In this fifth article in our series on state and local employment laws, we consider the ways in which right-to-work legislation impacts site selection decisions. Frequently a proxy for a location’s employer-employee relations, and even more broadly, for its business friendliness, right-to-work remains an important consideration for many site selection projects.
What Is Right-to-Work and Why Does It Matter?
In all states, employees of unionized facilities have the option of joining the union, or not. If they elect not to join the union, the union still has certain obligations to represent the interests of that worker. “Agency fees” (also called “fair share fees”) are the fees associated with the costs of fulfilling those obligations. In a non-right-to-work state, employees can be forced to pay those fees in order to keep their job. In a right-to-work state, they cannot.
Companies hoping to avoid areas with heavy union activity would be better served to look at election activity than whether the location is right-to-work now. Nevertheless, business leaders frequently look to right-to-work as an indicator of an area’s business friendliness, with the assumption that right-to-work jurisdictions are more attuned to business interests. Many, particularly in the manufacturing sector, will even eliminate locations that are not right-to-work.
Which States Are Right-to-Work?
Right-to-work legislation has been adopted in 27 states.
The most recent additions to the list include Michigan (2012), Wisconsin (2015), West Virginia (2016), and Kentucky (2017).
Noteworthy is that in less than eight years, six states (Indiana, Michigan, Wisconsin, West Virginia, Kentucky and Missouri) have passed such legislation, compared to only three states in the previous 37 years, according to the National Right to Work Committee.
Also noteworthy is that most of these states are in the “Rust Belt,” a region profoundly impacted by the decline of American manufacturing in the second half of the 20th Century. Becoming right-to-work is one of the ways in which these states are attempting to reignite their economies. This has left Illinois and Missouri fairly isolated in the Midwest region. (Missouri’s legislation required adoption through public referendum; the referendum failed.) Ohio’s western and southern neighbors are also now right-to-work, though it is bordered on the east by Pennsylvania, which remains non-right-to-work.
Throughout this series on employment laws, we have been highlighting the noticeable increase in state and local participation in employment issues. Right-to-work has been a state-level matter since 1944 when Florida and Arkansas included it in their State Constitutions, but we have more recently seen local jurisdictions become active on the subject.
Before Kentucky passed statewide right-to-work legislation, a number of the state's counties were individually electing to become right-to-work. Lincolnshire, a village in the Chicago, Illinois metro area, took the step of declaring its municipality as right-to-work. Ten counties in New Mexico proclaimed themselves right-to-work. Such local ordinances have been challenged throughout the federal court system, and Lincolnshire, Chicago was expecting its case to be heard by the Supreme Court.
Unions aren’t the only organizations opposed to these local moves. State government officials have pushed back, as well. Illinois and New Mexico, for example, passed legislation during the spring of 2019 banning local ordinances related to right to work. (This resulted in the Supreme Court’s abandonment of its pending review of Lincolnshire’s ordinance.)
Evaluation of Right-To-Work During Site Selection
What appeared to be becoming increasingly a highly localized issue, now appears poised to return to being exclusively a state-level issue. Further, we’re not currently expecting new states to adopt right-to-work legislation. In fact, we’re seeing more headlines around potential repeals of right-to-work laws, Virginia among those actively debating the possibility.
As mentioned above, right-to-work status is not our recommended measure of union activity for companies wanting to incorporate this into their site selection process. Nevertheless, the fact remains that business leaders are attuned to this consideration and will frequently use it to screen out states during a location search. Thus, we will continue to monitor state (and, as needed, local) activity.
While this post has focused on the latest developments on right-to-work legislation and ordinances, you can find a longer explanation of the role the issue plays in site selection at this link.
Of course, this is just one component of the complex and variable site selection process. For more information, head to www.BLSstrategies.com.
Tracey Hyatt Bosman is a Managing Director at Biggins Lacy Shapiro & Co., one of the largest, most highly regarded site selection and incentives advisory firms in North America. BLS & Co. helps manage the complexities associated with finding optimal locations and securing incentives to support new ventures. Connect with Tracey on LinkedIn or email her directly at TBosman@BLSStrategies.com.
This is the fifth installment in BLS & Co.’s employment law series; read Part I, Part II, Part III and Part IV here. Stay tuned for our last article in the series, Part VI which will address a myriad of other local employment-related laws, including biometric data privacy, scheduling changes, paid time off, and more. www.BLSstrategies.com.