Alaska hire preference in limbo after AG drops defense

  • Workers with Exclusive Paving work on the Farmers Loop Resurfacing and Signal Interconnect project on the outskirts of Fairbanks in 2017. Alaska hire rules for such projects are now in limbo after Attorney General Kevin Clarkson has determined that the current statute is unconstitutional. (Photo/Courtesy/Exclusive Paving)

Editor's note: This story has been updated with a statement from Associated General Contractors of Alaska Executive Director Alicia Siira.

Alaska’s local hire requirements are a touchy subject these days.

On one hand, they are a means to ensure the residents of a state with historically high unemployment aren’t passed over when often large, nationwide construction firms are looking for help.

At the same time, though, several iterations of Alaska hire laws have been struck down as unconstitutional, which appears to have led Attorney General Kevin Clarkson to conclude the current in-state hire mandates for many public projects are illegal, too.

Clarkson issued a formal legal opinion Oct. 3 contending the state’s Alaska hire statute violates portions of both the U.S. and Alaska constitutions. In the 11-page opinion written for Gov. Michael J. Dunleavy, Clarkson wrote that laws intended to economically benefit Alaska residents at the expense of nonresidents violates the Privileges and Immunities Clause of the U.S. Constitution.

Similarly, provisions in the current law could at times put Alaskans from one region of the state ahead of others when being considered for certain work, meaning it violates the Alaska Constitution’s Equal Rights, Opportunities, and Protection Clause, according to Clarkson.

Clarkson’s interpretation of the Alaska hire law was published as the state Department of Labor and Workforce Development was being sued by SECON, a Juneau-based general contractor firm that works extensively on government-funded Southeast road projects as well as Ricky Kirby, a seasonal SECON paving equipment operator from Yakima, Wash.

The Labor Department implements the Alaska hire law.

SECON is a subsidiary of Colaska Inc., which is part of the larger Colas USA group of construction companies.

While the law was being challenged, the case had not been adjudicated and state Superior Court Judge Peter Ramgren had not indicated how he might rule on the complaint, according to court records.

Filed in July, the lawsuit alleges the state’s residential hiring preference violates the Privileges and Immunities and Commerce clauses of the U.S. Constitution and the Equal Protection Clause of the Alaska Constitution.

SECON was fined by the Labor Department and paid $3,678 in July 2017 for violating the Alaska hire law while working on a public water system project; the company was additionally fined 17 separate times from Feb. 15 to May 20 for not meeting resident hire thresholds on a host of projects it worked on earlier this year, according to the complaint.

The 2019 fines totaled $158,670.

The complaint asserts that SECON is a union contractor managed by Alaskans and has an 85 percent resident workforce but is periodically forced to hire Outside laborers such as Kirby to work on its projects in the state.

As it stands, state law requires that staffing for state or locally funded public works projects be conducted with a 90 percent Alaska resident hire requirement by trade when a given project is in a region of the state deemed to be a Zone of Underemployment by the Labor Department commissioner.

A region of the state can be considered a Zone of Underemployment if the unemployment rate for the area averaged 10 percent more than the national unemployment rate over the prior 12-month period.

The entirety of Alaska can also be deemed a Zone of Underemployment if the criteria are met statewide. Labor Commissioner Tamika Ledbetter found all of Alaska to be a Zone of Underemployment in the most recent employment preference determination issued by the department June 13.

The determination was effective through June 30, 2021, for 21 trades — boilermakers to culinary workers to carpenters and tugboat workers — until Clarkson’s opinion.

The subsistence lifestyle and lack of economic opportunities prevalent in rural Alaska and the state’s highly seasonal industries have historically combined to give the state a significantly higher unemployment rate than the rest of the country.

The resident hire preference was suspended in 2013 under former Gov. Sean Parnell when the Lower 48 was continuing to recover from the Great Recession that largely missed Alaska. It was reinstated statewide in June 2015 by Gov. Bill Walker’s administration after the national unemployment rate had fallen below Alaska’s, which at the time was mostly holding steady.

According to the most recent data available from the Labor Department, nonresidents made up 20.9 percent of the Alaska workforce in 2017.

Kirby’s and SECON’s attorney Michael Geraghty wrote in the complaint that the state cannot justify upholding the Alaska hire law because there is no good reason for treating nonresidents differently than Alaskans.

Discriminating against nonresidents won’t improve the employment situation of residents because workers from Outside “are not the ‘peculiar source of the evil at which the statute is aimed,’” Geraghty wrote, citing a 1978 U.S. Supreme Court ruling that struck down a prior Alaska hire law focused at oil industry employment based on the Privileges and Immunities Clause.

“The residency law, thus, unlawfully discriminates against out-of-state individuals like Kirby who have the requisite skill, knowledge, and experience to work on publicly funded projects in Alaska, but for the residency law,” the complaint further contends.

Geraghty was attorney general for Alaska from 2012-14 under former Gov. Sean Parnell.

Kirby, according to the complaint, can make more money working on Alaska projects for roughly half the year than he can working in his home state of Washington for the same amount of time.

Kirby is a member of the International Union of Operating Engineers, Local 302, which covers Alaska, Washington and Idaho. Local 302 Juneau district representative Corey Baxter said in an interview that union contractors such as SECON call him when they need workers for projects in the area.

Baxter subsequently calls Local 302 union halls in Anchorage and Fairbanks if there are not enough Southeast workers to fill projects. However, he said it can be a challenge to get workers to temporarily relocate, particularly in summer when work is plentiful.

“We can’t force somebody to come down to help,” Baxter said.

He added that union officials always try to hire in state when they can, but sometimes they have to go Outside to meet the labor demand.

SECON’s complaint lays out a similar scenario.

The state does have a detailed process by which companies can have the local hire requirement waived on a case-by-case basis; it includes advertising the positions that need to be filled statewide for at least three days, according to an informational paper published by the Labor Department.

The Associated General Contractors of Alaska, a trade group that represents numerous contractors subject to Alaska hire requirements, issued the following statement from Executive Director Alicia Siira.

"In the construction industry, few people believe in local and Alaska hire more than we do," she said. "This determination will not open the floodgates to Outside contractors coming to Alaska. It costs more for a contractor to import labor from the Lower 48 than it does to hire local. The public projects that the Alaska hire law applies to have a prevailing wage requirement — workers are paid at published rates. These requirements also include paying $100 per day to workers whose domicile is more than a specific number of miles away from the job. There are not margins on construction projects to allow contractors to hire Outside labor unless it's absolutely necessary because workers are not available. And why would they? The excellent training Alaskans recieve in the construction trades results in some of the best trained workers in the country, and our industry wants to make sure they stay in Alaska."

Clarkson wrote in his opinion that just because the Alaska hire law is based on good intentions, that doesn’t mean it passes legal muster.

“Despite its popularity among some Alaskans, Alaska hire has not fared well in the courts,” also referencing the 1978 Supreme Court ruling and other rulings by the Alaska Supreme Court against broader Alaska hire laws that have since been repealed.

“The U.S. Supreme Court has long held that the Privileges and Immunities Clause ‘plainly and unmistakably secures and protects the right of a citizen of one state to pass into any other state of the union for the purpose of engaging in lawful commerce, trade, or business without molestation,’” Clarkson wrote, citing the same U.S. Supreme Court precedent as Geraghty.

Department of Law spokeswoman Cori Mills wrote via email Oct. 29 that the state was close to finalizing a settlement with SECON.

But some legislators are not keen on the attorney general not defending the laws they’ve passed.

House State Affairs Committee co-chair Rep. Zack Fields, D-Anchorage, called Clarkson’s opinion “politically charged” in a statement issued shortly after it was published.

He acknowledged that courts have struck down local hire mandates for privately funded projects, but noted that, except for Dunleavy, both Democrat and Republican gubernatorial administrations since 1986 have implemented Alaska hire laws.

Senate President Cathy Giessel, R-Anchorage, sent a letter to Clarkson Oct. 22 in which she wrote that his opinion “caused consternation” to her and many of her constituents.

The State of Alaska has long tried to find a balance between being unjustifiably parochial and supporting employment for Alaskans, according to Giessel.

She wrote that Alaska hire laws have been “tested and refined through the judicial process” but the current version has not been thrown out in court.

Giessel stressed that as attorney general, Clarkson has a constitutional duty to enforce and defend the laws of the state, including Alaska hire.

“Your ad hoc determination that the laws of our land, which remain untested in the courts, are unconstitutional is a diversion into the lawmaking field that is rightfully the purview of this branch of government (the Legislature). I respectfully urge you to cease a law creation process that appears to be done by executive fiat,” she wrote. “I also respectfully urge you to modify or revoke your Oct. 3 opinion in recognition of the constitutional obligation of the executive branch to faithfully execute the laws of this state enacted by the Legislature.”

Clarkson responded to the Senate President Oct. 29, writing in a four-page letter that he and Dunleavy share her desire to see Alaskans working on projects in the state, but stressed that he took an oath of office to defend the state and federal constitutions.

"Nowhere in law is the attorney general charged with a duty to defend every statute, however plainly unconstutitional it may be," Clarkson wrote, contending Alaska Supreme Court precedent gives the attorney general the discretion to handle the state's legal matters as he or she deems appropriate.

At this point it’s unclear if Dunleavy, who has long stressed a need for state officials to follow the laws of the state — most often regarding the Permanent Fund dividend — will seek to repeal Alaska hire in the upcoming session. A spokesman for Dunleavy did not respond to questions in time for this story.

Elwood Brehmer can be reached at [email protected].

Updated: 
10/31/2019 - 10:22am

Comments