November 28, 2017

California Supreme Court upholds compulsory arbitration for agriculture

By Damien M. Schiff Senior Attorney

Yesterday, the California Supreme Court upheld the constitutionality of California’s “mandatory mediation and conciliation” process for labor disputes between agricultural employers and unions. In Gewaran Farming, Inc. v. Agricultural Labor Relations Board, the state’s high court ruled that compulsory interest arbitration—whereby an arbitrator can impose all of the terms of a union labor agreement—does not, at least on its face, violate the equal protection rights of agricultural employers. The court also ruled that this labor relations regime—unique in the United States with respect to private sector workers*—does not constitute an impermissible delegation of legislative power to an administrative agency.**

We filed an amicus brief on behalf of a broad coalition of agriculture and property rights advocates, in support of Gerawan.*** Among other points, our brief argued that the mandatory mediation and conciliation process violates the “class of one” doctrine under the Equal Protection Clause. Traditionally, that Clause has been used to invalidate laws that improperly single out discrete groups of persons. But according to the class-of-one theory, the Clause goes further, to preclude as well the irrational or arbitrary regulation of individuals as individuals. Such unfair targeting is precisely what the mandatory mediation and conciliation process effects: it subjects individual agricultural employers to the whim of an unelected arbitrator, without any guarantee that the contractual terms imposed on one employer will be consistent with those imposed on another employer.

The Labor Board and the Union had argued against this equal protection argument principally on the ground that the “class of one” doctrine does not apply to highly discretionary government decision-making. They drew support from the U.S. Supreme Court’s decision in Enquist v. Oregon Department of Agriculture, which holds that government employment decision-making—such as hiring and firing—is so discretionary that it is not subject to class-of-one analysis. Our brief contended that Enquist was inapposite because it concerned quasi-adjudicatory decision-making, whereas the outcome of the mandatory mediation and conciliation process is quasi-legislative action—essentially, the production of mini-labor codes governing employment relations for each agricultural employer. Yesterday’s decision avoids deciding whether Enquist‘s narrowing of the class-of-one theory’s reach is as substantial as the Labor Board and Union believed, by concluding that Gewaran’s class-of-one claim would fail on its own terms. The trouble for Gewaran, reasoned the court, was that it had challenged the mandatory mediation and conciliation statute on its face. Simply because arbitrary or irrational action could result from a statutory process does not mean that such a loathsome outcome would necessarily obtain, the showing that Gewaran would need to make to prevail on its facial claim.

Our amicus brief also argued that the mandatory mediation and conciliation process violates the California Constitution’s non-delegation doctrine, which permits only the Legislature to make fundamental policy decisions, and which requires that the Legislature give administrative agencies sufficient direction to carry out those policies. Here, the court ruled that the Legislature had made the fundamental policy decision of authorizing compulsory interest arbitration, and merely left the carrying out of that policy to the Labor Board and its mediators. Of course, simply authorizing the process doesn’t really decide the substance of labor relations. How high should wages be? What benefits should employees receive? These and similar questions the Legislature passed off entirely. The court also noted that the Legislature had provided arbitrators with a number of factors to consider when drafting labor agreements. But the Legislature did not require arbitrators to consider any of those factors, we and Gerawan protested. Irrelevant, the court responded, relying largely on its rent control precedent which have upheld broad delegations to administrative bodies.

In sum, yesterday’s decision was a disappointing one from the California Supreme Court, not least because it was unanimous. Further review in the U.S. Supreme Court would be possible for Gewaran’s equal protection claim, but given its facial posture and the absence of private-sector compulsory arbitration regimes in other states, such review will be difficult to obtain.

*The National Labor Relations Act, which governs nearly all private sector labor relations (the principal exception being agricultural workers), does not authorize compulsory interest arbitration.

**The court also ruled that an agricultural employer cannot resist an order to proceed to compulsory interest arbitration on the ground that the union had “abandoned” its employees.  Such decertification can occur only as the result of an employee election.

***See also this op-ed by me and former PLF Vice President and Labor Board General Counsel M. David Stirling.

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Gerawan Farming v. Agricultural Labor Relations Board

Gerawan Farming is a family-owned company that grows grapes and stone fruit in the San Joaquin Valley. Unique in the nation, a California statute compels agricultural employers and their employees’ unions to assent to collective bargaining agreements. Rather than being negotiated at arm’s length, these agreements’ terms are dictated to the parties by a “mediator” who has nearly unlimited discretion to compel the parties’ assent to whatever terms the mediator wishes. A California appellate court struck down this scheme that imposed an unwanted “agreement” on Gerawan, but the California Supreme Court granted review. Representing an array of agricultural and constitutional liberty groups, PLF filed an amicus brief arguing that this compulsory regime is unconstitutional.

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