Permanent replacements, Presidential power, and politics: judicial overreaching.

• Author: Kimmett, Charles Thomas
• Position: Case Note

One of the most contentious decisions an employer can make during a labor dispute is to replace striking workers permanently. When striking Greyhound workers were permanently replaced by their employer, replacement bus drivers and bus riders became the targets of sniper fire.(1) As expected, customer use of Greyhound buses significantly declined in those areas in which buses had been targeted, and Greyhound quickly discovered that replacements were unwilling to drive those routes.(2) Similarly, the Hormel Company's decision to hire permanent striker replacements was accompanied by such violence that Minnesota Governor Rudy Perpich called in the National Guard to quell the unrest.(3)

Strikers' willingness to resort to violence is due largely to the fact that permanent replacements represent an immediate, long-term threat to their future livelihood. Such violence cannot be condoned, but the tangible effect on those who contract with the firm employing the replacements must be recognized. The external effects of an employer's decision to hire permanent replacements raise even more significant concerns when the federal government is contracting with the struck business. The prospect of the government's being unable to fulfill its obligations, especially in times of crisis or national emergency, would suggest that it should be allowed to protect its interests when employers with which it contracts are involved in contentious strikes involving permanent replacements.(4)

On March 8, 1995, President Bill Clinton issued Executive Order 12,954, designed to bar the federal government from contracting with employers who permanently replace striking workers during the course of a labor dispute.(5) The purpose of the Order was to protect the federal government's "economy, efficiency, and cost of operations" by promoting stable relationships between those businesses contracting with the federal government and their employees.(6) The Order referred specifically to overarching problems that accompany an employer's decision to use permanent replacements. First, it stated that using such replacements exacerbates labor disputes, resulting in longer and more contentious strikes.(7) Second, it asserted that by using permanent replacements, employers often lose the "accumulated knowledge, experience, skill, and expertise" of the replaced employees to the detriment of the federal government with which the employer has contracted.(8)

By barring those contracting with the federal government from using permanent replacements during a labor dispute, the Order attempted to protect the proprietary interest of the federal government. Under the Procurement Act,(9) the President has the power to issue executive orders dealing with federal contracting to protect the government's proprietary interest as a contracting party. Although the stated purpose of the Order was to protect the government's proprietary interest, its implementation was the focus of much partisan criticism, largely because of the controversial nature of permanent replacements.(10) Recent studies have indicated that strikes in which employers use permanent replacements last longer and are more contentious than strikes in which no such replacements are used.(11) By issuing the Order, the Clinton Administration made a policy choice - it chose to accept the rationale that the use of permanent replacements was a cause, rather than a result, of unstable labor relations - and took action to restrict the use of such replacements by those contracting with the government. Such a choice undeniably had political overtones. Although the stated purpose of the Order was to protect the government's proprietary interest, it also was an attempt by President Clinton to curry favor with labor interests.(12)

The controvercy surrounding the use of permanent replacements can be traced back to the passage of the National Labor Relations Act (NLRA).(13) In 1935, the Supreme Court upheld the NLRA,(14) which protected employees, right to organize, bargain collectively, and engage in concerted activities.(15) The right to strike is one of the most important concerted activities in which employees can participate and is specifically mentioned in section 13 of the NLRA: "Nothing in this subchapter, except as specifically provided for herein, shall be construed so as either to interfere with or impede or diminish in any way the right to strike . . . ."(16)

Although the NLRA presents a strong congressional statement in support of an undiminished right to strike, the Supreme Court qualified this right in 1938. In NLRB v. Mackay Radio & Telegraph Co.,(17) the Court stated: "[The employer] is not bound to discharge those hired to fill the places of strikers, upon the election of the latter to resume their employment, in order to create places for them."(18) It is this dictum19 that has become the basis for subsequent Court decisions recognizing an employer's right to replace striking workers permanently.(20) The fact that the NLRA is silent on the issue of permanent replacements and explicit in its protection of the employees, right to strike has been the basis for much criticism of the Mackay doctrine.(21)

Recently, employers have more readily resorted to the use of permanent replacements as a means of maintaining operations during labor disputes and breaking a strike.(22) This has prompted labor to prioritize the passage of a federal anti-replacement law.(23) The most recent legislative attempt to overrule the Mackay dicta was the Cesar Chavez Workplace Fairness Act, which passed in the House of Representatives, but was defeated in the Senate by a Republican-led filibuster in 1994.(24) In the wake of the defeat of this Act, President Clinton issued the Order, thus affirming a prolabor policy with regard to the controversial striker replacement doctrine.(25)

This policy choice did not go uncontested. A number of probusiness interests,(26) led by the Chamber of Commerce, challenged the validity of the Order in federal court and claimed that, by interfering with an employer's right to hire permanent replacements, the Order violated the National Labor Relations Act.(27) In Chamber of Commerce v. Reich,(28) the United States Court of Appeals for the D.C. Circuit struck down the Order.(29) In doing so, the court noted that there was "undeniably . . . some tension between the

President's Executive Order and the NLRA"(30) and held that the Order was preempted by the NLRA.(31) The court also concluded that the Order was "regulatory in nature," and, as such, an impermissible use of the President's executive order powers.(32)

This Note will argue that Reich was an example of judicial overreaching for three reasons. First, the court paid undue deference to the dicta of NLRB v. Mackay Radio & Telegraph Co.(33) The Reich court treated Mackay as if it were explicit statutory text and failed to acknowledge the limitations placed on it by Congress and the Supreme Court. Second, the court improperly extended the preemption doctrine developed in Lodge 76, International Ass'n of Machinists v. Wisconsin Employment Relations Commission(34) to the acts of the President of the United States.(35) Not only was such action unprecedented, but it was also contrary to the Supreme Court's recent trend toward limiting the Machinists preemption doctrine.(36) Third, the court refused to recognize the fact that the scope of the Order fell within the government's proprietary interest as defined in the Supreme Court's recent Boston Harbor decision(37) and, as such, was a legitimate exercise of the executive order power within the realm of labor relations.

1. The Extraordinary Elevation of Mackay

   In Reich, the D.C. Circuit Court of Appeals held that the Order as implemented by the Secretary's regulations "promise[d] a direct conflict with the NLRA."(38) It stated that the NLRA is "a statute that delegates no authority to the President to interfere with an employer's right to hire permanent replacements during a lawful strike."(39) According to the court, the Order altered "the delicate balance of bargaining and economic power that the NLRA establishes."(40) The NLRA, however, does not explicitly address an employer's use of permanent replacements; instead, the right to replace workers permanently is derived from dicta contained in the Mackay decision of 1938. By stating that the NLRA delegated no authority to the President to address the issue of permanent replacements, the court misrepresented the issue.

   This Part presents three arguments in critique of the Reich decision. First, the court mistakenly characterized the Order as an attempted repeal by implication. The court supported this characterization by elevating the dicta of Mackay to the level of explicit statutory text. Because the NLRA is silent on the issue of permanent replacements, the court, in order to reach its conclusion, had to treat the dicta of Mackay as though it were the actual text of the NLRA. Second, the court failed to take note of specific provisions of the Order that serve to limit its scope so that it does not entirely eliminate an employer's replacement rights. Third, the court, in unduly deferring to the Mackay dicta, failed to acknowledge the existence of statutory and judicial limitations on the employer's right to use replacement workers.

   1. The "Repeal by Implication" Argument

      In any analysis of the Order, there are two major statutes that must be addressed: the Procurement Act, which gives the President the power to issue executive orders for the purpose of preserving the economy and efficiency of the federal government,(41) and the NLRA, which regulates labor-management relations.(42) The court reasoned that since the NLRA addresses labor policy more specifically than the Procurement Act, the NLRA is controlling absent express congressional intent in the Procurement Act to repeal the NLRA's striker replacement doctrine. In making this analogy...