Business | Law | Politics

Court opens Alaska Native corporation to suit

Friday, May 4, 2007

An Alaska Native corporation can be sued for allegedly discriminating against its employees, a federal appeals court ruled on Tuesday.

In a unanimous decision, the 4th Circuit Court of Appeals agreed that Congress exempted tribes and Alaska Native corporations from discrimination lawsuits under Title VII of the landmark Civil Rights Act of 1964.

But a three-judge panel said the same protections did not extend to a different federal law that bars discrimination on the basis of race or national origin. The court said Chugach Alaska, an Alaska Native regional corporation, doesn't fall in the same category as tribal governments.

"While the sovereign immunity of Indian tribes 'is a necessary corollary to Indian sovereignty and self-governance,'" Judge J. Harvie Wilkinson wrote in the 19-page opinion. "Alaska Native Corporations and their subsidiaries are not comparable sovereign entities."

The ruling opens Chugach to allegations that one of its subsidiaries discriminated against two Hispanic men who said they were subjected to racial slurs at a construction site in Maryland. Chugach Support Services performs general contracting services for the Department of Health and Human Services at the National Institutes of Health.

A third employee, who is not Hispanic, said he was fired when he reported the alleged hostile treatment of the Hispanic men.

While working on the government contract, Jose Aleman and Cesar Basilis "allege that when they were employed by CSS, they were paid less than non-Hispanic employees and were subjected to a hostile work environment and discriminatory terms and conditions of employment, including anti-Hispanic statements by managers and employees, segregated eating areas, and disparate disciplinary treatment," the court opinion stated.

There is no guarantee the two men, or the third employee, will prevail against Chugach, one of the largest Alaska Native corporation contractors. The case was remanded to a federal judge for further proceedings, which could include out-of-court arbitration.

But the lawsuit highlights growing concern, politically and legally, about Alaska Native corporation contracting. Democrats have objected because labor unions contend the contracts are unfair and abusive while Republicans have raised racial preference and constitutional doubts.

So far, the courts have sided with the corporations. In 2003, the D.C. Circuit Court of Appeals ruled that Congress can carve out special preferences for American Indian and Alaska Native-owned businesses without violating the U.S. Constitution. The U.S. Supreme Court refused to hear the case.

The 4th Circuit took a different approach after being presented with an alternative to Title VII of the Civil Rights Act, which specifically exempts tribes and Alaska Native corporations. The court instead looked at Section 1981 in Title 42, Chapter 21 of the U.S. Code, which lacks similar language.

But that doesn't mean Section 1981 applies to tribal governments. In a recent case involving the Eastern Band of Cherokee Indians, the 4th Circuit unanimously ruled that sovereign immunity protected the tribe and its management company from a discrimination lawsuit at the Harrah's Cherokee Casino in North Carolina.

The court, however, said the Chugach dispute was not the same. "[W]e find no basis to conclude that the ownership of the defendant corporations by Alaska Natives and their devisees, or any other attribute, entitles the defendants to immunity from suits arising from their for-profit construction activities in Maryland," the court wrote.

The stakes in Alaska Native government contracting are high. Chugach, in particular, has won billions of dollars in government work through special laws and regulations meant to favor minority-owned businesses.

Just this Tuesday, the House Oversight and Government Reform Committee passed a bill to revise government contractor policies but only after adopting an amendment to ensure tribal and Alaska Native corporation business weren't harmed.

Court Decision:
Aleman v. Chugach (May 3, 2007)

Related Decision:
Yashenko v. Harrah's NC Casino (April 27, 2006)

Outsourcing the Pentagon:
Chugach Alaska Corporation (Center for Public Integrity)