Ninth Circuit Upholds TERO Requirements In Indian Country Mineral Leasing

Conducting commercial operations on tribal lands can pose significant challenges for non-Indian companies. Demonstrating sensitivity to the cultural nuances of Native American society and navigating the complex web of federal and tribal regulations applicable to Indian Country requires expertise and invariably adds time and costs to projects. Among the more difficult aspects of operating on tribal lands is managing compliance with applicable tribal preference requirements. These requirements, often expressed through a Tribal Employment Rights Ordinance ("TERO"), require commercial entities doing business in Indian Country to give preference to tribal members and member-owned businesses when making employment and contracting decisions in association with projects conducted on Indian lands.

Although TERO laws are common on Indian reservations around the country, some commentators have questioned the enforceability of TERO provisions, arguing that the preference requirements represent impermissible discrimination on the basis of national origin, a practice that Title VII of the Civil Rights Act of 19641 prohibits. On September 26, 2014, the United States Court of Appeals for the Ninth Circuit became the first federal appellate court to address the merits of this question. In EEOC v. Peabody Western Coal Co.,2 the Ninth Circuit upheld the validity of Navajo hiring preferences in coal leases issued to private companies on the Navajo Nation's Reservation. In reaching its result, the Ninth Circuit concluded that the Navajo hiring preference in the leases represented a political classification, rather than a classification based on national origin, and therefore did not violate Title VII. While the question remains open in other circuits, most notably in the Eighth and Tenth Circuits (where significant private mineral development is occurring on tribal lands), the decision in Peabody Western is likely to be influential in how tribes apply, and courts interpret, tribal TERO requirements in the future.

1. BACKGROUND.

   Those not familiar with federal Indian law might be surprised to learn that common constitutional prohibitions against discrimination either do not apply, or apply in modified form in the context of Indian Country. Most notably, neither the Bill of Rights nor the Fourteenth Amendment apply to tribal governments.3 Accordingly, the concepts of equal protection and due process lack constitutional force in limiting tribal power.

   Tribes are subject, however, to "certain restrictions . . . similar, but not identical, to those contained in the Bill of Rights and the Fourteenth Amendment."4 In 1968, Congress passed the Indian Civil Rights Act ("ICRA").5 Among other protections, ICRA provides that "[n]o Indian tribe in exercising powers of self-government shall . . . deny to any person within its jurisdiction the equal protection of its laws."6

   Whether a TERO Ordinance would violate ICRA's equal protection clause is an open question. The federal courts have acknowledged that "the standards of analysis developed under the Fourteenth Amendment's Equal Protection Clause [are] not necessarily controlling in the interpretation of the [ICRA]," recognizing that interpretation of ICRA must account for the unique cultural, historical, and socio-political circumstances of individual tribes.7 Equally important, the statute itself is not...