MASSACHUSETTS COUNCIL OF CONSTRUCTION EMPLOYERS, INCORPORATED, & others [Note 1] vs. MAYOR OF BOSTON & others. [Note 2]

LYNCH, J. Before us is a challenge to a portion of G. L. c. 149, Section 26, [Note 3] and to an executive order [Note 4] of the mayor of the city of Boston, as well as to a regulation of the Boston Redevelopment

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Authority (BRA). [Note 5] The contested section of the statute mandates that private contractors on State-funded construction projects give preference to residents of the Commonwealth in hiring for certain positions. [Note 6] Disputed in the mayoral order is the requirement that private contractors fill fifty percent of the positions on city-funded [Note 7] construction projects with Boston residents. [Note 8] Originally the action came before a single justice of this court on a complaint of injunctive and declaratory relief. The single justice

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reserved and reported ten questions to the full court. [Note 9]

A number of issues are raised. Both the statute and the executive order are challenged in their entirety as an interference

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in labor negotiations in violation of the National Labor Relations Act (NLRA), and thereby in conflict with the supremacy clause of the United States Constitution, art. VI, cl. 2. Both are also said to be invalid because of the Federal constitutional protections contained in the privileges and immunities (art. IV, Section 2, cl. 1), due process, contract, and commerce clauses. Analogous provisions in the Constitution of the Commonwealth are also invoked by the plaintiffs, chiefly arts. 1, 10, and 12. The executive order alone is claimed to be an improper exercise of power under the "home rule" provisions of art. 2, as amended by art. 89, of the Amendments to the Massachusetts Constitution, and as beyond the inherent power of the mayor under the city charter. So too the actions of the BRA are claimed to exceed the authority granted by G. L. c. 121A. Finally both G. L. c. 149, Section 26, and the executive order are challenged in part as they apply to Federal funds. The plaintiffs contend that the Federal statutory and regulatory frameworks for the distribution of these funds forbid the imposition of residency provisions.

We must first consider those statutory arguments which would invalidate the challenged provisions. It is only if the statute and order survive this scrutiny that we need consider constitutional issues. Compare School Comm. of Springfield v. Board of Educ., 366 Mass. 315, 338 (1974) (Quirico, J., concurring), cert. denied, 421 U.S. 947 (1975), with id. at 339-350 (Tauro, C.J., addendum). In the questions before us, only affirmative answers to the questions concerning pre-emption under the NLRA (questions 3 and 6) would fully resolve the plaintiffs' claims without reaching a constitutional issue. Since we find for the defendants on that issue, we turn to the privileges and immunities clause of art. IV, Section 2, [Note 10] and the commerce clause [Note 11] of the United States Constitution,

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which dictate a decision in the plaintiffs' favor. [Note 12] Finally, we decline to answer question 8, which concerns the residents preference instituted by the BRA, both because we believe the agency may wish to reconsider its regulation in light of this opinion and because the issue has not been adequately argued before this court.

I. THE CHARACTER OF THE RESIDENTS PREFERENCES.

General Laws c. 149, Section 26, provides an absolute preference for residents [Note 13] of the Commonwealth in the positions described. There seems little dispute that a qualified resident of the Commonwealth, if available, must be hired for any job covered by Section 26. Although the statute also contains a local preference, the Department of Labor and Industries has chosen not to enforce that provision because of concerns about its constitutionality. [Note 14] The order of the mayor is somewhat broader in its application to all "worker hours on a craft-by-craft basis," but rather than imposing an absolute preference it mandates that fifty percent of those hours must be contributed by workers who are residents of the city.

To the extent that all workers are hired anew by contractors for every project, these provisions may have little impact on the structure of the industry or its functioning in interstate commerce. In differing degrees many subcontractors do hire for each project. Frequently, however, a contractor will have a regular work crew, particularly in certain specialized fields. If some members of a crew are

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not residents of the Commonwealth or of the city, it will be necessary that they be replaced or, alternatively, their employer may opt out of bidding on these projects. The defendants acknowledge that both results do occur.

The goals of both G. L. c. 149, Section 26, and the executive order are to lessen unemployment in the Commonwealth or in the city and to ensure that the expenditure of local funds results in maximum benefits to the locality where the monies are raised. As an additional reason for the mayor's order the city describes a desire to ensure adequate representation of city residents in construction union jobs and a lessening of racial tensions. [Note 15]

II. PREEMPTION AND THE NATIONAL LABOR RELATIONS ACT.

The plaintiffs suggest that the policy of the National Labor Relations Act (29 U.S.C. Sections 151 et seq. [1976]) pre-empts the residents preference contained in both the statute and executive order. In effect G. L. c. 149, Section 26, and the order are claimed to be invalid as attempts to override or control substantive terms in agreements between unions and contractors. Neither the Commonwealth nor any of its subdivisions may act in a manner that frustrates Federal labor policy. States are forbidden to penalize practices which Congress and the National Labor Relations Board (NLRB) deem to be legitimate economic weapons. Lodge 76, Int'l Ass'n of Machinists v. Wisconsin Employment Relations Comm'n, 427 U.S. 132 (1976) (State may not penalize union refusal to work overtime when such refusal was allowed under the NLRA); San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236 (1959) (State may not penalize picketing arguably protected under the NLRA even though the NLRB declines jurisdiction), nor may State law be used to dictate the outcome in an area of mandatory bargaining, Local 24,

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Int'l Bhd. of Teamsters v. Oliver, 358 U.S. 283 (1959) (State antitrust laws may not be used to invalidate an agreement meant to protect negotiated wage scale).

Here, however, it is difficult to imagine how the Commonwealth or the city is intruding into the negotiating process between contractors and unions. In essence, the plaintiffs argue that the Commonwealth may do nothing that influences any possible condition of a labor contract. This is far too broad a reading of preemption under the NLRA. See Amalgamated Transit Union, Div. 819 v. Byrne, 568 F.2d 1025 (3d Cir. 1977) (en banc) (State did not violate NLRA by threatening to withdraw subsidies to private transportation companies which included unlimited cost of living increase provisions in their collective bargaining agreements). Additionally, in this particular instance, it is curious to contend that the negotiating process has been skewed in favor of either party when both unions and contractors are before this court opposing the residents preference. We therefore answer both parts of questions 3 and 6 in the negative.

III. THE CONSTITUTIONAL PROVISIONS AT ISSUE.

The privileges and immunities and commerce clauses act together to provide a free flow of individuals and business activities among the States. The former "was designed to insure to a citizen of State A who ventures into State B the same privileges which the citizens of State B enjoy," Toomer v. Witsell, 334 U.S. 385, 395 (1948), while the latter serves as an embodiment of the assumption implicit in the Constitution that "the peoples of the several states must sink or swim together, and that in the long run prosperity and salvation are in union and not division." Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 523 (1935) (Cardozo, J.).

Thus, while States are not prevented from favoring their citizens in certain circumstances, Reeves, Inc. v. Stake, 447 U.S. 429 (1980) (State may favor its own citizens in selling cement from State-owned plant during shortage); Baldwin v. Fish & Game Comm'n, 436 U.S. 371 (1978) (States may charge nonresidents substantially higher fees for recreational hunting licenses), there are definite limitations

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on the methods that may be used, Philadelphia v. New Jersey, 437 U.S. 617, 627 (1978), and cases cited.

IV. THE STATUTE.

Determining whether G. L. c. 149, Section 26, violates the privileges and immunities clause requires a two-step analysis. First, is the right at stake "fundamental"? See Baldwin v. Fish & Game Comm'n, 436 U.S. 371, 387 (1978). Compare Ostrager v. State Bd. of Control, 99 Cal. App. 3d 1, 5 (1979) (participation in State compensation program for victims of crime not fundamental), with State v. Nolfi, 141 N.J. Super. 528, 537-538 (1976) (out-of-State resident must be allowed to participate in pretrial diversion program for criminal defendants). Second, if the right is found to be fundamental, the discrimination challenged may be justified if there is a showing that nonresidents are a "peculiar source" of an "evil" that the Legislature is seeking to remedy, Hicklin v. Orbeck, 437 U.S. 518, 525 (1978), quoting from Toomer v. Witsell, supra at 398, or that there is a valid justification for the distinction other than the mere fact of nonresidency, Hicklin, supra. See, e.g., Rubin v. Glaser, 83 N.J. 299, 305-306 (1980) (State may treat residents and nonresidents differently for some tax purposes, if such treatment bears a close relation to extra taxes paid by residents in other contexts). Accord, Lung v. O'Chesky, 94 N.M. 802, 804 (1980).

A. Fundamentality.

Initially the defendants contend that the employment at issue involves no fundamental interest and so the privileges and immunities clause is inapplicable. A certain surface plausibility is lent to this theory because the term "fundamental" has been used to describe several very different concepts in constitutional analysis. Carchman v. Korman Corp., 456 F. Supp. 730, 738 & n.9 (E.D. Pa. 1978). Note, Of Interests Fundamental and Compelling: The Emerging Constitutional Balance, 57 B.U.L. Rev. 462 (1977). Our attention is directed to cases that hold certain rights fundamental for purposes of the equal protection clause of the Fourteenth Amendment to the United States Constitution,

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rights which, therefore, can be restricted only upon the showing of a compelling State interest. See, e.g., Shapiro v. Thompson, 394 U.S. 618 (1969) (right to interstate travel); L. Tribe, American Constitutional Law Section 16-10 (1978) (discussing fundamental nature of equal access to the ballot). Admittedly, employment opportunities, whether public or private, have not been given this extraordinarily high level of protection.

For purposes of art. IV, Section 2, however, from the earliest incorporation of the notion of "fundamentality," the clause has been thought to protect the "right of a citizen of one state to pass through, or to reside in any other state, for purposes of trade, agriculture, professional pursuits, or otherwise," Corfield v. Coryell, 6 F. Cas. 546, 552 (C.C.E.D. Pa. 1823) (Washington, Circuit Justice). This position has been consistently followed. See Doe v. Bolton, 410 U.S. 179, 200 (1973); Ward v. Maryland, 79 U.S. (12 Wall.) 418, 430 (1870). Indeed, reconciling the holding in Baldwin, supra, which allowed a substantially higher licensing fee to be charged to out-of-State hunters, with the holding in Toomer v. Witsell, supra, which negated a substantial differential in license fees for commercial shrimp fishing, is possible because the Court in Baldwin, supra, recognized a constitutional difference between recreational activity and the pursuit of a livelihood. [Note 16] See Note, The Privileges and Immunities Clause: A Reaffirmation of Fundamental Rights, 33 U. Miami L. Rev. 691, 693 (1979). Limiting a particular kind of work opportunity because of a person's place of residence does impinge upon a "fundamental" right and thus satisfies the first element of a privileges and immunities analysis.

B. Possible Sources of Justification for the Discrimination.

Hicklin v. Orbeck, 437 U.S. 518 (1978), is controlling on this issue because it establishes a clear rule that a State may

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not use its control over a resource to create an absolute employment preference for its own residents. There, Alaska had attempted to utilize its control over oil leases on State-owned land to require that Alaska residents be given absolute preference in hiring not only in the oil fields, but also in any activity that benefited from the ripple effect of the energy boom. Id. at 531. The Supreme Court rejected Alaska's claim that ownership of the land in question gave the same authority that any owner might have to place conditions on the lease or sale of a resource. Id. at 528. A significant factor in the Court's holding was that no evidence was presented that nonresidents were a particular source of Alaskan unemployment. Id. at 526. Additionally, the statute was suspect because it swept more broadly than necessary to achieve the goal of increased training and employment of Alaska residents, an end better served by a preference aimed at the unemployed or those in training programs. [Note 17] Id. at 527-528. Since Hicklin forbids the use of State control over a resource to force an absolute preference in hiring by a private contractor, the residents preference provisions of G. L. c. 149, Section 26, must fall.

The defendants would distinguish Hicklin on two bases. First, that the regulation at issue merely protects the use of a limited resource (jobs), restricting them to State residents and second, by analogy to certain commerce clauses, that as a market participant it may act unfettered by the restrictions of the privileges and immunities clause. See Reeves, Inc. v.

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Stake, 447 U.S. 429 (1980); Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976).

1. Limited resources. There may be a suggestion in older cases that when a State-controlled resource is limited, a preference can be given to residents. See Toomer v. Witsell, supra at 397-398. But there must be some evidence that the services or resources, assuming they involve fundamental rights, are overburdened. Doe v. Bolton, 410 U.S. 179, 200 (1973). The defendants point to a high level of Statewide unemployment. Hicklin, supra, however, clearly rejects such an argument without a clear demonstration that out-of-State residents are a peculiar source of high unemployment. Id. at 526. Such a showing is not made on the record before us.

2. Acting as a market participant. The defendants' second contention is that a residents preference in hiring for construction financed by public funds is substantially different from a preference based on the fortuitous location of a natural resource within a State's borders. The Commonwealth would thus turn to Hughes, supra, and Reeves, supra, in determining the extent to which a State, acting as a purchaser of goods and services, is exempt from the restrictions of the privileges and immunities clause. [Note 18]

The Commonwealth is correct that the commerce clause does not prevent a State from preferring resident business in purchasing goods, see Hughes, supra at 810, or services, American Yearbook Co. v. Askew, 339 F. Supp. 719, 723

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(M.D. Fla.) (three-judge court), aff'd mem., 409 U.S. 904 (1972), or in the distribution of State-produced materials in a shortage situation, Reeves, Inc. v. Stake, supra at 446-447. One major weakness in such an analogy is that in none of the cases cited was the use of the State's market power extended beyond granting an initial contract or a first sale. The commerce clause cases suggest that Alaska might quite properly have preferred its own residents in granting initial leases on its oil land, but Hicklin, supra, leaves no question that the extension of this power to favor absolutely all State residents in employment was unacceptable. Therefore, the statute before us cannot stand. See Salla v. County of Monroe, 48 N.Y. 2d 514 (1979) (overturning on privileges and immunities grounds a New York statute nearly identical to G. L. c. 149, Section 26, as enforced). We thus respond "Yes" to the first issue raised in question 2. We need not consider the additional issues raised therein, nor need we answer question 1.

V. THE EXECUTIVE ORDER.

A. Privileges and Immunities.

The invalidity of the residents preference contained in the statute does not necessarily dictate a similar result with regard to the mayoral order. The plaintiffs contend that the same privileges and immunities analysis should be applied, but neither on its face, nor in fact, can the order be said to aim solely, or chiefly, at out-of-State residents. The preference is for inhabitants of the city, and its "negative" effect is felt in significant part by other citizens of the Commonwealth, as well as by residents of other States. In such circumstances it may be more difficult to find a violation of the privileges and immunities clause because the discrimination adversely affects citizens of the Commonwealth as well. [Note 19] But see Construction & Gen. Laborers Local 563 v. St. Paul, 270 Minn. 427, 431 (1965) (invalidating, partially on privileges and immunities grounds, a city ordinance requiring

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contractors on public building projects to hire only residents of the county in which the city was located).

B. The Commerce Clause.

The commerce clause, however, presents a clear obstacle to the city's order. Neither party would, we think, seriously dispute the proposition that an attempt by the city to apply the regulations contained in the order to all private construction would fall to such a challenge. Simple economic protectionism triggers a "virtually per se rule of invalidity." Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978).

The key question is whether the exception for a State (or one can safely say a municipality) as a market participant, discussed supra, serves to protect the mayoral order. In addition, we must consider our decisions and those of other courts which have held that in at least certain kinds of direct hiring, a municipality may employ only residents or may give preference to residents. See Milton v. Civil Serv. Comm'n, 365 Mass. 368 (1974); McCarthy v. Philadelphia Civil Serv. Comm'n, 424 U.S. 645 (1976); Wardwell v. Board of Educ. of the City School Dist. of Cincinnati, 529 F.2d 625 (6th Cir. 1976); Detroit Police Officers Ass'n v. Detroit, 385 Mich. 519 (1971).

We perceive, however, three key distinctions between the actions upheld in the cases cited by the defendants and the mayoral order. First, given the statement of agreed facts, there is no doubt that the implementation of the mayor's order will have a significant impact on those firms which engage in specialized areas of construction and employ permanent works crews composed of out-of-State residents. The municipal hiring cases are quite different since they affect the permanent domicil of employees rather than discouraging the interstate activities of construction firms. Second, the record indicates that a significant percentage of the funds affected by the order are received from Federal sources. Thus, it is inaccurate to describe the preference as a mere use of city-raised funds to further local interest. The analysis in Reeves, supra, which the city cites in defense of the executive order, is distinguishable on this ground. There,

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the concrete plant operated by South Dakota was an example of State-raised revenues being expended with a genuine risk of failure, the cost of which would have been borne by the State. The Court of Appeals of New York in Salla, supra at 524-525, found this element nearly definitive in justifying the invalidation of New York's residents preference in the awarding of public construction contracts. We do not go so far, but the presence or absence of substantial funds from nonlocal sources is at the very least an important factor in determining whether the Reeves decision is applicable.

Finally, as in Hicklin, supra, there is a broadly drawn statute which sweeps far wider than merely favoring unemployed or underemployed local residents. Although Reeves, supra, does indicate that a sympathetic reading under the commerce clause should be given to State or local action in a proprietary capacity, it is doubtful that the city is acting in its proprietary capacity in all the activities affected by the executive order. Even if this were so, the extensive preference for local residents contained in the executive order cannot come within the exception outlined by Reeves because it sweeps so broadly. In Reeves, the existence of a genuine shortage of concrete necessitated some form of rationing. The State's choice of favoring its own citizens was a rational means of allocation which recognized the special interests of local taxpayers. The executive order before us establishes a strict numerical requirement which is not at all targeted to the legitimate interests which the city has asserted. Given the order's negative impact on interstate commerce linked with this broad application, it must fall. Question 5 is to that extent answered in the affirmative and we therefore need not reach questions 4, 7, 9 and 10.

In summary, we answer questions 3 and 6 "No."

We answer question 2 "Yes" to the extent outlined in part IV.

We answer question 5 "Yes" to the extent outlined in Section V.

We decline to answer questions 1, 4, 7, 8, 9, and 10.