Over the last several years, unions have increasingly sought to enact laws and ordinances that place heavy or complete restrictions on the ability of healthcare employers who receive public funding to speak out against union activity. As 2005 drew to a close, the Seventh Circuit Court of Appeals (which covers Indiana, Wisconsin and Illinois) ruled against the City of Milwaukee’s attempt to pass such an ordinance. This decision was unquestionably pro-employer and good news all around.

However, as 2006 came to an end, two other Circuit Courts of Appeal decided similar cases with different results from the Seventh Circuit and each other. This means that this particular brand of union-friendly legislation is legal in some places and illegal in others. So what are these cases about, and what do they mean for you?

In addition to the County of Milwaukee, the States of California and New York each have passed legislation aimed at tipping the balance of power between unions and healthcare employers decidedly toward the union side. The specifics of the laws vary, but all three contain several common provisions important here. Each law essentially provided that healthcare employers who received public subsidies had to give up their right to challenge many aspects of union organizing campaigns. In Milwaukee, recipients of County money had to sign a neutrality agreement with any union that wanted to organize their employees in which they promised not to actively oppose organizing efforts. The New York and California laws prohibited recipients of state funds from using those funds to comment on, promote, or oppose organizing efforts. The laws required employers to keep public money separate from other funds and imposed burdensome record-keeping requirements that the state attorneys general could enforce in court. Going into 2006, the lower courts had held all three laws unenforceable, which was good news.

However, there have been a few developments since then. While the Seventh Circuit decision remains firm, the Ninth Circuit originally found the California law unenforceable, then flip-flopped and found it lawful. The Court based its ultimate ruling in part on the notion that California’s law does not truly alter the balance of power between unions and employers because, if an employer does not want to be subject to the law, it can simply forego state subsidies and use its own money to fight union organizing. Then, in late 2006, the Second Circuit ruled that the trial court ruling on the New York law was premature and the court needed to gather more facts before it could make a call one way or the other. So this has put the New York law in limbo. The result: the employer “gag laws” described above are valid in California, invalid in Milwaukee County, and their status is unclear in New York.

What does this mean to you? Many healthcare employers have operations in different jurisdictions, and having different rules in different jurisdictions makes it considerably more difficult to run those operations smoothly. In addition, because there are conflicting decisions in different areas of the country, the Supreme Court would likely be inclined to decide this issue on appeal to resolve the conflict. Without diving into the details of each opinion, the Seventh Circuit’s opinion is sound from a legal and policy standpoint, and the Second Circuit’s opinion contains several important observations that buttress the Seventh’s conclusion. Particularly, the Seventh Circuit points out the absurdity behind the idea that many employers might welcome unionization. In addition, the employers in the Second Circuit case offered evidence that 90-95% of their income comes from government or Medicaid funding, undercutting the Ninth Circuit’s implication that healthcare providers can easily avoid the provisions of these gag laws by foregoing public money. Nevertheless, there is at least some chance that, should a "gag law" be appealed to the Supreme Court, the Court may adopt the Ninth Circuit’s reasoning and validate such union-friendly legislation. Given that Democrats were victorious in many recent elections, such an opinion would virtually guarantee the proliferation of similar pro-union legislation across the country.

So what is the bottom line? Until the Supreme Court issues an opinion on this issue, healthcare employers should make sure they know what their trade associations are doing and find out what they can do to oppose the enactment of pro-union labor legislation in their own localities. The results of these cases will undoubtedly have a major impact on the U.S. healthcare industry’s labor-management relations, regardless of the locations in which a given company does business.