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. e du/thir dc ir c uit_2000/140Filed June 30, 2000

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 99-3513, 99-3563

THE ST. THOMAS - ST. JOHN HOTEL & TOURISM ASSOCIATION, INC.; THE ST. THOMAS - ST. JOHN CHAMBER OF COMMERCE, INC.; ST. CROIX HOTEL & TOURISM ASSOCIATION, INC.

v.

GOVERNMENT OF THE UNITED STATES VIRGIN ISLANDS, by and through the Virgin Islands Departme nt of Labor; ELEUTERIA ROBERTS, in her official capaci ty as Acting Commissioner of the Virgin Islands Depart ment of Labor, Appellants in No. 99-3563

Elsa Huggins; Ladiah Whyte, Intervenors/Appellants in No. 99-3513

On Appeal from the District Court of the Virgin Isl ands (D.C. No. 99-cv-00054) District Judge: Hon. Thomas K. Moore

Argued: October 22, 1999

Before: SLOVITER and RENDELL, Circuit Judges, and BYRNE, District Judge*

___________________________________________________ ______________ *Hon. Wm. Matthew Byrne Jr., United States District Court for the Central District of California, sitting by designat ion.(Filed: June 30, 2000)

Iver A. Stridiron Pamela R. Tepper

Carol S. Moore Department of Justice St. Thomas, USVI 00802

Attorneys for Appellants

in No. 99-3563

Scott A. Kronland Altshuler, Berzon, Nussbaum

Berzon & Rubin San Francisco, CA 94108

Jonathan P. Hiatt Washington, D.C. 20006

Richard Austin Kathleen Navin (Argued) Legal Services of Virgin Islands, Inc. Christiansted, St. Croix, USVI 00820

Attorneys for Intervenors/Appellants

in No. 99-3513

Charles E. Engeman (Argued) Dudley, Topper & Feuerzeig Charlotte Amalie, St. Thomas,

USVI 00804

Attorney for Appellees

2OPINION OF THE COURT

SLOVITER, Circuit Judge.

I.

INTRODUCTION

Before us is an appeal from the order of the Distri ct Court granting a preliminary injunction enjoining enforcement of the Virgin Islands Wrongful Discharg e Act (WDA or "Act"), V.I. Code Ann. tit. 24, SS 76-79, a territorial law that declares that an employee discharged for a ny reason other than for cause as set forth in nine en umerated reasons "shall be considered to have been wrongfull y discharged," unless modified by a union contract. T he central issue is the District Court's holding that the

plaintiffs have a probability of success on the mer its on their claim that the WDA is preempted by the Nation al Labor Relations Act (NLRA), 29 U.S.C. SS 151-169. T he Government of the Virgin Islands and two intervenin g employees who have claims pending under the WDAfile d appeals, which we consolidated.

We have jurisdiction over the appeal from the grant of the preliminary injunction pursuant to 28 U.S.C. S 1292 (a)(1). Although the issuance of a preliminary injunction i s reviewed for abuse of discretion, the underlying le gal determination regarding preemption is reviewed de n ovo. Acierno v. New Castle County, 40 F.3d 645, 652 (3d Cir. 1994).

3II.

BACKGROUND

A.

The Virgin Islands Wrongful Discharge Act

Section 76 of the WDA, enacted by the Virgin Island s legislature in 1986, sets forth the grounds for law ful employee discharge as follows:

(a) Unless modified by union contract, an em ployer may dismiss any employee:

(1) who engages in a business which conflict s with his duties to his employer or renders him a riva l of his employer;

(2) whose insolent or offensive conduct towa rd a customer of the employer injures the employe r's business;

(3) whose use of intoxicants or controlled s ubstances interferes with the proper discharge of his duties;

(4) who wilfully and intentionally disobeys reasonable and lawful rules, orders, and instructions o f the employer; provided, however, the employer sh all not bar an employee from patronizing the employe r's business after the employee's working hours are completed;

(5) who performs his work assignments in a n egligent

manner;

(6) whose continuous absences from his place of employment affect the interests of his emplo yer;

(7) who is incompetent or inefficient, there by impairing his usefulness to his employer;

(8) who is dishonest; or

(9) whose conduct is such that it leads to t he refusal, reluctance or inability of other employees t o work with

him.

4(b) The Commissioner may by rule or regulati on adopt

additional grounds for discharge of an emplo yee not inconsistent with the provisions enumerated in subsection (a) of this section.

(c) Any employee discharged for reasons othe r than those stated in subsection (a) of this secti on shall be considered to have been wrongfully discharge d; however, nothing in this section shall be co nstrued as prohibiting an employer from terminating an employee as a result of the cessation of business ope rations or as a result of a general cutback in the work fo rce due to economic hardship, or as a result of the emp loyee's participation in concerted activity that is not protected by this title.

V.I. Code Ann. tit. 24, S 76.

Any employee covered by the WDA and discharged in violation of S 76 may file an administrative compla int with the Commissioner of Labor, who has the authority to order reinstatement and back pay. See V.I. Code Ann. tit. 24, S 77. In addition, the employee may file a lawsuit for compensatory and punitive damages in any court of competent jurisdiction. See V.I. Code Ann. tit. 24, S 79.

As originally enacted, the text of S 76 began,"Unle ss modified by contract . . . ." In 1991, the Virgin I slands Department of Labor defined the term "contract" as a "written agreement negotiated between an employer a nd an employee, or representatives thereof, which contain s the specific grounds for discharge, where the employmen t relationship has an established mechanism or proced ure for resolving discharge grievances and this mechani sm or procedure is referred to in the agreement or is oth erwise known by the parties, such as a collective bargaini ng agreement." V.I.R. & Regs. tit. 24, S 77-1(E). Expr essly excluded from that definition were printed statemen ts on an application for employment, in employee manuals, or in statements of employers' rules. Id. However, in its administrative rulings, the Department later relaxe d the definition by holding that the Department was depri ved of jurisdiction under the WDA if an employee agreed in any contract, even an application for employment, that s/he

5was an at-will employee. This interpretation permit ted the

employer to remove the protection of the Act by con tracting with one or more individual employees.

In 1996, the Virgin Islands legislature amendedS 76 (a) to begin, "Unless modified by union contract . . .." S ee V.I. Code Ann. tit. 24, S 76(a). Since that time,S 76(a) has been interpreted to apply to all employees in the Virgin Islands, absent a collective bargaining agreement setting di scharge terms to the contrary.

B.

Procedural Background

The District Court that issued the preliminary inju nction in this case had previously considered the same iss ue in Bell v. Chase Manhattan Bank, 40 F. Supp. 2d 307 (D .V.I. 1999), a suit brought by a former employee alleging that she was discharged in violation of the WDA. The cou rt held in Bell that the WDA was preempted by the NLRA and dismissed the employee's WDA action on that ground. Soon thereafter, the Department of Labor postponed all h earings then scheduled under the WDA. After a public hearin g held by the Virgin Islands legislature on March 15, 1999

, however, the Department of Labor announced that it would reschedule all hearings. The first hearing was resc heduled to commence on April 6, 1999.

On April 5, 1999, the St. Thomas-St. John Hotel & Tourism Association, Inc., the St. Thomas-St. John Chamber of Commerce, Inc., and the St. Croix Hotel & Tourism Association, Inc. (collectively "the associ ations") filed this action in the District Court of the Virg in Islands seeking to restrain the enforcement of the WDA in a ny pending or future WDA wrongful discharge proceeding . The associations, relying on the District Court's earli er decision in Bell, alleged that the WDA was preempted by the NLRA and contended that enforcement of the Act deprived them of federal rights in violation of 42 U.S.C. S 1983. They sought declaratory and injunctive relief under the Declaratory Judgment Act, 28 U.S.C. SS 2201, 2202, as well as injunctive relief under 42 U.S.C. S 1983 and att orneys'

6fees under 42 U.S.C. S 1988 and V.I. Code Ann. tit. 5,

S 541.

The associations are three not-for-profit corporati ons that represent the interests of more than 800 employers on the islands of St. Thomas, St. John, and St. Croix in t he Virgin Islands. Together, their members employ over 12,000 employees in the Virgin Islands. The associations n amed as defendants the Government of the Virgin Islands, th e Department of Labor, and the Acting Commissioner of the Department of Labor (collectively "the government") . Elsa Huggins and Ladiah Whyte, two employees who have WD A claims pending before the Virgin Islands Department of Labor, intervened as additional defendants.

The associations sought a preliminary injunction ag ainst the Virgin Islands Department of Labor, prohibiting it from holding any preliminary or formal hearings under th e WDA. After a hearing, the District Court, adopting its e arlier reasoning in Bell, concluded that the associations were likely to succeed on the merits of their preemption arguments and issued the requested preliminary injunction. St. Thomas-St. John Hotel & Tourism Ass oc., Inc. v. Government of the United States Virgin Islands , Civ. No. 1999-54 (D.V.I. June 2, 1999) (hereafter "slip op." ). The court believed that the WDA is "directly" preempted by S 7 of the NLRA "because it requires union involvement before any contractual modification to the WDA's requireme nts," and also preempted because "it upsets the `balance of power' between labor and management in an area Cong ress intended to remain free [from regulation]." Slip op . at 6.

The court's order permitted the Department of Labor to continue to accept complaints and to encourage volu ntary mediation, and to hold formal hearings for employee s who are not covered by the NLRA. It also required the associations to post a bond in the amount of $25,00 0 to cover losses to any employee who may ultimately be awarded back pay under the WDA and is unable to rec over from the former employer. In their appeal, the gove rnment and intervening employees argue that the District C ourt

erred as a matter of law in its determination that the WDA was preempted.

7III.

DISCUSSION

A.

Preemption Principles

An understanding of the principles of preemption is necessary background for all of the issues raised, including the appellants' challenge to standing, a jurisdicti onal issue. Preemption derives from the Supremacy Clause of the United States Constitution, which provides that the laws of the United States "shall be the supreme Law of the Land . . . any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. Const. art. VI, cl. 2. Those principles are made applicable to the laws of the Virgin Islands through the Revised Organic Act, whi ch authorizes the Virgin Islands legislature to enact territorial

laws that are "not inconsistent with . . . the laws of the United States made applicable to the Virgin Islands ." 48 U.S.C. S 1574(a).

The NLRA, "a comprehensive code passed by Congress to regulate labor relations in activities affecting in terstate and foreign commerce," Nash v. Florida Industrial Comm' n, 389 U.S. 235, 238 (1967), expressly applies to the Virg in Islands, a territory of the United States. See 29 U.S.C. S 152(6). Accordingly, we must apply the preemption principles as articulated by the Supreme Court of t he United States. See, e.g., Abdullah v. American Airl ines, Inc., 181 F.3d 363 (3d Cir. 1999) (applying general preem ption principles to determine whether application of terr itorial law was preempted by the Federal Aviation Act).

The Supreme Court has recognized three general ways in which federal law may preempt, and thereby displace , state law: (1) "express preemption," which arises when th ere is an explicit statutory command that state law be dis placed, see Morales v. Trans World Airlines, Inc., 504 U.S. 374 (1992); (2) "field preemption," which arises when f ederal law "so thoroughly occupies a legislative field as to m ake

8reasonable the inference the Congress left no room for the

States to supplement it," Cipollone v. Liggett Grou p, Inc., 505 U.S. 504, 516 (1992) (internal quotations omitt ed); and (3) "conflict preemption," which arises when a stat e law makes it impossible to comply with both state and f ederal

law or when the state law "stands as an obstacle to the accomplishment and execution of the full purposes a nd objectives of Congress," Hines v. Davidowitz , 312 U.S. 52, 67 (1941).

Because the NLRA contains no express preemption provision, and because the NLRA regulates in an are a of law traditionally regulated by the states, any NLRA preemption analysis starts "with the basic assumpti on that Congress did not intend to displace state law." Bui lding and

Constr. Trades Council v. Associated Builders and Contractors of Mass./R.I., 507 U.S. 218, 224 (1993) (quoting Maryland v. Louisiana, 451 U.S. 725, 746 ( 1981)).1 Nonetheless, although the NLRA neither contains an express preemption provision nor indicates a congre ssional intent to usurp the entire field of labor-managemen t relations, courts have often found state laws impli edly preempted by conflict with the NLRA, its express pr ovisions as well as its underlying goals and policies, on th e ground

that the state law stands "as an obstacle to the accomplishment and execution of the full purposes a nd objectives" of Congress. See, e.g., Livadas v. Brad shaw, 512 U.S. 107, 120, 134-35 (1994) (holding a state polic y preempted by conflict with employee's right, implic it in the structure of the NLRA, to "complete the collective bargaining process and agree to an arbitration clau se"); Nash, 389 U.S. at 238-40 (holding a state policy pr eempted

___________________________________________________ ______________

1. The associations argue that this assumption does not apply here

because the WDA is a territorial law rather than a state law and, therefore, does not raise a problem of "dual sovere ignties." Appellees' Brief at 10. We see no reason to alter our preempti on analysis, which is premised on the purpose of Congress in enacting the NLRA, based on a distinction between the legislative power of the Vi rgin Islands and that of the states, nor have we seen such reason in the past. See Peter v. Hess Oil V.I. Corp., 903 F.2d 935, 937 n.1 (3d Cir. 1990) ("For purposes of our [preemption] analysis, the Virgin Islands st ands in no different position than would a state.").

9by conflict with the NLRA because "Congress has mad e it

clear that it wishes all persons with information a bout [unfair labor practices] to be completely free from coercion against reporting them to the Board").

Although the general preemption principles "are no less applicable in the field of labor law," Brown v. Hot el & Restaurant Employees & Bartenders Int'l Union Local 54, 468 U.S. 491, 501 (1984), two unique subspecies of preemption, commonly known as Garmon preemption and Machinists preemption, are often invoked in connect ion with the NLRA. Garmon preemption, which derives fro m San Diego Building Trades Council v. Garmon, 359 U. S. 236 (1959), protects the primary jurisdiction of the Na tional Labor Relations Board (NLRB) by displacing state jurisdiction over conduct which is "arguably within the compass of S 7 or S 8 of the Act." Id. at 246. The doctrine is based on an "overriding interest in a uniform, n ationwide interpretation of the federal statute by the centra lized expert agency created by Congress," rather than on federal protection of particular conduct of private bargain ing parties. New York Tel. Co. v. New York State Dept. of Labor, 440 U.S. 519, 528 (1979) (plurality opinion). Becau se Garmon preemption concerns cases which "arguably" f all within the NLRA, a determination of whether state jurisdiction is displaced under Garmon preemption m ay require a consideration of the strength of the stat e's interest in its regulation over the relevant conduct. See Br own, 468

U.S. at 502-03.

In contrast to Garmon preemption, Machinists preemption, derived from Lodge 76, Int'l Ass'n of M achinists v. Wisconsin Employment Relations Comm'n, 427 U.S. 132 (1976), is premised on congressional intent that ce rtain conduct of private bargaining parties be unregulate d. Machinists preemption can be described as a form of conflict preemption under which state regulation of the bargaining conduct of private parties is displaced because it conflicts with the purpose of Congress in enacti ng the NLRA to leave that conduct "to be controlled by the free play of economic forces." Id. at 140. 2 Although "[ a]n

___________________________________________________ ______________

2. As we have noted elsewhere, the distinction betw een conflict preemption and field preemption is "not necessarily airtight." Orson,

Inc.,

10appreciation of the State's interest in regulating a certain

kind of conduct may . . . be relevant in determinin g whether Congress in fact intended the conduct to be unregulated," because the doctrine of Machinists preemption is premised solely on congressional inte nt that an area of conduct be unregulated, an analysis unde r this doctrine does not require a balancing of the state and federal interests in the first instance. Metropolit an Life Ins. Co. v. Massachusetts, 471 U.S. 724, 749 n.27 (1985)

.

A brief summary of the underlying facts in Machinis ts sheds light on the types of state regulation that a re preempted under the doctrine. During negotiations f or renewal of an expired collective-bargaining agreeme nt, the employer sought and the union resisted an increase of the

basic workweek from 37 to 40 hours. After a vote of the membership, the union instructed its members to ref use to work more than 37 hours. While negotiations continu ed, the employer filed a charge with the NLRB seeking a

determination that the union's action was an unfair labor practice prohibited by S 8 of the NLRA. The NLRB di smissed the charge, finding that the union's conduct did no t violate any provision of the NLRA. The employer also filed a complaint with the Wisconsin Employment Relations Commission, charging that the refusal to work overt ime constituted an unfair labor practice under state la w. The state Commissioner granted an injunction that the u nion cease and desist encouraging the employees' concert ed refusal to accept overtime assignments. This injunc tion was subsequently upheld by the state courts.

The United States Supreme Court reversed. Drawing f rom earlier decisions, the Court held that even though the employees' concerted refusal to work overtime was n either prohibited nor protected under specific provisions of the

___________________________________________________ ______________

v. Miramax Film Corp., 189 F.3d 377, 382 (3d Cir. 1 999). "Indeed, field pre-emption may be understood as a species of confl ict pre-emption: A state law that falls within a pre-empted field conf licts with Congress' intent (either express or plainly implied) to exclu de state regulation." English v. General Elec. Co., 496 U.S. 72, 79 n. 5 (1990). The overlap is evident in Machinists preemption, which recognizes an area within the field of labor-management relations where there is to be no state regulation.

11NLRA, the NLRA nonetheless preempts state regulatio n of

that conduct because the conduct is a "weapon of se lf-help" that Congress meant to leave unregulated. Machinist s, 427 U.S. at 146 (quoting Garner v. Teamsters Union , 34 6 U.S. 485, 500 (1953)).

B.

Jurisdiction

Before we apply the principles of NLRA preemption t o the case at hand, we consider first a question raised b y the intervenors, joined by the government, with respect to the standing of the associations to challenge the WDA a s preempted by conflict with S 7 of the NLRA. The iss ue of standing is jurisdictional.

A declaratory judgment or injunction can issue only when the constitutional standing requirements of a" case" or "controversy" are met. See U.S. Const., Art. III , S 2; Maryland Casualty Co. v. Pacific Coal & Oil Co. , 3 12 U.S. 270, 272 (1941). Although declaratory judgments are frequently sought in advance of the full harm expec ted, they must still present a justiciable controversy r ather than "abstract, hypothetical or contingent questions." A labama State Fed'n of Labor v. McAdory, 325 U.S. 450, 461 (1945). We have explained that these standing requirements are satisfied when "there is a substantial controversy, between parties having adverse legal interests, of sufficie nt immediacy and reality to warrant the issuance of a declaratory judgment." Step-Saver Data Sys., Inc. v . Wyse Tech., 912 F.2d 643, 647 (3d Cir. 1990) (quoting Ma ryland Casualty, 312 U.S. at 273 (1941)).

That there is a substantial controversy between the parties here sufficient to meet the constitutional requirement of standing is evident. When the compla int was filed, the WDA was being enforced in the Virgin Islands. Employees had filed claims with the Depart ment of Labor seeking relief under the Act. Hearings had be en scheduled for April 6, 1999, and at least 12 employ ers scheduled for April hearings were members of the St

. Thomas-St. John Hotel and Tourism Association. As a

12consequence of the enforcement of the WDA, the empl oyers'

ability to freely discharge their employees or to c ontract for terms of discharge was limited as they would be sub ject to liability if they discharged their employees for re asons other than those stated in the challenged act.

The associations, representing the interests of emp loyers in the Virgin Islands, seek declaratory and injunct ive relief from enforcement of the statute on the ground that the WDA is unenforceable because it is preempted by the NLRA,3 and seek prospective injunctive relief under 42 U.S .C. S 1983 against the Commissioner of Labor in her off icial capacity, alleging that by enforcing the WDA the Commissioner is violating their federal rights. The parties' interests in this action could not be more adverse, as the government and employees, both defendants here, see k to enforce the protections provided by the WDA, and th e employers, through the associations, seek to avoid enforcement of those protections.

The intervenors and the government do not question the associations' organizational standing to bring a ca use of action challenging the statute on behalf of their m ember employers. Instead, the intervenors challenge the associations' ability to argue that the WDA is pree mpted

based on conflict with S 7.

The appellants claim that because employers, unlike employees, have no substantive rights under S 7, th ey are precluded from relying on S 7 for their preemption claim. Section 7 provides:

Employees shall have the right to self-organ ization, to form, join, or assist labor organizations, t o bargain collectively through representatives of thei r own choosing, and to engage in other concerted a ctivities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the r ight to

___________________________________________________ ______________

3. The associations also allege that "supervisors c annot be covered by the [WDA] pursuant to the Supreme Court's decision in B easley v. Food Fair of North Carolina, Inc., 416 U.S. 653, 662 (1974)." Compl. P 13. The District Court declined to decide that claim, and i t is therefore not

before us on appeal.

13refrain from any or all such activities exce pt to the

extent that such right may be affected by an agreement requiring membership in a labor organization as a condition of employment as authorized in sec tion 158(a)(3) of this title.

29 U.S.C. S 157.

It is indeed evident, as the appellants argue, that S 7 confers rights on employees rather than employers, but

that is not determinative of the associations' stan ding to raise that issue. We know of no governing authority to the effect that the federal statutory provision which a llegedly preempts enforcement of local legislation by confli ct must confer a right on the party that argues in favor of preemption. On the contrary, a state or territorial law can be unenforceable as preempted by federal law even w hen

the federal law secures no individual substantive r ights for the party arguing preemption. See, e.g., California Fed. Sav. & Loan Assoc. v. Guerra, 479 U.S. 272 (1987) (actio n for declaratory and injunctive relief brought by employ ers arguing that California state law was preempted by the Pregnancy Discrimination Act of 1978, which gives r ights to pregnant employees under Title VII); Ray v. Atlanti c Richfield Co., 435 U.S. 151 (1978) (action brought by a tanker company arguing that Washington Tanker Law w as preempted by conflict with the Ports and Waterways Safety Act of 1972, which imposes operation, safety, and environmental requirements on tanker companies).

But our conclusion that the associations have stand ing to bring this action challenging enforcement of the WDA does not end the jurisdictional inquiry, for the Di strict Court must also have subject matter jurisdiction ov er the associations' claims. See 48 U.S.C. S 1612(a) (prov iding that the District Court of the Virgin Islands "shall hav e the jurisdiction of a District Court of the United Stat es"); see generally Estate of Thomas Mall, Inc. v. Territoria l Court of the V.I., 923 F.2d 258, 260-64 (3d Cir. 1991) (expl aining jurisdictional system for civil actions in the Virg in Islands).

Jurisdiction is established in this case under 28 U .S.C. S 1331. The associations seek injunctive and declar atory relief from enforcement of a territorial regulation on the

14ground that the regulation is preempted by the NLRA , a

federal statute which grants employers as well as employees substantive federal rights. See Golden St ate Transit Corp. v. City of L.A., 493 U.S. 103, 108-12 (1989) (Golden State II) (holding that the NLRA confers a substantive right on employers and employees to be free of governmental regulation within the zone of Machinis ts preemption).4 The Supreme Court has recognized that such a challenge presents a federal question which the f ederal courts have jurisdiction under 28 U.S.C. S 1331 to resolve. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 n.14 (1983); see also Lawrence County v. Lead-Deadwood S ch. Dist. No. 40-1, 469 U.S. 256, 259 n.6 (1985). 5

C.

Application of Preemption Principles to the WDA

The associations argue, and the District Court agre ed, that the WDA is preempted by the NLRA under the Machinists doctrine because it regulates conduct th at Congress meant to leave unregulated. That argument is

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4. The associations assert that, in addition to the right conferred by the NLRA under Machinists preemption, the NLRA also con fers a substantive right of "voluntary unionism" on employers. Our res earch uncovered no case in which a court has recognized such a right. Moreover, even if such a right were to exist, we find questionable th e District Court's assertion that the right would enure in the text of S 7, see slip op. at 14 (stating that "section 7 . . . guarantee[s] rights to employers as well as to employees"), rather than its being implicit in t he structure and goals of the NLRA as a whole. In any event, we do not rea ch that issue in this

case.

5. In finding federal jurisdiction under 28 U.S.C. S 1331 we do not decide whether territorial officials in their official cap acities are "persons"

under S 1983 when sued solely for prospective injunctive relief. Cf. Ngiraingas v. Sanchez, 495 U.S. 182, 192 (1990) (holding that plaintiff who sought damages against territory of Guam and its officials in their official capacities could not state a S 1983 claim because t he territory and its officials are not "persons" under the section). Nor do we decide whether the federal Declaratory Judgment Act, 28 U.S.C.S 22 01, applies to the Virgin Islands. Cf. 28 U.S.C. S 2201 (authorizing s uch relief by "any court of the United States").

15foreclosed by the Supreme Court's decisions in Metr opolitan

Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985) , and Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1 (1987).

At issue in Metropolitan Life was a Massachusetts s tatute that required that specified minimum mental health care benefits be provided to a state resident who was in sured under a general insurance policy, an accident or si ckness insurance policy, or an employee health-care plan t hat covered hospital and surgical expenses. Metropolita n Life Insurance Co. brought suit for declaratory and inju nctive relief, arguing, inter alia, that the Massachusetts law was preempted by the NLRA under the Machinists doctrine "because Congress intended to leave the choice of t erms in collective-bargaining agreements to the free play o f economic forces." Metropolitan Life, 471 U.S. at 74 8. After examination of the congressional concerns behind th e enactment of the NLRA, the Court rejected the argum ent that state regulations imposing minimum substantive standards on contract terms are preempted under Machinists. As the Court explained:

The NLRA is concerned primarily with establi shing an equitable process for determining terms and conditions of employment, and not with particular subst antive terms of the bargain that is struck when the parties are negotiating from relatively equal positi ons. . .. The evil Congress was addressing thus was entire ly unrelated to local or federal regulation est ablishing minimum terms of employment. . . . No incomp atibility exists, therefore, between federal rules des igned to restore the equality of bargaining power, an d state or federal legislation that imposes minimal sub stantive requirements on contract terms negotiated be tween parties to labor agreements, at least so lon g as the purpose of the state legislation is not inco mpatible with the[ ] general goals of the NLRA.

Id. at 753-55.

The Court addressed a similar argument two years la ter

in Fort Halifax. The state statute at issue in Fort Halifax required employers in Maine to provide a one-time severance payment to employees in the event of a pl ant

16closing, unless the employee was "covered by a cont ract

that deals with the issue of severance pay." 482 U. S. at 5. Employees of a closed packing plant, as well as the Maine Director of the Bureau of Labor Standards, brought suit in

state court for enforcement of the statute. On cert iorari to the Supreme Court, the owner of the closed plant, l ike the insurer in Metropolitan Life, argued that preemptio n of the state statute was necessary under Machinists"to fur ther Congress' intent that the conduct involved be unreg ulated because [it should be] left to be controlled by the free play of economic forces." Id. at 19-20 (internal quotati ons omitted). It argued that its case was not controlle d by Metropolitan Life because the statutory obligation under the Maine statute applied only in the absence of an agr eement between an employer and its employees.

The Fort Halifax Court confirmed its holding in Metropolitan Life that a state law establishing a m inimum employment standard is not preempted by the NLRA, adding that there is no preemption even when the st ate law permits parties to an employment agreement to contr act out of the protections provided by the law. See id. at 22. The Court explained:

It is true that the Maine statute gives empl oyees something for which they otherwise might hav e to bargain. That is true, however, with regard to any state law that substantively regulates employment conditions. Both employers and employees com e to the bargaining table with rights under state law that form a "backdrop" for their negotiations.

Id. at 21 (quoting Metropolitan Life, 471 U.S. at 7 57).

Metropolitan Life and Fort Halifax clearly stand fo r the proposition that, in enacting the NLRA, Congress di d not intend to prevent states from establishing minimum substantive requirements for contract terms. See ge nerally Metropolitan Life, 471 U.S. at 754-55 (discussing g oals of the NLRA). Although the associations insist that th e WDA is not a minimum substantive requirement like the o nes at issue in Metropolitan Life or Fort Halifax, they pr ovide no principled basis for distinguishing the WDA from th e statutes upheld in those cases.

17The associations attempt to draw support from two c ases

decided in the Court of Appeals for the Ninth Circu it. In the first, the court held that a wrongful discharge cla im brought by an employee under the Montana Wrongful Discharge from Employment Act, Mont. Code Ann. SS 3 9-2- 901 et seq. (providing that discharge must be for g ood cause), was preempted by the NLRA. See Barnes v. St one Container Corp., 942 F.2d 689 (9th Cir. 1991). A lo ok at the facts of Barnes reveals, however, that it is of lit tle value

here.

The collective-bargaining agreement between Barnes' s employer, Stone Container Corp., and his union expi red and, after its extension for unsuccessful negotiati ons, the employer exercised its right to terminate the agree ment and hired a number of replacement workers. Two of those new employees were sprayed with water at the work site, and Stone Container charged Barnes with the harassment of those employees and fired him. The union filed an u nfair labor practice charge on behalf of Barnes, assertin g that the stated reason for his discharge was pretextual and that Stone Container fired him for his union activity. A fter investigation, the NLRB found no basis for the reta liation charge and the union withdrew the complaint.

Barnes then filed an action under the Montana wrong ful discharge act, alleging dismissal without just caus e. After Barnes had been discharged, the bargaining between his employer and union reached an impasse. The employer sought summary judgment from the federal court to w hich the action had been removed, arguing preemption und er Machinists, because the wrongful discharge act woul d impose a just cause term where one did not exist. T he district court denied summary judgment but the cour t of appeals reversed. The court held that permitting a wrongful discharge action during the period after contract e xpiration but before a bargaining impasse is the sort of enta nglement Machinists sought to avoid, as it altered significa ntly the incentives to negotiate. The court did not invalida te the state statute but merely held its use in those uniq ue circumstances was preempted.

That the Barnes decision is limited to a narrow set of circumstances was made clear by the Ninth Circuit i tself

18the following year in National Broad. Co., Inc. v. Bradshaw,

70 F.3d 69, 73 (9th Cir. 1995) (holding that becaus e a state statutory remedy was not invoked until after bargai ning impasse was reached, "the type of interference with negotiations frowned upon in Barnes did not occur") . That set of circumstances is not present in this case.

The second case out of the Ninth Circuit relied on by the associations, Chamber of Commerce of United States v. Bragdon, 64 F.3d 497 (9th Cir. 1995), is also distinguishable from this case. There, the court he ld that a county ordinance that required private employers to pay "prevailing wages" to employees on certain types of private industrial projects costing over $500,000 was preem pted by the NLRA under Machinists preemption. See id. at 49 8. The court noted that imposition of such substantive requirements affects the bargaining process and cou ld dictate the results of a contract, id. at 501, an u ndue governmental interference with the collective barga ining processes protected by the NLRA, id. at 504.

Even if we were to agree with the Ninth Circuit tha t Metropolitan Life and Fort Halifax permit the exten sion of Machinists preemption to displace state law that im poses substantive minimum requirements for contract terms rather than regulates the use of economic bargainin g weapons, see id. at 501, the county ordinance at is sue in that case is remarkably different from the WDA. In establishing nine statutory bases for lawful discha rge in the Virgin Islands, the WDA neither regulates the proce ss of bargaining nor upsets the balance of power of manag ement

on one side and labor on the other that is establis hed by

the NLRA.

Instead, the WDA is directed to limiting the permis sible bases for discharge of an employee to a broad list, including, inter alia: engaging in conflicting busi ness; engaging in insolent or offensive conduct; using in toxicants or controlled substances that affect the employee's work; disobeying reasonable rules or instructions; being negligent, incompetent, inefficient, dishonest, or unable to work with others; and, regardless of the employee's behavior, economic hardship of the employer. See V .I. Code

19Ann. tit. 24, S 76. This appears to be a comprehens ive list,

covering all or almost all legitimate reasons for d ischarge.

The associations also argue that the WDA cannot be a minimum employment standard because it treats union and non-union employees differently by permitting t he union to contract its members out of the protection s provided by the WDA but not permitting non-union employees to contract out of the protections. They argue that this opt-out for union employees "forces" unio nization, triggering preemption by conflict with S 7 and the

Machinists doctrine.

Our analysis of this alternative argument is guided by the Supreme Court's discussion in Livadas v. Bradshaw, 512 U.S. 107 (1994). A California state law guaranteed to all California workers immediate payment of wages upon discharge. Livadas, an employee of Safeway supermar ket, was covered by a collective-bargaining agreement wh ich provided for binding arbitration for disputes as to the interpretation or application of the agreement, inc luding grievances arising from allegedly unjust discharge or suspension. Id. at 110. When Livadas was discharged , she demanded her payment immediately, but the store man ager refused, instead sending her payment by mail. Livad as filed an administrative claim against Safeway for a statu tory penalty for the three-day delay caused by the maili ng, but

the Commissioner of Labor refused to enforce the cl aim because Livadas was covered by a collective-bargain ing agreement containing an arbitration clause. Livadas thenfiled suit, asserting that the Commissioner's nonenforcement policy was preempted.

The Supreme Court agreed, holding that the Commissioner's policy was preempted by the NLRA bec ause it forced Livadas to choose between exercising her state law right to immediate payment and exercising her right to enter into a collective bargaining agreement with a n arbitration clause. See id. at 117. In doing so, th e Court distinguished Fort Halifax, which involved a minimu m employment standard with an opt-out provision, in p art on the ground that "the minimum protections of Maine's plantclosing law were relinquished not by the mere act o f signing an employment contract (or collective-bargaining

20agreement), but only by the parties' express agreem ent on

different terms." Id. at 131. The Court stated:

While the Commissioner and her amici call ou r attention to a number of state and federal l aws that

draw distinctions between union and nonunion represented employees, virtually all share t he important second feature observed in [Fort H alifax], that union-represented employees have the fu ll protection of the minimum standard, absent a ny agreement for something different. These `op t out' statutes are thus manifestly different in th eir operation (and their effect on federal rights) from th e Commissioner's rule that an employee forfeit s his state-law rights the moment a collective-bar gaining agreement with an arbitration clause is ente red into. Hence, our holding that the Commissioner's u nusual policy is irreconcilable with the structure and purposes

of the Act should cast no shadow on the vali dity of these familiar and narrowly drawn opt-out pr ovisions.

Id. at 131-32 (citations omitted). In a footnote, t he Court added: "Nor does is seem plausible to suggest that Congress meant to pre-empt such opt-out laws, as `burdening' the statutory right of employees not to join unions by denying nonrepresented employees the `ben efit' of being able to `contract out' of such standards." Id. at 132

n.26.

The Supreme Court's discussion in Livadas thus supports a conclusion that the WDA is not preempted by the NLRA even though it provides an opt-out by expr ess terms of union contract. Like the Maine statute at issue in Fort Halifax, and unlike the California Commissione r's policy in Livadas, the WDA does not force an employ ee to choose between collective bargaining and the protec tions of state law; rather, it protects all Virgin Islands e mployees, but gives employees the option of relinquishing the territorial statutory protections through the terms of a collective-bargaining agreement.

We are not alone in our conclusion that state minim um employment requirements are not inconsistent with t he NLRA even when they provide for a union contract op t-out.

21We have seen no case in which a court of appeals ha s

decided otherwise. Indeed, there are several cases in which the Court of the Appeals for the Ninth Circuit held that an opt-out provision for union contracts did not trigg er preemption by the NLRA. See Viceroy Gold Corp. v. A ubry, 75 F.3d 482, 490 (9th Cir. 1996) (holding that stat ute limiting mine workers to an 8-hour day unless other wise provided in a collective bargaining agreement is no t preempted); National Broadcasting Co., 70 F.3d at 7 3 (holding that state regulations requiring employers to pay

double time for all hours worked over 12 hours in a day unless the employees were covered by a collective bargaining agreement providing specified minimum overtime benefits are not preempted).

Underlying the associations' argument and the Distr ict Court's opinion in this case is the unsettling supp osition that by enacting the WDA the Virgin Islands legisla ture is regulating in an area that has traditionally been l eft to the freedom of contract between an employer and an empl oyee. The Supreme Court has made clear that Machinists preemption does not extend into the realm of establ ishment of minimum employment standards like that establish ed by the WDA. Moreover, the Court has cautioned that"[i] n labor pre-emption cases . . . our office is not to pass judgment on the reasonableness of state policy." Li vadas, 512 U.S. at 120. It appears that the determination of the Virgin Islands legislature that its citizens are in need of minimum employment protections falls within the precedent established by the Supreme Court that suc h legislation is not preempted by the NLRA.

IV.

CONCLUSION

We have determined that the District Court's conclu sion

that the associations have a likelihood of success on the merits of their claim that the WDA is preempted by the NLRA under the Machinists doctrine or by conflict w ith S 7 was based on erroneous legal analysis. It follows t hat we will vacate the District Court's order granting the preliminary injunction.

22It is apparent that although the District Court ref erred to

testimony introduced by the associations at the hea ring on the preliminary injunction, that testimony was not factual and the District Court relied on its earlier legal ruling in Bell as the basis for its preemption decision. At a rgument, the parties seemed to agree that there are no factu al issues

to be decided and no further evidence to be taken t hat would be relevant to a ruling on a permanent injunc tion. The Supreme Court has counseled that "if a district court's ruling rests solely on a premise as to the applicab le rule of law, and the facts are established or of no control ling relevance, that ruling may be reviewed even though the appeal is from the entry of a preliminary injunctio n." Thornburgh v. American Coll. of Obst. & Gyn., 476 U .S. 747, 757 (1986). However, we have not asked the parties to brief this issue and there remains for decision by the Di strict

Court the associations' claim that the WDA should n ot be applied to supervisors. Accordingly, we will not pr esume to go further than the appellants request, i.e. that w e vacate the preliminary injunction, and we will remand for further proceedings consistent with this opinion.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

23