The Honorable Michael J. Dunleavy
AGO 19-5
No. 19-005
Alaska Attorney General Opinion
October 3, 2019
The
Honorable Michael J. Dunleavy
Governor
State
of Alaska
P.O.
Box 110001
Juneau,
AK 99811-0001
Re:
Constitutionality of Alaska Hire
Dear
Governor Dunleavy:
You
have asked for a legal opinion on whether section AS
36.10.150 of the State’s resident preference law, known
as Alaska Hire, is consistent with the United States and
Alaska Constitutions. Simply stated, Alaska Hire requires
certain private employers to hire a fixed percentage of
qualified Alaskans, or face fines or
imprisonment.1 As explained below, I have concluded
that Alaska Hire violates both the U.S. and Alaska
Constitutions, and that the State should stop enforcing its
provisions.
I.
Short answer
Alaska
Hire violates the U.S. Constitution’s Privileges and
Immunities Clause2 and the Alaska Constitution’s
Equal Rights, Opportunities, and Protection Clause
(“Equal Protection”).3 Excluding nonresidents in
order to economically benefit residents is not a legitimate
state purpose under the federal Privileges and Immunities
Clause4 or Alaska’s Equal Protection
Clause.5 Both the U.S. Supreme Court and the
Alaska Supreme Court have struck down previous versions of
Alaska Hire statutes because the State could not provide a
legitimate reason justifying discrimination against
nonresidents.6 Because the purpose of AS 36.10.150 is
to economically benefit Alaska residents at the expense of
nonresidents—and because it is not sufficiently
tailored to the problem it seeks to address—the current
version of Alaska Hire is unconstitutional and should not be
enforced.
II.
History of Alaska Hire laws and treatment by the
courts
Since
attaining statehood, Alaska has enacted three resident hiring
preference laws, all referred to as “Alaska
Hire.”7 In 1960, the State enacted Alaska Hire
for public works contracts (subsequently amended in 1986),
and in 1972 the State enacted a hiring preference for
contracts that were “a result of” the
State’s oil and gas leases.8 Despite its popularity
among some Alaskans, Alaska Hire has not fared well in the
courts.
The
U.S. and Alaska Supreme Courts have considered the various
iterations of Alaska Hire in three major cases: Hicklin
v. Orbeck,9 Robison v.
Francis,10 and State, By and Through
Departments of Transportation and Labor v. Enserch Alaska
Construction, Inc.11 In each case, the court held that
Alaska Hire violated either the U.S. Constitution or the
Alaska Constitution.
In
Hicklin v. Orbeck, the U.S. Supreme Court reviewed
the 1972 version of Alaska Hire, which required all contracts
related to the State’s oil and gas leases to include a
resident hiring preference provision.12 The Court held
that Alaska Hire violated the Privileges and Immunities
Clause of the U.S. Constitution, which essentially restricts
States from discriminating against out-of-state residents,
because Alaska could not show that nonresidents were a
“peculiar source” of the unemployment problem the
statute sought to remedy.13 The Court further held
that Alaska Hire’s scope was impermissibly broad
because the hiring preference applied not only to employers
directly involved with the State, but to “all
employment which is a result of oil and gas
leases.”14 The Legislature repealed this
version of Alaska Hire in 1980.15
After
Hicklin, state officials expressed concern over the
constitutionality of the initial 1960 version of Alaska Hire,
which applied to public works contracts. In 1982, Attorney
General Wilson L. Condon issued an Attorney General Opinion
advising Department of Labor Commissioner Edmund N. Orbeck
that Alaska Hire was, on balance, likely consistent with the
Privileges and Immunities Clause.16 Attorney General
Condon reasoned that courts would probably apply a less
rigorous standard of review to Alaska Hire’s public
works contract provisions under a “market
participant” exception to the Privileges and Immunities
Clause,17 though he also noted that the
validity of the market-participant exception was
uncertain.18 And as neither the Alaska Supreme
Court nor the U.S. Supreme Court had specifically addressed
the market-participant argument, Alaska Hire was presumed to
be constitutional.19
The
Alaska Supreme Court later rejected the market-participant
argument in Robison v. Francis.20 The Court
reasoned that any deference due to the State as a market
participant was outweighed by the “pervasiveness and
intensity of the discrimination” mandated by Alaska
Hire.21 The Court accordingly held that the
public works contract provision of Alaska Hire suffered from
the same defects the U.S. Supreme Court identified in
Hicklin.22
The
State of Alaska responded to the Robison decision in
two ways. First, the people of the State ratified Article I,
Section 23 of the Alaska Constitution, authorizing resident
preferences “to the extent permitted by the U.S.
Constitution.”23 Second, and within months of the
Robison decision, the Legislature enacted the
current version of Alaska Hire, AS 36.10.[24]
With
this latter statutory change, the Legislature sought to
remedy Alaska Hire’s shortcomings by requiring the
Commissioner of the Department of Labor and Workforce
Development to make detailed factual findings before the
hiring preference could take effect.25 The Commissioner
could determine that an area of the State was an
“economically distressed zone” or a “zone
of underemployment” and was therefore entitled to a
regional hiring preference.26
Unfortunately
for Alaska Hire, the creation of resident preference zones
within the State ran afoul of the Alaska Constitution’s
Equal Protection Clause. In 1987, the Commissioner determined
that the Northwest Arctic Borough was an “economically
distressed zone” under AS 36.10.160.[27] Alaskans
residing in Fairbanks but working in the Northwest Arctic
Borough sued to enjoin the Commissioner’s
determination.28 In State, By and Through
Departments of Transportation and Labor v. Enserch Alaska...
