A labor union can best be defined as an organization that exists for the purpose of representing its members to their employers regarding wages and terms and conditions of employment.3 Historically, government has taken three approaches to labor unions: the criminal conspiracy approach, the free-market (government-neutral) approach, and the compulsory unionism approach (see Chart 1).

Under the criminal conspiracy approach, the government views labor unions as illegal organizations that conspire to disrupt commerce or harm employers. Membership in a labor union is illegal under this approach, and so are strikes and threats designed to force employers to bestow additional benefits upon their workers. This approach existed in many states for a brief time in American history (roughly between 1806 and 1842).

The free-market (or government-neutral) approach requires that the government neither encourage nor discourage the formation of labor unions. Workers who choose to form a union are free to do so. Government does not prohibit union membership or union activity, provided existing laws against fraud, violence, and property damage are not violated. Individual workers may join or not join a union, and union leaders must earn each worker's voluntary support by providing desired benefits. Under this approach, employers may choose to deal or not deal with the labor union and workers are free to strike regardless of how much it may economically harm their employer. This approach existed in a number of states mostly prior to the 1850s.

The third government approach to labor unions is the compulsory unionism approach, where government plays an active role in encouraging labor unions. The government forces employers to recognize labor unions and negotiate with them in a process called "mandatory collective bargaining." Unions are recognized by law as "exclusive bargaining representatives" who may prohibit individual workers in their bargaining units from negotiating individual working arrangements with their employer, even if they would be better off doing so and their employer is willing. This approach arose out of the Great Depression era of the late 1920s to the mid-1930s.

Likewise, the privilege of exclusive representation prevents workers from being represented by a union other than the one approved by a majority of their co-workers. Everyone in the bargaining unit is in turn required to work under the terms of any contract the union approves. If the contract includes a union security clause, then all unit members are required to pay for the union's workplace representation through dues or fees.