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Thursday, July 02, 2015

When does labor law violate the Takings Clause?

 In Horne, the Court held 8-1 that the government committed a per se taking when it required raisin growers to set aside a percentage of their crop each year for the government to take and dispose of as it wanted. It was a taking even though: the burden on raisin growers was originally part of a much larger New Deal economic policy; growers could, and often did, get something in return (namely, the net proceeds from the government’s sale of the raisins after certain deductions were taken), and; raisin farmers could have avoided the burden by simply getting out of the raisin market entirely. This got me thinking: what would happen if the Court extended its Horne Takings analysis to another area of massive New Deal economic policy – labor law. And in particular, to the collision of “right to work” statutes with the federal requirement that unions provide non-members of the bargaining unit with the same goods and services they offer to paying members. I’ve written before on just this collision, but if the Court overturns Abood in Friedrichs v. CTA we’ll have a de facto “right to work” regime for all public-sector employees, making this puzzle worth a second look. 

The first place I saw a takings argument in this context was in Chief Judge Wood’s dissent in Sweeney v. Pence. As Wood saw it, this collision constituted a taking because the government was compelling one private party to give their property to another with neither a public purpose nor just compensation.[1] The majority engaged in a takings analysis but found a public purpose (it being whatever motivated the duty of fair representation) and just compensation (in the form of exclusive representation). Horne, however, seems to interject itself on both sides of this argument: (1) it is likely that a majority of the Court would find the labor law regime itself to have a public purpose, in the same way the Horne majority assumed the New Deal agricultural cartel did, but (2) benefits other than the fair market value of the thing taken does not typically count as just compensation, which suggests the “benefit” of exclusive representation the majority in Sweeney relied on will not suffice.

Statutory Refresher

Section 7 of the NLRA gives workers the right to “bargain collectively through representatives of their own choosing.” Yet while one might read section 7 and think it means employees are free to choose how to organize themselves for purposes of bargaining, the courts have not read it that way. Instead, over time, the Court has enforced a system of exclusive bargaining representation. If employees want to bargain collectively, then all employees in that bargaining unit must be represented by a single union. And conversely, if a union wants to represent its members collectively in negotiations with those members’ employer, the union is required to fairly represent all members of that bargaining unit, even those who are deeply opposed to union representation.

Whether exclusive representation should have been read into the NLRA is questionable but irrelevant: courts have required it. As a result of this government-imposed exclusive representation regime comes an equally government-created free rider problem. Nobody is forced to join the union and pay the corresponding member dues but non-union members benefit from a variety of goods the union provides. As a result of this problem, unions and employers have had the right, through the private negotiation of collective bargaining agreements, to require non-members to pay a service fee that covers the cost of (and only of) the union’s collective bargaining activities. This is not to say unions will always ask for non-members to pay (again, it depends on whether the provision for such payments is bargained for in the collective bargaining agreement with the employer), but the option is there.

Now enter state right to work laws. Such laws typically include a provision that prohibits employers and unions from making contracts that require non-union members of the bargaining unit to pay any dues, fees, assessments, or other charges of any kind or amount to the union. In other words, in right to work states, to take advantage of their section 7 right to bargain collectively through representatives of their own choosing, a worker’s union has to not only take on the burden of exclusive bargaining representation but must do so while being compensated by those non-members for its services is statutorily prohibited.

Taking in Horne and after

The first question is whether the government is actually taking property from the union. Here the answer seems to be yes, as the setup is reminiscent of the one in both Brown v. Legal Foundation of Washington, 538 U.S. 216 (2003) and to a large degree Horne itself. The government is compelling one private party (the union) to donate its private property (money) to another private party (non-members).

One possible out here is to say the government is not taking the union’s money outright but instead simply forcing it to provide services, in which case a regulatory taking analysis may be more appropriate. But as I understand it, unions often outsource the provision of at least some services to third-parties. In those cases, the right to work law entails the direct taking of dollars. Regardless of whether the setup requires the union to transfer either dollars or services to another private party, if we assume a public purpose, where is the just compensation? 

The majority in Sweeney thought the “benefit” of exclusive representation compensation enough but Horne seems to cut against that position. First, in response to the government’s argument that general regulatory activity can constitute just compensation for a specific physical taking, the Court found its “cases … set forth a clear and administrable rule for just compensation … just compensation normally is measured by the market value of the property at the time of the taking.” If the government wants to take the union’s money to deal with a government-created free rider problem, just compensation will not come in the form of something like exclusive representation, especially when the fair market value of the taking is clear. 

In Horne, the government also argued that the raisin requirement was not a taking “because raisin growers voluntarily choose to participate in the raisin market.” As far the government saw it, if they didn’t like the requirement, they could grow something else. The Court did not approve, finding that like in Loretto, where it rejected the argument there was no take because the landlord in question could avoid it by simply ceasing to be a landlord, “property rights ‘cannot be so easily manipulated.’” Something similar is arguably happening in the labor context. Employees have a right to bargain collectively. If they want to do so through a union, that union is required by the government to be the exclusive bargaining representative of the entire bargaining unit. That is the union’s job. The union, like landlords, also have property. It seems unavailing to say that if the union wishes to keep doing its job it must give up some of its private property to non-paying non-members.

That all said, the best response to a takings argument is also found in Horne, but the Chief Justice’s opinion for the majority moves through it so quickly that its potential utility is unclear. In making the above argument the Court distinguished Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984), where the Court held that the EPA could require companies manufacturing things like pesticides to disclose certain health and safety information about their products as a condition of receiving a permit to sell those products. The manufacturers thought the disclosure requirements a taking of their trade secrets but the Court did not find it so because they received a “valuable Government benefit” in exchange. That is, a license to sell dangerous chemicals. The Court thought Ruckelshaus did not apply in Horne because while selling raisins in interstate commerce could be subject to reasonable regulation, it was not a “special governmental benefit that the Government may hold hostage, to be ransomed by the waiver of constitutional protection.” Raisins, the Court found, “are not dangerous pesticides; they are a healthy snack” and “[a] case about conditioning the sale of hazardous substances on disclosure of health, safety, and environmental information related to those hazards is hardly on point.”

The question we are left with seems to be: exclusive bargaining – healthy snack or dangerous pesticide? I’d be pretty surprised if the Court thought it the latter.

[1] Disclosure: I clerked for Judge Wood when Sweeney was argued. 

Posted by Heather Whitney on July 2, 2015 at 08:00 AM in Employment and Labor Law | Permalink


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