The Use of Hiring Preferences by Alaska Native Corporations After Malabed v. North Slope Borough

• Publication year: 2004
• Citation: Vol. 28 No. 02

SEATTLE UNIVERSITY LAW REVIEWVolume 28, No. 2WINTER 2005

COMMENTS

The Use of Hiring Preferences by Alaska Native Corporations After Malabed v. North Slope Borough

James P. Mills (fn*)

I. Introduction

In 1971, Congress passed the Alaska Native Claims Settlement Act ("ANCSA"),(fn1) granting Alaska Natives(fn2) title to 40 million acres of land and nearly a billion dollars in exchange for extinguishing their claims to Alaskan land.(fn3) ANCSA authorized the creation of two tiers of Native corporations, regional and village, to receive the settlement offer on behalf of Alaska Natives.(fn4) Under ANCSA, each regional and village corporation was required to incorporate under the laws of Alaska as a business for profit, and every Alaska Native in each region alive at the time received 100 shares of stock.(fn5)

Since that time, the thirteen regional Native corporations have become an economic force, employing more than 12,000 employees in Alaska and boasting a portfolio of $2.3 billion in 2003.(fn6) Alaska Native corporations are in a wide range of businesses, including petroleum services, pipeline construction and maintenance, oil drilling, mining and mining support work, catering and camp services, timber harvesting, and construction.(fn7) Although many of the corporations have diversified with assets and employees outside of Alaska, the focus of the Native corporations remains in Alaska.(fn8)

According to the 2000 census, the Alaska Native population amounted to 98,043 of the total Alaska population of 626,932.(fn9) The number of working-age Alaska Natives is much smaller than the total population of Alaska Natives, with more than forty percent of Alaska Natives being under the age of eighteen.(fn10) As a result of the proportionally large number of young Alaska Natives, the number of those who will need employment in the coming decades is likely to increase dramatically.(fn11) Consequently, employment availability and job growth will prove to be critical issues in the coming decades as the number of Alaska Natives entering the work force increases.(fn12)

Currently, most Native corporations offer hiring preferences to Alaska Natives in some form, either to Native Americans, Alaska Natives, shareholders, or those closely related to shareholders of ANCSA stock.(fn13) These corporations provide jobs for 3,100 Alaska Natives within the state and hiring of Alaska Natives is considered to be part of "the Native corporations' commitment to welcoming shareholder and Native participation in company operations and growth."(fn14)

The legal questions arising from the use of hiring preferences by Native corporations are complex because of the overlapping considerations of federal and state discrimination laws and the Alaska Natives' need for distinct employment opportunities. The competing goals of ANCSA-to provide quick settlement of the land claims while remaining in conformity with the real economic and social needs of Natives- also contribute to the complexity of the legality of hiring preferences.(fn15) For example, employers are generally prohibited from discriminating in hiring practices under federal law,(fn16) but at least with respect to hiring preferences, Native corporations are exempt from such antidiscrimination laws.(fn17) Despite this fact, however, Native corporations are nonetheless organized under Alaska state law, and as such they are subject to state corporation laws, unless federal law preempts those laws.(fn18)

The Alaska Supreme Court recently overruled the legality of a Native American hiring preference implemented by ordinance in Malabed v. North Slope Borough.(fn19) North Slope Borough is a political subdivision in Alaska.(fn20) In 1997, the borough enacted an ordinance that granted an employment preference to Native Americans, whom it defined as members of federally recognized tribes.(fn21) The Ninth Circuit Court of Appeals certified the question of the ordinance's legality to the Alaska Supreme Court because it was a state law question with no controlling precedent in previous Alaska Supreme Court decisions.(fn22) In response, the Alaska Supreme Court held the following:The borough's hiring preference violates the Alaska Constitution's guarantee of equal protection because the borough lacks a legitimate governmental interest to enact a hiring preference favoring one class of citizens at the expense of others and because the preference it enacted is not closely tailored to meet its goals.(fn23)

Thus, the question remaining after Malabed is whether Native corporations can continue to provide employment preferences to Alaska Natives. If they can, the next question is whether such hiring preferences enacted pursuant to ANCSA are protected by virtue of federal preemption of Alaska state law regarding hiring preferences.

This Comment argues that Native corporations can provide employment preferences for Alaska Natives, so long as they are appropriately tailored to provide employment preferences to that corporation's shareholders or those closely related to the shareholders. Moreover, a hiring preference based on shareholder status is not a preference based on race and, as such, does not violate Alaska state law.(fn24) But even if the Alaska Supreme Court found that these hiring preferences did violate the state constitution, given the federal government's unique relationship with Native corporations(fn25) and Congress's clear intent for Native corporations to favor Alaska Natives in their hiring practices, federal courts would likely find that under ANCSA, Congress has preempted Alaska state law that would disallow hiring preferences for shareholders and their families. Thus, if properly tailored, Native corporations could use hiring preferences to meet the needs of shareholders, their spouses, and their closely related descendants.

This Comment is divided into six parts. Part I provides background about the Alaska Native corporations and their justifications for using hiring preferences. Next, Part II discusses related federal law issues and provides background on Native American hiring preferences in the lower forty-eight states under the Morton v. Mancari decision. Part III addresses Congress's extension of hiring preferences to Native corporations. Then, Part IV discusses Alaska constitutional law, Alaska statutes, and Malabed v. North Slope. Part V draws from the previous discussion and considers the future of hiring preferences in Native corporations after Malabed, particularly in the context of Alaska state law, federal preemption, and permissible forms of hiring preferences. Finally, Part VI concludes by suggesting congressional amendments that might strengthen Congress's intent to preempt state laws to allow hiring preferences for Alaska Natives.

II. Background

A. Why Native Corporations Need and Use Hiring Preferences

Hiring preferences provide jobs for Alaska Natives within their communities and contribute to their economic well-being. Although there is only one Indian reservation in Alaska,(fn26) the majority of Alaska Natives live in rural or semi-rural villages with limited employment.(fn27) The high unemployment rate has not changed substantially since the enactment of ANCSA in 1971.(fn28) Mayor Nageak of the North Slope Borough provided an affidavit for the North Slope litigation showing that, in contrast to an unemployment rate as high as 25% reported in 1971, the unemployment rate for Inupiat in 1994 had improved to only 17%.(fn29) Unemployment rates of 32% to 50% in many Alaska Native villages have been documented.(fn30) Alaska Natives are often dependent on highly variable seasonal work, such as the limited number of jobs available during the summer construction season.(fn31) One joint federal-state commission noted that a primary cause of Native unemployment is the "in-flow to rural areas of non-residents who take many of the few jobs that are available."(fn32) Non-residents have an advantage over Alaska Natives in hiring because they tend to be better educated, are willing to move away from their communities to find work, and perhaps most importantly, they are not likely to be involved in the mix of economies(fn33) that require Alaska Natives to forego long-term positions to maintain aspects of their traditional lifestyles.(fn34)

The mix of economies of Alaska, particularly in Alaskan villages,(fn35) is substantially different than the economies of the lower forty-eight states. Alaska Natives often work in two or three economies at the same time, and the interplay between the modern economy and subsistence economies is often evident.Economic development for Fort Yukon is hunting, trapping, and fishing. We got a project right now at Fort Yukon, the airport project ... with all kind[s] of work. Monday morning there was eight job opening[s]. Not one [of them] was filled, because the kings(fn36) happened to show up. When September hunting come[s] around, you're not going to find anybody work in Fort Yukon, because this is their economic development you're talking about, their livelihood.(fn37)

In light of these mixed economies, in order to promote Alaska Native employment, jobs must be structured to accommodate this dependence on subsistence.(fn38) Even when jobs are available, and Alaska Natives have the skills to fill them, most employers have not shaped the jobs to account for the differing life and work...