Chamber of Commerce of U.S. v. Reich

Citation74 F.3d 1322
Decision Date02 February 1996
Docket NumberNo. 95-5242,95-5242
Parties151 L.R.R.M. (BNA) 2353, 64 USLW 2489, 131 Lab.Cas. P 11,496, 40 Cont.Cas.Fed. (CCH) P 76,878 CHAMBER OF COMMERCE OF the UNITED STATES, et al., Appellants, v. Robert B. REICH, Secretary, United States Department of Labor, Appellee.
CourtU.S. Court of Appeals — District of Columbia Circuit

Timothy B. Dyk argued the cause, for appellants, with whom Andrew M. Kramer, Willis J. Goldsmith, and Daniel H. Bromberg, Washington, DC, were on the briefs.

Stephen W. Preston, Attorney, United States Department of Justice, Washington, DC, argued the cause, for appellee. On the brief were Frank W. Hunger, Assistant Attorney General, and Mark B. Stern, Attorney, Eric H. Holder, Jr., United States Attorney, Allen Feldman, Steven J. Mandel, and Edward D. Sieger, Attorneys, Washington, DC, United States Department of Labor.

Martin S. Kaufman was on the brief, for amici curiae Paul Coverdell and Slade Gorton.

Maurice Baskin, Washington, DC, Michael E. Avakian, North Springfield, VA, Peter A. Susser, Washington, DC, and Douglas Darch Chicago, IL, were on the brief, for amici curiae Associated Builders and Contractors, Inc., Manufacturers Alliance International Mass Retail Association, Center on National Labor Policy, Inc., American Bakers Association, National-American Wholesale Grocers' Association/International, Driver Employer Council of America, Society for Human Resource Management, Illinois Chamber of Commerce, and Wisconsin Manufacturers and Commerce.

Anthony B. Byergo, Chicago, IL, entered an appearance, for amici curiae Illinois Chamber of Commerce and Wisconsin Manufacturers and Commerce.

Before: SILBERMAN, SENTELLE, and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

Appellants challenge President Clinton's Executive Order barring the federal government from contracting with employers who hire permanent replacements during a lawful strike. The district court determined that appellants' challenge is not judicially reviewable and, in any event, the Order is legal. We conclude that judicial review is available and that the Order conflicts with the National Labor Relations Act, and therefore we reverse.


President Clinton issued Executive Order No. 12,954, 60 Fed.Reg. 13,023 (1995), on March 8, 1995, pursuant to his authority under the Federal Property and Administrative Services Act, 40 U.S.C. Sec. 471 et seq. (the Procurement Act), which declares:

It is the policy of the executive branch in procuring goods and services that, to ensure the economical and efficient administration and completion of Federal Government contracts, contracting agencies shall not contract with employers that permanently replace lawfully striking employees.

Order at 13,023, Sec. 1. The Order applies to all government contracts over $100,000. In 1994, federal procurement exceeded $400 billion and constituted approximately 6.5% of the gross domestic product. See STATISTICAL ABSTRACT OF THE UNITED STATES 451 (115th ed. 1995). As of 1993, approximately 26 million workers, 22% of the labor force, were employed by federal contractors and subcontractors. GENERAL ACCOUNTING OFFICE, REPORT TO SENATOR PAUL SIMON, WORKER PROTECTION: FEDERAL CONTRACTORS AND VIOLATIONS OF LABOR LAW (Oct. 1995) (GAO REPORT).

The Order explains that the "balance" between allowing businesses to operate during a strike and preserving worker rights is disrupted when an employer hires permanent replacements during a strike. "It has been found" that the hiring of permanent replacements results in longer strikes, can change a "limited dispute into a broader, more contentious struggle," and results in the loss to the employer of the "accumulated knowledge, experience, skill, and expertise" of the striking workers. These consequences adversely affect federal contractors' ability to supply high quality and reliable goods and services.

The Secretary of Labor is charged with implementing and enforcing the Order. If the Secretary finds that a contractor has permanently replaced lawfully striking workers, the Secretary "may make a finding that it is appropriate to terminate the contract for convenience" unless the head of the contracting agency objects. The Secretary is also to debar contractors that have permanently replaced striking workers from future government contracts unless the "labor dispute precipitating the permanent replacement of lawfully striking workers has been resolved, as determined by the Secretary" or the head of the agency determines that there is a compelling reason to lift the debarment. A debarment "normally will be limited to those organizational units of a Federal contractor that the Secretary finds to have permanently replaced lawfully striking workers."

On May 25, Secretary Reich issued final implementing regulations. See Permanent Replacement of Lawfully Striking Employees by Federal Contractors, 60 Fed.Reg. 27,856 (1995). Organizational unit is defined as covering "(1) A division or other organizational element of a person that is responsible as the prime contractor for performing a contract, and (2) Any other affiliate of the person that could provide the goods or services required to be provided under the contract." The regulations also set forth the factors to be considered in determining whether a labor dispute resulting in debarment has been resolved: whether the parties to the dispute have reached a formal settlement or agreed upon a procedure for resolving their differences, whether the parties have agreed to an informal resolution of the dispute, whether the striking employees have returned to work, and any other factors "tending to lead to the conclusion that the labor dispute has ended."

Prior to the President's Executive Order, there were numerous legislative attempts to restrict the use of permanent replacements. In 1993 the Workplace Fairness Act was introduced in the Senate, see S. 55, 103d Cong., 1st Sess., which would have made the use of permanent replacements an unfair labor practice. Supporters similarly argued that the use of permanent replacements upsets the "balance" between labor and management and leads to lower productivity. See S.REP. NO. 110, 103d Cong., 1st Sess. 20-25 (1993). It failed to pass.

Appellants, the Chamber of Commerce, American Trucking Associations, Inc., Labor Policy Association, National Association of Manufacturers, Bridgestone/Firestone, Inc., and Mosler Inc., filed suit on March 15, prior to the Secretary's promulgation of the regulations, seeking declaratory and injunctive relief against the Secretary of Labor's enforcement of the Executive Order. They alleged that the Order is contrary to the National Labor Relations Act, 29 U.S.C. Sec. 151 et seq. (NLRA), the Procurement Act and the Constitution. On expedited appeal we reversed the district court's determination that appellants' claims were not ripe. See Chamber of Commerce v. Reich, 57 F.3d 1099 (D.C.Cir.1995). The district court, on remand, again ruled in favor of the government. It held that appellants' statutory claim that the Executive Order violated the NLRA is not judicially reviewable since the Procurement Act vests broad discretionary authority in the President just as did the statute at issue in Dalton v. Specter, --- U.S. ----, 114 S.Ct. 1719, 128 L.Ed.2d 497 (1994), in which the Supreme Court refused to review a claim that the President had abused his statutory discretion. Appellants' constitutional claim similarly was held to be unreviewable as nothing more than an argument that the President abused his statutory powers. The district court, in the alternative, rejected appellants' statutory claim on the merits, reasoning that under the Executive Order the government was acting in a proprietary capacity and, therefore, NLRA pre-emption was inapplicable. The court stressed that the President's interpretation of the Procurement Act as authorizing the Order was entitled to Chevron-like deference and was reasonable because it furthered the statutory values of "economy" and "efficiency" (the government does not attempt to defend on appeal the court's deference to the President's interpretation). The court also noted that the government was merely exercising an option "available" to a private contractor.


Appellants challenge the Executive Order on three separate grounds: that the Order transgresses an employer's statutory right (under the NLRA) to hire permanent replacements to supplant "economic" strikers; 1 that the Order also violates the very Procurement Act which it purports to implement because the President neglected to make findings tying the Order to savings in government procurement costs; and that this lack of presidential findings independently violates the Constitution since it would render the Procurement Act an unconstitutional delegation under Panama Refining Co. v. Ryan, 293 U.S. 388, 55 S.Ct. 241, 79 L.Ed. 446 (1935).

Before dealing with appellants' substantive arguments, we must treat with the government's assertion that we lack authority to review the President's Order. The government argues that appellants lack the necessary statutory cause of action and can point to no applicable waiver of sovereign immunity. A cause of action under Sec. 702 of the APA is not available because this section applies only to a "person suffering legal wrong because of agency action," 5 U.S.C. Sec. 702 (1977) (emphasis added). Here, the government argues, appellants' challenge is directed at the President's statutory authority to issue the Executive Order. In Franklin v. Massachusetts, 505 U.S. 788, 797, 112 S.Ct. 2767, 2773, 120 L.Ed.2d 636 (1992), the Supreme Court held that the "President is not an agency within the meaning of the [APA]." Similarly, the government contends that Sec. 702's waiver of sovereign immunity "by [its] terms appl[ies] only to agency action." Given the...

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