Plaintiffs' experts then proceed to estimate that § 7-754 is capable of reducing the unemployment rate in the Pennsylvania construction industry by only 0.037%.
Defendants' expert does not specifically estimate the number or percentage of jobs that are or could be affected by the statute, but he does agree, at page 7 of his initial report, that "the legislation in question in the instant case pertains to a very small part of the labor force to begin with, and indeed even smaller than that, since it relates to only a very small part (school district activity in this industry) of construction as a whole." Defendants' Motion for Summary Judgment, Exhibit 1, at 13. At page 5 of his response to plaintiffs' expert report, defendants' expert writes: "the important thing to note is that there is agreement that the unemployment impact of out-of-state hiring is relatively small." Id. at 46. In fact, even if the estimate of plaintiffs' experts were so inadequate as to account for only one third of the statute's true effect, the effect of the statute would be to reduce the unemployment rate by slightly more than one-tenth of one percent.
The minuscule effect which § 7-754 has on the unemployment rate in Pennsylvania's construction industry demonstrates that nonresident construction workers are not a peculiar source of unemployment among Pennsylvania's construction workers. The U.S. Bureau of Labor Statistics reported in July, 1992, that the unemployment rate in the construction industry in Pennsylvania was 16.5%. Were § 7-754 enforced to its fullest extent, the rate might drop to 16.4%. The unemployment rate in the construction industry in Pennsylvania has historically been higher than the overall unemployment rate. Unemployment in construction also tends to fluctuate more than the overall rate, and the rate grows much larger in times of recession. The higher rates and greater fluctuations are not, however, the result of a flood of non-resident construction workers pouring into the Pennsylvania market. Rather, these phenomena are the results of the ebb and flow of supply and demand. The supply of construction workers has historically been high, while the demand for their services has varied with the economic fortunes of the Commonwealth. Nonresident workers who work on publicly funded school construction projects are simply not a "peculiar source of the evil" of unemployment which plagues the Pennsylvania construction industry.
This case is not this constitutional question's maiden voyage across the Delaware. In Neshaminy Constructors v. Krause, 181 N.J. Super. 376, 437 A.2d 733 (N.J. Super. Ct. Ch. Div. 1981), modified, 187 N.J. Super. 174, 453 A.2d 1359 (N.J. Super. Ct. App. Div. 1982), the Chancery Division of the New Jersey Superior Court held that a New Jersey public works construction preference statute violated the Privileges and Immunities Clause. New Jersey, like the defendants in this case, argued that its statute was aimed at alleviating unemployment in the state's construction industry. The suit was brought by Pennsylvania construction workers wishing to land jobs in New Jersey. The court held: "New Jersey, absent a special showing of specific dangers posed by out-of-state employees, may not attempt to resolve its problems on the backs of citizens of our neighboring states." Neshaminy Constructors, 437 A.2d at 738.
Defendants argue that the small effect which the statute and nonresident construction workers have on the unemployment rate demonstrates that § 7-754 is narrowly tailored to aid Pennsylvania's unemployed construction workers. Therefore, the argument goes, the statute is unlike the broad Alaska Hire statute, and it survives Hicklin analysis. However, this statute is not narrowly drawn to aid unemployed construction workers. The statute does not require employers to replace nonresident workers with unemployed Pennsylvanians. Employers may, as 1st Westco did in this case, simply shift workers around so that Pennsylvania residents work on Pennsylvania school projects, and residents of other states work on other projects. Alternatively, Pennsylvania workers engaged in ongoing non-school projects might leave those projects to take more attractive school construction jobs, and those workers might well be replaced by non-Pennsylvanians. In either event, the result would be that Pennsylvania construction workers would achieve no net gain in employment. The New York Court of Appeals relied on similar reasoning when it invalidated a public works construction employment preference statute which was challenged by a group of Pennsylvania construction workers wishing to work in New York. Salla v. County of Monroe, 48 N.Y.2d 514, 399 N.E.2d 909, 423 N.Y.S.2d 878 (N.Y. 1979), cert. denied sub nom. Abrams v. Salla, 446 U.S. 909, 64 L. Ed. 2d 262, 100 S. Ct. 1836 (1980).
It could also be argued that § 7-754, if fully enforced, would actually harm the very unemployed construction workers it was intended to benefit. In this case, for example, 1st Westco, the lowest bidder, would not have been awarded the contracts, had the school district known that 1st Westco intended to use nonresident workers. The contracts would have been awarded to the next-highest bidder, costing the school district, the Commonwealth, and ultimately the taxpayers, more money. The higher costs of contracts such as these would leave less money in the Commonwealth's educational coffers for other construction projects, and this could cause the cancellation of some projects altogether. Thus, the enforcement of § 7-754 could reduce the overall number of school construction projects, thereby reducing the overall number of construction jobs and violating the very purpose for which the statute was supposedly enacted.
Even the most cursory glance at § 7-754 reveals that this statute is not narrowly drawn. Rather, it was painted with a brush as broad as the one used by the Alaska legislature in drafting Alaska Hire. This is not merely a statute which prefers qualified, yet unemployed, Pennsylvanians over non-Pennsylvanians. This statute, for no substantial reason, absolutely prohibits all non-Pennsylvanians from working on public school construction projects in Pennsylvania. Section § 7-754 suffers from the same "blunderbuss overbreadth" as did the statute invalidated by the New York court. Salla, 399 N.E.2d at 914.
Finally, I am most mindful of the Supreme Court's instruction that "every inquiry under the Privileges and Immunities Clause 'must be conducted with due regard for the principle that the States should have considerable leeway in analyzing local evils and in prescribing appropriate cures.'" United Bldg., 465 U.S. at 222-23 (quoting Toomer, 334 U.S. at 396.) The Court also advised that "this caution is particularly appropriate when a government body is merely setting conditions on the expenditure of funds it controls." United Bldg., 465 U.S. at 223. However, this leeway does not give the states license to disregard the Privileges and Immunities Clause altogether. Section 7-754 cannot survive Toomer/Hicklin analysis, and therefore it must be struck down under the Privileges and Immunities Clause.
The Commerce Clause
Since I have held that § 7-754 is violative of the Privileges and Immunities Clause, I need not reach 1st Westco's additional challenge to the statute under the Commerce Clause. I do observe, however, that Trojan Technologies v. Commonwealth, 916 F.2d 903 (3d Cir. 1990), cert. denied, 115 L. Ed. 2d 986, 111 S. Ct. 2814 (1991), instructs the court that the Commonwealth acts as a market participant, rather than a market regulator, when it regulates the expenditures of its political subdivisions. School districts are defined to be political subdivisions of the Commonwealth by Act of March 8, 1978, P.L. 673, No. 3, § 6, 73 P.S. § 1886. Under White v. Massachusetts Council of Constr. Employers, 460 U.S. 204, 75 L. Ed. 2d 1, 103 S. Ct. 1042 (1983), states are not subject to the Commerce Clause when they act as market participants.
An order follows.
EDITOR'S NOTE: The following court-provided text does not appear at this cite in 811 F. Supp. 204.
AND NOW, this 8th day of January, 1993, upon consideration of plaintiffs' and third-party defendants' Cross-Motions for Summary Judgment, and the parties' respective Responses thereto, it is ORDERED that plaintiffs' motion is GRANTED and third-party defendants' motion is DENIED.
It is further ORDERED that judgment is entered in favor of plaintiffs and against defendant and third-party defendants.
Finally, it is hereby DECLARED, ADJUDGED, and DECREED that the Act of March 10, 1949, P.L. 30, art. VII, section 754, 24 P.S. § 7-754, is in violation of the Privileges and Immunities Clause, article IV, section 2, clause 1, of the Constitution of the United States of America.
BY THE COURT:
Robert S. Gawthrop, III J.