Interpipe Contracting, Inc. v. Xavier Becerra
898 F.3d 879
9th Cir.2018Background
- California prevailing wage law allows employers on public works to meet the prevailing wage via cash wages or a combination of wages and certain employer-paid benefits (e.g., health, pension). In 2004 the statute was interpreted to permit credits for contributions to third-party industry advancement funds (IAFs).
- A loophole permitted employers to take wage credits for payments to IAFs without employee consent by relying on a broad "other purposes" clause. SB 954 (effective Jan. 1, 2017) amended Cal. Lab. Code §1773.1 to require that wage-crediting for IAF contributions be made only pursuant to a collective bargaining agreement (CBA).
- Interpipe (an open-shop contractor) formerly took wage credits for contributions to ABC-CCC (an IAF that promotes open-shop policies); after SB 954 it stopped contributions and sued. ABC-CCC also sued, asserting First Amendment and Equal Protection claims.
- District court denied a preliminary injunction and dismissed the complaint holding SB 954: (1) not preempted by the NLRA under Machinists; (2) not a First Amendment violation because it trims a state subsidy neutrally and is rationally related to a legitimate purpose; and (3) ABC-CCC lacked standing for its equal protection claim. Plaintiffs appealed.
- The Ninth Circuit affirmed, holding SB 954 is a valid state minimum labor standard, does not regulate non-coercive labor speech or impermissibly burden IAF speech, and is viewpoint-neutral and rationally related to protecting employee consent and prevailing-wage floor.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| NLRA preemption (Machinists doctrine) | SB 954 interferes with NLRA-protected non-coercive labor speech and the bargaining process by disadvantaging anti-union advocacy funded via IAFs | SB 954 is a traditional state minimum labor standard setting a wage floor and does not regulate speech; such laws are generally not preempted | Not preempted: SB 954 is a permissible state labor standard that sets the bargaining "backdrop" and does not intrude on collective-bargaining mechanics or regulate non-coercive speech |
| First Amendment — right to receive funds / amass contributions | ABC-CCC has a First Amendment interest to receive employee-subsidized contributions and SB 954 burdens its ability to amass funds for advocacy | No free-floating right to receive subsidy funds; SB 954 trims a state-authorized subsidy/mechanism and leaves ABC-CCC free to solicit funds | Rejected: no independent constitutional right to be funded; SB 954 trims a state subsidy and is subject to rational basis review |
| First Amendment — regulation of speech/conduct | SB 954 effectively restricts speech by limiting a funding mechanism tied to expressive activity | SB 954 regulates employer wage conduct (not inherently expressive) and only indirectly affects IAF revenue; it does not target IAF solicitations or speech | Rejected: law regulates non-expressive economic conduct (wage-crediting), not inherently expressive activity, so it does not trigger heightened scrutiny |
| Viewpoint discrimination / Equal Protection | SB 954 disfavors anti-union/open-shop advocacy because only CBAs allow credits, making the law underinclusive/overinclusive and viewpoint discriminatory; ABC-CCC alleges equal protection injury | Law is facially neutral toward recipients, aims to ensure employee consent and protect the prevailing wage; it regulates employers’ conduct, not IAFs; ABC-CCC lacks standing for equal protection claim | Rejected: statute is viewpoint-neutral and rationally tailored to protect employee consent; ABC-CCC lacks standing to pursue the equal protection claim because the law regulates employers, not IAFs |
Key Cases Cited
- Machinists v. Wisconsin Employment Relations Commission, 427 U.S. 132 (preemption doctrine protecting areas Congress left to economic forces)
- Chamber of Commerce v. Brown, 554 U.S. 60 (state restrictions on use of subsidies can be preempted if they chill NLRA-protected speech; distinguishes subsidy limits from speech regulation)
- Ysursa v. Pocatello Education Association, 555 U.S. 353 (state may refuse to facilitate payroll deductions for political contributions without triggering strict scrutiny)
- Regan v. Taxation With Representation of Washington, 461 U.S. 540 (government refusal to subsidize lobbying does not infringe speech)
- Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (states may set minimum labor standards; such laws form the bargaining backdrop)
- Garmon v. San Diego Building Trades Council, 359 U.S. 236 (preemption of state regulation of areas protected/proscribed by NLRA)
- Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724 (discusses NLRA purpose and limits on state interference with collective bargaining)