Enforceability of Local Hire Preference Programs (2013)

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5 ployment of local businesses and residents and case studies of such tools in practice. Lastly, given the issues confronting the enforceability of local hire programs, this digest provides considerations that public agencies and community groups should take into account when contemplating whether to implement local hire pro- grams. The major legal challenges confronting local hire statutes and ordinances are discussed in Section II. Section III addresses the impact federal funding may have on the enforceability and viability of local hire programs. Section IV highlights the diverse tools that have been utilized to increase the employment opportu- nities of local residents and provides examples of each of them in practice. Given the legal issues and federal funding issues confronting local hire preference pro- grams, Section V identifies and recommends steps pub- lic agencies and community groups should consider when contemplating the implementation of local hire programs. II. LEGAL ISSUES ASSOCIATED WITH LOCAL HIRE PREFERENCE PROGRAMS Local hire programs have been subjected to various constitutional challenges. Specifically, they have been challenged under the Privileges and Immunities Clause, the Commerce Clause, and the Equal Protection Clause. The enforceability and viability of a local hire program can be threatened on the basis of any one of these constitutional challenges, meaning that even if it survives a legal challenge on one basis, it can still be deemed unconstitutional on another. A. Privileges and Immunities Clause The Privileges and Immunities Clause has been used to successfully challenge the constitutionality of some local hire statutes and municipal ordinances. The Privi- leges and Immunities Clause of Article IV, Section 2, of the United States Constitution provides that “[t]he Citi- zens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.”27 The primary purpose of the Privileges and Immunities Clause is to prevent states from enacting measures that discriminate against nonresidents for reasons of eco- nomic protection.28 It “place[s] the citizens of each State upon the same footing with citizens of other States, so far as the advantages resulting from citizenship in those States are concerned.”29 In particular, the framers of the Constitution were concerned with avoiding “the tendencies toward economic Balkanization that had plagued relations among the Colonies and later among 27 U.S. CONST. art. IV, § 2, cl. 1. 28 Supreme Court v. Piper, 470 U.S. 274, 285, 105 S. Ct. 1272, 1279, 84 L. Ed. 2d 205, 214 n.18 (1985). 29 Paul v. Virginia, 75 U.S. (8 Wall.) 168, 180, 19 L. Ed. 357, 360 (1869). the States under the Articles of Confederation.”30 The Constitution sought to protect nonresidents from eco- nomic discrimination so that the nation may function as a single economic union.31 Local hire programs, to the extent that they dis- criminate on the basis of residency, trigger scrutiny under the Privileges and Immunities Clause. This is true even if the policy is adopted at the municipal rather than state level. The terms “resident” and “citi- zen” have been deemed essentially interchangeable for the purposes of Privileges and Immunities challenges because an out-of-state citizen who seeks employment in a city would not enjoy the same privileges as a state citizen residing in the city.32 Whether the exercise of a privilege is conditioned on state residency or municipal residency, an individual would still be excluded.33 Local hire preferences, even if adopted solely by a local mu- nicipality to regulate expenditure of local public funds, must still withstand scrutiny under the Privileges and Immunities Clause.34 1. Basis of a Privileges and Immunities Clause Challenge The Privileges and Immunities Clause is triggered by discrimination against nonresidents on matters of “fundamental concern.” In Baldwin v. Fish & Game Commission of Montana, the United States Supreme Court specifically addressed the issue of “fundamental rights.”35 There, the Court upheld against a Privileges and Immunities Clause challenge of a Montana elk hunting licensing scheme that required greater fees for nonresidents than Montana residents.36 The court held that elk hunting is not a fundamental right.37 The Baldwin Court relied on Justice Washington’s opinion in Corfield v. Coryell, an 1823 federal circuit case.38 While upholding a New Jersey law restricting access to the state’s oyster beds, the Corfield opinion grounded the Privileges and Immunities Clause in the natural 30 Hughes v. Oklahoma, 441 U.S. 322, 325–26, 99 S. Ct. 1727, 1731, 60 L. Ed. 2d 250, 255 (1979); see also Laborers Local Union No. 374 v. Felton Constr. Co., 98 Wash. 2d 121, 123, 654 P.2d 67, 68 (1982) (“The history of the [Privileges and Immunities] clause reflects a concern by the framers for keep- ing the newly independent states from adopting highly protec- tionist economic policies.”) 31 Hughes, 441 U.S. at 325–36; see also A.L. Blades & Sons, Inc. v. Yerusalim, 121 F.3d. 865, 870 (3d Cir. 1997). 32 Camden, 465 U.S. at 216. 33 Id. at 216–17; see also Austin v. New Hampshire, 420 U.S. 656, 662, 95 S. Ct. 1191, 1195, 43 L. Ed. 2d 530, 535, n.8 (1975). 34 Camden, 465 U.S. 216, 217, 98 S. Ct. 1852, 56 L. Ed. 2d 354 (1978). 35 Baldwin, 436 U.S. 371. 36 Id. at 393–94. 37 Id. at 372–74. 38 6. F. Case. 546 (C.C.E.D. Pa. 1823) (Case No. 3230).

6 rights belonging “of right” to citizens “of all free gov- ernments.”39 In his opinion, Justice Washington stated: The right of a citizen of one state to pass through, or to reside in any other state, for purposes of trade, agricul- ture, professional pursuits, or otherwise; to claim the benefit of the writ of habeas corpus; to institute and maintain actions of any kind in the courts of the state; to take, hold and dispose of property, either real or per- sonal…may be mentioned as some of the particular privi- leges and immunities of citizens, which are clearly em- braced by the general description of privileges deemed to be fundamental…. From this premise, the Baldwin Court concluded that recreational elk hunting was not essential or fun- damental to the nation’s livelihood.40 In International Organization of Masters, Mates & Pilots v. Andrews, the Ninth Circuit Court of Appeals upheld the constitutionality of a wage differential be- tween state resident and nonresident employees, find- ing that receiving an equal wage did not amount to a fundamental right protected by the Privileges and Im- munities Clause.41 However, in O’Reilly v. Board of Ap- peals, the Fourth Circuit Court of Appeals found driv- ing a taxi to be a fundamental privilege and held the county’s denial of plaintiff’s license application because he was resident of a neighboring Virginia county and not a resident of Montgomery County to be unconstitu- tional under the Privileges and Immunities Clause.42 While the outer contours of what constitutes a “funda- mental right” have not been delineated, it is taken to mean core economic interests and civil liberties. Fundamental Right to Pursue a “Common Calling.” Despite the lack of clarity as to what constitutes a “fun- damental right,” the Supreme Court has consistently held that the pursuit of a “common calling” is funda- mental and therefore within the Privileges and Immu- nities Clause protection.43 A common calling is defined as the right of a “citizen of one State to pass into any other State of the Union for the purpose of engaging in lawful commerce, trade, or business without molesta- tion.”44 In United Building & Construction Trades Council v. Mayor of Camden (Camden), the Court stated “the pursuit of a common calling is one of the most fundamental of those privileges protected by the 39 Id. at 551–52. 40 Baldwin, 436 U.S. at 388. 41 831 F.2d 843, 846 (9th Cir. 1987). 42 942 F.2d 281, 284 (4th Cir. 1991). 43 See Camden, 465 U.S. at 219; Hicklin v. Orbeck, 437 U.S. 518, 524, 98 S. Ct. 2482, 2487, 57 L. Ed. 2d 397, 403 (1978) (discrimination against nonresidents seeking to pursue com- mon callings violative of Privileges and Immunities Clause); Baldwin, 436 U.S. at 387 (linking “essential activities” to “common callings”); Ward v. Maryland, 79 U.S. (12 Wall.) 418, 430, 20 L. Ed. 449, 452 (1870); Salem Blue Collar Workers Ass’n v. City of Salem, 33 F.3d 265, 268–69, 20 L. Ed. 449, 452 (3d Cir. 1994) (holding that “common callings” are within pro- tection of Privileges and Immunities Clause). 44 Ward, 79 U.S. at 430. Clause.”45 For example, in Supreme Court of New Hampshire v. Piper, the Court struck down a residency requirement for admission to the New Hampshire State Bar.46 The Court held that the practice of law is suffi- ciently important to the national economy to deserve protection as a fundamental privilege.47 Moreover, in Supreme Court of Virginia v. Fried- man,48 the Court seemed to broaden the concept of “fundamental right” to encompass actual equality be- tween residents and nonresidents. The Court held the State of Virginia could not permissibly deny nonresi- dents the privilege of admission to the State Bar “on motion” or without taking the bar examination.49 Al- though the inability of nonresidents to take advantage of Virginia’s special discretionary procedure did not amount to a total bar on their pursuit of a common call- ing, the Court held that the Privileges and Immunities Clause guarantees citizens the right of practicing law “[o]n terms of substantial equality with those enjoyed by residents.”50 What has been deemed a common calling goes be- yond the right to practice law. In Tangier Sound Waterman’s Association v. Pruitt, the Fourth Circuit held that a Virginia licensing scheme that charged much greater fees to nonresident commercial fisherman than to Virginians violated the Privileges and Immuni- ties Clause because the court reasoned that commercial fishing constituted a right to earn a living.51 Direct Public Employment Versus Employment on Publicly Funded Contracts. Within the area of employ- ment, the Court has distinguished between the right to work for the government and the right to work at all.52 The Constitution does not guarantee a right to a gov- ernment job.53 Thus local residency can be a condition of direct employment by a state or local municipality without violating the Privileges and Immunities Clause.54 However, courts have treated those employed 45 465 U.S. at 219. 46 470 U.S. at 288. 47 Id. at 281–82. 48 487 U.S. 59, 108 S. Ct. 2260, 101 L. Ed. 2d 56 (1989); Sullivan, supra note 16, at 1335, 1348. 49 Friedman, 487 U.S. at 61. 50 Id. at 70. 51 Id. at 266 (referring to Toomer v. Witsell, 334 U.S. 385, 403 (1948)). 52 Day, supra note 3, at 271, 278. 53 Camden, 465 U.S. at 219. 54 See McCarthy v. Philadelphia Civil Comm’n, 424 U.S. 645, 646–47, 96 S. Ct. 1154, 1155, 47 L. Ed. 2d 366, 368 (1976) (upholding residency requirement for firemen under Equal Protection Clause); Detroit Police Officers Assn’ v. Detroit, 385 Mich. 519, 522–23, 190 N.W.2d 97, 98 (1971) (residency re- quirement for police officers upheld under Equal Protection Clause). In Salem Blue Collar Workers Ass’n v. City of Salem 33 F.3d 265, 269–70 (3d. Cir. 1994), the Third Circuit Court of Appeals held that direct public hiring is not protected by the Privileges and Immunities Clause. Determining that there was no fundamental right to direct public employment, the Court upheld the validity of an ordinance that required all Salem city

7 by government contractors on publicly funded contracts differently. A state’s restrictions on nonresidents who are employed by, or seek employment from, any party other than the state or local government itself, even if the restrictions pertain to state-funded projects, consti- tute a prima facie violation of the Privileges and Im- munities Clause.55 The United States Supreme Court has stated that “public employment is qualitatively different from em- ployment in the private sector; it is a subspecies of the broader opportunity to pursue a common calling.”56 The Supreme Court has explicitly protected private employ- ers contracting with government entities.57 In Hicklin v. Orbeck, the Court held that the “Alaska Hire” statute violated the Privileges and Immunities Clause because the statute’s mandate reached all “employment which is a result of oil and gas” agreements with Alaska.58 Be- cause the “Alaska Hire” statute reached employers with no direct relation to the state, the broadness of Alaska’s statute was deemed unconstitutional.59 However, in Camden, the Court stated that whether a privilege is “fundamental” for purposes of the Privi- leges and Immunities Clause is not dependent on if the employees of private contractors and subcontractors engaged in public works projects can or cannot be said to be “working for the city.”60 Camden concerned the constitutionality of a municipal ordinance requiring that at least 40 percent of the labor force of the contrac- tors and subcontractors working on city construction projects be local residents.61 The Court’s decision fo- cused on the initial opportunity to seek employment with private employers, which was found to be “suffi- ciently basic to the livelihood of the Nation” as to fall within the purview of the Privileges and Immunities Clause even if those same private employers were en- gaged in construction projects funded in whole or in part by the city.62 This suggests that the opportunity of individuals to be hired by private contractors for pro- jects funded by the city is enough to be considered fun- damental under the Privileges and Immunities Clause. The Supreme Court’s jurisprudence suggests that public employment is different from employment by a government contractor. While the distinction between direct employment by public entities and government contractors might be significant, most local hire acts are generally utilized and designed to affect contractors’ employees to be residents of the City. The Court distinguished Camden on the ground that the Salem ordinance dealt with direct city employment, while Camden addressed only indirect city employment, workers seeking employment with private employers contracting with the City. 55 Camden, 465 U.S. at 221–22. 56 Id. 57 Id. at 219, 221–22. 58 Hicklin, 437 U.S. at 529. 59 Id. at 527–28, 530. 60 Camden, 465 U.S. at 221. 61 Id. at 210. 62 Id. at 221–22. dealings with employees outside the public agency’s direct participation. Thus a local hire program that seeks to restrict an individual’s employment opportu- nity with a private employer working with a state or local government would be found to implicate a funda- mental right under the Privileges and Immunities Clause.63 2. Modern Test When Fundamental Right Implicated Once it is determined that a fundamental right has been implicated, the court engages in a two-prong test that was enunciated in Toomer v. Witsell.64 Toomer in- volved a South Carolina statute that discriminated against nonresident commercial shrimp fishermen by imposing a license fee 100 times greater than that charged to residents.65 In declaring that statute invalid and emphasizing that each state had to accord substan- tial equality of treatment to the citizens of the other, the Court set forth what has become the modern Privi- leges and Immunities doctrine.66 Pursuant to the two-prong test, a state may not dis- criminate against nonresidents unless 1) there is sub- stantial reason for the difference in treatment and 2) the discriminatory remedy bears a close relation to the state’s objective.67 Each prong is discussed in turn. Substantial Reason for the Difference in Treatment. Once a challenger establishes that an ordinance, stat- ute, or policy implicates a fundamental privilege or im- munity, the burden shifts to the governmental entity to show that there is a “substantial reason” for the differ- ence in treatment between residents and nonresidents “beyond the fact that they are citizens of other States.”68 This required showing highlights that local hire pro- grams are not per se invalid under the Privileges and Immunities Clause.69 A state or local government may only discriminate against nonresidents if it makes a clear showing that noncitizens constitute a “peculiar source of evil” at which the discriminatory statute is aimed.70 In Camden, the Court found that a city resident hir- ing preference imposed on public works contractors vio- lated the plaintiff’s fundamental right to pursue a common calling. It remanded the case for further find- ings as to what motivations, if any, lay behind the Camden ordinance, leaving open the possibility that a city or state can defend a local hire program, however difficult it may be to do so.71 While the City of Camden 63 See Camden, 465 U.S. at 219, 221–22. 64 334 U.S. 385, 396, 68 S. Ct. 1156, 1162, 92 L. Ed. 1460, 1471 (1948). 65 Id. at 389. 66 Id. at 396. 67 Id. 68 Camden, 465 U.S. at 222; Toomer, 334 U.S. at 396. 69 Camden, 465 U.S. at 222; see also Sullivan, supra note 16, at 1335, 1345. 70 Camden, 465 U.S. at 222. 71 Id.

8 argued that the ordinance was “necessary to counter- act…social ills” and would prevent nonresidents from “liv[ing] off” Camden without “living in” Camden, the Court ultimately found it was impossible to evaluate these proffered justifications because the City did not present any findings of fact.72 Nonetheless, many cities have patterned themselves after Camden by incorporat- ing similar language into their local preference pro- grams. Like Camden, these cities justify their programs using the same boilerplate language that nonresidents constitute a “particular source of evil.” However, as dis- cussed below, absent sufficient evidentiary proof, such blanket statements—that nonresidents are a source of “peculiar evil” or that preference for residents is re- quired to counteract “grave economic and social ills and spiraling unemployment”—are insufficient to withstand a Privileges and Immunities challenge. Post-Camden Case Law Emphasizes High Eviden- tiary Burden. After Camden, governmental entities have a very high evidentiary burden to satisfy when it comes to showing that nonresidents are a “peculiar source of the evil” at which the discriminatory local hire preference is aimed at remedying. Commentator Werner Z. Hirsch has explained that [I]n applying the substantial reason test, the State courts have interpreted the phrase “peculiar source of evil” to require a showing that nonresidents were a cause of the unemployment the hiring preference acts were designed to alleviate…. Providing that nonresidents are the cause of unemployment in a State would be a difficult, if not impossible, evidentiary task, given the large number of variables contributing to unemployment.73 Because the showing needed to overcome a violation of the Privileges and Immunities Clause is so difficult to make, nearly all state courts that have adjudicated Privileges and Immunities Clause challenges to local hire laws have found such resident preferences to be unconstitutional.74 72 Id. at 222–23. 73 Hirsch, supra note 4, at 16–17. 74 See, e.g., Salla v. County of Monroe, 48 N.Y.2d 514, 522– 525, 399 N.E.2d 909, 913–915 (N.Y. 1979) (While “the counter- acting of unemployment is a legitimate State concern…there is nothing to indicate that an influx of nonresidents…is a major cause of our unemployment.”); Neshaminy Constructors, Inc. v. Krause, 181 N.J. Super. 376, 385, 437 A.2d 733, 738 (N.J. Ch. 1981) (“Absent a showing of specific dangers posed by out-of- state employees, [New Jersey] may not attempt to resolve its problems on the backs of citizens of [its] neighboring States.”); Laborers Local Union No. 374, 98 Wash. 2d 121, 129, 654 P.2d 67, 71 (1982) (“Neither appellants nor amicus have demon- strated that nonresidents are a peculiar evil, nor has either shown how the statute is ‘closely tailored’ to achieving a le- gitimate State purpose.”); People ex rel. Beranardi v. Leary Const. Co., 102 Ill. 2d 295, 299, 464 N.E. 2d 1019, 1022 (1984) (“There is nothing in the record, including the complaint itself, to show that nonresident laborers are a cause of unemployment in Illinois.”); Robinson v. Francis, 713 P.2d 259, 266 (Alaska 1986) (“What is lacking is a showing that non-residents are a ‘peculiar source of the evil’ of unemployment.”). With regard to remedying unemployment, post- Camden case law implies that a state or local munici- pality must establish that its unemployment problem is directly caused by the influx of nonresident labor and is not of the state’s own doing.75 Thus, without substan- tially more justification and evidence showing that non- residents are the cause of unemployment, challenged local hire programs and policies are unlikely to meet the burden of establishing a substantial reason to dis- criminate against nonresidents. Accordingly, they most likely will be held unconstitutional. Type of Evidence Needed. Presently, the courts have not yet clearly delineated just how much evidence is sufficient or exactly what type of evidence a state or city must produce to justify local hire preference laws.76 In the remand of Camden, the Supreme Court hinted as to what type of evidence might be required to justify a local hire preference.77 There, the record contained comparative statistics on the difference between Cam- den’s high level of unemployment and unemployment levels in the state and in the county.78 But without more, the Court was not persuaded by the presentation of comparative statistics. The Court also refused to take judicial notice of “Camden’s decay,” and implied that the city would have to conduct an investigation more thorough than “the brief administrative proceeding that led to approval of the ordinance by the State Treas- urer.”79 At least one lower court has called for a more quanti- tative “cost-benefit” analysis in which the evidence of increased employment among state residents is weighed against the costs associated with barring non- resident workers and contractors.80 In W.C.M. Window Company v. Bernardi, the Seventh Circuit did not find it obvious that preventing nonresidents from working would benefit the state, and therefore required the state to provide some sort of financial or employment data to justify its resident hiring preference.81 Judge Posner specifically described evidence he believed was neces- sary to uphold a state local hiring law, such as informa- tion concerning the benefits of the preference law, the unemployment rate in the construction industry, the costs of local residential unemployment to the state, and whether there were any costs to the state for non- resident laborers on such projects.82 75 See supra note 74. 76 George T. Reynolds, Constitutional Law—Constitutional Assessment of State and Municipal Residential Hiring Prefer- ence Laws, 40 VILL. L. REV. 803, 832 (1995). 77 Camden, 465 U.S. at 223. 78 United Bldg. & Constr. Trades Council v. Mayor of Cam- den, 88 N.J. 317, 323, 443 A.2d 148, 151 (1982) (Camden: 11.5 percent; New Jersey: 8.1 percent; county: 7.6 percent). 79 Camden, 465 U.S. at 223. 80 W.C.M. Window Co. v. Bernardi, 730 F.2d 486, 498 (7th Cir. 1984). 81 Id. at 497–98. 82 Id. at 498.

9 However, in State v. Antonich, the Supreme Court of Wyoming reached the opposite conclusion on nearly identical facts.83 While Judge Posner identified specific evidence that could be used to justify discrimination against nonresidents, the Wyoming Supreme Court upheld a state local hire program without citing to any facts or findings indicating that nonresidents were ac- tually keeping residents from working.84 The Wyoming statute required contractors to contact a local employ- ment office to determine whether qualified resident workers were available, and if so, to hire them first.85 In holding that the Wyoming preference statute satisfied the requirements of the Toomer substantial reason test, the Wyoming Supreme Court’s Privileges and Immuni- ties analysis stressed that Toomer required states be given “considerable leeway” as to their analysis of per- ceived “local evils” and “appropriate cures.”86 The Wyoming Supreme Court accepted the State’s justification that the purpose of the Wyoming Prefer- ence Act was not to eradicate general unemployment but rather to “prevent a qualified Wyoming worker’s remaining unemployed while a nonresident goes to work on a government-funded construction project.”87 The Wyoming Supreme Court’s decision in Antonich and its deference to the State’s proffered justification has been sharply criticized because it represents a lack of evidence that was fatal in other cases.88 For example, Hirsch has stated that in contrast to Antonich, the Sev- enth Circuit’s decision in “[W.C.M. Window]89 repre- sents a move to a more analytically sound and practical test for justifying [state preference laws] under the sub- stantial reason test.”90 Given the emphasis on the high evidentiary burden, Antonich may be viewed as an out- lier. Discrimination Practiced Against Nonresidents Must Bear a Close Relation to the State’s Objectives. The sec- ond prong of the Toomer test requires that the govern- mental actor’s discriminatory remedy bear a “close rela- tion” to the State’s objective.91 Thus, even when the presence of nonresidents causes or exacerbates the problem the State seeks to remedy, there must be a “reasonable relationship between the danger presented by noncitizens, as a class, and the severe discrimination practiced upon them.”92 83 694 P.2d 60 (Wyo. 1985). 84 Id. at 64. 85 Id. at 63. 86 Id. at 61–62 (quoting Toomer, 334 U.S. at 396). 87 Id. at 63. 88 Hirsch, supra note 4, at 1, 17 (stating that this decision “seems flawed by the court’s easy acceptance of Wyoming’s justification…in the face of a lack of evidence.”). 89 730 F.2d at 498. 90 Hirsch, supra note 4, at 1, 17. 91 Toomer, 334 U.S. at 396. 92 Hicklin, 437 U.S. at 526 (quoting Toomer, 334 U.S. at 399). In Hicklin v. Orbeck, the first case in which the Su- preme Court reviewed a public works local hire prefer- ence law, the State of Alaska had required that all con- tractors involved in oil and gas related work where the State was a party give preference to state residents.93 The Court decided that the Alaska Hire Act was overly broad in that it gave a preference to all Alaskans “re- gardless of their employment status, education or train- ing.”94 The Court stated that “if Alaska is to attempt to ease its unemployment problem by forcing employers within the State to discriminate against nonresi- dents…the means by which it does so must be more closely tailored to aid the unemployed the Act is in- tended to benefit.”95 The Court determined that Alaska’s blanket preference for state residents did not bear a close relation to combating the peculiar evil of nonresidents taking local jobs, as the State had not shown nonresidents actually caused local unemploy- ment.96 In Camden, the Court noted the city’s ordinance, which was “limited in scope to employees working di- rectly on city public works projects,” was not as broad as the act in which the court found excessive in Hick- lin.97 But because the record contained insufficient evi- dence to determine whether the city had substantial reasons, it could not consider whether the City of Cam- den’s methods were “closely related” to solving its resi- dents’ unemployment problem.98 In Supreme Court of New Hampshire v. Piper, the Court failed to mention the “peculiar source of evil” element.99 Instead the Court held that to pass Privi- leges and Immunities scrutiny, a state need only show that it has a substantial reason for discriminating against nonresidents, and that its method of discrimi- nation bears a close relationship to that objective.100 Under this variation, the Court judges the “close rela- tion” of a preference statute to the city’s substantial reason in light of the other policy options that the city or state had available.101 Thus, to pass constitutional muster under the Privileges and Immunities Clause, the resident preference would have to be “less restric- tive” of the rights of nonresidents than other policy op- tions.102 In his dissent in Piper, Justice Rehnquist as- serted that this increased level of judicial scrutiny amounted to an unwarranted intrusion into State deci- sionmaking and argued that the Court should defer to 93 Id. at 520. 94 Id. at 527–28. 95 Id. at 528. 96 Id. at 526–28. 97 Camden, 465 U.S. at 223. 98 Id. 99 Piper, 470 U.S. at 285–87; see also Sullivan, supra note 16, at 1335, 1346. 100 Piper, 470 U.S. at 285–87. 101 Sullivan, supra note 16, at 1335, 1346; see also Day, su- pra note 3, at 294–96. 102 Sullivan, supra note 16, at 1335, 1346.

10 states and cities under the Privileges and Immunities Clause when they have a rational basis for their stat- utes.103 He noted that with respect to the less restrictive means rationale, “such an analysis, when carried too far, will ultimately lead to striking down almost any statute on the ground that the Court could think of an- other ‘less restrictive’ way to write it.”104 At the other end of the spectrum, the Wyoming Su- preme Court’s decision in Antonich highlights the pos- sibility of meeting the close relation test simply by de- fining the State’s reason very narrowly.105 As discussed above, the court found the statute’s definition bore a close relation to the State’s goal, since anyone listed on the employment office’s list would be in some way look- ing for work. Despite the Piper and Antonich decisions, courts have subsequently continued to apply the “peculiar source of evil” element of the “close relation” prong enunciated in Toomer. As such, whether a local hire measure is found to bear a close relation to remedying unemployment is strongly dependent on whether the court believes sufficient evidence has been provided to show discrimination against nonresidents is justified. Summary Regarding Privileges and Immunities Challenges to Local Hire Programs. The Privileges and Immunities Clause prevents states from enacting measures against nonresidents for reasons of economic protection.106 The Clause is triggered by discrimination against nonresidents on matters of “fundamental con- cern.”107 The right to seek employment with a private employer has been deemed fundamental under the Privileges and Immunities Clause.108 Consequently, local hire programs that require contractors receiving public funds to hire local residents are subject to a Privileges and Immunities Clause challenge.109 Local hire programs have a small chance of surviv- ing a Privileges and Immunities Clause challenge be- cause governmental entities must establish that non- residents are a “peculiar source of the evil” that the local hire preference is aimed at remedying.110 Given that local unemployment can be attributed to a number of different variables besides the influx or presence of nonresidents, this has been a difficult evidentiary bur- den to meet. In addition to showing that it has a sub- stantial reason to discriminate against nonresidents, governmental entities have to show that the local hire 103 Piper, 470 U.S. at 295 (Rehnquist, J., dissenting) (argu- ing that Privileges and Immunities challenges “should be over- come if merely a legitimate reason exists for not pursuing” a proffered less discriminatory path); see also Sullivan, supra note 16, at 1335, 1346. 104 Piper, 470 U.S. at 294–95; Sullivan, supra note 16, at 1335, 1346. 105 Sullivan, supra note 16, at 1335, 1346. 106 Piper, 470 U.S. at 285 n.18. 107 Camden, 465 U.S. at 220. 108 Id. at 219, 221–22. 109 Id. 110 Toomer, 334 U.S. at 398; Camden, 465 U.S. at 222. preference is directed at remedying unemployment.111 The local hire preference must bear a close relation to the state’s objective. Given the case law in this area, the biggest hurdle to the enforceability of a local hire pref- erence is a Privileges and Immunities Clause challenge. B. Commerce Clause Local hire programs may also be challenged under the Commerce Clause. The Commerce Clause, con- tained in Article I, Section 8 of the Constitution, gives Congress the exclusive authority to “regulate Com- merce…among the several states.”112 The Commerce Clause also includes a negative or “dormant” aspect, which restricts states and municipalities from imposing burdens on interstate commerce.113 The doctrine is driven by concern about “economic protectionism, that is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competi- tors.”114 “The Court gives life to the ‘dormant’ side of the Commerce Clause by striking down state or local laws of facial economic protectionism, as well as laws that place an undue burden on interstate commerce.”115 1. Basis of a Commerce Clause Challenge While both the Privileges and Immunities and the Commerce Clauses find common origin in Article IV of the Articles of Confederation and evolved together, their policies differ.116 Whereas the Privileges and Im- munities Clause precludes discrimination against out- of-state residents, the Commerce Clause is triggered by regulation affecting interstate commerce.117 Thus, a court’s analysis under the Privileges and Immunities Clause and the Commerce Clause are not identical. In order to determine whether a state or municipal law violates the “dormant” aspect of the Commerce Clause, a court asks whether it discriminates on its face against interstate commerce.118 In this context, “discrimination” simply means differential treatment of in-state and out- of-state economic interests that benefits the former and burdens the latter. Discriminatory laws motivated by “simple economic protectionism” are subject to a “virtually per se rule of invalidity,”119 which can only be 111 Toomer, 334 U.S. at 396. 112 U.S. CONST. art. 1, § 8, cl. 3. 113 New Energy Co. v. Limbach, 486 U.S. 269, 273, 108 S. Ct. 1803, 1807, 100 L. Ed. 2d 302, 308 (1988). 114 Id. at 273–74. 115 Sullivan, supra note 16, at 1335, 1349; see also Dan T. Cohen, Untangling the Market-Participant-Exemption to the Dormant Commerce Clause, 88 MICH. L. REV. 395, 398–400 (1989). 116 Piper, 470 U.S. at 284 & n.17; Day, supra note 3, at 271, 272. 117 Camden, 465 U.S. at 220; Day, supra note 3, at 271, 273– 74. 118 ERWIN CHEMERINSKY, CONSTITUTIONAL LAW: PRINCIPLES AND POLICIES 412 (2d ed., Aspen Publishers 2002). 119 City of Philadelphia v. New Jersey, 437 U.S. 617, 98 S. Ct. 2731, 57 L. Ed. 2d 475 (1978); Dean Milk Co. v. City of

11 overcome by a showing that the State has no other means to advance a legitimate local purpose.120 However, where other legislative objectives are credibly advanced and there is no patent discrimination against interstate trade, the Court has adopted a much more flexible approach.121 If the law is not outright or intentionally discriminatory or protectionist, but still has some impact on interstate commerce, the Court will evaluate the law using a balancing test. The Court determines whether the interstate burden imposed by a law outweighs the local benefits. If such is the case, the law is usually deemed unconstitutional.122 In Pike v. Bruce Church, the Court explained that a state regulation having only “incidental” effects on interstate commerce “will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.”123 In Pike, the Court stated when weighing burdens against benefits, both “the nature of the local interest involved, and...whether it could be promoted as well with a lesser impact on interstate activities” should be considered.124 2. Market Participant Exception While local hire programs may be subject to a Com- merce Clause challenge, the judicially created market participant exception to the Dormant Commerce Clause “enables cities and states to enact hiring preference programs and to take other actions when such behavior does not constitute ‘regulating commerce.’”125 Despite a state or municipality’s protectionist motives in enacting and instituting local hire programs and its effects, “the market participant exception considers such ‘non- regulatory’ action as nonthreatening to Congress’ power to regulate commerce.”126 The Commerce Clause as “an affirmative grant of power to Congress to regulate [trade between the states and foreign nations, and] has long been recognized as a self-executing limitation on the power of the States to enact laws imposing substantial burdens on such com- merce.”127 However, in Hughes v. Alexandria Scrap Corporation, the United States Supreme Court has held that “[n]othing in the purposes animating the Com- merce Clause prohibits a State, in the absence of con- gressional action, from participating in the market and Madison, Wisconsin, 340 U.S. 349, 71 S. Ct. 295, 95 L. Ed. 329 (1951); Hunt v. Washington State Apple Advertising Comm., 432 U.S. 333, 97 S. Ct. 2434, 53 L. Ed. 2d 383 (1977). 120 Maine v. Taylor, 477 U.S. 131, 106 S. Ct. 2440, 91 L. Ed. 2d 174, 179 (1986). 121 Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S. Ct. 844, 847, 25 L. Ed. 2d 174, 178 (1970); City of Philadelphia, 437 U.S. at 624. 122 See Pike, 397 U.S. 137. 123 Id. at 142. 124 Id. 125 Sullivan, supra note 16, at 1335, 1349. 126 Id. 127 South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 87, 104 S. Ct. 2237, 2240, 81 L. Ed. 2d 71, 76 (1984). exercising the right to favor its own citizens over oth- ers.”128 Thus, the Commerce Clause does not constrain a state when it acts as a “market participant” or proprie- tor, that is, when it purchases goods or services with its own money. When acting as a proprietor, a government shares the same freedom under the Commerce Clause that private parties enjoy.129 The justification underly- ing the distinction between market regulator and mar- ket participant arises from the fact that the Dormant Commerce Clause “is animated by a desire to prevent states from erecting barriers that ‘imped[e] free private trade in the national marketplace.’”130 In White v. Massachusetts Council of Construction Employers, Inc.,131 the Supreme Court upheld a local executive order that required all construction projects funded by the City of Boston be performed by a work- force at least half of whom were Boston residents.132 The Court held that “[i]nsofar as the city expended only its own funds in entering into construction contracts for public projects, it was a market participant and entitled to be treated as such under the rule of Hughes….”133 As such, the Court held that Boston’s local hire ordinance did not implicate or violate the Commerce Clause be- cause the City had simply placed restrictions on the use of its own funds and the funds it administered.134 The Court agreed that there are “some limits on a state or local government’s ability to impose restrictions that reach beyond the immediate parties with which the government transacts business.”135 However, the Com- merce Clause does not require the city “to stop at the boundary of formal privity of contract.”136 In the case of White, the majority considered the mayor’s executive order to cover a “discrete, identifiable class of economic activity in which the city is a major participant.”137 Eve- ryone affected by the order is, “in a substantial if infor- mal sense, ‘working for the city.’”138 By invoking and 128 Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 810, 96 S. Ct. 2488, 2498, 49 L. Ed. 2d 220, 231 (1976) (court first rec- ognized the market participant exception). 129 See South-Central Timber Dev. Inc., 467 U.S. at 95–97 (stating that market participant doctrine provides exception to Dormant Commerce Clause’s limitation imposed on states when state acts as participant in market and not merely regu- lator); Reeves, Inc. v. Stake, 447 U.S. 429, 436, 100 S. Ct. 2271, 2277 (1980) (upholding market participant exception because it “makes good sense and sound law”); Hughes, 426 U.S. at 810 (holding that purposes of the Commerce Clause are not impli- cated when state acts as participant in market); see also Day, supra note 3, at 279–80 n.41 (discussing development of “mar- ket participant” jurisprudence in discussing White). 130 Reeves, 447 U.S. at 437. 131 460 U.S. 204, 103 S. Ct. 1042, 75 L. Ed. 2d 1 (1983). 132 Id. at 214. 133 Id. 134 Id. 135 Id. 136 Id. at 211, n.7. 137 Id. 138 Id.

12 utilizing the market participant exception, the Court disposed of the Commerce Clause challenge to the City of Boston’s local hire program by finding that it fell within the scope of the market participant exception espoused in Hughes.139 The impact of a local business preference or a local hire program on out-of-state residents “figures into the analysis only after it is decided the City is regulating the market rather than participating in it.”140 Thus when a local hire program is subject to a Commerce Clause challenge, the inquiry is whether the challenged “program constituted direct state participation in the market.”141 In other words, is the state or municipality acting as a market participant or regulator by enacting and imposing a local hire program? State or Local Government Acting as a Market Par- ticipant or Regulator. In the following local preference cases, the Fourth and Seventh Circuit Courts of Ap- peals each held that a state or local municipality was acting as a market participant and therefore the prefer- ence law at issue was constitutional under the Com- merce Clause. In J. F. Shea Co., Inc. v. City of Chicago, an out-of- state contractor and its employee brought an action against the City of Chicago, challenging the City’s award of a contract to a local contractor under its local business preference rule.142 The preference gave local businesses a 2 percent advantage over the bids of non- local businesses.143 The Seventh Circuit held that the City’s application of its local business preference rule did not violate the Commerce Clause because the City was not regulating, it was merely being selective about the parties with whom it contracts.144 In Smith Setzer & Sons, Inc. v. South Carolina Pro- curement Review Panel,145 a North Carolina concrete pipe manufacturer who was the lowest bidder on a South Carolina government solicitation challenged the constitutionality of a statutory program under which South Carolina products and vendors were given pref- erences in the state procurement bidding process.146 Smith Setzer & Sons argued that the State of South Carolina was acting as a market regulator in its pur- chasing scheme because of the “regulatory effect” it had on local governments.147 The Fourth Circuit Court dis- agreed, holding that South Carolina was not acting as a market regulator in its local product and vendor prefer- ence schemes because the State entered the market to 139 Id.; see also Reeves, 447 U.S. at 436; Hughes, 426 U.S. at 810. 140 J.F. Shea Co., Inc. v. City of Chicago, 992 F.2d 745, 748 (7th Cir. 1993); W.C.M. Window, 730 F.2d at 494. 141 White, 460 U.S. at 208, quoting Reeves, 447 U.S. at 436, n.7). 142 992 F.2d at 747. 143 Id. 144 Id. at 748. 145 20 F.3d 1311 (4th Cir. 1994). 146 Id. at 1316. 147 Id. at 1318. purchase a product for its own consumption.148 Local governments retained the option of purchasing their own concrete pipe requirements under the State con- tracts awarded.149 Additionally, the Court stated it did not see any analytical reason to treat state and local governments separately for Commerce Clause pur- poses.150 By contrast, in W.C.M. Window Company v. Bernardi, the Seventh Circuit declared an Illinois stat- ute that required contractors working on state public works projects to employ only Illinois residents uncon- stitutional.151 The Court of Appeals acknowledged that pursuant to White the State could bind itself to such a preference without violating the Commerce Clause if it had limited the preference law to construction projects financed, in whole or in part, or administered by the State.152 However, the Seventh Circuit found the State preference statute went further, by binding every local government unit as well.153 The Seventh Circuit be- lieved that the State of Illinois was acting as a “regula- tor” by telling local government units, via its preference statute, that they must not give construction contracts to employers of nonresidents.154 “When the project on which the state impresses a home-state preference is undertaken by a unit of local government without any state financial support or supervision, the state is not a participant in the project, but a regulator.”155 The Court went on to say “extending Reeves and White to cases where a state’s relationship to its local agencies is purely regulatory could do great damage to the princi- ples of free trade on which the negative commerce clause is based.”156 A comparison of South-Central Timber Development, Inc. v. Wunnicke and White v. Massachusetts Council of Constr. Employers, Inc., demonstrates the tension in distinguishing between market participant and regula- tor.157 In South-Central Timber Development, the Court did not believe that the State of Alaska retained a pro- prietary interest in its timber that was sufficient to qualify as market participation. The Court held that the State of Alaska’s local processing law constituted 148 Id. 149 Id. 150 Id. at 1319; see also Big Country Foods, Inc. v Board of Educ., 952 F.2d 1173, 1179 (9th Cir. 1992); Trojan Technolo- gies, Inc. v. Commonwealth of Pennsylvania, 916 F.2d 903, 911 (3d Cir. 1990) (While the Seventh Circuit seemed to draw a distinction between state and local governments, these subse- quent cases all found that such a distinction did not make any sense and that there was no reason to treat the two separately for Commerce Clause purposes.). 151 730 F.2d at 495. 152 Id. 153 Id. 154 Id. 155 Id. at 496. 156 Id. 157 South-Central Timber Dev., Inc., 467 U.S. at 82; White, 460 U.S. at 204.

13 “downstream” regulation or regulation beyond the mar- ket which Alaska participated.158 However, in White, the Court allowed the City of Boston to exercise control beyond the point at which the City entered a con- tract.159 Both cases involved private parties making contracts with a public entity in which preferential use of local resources (workers in White, sawmills in South-Central Timber Development) was tied to the disposition of pub- lic property.160 The City of Boston required that its dol- lars must end up in the pockets of Boston residents and the State of Alaska required that its timber must end up in the mills of Alaskan factories.161 In White, whether a city is regulating or participating in the market seemed to depend on whether the city is spend- ing public money.162 In White, the City expended its own funds in entering into construction contracts for public projects, whereas in South-Central Timber Develop- ment, the state was not spending any of its own money.163 Also, in White the Court reasoned that the City of Boston was not acting as a regulator because the private contractors’ employees were essentially “work- ing for the city.”164 However, in South-Central Timber Development, because Alaska itself was not engaged in processing timber, it was not a market participant and therefore violated the Commerce Clause when it im- posed conditions on purchasers of the State’s timber that required them to send their timber to in-state processors.165 While the market participant doctrine enables a pub- lic agency to enact a local hire program without run- ning afoul of the Commerce Clause, jurisprudence in this area highlights that drawing a distinction between market participant and regulator is not so clear cut. Summary Regarding Commerce Clause Challenges to Local Hire Programs. A Commerce Clause challenge to a local hire program is rooted in the argument that a preference for local residents over nonresidents places an undue burden on interstate commerce because it burdens the ability of workers to seek employment across state lines.166 A state or local municipality may still be able to enact a local hire program under the ju- dicially created “market participant” exception to the Dormant Commerce Clause. Thus, the primary issue with regard to a Commerce Clause challenge is whether the enacting governmental actor is operating as a mar- ket participant or regulator. When it comes to local hire 158 South-Central Timber Dev., Inc., 467 U.S. at 95. 159 White, 460 U.S. at 211, n.7. 160 Sullivan, supra note 16, at 1335, 1365. 161 See id. 162 White, 460 U.S. at 214. 163 Id.; South-Central Timber Dev., Inc., 467 U.S. at 84–85. 164 White, 460 U.S. at 211, n.7. 165 South-Central Timber Dev., Inc., 467 U.S. at 98. 166 See White, 460 U.S. 204 (1983) (Supreme Court granted certiorari to determine whether Commerce Clause prevents the City of Boston from giving effect to the Mayor’s order.). programs it is critical that a public agency be able to show it is acting as a market participant to survive a Commerce Clause challenge. C. Equal Protection Clause The primary issues concerning local hire preferences and Equal Protection Clause challenges focus on 1) residential requirements and 2) requirements that a percentage of work be subcontracted or public contracts be preferentially awarded to minority-owned business enterprises (commonly referred to as MBEs) and women-owned business enterprises (commonly referred to as WBEs). The Equal Protection Clause of the Four- teenth Amendment provides, in part, “No state shall…deny to any person within its jurisdiction the equal protection of the law.”167 This provision prohibits the government from discriminating against citizens based on fundamental rights and protected classifica- tions.168 1. Basis of an Equal Protection Clause Challenge If a state or local government passes a law that dis- tinguishes among groups on the basis of a suspect class or burdens the exercise of a fundamental right, the gov- ernmental entity must demonstrate that the regulation is necessary to further a compelling state or govern- mental interest and is the least drastic means available to further that interest.169 This is the strict scrutiny test. As previously noted, the Constitution does not guar- antee a fundamental right to a government job.170 Thus, a state or local government may make residency a con- dition of direct employment by the state or local mu- nicipality without violating the Equal Protection Clause so long as the challenged local hire program bears a reasonable relationship to a legitimate state interest.171 2. Residency Requirements Many municipal governments and a few state gov- ernments have established residency requirements for eligibility of municipal employment. Residential re- quirements are often classified as durational or condi- tional.172 Both types have been challenged under the Equal Protection Clause. Durational Residency Requirements. Durational residency requirements condition eligibility for em- ployment or other rights or benefits on an individual having resided in the jurisdiction for a minimum period 167 U.S. CONST. amend. XIV, §1. 168 See, e.g., Dunn v. Blumstein, 405 U.S. 330, 342–43, 92 S. Ct. 995, 1003, 31 L. Ed. 2d 274, 284 (1972). 169 Id. 170 Camden, 465 U.S. at 219; see also Massachusetts Bd. of Retirement v. Murgia, 427 U.S. 307, 313, 96 S. Ct. 2562, 2566, 49 L. Ed. 2d 504, 524 (1976) (per curium) (no fundamental right to government job under Equal Protection Clause). 171 See McCarthy, 424 U.S. at 467. 172 Id.

14 of time.173 Such residential requirements have been held to implicate an individual’s fundamental right to travel. In Dunn v. Blumstein, the United States Supreme Court ruled that a durational residency requirement imposed as a condition of voting directly impinged upon the right to travel, a fundamental right, and was thus subject to the strict scrutiny test.174 Moreover, in Shapiro v. Thompson,175 the Supreme Court held that a 1-year durational residency requirement for eligibility for welfare benefits was unconstitutional because it denied equal protection and infringed upon the funda- mental right to travel.176 The Court stated that right to travel encompassed the right to “migrate, resettle, find a job, and start a new life.”177 In Hicklin v. Orbeck, the Alaska Supreme Court con- sidered whether a durational residency requirement contained in the state’s local hire law violated the Equal Protection Clause.178 Alaska law defined a resident as a person who had physically been present in the state for a period of 1 year immediately prior to the determina- tion of his residency status.179 The law was challenged by individuals who did not qualify as “residents” on the ground that the 1-year durational residency require- ment violated the federal and state Equal Protection Clauses. Hicklin held that the local hire law’s 1-year durational residency requirement was subject to strict scrutiny because it “penalizes those who have exercised their fundamental right of interstate migration.”180 The Court held that Alaska’s local hire law violated the Equal Protection Clauses of the federal and state con- stitutions because it was not the least drastic means available to reduce Alaska’s high unemployment rate.181 The court noted that the State Legislature could have drafted the local hiring law in such a way that prefer- ence was given to current state residents that were un- employed and/or recent trainees.182 The lesson from these cases is that if a local hiring law or policy contains a durational residency require- 173 See Dunn, 405 U.S. at 334. 174 405 U.S. at 334–35, 338, 342 Durational residence laws penalize those persons who have traveled from one place to another to establish a new residence during the qualifying period. Such laws divide residents into two classes, old residents and new residents, and discriminate against the latter to the extent of totally denying them the op- portunity to vote…. Obviously, durational residence laws single out the class of bona fide State and county residents who have recently exercised this constitutionally protected right, and pe- nalize such travelers directly…. Absent a compelling State in- terest a State may not burden the right to travel in this way. 175 394 U.S. 618, 89 S. Ct. 1322, 22 L. Ed. 2d 600 (1969). 176 Id. at 638. 177 Id. at 629. 178 565 P.2d 159 (1977), reversed on other grounds by Hicklin, 437 U.S. 518 (1978). 179 See Hicklin, 437 U.S. at 520. 180 Hicklin, 565 P.2d at 162. 181 Id. at 165. 182 Id. ment, it will likely be subject to strict scrutiny if chal- lenged on Equal Protection grounds. As such, the gov- ernment agency would be required to demonstrate that the law is necessary to further a compelling state inter- est and is the least drastic means available to achieve that interest.183 Assuming that the state interest is that of combating local unemployment, there are usually less drastic means of achieving that end, such as limit- ing the application of the law to unemployed residents. Accordingly, durational residency requirements in local hire laws will probably not pass judicial muster. Conditional Residency Requirements. Conditional residential requirements require residency within or near a specified government unit as a condition of ob- taining or continuing employment.184 Unlike durational residency requirements, continuing residency require- ments have not been held to implicate the fundamental right to travel. In McCarthy v. Philadelphia Civil Commission, a firefighter was discharged because he moved his permanent residence from Philadelphia to New Jersey, in violation of Philadelphia’s continuing residency ordinance.185 The firefighter challenged the ordinance as unconstitutionally abridging the right to travel.186 The Supreme Court rejected the claim, holding that continuing residency requirements do not impli- cate the fundamental right to travel.187 The ordinance was thus evaluated under the rational basis stan- dard.188 So long as the ordinance was “appropriately defined and uniformly applied,” it was constitutional.189 After McCarthy, hiring preferences for local resi- dents directly employed by a state or local municipality have been upheld with regard to specific types of mu- nicipal positions and public professions such as teach- ers, police officers, and firefighters.190 Lower court deci- sions have found numerous rational bases to uphold conditional residency requirements. For example, resi- dency requirements for public school teachers and counselors have been upheld because residents have a 183 Dunn, 405 U.S. at 342. 184 See McCarthy, 424 U.S. at 646. 185 Id. at 645. 186 Id. 187 Id. at 646–47. 188 Id. at 646. 189 Id. at 647. 190 See also Cook County College Teachers Union v. Taylor, 432 F. Supp. 270 (N.D. Ill. 1977) (teachers who reside within city have greater commitment to an urban education system); Wardwell v. Bd. of Educ., 529 F.2d 625 (6th Cir. 1976) (resi- dents are more likely to vote for district taxes and less likely to engage in illegal strikes); McClelland v. Paris Pub. Sch., 294 Ark. 292, 742 S.W.2d 907 (1988); Meyers v. Newport Consol. Joint Sch. Dist., 31 Wash. App. 145, 639 P.2d 853 (1982) (resi- dents are more likely to be involved in school and community activities); Pittsburgh Fed’n of Teachers Local 400 v. Aaron, 417 F. Supp. 94 (W.D. Pa. 1976) (residents have a greater per- sonal stake in the district and have reduced tardiness due to traffic delays); Mogle v. Sevier County Sch. Dist., 540 F.2d 478 (10th Cir. 1976) (residents have greater opportunity to become personally acquainted with students).

15 greater understanding of the urban problems faced by their students.191 With regard to police officers and fire- fighters, courts have cited that such continued resi- dency requirements enhanced performance due to greater personal knowledge of the city, created a greater personal stake in the city’s progress, reduced tardiness and absenteeism, provided economic benefits to the city from local expenditure of salaries, increased availability in emergencies, and deterred crime due to the presence of off-duty police.192 While a conditional residential requirement con- tained in a local hire program may be challenged under the Equal Protection Clause, it most likely will with- stand the challenge, as conditional residential require- ments are subject to the more deferential rational basis standard of review. So long as the government agency shows that the continued resident requirement bears a reasonable relationship to a legitimate state interest, it will not be found to violate the Equal Protection Clause. 3. Suspect Classification Residency status is not considered a suspect classifi- cation.193 By contrast, local hire laws that express a preference for local residents or businesses on the basis of race, national origin, or gender may be challenged under the Equal Protection Clause if a governmental agency attempted to introduce such a preference as a clear proxy for race194 or if they contained provisions that targeted certain individuals such as women in an effort to improve employment opportunities and en- hance local economic development. Such a situation would arise, for example, where a local hire policy was enacted in a largely minority-populated city. In analyzing challenges to ordinances or statutes that appear to give preference on the basis of race, eth- nicity, or gender classification, the Court must first consider which standard of equal protection review ap- plies to each classification. The choice of the appropri- 191 See supra note 188. 192 See Wright v. Jackson, 506 F.2d 900 (5th Cir. 1975); Marabuto v. Emeryville, 183 Cal. App. 2d 406, 6 Cal. Rptr. 690 (1960); Hattiesburg Firefighters Local 184 v. Hattiesburg, 263 So. 2d 767 (Miss. 1972).; Krzewinski v. Kugler, 338 F. Supp. 492 (D. N.J. 1972); Carofano v. Bridgeport, 196 Conn. 623, 495 A.2d 1011 (1985); Berg v. Minneapolis, 274 Minn. 277, 143 N.W.2d 200 (1966); Simien v. City of San Antonio, 809 F.2d 255 (5th Cir. 1987); Abrahams v. Civil Service Comm., 65 N.J. 61, 319 A.2d 483 (1974); Detroit Police Officers Ass’n v. Detroit, 385 Mich. 519, 522–23, 190 N.W.2d 97–98 (1971). 193 As opposed to alienage or U.S. citizenship, which is pro- tected as a suspect classification. See CHEMERINSKY, supra note 118. 194 See Personnel Adm’r of Mass. v. Feeney 442 U.S. 256, 272, 99 S. Ct. 2282, 2292, 60 L. Ed. 2d 870, 883 (1979) (“A ra- cial classification…is presumptively invalid and can be upheld only upon an extraordinary justification…. This rule applies as well as to a classification that is ostensibly neutral but is an obvious pretext for racial discrimination.”). ate standard of review turns on the nature of the classi- fication.195 Race-Conscious Measures. The Supreme Court has stated “racial classifications are simply too pernicious to permit any but the most exact connection between justi- fication and classification.”196 In City of Richmond v. J.A. Croson Co.,197 the Court held that municipalities may utilize racial classifications only to serve a compel- ling state interest, and then the method chosen must be narrowly tailored to serve that interest.198 Thus, the constitutional standard applicable to federal, state, or local governmental programs creating preferences based on race and ethnicity is the strict scrutiny test.199 While imposing a substantial burden, the Croson Court stated that nothing from its decision “precludes a state or local entity from taking action to rectify the effects of identified discrimination within its jurisdic- tion…. In the extreme case, some form of narrowly tai- lored racial preference might be necessary to break down patterns of deliberate exclusion.”200 Compelling State Interest. To justify a race- or eth- nicity-conscious measure, a governmental actor must “identify that discrimination, public or private, with some specificity,”201 and must have a “‘strong basis in evidence for its conclusion that remedial action [is] nec- essary.’”202 One way a governmental entity can meet its evidentiary showing is by demonstrating gross statisti- cal disparities between the proportion of minorities hired and the proportion of minorities willing to do the work.203 Additionally, a government entity may estab- 195 See Contractors Ass’n of Eastern Pennsylvania, Inc. v. City of Philadelphia, 6 F.3d 990, 999 (3d Cir. 1993). 196 Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 229, 115 S. Ct. 2097, 2113, 132 L. Ed. 2d 158, 183 (1995). 197 488 U.S. 469, 109 S. Ct. 706, 102 L. Ed. 2d 854 (1989) (the Court articulated race or ethnicity conscious affirmative action programs require a “searching judicial inquiry” into the justification for the preference, because without that kind of close analysis “there is simply no way of determining what classifications are ‘benign’ or ‘remedial’ and what classifica- tions are in fact motivated by illegitimate notions of racial inferiority or simple racial politics.”). 198 Id. at 490–91, 493–94. 199 Adarand Constructors, Inc., 515 U.S. at 235. 200 Croson, 488 U.S. at 500; Eng’g Contractors Ass’n. of South Florida, Inc. v. Metropolitan Dade County, 122 F.3d 895, 906 (11th Cir. 1997) (referring to Ensley Branch, NAACP v. Seibels, 31 F.3d 1548, 1565 (11th Cir. 1994) (In practice be- cause the alleged support of racial preference is almost always the same—remedying past or present discrimination—the government’s interest is widely accepted as compelling. Thus the true test of whether a race or ethnicity conscious program is permissible is usually not the nature of the government’s interest, but rather the adequacy of the evidence of discrimina- tion offered to show that interest.). 201 Croson, 488 U.S. at 504. 202 Croson, 488 U.S. at 500 (quoting Wygant v. Jackson Bd. of Educ. 476 U.S. 267, 277 (1986)); H.B. Rowe Co., Inc. v. Tippett, 615 F.3d 233, 241 (4th Cir. 2010). 203 Croson, 488 U.S. at 509.

16 lish its compelling interest by presenting evidence of its own direct participation in racial discrimination or its passive participation in private discrimination in a sys- tem of racial exclusion practiced by elements of a local industry.204 For example, two courts have upheld ordinances where the city and county presented statistical data showing minority contractors received a disproportion- ately low share of contracts given their representation in the total contractor population.205 However, in O’Donnell Construction Company. v. District of Colum- bia, the court struck down a municipal race-based con- tract preference program because the District of Co- lumbia presented conflicting statistics.206 Many circuit courts have recognized the utility of the disparity index in determining statistical disparities in the utilization of minority owned businesses.207 Disparity indices have been held to be “highly probative evidence of discrimi- nation because they ensure that the relevant statistical pool of minority contractors is considered.”208 Anecdotal evidence may also be used to document discrimination, if buttressed by relevant statistical evidence.209 Importantly, governmental actors need not conclu- sively prove the existence of past or present racial dis- 204 Id. at 492. 205 Cone Corp. v. Hillisborough County, Fla., 908 F.2d 908, 915 (11th Cir. 1990); Associated Gen. Contractors of California v. Coalition for Econ. Equity, 950 F.2d 1401, 1414 (9th Cir. 1991). 206 O’Donnell Construction Co. v. District of Columbia, 963 F.2d 420, 426 (D.C. Circ. 1992); see also Associated Gen. Con- tractors of Connecticut v. New Haven, 791 F. Supp. 941, 946 (D. Conn. 1992) (striking down minority-owned contractor pro- gram where minority- and women-owned businesses received a share of contracts “in proportion to the numbers of firms in existence”); Eng’g Contractors Ass’n of South Florida, Inc., 122 F.3d at 924. 207 See, e.g., H.B. Rowe Co., 615 F.3d at 243–44; Concrete Works, 321 F.3d at 962–63; Eng’g Contractors Ass’n of South Florida, 122 F.3d at 914; Associated Gen. Contractors of Cal., Inc., 950 F.2d at 1413–14. 208 Contractors Ass’n of Eastern Pennsylvania, 6 F.3d at 1005. 209 Croson, 488 U.S. at 509; Cone Corp., 908 F.2d at 916 (held anecdotal testimony “combined with the gross statistical disparities uncovered by the County studies, provides more than enough evidence on the question of prior discrimination and the need for racial classification….”); see also Ensley Branch, 31 F.3d 1548, 1565 (11th Cir. 1994) (recognized that “[a]necdotal evidence may also be used to document discrimi- nation, especially if buttressed by relevant statistical evi- dence.”); but see Contractors Ass’n of Eastern Pennsylvania, 6 F.3d at 1003 (recognizing that the “combination of anecdotal evidence and statistical evidence is potent” and that anecdotal evidence, taken alone, could satisfy Croson only in the “excep- tional” case, if at all); Coral Constr. Co., v. King County, 941 F.2d 910, 919 (9th Cir. 1991) (recognizing the value of anecdo- tal evidence when combined with a “proper statistical founda- tion,” but stating that anecdotal evidence alone “rarely, if ever, can…show a systematic pattern of discrimination necessary for the adoption of an affirmative action plan.”). crimination. However, it cannot insulate its local hire policies simply by claiming remedial motive. Once the government makes its prima facie showing, challengers of race or ethnicity-based remedial measures must “in- troduce credible, particularized evidence to rebut” the governmental entity’s showing of a strong basis in evi- dence for the necessity of remedial action.210 Mere speculation that the government entity’s evidence is insufficient or methodologically flawed is insufficient to rebut a state’s showing.211 Narrowly Tailored. Besides serving a compelling in- terest, race or ethnicity conscious remedies must be narrowly tailored to achieve that interest.212 With re- gard to local hire laws that may incorporate provisions as to MBEs and WBEs, a court considers whether an ordinance or statute was “narrowly tailored” to the compelling government interest of eradicating racial or gender discrimination in the awarding of public con- tracts. This requirement ensures that “there is little or no possibility that the motive for the classification was illegitimate racial prejudice or stereotype.”213 “The es- sence of the ‘narrowly tailored’ inquiry is the notion that explicit racial preferences…must be only a ‘last resort’ option.”214 Croson set forth four factors for determining whether a remedy that discriminated on the basis of race was narrowly tailored. The factors include 1) the utilization of race-neutral measures prior to the adoption of a race- conscious measure, 2) the basis offered for the percent- age selected, 3) the presence of waivers and flexibility, and 4) whether the ordinance or statute is geographi- cally tailored and not over-inclusive.215 A court may make a finding that a remedy is not narrowly tailored on the basis of any one of these factors. Consideration of race-neutral alternatives prior to the adoption of race-conscious measures is critical. In Croson, the Supreme Court held that because the City of Richmond failed to consider race-neutral alternatives such as simplifying its bidding procedures, relaxing bonding requirements, or providing training and finan- cial aid to disadvantaged entrepreneurs prior to the adoption of its ordinance, the ordinance was not nar- rowly tailored.216 In Contractors Association of Eastern 210 H.B. Rowe Co., Inc., 615 F.3d at 242; see Concrete Works, 321 F.3d at 959. 211 H.B. Rowe Co., Inc., 615 F.3d at 242; see Concrete Works, 321 F.3d at 991. 212 Croson, 488 U.S. at 493; Adarand, 515 U.S. at 235. 213 Croson, 488 U.S. at 493. 214 Hayes v. North State Law Enforcement Officers Ass’n, 10 F.3d 207, 217 (4th Cir. 1993); see also Croson, 488 U.S. at 519 (Kennedy, J., concurring in part and concurring in the judg- ment) (“[T]he strict scrutiny standard…forbids the use even of narrowly drawn racial classifications except as a last resort.”). 215 Croson, 488 U.S. at 507–508. 216 Id. at 509–510; see Eng’g Contractors Ass’n of South Flor- ida, Inc., 122 F.3d at 929 (County merely pointed to legislative findings that provided a conclusory statement that “race neu- tral programs cannot address the above problems and do not focus limited County money, efforts and personnel on the prob-

17 Pennsylvania, Inc. v. City of Philadelphia, the City re- lied on affidavits from the City Council President and the former General Counsel of a local coalition group who testified as to the race-neutral precursors of the ordinance, such as a revolving loan fund, a technical assistance and training program, and bonding assis- tance.217 The court found the information in the affida- vits sufficient to establish the City’s prior consideration of race-neutral programs.218 In H.B. Rowe Company, Inc. v. Tippett, the court concluded that the State of North Carolina gave serious good faith consideration to race-neutral alternatives prior to adopting its statutory scheme that required a contractor to demonstrate “good faith efforts” to obtain a predesignated level of minority participation in a state-funded road construction project contract.219 Despite engaging in these race-neutral al- ternatives, the State was able to show that statistical evidence demonstrated that disparities continued to exist in the utilization of African American and Native American subcontractors in state-funded highway con- struction subcontracting.220 Another factor considered in whether a remedy is narrowly tailored is the basis offered for the preference percentage selected. In Associated General Contractors of California v. City and County of San Francisco,221 the court found the statute to be narrowly tailored in part because the City’s 5-percent bidding preference corre- sponded to the identified discrimination found with regard to the City’s “old boys network” that created a competitive disadvantage for MBEs.222 The bidding preference provided a modest “competitive plus” to off- set the identified disadvantage and nothing more and was limited only to those qualifying MBEs that were economically disadvantaged.223 The flexibility and presence of waivers is another factor utilized in determining whether a statute or or- dinance containing a race-conscious measure is nar- lems caused by racial discrimination,” thus the County’s ordi- nance did not meet the narrowly tailored requirement. Fur- thermore, the records showed that the County opted to turn to a race- and ethnicity-conscious remedy as a first resort rather than give the slightest consideration to race-neutral alterna- tives.). 217 6 F.3d at 1008. 218 Id. 219 H.B. Rowe Co., Inc., 615 F.3d at 252–53 (The State of North Carolina had set up a Small Business Program that favored small businesses for highway construction procure- ment contracts of $500,000 or less. The program also allowed a waiver to institutional barriers of bonding and licensing re- quirements on such contracts and sought to assist disadvan- taged business enterprises with bookkeeping, accounting, mar- keting, bidding, and other aspects of entrepreneurial development.). 220 Id. 221 748 F. Supp. 1443 (N.D. Cal. 1990). 222 Id. at 1453–54. 223 Id. rowly tailored.224 In H.B. Rowe Company, the court found the State’s statute narrowly tailored in part be- cause the State’s program contemplated a waiver of project specific goals when prime contractors made good faith efforts to meet those goals.225 “Good faith efforts essentially require only that the prime contractor solicit and consider bids from minorities.”226 Specifically, the State’s program did not require or expect contractors to accept a bid from an unqualified bidder or a bid that is not the lowest bid and allowed prime contractors to “bank any excess minority participation for use against future goals over the following two years.”227 The leni- ent standard and flexibility of the “good faith efforts” requirement were considered to be a significant indica- tor of the statute being narrowly tailored.228 Courts have found targeting mechanisms significant in concluding programs are narrowly tailored.229 For example, in Associated General Contractors of Califor- nia, the court highlighted that the City’s remedy was narrowly tailored in that its reach was limited to MBEs in San Francisco, thus avoiding any extension of bene- fits to groups not shown to have been subject to dis- criminatory practices.230 Likewise, in H.B. Rowe Com- pany, the Court of Appeals found that the statutory scheme was not “overinclusive.”231 The court stated that in tailoring the remedy, the State legislature did not include groups that may have never suffered from dis- crimination in the construction industry.232 In contrast, when a remedy’s reach extends to groups for which there is no evidence supporting a finding of discrimina- tion, it has not been found to be narrowly tailored.233 Other considerations that have played a role in a court’s narrowly tailored determination include whether the remedy is limited to particular types of 224 See also Contractors Ass’n of Eastern Pennsylvania, Inc., 6 F.3d at 1009 (Philadelphia ordinance provided several types of waivers of the 15-percent goal). 225 H.B. Rowe Co., Inc., 615 F.3d at 253. 226 Id. 227 Id. at 253–54. 228 Id. 229 See Contractors Ass’n of Eastern Pennsylvania, Inc., 6 F.3d at 1009; Cone Corp., 908 F.2d at 917. 230 Associated Gen. Contractors of California, 748 F. Supp. at 1454. 231 H.B. Rowe Co., Inc., 615 F.3d at 254. 232 Id. 233 See Associated Gen. Contractors of Ohio, Inc. v. Drabik, 214 F.3d 730, 737 (6th Cir. 2000) (“By lumping together the groups of [African Americans], Native Americans, Hispanics, and [Asian Americans]…the [challenged statute] may well provide preference where there has been no discrimination.”); Monterey Mechanical Co., 125 F.3d, 702, 714 (9th Cir. 1997) (court found the program overinclusive and swept in groups highly unlikely to have been discriminated against in the Cali- fornia construction industry as it included people native to the western part of the Alaska peninsula and the Aleutian Islands, and the California State University System nor the State of California has never actively or passively discriminated against Aleuts in the award of construction contracts).

18 contracts and their duration.234 In both Associated Gen. Contractors of California and H.B. Rowe Company, the courts found that because the ordinance was of a very limited duration or had a specific expiration date it was narrowly tailored because it was designed only to en- dure until the discriminatory impact had been elimi- nated.235 In H.B. Rowe Company, the statute even re- quired a new disparity study every 5 years.236 In the context of the awarding of public contracts, race-based measures, including preferences for MBEs or requirements that a certain percentage of work be subcontracted to minority-owned businesses, are sub- ject to strict scrutiny. To successfully withstand this challenge a governmental actor must ensure it has suf- ficient evidentiary proof to support its need for remedial action and must attempt race-neutral alternatives prior to adopting a race-based measure. Moreover, the race- based remedy selected must not only be flexible but must be targeted to only those groups for which there is evidence of discrimination in the construction industry or in the awarding of public contracts. 4. Gender-Conscious Measures Measures that classify on the basis of gender are evaluated under intermediate scrutiny.237 Several fed- eral courts have applied intermediate scrutiny to gen- der preferences contained in state and affirmative ac- tion contracting programs.238 Thus, in order for a local hire law or program expressing a gender-based prefer- ence to survive an Equal Protection Clause challenge, a governmental entity must establish an “exceedingly persuasive justification” for those gender-based meas- ures.239 This burden can be met by demonstrating that the gender-based preferences “serve important govern- mental objectives” and are “substantially related to achievement of those objectives.”240 To meet its burden of demonstrating an important governmental interest, a governmental actor must show that the gender-based measure is based on “reasoned analysis rather than through the mechanical application of traditional, often 234 See Associated Gen. Contractors of Cal., 748 F. Supp. at 1454 (the bid preference was not applicable to Asian or His- panic architectural or engineering firms or Black medical ser- vices firms). 235 Associated Gen. Contractors of Cal., 748 F. Supp. at 1454 (limited duration of 3 years); H.B. Rowe Co., Inc., 615 F.3d at 253 (had a specific expiration date). 236 H.B. Rowe Co., Inc., 615 F.3d at 253. 237 Craig v. Boren, 429 U.S. 190, 197, 97 S. Ct. 451, 457, 50 L. Ed. 2d 397, 407 (1976). 238 See Coral Constr. Co. v. King County, 941 F.2d 910, 930 (9th Cir. 1991); Michigan Road Builders Ass’n, Inc. v. Miliken, 834 F.2d 583, 595 (6th Cir. 1997); Associated General Contrac- tors of California v. City and County of San Francisco, 813 F.2d 922, 942 (9th Cir. 1987); Main Line Paving Co. v. Board of Educ., 725 F. Supp. 1349, 1362 (E.D. Pa. 1989). 239 United States v. Virginia, 518 U.S. 515, 524, 116 S. Ct. 2264, 2271, 135 L. Ed. 2d 735, 746 (1996). 240 Id. inaccurate, assumptions.”241 Although it is clear that both race- and gender-conscious programs must be tested for evidentiary sufficiency, the measure of the evidence required is less clear in the gender context.242 5. Preferences for Minority- and Women-Owned Business Enterprises The most common way for increasing opportunities for people of color and women in the construction indus- try is by setting up minority- and women-based busi- ness set-asides or participation goals.243 Oftentimes, the provisions will require a contractor to provide good faith efforts to obtain a predesignated level of minority par- ticipation.244 Another way of increasing opportunities for minority- and women-owned businesses is by provid- ing a bidding award preference to minority- or women- owned firms in their bid forms.245 In practice, contract- ing preferences for MBEs and WBEs can be provided for in ordinances or statutes, via an adopted agency policy, or incorporated into DAs or CBAs.246 However, as mentioned above, preferences for minor- ity- and women-owned businesses, which have been prevalent as a means of addressing disproportionate representation and ensuring that minority- and women- owned businesses have the opportunity to participate in public contracts, have been challenged as creating a classification subject to equal protection analysis. Gen- der-based preferences are subject to intermediate scru- tiny.247 And by its rulings in City of Richmond v. J.A. Croson and Adarand Constructors, Inc. v. Pena, the Supreme Court subjects all city, state, and federal race- 241 Miss. Univ. for Women v. Hogan, 458 U.S. 718, 726, 102 S. Ct. 3331, 3336, 73 L. Ed. 2d 1090, 1099 (1982); Thus, the evidentiary basis necessary to demonstrate a governmental entity’s interest may be something less than the “strong basis in evidence” required to justify race-based remedial measures. See Eng’g Contractors Ass’n of South Florida, Inc., 122 F.3d at 909 (“Logically, a city must be able to rely on less evidence in enacting gender preferences than a racial preference because applying Croson’s evidentiary standard to a gender preference would eviscerate the difference between strict and immediate scrutiny.”); Concrete Works, 321 F.3d at 959-60; Contractors Ass’n of Eastern Pennsylvania, Inc., 6 F.3d at 1010; Coral Constr., 941 F.2d at 931–32. 242 See Eng’g Contractors Ass’n of South Florida, Inc., 122 F.3d at 909 (“The Supreme Court has not addressed the ques- tion explicitly, and there is a similar dearth of guidance in the reported decisions of other federal appellate courts.”); Contrac- tors Ass’n of Eastern Pennsylvania, Inc., 6 F.3d at 1010 (“It is unclear whether statistical evidence as well as anecdotal evi- dence is required to establish discrimination necessary to sat- isfy intermediate scrutiny, and if so, how much evidence statis- tical evidence is necessary.”) 243 Policylink.org, Minority Contracting—How to Use It?, http://www.policylink.org/site/c.lkIXLbMNJrE/b.5137651/k.86F 9/How_to_Use_It.htm (last accessed Oct. 15, 2012). 244 Id. 245 Id. 246 Id. 247 Craig, 429 U.S. at 197.