Skip to content


Seyfarth Synopsis: AB 1654 provides a PAGA exemption for certain employees covered by a collective bargaining agreement. While AB 1654 is limited to the construction industry, its underlying rationale applies much more broadly, and may augur further thoughtful restrictions on PAGA’s broad scope.

California’s Private Attorneys General Act, imposing draconian penalties for even relatively trivial Labor Code violations, remains the bane of California employers. Efforts to restrict PAGA’s scope thus arise from time to time in the California Legislature, which occasionally enacts some reform. Lost in the attention received by recent high-profile employment legislation was a bill of enormous import for the construction industry specifically but also (potentially) for the future of PAGA enforcement more broadly.

AB 1654, effective on January 1, 2019, exempts “employees in the construction industry” from PAGA if employees’ collective bargaining agreements meet certain requirements. To qualify for a PAGA exemption, a CBA must

  • apply to working conditions, wages, and hours of work of employees in the construction industry,
  • ensure employees receive a regular hourly wage not less than 30% more than the minimum wage,
  • prohibit Labor Code violations redressable by PAGA,
  • contain a grievance and binding arbitration procedure to redress Labor Code violations remedied by PAGA,
  • expressly waive the requirements of PAGA in clear and unambiguous terms, and
  • authorize an arbitrator to award all remedies available under PAGA, except for penalties payable to the LWDA.

While limited to the construction industry, AB 1654 suggests the question: why are not all industries afforded this exemption option? This thought was not lost on AB 1654’s opponents, who wondered if the bill was a “camel’s nose under the PAGA tent”:

The immediate impact of this bill is limited to the construction industry. Its longer term policy implications may not be. The justification provided for the PAGA exemption proposed by this bill is that some construction industry employers have been recently targeted by frivolous PAGA lawsuits. It is not hard to imagine employers in many other sectors making the same argument.

. . .

With that in mind, a key policy question presented by this bill is whether there is sound basis for distinguishing the construction industry from other sectors of the economy in relation to the application of PAGA. If not, it may be difficult, from a policy point of view, to rationalize denying future requests for PAGA exemptions under similar circumstances.

This is indeed the key policy question, and to which there is an easy answer: there is no sound basis to single out the construction industry for special protection from PAGA lawsuits. AB 1654 undermines the PAGA defenders’ argument, adopted by the California Supreme Court in Iskanian, that a PAGA plaintiff stands in for the state and cannot waive the state’s power by private arbitration agreement. In the bill, the Legislature says otherwise. PAGA claims can be waived—in this case through a valid CBA—provided employees have redress for Labor Code violations through a grievance and arbitration procedure in the CBA. While AB 1654 applies only to the construction industry, its reasoning supports an argument employers should use to argue against the logic of Iskanian in other contexts.

Gavel By: Christopher Lowe, Robert T. Szyba, Kaitlyn F. Whiteside

Seyfarth Synopsis: The New Jersey Appellate Division reinstated plaintiff’s state law discrimination and retaliation claims, finding the claims were not pre-empted by Section 301 of the LMRA.

In a published opinion issued on May 9, 2017, the three-judge panel of the New Jersey Appellate Division held that a union member’s Law Against Discrimination (“LAD”) and Workers’ Compensation Law (“WCL”) claims were not preempted by Section 301 of the Labor Management and Relations Act (“LMRA”), despite the presence of an applicable collective bargaining agreement (“CBA”) and potential CBA-based defenses available to the employer.

The plaintiff was employed as a commercial truck driver, and was a member of Teamsters Local Union No. 813.  Following a workplace injury, he was cleared for light duty work, so long as it did not involve commercial driving. The plaintiff then filed a workers’ compensation claim with the New Jersey Department of Labor and Workforce Development, Division of Workers’ Compensation.

Three months after filing the workers’ compensation claim, the company asked plaintiff to leave work, and by letter to the union, indicated that plaintiff would need to be recertified for duty as required by Department of Transportation (“DOT”) regulations before returning to work.  The company scheduled an independent medical examination, but the plaintiff declined to undergo the exam, and therefore, was not returned to work.

The union filed a grievance challenging the company’s failure to reinstate the plaintiff.  The grievance proceeded to arbitration, and was denied by the arbitrator who concluded that reinstatement would require examination and recertification pursuant to the DOT regulations.

The plaintiff then sued in New Jersey Superior Court alleging unlawful discrimination under the LAD and retaliation under the WCL. Concluding that the claims were pre-empted, the trial judge dismissed the complaint for lack of subject matter jurisdiction.  The plaintiff appealed.

The question before the Appellate Division was whether the trial judge correctly concluded that the LAD and WCL claims were pre-empted under Section 301 of the LMRA, which pre-empts claims that require an interpretation of a collective bargaining agreement.

The court first looked to the elements of the plaintiff’s claim that the company retaliated against him based on his workers’ compensation claim, which required showing that (i) he made, or attempted to make, a claim for workers’ compensation, and (ii) he was discharged for making that claim.

According to the court, under U.S. Supreme Court precedent in Lingle v. Norge Div. of Magic Chef, 486 U.S. 399 (1988), each of these is a “purely factual inquiry,” and therefore, requires no interpretation of the CBA.  Plus, plaintiff did not make any mention of any provision of the CBA in his complaint.  So, his WCL claim was not pre-empted under Section 301.

The court then turned to the LAD claim, which proved to be a more difficult question.  To establish a prima facie LAD claim, the plaintiff had to demonstrate (i) he was disabled; (ii) he was objectively qualified for his former position; (ii) he was terminated; and (iv) the company sought a replacement.  Although the court determined that each of these also presented a “purely factual inquiry,” the court recognized that the company may have a CBA-based defense based the CBA’s requirement that employees promptly comply with DOT physicals. Further, whether the plaintiff was “objectively qualified” for the position potentially implicated the CBA.

Ultimately, however, the appellate court determined that neither the requirement that the plaintiff was objectively qualified nor the company’s potential defenses required an interpretation of the CBA that would preempt the claim.  As noted by the New Jersey Supreme Court in Puglia v. Elk Pipeline, Inc., 226 N.J. 258, 279 (2016), “… a CBA-based defense is ordinarily insufficient to preempt an independent state-law action.”

Further, the CBA was not the only source, or even the primary source of the plaintiff’s duty to recertify.  Instead, it was DOT regulations that set forth the requirement and “To the extent an interpretation of them is required, federal law [and not the CBA] must be applied.”

Looking forward, unionized employers in New Jersey who are defending against claims under state law thus face additional hurdles stemming from decisions like Hejda v. Bell Container Corporation. For example, a Section 301 claim, which is a claim under a federal statute, could be removable to federal court.  Without the Section 301 claim, a defendant thus loses a potential basis for removal.  Additionally, where CBAs otherwise provide an administrative process that must be utilized before a Section 301 claim is filed, employers may lose the ability to enforce the administrative remedies provisions, or otherwise have a lawsuit dismissed if the administrative remedies were not exhausted. Last, unionized employees have a greater ability to circumvent Section 301’s limitation to contract-based remedies, and instead seek the full panoply of tort-based remedies that the LAD affords plaintiffs. Accordingly, the dynamics for any employer with an organized workforce that is defending a claim under New Jersey state law have shifted further in the direction of state-law protections, and away from the uniformity and precedent of the LMRA.

Hejda v. Bell Container Corporation, while not a sea change in the law, is representative of the both the trend in New Jersey of courts declining to find Section 301 pre-emption, as well as the courts’ interpretation of the LAD as a wide-reaching, liberally-construed source of employee protections.

By: Kyllan B. Kershaw, Esq.

Seyfarth Synopsis: This weekend Kentucky became the 27th state to pass right-to-work legislation, eliminating the right of unions to collect compelled-dues payments and providing a significant boost to employers hoping to operate union-free.

On Saturday, January 7th, Kentucky’s Governor signed Kentucky House Bill 1 into law, making Kentucky the 27th state in the country to adopt right-to-work legislation and the last state in the South to pass such a law. The new legislation is effective immediately but carves out an exemption for existing collective bargaining agreements.

The law bars making union membership a condition of employment and allows workers in union shops to opt out of paying union dues without fear of losing their jobs. The law also prohibits public employees from going out on strike.

Kentucky House Bill 1 was introduced on January 3 and fast-tracked by Kentucky House Republican leaders, passing by a vote of 58-39 on January 5th and pushed through the full State Senate in a special Saturday session on January 7th. A major factor motivating Kentucky Republicans who introduced the law is that Kentucky’s unemployment figures lag behind those of neighboring right-to-work states such as Indiana and Wisconsin. Likewise, while Kentucky’s overall union membership rates remain on par with the U.S. average, private-sector union membership rates in Kentucky are slightly above the national average. For example, in 2016, 11 percent of employees in Kentucky belonged to a union (right around the national average of 11.1%), while Kentucky’s private-sector employee membership rates hovered slightly above 8 percent, higher than the national average of 6.7 percent.

Overall, right-to-work states are considered more favorable to employers. Specifically, employers in non-right-to-work states experience a higher density of unionization and increased organizing efforts. Likewise, employers in non-right-to-work states often experience greater employment costs associated with doing business. For example, employers in non-right-to-work states: (a) generally pay higher wage rates and benefits to employees, regardless of the employer’s union status; and (b) are subject to increased government regulation of employment, including pro-employee laws and onerous regulations, as unions in these states often possess greater political capital and have additional lobbying capabilities as a result of compelled-dues payments.

Kentucky House Bill 1 follows the 6th Circuit’s recent affirmation of the rights of Kentucky counties to pass right-to-work legislation based on Kentucky’s home-rule powers. See UAW v. Hardin Cty., Docket No. 16-5246 (6th Cir. Nov. 18, 2016). Not surprisingly, Kentucky House Bill 1 restricts the right of local governments to enforce an ordinance contrary to the provisions of the new state law.

Kentucky’s right-to-work legislation comes as Republicans control the state government in Kentucky for the first time in nearly a century. States such as Missouri and Iowa may follow Kentucky’s lead, where Democrats suffered losses in November and state lawmakers have expressed interest in pursuing such laws and creating more employer-friendly climates.

By: Skelly Harper, Esq.

Seyfarth Synopsis: Third Circuit rejects market-participant argument, opening the door for preemption challenge to local law tying tax incentives to use of union labor.

The case before the Third Circuit, Associated Builders & Contractors v. City of Jersey City,  involves a Jersey City ordinance providing developers with tax abatements when they build projects in certain areas. Developers are eligible for the tax abatements, however, only if they enter into project labor agreements requiring their contractors and subcontractors to use union labor for the duration of the project. The PLAs required by the ordinance specify, among other things, that “there will be no strikes, lock-outs, or other similar actions,” and that the developer and the union will agree to dispute-resolution procedures. The ordinance covers projects that are funded entirely by private investment.

The legal issue before the Third Circuit was application of the “market participant doctrine.” The plaintiffs in the case argued that the ordinance was preempted by both the NLRA and ERISA. They also argued that the ordinance is barred by the dormant Commerce Clause of the U.S. Constitution. The District Court had ruled that these arguments were not cognizable, because it concluded that Jersey City acted as a market participant — and not a regulator — when enforcing the ordinance. The Third Circuit reversed and remanded.

The Third Circuit held that the market-participant doctrine did not apply because Jersey City did not have a “proprietary interest” in the privately funded projects. The Third Circuit reasoned that providing tax incentives does not transform Jersey City into an investor, owner, or financier of a project. The Third Circuit therefore directed the District Court to decide whether the ordinance was preempted or barred. The decision offered “no comment” on whether the ordinance was in fact preempted the NLRA or ERISA or barred by the dormant Commerce Clause.

The decision sets forth a potential road map for all employers — not just developers — to consider whenever confronted with local tax incentives that are only available to employers with a union contract. While the challenge was brought in this case by the developers, employers outside the construction industry may be able to pursue similar arguments. For example, the Third Circuit’s theory should encompass local laws that require hotels have a union for the hotel developer to receive a tax break

By:  Michael J. Rybicki, Esq.

Today Wisconsin became the 25th state to pass right to work legislation applicable to private sector employers. Most private employers are covered by the National Labor Relations Act (“NLRA”), which originally permitted collective bargaining agreements to provide for the termination of any employee who failed to join or at least pay representational fees to the union. While these “union security clauses” remain lawful in now half of the states, the 1947 Taft-Hartley amendments to the NLRA gave states the ability to enact laws giving workers the “right to work” without becoming a union member or paying union dues, which is what the Wisconsin bill does. The bill would also make it a crime punishable by up to nine months in jail to require private sector workers who are not union members to pay dues after the bill becomes effective.

The Wisconsin bill will be effective after the Governor has signed it – most likely March 11, 2015. It does not make union security clauses presently in effect unlawful or otherwise render them null and void because the Act only applies to the “renewal, modification, or extension” of a collective bargaining agreement occurring on or after its effective date. Although some unions may attempt to negotiate contract extensions prior to the law’s effective date they have relatively little time to do so (unlike the case with the Michigan law).

The Wisconsin bill was narrowly approved in the Senate by a 17-15 vote on Wednesday, February 25, 2015. It was referred to the Republican-controlled Assembly where it passed on party lines on Friday, March 6, 2015. Wisconsin Governor Scott Walker has said he will sign the bill on Monday (March 9, 2015).

Once largely confined to southern or western states, right to work laws have now come to the “rust belt,” historically a union stronghold. In 2012, Indiana and Michigan passed right to work laws, and why unions hate them is evident from the Michigan experience. In 2013, the first full year under the state’s right to work law, Michigan saw one of the sharpest dips in year-to-year union membership, declining from 16.3% to 14.5%.

Advocates of right to work legislation argue that it is unfair to force workers who do not want to join a union to pay dues, which are frequently used for political purposes they personally oppose. Advocates further argue that right to work laws promote economic growth and figures from the Department of Labor and the Bureau of Economic Analysis appear to support this contention.

Unions and their supporters counter that such legislation is nothing more than part of a “race to the bottom” that undermines the middle class. They also argue that because so-called “free riders” – workers who do not pay union dues – share the benefits of collectively bargained contracts, they should have to pay their “fair share” to the union.

Right to work legislation unquestionably has a heightened political dimension in today’s polarized environment. The Democratic Party, of course, relies heavily on Big Labor to raise money and turn out the vote at election time. The Wisconsin right to work bill is part of an continuing epic battle between that state’s Republican and Democratic constituencies, which up to now the Republicans have been winning. Its passage also occurs against the backdrop of Republican Governor Walker’s presidential bid. Democratic Representative Cory Mason, of Racine, denounced the bill saying, “It is the workers in this state that are suffering through the politics of our governor’s ambitions.”

It is likely that a legal challenge to the Wisconsin legislation will be mounted by the bill’s opponents. Legal challenges to right to work laws in Indiana and Michigan, however, failed.

The majority of right to work provisions (either by law or constitutional provision) were passed in the 1940’s or early 1950’s. Prior to the recent passage of right to work laws by what is now a trio of rust belt states, the only other right to work provision passed in this century was in 2001, when voters approved a constitutional amendment in Oklahoma. Right to work proponents will continue to press their case in other states and there may come a day when union security clauses are permitted in only a minority of states, a situation once considered preposterous.

By: Marc R. Jacobs, Esq.

On January 13, 2015, the U.S. Court of Appeals for the Seventh Circuit rejected the International Union of Operating Engineers Local 150’s bid for the full circuit court to rehear the September 2, 2014 panel decision upholding the Indiana law.  Five of the ten active judges on the Seventh Circuit dissented from the decision not to rehear the case.  Under the court’s rules, because a majority of the active judges did not vote for rehearing, the panel’s decision stands. 

We discussed the panel’s decision and the issues that it raised in a September 4, 2014 post [here], in which the panel (despite a vigorous dissent from Judge Diane Wood) held that the Indiana law was not preempted by the National Labor Relations Act and did not violate the United States Constitution.  As we also reported in a November 7 post [here], the Indiana Supreme Court has upheld the Indiana Right to Work Law, ruling that the law did not violate the Indiana Constitution.  

In light of the January 13 ruling, the union’s sole remaining avenue of judicial redress is to the United States Supreme Court.  Although the union has not formally announced its plans, a petition to the Supreme Court is likely.

By: Marc R. Jacobs

On November 6, 2014, the Indiana Supreme Court reversed the ruling of a superior court judge and held that the Indiana Right to Work Law does not violate the Indiana Constitution. Zoeller v. Sweeney, Case No. 45S00-1309-PL-596 (2014) (“Sweeney”).

The Indiana state law challenge decided in Sweeney raised a novel issue under the Indiana Constitution. Section 21 of the Indiana Bill of Rights, Article I of the Indiana Constitution, states in part: “No person’s particular services shall be demanded without just compensation.” The plaintiff union argued that because federal labor law requires a union with an exclusive bargaining relationship with the employer to represent the interests of all employees in the bargaining unit regardless of union membership, the law is a demand on the union to provide services without compensation. The lower court agreed and held that the Act violated Section 21.

The Indiana Supreme Court rejected the union’s claim, reversed the lower court decision, and held that the Act was constitutional. The Court ruled that the Indiana Constitution only limits “state, not federal, power.” As we reported on September 4, 2014, the U.S. Court of Appeals for the Seventh Circuit upheld the Act against federal law challenges in Sweeney v. Pence, Case No. 13-1264 (7th Cir. 2014). Borrowing from the Seventh Circuit’s decision, the Indiana Supreme Court determined that federal law and not Indiana state law provides the duty to represent all employees in the bargaining unit. As a result, the Court concluded that the Act did not violate Section 21 because “Article 21 requires just compensation when the state demands particular services, not when the federal government does so.”

In a statement after the ruling, Indiana Governor Mike Pence state: “Today’s unanimous decision by the Indiana Supreme Court upholding Indiana’s right to work law is a victory for the freedom of every Hoosier in the workplace. By this ruling, our Court reaffirmed Indiana law that no Hoosier may be compelled to join a union as a condition of their employment but every Hoosier is free to join a union if they choose.”

Although you might think that the unanimous decision of the Indiana Supreme Court in Sweeney should put to rest the validity of Indiana’s Right to Work Law, legal challenges remain pending. First, the federal court challenge to the Act (mentioned above) continues because the plaintiff union filed a request that the entire Seventh Circuit re-hear the case en banc. Briefs related to that request have been filed (the most recent filing was on October 30). Second, another case brought by a different union is pending before the Indiana Supreme Court. Zoeller v. United Steel, Paper, Forestry, Rubber, Manufacturing, Allied Industrial and Service Workers International Union, AFL-CIO, Case No. 45S00-1407-PL-00492. In this second state court case, a different Indiana superior court judge also determined that the Act violated Section 21 of the Indiana Constitution. Given the ruling by the Indiana Supreme Court in the Sweeney case, it is reasonable to expect that the second state law case will be dismissed in the near future.

By:  Ronald J. Kramer, Esq.

It is black letter law that states can prohibit contracts from requiring bargaining unit members to pay money to unions, right?  Maybe not, at least according to the Chief Judge of the Seventh Circuit.  On September 2, 2014, the Seventh Circuit upheld Indiana’s Right to Work Act in a contested 2-1 decision that ultimately may raise more questions than it resolves.  Sweeney v. Pence, Case No. 13-1264 (7th Cir. Sept. 2, 2014).  And the Indiana Supreme Court will soon be weighing in on state constitutional issues as well.

Indiana’s 2012 Right to Work Act (“Act”) prohibits any person from being required to become a union member or to pay dues, fees, assessments or other charges of any kind or amount to a union (or a similar equivalent to charity in lieu to the union).  Such right to work acts have existed for decades, even well before the 1947 Taft-Hartley Act added Section 14(b) to the National Labor Relations Act (“NLRA”), which expressly recognized the right of states to prohibit union “membership” as a condition of employment.

The Union challenged the Act on two grounds.  First, the Union claimed that the Act was preempted by NLRA Section 8(a)(3), which expressly permits bargaining parties to require union membership as a condition of employment.  According to the Union, NLRA Section 14(b) only gave states the limited right to ban union security agreements requiring “membership,” and thus states had no authority to interfere with provisions addressing what non-union bargaining unit members might have to pay for to cover their “fair share” of bargaining costs.  As long as bargaining unit personnel who did not want to be members did not have to become members or pay full membership dues, the Union claimed, they could be required to pay for the costs the Union incurred in representing them under its statutory duty of fair representation.

The Court majority disagreed.  Initially, the majority found “membership” to have the same meaning under both NLRA Sections 8(a)(3) and 14(b), and noted that the Supreme Court had described union membership under Section 8(a)(3) to be whittled down to its “financial core,” given decisions preventing unions under union security agreements from requiring non-members to pay more than the union’s actual bargaining costs.  Thus, according to the majority, any bargaining unit member who paid money to the Union was a union financial core “member” under both Sections 8(a)(3) and 14(b).  Accordingly, under Section 14(b) states could ban parties from negotiating provisions requiring the payment of any fees to the union.  Moreover, when it adopted the Taft-Hartley Act, Congress did so to protect existing right to work laws, seven of the twelve of which had language similar to Indiana’s law.  Thus, the legislative history supported the majority’s view that Indiana’s law fell within a state’s authority under Section 14(b).  Last but not least, the sole appellate court to directly address the issue similarly found as much.

Second, the Union raised numerous federal constitutional claims.  The Court dismissed the Contracts and Ex Post Facto Clause arguments since the Act expressly provided it would only apply prospectively as existing collective bargaining agreements expired.  The Court also dismissed the Unions’ Equal Protection Clause claim that somehow the Act infringed on union members free speech rights by taking away union financial resources, and/or infringed on the right of union membership, which the Union asserted was a fundamental right since it involved the exercise of First Amendment association and assembly rights.  The Court found that unions have no constitutional right to non-member fees, and that there is no fundamental right to union membership.  Given the Act did not encroach on any “fundamental” rights, the Court applied a deferential standard of review to the law to find that the statute bore a reasonable relation to its legislative purpose of contributing to a business friendly environment.

The Court majority also found that the Act did not constitute an unconstitutional taking — i.e., that the Union was being required to provide a service (fair representation regardless of membership) without just compensation.  The majority noted that the Union never raised the argument, and thus had forfeited it.  Nonetheless, the majority questioned whether the state was even the proper party in such a claim since, while Indiana law prohibited the Union from collecting fees, it was federal law that required it to provide fair representation.  The majority asserted that the Union nonetheless was justly compensated for its fair representation obligation by the federal law’s grant of exclusive representation to the Union — something which provided the Union with benefits and powers that it would not otherwise have.

Chief Judge Wood issued an extensive dissent.  Judge Wood agreed with the Union that Section 14(b) only permitted states to prohibit union membership, not to prohibit unions from collecting fees for representational services rendered.  In her review of the underlying precedent, Judge Wood found the Supreme Court never considered non-members who were required to pay representation fees to be “members” under Section 14(b).  Moreover, in its cases addressing Section 14(b), the Supreme Court had not addressed the issue at hand but instead only found that states could prohibit agreements from requiring membership or attempting an end run by imposing non-member fees equal to those paid by union members.  Judge Wood dismissed the legislative history argument, noting that the Court had no idea what Congress thought, and that Congress also could have easily believed the courts would decide which state laws complied with Section 14(b).  In any event, the statutory language itself should control.

If the Act was not preempted, Judge Wood argued that it violated the Takings Clause.  The government may only confiscate private property for public use with just compensation, and is prohibited from taking property from one private party for the sole purpose of transferring it to another private party, regardless of whether “just” compensation is paid.  Here, according to Judge Wood, the state did exactly that by forcing one private party, the Union, to give services to another private party, non-union members.  Judge Wood  claimed no public purpose for the taking was even alleged.  Judge Wood compared the situation to the equivalent of requiring a gas station, if it wanted a business license, to give away gas to customers who did not want to pay.  Wood rejected the majority’s just compensation claims for numerous reasons, including that it ignored the tangible costs placed on unions in administering the contract and handling grievances.

Thus, Indiana’s Right to Work Act survived federal preemption and constitutional challenge, for now.  Judge Wood’s dissent may give the Union cause to consider a petition for rehearing en banc or a petition for certiorari, and no doubt it will give others the idea to bring their own challenges to Indiana’s Act or other similar state right to work statutes.

While Indiana’s Act survived Judge Wood, it is not out of the woods.  Two state courts, in cases involving IUOE Local 150 in September 2013 and the USW just last July, found the Act violated an Indiana State Constitutional provision barring the delivery of particular services without just compensation.  The Indiana Supreme Court is set to hear oral argument on IUOE Local 150’s case on September 4th.  Stay tuned.  This fight is far from over.

By: Ashley K. Laken, Esq.

On November 22, 2013, a group of home-care providers for Medicaid recipients in Illinois filed their brief in Harris v. Quinn (No. 11-681) in which they urged the U.S. Supreme Court to overturn its precedent allowing union fair share fees to be imposed on public employees.

The Supreme Court granted the providers’ petition in October to hear the case, agreeing to review a September 2011 decision in which the Seventh Circuit Court of Appeals held that a collective bargaining agreement that requires home-care providers for Medicaid recipients to pay fair share fees to a union does not violate the First Amendment. The Seventh Circuit reasoned that the State of Illinois is a joint employer of the providers and that Supreme Court precedent permits the State, as a joint employer, to compel fair share fees in the interest of stable labor relations. 

In determining that the State was the providers’ joint employer, the Seventh Circuit reasoned that, although the hiring selection is up to the patients and the providers sign employment agreements directly with patients, the State sets the providers’ qualifications, annually reviews each provider’s performance, sets their wages and work hours, pays for training, and pays them directly.  (See our prior blog posting regarding the case here.)   

In their brief to the Supreme Court, the providers urged the Justices to overturn Abood v. Detroit Board of Education, 431 U.S. 209 (1977), in which the Supreme Court held that mandatory union fees could be imposed on public employees. The providers’ brief argued that Abood should be overruled because it failed to give adequate recognition to First Amendment rights. 

In the alternative, the providers argued that Abood should be limited to its narrow facts and to “true public employees.” Specifically, the providers argued that a government employer should be able to compel association with a union only when (1) the government is directly supervising the individuals in government workplaces and (2) the union representation does not involve matters of public concern. In support of their argument, the providers reasoned that mandatory association must be justified by compelling state interests and that “labor peace” cannot justify compelled association when the employer is not actively managing and supervising the alleged employees.   

Of the eight home-care providers who are challenging the Seventh Circuit’s decision, all but one of them care for a family member and many of them provide the care in their own homes. A series of executive orders issued by Governor Quinn and his predecessor nonetheless classified these providers as public employees for purposes of union organizing. In their brief to the Supreme Court, the providers argued that the Seventh Circuit was unjustified in relying on the concept of joint employment when it determined that the providers could be required to pay fair share fees, as joint employment is a statutory concept that arises from the National Labor Relations Act and has no relevance to the requisite constitutional analysis.

It’s too early to tell what the Court will do with Abood, but the fact that the providers straddle the line between the public and private sector will likely play a part in the Court’s analysis. The case is scheduled for oral argument on January 21, 2014. Stay tuned for further developments.

By:  Marc R. Jacobs, Esq.

As we reported in a prior blog post, in February 2012, Indiana became the 23rd state, and the first in the “Rust Belt” to pass a “right-to-work” law. In short, as applied to collective bargaining agreements that expired or are renewed, modified or extended after March 14, 2012, the law prohibits employers from requiring their employees from joining a union or paying dues or fees to a union.

Recently, Judge John Sedia, a Lake County, Indiana Superior Court Judge, upheld a union challenge to Indiana’s right-to-work law and held the law unconstitutional. In the state court lawsuit, the Operating Engineers union alleged that the law was improper for multiple reasons. Although he rejected most of the union’s claims, Judge Sedia declared the law in violation of Article I, Section 21 of the Indiana Constitution, which states: “No person’s particular services shall be demanded, without just compensation.” The Judge concluded that the law violated this provision because it required the union to represent employees (i.e., provide services) regardless of whether they were members or paid union dues.

Judge Sedia stayed his ruling pending an expected appeal, so the law remains in effect. On September 12, 2013, the Indiana Attorney General filed his appeal of Judge Sedia’s ruling directly with the Indiana Supreme Court. We will continue to monitor developments and report them here.