As a result of intense media coverage of the protests in Madison, Wisconsin, clients, colleagues and friends have asked me to explain the recent trend of state legislatures to address budget concerns by enacting laws to limit public sector collective bargaining rights. Simple, innocent questions prompt complex, counterintuitive answers that implicate distinctions between the National Labor Relations Act, the federal law that governs labor relations in the private sector, and state laws, like the Illinois Public Labor Relations Act and the Illinois Educational Labor Relations Act, that control labor relations in the state and local governmental sector. Because the NLRA specifically excludes a “state” from the definition of “employer,” public sector labor relations remains a matter left to the discretion of the states.

According to the most recent report on the subject from the U.S. General Accounting Office (n/k/a U.S. General Accountability Office), a dozen states have not enacted laws creating public sector bargaining rights. Another dozen provide bargaining rights to some employees, like teachers or firefighters, but not to all state and local workers. The 26 remaining states and the District of Columbia extend bargaining rights to virtually all public employees. Some states, like Illinois, actively encourage unionization of government workers by providing employees and unions with rights not afforded to their private sector counterparts.

Recall for example, the proposed Employee Free Choice Act, which, but for the election of Scott Brown to the Senate seat formerly held by Ted Kennedy, nearly became an amendment to the NLRA. Among other consequences, that statute essentially would have eliminated the secret ballot election process for employees to decide whether or not they wanted to be represented by a union. The amendment would have required an employer to bargain with a union that merely obtained signed authorization cards from a majority of employees in an “appropriate unit” of the workforce. Employees often sign cards without knowing all the facts or due to deception, misunderstanding, intimidation or peer pressure. Card campaigns frequently occur without management’s knowledge. As a result, an employer’s ability to run an effective, lawful campaign to oppose unionization by communicating directly with employees about the potential consequences of unionization would have been severely impaired. In contrast, public sector employers in Illinois have been subject to the vulnerability of “card check” organizing for several years through the action of our state legislature.

An employer is required to bargain in good faith with a union concerning mandatory subjects like wages, hours, benefits and working conditions. The duty to bargain, however, does not require the employer to agree to union proposals or make concessions. Some issues like pay, benefits and work rules are important to a union because they are important to employees. Other issues like “union security” and “dues check-off” are important to a union in its capacity as a money-making enterprise.

Unless a state legislature has enacted a “right to work” law, as 22 states have, a union and employer may agree to a “union security” clause that requires employees to join the union or pay a fee as a condition of employment. If a union is successful in obtaining such a clause, all employees must pay or be fired—even those employees who voted against the union. Dues check-off involves the employer’s agreement to withhold dues and union fees from employees’ pay checks and send the money directly to the union. Imagine the impact on a union if it were required to send monthly bills to employees in order to collect dues and fees. Obviously, union security and dues check-off are the lifeblood of a union. In the give and take of collective bargaining negotiations, these provisions can be traded in exchange for items of significance to the employer.

Whether a union or an employer can obtain their respective bargaining demands in the private sector is left to the free play of economic forces. Distilled to its overly simplistic essence, if a union can shut down an employer’s operation by striking, it increases the likelihood of obtaining its bargaining objectives. If an employer can withstand a strike and continue operations by using management employees, line-crossers, unrepresented employees or temporary or permanent replacement workers, the employer is more likely to obtain its desired outcome. As a result, through careful planning, appropriate risk taking, careful long-term financial analysis and unified management decision making, a private sector employer can negotiate a labor contract that provides fair wages and benefits, allows flexibility and reserves to the company the right to effectively manage its business with the goal of making a profit.

The “business” justification for state efforts to obtain through legislation what many government employers have surrendered through negotiation reflects simple political reality. Public labor unions make huge financial contributions to elected officials. These elected officials and their appointees make the “business decisions” that drive the give and take of collective bargaining. Many argue, perhaps cynically, that short-term self-interest unduly influences these political decision makers and fosters expensive, unfunded, long-term commitments and inflexible, costly work rules that have placed many units of government in positions of near insolvency.

That brings us to state law labor relations developments in Florida, Idaho, Iowa, Michigan, Ohio and Wisconsin. Some of these states, like Idaho, seek to overhaul failing school systems by eliminating tenure, seniority in layoffs and by lifting restrictions that prevent merit pay for highly performing teachers. For a better understanding of the forces motivating these legislative efforts, I recommend viewing David Guggenheim’s highly acclaimed documentary, Waiting for Superman.

Other states, like Wisconsin, seek more far-reaching changes. In an extraordinary turn of events, on March 9, 2011, the Republican-controlled Wisconsin Senate employed a procedural maneuver and passed legislation that eliminates the right of most public employees to engage in meaningful collective bargaining negotiations. The state assembly passed the bill the following day and Governor Walker signed it into law.

The law limits collective bargaining over any issue except wages and limits wage increases to the amount of inflation, unless a local referendum is passed authorizing higher raises. Moreover, the law prohibits dues check-off. Public employee unions now will be required to bill and collect dues directly from employees. Furthermore, the legislation prohibits mandatory dues payments. The law also requires annual elections to determine whether a majority of all employees in the represented unit desire continued union representation. Additionally, the enactment allows public sector employers to fire employees who strike or engage in other service interruptions such as sit-ins, slow-downs or sick-ins. Finally, the law requires employees to share the cost of funding their pensions and increases their contributions for healthcare coverage.

The political fallout from this sea change in Wisconsin law remains unknown. Democrat lawmakers and union officials vow to pursue legal challenges and will seek to unseat vulnerable Republican legislators through the recall process. What remains certain, however, is that the stunning victory in last fall’s mid-term election that gave control of many states to Republicans will undoubtedly result in other states pursuing similar legislative agendas in the name of financial responsibility and educational reform. iBi