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Opinion Recap: Chamber of Commerce v. Brown

Below, Stanford student Micah Block discusses Thursday’s decision in Chamber of Commerce v. Brown (06-939). Please note that Micah worked on an amicus brief on behalf of the respondents in the case.

In an opinion that brings labor laws in a dozen states into question, the Supreme Court ruled on June 19 in Chamber of Commerce v. Brown (06-939) that federal labor law preempts a California law which prevented employers from using state funds “to assist, promote, or deter union organizing,” because the state law regulated conduct that Congress intended to leave unregulated. Justice Stevens delivered the opinion of the Court for seven justices; Justices Breyer and Ginsburg dissented.

Fundamentally, the majority’s holding is based on the conclusion that AB 1889 represents a policy judgment by the state of California that directly contradicts the federal labor policy laid out by Congress in the National Labor Relations Act. The majority relied heavily on AB 1889’s preamble, which opines that even noncoercive employer speech “interfere[s] with an employee’s choice about whether to join or to be represented by a labor union.” According to Justice Stevens, Congress preempted states from acting on this view by adding Section 8(c) – which provides that noncoercive speech by either unions or employers cannot be subject to NLRB regulation as an unfair labor practice – to the NLRA, thereby establishing precisely the opposite judgment as the labor policy of the United States.

Having laid out its basic perception of the conflict between AB 1889 and the NLRA, the majority considered and rejected several arguments that nonetheless sought to avoid preemption.

First, the majority declined to distinguish AB 1889’s restrictions on the use of state funds from impermissible restrictions on who may receive state funds. The Ninth Circuit below had recognized that California could not withhold state funds from a party exercising its right to engage in labor-related speech that is not barred by the NLRA, but nonetheless concluded that the state could legitimately restrict the use of state funds for those purposes. Justice Stevens did not reject the premise that use and receipt could be legally different, but concluded that AB 1889’s restrictions are impermissibly onerous, even if drafted as use restrictions, because they are accompanied by “compliance costs and litigation risks that are calculated to make union-related advocacy prohibitively expensive for employers that receive state funds.”

Second, the majority rejected the Ninth Circuit’s reliance on special NLRA provisions allowing the NLRB to regulate noncoercive employer speech immediately before a union election. The Ninth Circuit took these provisions as an indication that Congress did not intend to leave noncoercive speech completely unregulated, and therefore did not intend to preempt state laws like AB 1889. The majority rejected this argument out of hand, noting that AB 1889 reaches far beyond the narrow context of election time to regulate speech that is clearly left unregulated by the NLRA.

Third, the majority concluded that three federal statutes forbidding the use of particular grant and program funds “to assist, promote or deter union organizing,” using the exact same language as AB 1889, did not suggest that Congress intended to leave noncoercive employer speech open to state regulation. The Ninth Circuit reasoned below that Congress was unlikely to have intended to preempt California from doing something it freely did itself in other contexts. Justice Stevens was not persuaded, characterizing the federal statutes as “tailored exceptions to otherwise applicable federal policies” that did not represent Congressional intent to “tolerate a substantial measure of diversity” in the regulation of employer speech. (He noted also that the federal statutes had not been accompanied by enforcement provisions and pro-union carveouts like the ones present in AB 1889, which further reduced the tension between them and the NLRA.)

The Chamber of Commerce had also challenged AB 1889 under an alternative preemption theory, arguing that the bill impermissibly interfered with the NLRA’s affirmative sphere of regulation (so-called Garmon preemption), but the majority declined to reach these arguments.

Two justices in dissent concluded that states have broad authority to determine how to spend their own money, and that AB 1889’s spending restrictions were within this power.

First, the dissent rejected the characterization of AB 1889’s spending restrictions as “regulation” that might be subject to preemption in the first place, pointing out that the restrictions left employers free to engage in noncoercive speech with their own money. The dissent would have held that a provision preventing the use of state funds for a particular private activity is no more a “regulation” or an interference with free conduct than a provision allowing state funds to be used in such a way, and that neither provision would be preempted by the NLRA.

This narrower definition dovetailed with the dissent’s recognition of broad state authority to act as an “appropriator.” In this part of its opinion, the dissent entered an interesting and potentially far-reaching rejection of the regulator/market-participant divide as a “false dichotomy.” Justice Breyer explained that “[a] State may appropriate funds without either participating in or regulating the labor market,” and concluded that California’s actions as an appropriator under AB 1889 did not amount to “regulation” that could interfere with federal labor law’s regulatory scheme.

Finally, the dissent faulted the majority for basing its holding in part on factual conclusions about the burden created by AB 1889’s compliance provisions. Justices Breyer and Ginsburg agreed with the majority that “should the compliance provisions, as a practical matter, unreasonably discourage expenditure of nonstate funds, the NLRA may well preempt California’s statute,” but they concluded that there was insufficient evidence in the record to evaluate the extent of the burden. This conclusion was reinforced by the fact that no lower court had decided the question, and that the supporters of AB 1889 had introduced uncontroverted expert evidence below opining that the provisions were not unduly burdensome.

Interestingly, the dissent referred several times to “the operative sections” or “the operative provisions” of AB 1889, focusing its attention on the simple language preventing certain classes of employers from using state funds “to assist, promote, or deter union organizing.” This characterization obviously fits well with their conclusion that the record lacked the necessary facts for a holding based on the onus created by the compliance provisions, but it also suggests an attempt to deflect attention from the bill’s preamble, which the majority relied on heavily to find a conflict with the NLRA, and which the dissent did not feel compelled to address.