Less than a month ago, the West Virginia Legislature overrode the veto of Governor Tomblin to enact the “Workplace Freedom Act” – commonly called the Right-to-Work bill – and eliminated the requirement that state contractors must pay the “prevailing wage” on state projects. While the rhetoric over both bills was highly charged with proponents and opponents vocally disagreeing over the effects, we will explain what happened and what it means to West Virginia employers.

What is Right-to-Work?

In 1935, Congress passed the National Labor Relations Act (“NLRA”), which largely established the rights of private-sector employees to collectively bargain and be represented by a union. Under the NLRA, unions originally were allowed to negotiate a variety of “union security” agreements relating to mandatory union membership:

1. a “closed shop” agreement that required the employer to hire only union members who were required to remain members of the union in order to remain employed;
2. a “union shop” agreement that allowed the employer to hire anyone, but required employees to join the union in a set number of days; and
3. an “agency shop” that did not mandate union membership, but required every employee to pay an “agency fee” to the union.

In 1947, Congress passed the Taft-Hartley Act, which, in part, made “closed shops” illegal and granted individual states the ability to prohibit a union and a company from entering into “union shop” and “agency shop” agreements. A state that exercises that right is said to have passed a right-to-work law.

The Workplace Freedom Act makes it illegal to require an employee, as a condition of employment, to:

1. Become or remain a member of a union;
2. Pay any dues, fees, assessments or other similar charges of any kind or amount to a union; or
3. Pay any charity or third party in lieu of those payments, any amount that is equivalent to or a pro rata portion of dues, fees, assessments or other charges required of members of a union.

In addition, effective July 1, 2016, the Act makes it illegal for an employer and union to agree to any “union security” clause as part of a collective bargaining agreement – though current agreements remain unchanged until the agreement is extended, modified or expires – and declares a violation is a misdemeanor punishable by a fine of not less than $500 and nor more than $5,000. West Virginia became the twenty-sixth state to adopt a right-to-work law.

What Does the Right-to-Work Law Mean?

Bear in mind that unions in right-to-work states are still free to organize a business and recruit members. However, they cannot force workers to join or to pay dues or to pay an “agency fee” as a condition of employment. This actually can be helpful to unions in their organizing drives. Unions in right-to-work states often inform employees during union organizing campaigns that the employees can simply “test drive” the union. The union further informs employees (correctly under the law) that in a right-to-work state, if they are not satisfied with the union, they don’t have to join. This “test drive” theme can be effective in an organizing campaign.

It goes without saying that union membership in existing West Virginia employers will drop as a result of right-to-work. That reduction will result in changes in bargaining dynamics for unionized employers in future negotiations. For non-unionized employers, experience has shown that unions seek to replace resultant lost revenues from stepping up organizing efforts. Right-to-work should spark heightened attention to employee policies, practices, satisfaction and education by non-union employers.

What is the Prevailing Wage?

West Virginia adopted a Prevailing Wage Act in 1933 and, until last year, was largely unchanged since 1961. The law requires any contractors performing public construction work to pay a certain hourly minimum wage rate and provided a certain level of “fringe benefits” (or pay in lieu of the fringe benefits). Additionally, the federal Davis-Bacon Act, established in 1936, required a legally mandated prevailing wage to be paid on all public construction contracts receiving at least $2,000 of federal money.

Until last year, the West Virginia Division of Labor was responsible for calculating the prevailing wage on an annual basis. The Division surveyed local prevailing wages each year with a comment period of a month, then posted the wage rate. Proponents of prevailing wage claim it is necessary to ensure that companies performing work on state projects pay the “going wage” and are not outbid by firms that could bring in lower-cost, out-of-state labor to perform the work. Opponents have asserted that the prevailing wage set by the Division was not truly representative and that market forces are a superior mechanism for determining wage rates.
In 2015, the West Virginia Legislature passed Senate Bill 361, which marked the first significant change to the prevailing wage law in more than 50 years. The bill limited the requirement for the paying of the prevailing wage to contracts of more than $500,000. Second, the bill reassigned the duty to determine the prevailing wage from the Division of Labor, to Workforce West Virginia, in coordination with the West Virginia University Bureau of Business and Economic Research and the Center for Business and Economic Research at Marshall University. Workforce West Virginia was to use “all appropriate economic data, including, but not limited to, the average rate of wages published by the U.S. Bureau of Labor Statistics” in order to calculate the prevailing wage.”

The Current Status of the Prevailing Wage Law

Opponents contended the prevailing wage set by Workforce West Virginia was as flawed as that set by the Division of Labor and sought a full repeal. House Bill 4005, which was adopted via legislative override a few weeks ago, did just that. When the law becomes effective in May 2016, contractors performing West Virginia public construction work will be free to pay whatever wages they desire and believe will secure a workforce. Projects receiving federal money will still be required to comply with the Davis-Bacon Act, and contracts entered into prior to the repeal must still be honored as a basis of traditional contract law. Whether the prevailing wage must still be paid under contracts entered into prior to the repeal of the prevailing wage, will largely turn on the language of the contracts themselves. Accordingly, contractors in West Virginia may want to postpone bidding on projects until after the repeal goes into effect.

If you have any questions about right-to-work laws or the prevailing wage issue, please contact our Labor and Employment Group.