2000 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

6-30-2000

St Thomas St John Hotel Tourism, Inc. v. Govt of

VI

Precedential or Non-Precedential:

Docket 99-3513

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Recommended Citation

"St Thomas St John Hotel Tourism, Inc. v. Govt of VI" (2000). 2000 Decisions. Paper 140.

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Filed 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 Department 

of Labor; ELEUTERIA ROBERTS, in her official capacity 

as Acting Commissioner of the Virgin Islands Department 

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 Islands 

(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 designation. 
(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 

 2 
OPINION OF THE COURT 

SLOVITER, Circuit Judge. 

I. 

INTRODUCTION 

Before us is an appeal from the order of the District 

Court granting a preliminary injunction enjoining 

enforcement of the Virgin Islands Wrongful Discharge Act 

(WDA or "Act"), V.I. Code Ann. tit. 24, SS 76-79, a territorial 

law that declares that an employee discharged for any 

reason other than for cause as set forth in nine enumerated 

reasons "shall be considered to have been wrongfully 

discharged," unless modified by a union contract. The 

central issue is the District Court's holding that the 

plaintiffs have a probability of success on the merits on 

their claim that the WDA is preempted by the National 

Labor Relations Act (NLRA), 29 U.S.C. SS 151-169. The 

Government of the Virgin Islands and two intervening 

employees who have claims pending under the WDAfiled 

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 is 

reviewed for abuse of discretion, the underlying legal 

determination regarding preemption is reviewed de novo. 

Acierno v. New Castle County, 40 F.3d 645, 652 (3d Cir. 

1994). 

 3 
II. 

BACKGROUND 

A. 

The Virgin Islands Wrongful Discharge Act 

Section 76 of the WDA, enacted by the Virgin Islands 

legislature in 1986, sets forth the grounds for lawful 

employee discharge as follows: 

 (a) Unless modified by union contract, an employer 

 may dismiss any employee: 

 (1) who engages in a business which conflicts with his 

 duties to his employer or renders him a rival of his 

 employer; 

 (2) whose insolent or offensive conduct toward a 

 customer of the employer injures the employer's 

 business; 

 (3) whose use of intoxicants or controlled substances 

 interferes with the proper discharge of his duties; 

 (4) who wilfully and intentionally disobeys reasonable 

 and lawful rules, orders, and instructions of the 

 employer; provided, however, the employer shall not 

 bar an employee from patronizing the employer's 

 business after the employee's working hours are 

 completed; 

 (5) who performs his work assignments in a negligent 

 manner; 

 (6) whose continuous absences from his place of 

 employment affect the interests of his employer; 

 (7) who is incompetent or inefficient, thereby impairing 

 his usefulness to his employer; 

 (8) who is dishonest; or 

 (9) whose conduct is such that it leads to the refusal, 

 reluctance or inability of other employees to work with 

 him. 

 4 
 (b) The Commissioner may by rule or regulation adopt 

 additional grounds for discharge of an employee not 

 inconsistent with the provisions enumerated in 

 subsection (a) of this section. 

 (c) Any employee discharged for reasons other than 

 those stated in subsection (a) of this section shall be 

 considered to have been wrongfully discharged; 

 however, nothing in this section shall be construed as 

 prohibiting an employer from terminating an employee 

 as a result of the cessation of business operations or as 

 a result of a general cutback in the work force due to 

 economic hardship, or as a result of the employee'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 complaint 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,"Unless 

modified by contract . . . ." In 1991, the Virgin Islands 

Department of Labor defined the term "contract" as a 

"written agreement negotiated between an employer and an 

employee, or representatives thereof, which contains the 

specific grounds for discharge, where the employment 

relationship has an established mechanism or procedure 

for resolving discharge grievances and this mechanism or 

procedure is referred to in the agreement or is otherwise 

known by the parties, such as a collective bargaining 

agreement." V.I.R. & Regs. tit. 24, S 77-1(E). Expressly 

excluded from that definition were printed statements on 

an application for employment, in employee manuals, or in 

statements of employers' rules. Id. However, in its

administrative rulings, the Department later relaxed the 

definition by holding that the Department was deprived of 

jurisdiction under the WDA if an employee agreed in any 

contract, even an application for employment, that s/he 

 5 
was an at-will employee. This interpretation permitted the 

employer to remove the protection of the Act by contracting 

with one or more individual employees. 

In 1996, the Virgin Islands legislature amendedS 76(a) to 

begin, "Unless modified by union contract . . .." See 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 discharge 

terms to the contrary. 

B. 

Procedural Background 

The District Court that issued the preliminary injunction 

in this case had previously considered the same issue 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 court 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 hearings 

then scheduled under the WDA. After a public hearing 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 rescheduled 

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 associations") 

filed this action in the District Court of the Virgin Islands 

seeking to restrain the enforcement of the WDA in any 

pending or future WDA wrongful discharge proceeding. The 

associations, relying on the District Court's earlier 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 attorneys' 

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

S 541. 

The associations are three not-for-profit corporations that 

represent the interests of more than 800 employers on the 

islands of St. Thomas, St. John, and St. Croix in the Virgin 

Islands. Together, their members employ over 12,000

employees in the Virgin Islands. The associations named as 

defendants the Government of the Virgin Islands, the 

Department of Labor, and the Acting Commissioner of the 

Department of Labor (collectively "the government"). Elsa 

Huggins and Ladiah Whyte, two employees who have WDA 

claims pending before the Virgin Islands Department of 

Labor, intervened as additional defendants. 

The associations sought a preliminary injunction against 

the Virgin Islands Department of Labor, prohibiting it from 

holding any preliminary or formal hearings under the WDA. 

After a hearing, the District Court, adopting its earlier 

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 Assoc., 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 requirements," 

and also preempted because "it upsets the `balance of 

power' between labor and management in an area Congress 

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 voluntary 

mediation, and to hold formal hearings for employees who 

are not covered by the NLRA. It also required the 

associations to post a bond in the amount of $25,000 to 

cover losses to any employee who may ultimately be 

awarded back pay under the WDA and is unable to recover 

from the former employer. In their appeal, the government 

and intervening employees argue that the District Court 

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

was preempted. 

 7 
III. 

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 jurisdictional 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, which 

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 interstate and 

foreign commerce," Nash v. Florida Industrial Comm'n, 389 

U.S. 235, 238 (1967), expressly applies to the Virgin 

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 the 

United States. See, e.g., Abdullah v. American Airlines, Inc., 

181 F.3d 363 (3d Cir. 1999) (applying general preemption 

principles to determine whether application of territorial 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 there is 

an explicit statutory command that state law be displaced, 

see Morales v. Trans World Airlines, Inc., 504 U.S. 374 

(1992); (2) "field preemption," which arises when federal law 

"so thoroughly occupies a legislative field as to make 

 8 
reasonable the inference the Congress left no room for the 

States to supplement it," Cipollone v. Liggett Group, Inc., 

505 U.S. 504, 516 (1992) (internal quotations omitted); and 

(3) "conflict preemption," which arises when a state law 

makes it impossible to comply with both state and federal 

law or when the state law "stands as an obstacle to the 

accomplishment and execution of the full purposes and 

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 area of 

law traditionally regulated by the states, any NLRA

preemption analysis starts "with the basic assumption that 

Congress did not intend to displace state law." Building 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 congressional 

intent to usurp the entire field of labor-management 

relations, courts have often found state laws impliedly 

preempted by conflict with the NLRA, its express provisions 

as well as its underlying goals and policies, on the ground 

that the state law stands "as an obstacle to the 

accomplishment and execution of the full purposes and 

objectives" of Congress. See, e.g., Livadas v. Bradshaw, 512 

U.S. 107, 120, 134-35 (1994) (holding a state policy 

preempted by conflict with employee's right, implicit in the 

structure of the NLRA, to "complete the collective 

bargaining process and agree to an arbitration clause"); 

Nash, 389 U.S. at 238-40 (holding a state policy preempted 

_________________________________________________________________ 

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 sovereignties." Appellees' 

Brief at 10. We see no reason to alter our preemption analysis, which is 

premised on the purpose of Congress in enacting the NLRA, based on a 

distinction between the legislative power of the Virgin 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 stands in no different 

position than would a state."). 

 9 
by conflict with the NLRA because "Congress has made it 

clear that it wishes all persons with information about 

[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. Hotel & 

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 connection 

with the NLRA. Garmon preemption, which derives from 

San Diego Building Trades Council v. Garmon, 359 U.S. 236 

(1959), protects the primary jurisdiction of the National 

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, nationwide 

interpretation of the federal statute by the centralized 

expert agency created by Congress," rather than on federal 

protection of particular conduct of private bargaining 

parties. New York Tel. Co. v. New York State Dept. of Labor, 

440 U.S. 519, 528 (1979) (plurality opinion). Because 

Garmon preemption concerns cases which "arguably" fall 

within the NLRA, a determination of whether state 

jurisdiction is displaced under Garmon preemption may 

require a consideration of the strength of the state's interest 

in its regulation over the relevant conduct. See Brown, 468 

U.S. at 502-03. 

In contrast to Garmon preemption, Machinists 

preemption, derived from Lodge 76, Int'l Ass'n of Machinists 

v. Wisconsin Employment Relations Comm'n, 427 U.S. 132 

(1976), is premised on congressional intent that certain 

conduct of private bargaining parties be unregulated. 

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 enacting 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 between conflict 

preemption and field preemption is "not necessarily airtight." Orson, 

Inc., 

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

kind of conduct may . . . be relevant in determining 

whether Congress in fact intended the conduct to be

unregulated," because the doctrine of Machinists 

preemption is premised solely on congressional intent that 

an area of conduct be unregulated, an analysis under this 

doctrine does not require a balancing of the state and 

federal interests in the first instance. Metropolitan Life Ins. 

Co. v. Massachusetts, 471 U.S. 724, 749 n.27 (1985). 

A brief summary of the underlying facts in Machinists 

sheds light on the types of state regulation that are 

preempted under the doctrine. During negotiations for 

renewal of an expired collective-bargaining agreement, 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 refuse to 

work more than 37 hours. While negotiations continued, 

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 dismissed 

the charge, finding that the union's conduct did not violate 

any provision of the NLRA. The employer also filed a 

complaint with the Wisconsin Employment Relations 

Commission, charging that the refusal to work overtime 

constituted an unfair labor practice under state law. The 

state Commissioner granted an injunction that the union 

cease and desist encouraging the employees' concerted 

refusal to accept overtime assignments. This injunction was 

subsequently upheld by the state courts. 

The United States Supreme Court reversed. Drawing from 

earlier decisions, the Court held that even though the 

employees' concerted refusal to work overtime was neither 

prohibited nor protected under specific provisions of the 

_________________________________________________________________ 

v. Miramax Film Corp., 189 F.3d 377, 382 (3d Cir. 1999). "Indeed, field 

pre-emption may be understood as a species of conflict pre-emption: A 

state law that falls within a pre-empted field conflicts with Congress' 

intent (either express or plainly implied) to exclude 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. 

 11 
NLRA, the NLRA nonetheless preempts state regulation of 

that conduct because the conduct is a "weapon of self-help" 

that Congress meant to leave unregulated. Machinists, 427 

U.S. at 146 (quoting Garner v. Teamsters Union , 346 U.S. 

485, 500 (1953)). 

B. 

Jurisdiction 

Before we apply the principles of NLRA preemption to the 

case at hand, we consider first a question raised by the 

intervenors, joined by the government, with respect to the 

standing of the associations to challenge the WDA as 

preempted by conflict with S 7 of the NLRA. The issue 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. , 312 U.S. 

270, 272 (1941). Although declaratory judgments are

frequently sought in advance of the full harm expected, 

they must still present a justiciable controversy rather than 

"abstract, hypothetical or contingent questions." Alabama 

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 sufficient 

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 Maryland 

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 complaint 

was filed, the WDA was being enforced in the Virgin

Islands. Employees had filed claims with the Department of 

Labor seeking relief under the Act. Hearings had been 

scheduled for April 6, 1999, and at least 12 employers 

scheduled for April hearings were members of the St. 

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

 12 
consequence of the enforcement of the WDA, the employers' 

ability to freely discharge their employees or to contract for 

terms of discharge was limited as they would be subject to 

liability if they discharged their employees for reasons other 

than those stated in the challenged act. 

The associations, representing the interests of employers 

in the Virgin Islands, seek declaratory and injunctive 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 official 

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, seek to 

enforce the protections provided by the WDA, and the 

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 cause of 

action challenging the statute on behalf of their member 

employers. Instead, the intervenors challenge the 

associations' ability to argue that the WDA is preempted 

based on conflict with S 7. 

The appellants claim that because employers, unlike

employees, have no substantive rights under S 7, they are 

precluded from relying on S 7 for their preemption claim. 

Section 7 provides: 

 Employees shall have the right to self-organization, to 

 form, join, or assist labor organizations, to bargain 

 collectively through representatives of their own 

 choosing, and to engage in other concerted activities 

 for the purpose of collective bargaining or other mutual 

 aid or protection, and shall also have the right to 

_________________________________________________________________ 

3. The associations also allege that "supervisors cannot be covered by the 

[WDA] pursuant to the Supreme Court's decision in Beasley 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 it is therefore not 

before 

us on appeal. 

 13 
 refrain from any or all such activities except 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 section 

 158(a)(3) of this title. 

29 U.S.C. S 157. 

It is indeed evident, as the appellants argue, thatS 7 

confers rights on employees rather than employers, but 

that is not determinative of the associations' standing to 

raise that issue. We know of no governing authority to the 

effect that the federal statutory provision which allegedly 

preempts enforcement of local legislation by conflict 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 when 

the federal law secures no individual substantive rights for 

the party arguing preemption. See, e.g., California Fed. Sav. 

& Loan Assoc. v. Guerra, 479 U.S. 272 (1987) (action for 

declaratory and injunctive relief brought by employers 

arguing that California state law was preempted by the 

Pregnancy Discrimination Act of 1978, which gives rights to 

pregnant employees under Title VII); Ray v. Atlantic 

Richfield Co., 435 U.S. 151 (1978) (action brought by a 

tanker company arguing that Washington Tanker Law was 

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 standing 

to bring this action challenging enforcement of the WDA 

does not end the jurisdictional inquiry, for the District 

Court must also have subject matter jurisdiction over the 

associations' claims. See 48 U.S.C. S 1612(a) (providing that 

the District Court of the Virgin Islands "shall have the 

jurisdiction of a District Court of the United States"); see 

generally Estate of Thomas Mall, Inc. v. Territorial Court of 

the V.I., 923 F.2d 258, 260-64 (3d Cir. 1991) (explaining 

jurisdictional system for civil actions in the Virgin Islands). 

Jurisdiction is established in this case under 28 U.S.C. 

S 1331. The associations seek injunctive and declaratory 

relief from enforcement of a territorial regulation on the 

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

federal statute which grants employers as well as 

employees substantive federal rights. See Golden State 

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 Machinists 

preemption).4 The Supreme Court has recognized that such 

a challenge presents a federal question which the federal 

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 Sch. 

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 agreed, 

that the WDA is preempted by the NLRA under the 

Machinists doctrine because it regulates conduct that 

Congress meant to leave unregulated. That argument is 

_________________________________________________________________ 

4. The associations assert that, in addition to the right conferred by the 

NLRA under Machinists preemption, the NLRA also confers a substantive 

right of "voluntary unionism" on employers. Our research uncovered no 

case in which a court has recognized such a right. Moreover, even if 

such a right were to exist, we find questionable the District Court's 

assertion that the right would enure in the text ofS 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 the structure and goals 

of the NLRA as a whole. In any event, we do not reach 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 capacities 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 the 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 2201, applies to the 

Virgin Islands. Cf. 28 U.S.C. S 2201 (authorizing such relief by "any 

court of the United States"). 

 15 
foreclosed by the Supreme Court's decisions in Metropolitan 

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 statute 

that required that specified minimum mental health care 

benefits be provided to a state resident who was insured 

under a general insurance policy, an accident or sickness 

insurance policy, or an employee health-care plan that 

covered hospital and surgical expenses. Metropolitan Life 

Insurance Co. brought suit for declaratory and injunctive 

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 terms in 

collective-bargaining agreements to the free play of 

economic forces." Metropolitan Life, 471 U.S. at 748. After 

examination of the congressional concerns behind the 

enactment of the NLRA, the Court rejected the argument 

that state regulations imposing minimum substantive

standards on contract terms are preempted under 

Machinists. As the Court explained: 

 The NLRA is concerned primarily with establishing an 

 equitable process for determining terms and conditions 

 of employment, and not with particular substantive 

 terms of the bargain that is struck when the parties 

 are negotiating from relatively equal positions. . .. The 

 evil Congress was addressing thus was entirely 

 unrelated to local or federal regulation establishing 

 minimum terms of employment. . . . No incompatibility 

 exists, therefore, between federal rules designed to 

 restore the equality of bargaining power, and state or 

 federal legislation that imposes minimal substantive 

 requirements on contract terms negotiated between 

 parties to labor agreements, at least so long as the 

 purpose of the state legislation is not incompatible with 

 the[ ] general goals of the NLRA. 

Id. at 753-55. 

The Court addressed a similar argument two years later 

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 plant 

 16 
closing, unless the employee was "covered by a contract 

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 certiorari to 

the Supreme Court, the owner of the closed plant, like the 

insurer in Metropolitan Life, argued that preemption of the 

state statute was necessary under Machinists"to further 

Congress' intent that the conduct involved be unregulated 

because [it should be] left to be controlled by the free play 

of economic forces." Id. at 19-20 (internal quotations 

omitted). It argued that its case was not controlled by 

Metropolitan Life because the statutory obligation under the 

Maine statute applied only in the absence of an agreement 

between an employer and its employees. 

The Fort Halifax Court confirmed its holding in 

Metropolitan Life that a state law establishing a minimum 

employment standard is not preempted by the NLRA, 

adding that there is no preemption even when the state law 

permits parties to an employment agreement to contract 

out of the protections provided by the law. See id. at 22. 

The Court explained: 

 It is true that the Maine statute gives employees 

 something for which they otherwise might have to 

 bargain. That is true, however, with regard to any state 

 law that substantively regulates employment 

 conditions. Both employers and employees come 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 757). 

Metropolitan Life and Fort Halifax clearly stand for the 

proposition that, in enacting the NLRA, Congress did not 

intend to prevent states from establishing minimum 

substantive requirements for contract terms. See generally 

Metropolitan Life, 471 U.S. at 754-55 (discussing goals of 

the NLRA). Although the associations insist that the WDA 

is not a minimum substantive requirement like the ones at 

issue in Metropolitan Life or Fort Halifax, they provide no 

principled basis for distinguishing the WDA from the 

statutes upheld in those cases. 

 17 
The associations attempt to draw support from two cases 

decided in the Court of Appeals for the Ninth Circuit. In the 

first, the court held that a wrongful discharge claim 

brought by an employee under the Montana Wrongful 

Discharge from Employment Act, Mont. Code Ann. SS 39-2- 

901 et seq. (providing that discharge must be for good 

cause), was preempted by the NLRA. See Barnes v. Stone 

Container Corp., 942 F.2d 689 (9th Cir. 1991). A look at the 

facts of Barnes reveals, however, that it is of little value 

here. 

The collective-bargaining agreement between Barnes's 

employer, Stone Container Corp., and his union expired 

and, after its extension for unsuccessful negotiations, the 

employer exercised its right to terminate the agreement 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 unfair 

labor practice charge on behalf of Barnes, asserting that 

the stated reason for his discharge was pretextual and that 

Stone Container fired him for his union activity. After 

investigation, the NLRB found no basis for the retaliation 

charge and the union withdrew the complaint. 

Barnes then filed an action under the Montana wrongful 

discharge act, alleging dismissal without just cause. 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 which 

the action had been removed, arguing preemption under 

Machinists, because the wrongful discharge act would 

impose a just cause term where one did not exist. The 

district court denied summary judgment but the court of 

appeals reversed. The court held that permitting a wrongful 

discharge action during the period after contract expiration 

but before a bargaining impasse is the sort of entanglement 

Machinists sought to avoid, as it altered significantly the 

incentives to negotiate. The court did not invalidate the 

state statute but merely held its use in those unique 

circumstances was preempted. 

That the Barnes decision is limited to a narrow set of 

circumstances was made clear by the Ninth Circuit itself 

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

70 F.3d 69, 73 (9th Cir. 1995) (holding that because a state 

statutory remedy was not invoked until after bargaining 

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 held 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 preempted by 

the NLRA under Machinists preemption. See id. at 498. The 

court noted that imposition of such substantive 

requirements affects the bargaining process and could 

dictate the results of a contract, id. at 501, an undue 

governmental interference with the collective bargaining 

processes protected by the NLRA, id. at 504. 

Even if we were to agree with the Ninth Circuit that 

Metropolitan Life and Fort Halifax permit the extension of 

Machinists preemption to displace state law that imposes 

substantive minimum requirements for contract terms

rather than regulates the use of economic bargaining 

weapons, see id. at 501, the county ordinance at issue in 

that case is remarkably different from the WDA. In 

establishing nine statutory bases for lawful discharge in the 

Virgin Islands, the WDA neither regulates the process of 

bargaining nor upsets the balance of power of management 

on one side and labor on the other that is established by 

the NLRA. 

Instead, the WDA is directed to limiting the permissible 

bases for discharge of an employee to a broad list,

including, inter alia: engaging in conflicting business; 

engaging in insolent or offensive conduct; using intoxicants 

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 

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

covering all or almost all legitimate reasons for discharge. 

The associations also argue that the WDA cannot be a 

minimum employment standard because it treats union

and non-union employees differently by permitting the 

union to contract its members out of the protections 

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" unionization, 

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 supermarket, 

was covered by a collective-bargaining agreement which 

provided for binding arbitration for disputes as to the 

interpretation or application of the agreement, including 

grievances arising from allegedly unjust discharge or 

suspension. Id. at 110. When Livadas was discharged, she 

demanded her payment immediately, but the store manager 

refused, instead sending her payment by mail. Livadas filed 

an administrative claim against Safeway for a statutory 

penalty for the three-day delay caused by the mailing, but 

the Commissioner of Labor refused to enforce the claim 

because Livadas was covered by a collective-bargaining 

agreement containing an arbitration clause. Livadas then 

filed 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 because 

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 an 

arbitration clause. See id. at 117. In doing so, the Court 

distinguished Fort Halifax, which involved a minimum 

employment standard with an opt-out provision, in part on 

the ground that "the minimum protections of Maine's plantclosing law were relinquished not by the mere act of signing 

an employment contract (or collective-bargaining 

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

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

 While the Commissioner and her amici call our 

 attention to a number of state and federal laws that 

 draw distinctions between union and nonunion

 represented employees, virtually all share the 

 important second feature observed in [Fort Halifax], 

 that union-represented employees have the full 

 protection of the minimum standard, absent any 

 agreement for something different. These `opt out' 

 statutes are thus manifestly different in their operation 

 (and their effect on federal rights) from the 

 Commissioner's rule that an employee forfeits his 

 state-law rights the moment a collective-bargaining 

 agreement with an arbitration clause is entered into. 

 Hence, our holding that the Commissioner's unusual 

 policy is irreconcilable with the structure and purposes 

 of the Act should cast no shadow on the validity of 

 these familiar and narrowly drawn opt-out provisions. 

Id. at 131-32 (citations omitted). In a footnote, the 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 `benefit' 

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 express 

terms of union contract. Like the Maine statute at issue in 

Fort Halifax, and unlike the California Commissioner's 

policy in Livadas, the WDA does not force an employee to 

choose between collective bargaining and the protections of 

state law; rather, it protects all Virgin Islands employees, 

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 minimum 

employment requirements are not inconsistent with the 

NLRA even when they provide for a union contract opt-out. 

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

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 trigger 

preemption by the NLRA. See Viceroy Gold Corp. v. Aubry, 

75 F.3d 482, 490 (9th Cir. 1996) (holding that statute 

limiting mine workers to an 8-hour day unless otherwise 

provided in a collective bargaining agreement is not 

preempted); National Broadcasting Co., 70 F.3d at 73 

(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 District 

Court's opinion in this case is the unsettling supposition 

that by enacting the WDA the Virgin Islands legislature is 

regulating in an area that has traditionally been left to the 

freedom of contract between an employer and an employee. 

The Supreme Court has made clear that Machinists 

preemption does not extend into the realm of establishment 

of minimum employment standards like that established 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." Livadas, 

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 such 

legislation is not preempted by the NLRA. 

IV. 

CONCLUSION 

We have determined that the District Court's conclusion 

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 with S 7 

was based on erroneous legal analysis. It follows that we 

will vacate the District Court's order granting the

preliminary injunction. 

 22 
It is apparent that although the District Court referred to 

testimony introduced by the associations at the hearing 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 argument, 

the parties seemed to agree that there are no factual issues 

to be decided and no further evidence to be taken that 

would be relevant to a ruling on a permanent injunction. 

The Supreme Court has counseled that "if a district court's 

ruling rests solely on a premise as to the applicable rule of 

law, and the facts are established or of no controlling 

relevance, that ruling may be reviewed even though the 

appeal is from the entry of a preliminary injunction." 

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 District 

Court the associations' claim that the WDA should not be 

applied to supervisors. Accordingly, we will not presume to 

go further than the appellants request, i.e. that we 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