Last week, the U.S. District Court for the Northern District of Illinois held that the Village of Lincolnshire’s municipal ordinance regulating union activities was invalid under federal law. The ruling is a defeat for Governor Bruce Rauner in his efforts to work with local governments to pass municipal and county-wide right-to-work ordinances.

Background

Since his election, Governor Rauner has encouraged local governments to create local right-to work areas, or “empowerment zones.” In March 2015, in reaction to these efforts, Illinois Attorney General Lisa Madigan issued an opinion that Illinois local governments cannot pass such ordinances because they are preempted by the National Labor Relations Act (NLRA) and can be enacted only on a statewide basis. The Attorney General, relying on state and federal court precedent, reasoned that if political subdivisions of a state were allowed to enact right-to-work ordinances on a local basis, the result would be a “crazy-quilt patchwork of regulations” contrary to the purpose of the NLRA.

Despite this ruling, in December 2015, the Village of Lincolnshire passed an ordinance that created a local right-to-work zone. Section 4 of the ordinance prohibited union security agreements within any collective bargaining agreement between an employer and labor union. Union security agreements, or “union shop” agreements, require employees to make payments to a labor organization as a condition of employment. Section 4(E) of the ordinance prohibited unions from imposing hiring hall provisions, which require all new hires by an employer to be referred through a labor union’s hiring hall. Finally, Section 5 of the ordinance required “dues check-off” provisions to be revocable by an employee at any time. Dues check-off provisions permit an employee to authorize his or her employer to automatically deduct union dues from his or her paycheck. The ordinance only applied to private sector companies within the Village and not to public-sector employees, such as police officers or teachers.

Court Finds Ordinance Preempted by Federal Law

Several labor unions that represent employees who work for private sector companies operating within the Village of Lincolnshire challenged these provisions of the ordinance. The unions argued that the NLRA and the Labor Management Relations Act (LMRA), both federal laws, preempted the Village from regulating the union activity addressed by the ordinance. The Village maintained that Section 14(b) of the NLRA gave the Village and other local governments the authority to regulate this activity.

Congress largely displaced state regulation of private sector labor relations when it passed the NLRA. It is well established that, under the Supremacy Clause of the U.S. Constitution, states may not regulate activity that the NLRA expressly or arguably protects or prohibits – in other words, Congress has “occupied the field” and preempted state regulation in this area. Further, Section 8(a)(3) of the NLRA expressly permits union security agreements within collective bargaining agreements. However, Section 14(b) carves out one exception to Section 8(a)(3)’s exclusive federal regulation of union security agreements by authorizing “any State or Territory” to pass laws prohibiting those agreements. The same section specifically provides that the purpose of the exception is to permit states to prohibit “agreements requiring membership in a labor organization as a condition of employment.”

  • Union Security Agreements

The Court considered whether Section 14(b)’s exception that permits state right-to-work laws also permits local right-to-work ordinances prohibiting union security agreements. Relying on the language of Section 14(b), the Court reasoned that because Congress did not mention local law, and referred only to “State or territorial laws,” the exception should be understood as a “narrow authorization that does not extend to local regulation of union security agreements.” Similar to the rationale applied by the Attorney General, the Court also found that “it is highly unlikely that Congress intended to subject this national policy [on labor relations] to the patchwork scheme that would result from city-by-city or county-by-county regulation of [union security] agreements.” Therefore, the Court held that Section 14(b) does not permit local governments to regulate union security agreements, and struck down Section 2 of the ordinance.

The Village pointed to a recent opinion from the U.S. Sixth Circuit Court of Appeals, which held that Section 14(b) did extend to local law, and that a similar local right-to-work ordinance in Kentucky was not preempted by the NLRA. The Sixth Circuit reasoned that in passing the NLRA and Section 14(b), Congress had not demonstrated a “clear and manifest purpose to preempt state authority to delegate government power to political subdivisions.” The Court “respectfully disagreed,” and ruled that the operative question is “whether Congress intended to preempt legislation in general in the field of union security agreements.” Because it had, the Court found the exception under Section 14(b) must “be read narrowly to extend to the states and no further.”

  • Union Hiring Halls

Relying on the same rationale, the Court found Section 4(E) of the ordinance prohibiting union hiring halls also was preempted by the NLRA. The Court ruled that even if Section 14(b) did permit local regulation of labor relations, union hiring halls are not a form of “compulsory unionism,” and are not covered by Section 14(b). Hiring hall provisions require employees to pay referral fees before they are hired, but do not require membership in a union. Therefore, under the narrow exception of Section 14(b), the Court reasoned that not even a state could regulate union hiring hall provisions.

  • Regulation of Dues Check-Off Provisions

Finally, the Court found Section 5 of the ordinance, which requires any dues check-off to be revocable at any time, also was invalid. Similar to the hiring hall provision, the Court held that this aspect of the ordinance is also preempted by the NLRA and does not fall within Section 14(b)’s narrow exception. Moreover, the Court held that even if Section 14(b) permitted local regulation of labor relations, the LMRA separately preempts local regulation of dues check-off provisions. The LMRA authorizes dues check-off arrangements “which shall not be irrevocable for a period of more than one year.” The Court held that because an agreement under the ordinance could satisfy all federal requirements (i.e., be irrevocable for a period of one year and no longer) but not meet the local requirements, the local requirement conflicts with federal law and violates preemption principles.

The Village has not yet indicated whether it will appeal the District Court’s ruling. As noted above, the Sixth Circuit has held that local governments may regulate union security agreements under Section 14(b), and the Village could encourage the Seventh Circuit Court of Appeals to agree. We will keep you apprised of further developments in this area.