Rethinking McCulloch (or Not)?
Rethinking McCulloch (or Not)?
Ninth Circuit holds that Washington can impose special workers' compensation burdens on the federal government.
Most history books that cover McCulloch v. Maryland (see here) focus on Chief Justice Marshall’s explanation for why the Second Bank of the United States was constitutional even though the Constitution does not say Congress can create banks. But the second part of the decision was also critical: The Supreme Court unanimously held that Maryland could not tax the bank, because to do so would undermine Congress’s goals (“the power to tax involves the power to destroy”). Allowing a state to tax the federal government would give each state de facto veto power over the policies adopted by the entire country.
This doctrine of intergovernmental immunity persists to this day. States may not tax or impose liability on the federal government absent Congress’s clear and unambiguous consent.
Why would the federal government ever consent to state taxation or liability? One reason is to avoid having to create duplicative federal systems to handle workplace issues. The federal government is, after all, one of the largest (if not the largest) employers in the United States. So, for example, federal law permits states to enforce their workers’ compensation laws against federal agencies.
That law is the focus of a recent Ninth Circuit decision.
Hanford Nuclear Site
Located in southeastern Washington State, the Hanford Nuclear Site covers more than 500 square miles and, from 1944 to 1989, produced more than two-thirds of the country’s weapons-grade plutonium. Though the site is now decommissioned, the Department of Energy (“DOE” ) has been working to clean up the site since it closed. Properly disposing of the highly radioactive and chemically hazardous waste left behind is expected to last until at least 2080.
To give an idea of the scope of the problem, consider this:
The liquid waste that the site generated—over fifty million gallons—is stored in 177 underground holding tanks, most of which are over seven decades old. The site also produce 270 billion gallons of contaminated groundwater, twenty-five million cubic feet of buried or stored solid waste, 2,300 tons of spent nuclear fuel, and twenty tons of plutonium bearing materials.
Roughly 10,000 DOE contractors work at the site. And those directly involved in the clean up operations obviously face frequent exposure to radioactive substances and hazardous chemicals.
Recognizing that risk, the Washington state legislature passed a new law in 2018 that applied only to Hanford-site workers. This new law provided that the state’s workers’ compensation scheme would assume that, if a Hanford worker contracted certain conditions or cancers, they resulted from working at the site. The federal government could only rebut that presumption by clear and convincing evidence. In other words, for the federal government—and the federal government alone—the burden of proof in workers’ compensation disputes would be flipped.
The federal government sued, arguing that the new law violated the doctrine of intergovernmental immunity established in McCulloch.
A unanimous panel of the Ninth Circuit upheld the law and the whole court refused (apparently by a 24-5 vote) to rehear the case en banc. But Judge Collins and four other judges issued a stinging dissent from the denial of rehearing. Their disagreement began with the text.
Congressional Waiver
As both sides of the debate admit, Congress passed a law subjecting federal agencies to state workers’ compensation laws. So the question in this case was whether that statute allowed Washington to apply different rules to the federal government or merely to apply the same rules that it applies to other, private employers.
The statute in question, 40 U.S.C. § 3172(a), says that:
The state authority charged with enforcing and requiring compliance with the state workers’ compensation laws and with the orders, decisions, awards of the authority may apply the laws to [the federal government] in the same way and to the same extent as if the premises were under the exclusive jurisdiction of the State in which the [federal facility] is located.
The disagreement between the judges of the Ninth Circuit focuses on the bolded text.
To the panel, this phrase is about power: It means that Washington can impose liability on the federal government in any way it could impose liability on a private employer. Because states theoretically could impose special workers compensation regimes on specific industries or employers, they can do the same for the federal government.
Judge Collins reads the text quite differently. He argues that the statute is not about power, but rather about practice. Because Washington is not in fact applying its laws against the federal government “in the same way and to the same extent” as against private employers, the waiver in § 3172(a) does not apply. In other words, Congress did not authorize states to discriminate against federal employers. To him, the panel’s reading effectively ignores the phrase “in the same way and to the same extent,” focusing purely on the permission to regulate “as if the premises were under the exclusive jurisdiction of the State.”
Dueling Views of Precedent
And Judge Collins believes the Supreme Court is on his side. He points to the Court’s decision in Goodyear Atomic Corp. v. Miller (see here), which involved an Ohio law that provided additional compensation where a workplace injury resulted from an employer’s violation of a state safety regulation. The Court upheld the law, noting along the way that it applied equally to private and public employers. Indeed, the Court said that “on its face § [3172(a)] compels the same workers’ compensation award for an employee injured at a federally owned facility as the employ would receive if working for a wholly private facility.” Thus, Judge Collins argues, no discrimination is allowed.
The panel acknowledged that troublesome language, but focuses on the Supreme Court’s statement that the § 3172(a) “places no express limitation on the type of workers compensation scheme authorized.” The panel reads this as providing plenary authority to the states to design their workers’ compensation systems as they wish. Concurring in the denial of rehearing, Judge Smith (the author of the panel opinion) contends that the neutrality of Ohio’s law was just a background fact in Goodyear. At worst, he implies, it was dicta because neutrality was not an issue in that case.
Instead, the panels says, the relevant case is United States v. Lewis County (see here), a Ninth Circuit case involving Washington’s decision to tax federal and private property, but not state or local government property. The panel points out that the statute there used the same “in the same manner and to the same extent” language, and yet the Ninth Circuit held that it allowed the “state to make the distinction” between federal and state or local employers. In other words, the panel suggests, the Ninth Circuit has allowed states to treat the federal government differently before.
Judge Collins counters that the panel over reads Lewis County. He stresses that the issue in that case was whether the state must essentially tax itself, and that (given the ubiquitous nature of state-and-local tax exceptions) holding that it must would essentially nullify Congress’s waiver of immunity. But, he points out, the Court in Lewis County stressed that the Washington statute did not discriminate between the federal government and private entities. The new workers compensation law does.
Another Statute
Finally, the panel pointed to different waiver language in CERCLA (the Superfund law) that it believes proves its point. There (42 U.S.C. § 9620(a)(4)), Congress wrote that its liability waiver “shall not apply to the extent a State law would apply any standard or requirement to [federal] facilities which is more stringent than the standards or requirements applicable to facilities which are not owned or operated by the” federal government. Here Congress did not use the same language explicitly prohibiting discrimination, the panel says, so it follows that the waiver is broader and Washington is free to treat the Hanford site differently than other workplaces.
In response, Judge Collins accuses the panel of turning “the governing canon of construction on its head.” In the intergovernmental immunity context, he says, the Court is supposed to ask if Congress provided “clear and unambiguous authorization” of a state practice, not whether it clearly forbade it.
Conclusion
In 1819, holding that Congress could not form a bank or that Maryland could tax it would likely have crippled the federal government or pitched the economy into chaos. (Imagine if, today, we dispensed with the Federal Reserve.) Indeed, economic tumult did follow when Andrew Jackson refused to reauthorize the bank some years later.
Today, allowing Washington to flip a presumption in workers compensation cases that involve 10,000 or so workers (plus those who have retired or left) hardly threatens the federal government with insolvency. But as Judge Collins points out “the fact that the Federal Government in 2021 is large enough to absorb Washington’s substantial financial hit does not in any way justify … betrayal of the bedrock principals established in McCulloch.” If indeed that is what the panel did.
There are also other immunity statutes out there similar to this one, such as the tax statute at issue in Lewis County. So it is tough to say what the larger consequences of the decision will be.
What is certain is that the federal government has until September to file a petition for a writ of certiorari asking the Supreme Court to review the case.
Something New: A Poll
Who do you think got it right? Vote here to voice your opinion:
The panel. (Washington can impose its special rule.)
The dissent. (Washington can't discriminate against the DOE.)
Neither. (I have a different opinion.)
I’ll announce the results with next week’s Last Week in Federal Appeals. If you have other thoughts about the case, please leave them below and start a discussion.
The case is United States v. Washington, No. 19-35673.
The panel included Judges Smith (author), Clifton, and Donato.
Judge Smith concurred in the denial of rehearing en banc.
Judge Collins, joined by Judges Callahan, Bennett, and Bress, dissented from the denial of rehearing
Any opinions expressed here are my own. This article is not legal advice; if you have a legal issue, you should consult an attorney.
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