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International Association of Machinists District 10 and Its Local Lodge 1061 v. State

Court of Appeals of Wisconsin, District III

September 19, 2017

International Association of Machinists District 10 and its Local Lodge 1061, United Steelworkers District 2 and Wisconsin State AFL-CIO, Plaintiffs-Respondents,
v.
State of Wisconsin, Scott Walker, Brad Schimel, James R. Scott and Rodney G. Pasch, Defendants-Appellants.

         APPEAL from a judgment of the circuit court for Dane County No. 2015CV628: C. WILLIAM FOUST, Judge. Reversed and cause remanded with directions.

          Before Stark, P.J., Hruz and Seidl, JJ.

          SEIDL, J.

         ¶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[1] in violation of the Wisconsin Constitution. We conclude the parties challenging Act 1 have not met their burden of proving the law is unconstitutional beyond a reasonable doubt.

         ¶2 Employees are permitted to unionize and elect exclusive representation. A benefit to unions of exclusive representation is that employers are compelled to bargain with that exclusive representative. But the benefits of exclusive representation correspond to a duty to represent all employees in the bargaining unit fairly, including non-members of the union who will pay nothing for representative services. Act 1 does not deprive compensation for those mandated services. The law merely prohibits anyone from conditioning a person's employment on the payment of monies designed to cover the costs of performing that duty of fair representation. Accordingly, Act 1 does not take property within the meaning of the Wisconsin Constitution. We therefore reverse the judgment and remand to the circuit court with directions to dismiss the complaint.

         BACKGROUND

         ¶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[2] (collectively, the Unions) commenced this declaratory action challenging the constitutionality of Act 1, naming as defendants the State of Wisconsin, Governor Scott Walker, Attorney General Brad D. Schimel, Wisconsin Employment Relations Commission (WERC) Chairman James R. Scott, and WERC Commissioner Rodney G. Pasch, all in their official capacities (collectively, the State).

         ¶4 The Unions alleged they collectively represent the interests of every Wisconsin worker in the bargaining units for which they have been elected the exclusive representative. The Unions' services are available equally to all members of the bargaining unit regardless of an individual's union membership status. The Unions historically negotiated "union shop" clauses, or other union security clauses, in collective bargaining agreements to require both members and non-members to pay their "fair share" for the union's representation as a condition of employment. These clauses required all employees who enjoyed the benefits of that agreement to either pay dues as members or a discounted fee for non-member employees who were charged only the cost of services germane to collective bargaining, contract administration, and grievance adjustment.

         ¶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 non-member 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.

         ¶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 chose not to pay dues or representative fees. Requiring the Unions to represent those non-members without compensation from the non-members created a "free rider problem" that was facially unconstitutional. The court further found the Unions sustained revenue losses that were "not isolated, " and the impact of Act 1 over time "is threatening to the unions' very economic viability."

         ¶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]njoining 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

         ¶8 The constitutionality of a statute is a question of law that we review de novo. Madison Teachers, Inc. v. Walker, 2014 WI 99, ¶13, 358 Wis.2d 1, 851 N.W.2d 337. We presume statutes enacted by the legislature are constitutional-and we indulge every presumption to sustain a challenged law. Wisconsin Med. Soc'y, Inc. v. Morgan, 2010 WI 94, ¶38, 328 Wis.2d 469, 787 N.W.2d 22. A party bringing a constitutional challenge bears a heavy burden, and it is not sufficient for a party to demonstrate that the statute's constitutionality is doubtful or probably unconstitutional. Rather, the presumption of constitutionality can only be overcome if the party establishes the statute's unconstitutionality beyond a reasonable doubt. Id. Therefore, any doubt that exists regarding the constitutionality of Act 1 must be resolved in favor of its constitutionality. Id.

         ¶9 We also review summary judgments independently. Green Spring Farms v. Kersten, 136 Wis.2d 304, 315-17, 401 N.W.2d 816 (1987). The standard methodology is well-established. A party is entitled to summary judgment if the pleadings, depositions, answers to interrogatories, admissions, and affidavits, if any, show no genuine issue exists as to any material fact and the party is entitled to judgment as a matter of law. Wis.Stat. § 802.08(2).

         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, 767 F.3d 654, 681 (7th Cir. 2014) (Wood, C.J., dissenting). The federal government had intervened to regulate a tumultuous relationship involving significant violence between workers and employers at the beginning of the twentieth century. See International Union of Operating Eng'rs Local 139 v. Schimel, 210 F.Supp.3d 1088, 1093 (E.D. Wis. 2016). In general, the NLRA established the right of workers to unionize and bargain collectively through a democratic system of exclusive representation. Id.

         ¶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, 767 F.3d at 681. In particular, "closed-shop" agreements, under which employers agreed to hire union members only, "were thought by some members of Congress to be a powerful tool that union leaders were abusing." Id. On the other hand, Congress was also sympathetic toward other union security agreements. Id. In response, Congress amended the NLRA in 1947 by enacting the Taft-Hartley Act. See Schimel, 210 F.Supp.3d at 1093.

         ¶13 The NLRA-as amended by Taft-Hartley-outlawed closed-shop agreements. See, e.g., NLRB v. Local Union No. 55,218 F.2d 226, 232 (10th Cir. 1954). However, union-shop agreements, in which new employees are required to join a labor union after being hired, remained legal under the NLRA.[3]See Schimel, 210 F.Supp.3d at 1094. Nonetheless, the freedom reserved to the states was extensive, and courts historically have interpreted Section 14(b) of the NLRA-which Taft-Hartley created-as allowing individual states to ban union-shop agreements. See, e.g., Retail Clerks Int'l Ass'n 1625 v. Schermerhorn,375 U.S. 96, 102 (1963). Courts have also held "Section 14(b)'s express allowance of state laws prohibiting agreements requiring membership in a ...


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