Budget Woes Deal Blow to Public-Employee Unions

Faced with a $137 million budget deficit, Wisconsin needs to take drastic measures to cut costs. Republican Gov. Scott Walker set his sights on the pay and benefits of public employees. Government workers agreed to pay more for their benefits, contribute more to pension funds and accept pay cuts. But Walker called for something more drastic--amendments to the Municipal Employment Relations Act that would essentially bar most public employees in the state from bargaining collectively for benefits, vacations, overtime pay and work rules, all of which have been common features of union contracts since the state authorized public employees to bargain collectively in the 1950s.

As teachers, bus drivers and other government workers convened in the Capitol building in Madison to protest,
14 Democratic state senators fled the state to prevent quorum from being established to bring the legislation to a vote. While several senators reportedly holed up at a hotel in Illinois, Republicans in the state's House of Representatives passed the bill by a 51 to 17 margin, conducting the vote while House Democrats shouted that they weren't done debating. The bill passed and was signed into law on March 11. But on March 18, Judge Maryann Suni put a temporary restraining order on the law after a Democratic district attorney filed a suit alleging the Republican legislators violated open meetings laws.

Aside from the political drama, much is at stake for public employers and workers nationwide as states look to remedy fiscal crises. Wisconsin could be the bellwether for other states questioning the viability of a unionized government workforce.

"Budget battles are affecting states across the country," says Kevin Kraham, a shareholder at Littler Mendelson. "How those holes will be filled remains to be seen, but the shortfalls are everywhere."

Breaking History

Wisconsin was the first state to authorize public employees to be represented by unions in 1959. Many others followed its lead. Currently, about 75 percent of states allow municipal and state employees to engage in collective bargaining.

Walker's budget repair bill erects several significant barriers to union representation. First, the legislation calls for annual decertification elections, the cost of which would be shouldered at least in part by the unions. If the union does not receive at least 51 percent support among all members of the bargaining unit (not just those who choose to vote), it will be out for at least a year.

"Governor Walker himself was elected by only 26 percent of those eligible to vote," points out Timothy Hawks, a partner at Hawks Quindel, which represents unions in Wisconsin. "[The bill is] intentionally designed to destroy labor organizations."

Currently, typical union contracts last two or three years. Under the budget repair bill, no collective bargaining agreement could last longer than one year. The bill would also bar municipal employers, except for police and fire departments, from deducting union dues from employee paychecks.

Moreover, the bill would greatly reduce the power of those unions that manage to hold on to majority support. Whereas in the past, health insurance, work hours, vacation time and procedures for promotion, discipline and termination were all fair game for collective bargaining agreements, under Walker's bill, unions would be permitted to bargain over total base wages only.

"There are three main purposes for a collective bargaining agreement: employment security, economic security and union security," Hawks says. "Under this bill, employment security cannot be bargained for, union security is deleted, and premium pay and benefits are out. It reduces collective bargaining to a sham."

Indiana Gov. Mitch Daniels has reported that after the state ended collective bargaining in 2005, union membership among public employees plummeted by 90 percent. A similar result is likely if Walker's legislation holds up.

Going Down Swinging

Union lawyers are challenging the Wisconsin statute, which they argue is unconstitutional. But according to experts, it's unlikely that the fundamental rights argument will carry the day.

"The legislature created and granted the right to collectively bargain," says Daniel Borowski, a shareholder at Phillips Borowski. "It's not anywhere in the state or federal constitution."

There will also be significant litigation over rights and benefits that employees previously enjoyed under union contracts. For instance, under most collective bargaining agreements, employees accrue vacation and sick days proportionally to their tenure. If the seniority system is abolished, employers may change the way paid time off is structured.

"Employees will argue that they have a vested property right in accrued time off," Borowski says. "We will see a lot of litigation over the application of the law to previously vested benefits."

And while most public employers would benefit from the increased flexibility and discretion to make decisions about hiring, firing and compensation, they may also face a downside to the elimination of union contracts.

"I would expect an increase in Title VII claims and other employment lawsuits," Borowski says. "Public employers will be put in the position of employers in the private sector."

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