Conference Call: Justices to Mull Labor Law Preemption Dispute

The following column, featuring a selected petition up for consideration at the Justices’ private conference on November 20, appears in today’s edition of Legal Times (available to subscribers here). To see the full list of “petitions to watch” for Tuesday’s conference, click here.

Conference Call: Supreme Court Asked to Take California Labor Case

Chamber of Commerce is challenging law barring use of certain state funds to influence union elections

On labor issues, the U.S. Chamber of Commerce and the National Labor Relations Board haven’t always seen eye to eye. But both bodies are hoping the Supreme Court will decide this week to review a California law that bars employers from using certain state funds to influence the outcome of a union election campaign — a prohibition opponents fear will infringe management’s speech rights and give organized labor the type of upper hand Congress never intended.

Letting the law stand could have wide national implications, as legislatures have introduced similar laws in 15 other states. With the solicitor general’s recent recommendation that the Court grant the petition, however, the odds are high that the justices will docket the case when it comes up for consideration at their pre-Thanksgiving conference on Nov. 20. (The petition is No. 06-939, Chamber of Commerce v. Brown.) The Court could issue its decision as soon as that afternoon.

California enacted the law at issue in late 2000. Passed with strong union backing, the measure prohibits employers receiving state grants or more than $10,000 in state program funds from using any portion of the money to “assist, promote, or deter” union organizing campaigns. In addition to potential treble damage awards, violators can face suits by private taxpayers and the state attorney general and must pay attorney fees to prevailing parties.

California called the bill a necessary measure to prevent taxpayer money from influencing workers’ decisions on whether to unionize. In practice, employer groups say, the bill would effectively prevent many companies from opposing unions at all.

Led by the Chamber of Commerce, a host of employer groups sought to enjoin the law in 2002. On a motion for summary judgment, the district court found that federal law pre-empted the California statute under the Supreme Court’s 1976 decision in Lodge 76, International Association of Machinists v. Wisconsin Employment Relations Commission, which forbids states from regulating activity Congress meant to leave “to the free play of economic forces.”

A panel of the U.S. Court of Appeals for the 9th Circuit later found the law also pre-empted under the high court’s 1959 ruling in San Diego Building Trades v. Garmon and later cases, which bar states from regulating activity even arguably covered by the National Labor Relations Act.

An en banc panel later upheld the law by a 12-3 margin, noting that employers remained free to express views on unionizing with their own funds. Rejecting Machinists’ pre-emption argument, Judge Raymond Fisher wrote for the majority that state spending decisions “are by definition not controlled by the free play of economic forces.” As to Garmon, Fisher wrote that, although the National Labor Relations Act bars the use of most employer speech “as evidence of an unfair labor practice,” it does not explicitly give employers the right to participate in organizing campaigns.

In its petition for certiorari, filed by Willis Goldsmith of Jones Day in New York, the Chamber calls the distinction “semantic gamesmanship.” By enacting the Taft-Hartley amendments of 1947, Goldsmith argues, Congress intended to let employers freely make their case for or against unionization — so long as they refrain from promising to reward or retaliate against workers for their choice.

In holding otherwise, the petition contends, the 9th Circuit broke with recent rulings of two other circuits. In a 2005 case, according to Goldsmith, the 7th Circuit found that federal law pre-empted any state measure that substantially affects the collective bargaining process, even a regulation coming “in the form of a restriction on the use of state funds.” In addition, the 2nd Circuit last year pre-empted a similar New York statute insofar as it applied to money employers earned through state contracts, as opposed to mere grants, the petition says.

Far from trying to stay neutral, California enacted the law as a “concerted effort to spur union organizing,” the Chamber argues. To speak out against unionization, Goldsmith argues, employers that receive a sufficient amount of state money must comply with burdensome record-keeping requirements and ensure that all employees who work on union matters are paid with separate funds. And the petitioners assert that the law, as a practical matter, entirely muffles employers that rely exclusively on state money — such as health care providers wholly dependent on reimbursements from California’s Medicaid program.

Opposing certiorari, California argues that the Chamber’s facial challenge offers a poor procedural vehicle for review, and that the 9th Circuit decision creates no significant split with either circuit ruling cited in the petition. Angela Sierra, a California deputy attorney general, argues further that lower courts should first have an opportunity to interpret the terms of the statute, including whether the restrictions in fact apply to funds received from state contracts or profits earned from participation in state programs.

The brief in opposition contends that the Wisconsin law struck down by the 7th Circuit went much further than the California law, and, while conceding that the 2nd Circuit found that the National Labor Relations Act protects employer speech, argues the difference in reasoning could eventually be rendered “merely academic.” Rather than grant certiorari now, California argues, the Court should wait for more states to enact similar laws and see if a deeper split emerges in the circuit courts. — Ben Winograd

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