PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

State of the Week: West Virginia…Highest State Court Upholds Right-to-Work

By at 27 September, 2017, 2:04 pm

by Raymond J. Keating-

Small Business Policy Index 2017: West Virginia ranked 30th among the 50 states.

SBE Council’s “Small Business Policy Index 2017” ranks the 50 states according to 55 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

Small Business Tax Index 2017: West Virginia ranked 27th among the 50 states.

SBE Council’s “Small Business Tax Index 2017” ranks the states according to 26 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

As noted above, West Virginia ranks a bit below a middling state on SBE Council’s two major indices of state policy competitiveness. There’s work to be done by lawmakers. At the same time, though, progress was made last year when lawmakers voted for, including overriding a gubernatorial veto, West Virginia to become the nation’s 28th right-to-work state.

Quite simply, the West Virginia law maintains that no worker can be forced to join a union or to support a union financially, such as through union dues. The law applies to collective bargaining agreements entered into or changed after July 1, 2016.

Unsurprisingly, labor unions immediately challenged the law. What was surprising, though, was that a lower court judge issued an injunction in August 2016 prohibiting the law’s implementation.

Thankfully, a decision by the West Virginia Supreme Court earlier this month made clear that the law is, in fact, constitutional. The Associated Press summed up matters this way:

The state AFL-CIO and other unions argued the law constitutes illegally taking union assets since they still have to represent all employees in a union shop, including those that the law would allow to stop paying union dues. They also asserted that it violated their rights to freedom of association and their liberty interests…

The law doesn’t affect existing contracts, only future agreements the union and employers have not yet negotiated or accepted, Ketchum wrote. “The unions therefore have no protected property right that the Legislature has taken,” he wrote.

In a concurring opinion, Justice Allen Loughry wrote that issuing the injunction “was not merely imprudent, but profoundly legally incorrect.” The Taft-Hartley Act expressly allows states to prohibit compulsory union membership or dues remittance, and the U.S. Supreme Court “has essentially spoken on all critical aspects of this issue,” he wrote.

As noted in SBE Council’s “Small Business Policy Index,” the freedoms under right-to-work protections “offer a more dynamic, flexible workforce, and a more amenable environment for increased productivity and improved efficiency.” Assorted studies have noted the benefits of being a right-to-work state. A NERA report summarized the broad findings in the economic literature regarding right-to-work (RTW) laws:

First, there is a large body of economic literature on the relationship between RTW laws and economic performance, which provides broad support for the conclusion that RTW laws improve economic performance along several dimensions, both directly (e.g., by affecting plant location decisions) and indirectly (e.g., by lowering union density).

Second, economists have examined the relationship between RTW laws and wages, finding no evidence of significant negative effects on wages, and some evidence that they ultimately translate into higher wages as a result of improved overall economic performance.

Third, the impact of RTW laws on union density has been studied extensively. The results strongly suggest that, holding other factors constant, the adoption of RTW laws leads to lower union density.

The West Virginia Supreme Court made the right decision from a law and constitutional perspective, while state lawmakers voting in favor of right-to-work made the right choice for small and large businesses, for investment in the state, for worker freedom, productivity and earnings, and for the West Virginia’s economy.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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