Can Maryland refuse to award state contracts to a company found in contempt of court for violating federal labor law?

Plain-English summary

A procurement advisor to the Board of Public Works asked the Attorney General whether Maryland's debarment statute, SF §13-404, could still be enforced. That law required the Attorney General to keep a list of companies found in contempt of a federal court of appeals for failing to correct an unfair labor practice under the National Labor Relations Act (NLRA), and barred state contracts to any company on that list. The question arose because the U.S. Supreme Court had just decided Wisconsin Department of Industry, Labor and Human Relations v. Gould, striking down a similar Wisconsin debarment law as preempted by federal labor law.

The Attorney General concluded that SF §13-404, as written, was likewise unconstitutional and unenforceable. The opinion reasoned that Maryland's law, like Wisconsin's, functioned as a supplemental penalty for NLRA violations, and only Congress, through the National Labor Relations Board, had the authority to decide what penalties apply to labor law violations. In some respects Maryland's law was found to be even more exposed than Wisconsin's, because it debarred a company automatically after a single contempt finding and did not lift the debarment once a company corrected its conduct. The opinion did leave open a path forward: a differently structured law, aimed at screening out contractors who are unreliable because they defied a court order (rather than at punishing labor law violations as such), and limited to the period a company remained in contempt, would not be clearly unconstitutional.

Currency note

This opinion was issued in 1986. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Could a state legally refuse to contract with a company found in contempt of court for repeated federal labor law violations?
Under this 1986 opinion, no, not through a law like Maryland's SF §13-404: the Attorney General concluded that debarment penalizing NLRA-related contempt was preempted by federal labor law, following the U.S. Supreme Court's Gould decision.

Did the opinion say all state debarment laws touching labor violators were unconstitutional?
No. The opinion suggested that a debarment law aimed at contractor reliability rather than punishing labor law violations, and limited to the actual period of contempt, would not be clearly unconstitutional, though it also noted language in Gould suggesting any labor-linked debarment law might face difficulty.

What eventually happened to Maryland's debarment statute?
According to the opinion's editor's note, former SF §13-404 was later repealed, referenced in the General Revisor's Note to Title 16, Subtitle 1, in Chapter 48 of the Laws of Maryland 1988.

Background and statutory framework

The National Labor Relations Act centralizes enforcement of labor relations law in the National Labor Relations Board, and under the Supremacy Clause, state laws that interfere with that scheme are invalid. In Gould, the Supreme Court held that a Wisconsin statute barring the state from purchasing from repeat labor law violators functioned as a penalty for NLRA violations and was therefore preempted, even though Wisconsin argued it was merely acting as a market participant rather than a regulator.

Maryland's SF §13-404 debarred from state business any person found in contempt of a federal court of appeals for failing to correct an unfair labor practice under the NLRA, based on a monthly list compiled by the Attorney General. The opinion found Maryland's law shared the same defect as Wisconsin's: it was enacted in 1978, per its preamble, "in order to encourage compliance with the law," making it a deterrent measure functionally identical to the one struck down in Gould. The opinion also identified ways SF §13-404 was arguably harsher than the Wisconsin statute, since it triggered on a single contempt finding rather than requiring multiple violations, and it debarred a company for a fixed period regardless of whether the company had since corrected its conduct.

The opinion discussed how the statute might be amended to survive: tying the length of debarment to the actual period of continuing contempt, and grounding the law's purpose in an assessment of a contractor's reliability, such as its risk of labor unrest disrupting contract performance, rather than in punishing past labor law violations. The opinion noted this alternative rationale had not been considered by the Supreme Court in Gould because Wisconsin conceded it had no such justification for its own law.

Citations

Statutes:

• SF §13-404 (debarment of NLRA contempt violators from state contracts)
• SF §13-401 (procurement officer's determination that a bidder is responsible and responsive)
• SF §13-101(h) (definition of "responsible bidder or offeror")
• 29 U.S.C. §158 (unfair labor practices under the NLRA)
• Chapter 507, Laws of Maryland 1978 (enacting SF §13-404 and its preamble)
• Chapter 840, Laws of Maryland 1986 (nonsubstantive redesignation of the debarment statute as SF §11-212)
• Chapter 48, Laws of Maryland 1988 (recodification; General Revisor's Note reflecting repeal of former SF §13-404)
• Wisconsin Statutes §101.245 (Supp. 1985) (the Wisconsin debarment statute struck down in Gould)

Cases:

• Nash v. Florida Industrial Comm'n, 389 U.S. 235 (1967)
• San Diego Building Trades Council v. Garmon, 359 U.S. 236, 244 (1959)
• Wisconsin Dep't of Indus., Labor and Human Relations v. Gould, 106 S.Ct. 1057 (1986)
• Farmer v. United Bhd. of Carpenters Local 25, 430 U.S. 290, 295-97 (1977)
• Pemberton v. Bethlehem Steel Corp., 66 Md. App. 133, 156 (1986)
• Republic Steel Corp. v. NLRB, 311 U.S. 7, 10 (1940)
• Motor Coach Employees v. Lockridge, 403 U.S. 274, 287 (1971)
• 68 Opinions of the Attorney General 136, 147 (1983)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1986/Volume71_1986.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

PROCUREMENT

Debarment—Constitutional Law—Federal Preemption—Current Statute Prohibiting Award Of State Contracts To Labor Law Violators Is Unconstitutional, But Amendment To Correct Defects May Be Possible.

August 14, 1986

Mr. Warren K. Wright
Procurement Advisor
Board of Public Works

You have requested our opinion about the constitutionality of §13-404 of the State Finance and Procurement Article ("SF" Article), which prohibits the award of State contracts to persons "found in contempt of court by a federal court of appeals for failure to correct an unfair labor practice prohibited by the National Labor Relations Act." This question arises from the recent decision of the United States Supreme Court in Wisconsin Dep't of Indus., Labor and Human Relations v. Gould, [106 S.Ct. 1057] (1986). In Gould, the Supreme Court ruled that a Wisconsin statute forbidding that state from purchasing any product manufactured or sold by recidivist labor law violators is constitutionally invalid under the Supremacy Clause of the United States Constitution.

For the reasons given below, we conclude that SF §13-404, as presently formulated, is likewise an unconstitutional interference with federal labor policy. However, an amended debarment statute, enacted for purposes unrelated to labor law compliance and limited in its effect to the period of time when a company was in contempt of court, would not be clearly unconstitutional.

I
Preemption Under Federal Labor Law

The National Labor Relations Act ("NLRA") was enacted by Congress to regulate labor relations comprehensively and to consolidate enforcement responsibility in the National Labor Relations Board ("NLRB"). Nash v. Florida Industrial Comm'n, 389 U.S. 235 (1967). Therefore, state laws that interfere with the NLRA are invalid under the Supremacy Clause of the U.S. Constitution, Article VI, cl. 2:

"When it is clear or may fairly be assumed that the activities which a State purports to regulate are [protected or prohibited by the NLRA], due regard for the federal enactment requires that state jurisdiction must yield. To leave the States free to regulate conduct so plainly within the central aim of federal regulation involves too great a danger of conflict between power asserted by Congress and requirements imposed by state law." San Diego Building Trades Council v. Garmon, 359 U.S. 236, 244 (1959).

The NLRA does not preempt all state legislation in the labor relations field. If there is something in or arising from allegedly wrongful conduct that would be of merely peripheral concern to the NLRB, but of significant interest to the state, the matter will not be preempted. Farmer v. United Bhd. of Carpenters Local 25, 430 U.S. 290, 295-97 (1977). See also Pemberton v. Bethlehem Steel Corp., 66 Md. App. 133, 156 (1986) (NLRA does not preempt State tort claims for intentional infliction of emotional distress and invasion of privacy arising in labor relations context).

II
Preemption of State Debarment Laws

In Wisconsin Department of Industry, Labor and Human Relations v. Gould, Inc., the Supreme Court unanimously held that the NLRA preempts the Wisconsin debarment statute. Under that statute, persons or firms that have been found to have violated the NLRA three times within a five year period are prohibited from competing for state business for three years.

Wisconsin argued that the debarment statute did not interfere with federal regulation of labor relations because "Wisconsin is acting as a market participant, not a market regulator." However, the Supreme Court concluded, "Wisconsin's debarment law functions unambiguously as a supplemental sanction for violations of the NLRA" by flatly prohibiting state purchases from repeat law violators. 106 S.Ct. at 1062.

Citing Garmon, the Supreme Court held that states are prohibited "not only from setting forth standards of conduct inconsistent with the substantive requirements of the NLRA, but also from providing their own regulatory or judicial remedies for conduct prohibited or arguably prohibited by the Act." 106 S.Ct. at 1061. The Court continued:

"[I]f Wisconsin's debarment law is valid, nothing prevents other States from taking similar action against labor law violators. Indeed, at least four other States already have passed legislation disqualifying repeat or continuing offenders of the NLRA from competing for state contracts. Each additional statute incrementally diminishes the [NLRB's] control over enforcement of the NLRA and thus further detracts from the 'integrated scheme of regulation' created by Congress." 106 S.Ct. at 1062 (quoting Garmon, 359 U.S. at 247).

This problem of conflict, the Supreme Court observed, is especially acute as to a remedy, debarment, that has been denied the NLRB, "because 'the range and nature of those remedies that are and are not available is a fundamental part' of the comprehensive system established by Congress". 106 S.Ct. at 1061 (quoting Motor Coach Employees v. Lockridge, 403 U.S. 274, 287 (1971)).

III
Preemption of the Maryland Debarment Statute

SF §13-404 debars from State business any person who, within the preceding two years, has been found in contempt of a federal court of appeals for failure to correct an unfair labor practice under the NLRA.

The statute is as follows:

"(a) The Attorney General shall establish and maintain a monthly list of all persons found in contempt of court by a federal court of appeals for failure to correct an unfair labor practice prohibited by the National Labor Relations Act (29 U.S.C. §158, 49 Stat. 452). This list shall contain the names of those persons found to have engaged in these practices during the 2-year period before the date of the list.

(b) A contract or subcontract may not be awarded to any person or for any supplies manufactured by a company whose name appears on the most recent list of the Attorney General.

(c) This restriction does not prohibit the awarding of a contract to a company whose name does not appear on such a list but whose supplies manufactured include component parts manufactured by a company whose name does appear on the list.

(d) This restriction does not apply during an emergency situation when the listed person is the sole source of supplies or services."

SF §13-404 is in one respect less sweeping than the Wisconsin statute struck down in Gould, which required debarment not only for contempt of court but also on the basis of cumulative violations alone. Nevertheless, although SF §13-404 might be seen as a lesser infringement on the federal scheme, the distinction does not lead to a different result. Like the Wisconsin law, SF §13-404 assesses a penalty for noncompliance with the NLRA "in order to encourage compliance with the law." Chapter 507, Laws of Maryland 1978 (preamble). Therefore, SF §13-404 interferes with the intended federal exclusivity in enforcing the NLRA and is preempted by that law, under the analysis in Gould.

Indeed, in a different respect SF §13-404 results in an even greater interference with federal law than the Wisconsin law. The enforcement scheme established by the NLRA is "essentially remedial" in nature; NLRB orders are directed toward granting relief to the injured parties rather than toward punishing violators. Republic Steel Corp. v. NLRB, 311 U.S. 7, 10 (1940). Under the NLRA, once an employer rectifies its unlawful conduct, federal sanctions cease. Debarment for a specified period, the Supreme Court wrote in Gould, regardless of whether the violations have been rectified, clearly interferes with the federal scheme by imposing a sanction harsher than that intended by Congress. 106 S.Ct. at 1062 n. 5. SF §13-404 not only debars for a specified period but also provides for automatic debarment on the basis of a single finding of contempt, in contrast to the Wisconsin law's requirement of three or more violations. In its obvious effort to punish labor law violators without regard to recidivism, SF §13-404 is more punitive and thus more clearly in conflict with the NLRA than the Wisconsin provision.

IV
Potential Amendment of SF §13-404

As discussed in Part III above, SF §13-404 in its present form is unconstitutional and unenforceable. However, it is arguably possible to amend the statute so as to correct the constitutional defect, although, we must add, some of the language in Gould suggests that no state debarment legislation linked to labor law violations would survive scrutiny.

Potential reform of SF §13-404 would involve both its substance and its underlying rationale. First, the statute has no chance of being upheld if it continues to impose a sanction that continues for a fixed period, even after the violator corrects the violation and is no longer in contempt. An amendment to make the period of debarment coextensive with the period of contempt would remove a major flaw in the present statute.

But this modification, in and of itself, would not be sufficient. Even this modified statute would be found unconstitutional, we believe, if the debarment were for punitive purposes.

In Gould, Wisconsin conceded "that the point of the statute is to deter labor law violations and to reward 'fidelity to the law.'" 106 S.Ct. at 1062 (quoting transcript of oral argument). The Wisconsin law could not "even plausibly be defended as a legitimate response to state procurement constraints or to local economic needs." Id. at 1064.

SF §13-404 was enacted in 1978 for the same deterrent purpose, now found by the Supreme Court to be constitutionally impermissible. The preamble to the bill states as follows:

"The State of Maryland should not tolerate injustice. Further, the State has the responsibility to act, if possible, against such injustice. Therefore, it is necessary and proper for the State, in order to encourage compliance with the law, to prohibit awards to any company which violates labor law". Chapter 507, Laws of Maryland 1978.

However, debarment can serve purposes unrelated to labor law compliance. Under SF §13-401, "the procurement officer shall determine that a bidder or offeror is responsible and responsive." A "responsible bidder or offeror" is one who has the capability in all respects to perform fully the contract requirements, and the integrity and reliability which will assure good faith performance. SF §13-101(h). Hence, a bidder or offeror who is not "responsible" is to be disqualified for that particular contract. Beyond this case-by-case assessment, the Board of Public Works has proposed regulations for the suspension or debarment of persons for "unsatisfactory performance" or "improper conduct." 13:9 Md. Reg. 1055 (April 25, 1986).

In our view, the General Assembly is not precluded by Gould from reaching the conclusive legislative judgment that a company that has not only violated the NLRA but also refuses to rectify its misconduct in the face of a contempt citation is an unreliable contractor. Corporate management so heedless of those legal obligations might be comparably careless of its legal obligations under a contract. The company would also likely be prone to labor unrest, putting at risk its contract fulfillment.

Wisconsin proffered no such economic justification for debarment; indeed, it conceded that it had none. Hence, the Supreme Court has not ruled on the constitutionality of a debarment statute grounded in this objective. See 106 S.Ct. at 1064.

To be sure, the effect of debarment is the same, whatever its purpose, and the Supreme Court might well conclude that a state's interest in contract performance does not save any debarment statute linked to labor law violations. But if the General Assembly enacted a debarment statute amended and justified as discussed above, we could not say that such a law would be clearly unconstitutional.

V
Conclusion

In summary, it is our opinion that:

1. SF §13-404 is unconstitutional and unenforceable.

2. If a debarment statute were enacted for reasons unrelated to labor law compliance and were limited so that companies would be subject to debarment only while in contempt, the statute would not be clearly unconstitutional.

Stephen H. Sachs
Attorney General
Jack Schwartz
Chief Counsel
Opinions and Advice

Editor's Note: Former SF §13-404 has been repealed. See General Revisor's Note to Title 16, Subtitle 1, in Chapter 48 of the Laws of Maryland 1988.