL-52 (Super. Ct. of Lake Cnty. Sept. 5, 2013). Plaintiffs called that decision to our attention. If the law falls on state grounds, so be it; our case will be moot. But if the higher state courts ultimately uphold the law under the state constitution, however, the federal constitutional issue will remain. In my view, the issue has been preserved adequately and even if it has been raised only indirectly, we should reach it.
Given the IOLTA cases and the confiscatory nature of the Indiana statute, which requires unions to provide services for free to the objectors, if there is no preemption, then I would feel compelled to find a taking. (Principles of federal preemption do not permit us to use the justification that the majority raises: they believe that this is all the fault of the duty of fair representation in federal law. Ante at 666. But it is not up to the state to override that duty; we must take it as a given.) The two most basic economic rights enjoyed in the United States are (1) that the government may not confiscate private property for public use without just compensation, and (2) that thе takings power must be exercised for a public purpose, and so the government may not take the property of one private party for the sole purpose of transferring it to another private party, regardless of whether “just” compensation is paid. See Kelo v. City of New London, Conn.,
How this can be anything but an unconstitutional taking I do not know. I am aware of no precedent in other areas to support it. We would be shocked by a rule providing that, as a condition of receiving a business license in a city, a company selling gasoline had to give it away to any customer who did not want to pay. Or, to take another example, think of the cooperative buying associations that small businesses often create so that they can enjoy economies of scale. See, e.g., Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co.,
The majority makes the surprising assertion that the union’s “seat at the bargaining table” somehow compensates it for the myriad real costs it incurs on behalf of nonmembers. Ante at 666-67. That idea does not hold up under any level of scrutiny. First, this suggestion fundamentally misunderstands how the union obtains its seat at the bargaining table. The union does so if and only if it succeeds in winning a representational election sponsored by the NLRB; it does not win that seat either through the grace of the employer or in exchange for some kind of quid pro quo from either the employer or the bargaining-unit employees (i.e., “you cover the expenses of collective bargaining and grievance processing, and in exchange we’ll let you participate in the process”). Second, the majority seems to think that the employer receives no benefits from collective bargaining, but that is not true either. Collective bargaining agreements commonly include such features as no-strike clauses, management rights clauses, and a grievance procedure, all of which are a win-win for both labor and management. Third, the majority’s hypothesis is flatly inconsistent with the Supreme Court’s reasoning in Beck and Abood, among other cases that recognized the tangible value of the services that nonmembers and objectors receive as a result of the duty of fair representation. Finally, even if there were anything to the point, it would apply at most to the collective bargaining portion of the union’s duties, not to the administration of the contract and the costly grievance procedures. For all these reasons, the majority cannot avoid the confiscatory regime it has endorsed by pointing to a certified union’s right to represent the workers.
None of this would be a problem if unions were permitted to deny services to nonmembers, but they are not, and I am not sure they would want to be. (That, however, is a question for another institution and another day.) Unless or until that aspect of our labor law is changed by Congress, the only constitutional path is to permit unions to charge fees to nonmembers that cover only the limited, mandatory representational services that the nonmembers receive. The majority has forbidden this, and has thus sanctioned the confiscation of one private party’s resources for the benefit of another private party. I cannot sign on to that result.
IV
As I have explained, I do not agree with the majority’s decision to define the term “member” for purposes of section 14(b) to include both members and nonmembers. The Supreme Court’s decisions in Retail Clerks and Beck, as well as its decisions in Phillips and Brown, point us in the right direction. Under them, the proper accommodation between state authority to adopt a “right-to-work” approach and the national labor laws is one under which the states may insist that no employee be required to become a member of a union, but at the same time, nonmembers must pay for the services that the unions are required by law to render to them. Supreme Court precedent, Board precedent, and the legislative history of the statute all support this approach. And if it is wrong and the majority is correct, we have a constitutional problem on our hands. In our country, the state is not entitled to force private organizations or persons to render uncompensated services to others. The Takings
For all these reasons, I respectfully dissent.