Argicultural labor relations case may go to high court

In 2015, a California Court of Appeal handed the small business community a "major win." The decision in Gerawan Farming v. Agricultural Labor Relations Board, 2017 DJDAR 11179 (Nov. 28, 2017), pronounced that California's Agricultural Labor Relations Act violated both the California and the U.S. Constitution in singling-out employers for special legal burdens -- above and beyond those imposed by generally applicable law. More specifically, that decision ruled that amendments to the ALRA were unconstitutional in authorizing a state agency, the Agricultural Labor Relations Board, to compel a private employer into a collective bargaining agreement with a union. Unfortunately, last week the California Supreme Court reversed that decision.

It is flatly unconstitutional to create specialized legal burdens through an imposed contract. But setting aside the question of whether government can single-out an employer for more burdensome employment standards, is it even constitutional for government to force a business (or anyone) into a contract where there is no actual agreement? Do individuals have a constitutional right to withhold assent to a contract?

Indeed, the notion of a compelled contract turns the very idea of a "contract" on its head. A contract requires a "meeting of the minds." For that matter, a law compelling a business to "agree" to a contract necessarily requires compulsion of assent -- which is a communicative act. Accordingly, California's regime would seem to raise a problem under the First Amendment's compelled speech doctrine and may also violate freedom of association. But, although the California courts have not considered the First Amendment implications of this regime, they have definitively ruled that there can be no due process objection to a law compelling non-consenting parties to enter a binding contract.

Though the Court of Appeal side-stepped these due process arguments in ruling the regime unconstitutional under the equal protection clause and California's non-delegation doctrine, the California Supreme Court choose to address the due process question head-on -- which now sets-up the issue up nicely if the U.S. Supreme Court should take the case. Gerawan Farming has already announced its intention to pursue a petition for certiorari. And we might expect the company to renew its due process argument.

The idea that government may not only regulate economic conduct but may affirmatively compel a business into a contract with a private party goes beyond any Supreme Court precedent. For that matter, the Supreme Court has only once addressed a similar regime -- back in 1923. And in that case, Wolf Packing Co. v. Court of Industrial Relations, the court ruled that it was unconstitutional to compel non-consenting parties into a contractual relationship. As with California's regime under the ALRA, Wolf Packing Co. concerned a Kansas statute that purported to force non-consenting parties into binding collective bargaining agreements -- which the court ruled violated due process in infringing upon the core freedom of contract.

The state of California defends its regime here on the view that subsequent Supreme Court decisions swept Wolf Packing Co. aside. And it is true that during the New Deal the Supreme Court repudiated a substantial body of its previous due process case law in forging the modern rational basis test that generally applies in review of economic regulation. But the Supreme Court has never backed away from the notion that a heightened standard of scrutiny should apply when reviewing a statute compelling non-consenting parties to enter into a contract with a specific party.

What is more, the question of whether California's regime violates the equal protection clause is likewise important. Indeed, the California Supreme Court's decision conflicts with the U.S. Supreme Court's decision in Village of Willowbrook v. Olech, which held that government must provide a rational justification when singling an individual out for distinct legal burdens not shared by others. Instead of providing that sort of rationale here, the California Supreme Court acknowledged that the contested regime may lead to inconsistent decisions. Yet the court found Olech doesn't apply when a challenged regime vests this sort of inherent discretion in a public authority.

In rejecting Olech, the state high court relied upon the U.S. Supreme Court's decision in Engquist v. Oregon Department of Agriculture, which held that Olech's "class-of-one" doctrine is inapplicable when one seeks to challenge a highly discretionary public-sector employment decision. But, even if Engquist might apply outside the public employment context, the decision only applies when the government acts in a "quasi-adjudicatory decision-making" process. By contrast, the ALRB acts essentially as a mini-legislature in imposing special rules through imposed collective bargaining agreements.

It remains to be seen whether the Supreme Court will grant Gerawan Farmings' anticipated petition for certiorari. And it may be true that Gerawan Farming faces a hard road in seeking further review.

The NFIB submitted a brief in the Gerawan case.