In 2015, a California Court of Appeals handed the small business community a “major win.” The decision in Gerawan Farming v. Agricultural Labor Relations Board pronounced that California’s Agricultural Labor Relations Act (Cal. ALRA) 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 Cal. ALRA were unconstitutional in authorizing a state agency, the Agricultural Labor Relations Board (ALRB), to compel a private employer into a collective bargaining agreement with a union. Unfortunately, this week the California Supreme Court reversed that decision.
As NFIB Legal Center has argued throughout this case, 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. Although the California courts have not considered the First Amendment implications of this regime, they, the courts have definitively ruled that there can be no due process objection to a law compelling non-consenting parties to enter into 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 can expect the company to renew its due process argument. Indeed, 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 Agricultural Labor Relations Act, 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. The question of whether California’s regime violates the Equal Protection Clause should gain traction. 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 Court relied upon the U.S. Supreme Court’s decision in Enquist v. Oregon Department of Agriculture, which held that Olech “class-of-one” doctrine is inapplicable when one seeks to challenge a highly discretionary public-sector employment decision. But, as we argued in our amicus brief to the California Supreme Court, Enquist only applies when the government acts in a “quasi-adjudicatory decision-making” process—whereas 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’ petition for certiorari and commentators note that Gerawan Farming faces a hard road in seeking Supreme Court review. But NFIB Small Business Legal Center plans to continue with its support.
For further analysis, check out this post from Luke Wake of the NFIB Small Business Legal Center, exploring the implications of the case in this SCOCA Blog post.