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Federal Appeals Court Rules That Act 10 Is Constitutional

By D&K’s Labor & Employment Team

The United States Court of Appeals for the Seventh Circuit has ruled that 2011 Wisconsin Act 10 is constitutional in an opinion released on Friday, January 18, 2013.

The Seventh Circuit’s decision reviewed a decision that had been issued by the United States District Court for the Western District of Wisconsin in the spring of 2012. The District Court had concluded that the majority of Act 10 was constitutional, but also found that those portions of Act 10 that required general municipal employees’ representatives to face annual recertification elections and that banned union dues deduction were unconstitutional. The Seventh Circuit concluded that even these two portions of the law were constitutional, and reversed the District Court’s decision on those portions of its earlier ruling. The Seventh Circuit also denied the unions’ cross appeal, which challenged provisions of Act 10 that limited general municipal employees’ collective bargaining rights as unconstitutional.

What Did The Court Actually Say About Act 10 And The U.S. Constitution?


Limits on Collective Bargaining

The Seventh Circuit began its analysis of Act 10’s collective bargaining limitations and recertification elections requirement by reviewing the standards that the Court would use to evaluate the unions’ claims that the distinctions made under the Act between public safety and general employee groups violate the Equal Protection Clause of the U.S. Constitution. The Court noted that laws only need to have a rational basis to survive an equal protection challenge, and explained that courts cannot decide whether a law has a rational basis by considering the statements of individual legislators or other proof of what may have really motivated lawmakers. Instead, according to the Court, laws must be upheld if there is a “rational relationship between the disparity of treatment and some legitimate governmental purpose,” whether that purpose actually represents the “legislature’s motive” or not.

The Seventh Circuit then considered whether restricting general municipal employee bargaining to “total base wages,” while leaving public safety employees free to bargain about wages, hours, and conditions of employment (with certain exceptions), violates the equal protection clause of the constitution. The Court reasoned that the state could rationally conclude that it could not risk labor unrest and potential work stoppages by public safety employees that might accompany the passage of Act 10. Based on this compelling state interest, the Court held that the state could distinguish between general municipal and public safety employees for purposes of defining their bargaining rights.

The Court rejected the unions’ related claim that the distinctions made by the state were not really based on public safety considerations, noting that the legislature must decide what groups constitute public safety occupations. Consequently, the Court determined that courts cannot assume the authority to decide which occupations would jeopardize public safety with a strike and then use that determination to support an equal protection challenge. The Court stressed that this involved a legislative policy judgment, concluding that “[d]istinguishing between public safety unions and general employee unions may have been a poor choice, but it is not unconstitutional.”

Recertification Election Requirements

The Seventh Circuit began this portion of its decision by noting that many of the same considerations that related to distinctions made between employee groups’ bargaining rights under Act 10 also were relevant to evaluating the legislature’s decision to require recertification elections. The Court stated that Act 10 reflects “a rational belief” about the financial costs of public sector unions to the state, and the recertification provisions implement this point of view about state finances by ensuring that the state does not have to “incur the cost of unions which have uncommitted members.The Court concluded that a legislative goal of avoiding the instability that could result from requiring similar elections for representatives of public safety personnel reasonably supports the distinction that the legislature made between public safety employees and general municipal employees for purposes of recertification elections. Consequently, requiring annual recertification elections for general municipal employees was found to be constitutional as well.


Union Dues Deduction and Fair Share Prohibitions

The Seventh Circuit also held that Act 10’s limitations on payroll deductions (union dues deduction and fair share) do not violate the First Amendment to the U.S. Constitution. The Court reasoned that use of the state’s payroll system to deduct union dues subsidizes, rather than burdens speech. The Court observed that the government is not permitted to place “obstacles in the path of speech,” but added that nothing requires the government to “assist others in the funding of particular ideas, including political ones.”

Critically, the Court found that this is no less true in circumstances where one group of employees (public safety employees) has statutory authority to enter into union dues deduction agreements, while another group of employees (general municipal employees) does not. The Court reasoned that Act 10 does not erect a barrier to speech and, to the extent it subsidizes the speech of public safety employees, such a subsidy is not unconstitutional because the U.S. Constitution does not require that the government subsidize all speech equally. The Court added that Act 10 does not discriminate based on viewpoint and, as a result, does not violate the constitutional principle requiring viewpoint neutrality.

On this basis, the Court concluded that Act 10’s limitations on payroll deductions does not violate the First Amendment.

The Seventh Circuit then began its discussion of Act 10’s prohibition against union dues deduction (and its corresponding repeal of the statutory authority for fair share agreements) by noting that the prohibition only needed to have a rational basis, since the First Amendment was not implicated by this change.

The Court then observed that the state “could have rationally eliminated all payroll deductions.” Although the unions maintained that it was “wholly implausible” that the legislature could truly fear that imposing a payroll prohibition on public safety employees would trigger an illegal strike, the Court responded that the state does not have to “produce evidence to sustain the rationality” of the law. Instead, according to the Court, all that is required is “some footing in the realities of the subject addressed by the legislation,” and added that the controversy and protests surrounding passage of Act 10 established that the state’s fear was rational under this standard of review.

What This Means For Municipal Employers

The Seventh Circuit Court of Appeals’ decision answers many questions but, because of companion state court litigation, it does not fully resolve the issues that the Court addressed for municipal employers. In this regard, Dane County Circuit Court Judge Juan Colas issued a decision in the fall of 2012, finding that many of the same portions of Act 10 that were considered by the Seventh Circuit were unconstitutional. Judge Colas’ decision is currently on appeal to the Wisconsin Court of Appeals. As a result, municipal employers will still have to account for decisions from the Court of Appeals and, potentially, our State Supreme Court to determine what course of action is appropriate.

By way of background, Judge Colas ruled that parts of Act 10 were unconstitutional under the Wisconsin Constitution, as well as the U.S. Constitution (which is what the Seventh Circuit considered). Judge Colas found that a number of Act 10’s provisions were unconstitutional, including provisions requiring referendum elections for wage increases that exceed the CPI, limiting fair share agreements to public safety employee bargaining units, prohibiting union dues deductions, prohibiting collective bargaining on anything but total base wages, and requiring recertification elections for general municipal employee bargaining units. If Judge Colas’ ruling concerning the limitations on collective bargaining rights for general municipal employees was to stand, “wages” became a mandatory subject of bargaining, while “hours and conditions of employment” became permissive subjects of bargaining, rather than prohibited.

However, Judge Colas reasoned that the Wisconsin Constitution provides no less rights than the U.S. Constitution and relied heavily on prior federal court decisions, including cases that were cited by the Seventh Circuit Court of Appeals. Thus, the Wisconsin Court of Appeals and/or the Wisconsin Supreme Court will have to determine whether the Seventh Circuit’s opinion is authoritative in circumstances where the state court interpreted Wisconsin constitutional provisions that are themselves based on the U.S. Constitution (such as the First Amendment) and relied on federal court decisions in doing so.

As a result, because of the Seventh Circuit’s decision, the motions to stay Judge Colas’ decision that are now pending before the Court of Appeals take on additional importance for municipal employers around Wisconsin. The state has asked that the Court of Appeals stay Judge Colas’ decision while the appeal is pending, and argued that Judge Colas’ decision has created statewide confusion on the state’s, as well as municipal employers’, rights and obligations under the law. However, the Court of Appeals noted that the state also maintained that Judge Colas’ decision does not have the force of precedent outside of Dane County, a factor that-according to the Court-tended to undermine the state’s claim that Judge Colas’ decision had statewide impact. The Court of Appeals also indicated that, while the unions defending Judge Colas’ decision maintained that it did represent current state law, the unions had not provided sufficient authority to support this claim.

As a result, the Court of Appeals asked both parties to provide additional briefs on the question of whether the portions of Act 10 that Judge Colas struck down as unconstitutional are, indeed, invalid statewide while an appeal is pending or whether that decision lacks the force of precedent. The briefs are due at the end of January 2013. If the Court of Appeals decides this issue directly, municipal employers should know whether they are required to follow Judge Colas’ decision as the current law of the state while the state’s appeal is processed or, alternatively, whether the Seventh Circuit’s decision defines current law until the Court of Appeals and/or the Wisconsin Supreme Court can make a final decision on what Wisconsin’s Constitution requires.

The attorneys at Davis & Kuelthau, s.c., will continue to monitor this litigation and provide our clients with information as it becomes available.

If you have questions or would like additional information on this matter, please contact your Davis & Kuelthau attorney or the Labor & Employment chair, James M. Kalny, at 920.431.2223 /