Court Opinion

ID: 3038905
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:59:37.851437+00
Date Added: 2024-06-11T11:48:52.383453
License: Public Domain

Volume 1 of 2

                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

CHAMBER OF COMMERCE OF THE              
UNITED STATES; CALIFORNIA
CHAMBER OF COMMERCE;
EMPLOYERS GROUP; CALIFORNIA
HEALTHCARE ASSOCIATION;
CALIFORNIA MANUFACTURERS AND
TECHNOLOGY ASSN.; CALIFORNIA
ASSOCIATION OF HEALTH FACILITIES;
CALIFORNIA ASSOCIATION OF HOME
& SERVICES FOR THE AGING; BETTEC
CORPORATION; MARKSHERM
CORPORATION; ZILACO INC., ZILACO;             No. 03-55166
DEL RIO HEALTHCARE, INC.;                      D.C. No.
BEVERLY HEALTH & REHABILITATION             CV-02-00377-GLT
SERVICES, INC. dba Beverly Manor
Costa Mesa; INTERNEXT GROUP,
                Plaintiffs-Appellees,
CALIFORNIA LABOR FEDERATION,
AFL-CIO; AMERICAN
FEDERATION OF LABOR AND
CONGRESS OF INDUSTRIAL
ORGANIZATIONS,
            Intervenors-Appellants,
                 v.
                                        

                            11765
11766         CHAMBER   OF   COMMERCE v. LOCKYER

BILL LOCKYER, Attorney General,         
in his capacity as Attorney
General of the State of California;
DEPARTMENT OF HEALTH SERVICES;
FRANK G. VANACORE, as the Chief
of the Audit Review and Analysis
Section of the California               
Department of Health Services;
DIANA M. BONTA, R.N., Dr., Ph.D,
as the Director of the California
Department of Health Services,
                        Defendants.
                                        

CHAMBER OF COMMERCE OF THE              
UNITED STATES; CALIFORNIA
CHAMBER OF COMMERCE;
EMPLOYERS GROUP; CALIFORNIA
HEALTHCARE ASSOCIATION;
CALIFORNIA MANUFACTURERS AND
TECHNOLOGY ASSN.; CALIFORNIA
ASSOCIATION OF HEALTH FACILITIES;             No. 03-55169

                                        
CALIFORNIA ASSOCIATION OF HOME                  D.C. No.
& SERVICES FOR THE AGING; BETTEC            CV-02-00377-GLT
CORPORATION; MARKSHERM
                                               OPINION
CORPORATION; ZILACO INC., ZILACO;
DEL RIO HEALTHCARE, INC.;
BEVERLY HEALTH & REHABILITATION
SERVICES, INC. dba Beverly Manor
Costa Mesa; INTERNEXT GROUP,
                Plaintiffs-Appellees,
                and
                                        
              CHAMBER   OF   COMMERCE v. LOCKYER      11767

CALIFORNIA LABOR FEDERATION,          
AFL-CIO; AMERICAN
FEDERATION OF LABOR AND
CONGRESS OF INDUSTRIAL
ORGANIZATIONS,
            Intervenors-Appellants,
                 v.
BILL LOCKYER, Attorney General,
in his capacity as Attorney
General of the State of California;   
DEPARTMENT OF HEALTH SERVICES;
FRANK G. VANACORE, as the Chief
of the Audit Review and Analysis
Section of the California
Department of Health Services;
DIANA M. BONTA, R.N., Dr., Ph.D,
as the Director of the California
Department of Health Services,
             Defendants-Appellants.
                                      
       Appeal from the United States District Court
          for the Central District of California
        Gary L. Taylor, District Judge, Presiding

                 Argued and Submitted
        March 21, 2006—San Francisco, California

                 Filed September 21, 2006

Before: Mary M. Schroeder, Chief Judge, Stephen Reinhardt,
   Robert R. Beezer, Alex Kozinski, Andrew J. Kleinfeld,
         Michael Daly Hawkins, Sidney R. Thomas,
        Barry G. Silverman, M. Margaret McKeown,
        Kim McLane Wardlaw, Raymond C. Fisher,
 Richard A. Paez, Johnnie B. Rawlinson, Richard R. Clifton
         and Consuelo M. Callahan, Circuit Judges.
11768   CHAMBER   OF   COMMERCE v. LOCKYER
          Opinion by Judge Fisher;
          Dissent by Judge Beezer
              CHAMBER   OF   COMMERCE v. LOCKYER      11771

                         COUNSEL

Bill Lockyer, Tom Greene, Richard T. Waldow, Angela
Sierra (argued), Sacramento, California, for the defendants-
appellants.
11772         CHAMBER   OF   COMMERCE v. LOCKYER
Stephen P. Berzon, Scott A. Kronland (argued), Stacey M.
Leyton, Altshuler, Berzon, Nussbaum, Rubin & Demain, San
Francisco, California, for the intervenors-appellants.

Bradley W. Kampas (argued), D. Gregory Valenza, Scott
Oborne, Jackson Lewis LLP, San Francisco, California, for
the plaintiffs-appellees.

John H. Ferguson, Division of Enforcement Litigation, Wash-
ington, DC, for amicus curiae National Labor Relations
Board.

Daniel V. Yager, McGuiness Norris & Williams, LLP, Wash-
ington, DC, for amici curiae Associated Builders and Con-
tractors, Inc. and LPA, Inc.

Fran M. Layton, Shute, Mihaly & Weinberger LLP, San Fran-
cisco, California, for amicus curiae South Coast Air Quality
Management District.

                          OPINION

FISHER, Circuit Judge:

   The question before us is whether a state’s exercise of its
sovereign power to control the use of its funds conflicts with
national labor policy as expressed in the National Labor Rela-
tions Act (“NLRA”), 29 U.S.C. §§ 151-169. Specifically, two
provisions in a California statute forbid employers who
receive state grant or program funds in excess of $10,000
from using those funds to assist, promote or deter union orga-
nizing. We hold that California’s grant and program fund
restrictions do not undermine federal labor policy, are not pre-
empted by the NLRA and do not violate the First Amend-
ment.
                  CHAMBER     OF   COMMERCE v. LOCKYER                  11773
                   FACTUAL BACKGROUND

  On September 28, 2000, California enacted Assembly Bill
No. 1889, Cal. Gov’t Code §§ 16645-16649 (collectively,
“AB 1889”). The preamble of the statute declares:

      It is the policy of the state not to interfere with an
      employee’s choice about whether to join or to be
      represented by a labor union. For this reason, the
      state should not subsidize efforts by an employer to
      assist, promote, or deter union organizing. It is the
      intent of the Legislature in enacting this act to pro-
      hibit an employer from using state funds and facili-
      ties for the purpose of influencing employees to
      support or oppose unionization and to prohibit an
      employer from seeking to influence employees to
      support or oppose unionization while those employ-
      ees are performing work on a state contract.

§ 16645, Historical and Statutory Notes, Section 1 of Stats.
2000, c. 872.

   Two provisions of the California statute, sections 16645.2
and 16645.7, are at issue in this appeal.1 Section 16645.2(a)
bars private employers who are “recipient[s] of a grant of
state funds” from “us[ing] the funds to assist, promote, or
deter union organizing.” Section 16645.7(a) bars “[a] private
employer receiving state funds in excess of [$10,000] in any
calendar year on account of its participation in a state pro-
gram” from using program funds “to assist, promote, or deter
union organizing.” The phrase “assist, promote, or deter union
organizing” includes “any attempt by an employer to influ-
ence the decision of its employees in this state or those of its
  1
   The parties stipulated to the district court’s entry of a partial final judg-
ment as to preemption of § 16645.2 and § 16645.7 to facilitate prompt
appellate review of the district court’s preemption ruling regarding these
two sections only.
11774            CHAMBER    OF   COMMERCE v. LOCKYER
subcontractors regarding . . . [w]hether to support or oppose
a labor organization that represents or seeks to represent those
employees . . . . [or] [w]hether to become a member of any
labor organization.” § 16645(a)(1)-(2). The statute specifies
as prohibited “any expense, including legal and consulting
fees and salaries of supervisors and employees, incurred for
research for, or preparation, planning, or coordination of, or
carrying out, an activity to assist, promote, or deter union
organizing.” § 16646(a). Expressly exempted from the stat-
ute’s reach are “activit[ies] performed” or “expense[s]
incurred” in connection with “[a]ddressing a grievance or
negotiating or administering a collective bargaining agree-
ment” and “[n]egotiating, entering into, or carrying out a vol-
untary recognition agreement with a labor organization.”
§ 16647(a), (d).

   The statute requires employers covered by sections 16645.2
or 16645.7 to certify that no state funds will be used to assist,
promote or deter union organizing. §§ 16645.2(c), 16645.7(b).
It also requires employers who make expenditures to assist,
promote or deter union organizing to maintain and provide
upon request “records sufficient to show that state funds have
not been used for those expenditures.” §§ 16645.2(c),
16645.7(c).2 If an employer commingles state and other funds,
  2
    Despite the absence of any finding by the district court that
§ 16645.2(c) and § 16645.7(c) are onerous, the dissent insists that these
provisions entail “burdensome and detailed record-keeping,” impose
“seemingly impossible compliance burdens” and are “daunting.” (Dissent
at 11815, 11816, 11817.) The dissent even suggests that these provisions
require “an employer [to] create and maintain two completely separate
accounting and payroll systems.” (Dissent at 11817.) The statute, how-
ever, does not require “employers to maintain records in any particular
form,” § 16648, and leaves employers free to design their accounting and
payroll systems however they wish, provided only that they have “records
sufficient to show that state funds have not been used” to assist, promote
or deter organizing. §§ 16645.2(c), 16645.7(c). Moreover, the only expert
testimony in the record on these provisions states that they provide
employers “flexibility in establishing proper accounting procedures and
controls,” impose no burden greater than numerous other common grant
restrictions and in fact “appear to be significantly less burdensome than
the detailed requirements for federal grant recipients . . . .”
                  CHAMBER    OF   COMMERCE v. LOCKYER                 11775
the statute presumes that any expenditures to assist, promote
or deter union organizing derive in part from state funds.
§ 16646(b).

   Employers who violate sections 16645.2 or 16645.7 are
subject to fines and penalties, which include the disgorgement
of the state funds used for the prohibited purposes and a civil
penalty paid to the state that is equal to twice the amount of
those funds. §§ 16645.2(d), 16645.7(d). Suspected violators
may be sued by the state Attorney General or by any private
taxpayer. § 16645.8(a)-(c). Prevailing plaintiffs, and prevail-
ing taxpayer intervenors who make substantial contributions
to an action under this section, are “entitled to recover reason-
able attorney’s fees and costs.”3 § 16645.8(d).

   In April 2002, plaintiffs-appellees (collectively, the “Cham-
ber of Commerce”) brought an action for injunctive and
declaratory relief challenging the statute facially on numerous
grounds, including NLRA preemption. The AFL-CIO and
others (collectively, the “AFL-CIO”) intervened. In May
2002, the Chamber of Commerce moved for summary judg-
ment. Defendants, who are the California Department of
Health Services and state officials sued in their official capac-
ity (collectively, “California”), filed cross motions for sum-
mary judgment in August 2002.

  On September 16, 2002, the district court granted partial
summary judgment in favor of the Chamber of Commerce.
The district court determined that the NLRA preempted sec-
  3
    The dissent finds it significant that the statute allows private taxpayers
to sue suspected violators. (Dissent at 11815-16.) In this respect, the stat-
ute is no different from any number of other federal and state laws or qui
tam causes that enable private attorneys general to help detect, punish and
deter wrongdoing. In contrast to some such statutes (e.g., § 4 of the Clay-
ton Act, 15 U.S.C. § 15), which encourage private suits by permitting
plaintiffs to be awarded treble damages, AB 1889 only allows private liti-
gants to recover attorney’s fees and costs — the damages go to the state.
See § 16645.8(d).
11776         CHAMBER   OF   COMMERCE v. LOCKYER
tions 16645.2 and 16645.7 under the Supreme Court’s
Machinists doctrine because the provisions “regulate[d]
employer speech about union organizing under specified cir-
cumstances, even though Congress intended free debate.”
Chamber of Commerce v. Lockyer, 225 F. Supp. 2d 1199,
1205 (C.D. Cal. 2002); see Lodge 76, Int’l Ass’n of Machin-
ists v. Wisc. Employment Relations Comm’n, 427 U.S. 132
(1976). The district court entered judgment in January 2003
and issued an injunction prohibiting California and the AFL-
CIO from taking any actions to enforce sections 16645.2 and
16645.7 against any employer subject to the NLRA. Califor-
nia and the AFL-CIO appealed.

   A three-judge panel of our court affirmed the district court,
but the panel then withdrew its opinion upon the grant of
appellants’ petition for panel rehearing. Chamber of Com-
merce v. Lockyer, 364 F.3d 1154 (9th Cir. 2004), withdrawn
and reh’g granted, 408 F.3d 590 (9th Cir. 2005). On rehear-
ing, a divided panel issued a second opinion, Chamber of
Commerce v. Lockyer, 422 F.3d 973 (9th Cir. 2005), which
was in turn vacated and withdrawn from publication for
reconsideration en banc. See Chamber of Commerce v. Lock-
yer, 435 F.3d 999 (9th Cir. 2006); Chamber of Commerce v.
Lockyer, 437 F.3d 890 (9th Cir. 2006). We now reverse the
district court’s judgment that the NLRA preempts the Califor-
nia statute and vacate the court’s injunctive order.

                STANDARD OF REVIEW

   We review de novo a district court’s grant of summary
judgment and preemption analysis. See Winterrowd v. Am.
Gen. Annuity Ins. Co., 321 F.3d 933, 937 (9th Cir. 2003);
Ting v. AT&T, 319 F.3d 1126, 1135 (9th Cir. 2003). “A facial
challenge to a legislative Act is . . . the most difficult chal-
lenge to mount successfully, since the challenger must estab-
lish that no set of circumstances exists under which the Act
would be valid.” Rust v. Sullivan, 500 U.S. 173, 183 (1991)
(internal quotation marks and citation omitted).
                  CHAMBER   OF   COMMERCE v. LOCKYER                11777
                            DISCUSSION

I.       Market Participant Exception

   [1] Before addressing the merits of the preemption issue,
we must first decide whether California’s condition on the use
of its funds constitutes “regulation.” “A prerequisite to pre-
emption [under the NLRA] is a finding that the state or local
action in question constitutes regulation of labor relations
between employers and employees.” Alameda Newspapers,
Inc. v. City of Oakland, 95 F.3d 1406, 1413 (9th Cir. 1996).
The NLRA “does not preempt actions taken by a state when
it . . . acts as a mere proprietor or market participant.” Dil-
lingham Constr. N.A., Inc. v. County of Sonoma, 190 F.3d
1034, 1037 (9th Cir. 1999) (citing Bldg. & Constr. Trades
Council of the Metro. Dist. v. Associated Builders & Contrac-
tors of Mass./R.I., Inc., 507 U.S. 218, 227 (1993) (“Boston
Harbor”)). We conclude that California has acted as a regula-
tor in enacting sections 16645.2 and 16645.7, and that the
market participant exception does not apply.

   Two Supreme Court cases define the scope of the market
participant exception: Wisconsin Department of Industry v.
Gould Inc., 475 U.S. 282 (1986), and Boston Harbor, 507
U.S. at 218.4 In Gould, the Court addressed a Wisconsin stat-
ute that forbade state procurement agents from using state
funds to purchase products manufactured or sold by “labor
law violators,” i.e., employers who had violated the NLRA
three times within a five-year period. 475 U.S. at 283-84.
Wisconsin conceded that it did not have the power to “bar its
     4
    Our discussion here is limited to the context of the market participant
exception under the NLRA. A market participant exception exists in a
number of other contexts, such as cases under the Commerce Clause. See,
e.g., Big Country Foods, Inc. v. Bd. of Educ. of Anchorage, 952 F.2d 1173,
1177-79 (9th Cir. 1992) (discussing market participant exception in the
dormant Commerce Clause context). We do not opine on the applicability
of our reasoning to the market participant exception in these other con-
texts.
11778          CHAMBER   OF   COMMERCE v. LOCKYER
residents from doing business with repeat violators of the
NLRA.” Id. at 287. It argued, however, that its statutory
scheme was not unlawful because the statute merely regulated
the spending power of its procurement officers. Id. The Court
found this to be a “distinction without a difference” because
the Wisconsin statute “serve[d] plainly as a means of enforc-
ing the NLRA.” Id. Wisconsin “concede[d], as [the Court
thought] it must, that the point of [its] statute is to deter labor
law violations and to reward fidelity to the law.” Id. (internal
quotation marks omitted). The Court emphasized the “rigid
and undiscriminating manner in which the statute operate[d],”
and concluded that “[n]o other purpose could credibly be
ascribed” to the statute than creating an additional remedy for
violations of the NLRA. Id. at 287.

   In Boston Harbor, on the other hand, the Court held that
the Massachusetts Water Resources Authority, a state agency,
acted as a market participant when it required contractors
working on the cleanup of Boston Harbor to agree to the
terms of a project labor agreement negotiated by a project
construction manager and a labor union. 507 U.S. at 232. The
Court concluded that there was “no question but that [the state
agency] was attempting to ensure an efficient project that
would be completed as quickly and effectively as possible at
the lowest cost.” Id. The Court also noted that “the challenged
action in this litigation was specifically tailored to one partic-
ular job, the Boston Harbor cleanup project,” and that there
was no reason to believe that the government was motivated
by anything other than purely proprietary interests. Id.

   We have applied these cases in a number of contexts with-
out formulating a general rule about when the market partici-
pant exception applies. We have held that the market
participant exception did not apply to a California law that
permitted employees in state-approved apprenticeship pro-
grams to receive less than the prevailing wage, but required
employees in non-approved apprenticeship programs to
receive the prevailing wage. Dillingham, 190 F.3d at 1037-38
                 CHAMBER    OF   COMMERCE v. LOCKYER               11779
(noting that the apprenticeship standards were not “based
upon unique needs that the . . . project presented” and that the
state was not motivated by “management concerns” in imple-
menting the standards). On the other hand, we have applied
the exception and held that the City of Oakland was a market
participant when it canceled a newspaper subscription and
refused to continue to pay for advertising during a labor dis-
pute. Alameda Newspapers, 95 F.3d at 1415-16. And we have
held that a city may require private contractors to adhere to
the terms of a collective bargaining agreement when doing
business with the city. Associated Builders & Contractors,
Inc. v. City of Seward, 966 F.2d 492, 496 (9th Cir. 1992).5

   [2] These cases teach that when a state uses its spending
power in a manner that is essentially not proprietary, the mar-
ket participant exception will not apply and the state action
may be subject to NLRA preemption. We draw upon the rea-
soning of the Fifth Circuit, which asks two discrete questions
to determine when the market participant exception applies:

     First, does the challenged action essentially reflect
     the entity’s own interest in its efficient procurement
     of needed goods and services, as measured by com-
     parison with the typical behavior of private parties in
     similar circumstances? Second, does the narrow
     scope of the challenged action defeat an inference
   5
     City of Seward, which was decided before Boston Harbor, creates
some confusion about the relation of the market participant exception to
other NLRA preemption doctrines. City of Seward concluded that “action
taken by the state as a market participant is not automatically immune
from NLRA preemption.” 966 F.2d at 495. Boston Harbor, however, held
explicitly that the “[NLRA] preemption doctrines apply only to state regu-
lation,” and that “a State may act without offending the pre-emption prin-
ciples of the NLRA when it acts as a proprietor.” 507 U.S. at 227, 229-30.
Boston Harbor, therefore, makes clear that once a state’s action falls
within the “market participant” exception, it is not preempted under the
NLRA. To the extent that City of Seward states otherwise, we hold it over-
ruled.
11780         CHAMBER   OF   COMMERCE v. LOCKYER
    that its primary goal was to encourage a general pol-
    icy rather than address a specific proprietary prob-
    lem? Both questions seek to isolate a class of
    government interactions with the market that are so
    narrowly focused, and so in keeping with the ordi-
    nary behavior of private parties, that a regulatory
    impulse can be safely ruled out.

Cardinal Towing & Auto Repair, Inc. v. City of Bedford, 180
F.3d 686, 693 (5th Cir. 1999).

   [3] The first question, which looks to the nature of the
expenditure, protects comprehensive state policies with wide
application from preemption, so long as the type of state
action is essentially proprietary. See, e.g., N. Ill. Chapter of
Associated Builders & Contractors, Inc. v. Lavin, 431 F.3d
1004, 1007 (7th Cir. 2005) (state law requiring recipients of
state grants for the construction of renewable-fuel plants to
enter into a project labor agreement was not preempted, where
the condition was limited to the project financed by the state
grant); Bldg. & Constr. Trades Dep’t, AFL-CIO v. Allbaugh,
295 F.3d 28, 34-36 (D.C. Cir. 2002) (executive order applying
to all federally funded construction projects was not pre-
empted, where the order concerned a project labor agreement
that private employers often enter into in the construction
field). The second question, which looks at the scope of the
expenditure, protects narrow spending decisions that do not
necessarily reflect a state’s interest in the efficient procure-
ment of goods or services, but that also lack the effect of
broader social regulation. See, e.g., Alameda Newspapers, 95
F.3d at 1417-18. Each question constitutes a separate method
of determining whether the state action at issue actually con-
stitutes regulation, and a state need not satisfy both questions
to be deemed to act as a market participant.

   [4] Here, we conclude that sections 16645.2 and 16645.7
are regulatory and are not protected by the market participant
exception. The statute on its face does not purport to reflect
                 CHAMBER    OF   COMMERCE v. LOCKYER               11781
California’s interest in the efficient procurement of goods and
services, as measured by the similar behavior of private par-
ties. Rather, the statute’s preamble makes clear that the legis-
lation’s purpose is to prevent “state funds and facilities” from
being used to subsidize an employer’s attempt to influence
employee choice about whether to join a union. See § 16645,
Historical and Statutory Notes, Section 1 of Stats. 2000, c.
872 (“It is the policy of the state not to interfere with an
employee’s choice about whether to join or to be represented
by a labor union. For this reason, the state should not subsi-
dize efforts by an employer to assist, promote, or deter union
organizing.”).

   [5] Nor do sections 16645.2 and 16645.7 have a narrow
scope or other element indicating that the statute is unrelated
to broader regulation. To the contrary, the statute by design
sweeps broadly, applying to all employers in California who
accept any state grant or program funds in excess of $10,000.
§§ 16645.2, 16645.7. It requires any business that accepts
state grant or program funds in excess of $10,000 to maintain
records sufficient to show that these funds were not used to
assist, promote or deter organizing. Id. It contains a provision
for civil penalties and permits private parties to file civil
actions against employers who violate the statute. § 16645.8.
The statute’s scope indicates a general state position of neu-
trality with regard to organizing, not a narrow attempt to
achieve a specific procurement goal. These considerations
counsel that sections 16645.2 and 16645.7 are regulatory
measures that fall outside the market participant exception.6
   6
     This case is thus distinct from Alameda Newspapers, where we con-
cluded that a city’s proclamation of support in favor of a labor union in
an ongoing strike at a local newspaper, and the city’s decision to refrain
from purchasing advertisements and to cancel its subscriptions as a result
of the strike, did not constitute regulation subject to NLRA preemption.
95 F.3d at 1409. There, we emphasized the merely exhortatory nature of
the proclamation, noting that “[t]he resolution ha[d] no binding force on
anyone.” Id. at 1414. We also concluded that the city’s cancellation of
subscriptions and refusal to advertise did not “have some ‘real effect’ or
practical economic impact on the employer that [wa]s either different from
that of the ordinary customer or . . . otherwise governmental in nature.”
Id. at 1416.
11782          CHAMBER   OF   COMMERCE v. LOCKYER
II.    NLRA Preemption

   [6] That sections 16645.2 and 16645.7 are regulatory does
not mean that they are also preempted by the NLRA. “We are
reluctant to infer pre-emption,” Boston Harbor, 507 U.S. at
224, and any analysis of preemption begins with the “basic
assumption that Congress did not intend to displace state
law.” Maryland v. Louisiana, 451 U.S. 725, 746 (1981). Pre-
emption is a question of congressional intent, and the “ ‘pur-
pose of Congress is the ultimate touchstone’ of preemption
analysis.” Alameda Newspapers, 95 F.3d at 1413 (quoting
Malone v. White Motor Corp., 435 U.S. 497, 504 (1978)).
Although the NLRA contains no express preemption provi-
sion, the Supreme Court has articulated two distinct NLRA
preemption doctrines: Machinists preemption, set forth in
Lodge 76, International Ass’n of Machinists v. Wisconsin
Employment Relations Commission, 427 U.S. 132 (1976), and
Garmon preemption, set forth in San Diego Building Trades
Council v. Garmon, 359 U.S. 236 (1959). We hold that sec-
tions 16645.2 and 16645.7 are not preempted under either
Machinists or Garmon.

  A.    Machinists Preemption

    [7] Machinists preemption operates as a form of labor field
preemption. It requires the preemption of any state regulation
of activity that, although not directly regulated by the NLRA,
was intended by Congress “to be controlled by the free play
of economic forces,” Machinists, 427 U.S. at 140 (internal
quotation marks and citation omitted), in a “zone free from all
regulations, whether state or federal.” Boston Harbor, 507
U.S. at 226. The doctrine “is based on the premise that ‘the
use of economic pressure by the parties to a labor dispute is
. . . part and parcel of the process of collective bargaining,’ ”
which means that “neither a state nor the National Labor
Relations Board is ‘afforded flexibility in picking and choos-
ing which economic devices of labor and management shall
be branded unlawful.’ ” Alameda Newspapers, 95 F.3d at
                 CHAMBER     OF   COMMERCE v. LOCKYER                11783
1413 (quoting Machinists, 427 U.S. at 144, 149). “Machinists
pre-emption preserves Congress’ intentional balance between
the uncontrolled power of management and labor to further
their respective interests” in an area free from regulation. Bos-
ton Harbor, 507 U.S. at 226 (internal quotation marks and
citation omitted).

   [8] Federal courts of appeals have applied Machinists pre-
emption in the context of collective bargaining between orga-
nized labor and employers, not in the context of organizing,
which is the subject of AB 1889.7 Machinists itself dealt with
a collective bargaining dispute in which union members
refused to accept overtime assignments during labor contract
renewal negotiations. The Supreme Court held that “state
attempts to influence the substantive terms of collective-
bargaining agreements are as inconsistent with the federal
regulatory scheme as are such attempts by the NLRB,” and
that “federal labor policy and the federal Act have pre-empted
state regulatory authority to police the use by employees and
employers of peaceful methods of putting economic pressure
upon one another.” 427 U.S. at 153, 154. In Golden State
Transit Corp. v. City of Los Angeles, 493 U.S. 103, 110-11
(1989), the Court stated that “[i]n Machinists, we reiterated
that Congress intended to give parties to a collective-
bargaining agreement the right to make use of ‘economic
weapons,’ not explicitly set forth in the Act, free of govern-
mental interference.”8 And in Metropolitan Life Insurance Co.
  7
     The dissent contends that Machinists preempts AB 1889 because the
California statute “specifically targets and substantially affects the NLRA
bargaining process.” (Dissent at 11822 (emphasis added).) But AB 1889
applies only to organizing, not collective bargaining.
   8
     In the Court’s 1989 Golden State Transit Corp. decision, it held that
the taxi company was entitled to maintain a § 1983 action against Los
Angeles for the city’s violation of the company’s right (as stated in the
Court’s 1986 decision, Golden State Transit Corp. v. City of Los Angeles,
475 U.S. 608 (1986) (“Golden State I”)), to be free from interference with
its choice and use of economic weapons in the collective bargaining pro-
cess. In Golden State I, the Court had held that the city’s refusal to renew
the taxi company’s franchise because the company’s employees were on
strike was preempted under Machinists.
11784         CHAMBER   OF   COMMERCE v. LOCKYER
v. Massachusetts, where a state statute mandating minimum
healthcare benefits was held not to be preempted, the Court
explained:

    [Machinists] cases rely on the understanding that in
    providing in the NLRA a framework for self-
    organization and collective bargaining, Congress
    determined both how much the conduct of unions
    and employers should be regulated, and how much
    it should be left unregulated: The States have no
    more authority than the Board to upset the balance
    that Congress has struck between labor and manage-
    ment in the collective-bargaining relationship. For a
    state to impinge on the area of labor combat
    designed to be free is quite as much an obstruction
    of federal policy as if the state were to declare pick-
    eting free for purposes or by methods which the fed-
    eral Act prohibits. All parties correctly understand
    this case to involve Machinists pre-emption.

471 U.S. 724, 751 (1985) (internal quotation marks and cita-
tion omitted).

   We have also held that “Machinists preemption prohibits
states from imposing restrictions on labor and management’s
‘weapon[s] of self-help’ that were left unregulated in the
NLRA because Congress intended for tactical bargaining
decisions and conduct ‘to be controlled by the free play of
economic forces.’ ” Associated Builders & Contractors of S.
Cal. v. Nunn, 356 F.3d 979, 987 (9th Cir. 2004) (alteration in
original) (quoting Machinists, 427 U.S. at 140, 146); see also
St. Thomas-St. John Hotel & Tourism Ass’n., Inc. v. Gov’t of
U.S.V.I. ex rel. V.I. Dep’t of Labor, 357 F.3d 297, 302 n.4 (3d
Cir. 2004) (“Machinists preemption is a form of conflict pre-
emption under which state regulation of the bargaining con-
duct 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.”
                 CHAMBER   OF   COMMERCE v. LOCKYER               11785
(internal quotation marks and citation omitted)); McNealy v.
Caterpillar, Inc., 139 F.3d 1113, 1117 n.1 (7th Cir. 1998)
(“The Machinists doctrine similarly preempts state regulation
of the economic weapons that Congress intended to leave
available to unions and employers.”); Glenwood Bridge, Inc.
v. City of Minneapolis, 940 F.2d 367, 370-71 (8th Cir. 1991)
(invoking Machinists preemption in a “state’s intrusion into
the bargaining process” between organized labor and an
employer); Derrico v. Sheehan Emergency Hosp., 844 F.2d
22, 29 (2d Cir. 1988) (“Our analysis of the [Machinists] pre-
emption issues similarly accords with the principle that the
parties’ intent must govern the duration of their collectively
bargained agreements.”). Insofar as all these cases concern
collective bargaining, they suggest that Machinists’ principal
and native application is limited to that sphere of activity,
where Congress enacted an “intentional balance between the
uncontrolled power of management” and organized labor to
advance their respective interests in negotiating the terms and
conditions of employment. Boston Harbor, 507 U.S. at 226
(internal quotation marks and citation omitted). Correspond-
ingly, these cases strongly suggest that the Machinists doc-
trine is not likely to apply to organizing, a conclusion that the
Chamber of Commerce conceded during oral argument when
it acknowledged that interference with organizing is “typical-
ly” analyzed under the Garmon doctrine.9

  We need not resolve whether Machinists extends to pre-
empting a state action that potentially affects organizing,
because even if it did, AB 1889 would not be preempted
  9
   Secondary sources also discuss Machinists in the context of collective
bargaining, not organizing. See, e.g., N. Peter Lareau, 2 Labor and
Employment Law 36.11-36.17 (2005); Robert A. Gorman, Labor Law
1103-10 (2004); Patrick Hardin et al., 2 The Developing Labor Law 2192-
99 (2002); Robert Rachal, Machinists Preemption Under the NLRA: A
Powerful Tool to Protect an Employer’s Freedom to Bargain, 58 La. L.
Rev. 1065, 1065 (1998) (“To protect the collective bargaining process
from [attempts by government to alter collective bargaining], the Supreme
Court developed Machinists preemption.”).
11786          CHAMBER   OF   COMMERCE v. LOCKYER
under the Machinists doctrine. In enacting a restriction on the
use of state grant and program funds with the purpose of
remaining neutral in labor disputes, California has not
intruded on conduct meant to be left to the free play of eco-
nomic forces, an area free from all governmental regulation.
Indeed, it is implausible that Congress intended the use of
such funds to be an area “unregulated because left to be con-
trolled by the free play of economic forces,” Machinists, 427
U.S. at 140 (internal quotation marks omitted), when the
state’s choices of how to spend its funds are by definition not
controlled by the free play of economic forces. See Boston
Harbor, 507 U.S. at 225-26.

   [9] In any event, AB 1889’s restrictions on the use of grant
and program funds do not interfere with an employer’s ability
to engage in “self-help” in the sense protected by Machinists.
Unlike in Gould and Golden State I, the state has not engaged
in a naked attempt to use its spending power to “introduce
some standard of properly balanced bargaining power” or to
alter employers’ private spending decisions. Machinists, 427
U.S. at 149-50 (internal quotation marks and citation omit-
ted). In restricting the use of state funds, California has not
made employer neutrality or the substantive terms of employ-
ment between employer and employee a condition for the
receipt of state funds. Under AB 1889, an employer has and
retains the freedom to spend its own funds however it wishes;
it simply may not spend state grant and program funds on its
union-related advocacy. In contrast, had California enacted a
statute that required neutrality as a condition of receiving state
funds, the employer’s use of its own funds would thereby
have been curtailed. See infra pp. 11800-03.

   The National Labor Relations Board (“NLRB”), which
filed an amicus curiae brief in support of the Chamber of
Commerce, nonetheless urges that Machinists does preempt
the California statute. It cites Alto Plastics Manufacturing
Corp., 136 N.L.R.B. 850, 851 (1962), for the proposition that
in a representation election, “employees may select a ‘good’
                 CHAMBER     OF   COMMERCE v. LOCKYER                11787
labor organization, a ‘bad’ labor organization, or no labor
organization, it being presupposed that employees will intelli-
gently exercise their right to select their bargaining represen-
tative.” The NLRB contends that AB 1889 works at cross
purposes with such a policy because it limits the flow of
information to employees by regulating employer speech in
an area — an organization election — that Congress did
intend to be controlled by the free play of economic forces.

   We disagree with the way in which the NLRB characterizes
AB 1889 and invokes Machinists. As explained above, the
California statute does not prevent an employer from using
non-state funds to assist, promote or deter organizing; it only
restricts a recipient’s use of state grant and program funds (in
excess of $10,000) for that purpose. Consequently, the Cali-
fornia statute does not impede the flow of information to
employees by regulating employers’ speech. Employers
remain free to convey their views regarding unionization, and
thus to exercise their First Amendment rights, provided only
that they do not use state grant and program funds to do so.10
For example, even if an employer made a business decision
to fund its operations entirely through the receipt of state
grants, such that the statute effectively prevented that
employer from spending any portion of its revenues to advo-
cate during an organization election, that effect would be inci-
dental and solely the consequence of the employer’s free-
market choice. Nothing prevents the employer from raising
additional funds from a non-state source and using those
funds for advocacy purposes. It is well established that a leg-
islature may attach “reasonable and unambiguous” conditions
to funds that a recipient is not obligated to accept. Rumsfeld
  10
    The statute’s effect is therefore indirect and incidental, not unlike the
Massachusetts law upheld in Metropolitan Life. See 471 U.S. at 755
(“Minimum state labor standards . . . neither encourage nor discourage the
collective-bargaining processes that are the subject of the NLRA. Nor do
they have any but the most indirect effect on the right of self-organization
established in the Act.”).
11788            CHAMBER     OF   COMMERCE v. LOCKYER
v. Forum for Academic & Institutional Rights, Inc., 126 S. Ct.
1297, 1306 (2006) (internal quotation marks omitted); see
also Lavin, 431 F.3d at 1006 (citing Rust, 500 U.S. at 173;
Nat’l Endowment for the Arts v. Finley, 524 U.S. 569 (1998);
Buckley v. Valeo, 424 U.S. 1 (1976)). We “cannot declare pre-
empted all local regulation that touches or concerns in any
way the complex interrelationships between employees,
employers, and unions; obviously, much of this is left to the
States.” Metro. Life, 471 U.S. at 757 (internal quotation marks
omitted).

   More fundamentally, the NLRB is simply incorrect to sug-
gest that Machinists preempts the California statute. As the
NLRB acknowledges elsewhere in its brief, Machinists
applies solely to zones of activity left free from all regulation.
See Boston Harbor, 507 U.S. at 226. The NLRB’s own exten-
sive regulation of organizing activities demonstrates that
organizing — and employer speech in the context of organiz-
ing — is not such a zone. See, e.g., Peoria Plastic Co., 117
N.L.R.B. 545, 547-48 (1957) (NLRB barring interviews with
employees in their homes immediately before an election);
Peerless Plywood Co., 107 N.L.R.B. 427, 429 (1953) (NLRB
barring employers and unions alike from making election
speeches on company time to massed assemblies of employ-
ees within 24 hours of an election). See also NLRB v. A.J.
Tower Co., 329 U.S. 324, 330 (1946) (“Congress has
entrusted the Board with a wide degree of discretion in estab-
lishing the procedure and safeguards necessary to insure the
fair and free choice of bargaining representatives by employ-
ees.”).11 Indeed, section 9 of the NLRA affirmatively grants
  11
     Like the NLRB, the dissent undermines its own argument when it
cites Board decisions as examples of the NLRB’s regulation of the orga-
nizing process. (Dissent at 11820.) Machinists applies only to zones free
from all regulation, and the NLRB decisions show that organizing is not
such a zone. “A state law that both explicitly targets and directly regulates
processes controlled by the NLRA” might be preempted under Garmon,
see infra p. 11791, but is surely not preempted “under the Machinists doc-
trine.” (Dissent at 11820.)
              CHAMBER   OF   COMMERCE v. LOCKYER          11789
the NLRB power to regulate employer and union conduct,
including speech, that is prejudicial to a fair election. 29
U.S.C. § 159. In Linn v. United Plant Guard Workers of Am.,
Local 114, 383 U.S. 53, 60 (1966), the Supreme Court
observed that the NLRB can set aside an election where a
material fact has been misrepresented in the representation
campaign, opportunity for a reply was lacking and the misrep-
resentation had an effect on the free choice of voting employ-
ees. The Court likewise noted that in a number of cases, the
NLRB had even determined that use of “epithets such as
‘scab,’ ‘unfair,’ and ‘liar,’ ” though not so indefensible as to
remove them from the protection of section 7, could lead the
NLRB to set aside an election if such epithets had “been
uttered with actual malice, a deliberate intention to falsify or
a malevolent desire to injure.” Id. at 60-61 (citing Bettcher
Mfg. Corp., 76 N.L.R.B. 526 (1948); Atl. Towing Co., 75
N.L.R.B. 1169, 1170-73 (1948) (internal quotation marks
omitted)). See also Midland Nat’l Life Ins. Co., 263 N.L.R.B.
127, 133 (1982) (“[W]e will set an election aside not because
of the substance of the representation, but because of the
deceptive manner in which it was made . . . .”).

   Significantly, the spending restrictions challenged by the
Chamber of Commerce and NLRB are modeled precisely on
those that Congress has enacted when prohibiting the use of
federal funds to assist, promote or deter organizing. See, e.g.,
Workforce Investment Act, 29 U.S.C. § 2931(b)(7) (“Each
recipient of funds . . . shall provide to the Secretary assur-
ances that none of such funds will be used to assist, promote,
or deter union organizing.”); National and Community Ser-
vice State Grant Program, 42 U.S.C. § 12634(b)(1)
(“Assistance provided under this title shall not be used by pro-
gram participants and program staff to . . . assist, promote, or
deter union organizing.”); Head Start Programs Act, 42
U.S.C. § 9839(e) (“Funds appropriated to carry out this sub-
chapter shall not be used to assist, promote, or deter union
organizing.”); see also Medicare Act, 42 U.S.C.
§ 1395x(v)(1)(N) (“In determining such reasonable costs,
11790            CHAMBER     OF   COMMERCE v. LOCKYER
costs incurred for activities directly related to influencing
employees respecting unionization may not be included.”).
These restrictions are inconsistent with a congressional belief
that union organizing involves “conduct . . . intended to be
unregulated.” Golden State Transit Corp., 475 U.S. at 614
(internal quotation marks omitted). Instead, because an area
left to the free play of economic forces is a “zone free from
all regulations, whether state or federal,” Boston Harbor, 507
U.S. at 226 (emphasis added), the federal restrictions are com-
pelling evidence that the analogous conditions in AB 1889 do
not intrude in a regulation-free area of labor relations and
thus, contrary to the dissent’s suggestion, do not “operate to
frustrate the purpose” of the NLRA. (Dissent at 11821, quot-
ing Local 20, Teamsters v. Morton, 377 U.S. 252, 258
(1964).) “The fact that Congress itself has . . . imposed the
same type of restriction . . . as [a state] seeks to impose . . .
is surely evidence that Congress does not view such a restric-
tion as incompatible with its labor policies.” De Veau v. Bra-
isted, 363 U.S. 144, 156 (1960) (plurality opinion).12

  [10] In sum, the mechanism California has employed to
preserve its neutrality in labor disputes does not affect an
employer’s ability to use its own funds in connection with
union organizing activities; nor do such activities constitute
an area Congress intended to be free from all regulation.
Accordingly, AB 1889 is not preempted under Machinists.
  12
     The Supreme Court engaged in similar reasoning in Metropolitan Life,
471 U.S. at 754-55. There, the Court held that no incompatibility existed
between national labor policy expressed in federal rules designed to
restore the equality of bargaining power and state legislation that imposed
minimal substantive requirements (in the form of healthcare benefits) on
contract terms negotiated between parties to labor agreements. The Court
reached this conclusion by noting, among other things, that it made no
sense to infer that Congress intended the NLRA to deprive states of the
ability to take such action when Congress itself passed similar federal laws
applying to unionized employers and employees.
                 CHAMBER   OF   COMMERCE v. LOCKYER        11791
  B.     Garmon Preemption

   [11] Garmon preemption arises when there is an actual or
potential conflict between state regulation and federal labor
law due to state regulation of activity that is actually or argu-
ably protected or prohibited by the NLRA. “When it is clear
or may fairly be assumed that the activities which a State pur-
ports to regulate are protected by § 7 of the National Labor
Relations Act, or constitute an unfair labor practice under § 8,
due regard for the federal enactment requires that state juris-
diction must yield.” Garmon, 359 U.S. at 244. Nonetheless,

       [w]hile the Garmon formulation accurately reflects
       the basic federal concern with potential state inter-
       ference with national labor policy, the history of the
       labor pre-emption doctrine . . . does not support an
       approach which sweeps away state-court jurisdiction
       over conduct traditionally subject to state regulation
       without careful consideration of the relative impact
       of such a jurisdictional bar on the various interests
       affected.

Sears, Roebuck & Co. v. San Diego County Dist. Council of
Carpenters, 436 U.S. 180, 188 (1978).

  1.     Actually protected or prohibited

   [12] Section 7 of the NLRA is entitled “Right of employees
as to organization, collective bargaining, etc.” 29 U.S.C.
§ 157. It identifies areas of protected employee conduct and
can be fairly characterized as setting forth those employee
practices that are actually protected by the NLRA. Section 8,
conversely, is entitled “Unfair labor practices.” 29 U.S.C.
§ 158. By its plain terms, it sets forth activities that are actu-
ally prohibited by the NLRA. It is easy to see how both sec-
tion 7 and section 8 can be implicated in a Garmon
preemption analysis: if a state regulates employee activities
that are actually protected under section 7, or activities of
11792            CHAMBER    OF   COMMERCE v. LOCKYER
either employers or labor unions that are actually prohibited
under section 8, that regulation will be preempted unless it
falls within an exception to Garmon. See 359 U.S. at 243-44.

   [13] Section 8(c) prohibits sanctioning employers under the
NLRA for engaging in an unfair labor practice when they
exercise speech rights that are guaranteed by the First Amend-
ment.13 This subsection can be termed the “free speech
exemption” to section 8’s delineation of unfair labor prac-
tices, because it carves out noncoercive speech from the cate-
gory of actually punishable activity. Notwithstanding the
dissent’s mistaken insistence to the contrary, section 8(c) does
not grant employers speech rights. (Dissent at 11824.) Rather,
it simply prohibits their noncoercive speech from being used
as evidence of an unfair labor practice. See, e.g., NLRB v. Gis-
sel Packing Co., 395 U.S. 575, 617 (1969) (stating that sec-
tion 8(c) “merely implements the First Amendment”); Hotel
Employees, Local 2 v. Marriott Corp., 961 F.2d 1464, 1470
n.9 (9th Cir. 1992) (“[S]ection 8(c) merely states an employer
does not commit an unfair labor practice by expressing its
views regarding unionization.”); UAW-Labor Employment &
Training Corp. v. Chao, 325 F.3d 360, 364-65 (D.C. Cir.
2003) (“Fitting a Garmon claim under the language of § 8(c)
is awkward. . . . [T]he activities described in § 8(c) . . . are
not ‘protected by’ the NLRA, except from the NLRA itself.”);
see also Fiber Indus., Inc., 267 N.L.R.B. 840, 841 (1983)
(“[I]t is well settled that Sec. 8(c) applies only to unfair labor
practice proceedings.”).

   The Chamber of Commerce and dissent argue, however,
that to say an activity is not punishable by the NLRA is to
  13
    Entitled “Expression of views without threat of reprisal or force or
promise of benefit,” § 8(c) provides that “[t]he expressing of any views,
argument, or opinion, or the dissemination thereof, whether in written,
printed, graphic, or visual form, shall not constitute or be evidence of an
unfair labor practice under any of the provisions of this Act, if such
expression contains no threat of reprisal or force or promise of benefit.”
29 U.S.C. § 158(c).
                  CHAMBER    OF   COMMERCE v. LOCKYER                 11793
protect that activity. Because AB 1889’s restrictions on grant
and program funds purportedly affect an employer’s ability to
speak against unionization, the Chamber of Commerce and
dissent urge, the statute improperly intrudes on the employ-
er’s implied (yet somehow actually explicit in section 8(c))
NLRA speech right — as distinct from its separate First
Amendment rights — and is therefore preempted under Gar-
mon.

   We reject this peculiar proposition. The Chamber of Com-
merce and dissent cite no authority to support it, and the
NLRB itself makes no such claim as to section 8(c)’s sup-
posed affirmative grant of speech rights. See NLRB Amicus
Brief at 4, 21-26 (echoing interpretation of NLRA in cases
quoted above, and noting section 8(c)’s “exemption” for non-
coercive speech). Rather, some activities in labor relations are
neither protected nor prohibited by the NRLA and are there-
fore not preempted under Garmon. See, e.g., NLRB v. Ins.
Agents’ Int’l Union, 361 U.S. 477, 492-95 & n.23 (1960)
(finding unpersuasive the argument that because certain union
activities were unprotected under section 7, those activities
should also be deemed unfair labor practices under section 8,
and stating that “[t]here is little logic in assuming that because
Congress was willing to allow employers to use self-help
against union tactics, if they were willing to face the eco-
nomic consequences of its use, it also impliedly declared
these tactics unlawful as a matter of federal law”).14 If this
were not the case, Machinists preemption would cease to
exist, for Machinists addresses “activity that [i]s neither argu-
ably protected against employer interference by §§ 7 and
8(a)(1) of the NLRA, nor arguably prohibited as an unfair
  14
     See also UAW-Labor Employment & Training Corp., 325 F.3d at 363-
64 (“The dissent makes a similar error when it suggests that the order is
preempted because it conflicts with the ‘regulatory scheme’ the Board has
established. This would be a sound analysis under ‘field’ preemption, but
Garmon works differently, operating only as to activities arguably pro-
tected or prohibited, not to ones simply left alone, even if left alone delib-
erately.” (internal citations omitted)).
11794            CHAMBER     OF   COMMERCE v. LOCKYER
labor practice by § 8(b) of that Act.” Metropolitan Life, 471
U.S. at 749.

   [14] California’s refusal to subsidize employer speech for
or against unionization does not regulate an activity that is
actually protected or actually prohibited by the NLRA. It does
not interfere with, much less govern, “the same partisan
employer speech that Congress committed to the jurisdiction
of the NLRB.” (Dissent at 11825.) Nor does it infringe
employers’ First Amendment rights, because employers
remain free to use their own funds to advocate for or against
unionization and are not required to accept neutrality as a con-
dition for receipt of state grant and program funds. See infra
pp. 11800-02; see also Regan v. Taxation with Representa-
tion, 461 U.S. 540, 549 (1983) (“We have held in several con-
texts that a legislature’s decision not to subsidize the exercise
of a fundamental right does not infringe the right.”); Rust, 500
U.S. at 193, 200; Cammarano v. United States, 358 U.S. 498,
513 (1959).

  2.    Arguably protected or prohibited

   [15] In Sears, the Supreme Court refined its Garmon pre-
emption doctrine in the context of an employer’s common law
trespass suit against picketing union members where the pick-
eting was “arguably — but not definitely — prohibited or pro-
tected by federal law.” 436 U.S. at 182. Sears divided the
inquiry into two related but distinct questions: whether the
state court’s jurisdiction over the trespassing claim was pre-
empted (1) by the arguably prohibited nature of the picketing,
or (2) by its arguably protected nature.15
  15
    The dissent argues that we err in considering whether AB 1889 is pre-
empted by interfering unduly with an arguably protected or prohibited
activity because, in the dissent’s idiosyncratic and incorrect view, the real
cause of Garmon preemption is AB 1889’s alleged interference with actu-
ally protected conduct — the speech rights purportedly granted under
§ 8(c). (Dissent at 11828.) Insofar as the dissent suggests we apply Sears
                  CHAMBER     OF   COMMERCE v. LOCKYER                 11795
   As to whether the union’s picketing was arguably prohib-
ited by the NLRA, Sears articulated a relatively straightfor-
ward “primary jurisdiction” test: if the claim considered by
the state tribunal is identical to one that could be presented to
the NLRB, the state’s jurisdiction is preempted. Id. at 197,
201; see also Belknap, Inc. v. Hale, 463 U.S. 491, 511-12
(1983) (applying primary jurisdiction test to state regulation
of arguably prohibited conduct). As to whether the picketing
was arguably protected by the NLRA, the Court went beyond
the primary jurisdiction test to address additional federal
supremacy concerns: chiefly, whether preemption was war-
ranted — despite the lack of identity between issues the state
court and NLRB might consider — to protect against the “risk
of misinterpretation of [the NLRA] and the consequent prohi-
bition of protected conduct.” Sears, 436 U.S. at 203. We
employed this “primary jurisdiction plus” approach in Rad-
cliffe v. Rainbow Construction Co., 254 F.3d 772, 786 (9th
Cir. 2001), where we held that state jurisdiction over claims
by union members against an employer for false arrest, false
imprisonment and malicious prosecution were not preempted
under Garmon.16

to avoid addressing whether AB 1889 is preempted by interfering with an
actually protected activity (Dissent at 11826), its claim ignores our express
repudiation of that argument in Section II.B.1 supra. To the extent the dis-
sent contends we err in even analyzing whether AB 1889 interferes with
arguably protected or prohibited conduct (id. at 11826, 11828), it neglects
the Chamber of Commerce’s own contention that the statute does so, and
fails to recognize that such analysis is orthodox in Garmon analysis. See,
e.g., Local 926, Int’l Union of Operating Eng’rs v. Jones, 460 U.S. 669,
676 (1983) (“Our approach to the pre-emption issue has thus been stated
and restated. First, we determine whether the conduct that the State seeks
to regulate or to make the basis of liability is actually or arguably pro-
tected or prohibited by the NLRA. Although the Garmon guidelines [are
not to be applied] in a literal, mechanical fashion, if the conduct at issue
is arguably prohibited or protected otherwise applicable state law and pro-
cedures are ordinarily pre-empted.” (internal quotation marks and citations
omitted) (alteration in original) (emphasis added)).
   16
      In Radcliffe, defendants argued that “the validity of the plaintiffs’
claims . . . turns on whether the union activities carried on by the plaintiffs
were . . . protected by § 7 of the NLRA.” 254 F.3d at 785.
11796         CHAMBER   OF   COMMERCE v. LOCKYER
   Here, the parties do not dispute that the NLRB has no inter-
est in resolving the central controversy that a state court
would have to resolve in enforcing AB 1889, namely, whether
state funds were used to “assist, promote, or deter union orga-
nizing.” Far from being the same as a question the NLRB
might consider, a suit under the California statute would entail
accounting only for the employer’s possible use of state
funds.

   The Chamber of Commerce, however, argues that a state
court enforcing AB 1889 would in some instances need to
determine whether a union was a “labor organization” under
section 16647, an area that it claims is reserved to the NLRB
under Marine Engineers Beneficial Ass’n v. Interlake S.S.
Co., 370 U.S. 173, 178 (1962). But even if the state court had
to make such a determination, it would be relevant only to the
ultimate question of whether an employer spent state grant or
program funds to assist, promote or deter organizing, not to
whether the employer’s advocacy violated the NLRA. We
have previously rejected an argument that the incidental deter-
mination by a state court of whether persons were engaged “in
lawful union activity” was sufficient to occasion Garmon pre-
emption, where the focus of the state proceeding was on
“state concerns of accommodating such union activity with
the state-law rights of private property.” Radcliffe, 254 F.3d
at 786. Moreover, AB 1889 is not comparable to the Minne-
sota statute at issue in Marine Engineers, under which a state
law determination that certain groups were not labor organiza-
tions permitted the state court to regulate picketing and other
activities identical to those that could have been raised before
the NLRB. Marine Eng’rs, 370 U.S. at 176.

   The Chamber of Commerce also argues that because AB
1889 restricts an employer’s ability to use state funds to “in-
fluence” its employees, see § 16645(a), California courts
would effectively be deciding whether employers had improp-
erly acted under section 8(a) of the NLRA to “restrain[ ] or
coerce employees in the exercise of the rights guaranteed in
                CHAMBER    OF   COMMERCE v. LOCKYER              11797
[section 7 of the NLRA].” 29 U.S.C. § 158(a)(1) (NLRA
§ 8(a)). However, were the NLRB to consider an unfair labor
practice charge arising from the employer’s conduct, it would
focus on whether the employer had interfered with the
employees’ section 7 rights, regardless of whether the
employer used state funds in the process. In contrast, under
AB 1889, the California court would determine only whether
an employer used state grant or program funds to influence
employees, not whether that attempt violated the NLRA.
Because the statute focuses solely on the use of state funds,
there is no identity of claims, and the primary jurisdiction test
is not met.17

   We next assess whether the state statute is preempted
because Congress would “prefer[ ] the costs inherent in a
jurisdictional hiatus to the frustration of national labor policy
which might accompany the exercise of state jurisdiction.”
Sears, 436 U.S. at 203. For essentially the same reasons
explained in the primary jurisdiction analysis, there is no risk
that a state court applying AB 1889 could “misinterpret[ ] . . .
federal law.” Id. Not only is there no identity of claims, but
the subject matter of an AB 1889 suit is so far removed from
the NLRA’s primary focus — the determination of what con-
stitutes an unfair labor practice — that any rationale for Gar-
mon preemption is absent.

   Sears itself is instructive. In that case, after noting the state
interest in hearing trespass claims, the Court identified a clear
potential overlap between the NLRB’s jurisdiction and that of
the state court.

       [T]he state court was obligated to decide [whether]
  17
     There is no merit to the Chamber of Commerce’s claim that the Cali-
fornia statute provides an additional remedy for NLRA violations. The
statute’s damages provisions are intended to remedy the misuse of state
funds under the statute, regardless of whether any NLRA violation has
occurred.
11798          CHAMBER   OF   COMMERCE v. LOCKYER
    the trespass was not actually protected by federal
    law, a determination which might entail an accom-
    modation of Sears’ property rights and the Union’s
    § 7 rights. In an unfair labor practice proceeding ini-
    tiated by the Union, the Board might have been
    required to make the same accommodation.

Id. at 201. The Court further stated that the trespass at issue
was arguably protected by the NLRA, whereas previously
recognized exceptions to Garmon preemption did not “in-
volve[ ] protected conduct.” Id. at 204. Nevertheless, the
Court held that the risk that a state’s regulation of trespass
might impermissibly trench upon the NLRB’s jurisdiction
over the speech rights of union members was too unlikely to
justify usurpation of the state’s prerogative. There was no
“significant risk of prohibition of protected conduct,” so the
Court was “unwilling to presume that Congress intended the
arguably protected character of the [regulated] conduct to
deprive the California courts of jurisdiction to entertain Sears’
trespass action.” Id. at 207.

   [16] In contrast to Sears, there is no potential overlap
between the NLRB’s jurisdiction and that of a state court
hearing a suit brought under AB 1889. However, even if there
were some risk of overlap, California has as important and
legitimate a sovereign interest in determining how the recipi-
ents of state grant and program funds use those funds as it
does in entertaining trespass actions. Thus, even if AB 1889
had some peripheral and incidental effect on the arguably pro-
tected advocacy rights of employers, given the nature and
mechanics of the statute (which has no concern for whether
the speech at issue is protected by the NLRA, but focuses
only on the source of the money funding the speech), there is
no “significant risk of prohibition of protected conduct.” Id.
California’s interest is so strong that we cannot “presume that
Congress intended the arguably protected character of the
[regulated] conduct to deprive” the state of the ability to con-
trol the use of its fisc in this modest manner. Id.
                 CHAMBER     OF   COMMERCE v. LOCKYER                11799
   The Supreme Court has cautioned that “inflexible applica-
tion of [the Garmon] doctrine is to be avoided, especially
where the State has a substantial interest in regulation of the
conduct at issue and the State’s interest is one that does not
threaten undue interference with the federal regulatory
scheme.” Farmer v. United Bhd. of Carpenters, 430 U.S. 290,
302 (1977). Our “balanced inquiry into such factors as the
nature of the federal and state interests in regulation and the
potential for interference with federal regulation,” id. at 300,
ensures that we avoid preempting state regulation of conduct
that involves “interests so deeply rooted in local feeling and
responsibility that, in the absence of compelling congressional
direction, we [cannot] infer that Congress ha[s] deprived the
States of the power to act,” or where “the activity regulated
[is] a merely peripheral concern” of the NLRA. Garmon, 359
U.S. at 243-44; see also Belknap, 463 U.S. at 498. The previ-
ously recognized exceptions to Garmon preemption have
involved exercises of state court jurisdiction over universally
recognized common law torts, rather than, as here, the limited
exercise of a state’s spending power. See, e.g., Linn, 383 U.S.
at 62 (“[A] State’s concern with redressing malicious libel is
‘so deeply rooted in local feeling and responsibility’ ” that it
is not preempted despite arguably overlapping NLRB juris-
diction over the speech at issue.) (quoting Garmon, 359 U.S.
at 244). But the logic that compelled the Supreme Court to
recognize the exception for certain torts applies just as power-
fully, if not more so, to a state’s effort to ensure that those
who accept its grant and program funds use them for the pur-
pose for which they were given.18
  18
     For instance, suppose California granted money to hospitals to create
more nurse positions and did not want the effectiveness of its grants
diminished by funding a campaign to convince nurses not to unionize. So
long as the hospitals remained free to lobby nurses with their own monies,
California would be well within its rights to insist that its grants be used
for the purpose for which they were given — the creation of needed nurs-
ing positions.
11800           CHAMBER   OF   COMMERCE v. LOCKYER
   In this sense, a state’s control of its purse strings is of at
least as great a concern to the state as its power to regulate
defamatory speech, violence, trespass, obstruction of access to
property or the intentional infliction of emotional distress.19
Just as the state has a responsibility to protect its citizenry
from such torts, so it has a responsibility and a right to spend
its treasure — largely generated from the pockets of its citi-
zens — based on principles and guidelines that its democrati-
cally elected legislature deems to be appropriate. Such
spending decisions are, of course, subject to federal suprem-
acy concerns. But the Supreme Court has commanded us to
be extremely cautious before concluding that a federal regula-
tory scheme intrudes upon so fundamental a state prerogative.
“Whatever risk of an erroneous state-court adjudication does
exist is outweighed by the anomalous consequence of a rule”
that would deny the state the ability to control its fisc in the
circumstances presented here. Sears, 436 U.S. at 206. In an
era of tight budgets, where many important and competing
interests vie for every dollar of a state’s treasury, it is all the
more important that states retain their right to control the allo-
cation of their scarce resources. Thus, even if AB 1889’s
restriction on the use of state grant and program funds
intruded on an activity arguably protected or arguably prohib-
ited by the NLRA — and we hold that it does not — Gar-
mon’s recognized exception would save the California statute
from preemption. See Garmon, 359 U.S. at 243-44.

III.    First Amendment

   [17] Although we elsewhere discuss why AB 1889 does not
infringe the First Amendment rights of grant and program
fund recipients, see supra pp. 11786-88, 11794, we elaborate
on our reasoning here in response to the dissent’s contention
  19
    See Linn, 383 U.S. at 63-64; Youngdahl v. Rainfair, Inc., 355 U.S.
131, 139-40 (1957); Sears, 436 U.S. at 207; Int’l Union, United Auto.
Workers of America (UAW-CIO) v. Russell, 356 U.S. 634, 644-46 (1958);
Farmer, 430 U.S. at 302-06.
                 CHAMBER     OF   COMMERCE v. LOCKYER                11801
to the contrary based largely on its erroneous premise that AB
1889 compels “employers themselves to take a position of
neutrality with respect to labor relations.” (Dissent at 11809.)
As we explained in Section II.A., supra p. 11786, the Califor-
nia statute does not impose any condition on the receipt of
state grant and program funds. Because an employer retains
the freedom to raise and spend its own funds however it
wishes — so long as it does not use state grant and program
funds on union-related advocacy — AB 1889 does not
infringe employers’ First Amendment right to express what-
ever view they wish on organizing.20

   Accordingly, AB 1889’s effect on speech is properly con-
sidered in light of Rust v. Sullivan, 500 U.S. 173 (1991). In
Rust, the Court held that “[b]y requiring that the . . . grantee
engage in abortion-related activity separately from activity
receiving federal funding, Congress has . . . not denied it the
right to engage in abortion-related activities.” Id. at 198. In
short, a restriction on the use of government funds for an
activity does not compel cessation of the activity.

   [18] Here, California has not “denied” employers the “right
to engage in [union]-related activity,” but has “merely refused
to fund such activities out of the public fisc.” Id. This conclu-
sion follows from the Court’s familiar observation about what
is regulation and what is not. “[A] legislature’s decision not
to subsidize the exercise of a . . . right does not infringe the
right.” Regan, 461 U.S. at 546, 549 (rejecting the “notion that
First Amendment rights are somehow not fully realized unless
they are subsidized by the State”); see also Lyng v. Int’l
Union, UAW, 485 U.S. 360, 368-69 (1988). The legislature
  20
    For instance, California agreed during oral argument that nothing in
AB 1889 prevents a closed corporation that receives 100% of its revenues
from the state from using its own funds to assist, promote or deter organiz-
ing, where the corporation receives those funds as a capital contribution
by a shareholder who reinvested a legitimately distributed corporate divi-
dend — itself the fruit of the receipt of state grant or program funds.
11802               CHAMBER    OF   COMMERCE v. LOCKYER
can “insist[ ] that public funds be spent for the purposes for
which they [a]re authorized,” even if doing so forbids the use
of government funds for other speech. Rust, 500 U.S. at 196;
see also United States v. Am. Library Ass’n, 539 U.S. 194,
212 (2003). California, in enacting AB 1889, has simply
availed itself of that prerogative.21

   Nor is there any merit to the dissent’s assertion that AB
1889 violates employers’ First Amendment Rights by “irrevo-
cably stamp[ing] dollar bills with ‘Property of California’ ”
and “limit[ing] the items an employer may purchase with
these specific dollar bills.” (Dissent at 11809.) The dissent’s
parade of horribles goes far beyond the scope of plaintiffs’
facial challenge to sections 16645.2 and 16645.7 and the
record before us. The district court made no findings, nor is
there evidence, that AB 1889 “co-opts the payment for goods
and services and profit realized under a contract.” (Dissent at
11808.)22 Consistent with Rust, the California statute, like var-
  21
    The dissent questions the legitimacy of AB 1889 because the statute
was “sponsored by the California Labor Federation, AFL-CIO, and sup-
ported by a phalanx of labor unions.” (Dissent at 11816.) Not only is this
an irrelevant consideration, but it also is not up to us as judges to impugn
the California legislature’s motives. As the Seventh Circuit wisely
observed in Lavin:
       If (as seems likely) Illinois has taken the approach in this law
       because state officials want to assist organized labor as well as
       the farmers who supply the grain to be made into ethanol and the
       owners of ethanol plants, that is neither a surprise nor a reason
       for invalidity. Most legislation is the product of coalitions among
       interest groups. Boston wanted to clean up its harbor, but there
       can be little doubt that it also wanted to shower benefits on work-
       ers who were the incumbents’ political supporters. . . . Federal
       preemption doctrine evaluates what legislation does, not why leg-
       islators voted for it or what political coalition led to its enact-
       ment. This statute does not affect people who spurn the state’s
       largesse.
431 F.3d at 1007 (emphasis added).
  22
     As noted previously, supra note 1, the only issue before us is whether
AB 1889’s grant and program fund restrictions, § 16645.2 and § 16645.7,
                 CHAMBER     OF   COMMERCE v. LOCKYER                11803
ious federal acts, requires only that those who accept govern-
ment grant and program funds use them for the purpose for
which they were given. Our construction of AB 1889 is “read-
ily apparent,” Gooding v. Wilson, 405 U.S. 518, 521 (1972)
(internal quotation marks and citation omitted), but even were
it not, the statute is not “overly broad and unconstitutional”
(Dissent at 11812) because its restrictions on the use of grant
and program funds have been “carefully drawn” to mirror the
mechanics of constitutionally sound federal acts. Gooding,
405 U.S. at 522; see also Regan, 461 U.S. at 549-50.

   It is even more implausible that AB 1889’s restrictions on
grant and program funds “alter [the funds’] use as legal ten-
der” and frustrate the “basic tenets of our economic system.”
(Dissent at 11809, 11811) Again, the statute’s text is precisely
modeled on language the Congress itself has used. The Work-
force Investment Act, for example, regulates federal funds
given to state boards to be awarded as “grants or contracts,
on a competitive basis, to eligible providers within the State
or outlying area to enable the eligible providers to develop,
implement, and improve adult education or literacy activities
within the State.” 20 U.S.C. § 9241(a) (emphasis added). The
Workforce Investment Act also requires “[e]ach recipient of
funds . . . [to] provide . . . assurances that none of such funds
will be used to assist, promote, or deter union organizing.” 29
U.S.C. § 2931(b)(7). AB 1889’s exactly analogous require-
ment can hardly be antithetical to the monetary concept of
free tender.23

are preempted by the NLRA or are constitutionally invalid. The statute’s
restriction on the use of contract funds, § 16645.4, is not at issue nor was
it addressed by the district court, and the dissent errs in implying other-
wise. (Dissent at 11808-12.)
   23
      The dissent also disregards the nature of state programs, which are run
to serve public purposes and need not guarantee a profit to private compa-
nies. (Dissent at 11811.) For instance, in the MediCal program, which the
Chamber of Commerce itself discusses in the context of nursing homes
that are “entirely dependent on state funds,” state funding is designed only
to cover the costs of services performed. Notably, allowable costs under
11804            CHAMBER    OF   COMMERCE v. LOCKYER
                          CONCLUSION

   Because sections 16645.2 and 16645.7 of AB 1889 are not
preempted under either Machinists or Garmon and do not on
their face infringe plaintiffs’ First Amendment rights, the
judgment of the district court is REVERSED and its injunc-
tion is VACATED. We remand for further proceedings con-
sistent with this opinion.

MediCal are also based on federal Medicare cost reporting standards,
which provide that “[i]n determining such reasonable costs, costs incurred
for activities directly related to influencing employees respecting union-
ization may not be included.” 42 U.S.C. § 1395x(v)(1)(N) (emphasis
added).
CHAMBER   OF   COMMERCE v. LOCKYER       11805
                                 Volume 2 of 2
11808         CHAMBER   OF   COMMERCE v. LOCKYER

BEEZER, Circuit Judge, with whom KLEINFELD and CAL-
LAHAN, Circuit Judges, join in dissent:

   May a state leverage its spending power to induce an
employer to adopt a neutral policy toward labor union orga-
nizing? The First Amendment, the National Labor Relations
Act (“NLRA” or “the Act”), and well-established doctrines of
preemption, demand an answer in the negative.

  By extending the definition of “state funds” to include any
monies received by a private employer as a result of contract-
ing with the state, AB 1889 strikes at the heart of the First
Amendment. AB 1889 prohibits not just the use of state
money granted to an employer for and under a specific pro-
gram but also co-opts the payment for goods and services and
profit realized under a contract (undoubtedly not state funds).
AB 1889’s gag rules prevent any employer from spending its
own funds in direct violation of the First Amendment.

   The NLRA extends to employees the opportunity to render
a free and informed choice about union representation. In
doing so, the Act allows for robust debate of union represen-
tation issues by employers and employees alike. California
Assembly Bill 1889, codified at Cal. Govt. Code §§ 16645-
49, (“AB 1889” or “the statute”), stifles employers from fully
participating in organizing and exercising the rights that are
explicitly granted to them by Congress under the NLRA. The
statute rides roughshod over the delicate balance established
by Congress between labor unions and employers. In addition,
the California statute interferes with the NLRA’s extension of
exclusive jurisdiction to the National Labor Relations Board
(“NLRB”) for the adoption and enforcement of representation
                 CHAMBER    OF   COMMERCE v. LOCKYER                11809
election rules. I would hold the federal preemption of the rele-
vant provisions of the California statute to be complete.

                                     I

   AB 1889 is far from a neutral enactment that simply
restricts use of undefined “state funds.” It abrogates the First
Amendment rights of employers to speak out and discuss
union organizing campaigns. Under the guise of preserving
state neutrality, the statute operates to impel employers them-
selves to take a position of neutrality with respect to labor
relations, in direct conflict with employers’ rights under the
First Amendment.

   AB 1889 applies to any vendor of goods or services who
receives payouts from the State of California “in excess of ten
thousand dollars in any calendar year on account of its partici-
pation in a state program.” “State program” is not defined in
the statute and this broad language brings under the auspices
of the statute every purveyor of goods or services unlucky
enough to cross the magic $10,000 threshold in its annual
contracting with the state.1 AB 1889’s speech regulations and
presumption that “state funds” have been spent on union-
related expenditures allows the state to irrevocably stamp dol-
lar bills with “Property of California,” alter their use as legal
tender and limit the items an employer may purchase with
those specific dollar bills. All this, despite the fact that the
employer has fully performed under a contract and the state
has received every item it is entitled to under the terms of the
contract. AB 1889 writes a neutrality provision into every
  1
    The term contracting may suggest a more narrow application than that
intended by AB 1889. AB 1889, as written, takes a programmatic
approach to controlling the labor-managment arena through its extensive
reach to all businesses who have a financial involvement in state regulated
activities. For example, hospitals or nursing homes that accept Medi-Cal
patients (a state program) are likely to receive over $10,000 in payments
from California. The acceptance of these state payments subjects those
payments and that vendor to the strictures of AB 1889.
11810          CHAMBER   OF   COMMERCE v. LOCKYER
contract the state enters into without requiring the state to bar-
gain or pay for such a pricey concession. The statute also fails
to state where an employer may turn to recover any compli-
ance costs that a labor organization may recover in a suit
authorized by the Act — another unbargained for benefit
gained by the state.

   A statutory blanket prohibition on employers advocating
for or against unions would blatantly violate the First Amend-
ment as the state has no legitimate interest in prohibiting
employers from speaking on union issues. Even the opinion
of the court recognizes that the statute only passes constitu-
tional muster if it is read to only apply to state funds. Opinion
of the Court at 11794 (“Nor does it interfere with employers’
exercise of their First Amendment rights, because employers
remain free to use their own funds to advocate for or against
unionization and are not required to accept neutrality as a con-
dition for receipt of state funds.”). Just because the majority
closes it eyes and wishes it were so cannot alter the economic
fact that AB 1889 both explicitly and implicitly does unconsi-
tutionally require neutrality as a condition for contracting with
the state. A state could not terminate a contract due to the
contractor’s speech, nor could it decide not to contract based
on the employer’s speech as either decision would violate the
employer’s First Amendment Rights. Board of County
Comm’rs v. Wabaunsee County, Kansas, 518 U.S. 668 (1996)
(Government cannot retaliate against independent contractors
for exercising First Amendment Rights).

   Once the state has chosen to award a contract to the lowest
responsible bidder, the state’s interest in the funds it pays for
the contracted goods and services is at end. It has made a bar-
gain for the provision of a limited set of benefits and the ven-
dor has agreed to provide those goods and services, including
labor, in exchange for money. Once the exchange has been
made and payment has been received, that money can no lon-
ger be considered “state funds.” The state has no interest in
how those funds are spent by the vendor and the state has no
              CHAMBER   OF   COMMERCE v. LOCKYER          11811
right or reason to limit an individual who engages in a labor
dispute from using its own money for any lawful purpose.
Upon payment to the employer those funds became free ten-
der and any attempt by the state to undermine the buying
power of free tender by limiting the types of goods that can
be purchased with funds in which the state is not vested with
a residual interest is fundamentally opposed to the basic ten-
ants of our economic system and the First Amendment.

   Every reasonable employer will also have built into its con-
tract a measure of profit. This profit is the earned compensa-
tion of the employer upon completion of its contractual duties.
AB 1889 seeks to condition the uses to which an employer
may put these specific funds. The problems with this profit-
taking are most stark when considering the case of employers
who conduct all of their business with the state. These
employers can offer their employees bonuses, pay for all-
inclusive vacations to Tahiti, throw extravagant parties with
champagne and caviar, or simply bank their profits to save for
a rainy day. What they cannot do, according to AB 1889, is
hold a mandatory meeting to discuss unionization (either the
benefits or burdens) with their employees. Employers who
receive all of their revenue from the state have no other option
but to cease all union-related speech. The opinion of the court
has no mercy for these employers as it concludes that they
have made their own bed through their “free-market choice.”
Simply because a business or individual chooses to contract
with the state, or even accept employment from the state, does
not mean that the state may abrogate First Amendment rights.
See, e.g. United States v. National Treasury Employees
Union, 513 U.S. 454 (1995). Free market choice or not, these
employers retain their First Amendment right to spend their
own funds, as they undoubtedly earn by contracting with the
state, as they see fit.

  Because AB 1889 commandeers private employers own
funds, in addition to regulating the use of state funds, I would
11812         CHAMBER   OF   COMMERCE v. LOCKYER
hold that the statute is overly broad and unconstitutional
under the First Amendment.

                                II

   The NLRA is a comprehensive scheme designed to balance
the rights and interests of both employers and employees and
provides an administrative mechanism to resolve questions
concerning union representation. Recognizing the extreme
importance of the free flow of information, the NLRA explic-
itly protects rights of employers to express their views on
union organizing efforts. The opinion of the court recognizes
the importance of unrestricted speech and the free flow of
information to the proper enactment of the Act but blithely
and naively concludes that the California statute does not
impede the flow of information to employees by regulating
employers’ speech. It ignores the application of AB 1889 to
employers own funds, the intensely burdensome and one-
sided regulatory scheme and the actual impact of the statute
as amply demonstrated in the record.

                               A.

   Congress’ intent to protect the free-flow of information
between employers and employees is embodied in Section
8(c) of the Act, which permits employers to articulate, in a
non-coercive manner, their views regarding union organizing
efforts:

    The expressing of any views, argument, or opinion,
    or the dissemination thereof, whether in written,
    printed, graphic, or visual form, shall not constitute
    or be evidence of an unfair labor practice under any
    of the provisions of this subchapter, if such expres-
    sion contains no threat of reprisal or force or promise
    of benefit.

29 U.S.C. § 158(c). Congress added Section 8(c) of the
NLRA in 1947, “to insure both to employers and labor orga-
              CHAMBER   OF   COMMERCE v. LOCKYER          11813
nizations full freedom to express their views to employees on
labor matters . . . .” S. Rep. 80-105, at 23 (1947). Indeed, the
explicit purpose of Section 8(c) was “to protect the right of
free speech when what the employer says or writes is not of
a threatening nature or does not promise a prohibited favor-
able discrimination.” H.R. Rep. No. 80-510 (1947), reprinted
in 1947 U.S. Code Cong. Serv. 1135, 1151.

   The United States Supreme Court recognizes that “the
enactment of § 8(c) manifests a congressional intent to
encourage free debate on issues dividing labor and manage-
ment.” Linn v. United Plant Guard Workers, Local 114, 383
U.S. 53, 62 (1966). The Court also holds that “an employer’s
free speech right to communicate his views to his employees
is firmly established and cannot be infringed by a union or the
Board.” NLRB v. Gissel Packing Co., 395 U.S. 575, 617
(1969). The Congressional enactment of Secion 8(c), the
Court explains, in conjunction with the First Amendment,
allows employers to express “any of [their] general views
about unionism or any of [their] specific views about a partic-
ular union” in a non-coercive manner. Id. at 618.

   Our case law has also consistently emphasized the impor-
tance of an employer’s freedom of speech in labor relations
matters. “Freedom of speech is an essential component of the
labor-management relationship. Collective bargaining will not
work, nor will labor disputes be susceptible to resolution,
unless both labor and management are able to exercise their
right to engage in ‘uninhibited, robust, and wide-open’
debate.” Steam Press Holdings v. Haw. Teamsters & Allied
Workers Union, Local 996, 302 F.3d 998, 1009 (9th Cir.
2002) (quoting New York Times v. Sullivan, 376 U.S. 254,
270 (1964)). For a concise and accurate statement of the rule,
we adopted the principle of free speech in union representa-
tion matters as crafted by the Fifth Circuit:

    The guaranty of freedom of speech and assembly to
    the employer and to the union goes to the heart of
11814         CHAMBER   OF   COMMERCE v. LOCKYER
    the contest over whether an employee wishes to join
    a union. It is the employee who is to make the choice
    and a free flow of information, the good and the bad,
    informs him as to the choices available.

NLRB v. TRW-Semiconductors, Inc., 385 F.2d 753, 760 (9th
Cir. 1967) (quoting Southwire Co. v. NLRB, 383 F.2d 235,
241 (5th Cir. 1967)).

   Our opinions have faithfully reiterated a “commit[ment] to
the principle that debate in union campaigns should be vigor-
ous and uninhibited,” so long as the debate is free of coercion
and retaliatory threats. NLRB v. Lenkurt Elec. Co., 438 F.2d
1102, 1108 (citing NLRB v. TRW-Semiconductors, Inc., 385
F.2d 753, 759-60 (9th Cir. 1967)). “The exercise of free
speech in these campaigns should not be unduly restricted by
narrow construction. It is highly desirable that the employees
involved in a union campaign should hear all sides of the
question in order that they may exercise the informed and rea-
soned choice that is their right.” Id.; accord, Montgomery
Ward & Co. v. NLRB, 385 F.2d 760, 763 (8th Cir. 1967)
(“[T]he right of free speech guaranteed by the First Amend-
ment and § 8(c) of the Act should not be defeated by narrow
or strained construction.”).

   This protection of the speech of both employees and
employers is the heart of Congress’ design to protect and
enhance union organizing. The NLRB supports this congres-
sional policy of free speech, holding “that it will not restrict
the right of any party to inform employees of the advantages
and disadvantages of unions and of joining them as long as
such information is imparted to employees in a noncoercive
manner.” Trent Tube Co., 147 N.L.R.B. 538, 541 (1964) (inter-
nal quotation marks omitted); see also United Technologies
Corp., 274 N.L.R.B. 1069, 1074 (1985) (“[A]n employer has a
fundamental right, protected by Section 8(c) of the Act, to
communicate with its employees concerning its position in
              CHAMBER   OF   COMMERCE v. LOCKYER          11815
collective-bargaining negotiations and the course of those
negotiations.” (footnote omitted)).

                                B.

   AB 1889 prohibits grantees and private employers from
using funds received from the state “to assist, promote, or
deter union organizing,” which is defined to include “any
attempt by an employer to influence the decision of its
employees in this state or those of its subcontractors regarding
. . . [w]hether to support or oppose a labor organization . . .
or [w]hether to become a member of any labor organization.”
Cal. Gov’t Code §§ 16645(a), 16645.2(a), 16645.7(a). The
prohibited expenditures include the payments by an employer
for legal and consulting fees relating to union organizing
efforts as well as the salaries of supervisors and employees
related in any respect to union organizing efforts. § 16646.
The statute exempts several types of pro-union activities and
expenses from the prohibition, including “[a]ddressing a
grievance or negotiating or administering a collective bargain-
ing agreement” and “[n]egotiating, entering into, or carrying
out a voluntary recognition agreement with a labor organiza-
tion.” §§ 16647(a), (d).

   The statute entails burdensome and detailed record-
keeping. The statute requires that employers and grantees cer-
tify in advance that the state funds will not be used for speech
and activities that are related to union organizing.
§§ 16645.2(c), 16645.7(b). In addition, employers and grant-
ees must maintain detailed records showing that none of the
funds have been used for speech regarding labor relations.
§§ 16645.2(c), 16645.7(c). Those records must be made avail-
able to the Attorney General upon request. Id. The statute pre-
sumes that, where funds are commingled, state funds were
used to assist, promote, or deter union organizing. § 16646(b).

   The enforcement provisions place heavy burdens on
affected employers. The statute renders employers and grant-
11816          CHAMBER   OF   COMMERCE v. LOCKYER
ees liable for treble damages (i.e., the amount of state funds
that were expended in violation of the statute, plus a civil pen-
alty equal to twice the amount of those funds). §§ 16445.2(d),
16445.7(d). The Attorney General of California, or any pri-
vate taxpayer, may file a lawsuit against a suspected violator
“for injunctive relief, damages, civil penalties, and other
appropriate equitable relief.” § 16645.8(a). The statute awards
a prevailing plaintiff, or certain prevailing taxpayer interve-
nors, attorney’s fees and costs. § 16645.8(d). The statute does
not award any attorney’s fees or costs to a prevailing
employer. By creating seemingly impossible compliance bur-
dens, by means of onerous accounting requirements and the
threat of lawsuits, the statute essentially mandates employer
neutrality. The statute effectively halts employer campaigns to
defeat labor organizing activity or even an employer’s ability
to offer an opinion on the merits of one union versus another.
Similar to neutrality agreements, which are often sought by
unions from employers, the California statute pushes employ-
ers to a policy of neutrality, which in turn helps facilitate
union organizing. It is no surprise that the California statute
was sponsored by the California Labor Federation, AFL-CIO,
and supported by a phalanx of labor unions. Sen. Comm. on
Industrial Relations, Comm. Rep. for 1999 Cal. Assemb. B.
No. 1889, 1999-00 Reg. Sess., at 1 (June 28, 2000). Equally
telling, a law firm which represented itself as “the largest
Union-side labor law firm on the West Coast” wrote in a letter
to the California Attorney General that AB 1889, if not halted
by a court, would “have a significant positive effect on vari-
ous [union] organization drives . . . .”

   The statute carries a false air of evenhandedness. It purports
to limit employers from using state funds to either “promote”
union organizing or “deter” union organizing. §§ 16645.2(a),
16645.7(a). What must be understood, of course, is that few,
if any, employers will wish for their employees to vote for
union representation. Rare, indeed, will the circumstance be
where an employer will actually dedicate resources to encour-
age its employees to unionize. The California Teamsters
               CHAMBER   OF   COMMERCE v. LOCKYER          11817
revealed the true impact of the legislation in a letter to certain
members of the California legislature when AB 1889 was
under consideration. The California Teamsters Public Affairs
Council “urged [an] ‘aye’ vote on AB 1889” because it “pro-
hibit[s] employers who receive state funds from using those
funds to discourage unionization” and will affect the “all too
common practice” of “employer campaigns to defeat labor
organizing activity.” (emphasis added).

   The compliance provisions are daunting. Employers must
maintain records demonstrating a complete separation of state
funds. These records must identify every expense at all related
to a union organizing campaign, save for a few pro-union
exceptions, and prove conclusively that such expenses do not
derive from state funds. §§ 16645.2(c), 16445.7(c), 16646,
16647. The statute creates a presumption that the employer
used state funds for unionization purposes unless proven oth-
erwise. § 16646(b). This presumption applies even when an
employer has sufficient private funds such that no state funds
were actually expended. Id. The statute’s documentation
demands, which require employers to track every moment of
employee time and every expense that somehow relates to
deterring union organizing efforts, operate to inhibit employ-
ers from opposing union representation drives at all.

   To comply with the statute and continue to oppose union-
ization or speak out on the merits of one union versus another,
an employer must create and maintain two completely sepa-
rate accounting and payroll systems. This becomes necessary
because the California statute requires the employer to moni-
tor public and private funds and ensure that the statute’s man-
date of fund separation is fulfilled. In addition, the statute
requires the employer to engage in the virtually impossible
task of allocating every single employer expense related to
union organizing activity, including supervisor time and
employee time, which must be meticulously logged and
tracked.
11818          CHAMBER   OF   COMMERCE v. LOCKYER
    The record before us shows that labor unions have lever-
aged the significant compliance burdens of the statute to
enhance their bargaining position as against employers. After
AB 1889 passed, unions began writing to the California Attor-
ney General’s office, alleging violations of the statute in an
effort to coerce employers to abstain from distributing litera-
ture, retaining consultants and legal counsel, or otherwise
communicating with employees about the advantages and dis-
advantages of employment in a union shop. One union wrote
the Attorney General and alleged that an employer violated
the statute because employees who were attending a manda-
tory meeting about union organizing were not paid with a sep-
arate paycheck for time that each employee spent at the
meeting. Another union alleged a violation of the statute, with
little factual support, but offered to “settle” the alleged viola-
tion if the employer agreed to enter into a neutrality agree-
ment with the union. Yet another union alleged that an
employer violated AB 1889 by hiring an attorney to represent
it during an organizing drive without arranging to pay for
these legal services from funds that were conclusively derived
from a source other than the state. The attempts by the AFL-
CIO, in briefs filed in this appeal, to downplay the decidedly
pro-union impact of AB 1889 are belied by the record before
the court. What that record teaches is that the unions’ have
and will aggressively use AB 1889 to gain a special advantage
in labor disputes and thereby alter the balance of power
between unions and employers.

   In light of these burdens and this record it cannot be said
with a straight face that the statute “does not affect an
employer’s ability to use its own funds in connection with
union organizing activity.” Opinion of the Court at 11790.
The significant and undeniable impact AB 1889 has on
employers’ speech rights means that not only does it violate
the First Amendment, but it is undoubtedly preempted by the
NLRA.
               CHAMBER   OF   COMMERCE v. LOCKYER          11819
                                III

   The Supreme Court’s preemption doctrines as they relate to
the NLRA have long been centered around reinforcing the
“purpose of the Act[, which] was to obtain ‘uniform applica-
tion’ of its substantive rules and to avoid the ‘diversities and
conflicts likely to result from a variety of local procedures and
attitudes toward labor controversies.’ ” NLRB v. Nash-Finch
Co., 404 U.S. 138, 144 (1971) (quoting Garner v. Teamsters
Union, 346 U.S. 485, 490 (1953)). The Court has articulated
“two distinct NLRA pre-emption principles” as expressed in
San Diego Building Trades Council v. Garmon, 359 U.S. 236
(1959) (“Garmon preemption”), and Machinists v. Wisconsin
Employment Relations Commission, 427 U.S. 132 (1976)
(“Machinists preemption”). Metropolitan Life Ins. Co. v. Mas-
sachusetts, 471 U.S. 724, 748, 748-49 (1985).

   I would hold that the preemption doctrines established in
Garmon and Machinists completely preempt the relevant pro-
visions of the California statute.

                                A.

   The doctrine of “Machinists pre-emption preserves Con-
gress’ intentional balance between the uncontrolled power of
management and labor to further their respective interests.”
Bldg. & Trades Council v. Associated Builders (“Boston Har-
bor”), 507 U.S. 218, 226 (1993) (internal quotation marks
omitted). Although cast nominally as an effort to ensure state
neutrality, the California statute, by stifling speech rights of
employers and their ability to participate in a debate about the
value of unions generally or advise employees as to which
union is preferable, operates to significantly empower labor
unions as against employers. In doing so, the statute destroys
the delicate balance between labor unions and employers as
mandated by Congress through the NLRA. For this initial rea-
son, AB 1889 is preempted by the NLRA, pursuant to
11820          CHAMBER   OF   COMMERCE v. LOCKYER
Machinists v. Wisconsin Employment Relations Commission,
427 U.S. 132 (1976).

    Machinists preemption “is based on the premise that ‘the
use of economic pressure by the parties to a labor dispute is
. . . part and parcel of the process of collective bargaining,’ ”
which means that “neither a state nor the National Labor
Relations Board is ‘afforded flexibility in picking and choos-
ing which economic devices of labor and management shall
be branded unlawful.’ ” Alameda Newspapers, Inc. v. City of
Oakland, 95 F.3d 1406, 1413 (9th Cir. 1996) (quoting
Machinists, 427 U.S. at 144, 149).

   Under the doctrine of Machinists preemption, a state cannot
“deny[ ] one party . . . a weapon that Congress meant him to
have available,” because such a state regulation “stands as an
obstacle to the accomplishment and execution of the full pur-
poses and objectives of Congress.” Machinists, 427 U.S. at
150, 151 (internal quotation marks omitted). Employers have
a number of tools at their disposal in exercising their Section
8(c) rights to express their views on union organizing efforts.
An employer is permitted, for example, to express its views
about union representation to masses of employees, in manda-
tory meetings, on company time, so long as such speech does
not occur within 24 hours of an election. See Peerless Ply-
wood Co., 107 N.L.R.B. 427, 429 (1953); Livingston Shirt
Corp., 107 N.L.R.B. 400, 409 (1953). Employers may dispatch
supervisors to engage in one-on-one discussions during work
time with employees about the negative effects of union rep-
resentation, see, e.g., Lenkurt Elec. Co., 438 F.2d at 1107-08,
and may disseminate written anti-union materials, Beverly
Enterprises-Hawaii, Inc., 326 N.L.R.B. 335, 336 (1998) (hold-
ing that “the [e]mployer did not engage in objectionable con-
duct when its supervisors handed out flyers [even] at a time
when the [e]mployer was enforcing its otherwise valid no-
distribution rule against employees”).
                 CHAMBER    OF   COMMERCE v. LOCKYER               11821
   A state law that both explicitly targets and directly regu-
lates processes controlled by the NLRA is preempted under
the Machinists doctrine. Because AB 1889, on its face,
directly regulates the union organizing process itself and
imposes substantial compliance costs and litigation risk on
employers who participate in that process using the statutorily
protected self-help mechanisms, it interferes with an area
Congress intended to leave free of state regulation. The statute
hands a coercive weapon to those seeking to unionize by cre-
ating an ever present threat of consuming and expensive liti-
gation should an employer deign to offer its opinion on the
merits of unionization. The statute ties the hands of manage-
ment financially and allows pro-union groups free reign.2

   Preemption will prevail over the application of local law
even when federal law does not expressly protect the conduct
at issue if “the application of state law . . . would operate to
frustrate the purpose of the federal legislation.” Teamsters v.
Morton, 377 U.S. 252, 258, 260 (1964) (noting also that a
conflicting state law cannot be permitted to “frustrate the con-
gressional determination to leave th[e] weapon of self-help
available, and to upset the balance of power between labor
and management expressed in our national labor policy”).
Machinists affirms this notion, holding that “a particular
activity might be protected by federal law not only when it [is
explicitly protected by the NLRA], but also when it was an
   2
     I note an additional manner in which AB 1889 alters the balance as
established between labor unions and employers: AB 1889 comes danger-
ously close to rendering employers’ financial records an open book, which
federal labor law does not allow. Labor unions are permitted to receive
employers’ financial records under the NLRA only after winning an elec-
tion and only for legitimate collective bargaining purposes. See NLRB v.
Acme Industrial Co., 385 U.S. 432, 435-36 (1967). Under AB 1889, how-
ever, unions are able to bypass these federal limits and file lawsuits in
state court, granting them access to employers’ financial records in state
court. With these records in hand, the unions would have additional lever-
age in advocating for a unionized workforce and place additional pressure
on an employer to simply recognize a given union.
11822          CHAMBER   OF   COMMERCE v. LOCKYER
activity that Congress intended to be unrestricted by [a]ny
governmental power to regulate.” 427 U.S. at 141 (internal
quotation marks omitted).

   An overriding principle of the NLRA is that the collective
bargaining process cannot function unless both employers and
employees have the ability to engage in open and robust
debate concerning unionization. See NLRB v. Jones &
Laughlin Steel Corp., 301 U.S. 1, 45 (1937) (“The theory of
the Act is that free opportunity for negotiation . . . may bring
about the adjustments and agreements which the Act in itself
does not attempt to compel.”). The NLRA’s declared purpose
is to “restor[e] equality of bargaining power” by, among other
ways, “encouraging the practice and procedure of collective
bargaining and by protecting the exercise by workers of full
freedom of association, self-organization, and designation of
representatives of their own choosing, for the purpose of
negotiating the terms and conditions of their employment.” 29
U.S.C. § 151.

   By impeding the flow of information and any substantive
discussion of unionization, the statute substantively regulates
and disrupts “Congress’ intentional balance between the
uncontrolled power of management and labor to further their
respective interests.” Boston Harbor, 507 U.S. at 226 (internal
quotation marks omitted). The statute frustrates “effective
implementation of the [NLRA’s] processes,” rendering pre-
emption of the California statute under Machinists appropri-
ate. Machinists, 427 U.S. at 148 (internal quotation marks
omitted).

   That California purports to act through its spending power
rather than its regulatory power, is a “distinction without a
difference.” Wisconsin Dep’t of Indus. v. Gould, Inc., 475
U.S. 282, 287 (1986). “[W]e cannot believe that Congress
intended to allow States to interfere with the ‘interrelated fed-
eral scheme of law, remedy, and administration,’ under the
NLRA as long as they did so through exercises of the spend-
               CHAMBER   OF   COMMERCE v. LOCKYER          11823
ing power.” Id. at 290 (quoting Garmon, 359 U.S. at 243)
(citation omitted). Although a state’s ability to control the use
of its funds is an important state interest, regulation that spe-
cifically targets and substantially affects the NLRA bargain-
ing process will be preempted, even if such regulation comes
in the form of a restriction on the use of state funds. See Met-
ropolitan Milwaukee, 431 F.3d 277, 278-79 (7th Cir. 2005).

                                 B.

   The doctrine of Garmon preemption exists to uphold
national labor policy and to vindicate Congress’ decision to
“entrust[ ] administration of the labor policy for the Nation to
a centralized administrative agency, armed with its own pro-
cedures, and equipped with its specialized knowledge and
cumulative experience.” San Diego Building Trades Council
v. Garmon, 359 U.S. 236, 242, 246 (1959). The California
statute stifles employers’ speech rights which are granted by
federal law, and in doing so, impedes the ability of the NLRB
to uphold its election speech rules and administer free and fair
elections. I would hold that AB 1889 is also preempted under
the Garmon doctrine.

   In upholding the NLRA from state-law dilution, the
Supreme Court has emphasized the importance of “delimiting
areas of conduct which must be free from state regulation if
national policy is to be left unhampered.” Garmon, 359 U.S.
at 246. Garmon preemption is focused on avoiding “the
potential conflict of two law-enforcing authorities, with the
disharmonies inherent in two systems, one federal the other
state, of inconsistent standards of substantive law and differ-
ing remedial schemes.” Id. at 242.

   There are two distinct circumstances under which Garmon
preemption can emerge. Sears, Roebuck & Co. v. San Diego
County Dist. Council of Carpenters, 436 U.S. 180, 187
(1978). The first preempts activity which is actually protected
or prohibited by federal law, dictating that “[w]hen it is clear
11824          CHAMBER   OF   COMMERCE v. LOCKYER
or may fairly be assumed that the activities which a State pur-
ports to regulate are protected [by the NLRA], due regard for
the federal enactment requires that state jurisdiction must
yield.” Garmon, 359 U.S. at 244. The second form of Garmon
preemption deals with activities that are merely either argu-
ably protected or arguably prohibited by the Act. Sears, 436
U.S. at 187-88. This second and distinct application of Gar-
mon preemption holds that “[w]hen an activity is arguably
subject [to the Act], the States as well as the federal courts
must defer to the exclusive competence of the National Labor
Relations Board if the danger of state interference with
national policy is to be averted.” Garmon, 359 U.S. at 245
(emphasis added).

   The first branch of the Garmon preemption doctrine is at
issue, and preempts AB 1889. Congress’ intent, the Supreme
Court and Ninth Circuit precedent all lead inextricably to the
conclusion that Section 8(c) of the NLRA actually grants and
protects speech rights of employers. See supra § I. Because
the Act is a comprehensive regulatory scheme, to say that an
activity is not punishable by the Act is the equivalent of pro-
tecting that activity. AB 1889 encumbers these speech rights,
and in doing so, interferes with the jurisdiction of the NLRB.
Congress has directed the NLRB to oversee elections and
determine what conduct constitutes an unfair labor practice
under the Act. See 29 U.S.C. § 158(a)(1). Broadly speaking,
and consistent with Section 8(c) of the NLRA, the NLRB
takes a laissez faire approach to employee and employer
speech, allowing passionate, partisan debate to proceed during
a union organizing campaign. See Trent Tube Co., 147 N.L.R.B.
538, 541 (1964). At the same time, the NLRB has jurisdiction
to regulate a certain bandwidth of employer speech, to ensure
compliance with Section 8(c). See Midland Nat’l Life Ins.
Co., 263 N.L.R.B. 127, 133 (1982) (“[W]e will no[t] probe into
the truth or falsity of the parties’ campaign statements, and [ ]
will not set elections aside on the basis of misleading cam-
paign statements. . . . [But] we will continue to protect against
other campaign conduct, such as threats, promises, or the like,
               CHAMBER   OF   COMMERCE v. LOCKYER          11825
which interferes with employee free choice.”). For example,
the NLRB has long enforced various “time, place, and man-
ner” rules that bar certain types of campaign and speech activ-
ities in the vicinity of the polls or in the final hours before an
election. See Peerless Plywood Co., 107 N.L.R.B. at 429-30;
Milchem, Inc., 170 N.L.R.B. 362, 362-63 (1968). The NLRB has
held that, consistent with Section 8(c), employers may hold
mandatory meetings with employees about union organizing
efforts, Livingston Shirt Corp., 107 N.L.R.B. at 409, direct
supervisors to informally discuss a representation campaign
with employees, see Stanley Oil Co., 213 N.L.R.B. 219, 225
(1974), and distribute anti-union literature to employees even
when enforcing a no-solicitation rule to employees, Beverly
Enterprises-Hawaii, 326 N.L.R.B. at 336.

   The California statute regulates the same partisan employer
speech that Congress committed to the jurisdiction of the
NLRB. In doing so, AB 1889 discourages employer speech,
which works at cross-purposes with the relaxed election
speech rules established by the NLRB. Congress “entrusted
[to the NLRB] . . . a wide degree of discretion in establishing
the procedure and safeguards necessary to insure the fair and
free choice of bargaining representatives by employees.”
NLRB v. A.J. Tower Co., 329 U.S. 324, 330 (1946). By dis-
couraging employer speech, California directly usurps the
ability of the NLRB to administer elections that will foster
fair and free employee choice.

   Far from hewing to the NLRA’s goal of installing a “na-
tional labor policy of minimizing industrial strife,” Emporium
Capwell Co. v. W. Addition Cmty. Org., 420 U.S. 50, 62
(1975), AB 1889 encourages additional litigation by allowing
unions and the California Attorney General to bring proceed-
ings in state court to attack the very partisan employer speech
that the NLRB protects. California defies Congress’ decision
to “entrust[ ] to the Board alone” the criteria necessary to con-
duct a fair representation election. NLRB v. Waterman S.S.
Corp., 309 U.S. 206, 226 (1940).
11826          CHAMBER   OF   COMMERCE v. LOCKYER
   “Garmon preemption is ‘intended to preclude state interfer-
ence with the National Labor Relations Board’s interpretation
and active enforcement of the integrated scheme of regulation
established by the NLRA.’ ” Alameda Newspapers, 95 F.3d at
1412 (quoting Golden State Transit Corp. v. City of Los
Angeles, 475 U.S. 608, 613 (1986)); see also Gould, 475 U.S.
at 286-89. California’s displacement of the NLRA’s free
speech protections and its interference with the NLRB render
AB 1889 preempted under Garmon. Garmon preemption
applies because AB 1889 “regulate[s] conduct so plainly
within the central aim of federal regulation [that it] involves
too great a danger of conflict between power asserted by Con-
gress and requirements imposed by state law,” thus creating
a “potential frustration of national purposes.” Garmon, 359
U.S. at 244.

   The opinion of the court avoids general Garmon preemp-
tion principles and replaces them with an overly narrow view
of the Garmon doctrine that is inapplicable to this dispute.
The critical error of the opinion of the court lies in a misread-
ing of Sears, Roebuck & Company, 436 U.S. 180, and a mis-
understanding of the form of Garmon preemption that applies
to AB 1889.

   The opinion of the court relies upon Sears for the proposi-
tion that Garmon preemption applies only when the contro-
versy presented to the state court is identical to the
controversy that would be presented to the NLRB. The opin-
ion of the court fails to recognize, however, that this require-
ment of identicalness applies only to the type of Garmon
preemption applied to those activities that are merely argu-
ably prohibited by the Act. Because of heightened concerns
rooted in the Supremacy Clause of the United States Constitu-
tion, the requirement of identicalness does not apply if the
activity is either arguably protected or, as here, actually pro-
tected, by the Act. An analysis of Sears readily uncovers the
misconception of the Garmon doctrine as expressed in the
court’s opinion filed today.
               CHAMBER   OF   COMMERCE v. LOCKYER          11827
   At issue in Sears was the power of a state court to hear a
trespass lawsuit brought by an employer to enforce trespass-
ing laws against union picketing. Sears, 436 U.S. at 182. The
Court first considered whether the picketing was “arguably
prohibited” by federal law, which would be possible grounds
for preemption. Id. at 190-98 (emphasis added). The Court
concluded that, with regard to activity which is arguably pro-
hibited by the Act, Garmon preemption (and the accompany-
ing risk of interference with the jurisdiction of the NLRB)
emerges only when “the controversy is identical to . . . that
which could have been, but was not, presented to the Labor
Board.” Id. at 197. The Court concluded that the NLRB’s
inquiry regarding the arguably prohibited conduct would
prove to be vastly different than an inquiry by the state court
as to whether there was a trespass, and therefore, declined to
find Garmon preemption.

   The Court then turned to the question whether the arguably
protected character of the union’s picketing could lead to
Garmon preemption. Id. at 199-207. Preliminarily, the Court
noted that “state-court interference with conduct actually pro-
tected by the act” invokes a “constitutional objection” rooted
in the Supremacy Clause. Id. at 199. Therefore,
“[c]onsiderations of federal supremacy . . . are implicated to
a greater extent when labor-related activity is protected than
when it is prohibited.” Id. at 200. The Court concluded that
even though the Union’s peaceful, if trespassory, picketing
could arguably be protected under the Act, such a trespass “is
far more likely to be unprotected than protected.” Sears, 436
U.S. at 205. Therefore, the Court held, “the assertion of state
jurisdiction [to adjudicate the alleged trespass] does not create
a significant risk of prohibition of protected conduct.” Sears,
436 U.S. at 207. Notably, with regard to the arguably pro-
tected conduct of the picketing and trespass, the Court did not
require (as it did with respect to arguably prohibited conduct)
that the controversies before the NLRB and state court be
identical before invoking Garmon preemption.
11828         CHAMBER   OF   COMMERCE v. LOCKYER
   As this analysis of Sears indicates, the rule that Garmon
preemption applies only when the state court and NLRB
inquiries are identical only applies to activity which is argu-
ably prohibited under the Act. With regard to conduct that is
arguably protected under the Act, the standard under which
preemption is found becomes less stringent because of height-
ened federal supremacy concerns. Accordingly, as compared
to activity which is merely arguably prohibited by the Act,
Garmon preemption is more readily found in relation to activ-
ity which is arguably protected or actually protected by the
Act. 436 U.S. at 199-200.

   At issue with regard to AB 1889 is not a mere arguable pro-
hibition or arguable protection granted by the NLRA. Rather,
Section 8(c) of the NLRA constitutes an explicit, actual pro-
tection which explicitly protects the speech rights of employ-
ers.

   All along, the Sears Court explicitly disclosed that it was
not addressing a case that involved actually protected con-
duct. Sears, 436 U.S. at 187 (“The case is not, however, one
in which ‘it is clear or may fairly be assumed’ that the subject
matter which the state court sought to regulate . . . is either
prohibited or protected by the Federal Act.”). In light of the
explicit speech protections granted by Section 8(c) of the
NLRA, the Sears test of strict identicalness does not apply to
a Garmon preemption analysis of AB 1889. Simply put, the
opinion of the court’s reliance on Sears, and its application of
the test of identicalness between the NLRB’s inquiry and the
state court’s inquiry, is misplaced.

   The traditional Garmon analysis applies to the explicitly
protected free speech rights of employers, and because AB
1889 interferes with those rights and undermines the speech
rules and election procedures of the NLRB, I would hold that
AB 1889 is preempted under Garmon.
             CHAMBER   OF   COMMERCE v. LOCKYER     11829
                              IV

  I must respectfully dissent because AB 1889 violates the
First Amendment and is preempted under both Machinists and
Garmon. The District Court properly entered summary judg-
ment in favor of plaintiffs.