Court Opinion

ID: 9604971
Source: CourtListenerOpinion
Date Created: 2023-08-22 02:28:57.665881+00
Date Added: 2024-06-11T18:02:25.532076
License: Public Domain

Dore, J.
(dissenting)—I would have held that RCW 39.16 was constitutional and not in violation of the privileges and immunities clause of the United States Constitution because RCW 39.16 does not apply to projects supported by public money but only to those organized by private persons and organizations, or by private employers who bid for state purchase contracts.
I
States may discriminate constitutionally on the basis of residency when acting in a sovereign or proprietary capacity.
The Washington statute applies only to those with whom the state or local government contracts to build a public work. By definition, money raised from residents finances the project. The State is, therefore, acting in a proprietary capacity when discriminating against nonresidents under RCW 39.16.
The mutually reinforcing relationship between the privileges and immunities clause and the commerce clause stems from their common origin in the fourth article of the Articles of Confederation and their shared vision of federalism. Baldwin v. Fish & Game Comm'n, 436 U.S. 371, 379, 56 L. Ed. 2d 354, 98 S. Ct. 1852 (1978). This unique relationship renders analogy to recent commerce clause proprietary cases particularly appropriate.
The United States Supreme Court recently found permissible under the commerce clause a state policy which limited the sale of a state-owned resource to state residents. Reeves, Inc. v. Stake, 447 U.S. 429, 65 L. Ed. 2d 244, 100 S. Ct. 2271 (1980). At stake in Reeves was the distribution policy of a cement plant owned and operated by the State of South Dakota. During a period of cement shortage, the State refused to supply cement to out-of-state custo*134mers. A Wyoming customer alleged that South Dakota's residents-only policy violated the commerce clause. Placing its support of the residents-only policy squarely on the rights of South Dakota when acting as a proprietor, the Supreme Court found no constitutional deficiency. Following the earlier case of Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 49 L. Ed. 2d 220, 96 S. Ct. 2488 (1976), the Court found that the commerce clause did not restrict a state when acting as a proprietor from favoring its own citizens over others. As a "general rule", states, when acting as market participants or as proprietors, were not engaged in "the kind of action with which the Commerce Clause is concerned". Hughes, at 805.
Reeves was grounded on three identifiable principles. First, states in their proprietary capacity should be free to set the terms of their own contracts. n[W]hen acting as proprietors, States should similarly [to private market participants] share existing freedoms from federal constraints, including the inherent limits of the Commerce Clause." (Italics mine.) Reeves, at 439. See also Reeves, at 438 n.10 ("States may fairly claim some measure of a sovereign interest in retaining freedom to decide how, with whom, and for whose benefit to deal").
Second, the favoring of residents comports with the very purpose of a state. The Wyoming customer had argued that the residents-only policy was "protectionist" and not an appropriate government objective. The Court disagreed, emphasizing the right of a state to limit state benefits to those it serves and by which it is funded.
Third, the Court was influenced by "considerations of state sovereignty" and its related role as ""'guardian and trustee for its people". Reeves, at 438. Earlier authority held that Congress could not interfere with certain employment relations with state workers affecting integral state operations "in areas of traditional governmental functions". Reeves, at 438 n.10, quoting National League of Cities v. Usery, 426 U.S. 833, 852, 49 L. Ed. 2d 245, 96 S. Ct. 2465 (1976) (Congress under the commerce clause could not *135apply Fair Labor Standards Act to state governments).
Even when public welfare laws were regularly stricken, the Supreme Court allowed states to place beneficial labor conditions on public works contracts. Atkin v. Kansas, 191 U.S. 207, 48 L. Ed. 148, 24 S. Ct. 124 (1903). The Atkin Court could not imagine a possible ground limiting the right of a state to set 8-hour workdays on public works projects. The Court concluded this right "belongs to the State, as the guardian and trustee for its people, and having control of its affairs, to prescribe the conditions upon which it will permit public work to be done on its behalf, or on behalf of its municipalities". Atkin, at 222-23. See also Equitable Shipyards, Inc. v. State, 93 Wn.2d 465, 611 P.2d 396 (1980), quoting Perkins v. Lukens Steel Co., 310 U.S. 113, 127, 84 L. Ed. 1108, 60 S. Ct. 869 (1940). Under the same theory, states may require state printing to be done by in-state companies. American Yearbook Co. v. Askew, 339 F. Supp. 719, 721-22 (M.D. Fla.), aff'd, 409 U.S. 904, 34 L. Ed. 2d 168, 93 S. Ct. 230 (1972).
In 1980, this court upheld the constitutionality of a statute granting a bidding preference to in-state companies for ferry construction contracts. Equitable Shipyards, Inc. v. State, supra. The statute was challenged only under the equal protection clause. However, the court found that the purpose of the state preference passed "constitutional muster" in part because "construction of ferries within the state strengthens state and local economies". Equitable, at 479. We stated at pages 476-78:
We have held the federal equal protection clause and the state privileges and immunities clause (Const, art. 1, § 12) are substantially identical. Olsen v. Delmore, 48 Wn.2d 545, 295 P.2d 324 (1956). While the State objects to considering the equal protection claim as not raised by Equitable in the trial court, we believe the issue should be addressed.
In other contexts, the United States Supreme Court has stated that government, like private individuals and businesses, "enjoys the unrestricted power to produce its own supplies, to determine those with whom it will deal, *136and to fix the terms and conditions upon which it will make needed purchases." Perkins v. Lukens Steel Co., 310 U.S. 113, 127, 84 L. Ed. 1108, 60 S. Ct. 869 (1940). See also Heim v. McCall, 239 U.S. 175, 191, 60 L. Ed. 206, 36 S. Ct. 78 (1915).
The State asserts that equal protection guaranties are not applicable when the state acts in its proprietary capacity as a purchaser of goods. Relying on Heim, other state courts have upheld statutory in-state purchasing preferences against both equal protection and commerce clause challenges. See, e.g., City and County of Denver v. Bossie, 83 Colo. 329, 266 P. 214 (1928) ("the state may buy of whom it will"); State ex rel. Collins v. Senatobia Blank Book & Stationery Co., 115 Miss. 254, 76 So. 258 (1917) (rejecting equal protection challenge to a statute prohibiting state contracting with nonresident bidders).
In this case, we need not go so far as to hold that because a contract is public and requires expenditure of public funds the legislature may, without reasonable basis, grant a preference. Here, as later discussed, a reasonable basis exists for the preference sufficient to withstand constitutional attack.
We conclude the preference statute is most closely allied with economic legislation requiring only rational basis scrutiny.
From reading Equitable it is clear that, without the 6 percent preference, the contract undoubtedly would have been awarded to Equitable. However, by its decision, the court, in effect, held that it was a legitimate state purpose to favor in-state corporations and contractors.
All three principles relied upon by Reeves and other courts recognize the unique constitutional status of states when they distribute state benefits rather than regular private activity. Each principle respects states, as members of a federal form of government, where states practice primary state purposes. The Washington statute is justified by these doctrines.
The privileges and immunities clause guarantees to nonresidents those rights of residents which properly belong to *137everyone. As Baldwin summarized, rights uniquely linked to residency such as suffrage, candidacy, and access to state services are not rights to which the privileges and immunities clause is directed. Distinctions favoring residents in these cases "merely reflect the fact that this is a Nation composed of individual States, and are permitted". Baldwin, at 383.
II
The majority's reliance upon the rationale and precedent of Hicklin v. Orbeck, 437 U.S. 518, 57 L. Ed. 2d 397, 98 S. Ct. 2482 (1978) is misplaced. The "Alaska Hire" law in Hicklin created an employment preference favoring Alaska residents for "all employment which is a result of oil and gas leases" and other legal arrangements to which the State of Alaska was lessor. Alaska Stat. Ann. § 38.40.050(a) (1977). The Supreme Court emphasized the broad reach of the Alaska law in Hicklin, at pages 530-31:
Under this provision, Alaska Hire extends to employers who have no connection whatsoever with the State's oil and gas, perform no work on state land, have no contractual relationship with the State, and receive no payment from the State. The Act goes so far as to reach suppliers who provide goods or services to subcontractors who, in turn, perform work for contractors despite the fact that none of these employers may themselves have direct dealings with the State's oil and gas or ever set foot on state land. ... In sum, the Act is an attempt to force virtually all businesses that benefit in some way from the economic ripple effect of Alaska's decision to develop its oil and gas resources to bias their employment practices in favor of the State's residents.
(Footnote omitted.) In Hicklin, the Court stated the purpose of the statute at pages 526-28:
Alaska Hire was enacted to remedy, namely, Alaska's "uniquely high unemployment." Alaska Stat. Ann. § 38.40.020 (1977). What evidence the record does contain indicates that the major cause of Alaska's high unemployment was not the influx of nonresidents seeking employment, but rather the fact that a substantial number of Alaska's jobless residents—especially the unem*138ployed Eskimo and Indian residents—were unable to secure employment either because of their lack of education and job training or because of their geographical remoteness from job opportunities; and that the employment of nonresidents threatened to deny jobs to Alaska residents only to the extent that jobs for which untrained residents were being prepared might be filled by nonresidents before the residents' training was completed.
. . . Alaska Hire simply grants all Alaskans, regardless of their employment status, education, or training, a flat employment preference for all jobs covered by the Act. A highly skilled and educated resident who has never been unemployed is entitled to precisely the same preferential treatment as the unskilled, habitually unemployed Arctic Eskimo enrolled in a job-training program. If Alaska is to attempt to ease its unemployment problem by forcing employers within the State to discriminate against nonresidents—again, a policy which may present serious constitutional questions—the means by which it does so must be more closely tailored to aid the unemployed the Act is intended to benefit. Even if a statute granting an employment preference to unemployed residents or to residents enrolled in job-training programs might be permissible, Alaska Hire's across-the-board grant of a job preference to all Alaskan residents clearly is not.
(Footnote omitted.) Hicklin concluded at pages 533-34:
Although the fact that a state-owned resource is destined for interstate commerce does not, of itself, disable the State from preferring its own citizens in the utilization of that resource, it does inform analysis under the Privileges and Immunities Clause as to the permissibility of the discrimination the State visits upon nonresidents based on its ownership of the resource. Here, the oil and gas upon which Alaska hinges its discrimination against nonresidents are of profound national importance. On the other hand, the breadth of the discrimination mandated by Alaska Hire goes far beyond the degree of resident bias Alaska's ownership of the oil and gas can justifiably support. The confluence of these realities points to but one conclusion: Alaska Hire cannot withstand constitutional scrutiny.
(Footnote omitted.)
The Washington statute has no such reach. Unlike *139Alaska Hire, (1) it is limited to projects to which state or local governments are direct contracting parties; (2) it applies only to those private employers who themselves contract with government and those employees who work directly on public jobs; and (3) the Washington statute regulates only those who receive direct economic benefit from public-funded government projects.
Conclusion
RCW 39.16 assures that state residents enjoy the benefits of state spending. The limiting of benefits to those who fund the state treasury and for whom the State was created to serve affects the essential and patently unobjectionable purpose of state government—to serve the citizens of the state.
Moreover, the State should be deemed free to deal with its own residents when it builds public works. It is the "owner" of the job creating the employment. If it built the sewer system itself, the City of Aberdeen would not violate any "right to travel" by requiring its employees to be residents. Since that right is accepted, the City should be permitted to put the same condition on work it contracts out.
The statute does not interfere with a nonresident's right to ply his or her trade within Washington state. General restrictions on private employment unconnected with state funds or projects are invalid. Ward v. Maryland, 79 U.S. (12 Wall.) 418, 20 L. Ed. 449 (1871). RCW 39.16 has no effect on the private labor market since it applies to work created by public agencies. As noted, unlike the Alaska Hire statute in Hicklin it does not expend public money to seek to control private employment. Nonresidents are precluded only from public works.
The Washington statute is confined to the reach justified by its interest as sovereign and owner of the project. Hicklin extensively distinguished Alaska Hire from such a narrow law. As later explained in Reeves, the public works employment statute affects interests which the privileges and immunities clause reserves to state control. Had Equi*140table Shipyards known that this court would declare RCW 39.16 unconstitutional, it could have arranged to go into right-to-work states and secure personnel to construct the job, underbidding the local company or contractor who is required to hire union employees. In the future, local contractors and subcontractors bidding on public works will be at an extreme disadvantage when competing with out-of-state corporations which can base their bids on nonunion labor and substantially undercut the bids of Washington contractors. At last report, Grays Harbor had an unemployment rate in excess of 30 percent. Such communities, when they own the public works project themselves, should be able to require that the work be done by unemployed union workers who are residents of the community. Even worse, at a time when statewide unemployment has hit an all-time high of over 12 percent, the majority precludes the Legislature from enacting legislation establishing proprietary public works projects for unemployed residents as a partial solution for our state's unemployment problem. Such a narrow interpretation of our constitution is not justified.
I would uphold the constitutionality of RCW 39.16, and reverse the judgment of the trial court.
Rosellini, Dimmick, and Pearson, JJ., concur with Dore, J.