7th Circuit upholds Wisconsin's Act 10

By Nathan Bass | Jan 22, 2013

CHICAGO (Legal Newsline) - The Seventh Circuit Court of Appeals, on Friday, upheld Wisconsin Governor Scott Walker's Act 10 "in its entirety." The budget repair bill significantly altered the state's public employee labor laws.

"Today's court ruling is a victory for Wisconsin taxpayers," Walker said in a statement. "The provisions contained in Act 10, which have been upheld in federal court, were vital in balancing Wisconsin's $3.6 billion budget deficit without increasing taxes, without massive public employee layoffs, and without cuts to programs like Medicaid."

Many labor leaders, including Wisconsin Education Association Council President Mary Bell, expressed disappointment in the ruling.

"What is so abundantly clear is that Act 10 was never about addressing the fiscal needs of the state but instead a ploy to eliminate workers' rights to have a voice through their union - political payback for citizens who didn't endorse the governor," Bell said in a statement.

"This marks a setback, but the fact of the matter is that our members will not give up on their commitment to restoring their rights to negotiate for fair wages and safe working conditions," Bell said.

A three-judge panel of the court, consisting of Judges William J. Bauer, Joel M. Flaum, and David F. Hamilton heard the appeal. Flaum wrote the majority opinion and Hamilton wrote a separate opinion, concurring in part and dissenting in part.

Flaum was appointed by President Ronald Reagan, and Bauer was appointed by President Gerald Ford. Hamilton was a President Bill Clinton appointee.

Act 10 became law after a contentious state legislature battle that inspired large protests at the Wisconsin State Capital for several weeks. At one point, several Democratic congressmen fled the state in an attempt to block a vote on the issue.

After the passage of Act 10, the Unions filed suit challenging three different parts of the act: (1) limitations on the permissible collective bargaining subjects of general employees; (2) stricter recertification requirements for general employee unions; and (3) a prohibition on the payroll deduction of union dues for general employees.

They alleged that all three provisions violated the Equal Protection Act because the Act treats public safety employees and general employees differently. They also claimed that the prohibition against payroll deductions violated the First Amendment on several grounds, including that the deduction prohibition targeted employees who had not politically supported Walker when he ran for Governor in 2010.

The district court found rational basis in the state's belief that applying Act 10's collective bargaining restriction to public safety employees might prompt them to strike whereas a similar strike by general employees might be less damaging.

However, the district court found no rational basis for treating the two groups differently with respect to the recertification and payroll deduction provisions.

The district court also found that the payroll deduction provision violated the First Amendment "because the court determined that the differing political viewpoints of, and endorsements by, employees in the two classifications were the only possible justifications for Act 10's prohibition on payroll deductions for general employees," the appellate opinion states.

Consequently, the district court invalidated the recertification and payroll deduction portions of the Act and enjoined the state from enforcing the provisions.

The State appealed the recertification and payroll deduction judgments and the Unions cross-appealed the collective bargaining ruling.

Regarding the First Amendment challenge, Flaum wrote, "Act 10's payroll deduction prohibitions do not violate the First Amendment. The Unions offer several different First Amendment theories to rebut the compelling deference of rational basis review required under applicable law.

"Ultimately, none apply because the Supreme Court has settled the question: use of the state's payroll systems to collect union dues is a state subsidy of speech that requires only viewpoint neutrality.

"The Bill of Rights enshrines negative liberties. It directs what government may not do to its citizens, rather than what it must do for them. While the First Amendment prohibits placing obstacles in the path of speech, nothing requires government to assist others in funding the expression of particular ideas, including political ones," Flaum wrote.

"On its face, Act 10 is neutral - it does not tie public employees' use of the state's payroll system to speech on any particular viewpoint. Nevertheless, the Unions argue that Act 10 facially discriminates on the basis of viewpoint because general employee unions and public safety unions will necessarily espouse different viewpoints.

"The mere fact that, in practice, the two categories of unions may express different viewpoints does not render Act 10 viewpoint discriminatory ... Indeed, the Unions' argument proves too much: if different speakers necessarily espouse different viewpoints, then any selective legislative funding decision would violate the First Amendment as viewpoint discriminatory."

The Unions made several more arguments that Act 10 was "invidiously discriminating" for political reasons. The Court dismissed them.

"Left with a facially viewpoint neutral state subsidy of speech, both the Unions and the district court ultimately rely on the floor statements of Senator Fitzgerald, who, rising in support of Act 10, explained '[i]f we win this battle, and the money is not there under the auspices of the unions, certainly what you're going to find is President Obama is going to have a . . . much more difficult time getting elected and winning the state of Wisconsin.'

"This singular comment, however overtly partisan, reveals little of the intent of the legislature as a whole when it enacted Act 10 or the governor when he introduced it ... In any event, we have insufficient basis to ascribe Senator Fitzgerald's personal position to the entire legislature."

The Court concluded that since Act 10 is not viewpoint discriminatory, the First Amendment is not implicated and the legislation need only survive the less rigorous rational basis review.

"All that matters," Flaum wrote of the rational basis test, "is whether the statute, as written, furthers a legitimate government objective. Once we find a rational relationship between the disparity of treatment and some legitimate government purpose the act passes constitutional scrutiny."

The Court then looked at the three provisions under the rational basis test.

"Wisconsin is correct that the collective bargaining limitations constitutionally promote flexibility in state and local government budgets by providing public employers more leverage in negotiations.

"This alone, however, is not enough to save the provision because the differential treatment of public safety and general employee unions must also be rational."

The district court had upheld the different classifications of the public safety and general workers because Wisconsin could "rationally believe" that Act 10's passage would result in labor unrest but the state could not withstand the unrest with respect to public safety employees.

The appeals court agreed with the district court's reasoning on this issue, concluding, "Distinguishing between public safety unions and general employee unions may have been a poor choice, but it is not unconstitutional."

"Many of the justifications for the collective bargaining limitation also apply to the recertification requirement," wrote Flaum as he started the analysis of the second provision.

"As we mentioned, Act 10 exhibits a rational belief that public sector unions are too costly for the state. The recertification process furthers this interest by imposing a recertification burden that impacts unions' influence over employees who are less passionate about union representation."

"Because the state clearly has an interest in the recertification requirement, the rational basis for applying it only to general employees flows from the justification for differentially applying the collective bargaining limits."

"The provision may tend to weaken unions, and Wisconsin rationally feared backlash- either immediate or eventual (in the event a public safety union later failed to garner recertification support) - if it applied the provision to the public safety unions.

"The Unions raise the same sorts of arguments against this provision that they did against the collective bargaining provision - that it was irrational to include the motor vehicle inspectors but exclude safety-related unions like the Capitol Police. For the reasons in the previous section, these arguments are unavailing."

The third provision was then analyzed by the Court.

Flaum began by noting that under prior case law, the State could have rationally eliminated all payroll deductions and that the State is not constitutionally obligated to provide payroll deductions at all.

"The Unions again rely on the alleged "gerrymandering" of the public safety employee definition to challenge the State's justifications for Act 10," Flaum wrote. "But these arguments fail for the same reasons stated above - such line-drawing is not for the courts.

"The state's fear is rational, particularly considering the controversy surrounding passage of Act 10 and the Unions' own admission before the district court that the effect of the payroll prohibition would be "catastrophic." Consequently, the payroll dues prohibition survives rational basis review."

Hamilton, concurring in part and dissenting in part, began his opinion, "Elections have consequences, as this case reminds us.

"Although the rationales offered for the State's different treatment of collective bargaining for "public safety" employees and "general" employees seem flimsy to me, the highly deferential rational-basis review requires that we uphold the principal provisions of Wisconsin's Act 10 against equal protection challenges.

"I therefore join the portion of the judgment upholding the new statutory limits on the subject matters of collective bargaining for the general employees.

"For essentially the same reasons, I also concur in the portion of the judgment upholding the unprecedented recertification provisions for unions representing "general" employees, although the reasons for those provisions were not presented to the district court.

"I respectfully dissent, however, from the portion of the court's decision upholding Wisconsin's selective prohibition on payroll deductions for dues for some public employee unions but not others. The district court correctly held that the new law's selective prohibition on payroll deductions violates the First Amendment rights of the plaintiff unions and their members."

Despite the federal ruling Friday, the future of the law remains uncertain. A Wisconsin state judge struck down parts of the law in September and the case is now before the Wisconsin Court of Appeals.

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