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July 25, 2014

Right-to-Work Becomes Law in Michigan: What it Means for Employers

On December 11, 2012, the Michigan House passed and Governor Snyder signed HB 4003 and SB 116, commonly referred to as "right-to-work" legislation.  This legislation effectively prohibits a "closed" union shop (membership/dues required to work) or an "agency" shop (fees required from non-members) for both public and private sector workers.  Michigan now becomes the 24th state to ban mandatory union dues or fees. The legislation will become effective sometime around the middle to end of March, 2013 (90 days after the adjournment of the current legislative session).

Once the legislation becomes effective, both public and private employees will be free to opt-out of paying union dues, agency fees or charitable contributions (in lieu of dues) mandated by a bargaining agreement.  However, unions will remain obligated to service all employees within the bargaining units they represent regardless of whether the employee is a dues paying, union member. As such, non-paying unit employees will receive all the benefits of the bargaining agreement, including wages and benefits as well as union representation in grievances and arbitrations.

To avoid issues with unconstitutional impairment of contract, the freedom of choice provisions will not apply until after the expiration date of any bargaining agreement in place as of the effective date of the legislation.  Extensions or renewals of an existing bargaining agreement will not extend the date for implementation of the choice provisions.  Employers with bargaining agreements which will renew before the March 2013 effective date will have to consider whether to negotiate for an "open" shop provision in their next agreement. Consulting with one of our experienced Labor and Employment Group attorneys or other experienced labor professional is advised if considering this option.

Any agreement that contravenes the freedom of choice is illegal and unenforceable and subject to a $500 fine payable by the person, employer or labor organization that commits the violation.  In addition, any employee who suffers an injury can sue in court for injunctive relief as well as actual damages, and if successful can also recover attorney fees.

The legislature has appropriated $1 million to the Department of Licensing and Regulatory Affairs for publicizing and enforcing the right-to-work provisions.  This appropriation also has the effect of preventing a state-wide referendum on repealing these provisions.  However, legal challenges are anticipated and will be expedited.

Most commentators expect that the legislation will result in revenue loss for unions, as most contracts currently require either dues or agency fees from all employees, normally around two hours of pay per month.  Some, perhaps many employees may decide to keep the money if it does not impact their wages or benefits.  The right to work provisions may also impact union organizing campaigns in the future.  Whether the option for employees to avoid dues or fees will make organizing easier or more difficult remains to be seen, as will the impact on unions' willingness to organize or continue to represent bargaining units where a majority of employees choose not to contribute towards representation costs.

The full impact of this legislation in terms of improving the business climate and impact on the effectiveness of unions will not likely be known for years.

© 2014 Varnum LLP

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