Preemption’s Silver Lining: The NLRA Offers California Tribes a Shield Against State Labor Protections

Labor Stock Photo

Steve Biddle and Jeremy Wood, Littler Mendelson

For over twenty years, the State of California has used tribal gaming compacts to accomplish what federal law and tribal sovereignty would otherwise forbid: forcing tribes to follow state labor law in their casinos.  Recently however, the Ninth Circuit decided that Congress, not California, has the paramount authority to regulate labor relations in Indian Country, and that the National Labor Relations Act (NLRA) applies to tribal casinos.  With federal authority confirmed, tribes can challenge state interference in their labor relations as a violation of federal law.

The Indian Gaming Regulatory Act

The power of tribes to run gaming facilities rests on two pillars: their own inherent economic sovereignty, and the Indian Gaming Regulatory Act (IGRA).  Congress passed IGRA as a federalist compromise, allowing states limited control over the highest-stakes tribal gaming (i.e., slot machines, casino games, etc.) within their borders.  IGRA permits tribes to conduct these operations, labelled class III gaming under IGRA, if authorized by a compact signed between the operating tribe and its surrounding state.  Upon tribal request, that state must negotiate in good faith to reach such a compact.

A state breaches this duty, and negotiates in bad faith, when it insists that a compact include a subject beyond what IGRA allows.  A compact under IGRA can only include subjects “directly related to the operation of gaming activities.”  By this limitation, Congress strove to limit states from forcing tribes to broadly adopt state law on their land as a precondition to gaming.

California’s Tribal Labor Relations Ordinance

In 1998, the Governor of California negotiated several gaming compacts with local tribes.  At the time, the National Labor Relations Board (NLRB) disclaimed jurisdiction over tribes as employers and held the NLRA did not reach their labor relations.  Unsatisfied, and to protect the organizational and representation rights of tribal gaming employees, California refused to sign any tribal gaming compact unless the signatory tribe agreed to certain labor protections.

California’s strong-handed negotiations resulted in a model compact that required, at Section 10.7, each signatory tribe to adopt:

an agreement or other procedure acceptable to the State for addressing organizational and representational rights of Class III Gaming Employees and other employees associated with the Tribe’s Class III gaming enterprise, such as food and beverage, housekeeping, cleaning, bell and door services, and laundry employees at the Gaming Facility or any related facility, the only significant purpose of which is to facilitate patronage at the Gaming Facility.

The agreement or other procedure that California deemed acceptable became the model Tribal Labor Relations Ordinance (TLRO), drafted between tribes and unions under the State’s direction.

The TLRO applies to any tribe with 250 or more casino employees that conducts class III gaming.  It protects “eligible employees” at casinos and related facilities like hotels or restaurants, and excludes supervisors, tribal gaming commission staff, security, cash counters, and dealers.

The TLRO largely tracks the NLRA.  It protects the right of eligible employees to unionize, negotiate collective bargaining agreements, strike, or refrain from these activities.  But its protections exceed the NLRA in other respects.  Significantly, the TLRO allows employees to engage in secondary boycotts after a bargaining impasse, which the NLRA prohibits.  As later amended, it even prohibits covered tribes from explaining to their employees why unionization might not serve their interests.  Admittedly, the TLRO may benefit tribes in other respects.  It maintains the right of tribes to promote and hire their own members over union supporters.  And it bars unions from interfering with tribal elections.

Still, many have criticized the TLRO for the burdens it imposes on tribal sovereignty.  First, it leaves tribes little option but to adopt state regulation in areas of labor relations the State could not regulate outside Indian Country.  Second, it exposes tribes to the heavy power of national unions.  UNITE HERE, for example, has sought to unionize several tribal casinos, supported by the dues of 300,000 members internationally.  Many of the gaming tribes in California are smaller, and it can be difficult for them to resist unionization campaigns.  Even for those who might support tribal labor protections, the TLRO deprives tribes of the opportunity to design their own legal regimes, suited to their particular circumstances, and nontribal jurisdictions to learn from that legislative ingenuity.

One tribe took action.  In 1999, the Coyote Valley Band of Pomo Indians asked the State to meet and discuss its concerns with the TLRO.  The State refused its invitation.  It then asked to change the TLRO to reconcile with the IGRA, and even offered to enact its own Coyote Valley labor ordinance.  The State responded that it would only agree to a labor ordinance identical to the TLRO.  The Coyote Valley Band sued.  But the federal district court, and ultimately the Ninth Circuit, disagreed, holding that IGRA allowed the State to insist on the TLRO as it related to gaming and the workforce necessary for its operation.

Many tribes have concluded they have no choice.  On September 10, 1999, 58 tribal governments signed gaming compacts with California, each including Section 10.7 and the TLRO.  Thus in California, the TLRO has remained a mandatory term in gaming compacts for nearly two decades.

National Labor Relations Act’s Application to Indian Casinos

Throughout the 2010s, the NLRB reversed its earlier position to recognize its own jurisdiction in tribal businesses and specifically the NLRA applicable to tribal casinos.  A handful of federal appellate circuits upheld that new position and, finally, the Ninth Circuit, covering California, joined those sister circuits in 2018.

The Ninth Circuit case, Pauma v. National Labor Relations Board, arose when security for a casino operated by the Pauma Band of Mission Indians limited where employees could distribute union flyers without risking discipline.  Holding the NLRA to apply, the NLRB concluded that tribal security’s actions constituted an unfair labor practice.

The Ninth Circuit upheld the NLRB’s decision, explaining that no basis existed to exempt tribes from the NLRA’s coverage.  The statutory text included no exemption, even as it exempted state employers.  Self-determination did not bar the NLRA’s application, because the casino was a commercial, not a governing entity.  A treaty may have, but the Pauma Band had none.

This emerging trend in the NLRB and certain circuit courts has driven many tribes to lobby for a Tribal Labor Sovereignty Act in Congress that would exempt tribal employers from the NLRA’s coverage.  But so long as Congress remains divided, such legislation may remain elusive.  The NLRA is, for better or worse, the law of the land for tribal employers.

But even while the NLRA, with the NLRB’s concomitant intrusion into tribal labor relations, threaten to burden tribal sovereignty and economic development, it offers tribes a powerful federal tool to block state labor protections like California’s TLRO.

The National Labor Relations Act May Preempt the Tribal Labor Relations Ordinance

The NLRA not only limits how employers, employees, and unions can act in labor relations, it also limits how states can or cannot regulate that conduct, through two doctrines of preemption, each named for the United States Supreme Court case where the doctrine was first expressed.

The first, Garmon preemption, precludes states from regulating conduct the NLRA protects, prohibits, or arguably protects or prohibits.  The Second, Machinists preemption, forbids the NLRB and the states from regulating conduct that Congress intended to leave exposed to market forces.  A state law or rule preempted under either doctrine is invalid.

A state cannot skirt federal preemption by pursuing its goals indirectly through compact negotiations rather than through direct regulation.  In a 2008 decision, the United States Supreme Court held that California could not prohibit employers receiving state funds by contract from using the funds to promote or deter union organizing.  This prohibition contradicted the NLRA’s express protection for the free speech of employer, employee, and union.  The target of California’s regulation, regardless of its method, triggered preemption.  There as here, California cannot skirt preemption by imposing its regulations through contract requirements.

The NLRA likely preempts the TLRO, as the Pauma court itself suggested.  First, even if harmless, most of the TLRO’s provisions overlap the NLRA and are thus preempted.  More significantly, preemption would invalidate those provisions of the TLRO that surpass federal law.  For example, the TLRO permits and protects secondary boycotts, while section 8(b)(4) expressly prohibits them.  The TLRO, as later amended, requires that tribal employers stay neutral in a unionizing campaign.  The United States Supreme Court has held that the NLRA preempts just such a requirement, when attempted before by California.  Thus the NLRA would likely preempt California from imposing the TLRO outside Indian Country, and should have no different an effect within.

Ultimately, tribes alone can determine whether to accept the TLRO or challenge its validity.  The circumstances that may inform such a determination are complex and particular to the labor conditions facing each tribal employer.  For many, the narrower restrictions of the NLRA will be preferable.  For those tribes, preemption offers a new tool to challenge California’s ongoing effort to dictate labor relations for tribal employers.