The opinion of the court was delivered by: LASKER
This case raises a question of major import to members of minority groups interested in finding employment in the construction industry in New York City. In its simplest terms, the issue is what affirmative efforts to employ minority workers the City can require of construction contractors engaged on City projects funded by the City, state and federal governments. The factual context in which the question arises involves the City's application for federal and state grants for the construction of two sewage treatment plants at Red Hook, Brooklyn, and Oakwood Beach, Staten Island.
The City has applied to the United States Environmental Protection Agency ("U.S.E.P.A.") for federal funding for the construction of sewage treatment facilities at Red Hook and Oakwood Beach. These projects are necessary to comply with the standards for effluent wastes contained in the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq. Subchapter II of the Act authorizes the assumption by the federal government of seventy-five percent of construction costs of approved water pollution control facilities. 33 U.S.C. § 1281 et seq. However, the U.S.E.P.A. may not approve a grant for a project unless it has been certified as entitled to priority over other state projects by the appropriate state agency, in this case the New York State Department of Environmental Conservation ("State Department of Environmental Conservation"). § 204(a) (3), 33 U.S.C. § 1284(a) (3). Certification has been granted for Red Hook and Oakwood Beach. In March, 1973, the City and the U.S.E.P.A. executed agreements for the funding of the initial phases of the construction of these projects. Contracts for the latter have already been put out for bidding; contracts for the former are ready to be put out.
Under the regulations of the U.S.E.P.A., an applicant for federal funds must state that it is in compliance with federal Executive Order No. 11246, which requires it to include in its contracts a provision that the contractor will not discriminate against any employee or applicant for employment on the basis of race, color, religion, sex or national origin and will take affirmative action to ensure the existence of nondiscriminatory hiring and employment practices. Executive Order No. 11246, § 202(1).
Until January, 1973, the affirmative action plan required by the City of its contractors was the "New York Plan," a federally approved agreement entered into in December, 1970, by New York City, New York State and the New York Building and Construction Industry Board of Urban Affairs Fund ("Board of Urban Affairs"), an industry group representing construction contractors and building trades unions. The City withdrew from the New York Plan in January, 1973, and the following July promulgated its own plan, which has come to be known as the "Mayor's Plan." This plan, which the City seeks to impose on contractors employed on its projects, makes minority hiring demands of contractors which exceed those found in the New York Plan.
The City submitted its new plan to the State Department of Environmental Conservation as an amendment to its plans and specifications for the Red Hook project, for approval and transmission to the U.S.E.P.A. Both the State Department of Environmental Conservation and the U.S.E.P.A. notified the City that its new plan was not acceptable, and that the specifications for Red Hook and any other project containing the Mayor's Plan would not be approved. Both agencies indicated that approval was withheld because in their view, the City could not incorporate in its federally and state funded contracts requirements which exceeded the demands of the federally approved New York Plan. The source of this position is a memorandum issued on July 19, 1973, by the United States Secretary of Labor, Peter J. Brennan, which prohibits local governments from imposing any equal employment opportunity requirements which have not been approved by the United States Department of Labor on federally funded construction projects. The policy laid down by the Brennan Memorandum was subsequently adopted by the New York State Department of Labor ("State Department of Labor"), by letter dated June 29, 1973.
Shortly thereafter, the City of New York and various City officials (collectively "the City") filed suit seeking declaratory and injunctive relief against federal and state disapproval of City applications for federal assistance solely because its affirmative action program includes the Mayor's Plan.
Defendants are the state Commissioners of Environmental Conservation and Labor, the Administrator of the U.S.E.P.A. and the Administration of its New York City Regional Office and the United States Secretary of Labor.
All the defendants move to dismiss. In the alternative, the federal defendants seek a stay of this proceeding and the state defendants move for summary judgment. The City originally sought a preliminary injunction, but it has been agreed between the parties and the court that their motion may be treated as one for summary judgment.
Executive Order No. 11246 is the source of the equal employment obligations of federal and federally-assisted contractors. Part I of the order requires that federally-funded contracts include the provision that:
"The contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin. The contractor will take affirmative action to ensure that applicants are employed, and that employees are treated [equally] during employment, without regard to their race, color, religion, sex or national origin. Such action shall include, but not be limited to the following: employment, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship." Id. at § 202.
Furthermore, the contractor must undertake to "comply with all provisions of Executive Order No. 11246 . . . and of the rules, regulations, and relevant orders of the Secretary of Labor." Id.
The Secretary of Labor is charged with the responsibility for administering the compliance provisions of the order, contained in Parts II and III. Id. at § 201. The Director of the Office of Federal Contract Compliance is authorized to implement the equal employment policies of the Secretary of Labor. Order No. 15-68 of the Secretary of Labor, 33 Fed. Reg. 2600 (Sept. 4, 1968). The two methods by which compliance with the order has been obtained entail use of either an "imposed plan" or a "hometown plan". An "imposed plan," as the name indicates, is a plan which is imposed by the Secretary of Labor, establishing yearly minority employment goals on a trade-by-trade basis, with increasing participation each year. The "hometown plan" approach involves local contractors and contractors associations, building trades unions and minority organizations in the formulation of a plan for voluntary compliance with the order. Under a hometown plan, minority participation obligations fall on the trade as a whole rather than on any individual contractor, and can be satisfied by minority employment on any work performed by the trade, whether federally-funded or private. A hometown plan must be submitted to the Office of Federal Contract Compliance for approval and, if approved, is incorporated by reference in Part I of the Federal Bid Conditions. For trades which decline to participate in a hometown plan, mandatory affirmative action requirements are set forth in Part II of the Federal Bid Conditions. Responsibility for compliance with these requirements is imposed directly on the individual contractor, as to his work force, rather than on the non-participating trade as a whole.
The federally-approved hometown plan in New York State is the New York Plan referred to earlier. It was submitted to the federal government for approval in 1970 by the Board of Urban Affairs, mentioned above, which is a creation of the Building & Construction Trades Council, representing labor organizations, and two contractor associations, the Building Trades Employers Association and the General Contractors Association. The U.S. Department of Labor declined to approve it in April of that year. Following negotiations between the Board of Urban Affairs and the City and State of New York an agreement was signed adopting the New York Plan, which is substantially identical to the Board's original plan. Approval was implemented by executive orders of the Mayor (Executive Order No. 31) and the Governor (Executive Order No. 43) in January, 1971. The following August the Office of Federal Contract Compliance announced its approval of the New York Plan. Following a number of extensions, approval of the Plan is scheduled to expire on August 1, 1974.
The New York Plan (Complaint, Exhibit E) originally provided for on-the-job training for a maximum of 800 minority workers (id., Art. IV, § 2), with goals established on a craft-by-craft basis, with qualified graduates of the program to be recommended to the appropriate union "for consideration for membership" (id., Art. II, § 2). The Plan was to be funded by the State and the City "on a 50-50 basis, less any Federal funds that may be obtained." Id., Art. IX.
The Plan expired on July 1, 1972, but was extended by informal agreements into 1973. In spring of 1973, New York State and the Board of Urban Affairs approved a formal extension of the Plan, which was approved as a hometown plan by the U.S. Department of Labor in April, 1973. The extended Plan differed from the original Plan in that it provided for the training of 1,000 rather than 800 minority workers and that New York City was no longer a participant, since it had withdrawn from the Plan in January, 1973. In place of the Plan, the City promulgated rules and regulations to take effect on July 20, 1973. These rules and regulations, together with the Mayor's Executive Order No. 20 of July 15, 1970,
constitute the Mayor's Plan. The Mayor's Plan imposes an obligation on public contractors, individually rather than by trade, to make a good faith effort to employ one minority trainee per four journeymen.
On July 19, 1973, the U.S. Secretary of Labor issued the memorandum referred to earlier stating that "administering agencies are directed to inform their grantees that where there is a viable and effective hometown or imposed construction industry plan in operation in a geographical area, additional and/or supplementary State or local EEO requirements may not be applied to Federally-assisted construction projects." Complaint, Exhibit P.
After the Red Hook project was certified by the State of New York to the U.S.E.P.A. as a priority project for federal grant assistance, the agency approved its first phase, subject to a review of the City's plans and specifications in connection with it. The City submitted its plans and specifications, including the New York Plan, to the State Department of Environmental Conservation in June, 1973, and they were forwarded to the federal agency. After promulgation of the Mayor's Plan in July, the City submitted addenda to the Red Hook contract documents containing the new plan to the state agency for transmission to the U.S.E.P.A. However, the former declined to forward the amendments and notified the federal agency that it was retracting its acceptance of the Red Hook contract specifications until the conflict between the Mayor's Plan and the New York Plan could be resolved by the State Department of Labor. Complaint, Exhibit G(b). Subsequently, the State Department of Labor informed the State Department of Environmental Conservation that the Mayor's Plan was unacceptable because it was not in accord with the New York Plan. Complaint, Exhibit G(c). The State Commissioner of Environmental Conservation, Henry L. Diamond, transmitted the State Department of Labor's communication to the Commissioner of the New York City Environmental Protection Administration, Martin Lang, together with a letter, stating:
"In consideration of the above, it is advised that all proposed addenda outlining the 'New York City Mayor's Plan ' should be deleted from the Red Hook contract documents to make them acceptable to both the State and Federal Governments. This should be done so as not to jeopardize the grants already committed and the future grants that your agency is presently requesting." Complaint, Exhibit H.
The City then contacted the U.S.E.P.A. directly, requesting it to instruct the State Department of Environmental Conservation that its determination that the Mayor's Plan was unacceptable was not a proper basis for withholding approval of the City's grant application, both because a state's role under the Water Pollution Control Act is limited to certifying a grant's priority nature and because inclusion of the affirmative action requirements of the Mayor's Plan is not a proper ground for disqualifying the City's grant application. Complaint, Exhibit I. The U.S.E.P.A. replied by letter, dated November 13, 1973, that it was unable to comply with the City's request. The letter stated:
"The conditions upon which the grant was made require compliance with equal opportunity requirements in advertising for construction contracts. Such requirements have been interpreted by the U.S. Department of Labor to the effect that where there is a viable and effective hometown plan or imposed construction industry plan in operation in a geographical area, additional and/or supplementary State or local EEO requirements may not be applied to Federally assisted construction projects.
"To the extent that the contract specifications applicable to the Red Hook Project are not in conformity with the Labor Department's interpretation, that is, that they incorporate additional New York City requirements, the specifications and any resultant contract would not be approved by EPA, and the construction contract costs under the EPA grant would not be considered as eligible costs under the EPA grant. In addition, a failure to comply with the EEO requirements of the grant agreement may serve as a basis for the withholding of grant funds or termination of the grant in accordance with applicable grant regulations." Complaint, Exhibit J.
Having been instructed by the State Department of Environmental Conservation and the U.S.E.P.A. that, because of its inclusion of the Mayor's Plan, the Red Hook contract would not be approved for federal funding by either agency, the City filed the instant suit, which, as we have indicated, seeks injunctive and declaratory relief permitting the implementation of the Mayor's Plan on Red Hook and other federally-funded construction projects.
On January 16, 1974, the U.S. Secretary of Labor, the Assistant Secretary of Labor for Employment Standards and the Director of the Office of Federal Contract Compliance issued a regulation, 39 Fed. Reg. 2365, which was published in the Federal Register on January 21, 1974, to be effective on the date of publishing. It constitutes an amendment to 41 CFR § 60-1.4 and, according to its preamble, is intended:
"to clarify the extent to which the U.S. Department of Labor will deem State and local government equal employment opportunity requirements applicable to federally assisted construction contracts subject to the equal employment requirements of Executive Order 11246, as amended, and its implementing rules, regulations, and orders, including Federal equal employment opportunity bid documents incorporating the requirements of voluntary or imposed construction industry plans established pursuant to the Executive Order." 39 Fed. Reg. 2365, (January 21, 1974).
The regulation requires any state or local government which intends to impose affirmative action requirements on contractors working on federally assisted construction projects to submit the requirements to the Director of the Office of Federal Contract Compliance for approval. The Director must render a decision within 60 days of submission. His decision is appealable by the state or local government and any person or group affected by it, including, for example, construction contractors, labor organizations and minority community groups, to the Assistant Secretary of Labor for Employment Standards. The appeal process must be completed within 101 days of the publication of the Director's decision. The regulation provides further:
"Such State or local government requirements will be deemed applicable to federally assisted construction contracts unless the Director, or in the case of an appeal of the Director's determination, the Assistant Secretary for Employment Standards, determines that such requirements are inconsistent with the Order or incompatible with the effective implementation of the federal minority hiring and/or training plan (either voluntary or imposed) in the area. The State or local government affirmative action hiring and/or training requirements shall not be included in federally assisted construction contracts until the Director, or, in the case of an appeal, the Assistant Secretary, has had an opportunity to make a determination in accordance with this paragraph." 41 CFR § 60-1.4(b) (2), 39 Fed. Reg. 2365 (January 21, 1974).
Although it challenged both the new regulation's validity and its applicability to the Red Hook project, whose plans and specifications had been rejected prior to its adoption, the City submitted the Mayor's Plan to the Department of Labor for a determination pursuant to the regulation. The period for determination was extended by the City from June 3 to June 24, 1974. The Director did not make a determination by that date and no determination is anticipated. Instead, the Department of Labor takes the position that its failure to act within the time frame established by the regulation constitutes approval by default, permitting the City to implement the Mayor's Plan with respect to Red Hook and any other federally-funded project.
The federal defendants originally moved for dismissal, or in the alternative for a stay, on the ground that the City had not exhausted the remedies created by the new regulation. Subsequently, the City submitted its requirements to the Director of the Office of Federal Contract Compliance for approval, pursuant to the regulation, and they became effective by the Director's failure to act within the prescribed period. Accordingly, the City has exhausted its remedies and the federal defendants' motion is denied as moot.
The federal defendants, however, now take the position that the entire case ought to be dismissed as moot. Their reasoning is that, since the City's requirements have become effective by the nonaction of the Office of Federal Contract Compliance and the Red Hook grant funds will be released in the near future, the City has achieved its objective in suing. Their stance is untenable for several reasons.
First, the regulation, as noted above, provides for an appeal by any interested party to the Assistant Secretary for Employment Standards, and an appeal has, in fact, been filed by the Board of Urban Affairs. Pursuant to the regulation, the Assistant Secretary has 80 days from the end of the appeal period, which runs 21 days from publication of the Director's determination in the Federal Register. No publication has yet occurred, and when publication takes place the Secretary has another 101 days within which to act. Accordingly, the ultimate determination by the Department of Labor of the validity under the regulation of the Mayor's Plan is still in doubt.
The federal defendants argue that the appeal period does not affect the question of mootness, because the City's requirements became effective immediately upon the expiration of the time within which the Director was to act. This argument, however, is unpersuasive, because the failure of the Director to act on the City's submission does not give the City the full relief it seeks. The City is requesting injunctive and declaratory relief which will permit the unfettered implementation of its affirmative action program. Even adopting the federal defendants' approach to the new regulation, the City's ability to implement its requirements is impaired inasmuch as any change which the City might desire to make in the Mayor's Plan would require a resubmission to the Office of Federal Contract Compliance, at which point, never having affirmatively determined that the Mayor's Plan is valid, the Office could reject the Plan. This point merely illustrates that the City's case, which challenges the validity of the new regulation, is not mooted out by any actions taken under it. See Roe v. Wade, 410 U.S. 113, 125, 35 L. Ed. 2d 147, 93 S. Ct. 705 (1973); Moore v. Ogilvie, 394 U.S. 814, 23 L. Ed. 2d 1, 89 S. Ct. 1493 (1969); Torres v. New York State Department of Labor, 318 F. Supp. 1313 (S.D.N.Y. 1970). As the Supreme Court stated in United States v. W. T. Grant Co.:
"Voluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, i.e., does not make the case moot." 345 U.S. 629, 632, 73 S. Ct. 894, 97 L. Ed. 1303 (1953).
The reason given in the Grant case for the inapplicability of the mootness doctrine to cases such as this is particularly appropriate in light ...