In the “Long Overdue” Department: Scrutiny for Alaskan Native Corporations

Last month, the Washington Post ran a series of articles about Alaskan Native Corporations. ANCs are the progeny of the Alaska Native Claims Settlement Act of 1971, which Congress passed to settle any and all future lawsuits by indigenous Alaskan tribespeople against the United States. Under the ANCSA, Alaska was divided into regions represented by native-owned corporations which were given preferences for federal contracting. All Alaskan natives were entitled to shares in their regional corporations as a birthright. Ownership of these shares entitles Alaskan natives to payments based on the earnings of the regional corporations. These payments are intended to help raise the standard of living in the undeveloped Alaskan wilderness, where many native people continue to live close to the land and sea but also in shocking poverty. On its face, this would all seem to be a good thing.

Unfortunately, as the Post articles point out, problems have developed. To summarize, many ANCs have developed into little more than fronts for regular, non-native federal contractors who actually perform the work which the government is trying to give to ANCs. Certain ANCs or their shell-game subsidiaries are awarded no-bid contracts by the Pentagon and other federal agencies in a hurry, but the work then gets sub-contracted to non-native companies to perform, and the ANCs simply take a cut of the proceeds. Many of the executives running ANCs are not Alaskan natives, and relatively little of the profits from the ANCs’ huge federal contracts is actually being sent back to Alaska in the form of dividend payments. Needless to say, no-bid contracts tend to cost the taxpayer a lot more than competitive ones. Thus, the beneficial purposes of the ANCs have been subverted, and unnecessary extra billions of federal tax dollars have been going to contractors who are not Alaskan Natives or working for their benefit.

The Post focused on the lack of regulatory or financial scrutiny for ANCs, as well as the continuing poverty of many Alaskan natives. However, there is another odious aspect of ANCs which doesn’t get much coverage: they are exempt from Title VII, the federal law which prohibits employment discrimination based on race, color, gender, religion, and national origin. Apparently Congress thought the best way to allow ANCs to have a hiring preference for Alaska natives was to give them a get-out-of-jail-free card for any Title VII lawsuits. Why didn’t Congress simply write a native hiring preference into the ANCSA, instead of writing ANCs out of Title VII? It must have made sense at the time. Of course, in light of the contracting shenanigans the Post reported, the exemption means that companies which have done little or nothing to help native Alaskans are nevertheless getting the benefit of the Title VII exemption and are therefore free to discriminate against their employees based on sex, religion, color, and national origin – while raking in billions of taxpayer dollars pursuant to no-bid federal contracts.

This deplorable state of affairs came to our attention a few years ago when a client of ours filed a private-sector charge with the EEOC alleging that she had been terminated based on her pregnancy. She was working under a contract with the Army. Her employer of record was an ANC. The EEOC determined it did not have jurisdiction over her complaint against the ANC, and indeed, there appeared at first glance to be no way she could sue, though pregnancy discrimination has rightly been illegal for decades. She would have been left with no remedy except that, fortunately, the EEOC eventually also agreed with our arguments that the Army had exercised sufficient control over her daily work that it could also be regarded as her employer, along with the ANC, under “joint-employer” theory. Our client was therefore eligible to have her complaint of pregnancy discrimination proceed using the federal sector EEO process, with the Army being named as an employer for purposes of Title VII.

It seems the federal courts are starting to catch on, too: a District Court in Delaware recently concluded that, while ANCs are indeed exempt from Title VII, they are not exempt from the Family and Medical Leave Act or from Title I of the Americans With Disabilities Act. The Court explained:

Turning to the ADA, its broad language and legislative history emphasize its sweeping authority and national scope. Title I of the ADA lacks an ANC exemption; moreover, case law circumscribes its tribal exemption to tribal organizations functioning in a governmental role. While the boundary of the ADA’s tribal exemption is imprecise, it is clear that for-profit tribal corporations operating in the ordinary course of interstate commerce fall outside that boundary. . .

The Court rejects Defendants’ contention that the Title VII exemption for ANCs also bars employer liability under the FMLA. As the Court stated earlier, supra, the language and legislative history of ANCSA support a narrow construction of the ANC exemption, limiting it to Title VII claims. Further, compared to Title VII and the ADA, the FMLA defines “employer” in broader terms and provides no exemption for ANCs, or even Native American tribes. Additionally, unlike Title VII and the ADA, Title VII and the FMLA do not share statutory language, procedures, or remedies that would support an exemption by inference. Moreover, there is almost no overlap in coverage between the FMLA and Title VII. In the end, there is no substantial evidence suggesting a ANC exemption from Title VII claims as provided for in the ANCSA is somehow expanded to include the FMLA. Therefore, because of the narrow purpose for the ANC exemption—to protect tribal self-governance and to permit an Alaskan Native employment preference—and the FMLA expansive scope, and their divergent purposes, the Court concludes that Alaskan Native Corporations are subject to employer obligations under the Family Medical Leave Act.

Pearson v. Chugach Government Services, Inc., 669 F. Supp.2d 467, 476-77 (D.Del.2009). The Court in Pearson cited a 2007 decision by the U.S. Fourth Circuit which concluded that an ANC employee was not barred from suing his employer under 42 U.S.C. § 1981 (part of the Civil Rights Act of 1866) even though that claim was based on the same facts underlying a Title VII claim, which was barred. See Aleman v. Chugach Support Services, Inc., 485 F.3d 206 (4th Cir.2007).

Since ANCs are not tribal governments – and, per the Post, many barely involve Alaskan natives at this point – the courts act well within reason and the long-standing American public policy against employment discrimination when they construe the Title VII exemption narrowly when deciding whether ANC employees alleging discrimination are even allowed through the courthouse doors.