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Business/Economy

State settles Alaska-hire lawsuit brought by contractor

The state of Alaska has paid $50,000 to settle a lawsuit challenging the validity of its resident hire law following a legal opinion from Attorney General Kevin Clarkson agreeing with the company that brought the suit earlier this year.

Alaska Attorney General Kevin Clarkson, left, speaks to reporters as Gov. Mike Dunleavy looks on in Anchorage. (AP Photo/Mark Thiessen, File)

The lawsuit was filed by the Southeast Alaska general contractor firm SECON in July in state Superior Court alleging that the “Alaska hire” law requiring contractors working on state and locally funded projects to utilize at least 90 percent resident labor under certain economic conditions violates the Privileges and Immunities and Commerce clauses of the U.S. Constitution and the Equal Protection Clause of the Alaska Constitution.

Juneau-based SECON is a subsidiary of Colaska Inc., which is part of the larger Colas USA group of construction companies. The company routinely works on Southeast Alaska road projects.

Ricky Kirby, a seasonal SECON paving equipment operator from Yakima, Wash., was also named as a plaintiff in the suit.

On Oct. 3 Clarkson issued a formal opinion at the behest of Gov. Michael J. Dunleavy indicating he also believes that laws intended to economically benefit Alaska residents at the expense of nonresidents violates the Privileges and Immunities Clause of the U.S. Constitution.

Similarly, provisions in the current law could at times put Alaskans from one region of the state ahead of others when being considered for certain work, meaning it violates the Alaska Constitution’s Equal Rights, Opportunities, and Protection Clause, according to Clarkson.

The $50,000 settlement, dated Nov. 8, ends the lawsuit in which SECON was seeking to have $158,670 of fines issued by the state Labor Department covering 18 Alaska hire violations since 2017 vacated or repaid.

According to SECON’s complaint, the union contractor is managed by Alaskans and has an 85 percent resident workforce but is periodically forced to hire Outside laborers such as Kirby to work on its projects in the state.

As it stands, state law requires that staffing for state or locally funded public works projects be conducted with a 90 percent Alaska resident hire requirement by trade when a given project is in a region of the state deemed to be a Zone of Underemployment by the Labor Department commissioner.

A region of the state can be considered a Zone of Underemployment if the unemployment rate for the area averaged 10 percent more than the national unemployment rate over the prior 12-month period.

The entirety of Alaska can also be deemed a Zone of Underemployment if the criteria are met statewide. Labor Commissioner Tamika Ledbetter found all of Alaska to be a Zone of Underemployment in the most recent employment preference determination issued by the department June 13.

The determination was effective through June 2021 for 21 trades until Clarkson’s opinion, which recommended the state stop enforcing the law.

Nonresident workers accounted for 17.9 percent of the state’s construction labor force in 2017, according the state Labor Department.

A common lack of economic opportunities and the subsistence lifestyle prevalent in rural Alaska, and the state’s highly seasonal industries such as fishing and tourism have historically combined to give the state a significantly higher unemployment rate than the rest of the country.

While settling the case means the true constitutionality of the Alaska hire law remains unsettled, some state lawmakers are unhappy with the Dunleavy administration’s decision to stop enforcing a law that otherwise remains remains on the books.

Republican Senate President Cathy Giessel sent a letter to Clarkson Oct. 22 insisting it is his duty as the Alaska’s top lawyer to defend the state’s laws until they have been thrown out in court. Clarkson responded Oct. 29 writing that the administration wants Alaskans to work on projects in the state, but also stressing that he took an oath to defend the state and federal constitutions first.

Senate Labor and Commerce Committee chair Lora Reinbold, R-Eagle River, said in a brief interview that she had not yet discussed with members of her committee whether they should look into the Alaska hire situation.

Reinbold, who is a supporter of many of the administration’s conservative policies, withheld an opinion on Clarkson’s position, saying she needed to research it further leading up to the legislative session that starts Jan. 21.

The House Labor and Commerce Committee is currently without a leader because of changes in committee assignments, but Labor and Commerce member Rep. Zack Fields, D-Anchorage, was blunt in his assessment of the situation, saying the issue is one he hopes the Legislature examines closely.

“When you have a law that’s been passed that hadn’t even previously been challenged, it’s pretty outrageous for an administration to unilaterally not enforce it,” Fields said. “It fundamentally challenges the balance of powers between the executive, legislative and the judiciary.”

The development director for Laborers International Union of North America Local 341, Fields said the decision to not enforce a statute that is still on the books leaves impacted businesses in an untenable situation because the next governor could, and likely would, revert the state’s policy back to enforcing Alaska hire requirements.

“The downsides for the State of Alaska and workers are obvious, but I think it is a very fair point that there are a lot of downsides for businesses, too, who are just trying to make reasonable investment decisions, recognizing that they have a graying workforce and that’s particularly true for the construction and oil and gas industries,” he said.

For his part, Dunleavy said in an interview that his administration is working on alternative ways to encourage companies to hire more Alaskans on projects in the state.

“We’re having discussions about how we can incentivize Alaska hire, how we can make that work without running afoul of the Commerce Clause issue,” Dunleavy said. “We really believe in Alaska hire. We’re doing everything we can with our economic development team to bring jobs up here, industries up here that have jobs.”

The governor said he needed to talk further with Clarkson about whether the administration should submit legislation to repeal the current Alaska hire statutes.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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