“An Analysis of the California Attorney General’s Opinion on TERO” by Daniel S. Press, CTER General Counsel

CALIFORNIA ATTORNEY GENERAL UPHOLDS POWER OF STATE TO INCLUDE TERO REQUIREMENTS ON STATE HIGHWAY PROJECTS

            On March 8, 2010, in a long-awaited opinion, the California Attorney General found that there is nothing in Proposition 209, the California anti-affirmative action proposition, that prohibits CALTRANS, the State Highway Department, from continuing its long-standing practice of including TERO requirements in State construction contracts involving roads that cross reservations and rancherias. The AG opinion also found that while a Tribe cannot compel the State to pay TERO fees, there is nothing that would prohibit CALTRANS from voluntarily paying such fees as part of its government-to-government relationship with tribes. It also provides a strong endorsement of the legality of TEROs generally.

The opinion provides a clear and strong endorsement of the legality of TERO and puts to rest concerns about whether the Ninth Circuit’s opinion in an Indian preference case from Alaska, Malabed v. North Slope Borough, 335 F.2d 864 (2003), constrained the authority of States to work with TEROs. This opinion also puts to rest a controversy that has festered for over three years, created by attorneys for CALTRANS when they issued a poorly reasoned opinion holding that, in light of the Malabed decision, Proposition 209 prohibited CALTRANS from including TERO provisions in its contracts. During the three year period, CALTRANS refused to work with the TEROs. The California TEROs, with help from CTER and other organizations, fought aggressively against this misguided effort. They are to be congratulated for this important victory, which will have ramifications for TEROs nationwide. Hopefully, it will cause CALTRANS to return to the cooperative relationship it had with the TEROs in California prior to the controversy.

Background

In 1997, the United States Supreme Court ruled that tribes did not have sovereign authority over state highways on reservations for which the State had valid rights of ways, which meant Tribes could not impose their TERO requirements on construction contractors working on such highways. However, the Federal Highway Act (23 USC 140) made clear that Indian preference requirements on those projects funded through the Federal-aid program are permissible if a State wishes to impose those requirements through contract. As a result, the State of California, along with other states, agreed to include the TERO requirements in the contracts they awarded for work on state highways located on reservations and agreed to pay the TERO fee on behalf of the contractor.

After California adopted Proposition 209, prohibiting any discrimination based on race, the State concluded that this did not conflict with Indian preference, which it correctly found is a political rather than a racial preference. As a result, TEROs and CALTRANS worked cooperatively together after Prop 209 until about three years ago, when several CALTRANS officials and low-level attorneys in the California AG’s office issued an opinion claiming that, based on a decision by the Ninth Circuit Court of Appeals in the case of Malabed, TERO requirements were in violation of Proposition 209 and therefore could not be included in State highway projects on rights of ways across reservations.

The TEROs in California tried to reason with CALTRANS, submitting legal memos showing that the Malabed case was not applicable to California. Malabed involved an effort by the North Slope Borough, a subdivision of the State of Alaska, to impose an Indian preference requirement in an area in which there were no reservations. However, the CALTRANS and AG officials were unwilling to engage in any reasonable discussions, creating a clear impression that they were pursuing an “agenda”, rather than being objective analyzers of the law.

Finally, the matter moved up the chain of command to the State Attorney General’s Office, which after deliberating on this issue for almost two years, handed down its March 8^th opinion soundly rejecting the opinions by the lower-level attorneys. In what is a clear slap at the shoddy legal analysis by the lower-level attorneys, the Attorney General virtually ignored Malabed, limiting its discussion of that case to one four-line footnote that mentions that the situation in Malabed was unrelated to tribal governance, culture or land.

The Attorney General’s Opinion

The AG begins his analysis with a clear and cogent review of the state of Indian preference under Federal law and the role of TEROs.

“We are persuaded that [Federal] courts would be untroubled by a tribe’s adoption of TERO Indian hiring preference or by incorporation of those preferences by state employers operating on Indian land. Preferential hiring programs that are intended to expand job training and employment opportunities for Indian workers promote vital tribal interests in the health, welfare, and financial well-being of the tribe’s members, and in the tribe’s self-sufficiency, thereby strengthening tribal self-government.

Then, after briefly reviewing the U.S Supreme Court decision in Morton v. Mancari, which found that Indian preference, when limited to members of Federally recognized tribes and involving work on or near a reservation, is a political rather than a racial classification, it asks “Could a state-implemented preference similarly limited be classified as a “political” rather than a “racial” classification under the Fourteenth Amendment. It answers that question with an emphatic “yes”, such that a CALTRANS Indian preference requirement would not be in violation of Proposition 209. The AG found that the strongest evidence that the Indian preference requirements are a political rather than a racial classification is that CALTRANS deals with tribes on a government-to-government basis, and that:

“In doing so, a practice of respecting a tribal ordinance by extending

hiring preference to Indian employees for work performed in Indian

country is fundamentally different from a policy favoring an ethnic

or racial group. In these very limited circumstances, we believe that

a tribe’s prescription of Indian hiring preference is an exercise of tribal governmental prerogative, and any cooperation therewith by a California governmental agency may reasonably understood to be matters of public

policy.”

The AG goes on to note that he would be less likely to uphold an Indian preference policy initiated by the State rather than the one at issue, where it was initiated by the Tribe and is being respected by the State. As a result, it would be difficult for CALTRANS to get legal support for a preference requirement in contracts for work on reservations where the Tribe has not enacted a TERO ordinance. Thus, it is the tribes’ exercise of its sovereignty that gives the State the ability to act in concert with the tribe.

The AG next asks if it is permissible for CALTRANS to add Indian preference requirements to its construction contracts. It concludes that CALTRANS has the discretionary authority to do so under the state statutes creating CALTRANS. It then turns to the final question – TERO taxes. It finds, correctly, the tribes do not have the sovereign authority to impose taxes on contractors working on state rights of ways on reservations. However, rejecting the argument that payment of TERO fees by the State would be an impermissible gift to the Tribe, the AG found that CALTRANS has the discretionary authority to pay the TERO fees as part of the government-to-government relationship between the State and the Tribe, so long as CALTRANS found that such payment served a legitimate governmental purpose. While providing some of the factors CALTRANS could rely on in reaching this conclusion, the AG refused to make any findings about what specific purposes would meet these criteria.

In conclusion, the AG opinion not only ends the controversy that has frozen State-TERO cooperation for over three years. It is also a strong affirmation of the centrality of tribal sovereignty and reinforces a message that CTER has been delivering for many years – that tribes are at their strongest when they actively exercise their sovereign authority through the enactment of TERO and other ordinances.