Monday, April 20, 2009

Indian Reservation Business Subject to Federal Wage Law

A Ninth Circuit court of appeal has concluded that the overtime provisions of the Fair Labor Standards Act (“FLSA”) applies to a business located on an Indian reservation and owned by Indian tribal members. The court also ruled that the United States Department of Labor has the authority to enter the Indian reservation to inspect the books of that business for enforcement purposes.

The case, titled Solis v. Matheson, pitted the Department of Labor against a retail store known as Baby Zack’s Smoke Shop, located on trust land within the Puyallup Indian Reservation in the State of Washington. 

The court acknowledged that Indian tribes generally operate under the legal shelter of “sovereign immunity.” The court wrote: “Indian tribes have a special status as sovereigns with limited powers. Indian tribes are dependent on, and subordinate to the federal government, yet retain powers of self government.”

Sovereign immunity is a bit of a misnomer, because tribes are not invulnerable to litigation. As the court wrote, “those powers may be limited, modified, or eliminated by Congress.”

Finding the FLSA to be a “statute of general applicability” designed to “achieve certain minimum labor standards with respect to industries engaged in commerce,” the court determined that Baby Zack’s Smoke Shop was regulated by the statute.

The court noted that some of the goods sold by Baby Zack’s have been shipped in from locations outside the State of Washington. Though located on tribal land and operated by a member of the tribe, “Baby Zack’s is a purely commercial enterprise engaged in interstate commerce selling out-of-state goods to non-Indians and employing non-Indians.”

Regulating this commercial enterprise, concluded the court, would not impinge upon matters of tribal self-government. The court added that the tribe had not enacted comparable labor laws, nor did it contend that such laws would preempt federal law.

Although law in the area of Indian sovereign immunity has been slow to evolve in relation to the rapid growth of tribal commercial enterprises, the Ninth Circuit’s decision can be characterized as part of a trend towards regulating labor relations of Indian tribes, particularly where the rights of a non-Indian workforce are at stake.

In 2007, as reported in our Legal Update here (page 2), in 2007 a court found that the National Labor Relations Act (NLRA) applied to an Indian tribe operating a casino. (San Manuel Indian Bingo and Casino v. National Labor Relations Board (D.C. Circuit, February 9, 2007).

The Ninth Circuit in Matheson also noted cases where courts had applied federal labor laws to Indian tribes, including cases where OSHA applied to a tribal farm employing non-Indians and ERISA applied to an Indian-owned saw mill. There are also a number of reported cases where courts have declined to apply federal labor laws to Indian tribal matters.

It is reasonable to expect labor law litigation against Indian tribes to increase, and, further, that the U.S. Supreme Court will sooner or later offer clarification due to conflicting lower court rulings.

Read the Ninth Circuit opinion (pdf)

Submitted by:
Christopher W. Olmsted, Esq.
Barker Olmsted & Barnier, APLC