Preemption's Market Participant Immunity—A Constitutional Interpretation: Implications for Living Wage and Labor Peace Policies

Abstract

Nationwide, state and local governments are adopting policies that oblige their private-sector business partners to pay employees a "living wage" and/or to agree in various ways not to use public funds to finance anti-union activities. Conventional labor preemption principles would invalidate many of these conditional business arrangements unless they are immunized by preemption's market participant doctrine, first applied in the now decade-old Boston Harbor case. Accordingly, the focus of preemption litigation challenging living wage and labor peace policies ordinarily is the immunity's applicability. Because its reach is subject to widely varying interpretations, there exists a need to fix workable and principled limits for the immunity's operation. This article addresses that need. Part II briefly describes labor law preemption but moves straightaway into a discussion of the market participant immunity doctrine. This examination shows that consistent administration of the immunity is thwarted by deep divisions among the lower courts. Coherency depends on resolving several discernible categories of disagreement. Part III proposes a solution. It argues that the immunity serves the constitutional function of restraining Congress's preemptive authority to assure states an equality of treatment with the private sector. Stated otherwise, my thesis is that the outcome in Boston Harbor was constitutionally prescribed. From this interpretation I demonstrate that disputes regarding a state's assertion of the immunity should be resolved by inquiring first into whether federal labor law would privilege a similarly situated private-sector employer to engage in the activity for which local government claims immunity protection. If so, then the outcome should turn on whether local government's purpose was to promote its own proprietary self-interest or whether it engaged in that activity as a pretext for setting labor policy. Part IV applies this two-part standard to analyze living wage and labor peace policies. Some are valid because they fall within a well-established labor preemption exception having nothing to do with market participant theory. Others are likely to be found invalid because they regulate within labor law's protected zones and courts are not likely to extend the market participant immunity to them. For the rest, I show that while the state may be acting within a zone also occupied by federal labor law, market participant immunity provides a safe harbor.