Opinion ID: 185756
Heading Depth: 2
Heading Rank: 2

Heading: The Executive Order and the NLRA

Text: 19 The district court held that because [p]rivate entities are being prohibited ... from requiring PLAs that are expressly allowed by the NLRA, the NLRA preempts § 3 of the Executive Order insofar as it applies to private recipients of federal funding who act as employers in construction projects, 172 F.Supp.2d at 167 (citing San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775 (1959)). In that case, the Supreme Court held that when the activities which a State purports to regulate are protected by § 7 of the [NLRA], or constitute an unfair labor practice under § 8, due regard for the federal enactment requires that state jurisdiction must yield. Id. at 244, 79 S.Ct. 773. The district court also held that because the Executive Order impermissibly attempts to create an ideally balanced state of bargaining according to the President's conception of open competition among labor and management, BCTD, 172 F.Supp.2d at 167, the NLRA preempts the Executive Order under the teaching of International Association of Machinists & Aerospace Workers v. Wisconsin Employment Relations Commission, 427 U.S. 132, 96 S.Ct. 2548, 49 L.Ed.2d 396 (1976). In that case the Court held that neither a state government nor the National Labor Relations Board may regulate an aspect of labor relations that the Congress intended be controlled by the free play of economic forces. Id. at 140, 96 S.Ct. 2548.  20 The Government argues that we need not determine whether the Executive Order runs afoul of the principles established in Garmon and Machinists because Executive Order 13202 clearly constitutes proprietary action rather than regulation. We agree. 21 As the plaintiffs expressly recognize, the principles of NLRA preemption come into play only when the Government is regulating within a protected zone, and not when it is acting as a proprietor, interact[ing] with private participants in the marketplace. Bldg. & Constr. Trades Council v. Associated Builders & Contractors, 507 U.S. 218, 227, 113 S.Ct. 1190, 122 L.Ed.2d 565 (1993) ( Boston Harbor ). The relevant distinction is whether, in placing a labor-related condition upon its award either of a construction contract or of funds to another entity that will award the construction contract, the Government acts just [as] a private contractor would act, and conditions its purchasing upon the very sort of labor agreement that Congress explicitly authorized and expected frequently to find, id. at 233, 113 S.Ct. 1190, or instead seeks to affect conduct unrelated to the employer's performance of contractual obligations to the [Government id. at 229, 113 S.Ct. 1190; accord, Chamber of Commerce, 74 F.3d at 1335. 22 As the Government maintains, § 1 of the Executive Order embodies just the type of decision regarding the use of labor agreements that a private project owner would be free to make. The construction proviso of the NLRA, 29 U.S.C. § 158(f), explicitly permits employers in the construction industry ... to enter into pre-hire agreements, Boston Harbor, 507 U.S. at 230, 113 S.Ct. 1190, but nothing in that proviso prevents an employer from refusing to enter into such agreements. Thus, § 1 leaves contractors free to determine whether they will use PLAs on government contracts, just as they may determine whether to use PLAs on projects for private owner-developers that neither require nor prohibit their use. 23 The plaintiffs argue that at least § 3 of the Executive Order is regulatory rather than proprietary because it applies only to federally funded rather than to Government-owned projects; but that argument proceeds from too crabbed an understanding of proprietorship. First, the Government unquestionably is the proprietor of its own funds, and when it acts to ensure the most effective use of those funds, it is acting in a proprietary capacity. Second, that the Government is a lender to or a benefactor of, rather than the owner of, a project is not inconsistent with its acting just as would a private entity; a private lender or benefactor also would be concerned that its financial backing be used efficiently. In sum, the distinction between federally owned and federally funded projects is not relevant here. 24 The plaintiffs also contend that when the Government acts through blanket, across-the-board rules that `flatly prohibit'... certain actions on the part of its contractors and recipients of its financial assistance, its conduct is clearly regulatory, whereas it acts in a proprietary capacity when it makes an ad hoc contracting decision. According to the plaintiffs, this distinction finds support in Chamber of Commerce, 74 F.3d at 1337 (observing Executive Order No. 12,954 cannot be equated to the ad hoc contracting decision made by [the State] in seeking to clean up Boston Harbor); but the plaintiffs misread that case, as did the district court, see BCTD, 172 F.Supp.2d at 170 (EO 13202 sets a blanket rule and does not require government agencies to act on a project-by-project basis, as was the case in Boston Harbor ). In Chamber of Commerce, we held that Executive Order No. 12,954 was regulatory not because it decreed a policy of general application, as opposed to a case-by-case regime, but because it disqualified companies from contracting with the Government on the basis of conduct unrelated to any work they were doing for the Government. See 74 F.3d at 1338 (executive order ha[d] the effect of forcing corporations wishing to do business with the federal government not to hire permanent replacements even if the strikers are not the employees who provide the goods or services to the government). It is not surprising, therefore, that neither the district court nor the plaintiffs offer any good explanation why a blanket rule — applicable to all government contracts, but not to the non-government contracts of those who do business with the Government — is somehow inconsistent with the action of a proprietor. We agree with the Government that there simply is no logical justification for holding that if an executive order establishes a consistent practice regarding the use of PLAs, it is regulatory even though the only decisions governed by the executive order are those that the federal government makes as [a] market participant. See Kahn, 618 F.2d at 789 (under Procurement Act, President may exercise authority over those larger administrative and management issues that involve the Government as a whole). 25 A condition that the Government imposes in awarding a contract or in funding a project is regulatory only when, as the Supreme Court explained in Boston Harbor, it addresse[s] employer conduct unrelated to the employer's performance of contractual obligations to the [Government]. 507 U.S. at 228-29, 113 S.Ct. 1190. Here the Government correctly notes that the impact of [the] procurement policy [expressed in Executive Order No. 13,202] extends only to work on projects funded by the government. Because the Executive Order does not address the use of PLAs on projects unrelated to those in which the Government has a proprietary interest, the Executive Order establishes no condition that can be characterized as regulatory. 26 Finally, the plaintiffs point out that § 1(a) of the Executive Order could be read to prohibit any recipient of federal funds from using a PLA for work on related construction project(s) that are not funded by the Government. The meaning of the word related in § 1(a) is indeed unclear. The plaintiffs argue that as a result the Executive Order cannot fairly be characterized as affecting only the particular contract in which the Government has a financial interest. When confronted with this reading, however, the Government disavowed any construction of the Executive Order that would prohibit an entity that uses a PLA in a non-federally funded project from receiving federal funds. We have no reason to doubt, and every reason to hold the Government to, that interpretation of § 1(a).