Laborers Local Union No. 374 v. Felton Construction Co.

654 P.2d 67, 98 Wash. 2d 121, 36 A.L.R. 4th 926, 1982 Wash. LEXIS 1679, 31 Empl. Prac. Dec. (CCH) 33

• Court: Washington Supreme Court
• Decided: November 24, 1982
• Docket: 47681-1
• Status: Published

Opinions

Utter, J.

The trial court declared RCW 39.16 violated U.S. Const, art. 4, § 2, the privileges and immunities clause. The matter is on direct review to this court. We affirm. RCW 39.16.005 provides in pertinent part:

In all contracts let by the state ... or any county, city ... for the erection, construction, alteration, demolition, or repair of any public building ... or any other kind of public work or improvement, the contractor or subcontractor shall employ ninety-five percent or more bona fide Washington residents as employees where more than forty persons are employed, and ninety percent or more bona fide Washington residents as employees where forty or less persons are employed . . .

Failure to comply with these provisions results in a criminal sanction. RCW 39.16.040.

In the spring of 1980, the City of Aberdeen awarded a sanitary sewer project to the lowest bidder, the Felton Construction Company, a Montana corporation. The project was funded by 25 percent state and local monies and 75 percent federal monies. After work commenced, appellants, Laborers Local Union 374 and two of its unemployed members, sued Felton and the City for a writ of mandamus and for injunctive relief. They alleged Felton had not employed the statutorily required percentage of Washington residents on the sewer project.

Both Felton and the City denied appellants' allegations. The City admitted the sewer project was a public work. Felton did not. Felton moved to dismiss the complaint for failure to state a claim. The City moved for a declaratory judgment on the constitutionality of RCW 39.16.005. Appellants filed a cross motion for an order adjudging the statute to be constitutional.

After hearing arguments on the motions, the trial court declined to dismiss the action for failure to state a claim, but ruled that RCW 39.16.005 "is void because it violates the Privileges and Immunities Clause of the United States Constitution." We accepted review.

I

The privileges and immunities clause of U.S. Const, art. 4, § 2 states:

The citizens of each state shall be entitled to all privileges and immunities of citizens in the several states.

The purpose of the privileges and immunities clause is "to place the citizens of each State upon the same footing with citizens of other States, so far as the advantages resulting from citizenship in those States are concerned." Paul v. Virginia, 75 U.S. (8 Wall.) 168, 180, 19 L. Ed. 357 (1869). The history of the clause reflects a concern by the framers for keeping the newly independent states from adopting highly protectionist economic policies. The Articles of Confederation provide, "The better to secure and perpetuate mutual friendship and intercourse among the people of the different states in this union, the free inhabitants of each of these states . . . shall be entitled to all privileges and immunities of free citizens in the several states ..." 9 Journals of the Continental Congress 1774-1789, at 908 (C. Ford ed. 1907).

The concerns expressed in the Articles of Confederation did not dissipate with the demise of the Articles, but were reiterated with equal (if briefer) force in the comity article of the constitution. The privileges and immunities clause "implicates not only the individual's right to nondiscriminatory treatment but also, perhaps more so, the structural balance essential to the concept of federalism." Austin v. New Hampshire, 420 U.S. 656, 662, 43 L. Ed. 2d 530, 95 S. Ct. 1191 (1975).

II

With these purposes in mind, the United States Supreme Court fashioned a test for determining if state legislation violates the privileges and immunities clause. The threshold inquiry is whether the interest subject to state legislation is a privilege or immunity within the meaning of the clause. In Baldwin v. Fish & Game Comm'n, 436 U.S. 371, 383, 56 L. Ed. 2d 354, 98 S. Ct. 1852 (1978), the Court stated:

Only with respect to those "privileges" and "immunities" bearing upon the vitality of the Nation as a single entity must the State treat all citizens, resident and nonresident, equally.

The Baldwin Court referred to such interests as "fundamental".

Once within the ambit of the clause, a state must demonstrate a "valid independent" reason for discriminating against nonresidents by showing:

(1) "'something to indicate that non-citizens constitute a peculiar source of the evil at which the [discriminatory] statute is aimed'". Hicklin v. Orbeck, 437 U.S. 518, 526, 57 L. Ed. 2d 397, 98 S. Ct. 2482 (1978), quoting from Toomer v. Witsell, 334 U.S. 385, 398, 92 L. Ed. 1460, 68 S. Ct. 1156 (1948); and

(2) "there must be a 'reasonable relationship between the danger represented by non-citizens, as a class, and the . . . discrimination practiced upon them.'" Hicklin, at 526, quoting from Toomer, at 399. The Hicklin Court also stated the discrimination must "bear a substantial relationship", Hicklin, at 527, and must be "closely tailored", Hicklin, at 528, to the particular evil nonresidents present.

We will refer to this 2-part test as the Toomer /Hicklin test.

A

Addressing Baldwin's threshold question, we must first clarify the meaning of the term "fundamental". By using the term the Baldwin Court revived the somewhat anachronistic discussion of the privileges and immunities clause by Justice Washington in Corfield v. Coryell, 6 F. Cas. 546 (C.C.E.D. Pa. 1823) (No. 3,230). In its use of the term, the Court did not mean to embrace the analytical structure for identifying fundamental rights requiring strict scrutiny under the equal protection clause. See San Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1, 36 L. Ed. 2d 16, 93 S. Ct. 1278 (1973). To the extent the term "fundamental" is helpful, it points to those interests "basic to the maintenance or well-being of the Union." Baldwin, at 388.

From the very beginning, "the right to ply one's trade in any State in the Nation was at the heart of the clause's guarantees." Salla v. County of Monroe, 48 N.Y.2d 514, 522, 399 N.E.2d 909, 423 N.Y.S.2d 878 (1979), cert. denied sub nom. Abrams v. Salla, 446 U.S. 909, 64 L. Ed. 2d 262, 100 S. Ct. 1836 (1980). See Ward v. Maryland, 79 U.S. (12 Wall.) 418, 20 L. Ed. 449 (1871).

[I]t was long ago decided that one of the privileges which the clause guarantees to citizens of State A is that of doing business in State B on terms of substantial equality with the citizens of that State.

(Italics ours.) Toomer v. Witsell, supra at 396, citing Ward v. Maryland, supra. See Hicklin, supra. Baldwin itself affirmed this principle in stating the "right to pursue a livelihood in a State other than his own [is] a right that is protected by the Privileges and Immunities Clause." Baldwin, at 386, citing Toomer v. Witsell, supra; see also Northwest Gillnetters Ass'n v. Sandison, 95 Wn.2d 638, 647-48, 628 P.2d 800 (1981) (sport fishing is not a privilege or immunity, but commercial fishing is protected).

Appellants claim RCW 39.16 does not regulate a fundamental interest, but their arguments in this regard are misplaced. They argue first that inasmuch as RCW 39.16.005 applies only to contractors and subcontractors engaged in public works, such livelihood interests are not fundamental. The capacity to pursue work is fundamental whether in a public or private context. Appellants also argue that since RCW 39.16.005 sweeps much less broadly than the Alaska statute at issue in Hicklin, the interest affected is not fundamental. This point may be relevant to evaluating the statute under the Toomer/Hicklin test, but it does not make the interest any less fundamental. The State, in its amicus brief, concedes that RCW 39.16 operates to discriminate against nonresident workers in a limited context of public works construction. The Toomer/Hicklin test must therefore be applied.

B

The State suggests the purpose of RCW 39.16.005 is to strengthen the economic welfare of state and local economies. We must first question the validity of such a legislative motive for purposes of privileges and immunities analysis. In Hicklin, at page 526, the Court questioned as "at least dubious" the validity of the Alaska Hire Statute's purpose of alleviating state unemployment. Here, the State has suggested no "evil” that nonresidents present. It has only suggested that by keeping within the state wages from public works projects, local economies will be strengthened. This is an example of the highly protectionist economic policies the privileges and immunities clause was designed to protect against. The State argues that since state tax dollars are being used on public works projects, the economic purposes of the statute "reflect the essential and patently unobjectionable purpose of state government—to serve the citizens of the State." Reeves, Inc. v. Stake, 447 U.S. 429, 442, 65 L. Ed. 2d 244, 100 S. Ct. 2271 (1980). The State thus seeks to justify the statute's purpose based on its proprietary role with respect to public works projects. While the State's proprietary role would not exempt it from privileges and immunities scrutiny (see discussion infra at 129-30), it might justify an otherwise illegitimate legislative purpose of seeking to foster state economic welfare. See Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 49 L. Ed. 2d 220, 96 S. Ct. 2488 (1976). We assume arguendo the legitimacy of the purpose of RCW 39.16.005 for purposes of analyzing the statute under the Toomer/Hicklin test.¹

C

Looking to the first part of the Toomer/Hicklin test, the "peculiar evil" that nonresidents represent is indicated by the State only by implication. By producing secondary economic activity and maximizing the return of tax dollars to the State, RCW 39.16.005's restrictions on contracting for public works benefit the state's economy. Eliminating the statute, we should assume, would undermine the secondary economic activity and reduce maximal use of state tax dollars by diverting wages out of the state.

Neither appellants nor the State provides any evidence that hiring out-of-state workers would constitute a peculiar evil by diverting wages out of the state. No proof is presented regarding the extent to which out-of-state contractors or subcontractors would bring their employees to the jobsite rather than hire locally (which is not an unfamiliar practice with respect to nonsupervisorial employees). Nor do appellants provide any evidence regarding the extent to which wages would be diverted out of state. Undoubtedly, out-of-state contractors purchase supplies and equipment in the state and some wages are spent here. In addition, some secondary economic activity is generated only by having out-of-state workers with their additional requirements of food and shelter. Finally, even if we were to assume some wages would be diverted out of state, we have been provided no information by which to compare how that "loss" would compare with the advantage of lower bids on public works by out-of-state contractors.

In essence, we are presented with a bare allegation that the state benefits from RCW 39.16 and that nonresidents are the peculiar evil that would eliminate that benefit. The State seems to acknowledge its paucity of evidence in stating if the statute were struck down, nonresidents "might otherwise drain the economy." Brief of Amicus Curiae, at 12. Neither appellants nor the State has shown "something to indicate that non-citizens constitute a peculiar source of the evil at which the statute is aimed." Toomer, at 398. RCW 39.16.005's discrimination against nonresidents is not justified by any "substantial reason . . . beyond the mere fact that they are citizens of other States." Toomer, at 396.

D

Absent an identified "peculiar evil", it is difficult to determine if the statute is closely related to eliminating the alleged evil nonresidents present. Needless to say, if the evil is not identified, legislation can hardly be closely related to eliminating it. We have no way of ascertaining if the statute is closely tailored to serving the purpose of benefiting the state economy. We have not been told the magnitude of the economic gain to the state the statute provides by its employment restrictions or the loss it occasions by discouraging competitive bids.

Neither appellants nor amicus has demonstrated that nonresidents are a peculiar evil, nor has either shown how the statute is "closely tailored" to achieving a legitimate state purpose.

E

Appellants and amicus nevertheless argue that since the legislation involves the State in its proprietary capacity, it may with justification discriminate against nonresidents. Addressing a similar proprietary interest argument in Hicklin, the Court refused to establish an exception under the privileges and immunities clause, stating:

Rather than placing a statute completely beyond the Clause, a State's ownership of the property with which the statute is concerned is a factor—although often the crucial factor—to be considered in evaluating whether the statute's discrimination against noncitizens violates the Clause. Dispositive though this factor may be in many cases in which a State discriminates against nonresidents, it is not dispositive here.

437 U.S. at 529. The Hicklin Court concluded Alaska had "little or no proprietary interest in much of the activity swept within the ambit" of the statute. Hicklin, at 529.

As a public work involving state tax dollars, the Aberdeen sewer project is one to which the State may claim some proprietary interest. No one questions that the sewer project will enure to the benefit of the City of Aberdeen or that if the City had desired to, it could have built the system itself. The statute is not limited to the ownership rights of the State, however. It specifically places limitations on private contractors and their subcontractors. While the economic impact of RCW 39.16 on the private sector is not as far ranging as the Alaska Hire Statute, it nevertheless affects private employers who have no direct dealings with the State. See Hicklin, at 532.

Furthermore, while the Hicklin Court did not dispute Alaska's ownership of its oil and gas, we have good reason to question the extent of the State's ownership here. State and local tax dollars were used for Aberdeen's sewer project, but 75 percent of the funding came from the federal government. This public works project is not solely a state endeavor, and its funding is an example of the principle embodied in the constitution that "the peoples of the several states must sink or swim together". Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 523, 79 L. Ed. 1032, 55 S. Ct. 497, 101 A.L.R. 55 (1935) (Cardozo, J.).

The interdependent nature of the funding for public works projects makes this case distinguishable from the commerce clause cases appellants cite in support of their proprietary interest argument. First, it must be remembered that while the commerce clause and privileges and immunities clause have a "mutually reinforcing relationship", Hicklin, at 531, the two clauses are not coextensive. Analogy to commerce clause cases here is simply that. The commerce clause focuses on undue burdens on interstate commerce. It is an affirmative grant of power to Congress and an implied restriction on the power of states. The privileges and immunities clause is a direct limitation on states and explicitly secures privileges and immunities for individuals who move from state A to state B. Toomer, at 395.

In Reeves, Inc. v. Stake, supra, South Dakota had by itself initiated cement production, and the Court felt it was entitled to benefit from its "foresight, risk, and industry". 447 U.S. at 446. In Hughes v. Alexandria Scrap Corp., supra, Maryland used only its own funds for bounties on junk cars to clean up the state's landscape and protect the state's environment. Cf. Baldwin v. Fish & Game Comm'n, supra (where the Court's reason for upholding a game-licensing statute reflected its appreciation of Montana's protection of its environment).

Even under the commerce clause, the United States Supreme Court has declined to permit states to pursue "simple economic protectionism" where the State's ownership of the resource protected is attenuated. See New England Power Co. v. New Hampshire, 455 U.S. 331, 71 L. Ed. 2d 188, 102 S. Ct. 1096 (1982).

Also, appellants' citation to Equitable Shipyards, Inc. v. State, 93 Wn.2d 465, 611 P.2d 396 (1980) in support of its proprietary interest argument is inappropriate. Equitable Shipyards, a case upholding a statutory preference for instate shipbuilders, concerned the equal protection clause. Since residency is not a suspect category, the statute in Equitable Shipyards was subject only to a minimum rationality test. By contrast, the Toomer /Hicklin .test establishes a standard at least comparable to the intermediate level of scrutiny, Massachusetts Coun. of Constr. Employers, Inc. v. Mayor of Boston, 425 N.E.2d 346, 352 n.7 (Mass. 1981) (U.S. appeal pending), and possibly consonant with the strict level of scrutiny under equal protection analysis. See L. Tribe, American Constitutional Law 411 (1978).

F

The statute before us specifically restricts nonresidents in their pursuit of a livelihood and the State's ownership interest here does not obviate the need for scrutiny under the privileges and immunities clause.

As the Court in Toomer stated:

The whole ownership theory, in fact, is now generally regarded as but a fiction expressive in legal shorthand of the importance to its people that a State have power to preserve and regulate the exploitation of an important resource. And there is no necessary conflict between that vital policy consideration and the constitutional command that the State exercise that power, like its other powers, so as not to discriminate without reason against citizens of other States.

(Footnote omitted.) 334 U.S. at 402.

The State's proprietary interest, represented by its tax dollars, is too attenuated to justify RCW 39.16.005's discrimination against nonresidents. Our conclusion is entirely consistent with a trio of decisions by other state courts which have struck down remarkably similar statutes under the privileges and immunities clause. Neshaminy Constructors, Inc. v. Krause, 181 N.J. Super. 376, 437 A.2d 733 (1981); Massachusetts Coun. of Constr. Employees, Inc. v. Mayor of Boston, supra; Salla v. County of Monroe, 48 N.Y.2d 514, 399 N.E.2d 909, 423 N.Y.S.2d 878 (1979), cert. denied sub nom. Abrams v. Salla, 446 U.S. 909, 64 L. Ed. 2d 262, 100 S. Ct. 1836 (1980). We do not hold that the State is proscribed from distributing resources it creates to its own citizens, but such a case is not before us. The State's proprietary interest is insubstantial and RCW 39.16.005's discrimination against nonresidents violates the provisions of the privileges and immunities clause.

Brachtenbach, C.J., and Stafford, Dolliver, and Williams, JJ., concur.

1 Notwithstanding this assumption, to the extent our discussion reveals the State's proprietary interest argument does not satisfy the requirements of the Toomer/Hicklin test, we will also be forced to reject the purpose of the statute as invalid.