Seventh Circuit Court of Appeals Issues Two Labor-Law Decisions in September 2018

The Seventh Circuit Court of Appeals, which covers Indiana, Illinois, and Wisconsin, issued two important labor-law decisions in September 2018. Both cases were decided in the unions’ favor but have the potential of being ultimately decided by the Supreme Court.

First, the court tackled state regulation of dues checkoff arrangements in International Association of Machinists, District Ten v. Allen, No. 17-1178 (7th Cir. Sep. 13, 2018). “Dues checkoff” is an arrangement whereby employees pay their union dues by executing a written wage assignment authorizing the employer to deduct an amount equivalent to their union dues from their paychecks and send that money directly to the union to pay their dues. Dues checkoff is permitted under federal law, specifically Section 302(c)(4) of the Taft-Hartley Act, which provides that authorizations must be in writing and may be irrevocable for up to one year. In Machinists District Ten, the Seventh Circuit, in a 2-1 decision, invalidated a Wisconsin law purporting to require all dues checkoff authorizations in Wisconsin be revocable upon 30 days’ notice. The Seventh Circuit held that the Wisconsin law was thwarted by a 1971 Supreme Court decision, Sea Pak, Div. of W.R. Grace & Co. v. Indus., Tech. & Prof’l Emps., 400 U.S. 985, 91 S. Ct. 452 (1971), which invalidated a Georgia law that purported to make checkoff authorizations revocable at any time. The Seventh Circuit also held that the Wisconsin law was more generally pre-empted by federal law, which, as noted above, specifically allows for dues checkoff authorizations to be irrevocable for up to one year.

It is interesting to note that while the Seventh Circuit did not cite it, the Indiana Court of Appeals recently reached the same conclusion in Warner v. Chauffeurs Local Union No. 414, 73 N.E.3d 190 (Ind. Ct. App. 2017). In Warner, the Indiana Court of Appeals stated, “[T]he validity of a dues checkoff authorization is a matter of federal law pursuant to the binding precedent of Seapak.” The Warner case was handled by Fillenwarth Dennerline Groth & Towe.

The second September 2018 Seventh Circuit case was Operating Engineers Local 399 v. Village of Lincolnshire, Nos. 17-300 & 17-1325 (7th Cir., Sep. 28, 2018). There, the Seventh Circuit was presented with whether a local government entity (such as a city or town), as opposed to a state, could enact a local right-to-work law. Section 14(b) of the National Labor Relations Act gives states the authority to enact right-to-work laws. The question was whether a state could delegate its authority to enact right-to-work legislation to local governments. The court emphatically said “no,” reasoning that allowing local governments to enact city or town-specific right-to-work laws would result in a “crazy-quilt of regulations” between cities and towns within a state, which would “do violence to the broad structure of labor law—a law that places great weight on uniformity.” In other words, the Seventh Circuit affirmed that labor law is essentially a federal issue, and while Congress allowed states some leeway to deviate through Section 14(b) of the NLRA, Congress did not intend to allow deviation on a local level.

Both of these cases have the potential to make their way to the Supreme Court. Machinists District Ten was a 2-1 decision in which the dissent called into question the validity of the Supreme Court’s 1971 SeaPak decision. The Operating Engineers Local 399 case conflicts with the Sixth Circuit’s decision in UAW Local 3047 v. Hardin Cnty., Ky., 842 F.3d 407 (6th Cir. 2016), which held that local governments can enact right-to-work laws. Stay tuned.

A Bad Summer at the Supreme Court for Workers

The Summer of 2018 was bad for workers at the Supreme Court. First, in Epic Systems v. Lewis, the Court held that employers can use arbitration agreements to block their employees from participating in class action lawsuits. Second, in Janus v. AFSCME, the Court held that public sector employees cannot be required to pay their fair share of the cost of negotiating and administering the collective bargaining agreement. Each decision is discussed below. 

Epic Systems

The first decision of this terrible pair is Epic Systems v. Lewis. The case concerned whether employers can require employees to sign arbitration agreements prohibiting them from joining together in class action lawsuits. The National Labor Relations Act gives employees the right to engage in “concerted activities” in furtherance of “mutual aid and protection.” The employers in Epic Systems argued that employees’ rights to engage in concerted activity under the NLRA should give way to the Federal Arbitration Act. In a 5-4 decision authored by Justice Gorsuch, the Court sided with the employers, holding that arbitration agreements “must be enforced as written.”

Epic Systems has important ramifications. Employees are often unable to enforce their rights in the workplace if they must do it alone. Perhaps the potential damages are too small for an attorney to take an individual case, they do not want to draw attention to themselves, they fear retaliation. But there is strength in numbers, and these concerns are not so weighty when employees can stand together in a class action lawsuit. Epic Systems permits employers to strip employees of this important tool by forcing them to sign arbitration agreements prohibiting them from engaging in class action lawsuits.

Janus

The Summer’s blockbuster decision was Janus v. AFSCME, where the conservative justices’ fascination with overruling the Court’s 1977 decision in Abood v. Detroit Board of Education finally paid off. The Abood Court unanimously held that public sector employees may be required to pay an “agency fee” to “finance expenditures by the Union for the purposes of collective bargaining, contract administration, and grievance adjustment.” It is important to note that employees already could not be compelled to pay for a union’s political activities, nor can they be compelled to be a member of the union.

Abood had been the law of the land for four decades. But with the Court now home to five conservative justices, anti-union special interest groups were able to succeed on the far-fetched claim that agency fees somehow violate the First Amendment. Janus opens the flood gates for free-riders in public sector unions.

These decisions make it harder for employees to band together. Under the current Supreme Court, we can expect to see more challenges to employee rights in both union and non-union workplaces.

What is “Right-to-Work”?

Chances are you’ve heard the term “right-to-work” or know that Indiana recently became a “right-to-work” state. Chances also are, unless you’re a labor lawyer or a union official, you don’t know what “right-to-work” actually means.

The phrase “right-to-work” sounds great, doesn’t it? Shouldn’t everyone have the “right-to-work”? Isn’t a law that gives everyone the “right-to-work” a good thing? What could be bad about giving people the “right-to-work”?

The reality is that “right-to-work” is an odious law and a complete misnomer. The “right-to-work” law does not guarantee work to anyone or have anything to do with giving employees the “right” to “work”.

“Right-to-work” laws are actually nothing more than devices by powerful special-interest groups to weaken labor unions. Period. What they do is say that employees who work in unionized workplaces—thereby benefitting from the increased wages, benefits, job security, and working conditions provided by a union contract—do not have to to pay their fair-share toward the cost of negotiating and administering that contract. In other words, “right-to-work” gives employees the right to freeload off their dues-paying co-workers.

The truth is that even without “right-to-work”, no one can be required to join the union at their workplace. What they could be required to do, before “right-to-work”, was pay their fair-share of the cost of negotiating and administering the union contract, an amount which is less than the full cost of union membership dues.

If everyone decided not to pay their dues, the union could not exist, and the union contract would go away, resulting in lower wages and benefits, inferior terms and conditions of employment, and no job security.

“Right-to-work” is wrong. Nobody likes a freeloader. If you are fortunate enough to work at a union workplace, pay your dues.