In 2012, Indiana enacted the “Indiana Right to Work Act”, prohibiting unions from requiring an individual, as a condition of employment, 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 equivalent to or a pro-rate part of dues, fees, assessments or other charges required of members of a labor organization. Indiana thus became one of 24 states with some version of a right to work law on the books.

The International Union of Operating Engineers, Local 150, AFL-CIO (Union) responded by filing separate lawsuits in federal court in the Northern District of Indiana and in Indiana state court. The federal lawsuit, which was the only action addressed by the Seventh Circuit, alleged that the Indiana statute violated the United States Constitution and was preempted by federal labor law. In essence, the Union argued that the Indiana legislation, by prohibiting unions from charging non-members any fee for their “fair share” of collective bargaining costs, exceeded the bounds of a permissible right to work law as laid down by Congress in 1947 as part of the Taft-Hartley Act. The Union further claimed that if the Indiana legislation was appropriate under the Taft-Hartley Act, then it amounted to an unconstitutional “taking” in violation of the Fourteenth Amendment, as evidenced by the fact that under federal law the union owes a duty of “fair representation” to the non-members, including protecting their interests in collective bargaining and representing them in grievance arbitration proceedings, while being precluded from charging non-members for the very services it is legally obligated to provide.

In a 2-1 decision earlier this month, the Seventh Circuit upheld the Indiana legislation against these challenges. Addressing the preemption claim required the court to determine what Congress intended when it added §14(b) (29 U.S.C. §164(b)) to the NLRA in 1947. Section 14(b) provides that nothing in the NLRA is to be construed as authorizing agreements “requiring membership in a labor organization” as a condition of employment in any state where such agreements are prohibited. The crux of the issue before the court was what sufficed to constitute “membership” within the meaning of this provision. For the majority, union “membership” is not just formal membership but extends to requiring individuals to pay those fees and dues necessary to perform the duties of an exclusive representative (e.g., negotiation and administration of a collective bargaining agreement), wholly apart from any “political” expenditures the union might make. Therefore, according to the majority, a state law (such as Indiana’s) prohibiting unions from charging non-members a fee in any amount is still protected by §14(b). Responding to the Union’s Takings argument, the majority holds that a union is compensated by federal law’s recognition of the union as the exclusive representative, the only party that “gets a seat at the negotiation table”, as the majority expresses it.

The dissent, authored by the Seventh Circuit’s Chief Judge, Diane Wood, argues that if §14(b) is interpreted so broadly as to sanction state laws prohibiting a union from requiring any compensation from non-members, even for expenses unquestionably related to the union’s representative responsibilities which it is obligated to perform, then there is no avoiding the Takings problem. The only way to avoid the constitutional problem, for the dissent, is to treat union “membership” as something separate and distinct from having to pay one’s fair share of the collective bargaining process, thereby allowing unions to charge a so-called “fair share fee”, even in right to work states.

As both the majority and the dissent observe, when §14(b) was adopted in 1947, more than 65 years ago, 12 states had “right to work” laws. Now there are 24. Despite this history, there was remarkably little in the way of previous court decisions analyzing the parameters of the “right to work” exception and the meaning of union “membership” to guide the Seventh Circuit, requiring both the majority and the dissent to dissect the origin and purposes of §14(b) and its treatment in the courts (the printed opinion is 59 pages long). It is, perhaps, indicative of the current state of the union movement that so long after the adoption of the Taft-Hartley amendments, fundamental questions are only now being subjected to vigorous debate.

Note:   On September 4, two days after the Seventh Circuit issued its opinion, the Indiana Supreme Court heard oral arguments on Local 150’s challenge to the right to work law based on state constitutional grounds. In the state court case, in contrast to the federal case, Local 150 was defending a lower court ruling finding that the law violated the Indiana constitution by requiring unions to provide services without compensation. Ensuring that the controversy over Indiana’s right to work law will not be resolved any time soon, yet another Indiana state court lawsuit challenging the law, brought by a different union, is headed to the Indiana supreme court after a lower court also held the law to violate the Indiana state constitution.