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Making Preferential Hiring Practices Work for You

The Tribal Employment Rights Ordinance, commonly referred to as TERO, is a set of regulations used by many tribal governments. Calling upon their sovereign status, tribal governments often see fit to enact these preferential hiring policies in order to address unemployment and poverty issues within reservations. While the exact wording may differ from reservation to reservation, their general theme is constant: those who wish to do business on a reservation must make efforts to hire tribal members and their companies. The government of the Three Affiliated Tribes passed their own version of TERO in 1983, with the most recent revision adopted in 2012. This current version lays out the expectations for all entities conducting business on tribally-owned land within the reservation and includes specific language for oil and gas development.

The existence of TERO regulations provides reservations with a certain degree of leverage, insofar as employment is concerned. As will be explained, TERO incorporates a system in which tribal members should be the first ones employed, the first to be considered for promotion, and the last ones laid off in any business. Additionally, tribal members that operate their own businesses, thanks to TERO, are notified of any available contracts and hiring preference for work in their field. These two factors establish an employment framework that, when properly enforced, should maintain employment levels at or below the United States’ national average.

Instead, unemployment levels continue to be persistently high on reservations across the country. Accurate employment figures for individual tribes can be difficult to find, but according to the 2013 American Indian Population and Labor Force Report conducted by the Bureau of Indian Affairs, the estimated percentage of those 16 and older available for work but not working within North Dakota reservations is around 22%. The estimated percentage of families living on North Dakota reservations whose income is below the poverty line is approximately 37%. The Economic Policy Institute refines those numbers beyond the BIA’s “available for work but not working” to a more specific unemployment number. In their report, High Unemployment Means Native Americans Are Still Waiting for an Economic Recovery, they estimate that the Northern Plains region has an unemployment rate of 15%, compared to 4.6% experienced by the white population in the same region. Even with the latest drop in oil prices, activity within the mineral extraction business is still prevalent and yet, according to this report’s findings, “the highest ratio of American Indian to white unemployment rates was 3.3-to-1, in the Northern Plains.” Additionally, the government of the Three Affiliated Tribes is looking for employees in a wide variety of fields. So, if there is work to be found, people available to work, and hiring policies that ensure tribal members can get work, why does high unemployment remain a problem?

Many readers may think that the high unemployment rate has something to do with substance abuse. Yes, drugs and alcohol are significant issues on reservations, and Fort Berthold is no exception. The 2003 report Drug Use Among Racial/Ethnic Minorities by the National Institute on Drug Abuse shows a significantly higher prevalence of drug use in American Indian/Alaska Native youth and adults compared to other populations. When looking at the 12-17 age group of the American Indian/Alaska Native population, the estimate for past-month drug use is 16.3%. That number jumps to 24.9% in the 18-25 age group. But the answer is more complex than simply surmising, “Well, they’d have work if they weren’t abusing drugs.” Substance abuse is a symptom of a larger public health problem, one that stems directly from a lack of TERO enforcement and corporate abuses. Each of these problems separately is substantial and warrants investigation and research independently, but by providing an overview of each and illustrating the interconnected nature of the problems, those affected by these issues will hopefully be encouraged to fight for their rights and their communities.

For brevity’s sake, an in-depth discussion of TERO is not feasible within the confines of this article and only general points will be examined. With this in mind, all tribal members should read TERO in full; it is essential to understanding important employment rights on the reservations. TERO applies to individual employees as well as to contractors; however, the responsibilities outlined fall largely upon the companies looking to hire either employees and/or contractors. Section 2 of TERO explains the responsibilities of a company that is looking to hire employees. Any company in need of employees must hire qualified tribal members before non-tribal members. If a company cannot find a qualified tribal member through normal hiring processes, that company must go to the TERO office and report their difficulties. Once this is done, the TERO office will refer a qualified tribal member or look to other federally recognized tribes for a referral. A company is permitted to hire a non-tribal member only after this search has been exhausted. There are a few exceptions to this regarding key and permanent employees of a company, as outlined in 2.1(b). Section 2 also covers the training plans that employers must implement, how employers go about awarding promotions, apprenticeships, relationships with unions, as well as job counseling and support programs.

Section 3 of TERO explains how companies hire contractors or sub-contractors for work on the reservation. The process begins with the company contacting the TERO office for a list of contractors that have been certified by TERO as Indian-owned and operated. These contractors are certified by TERO based upon a set of criteria that evaluates management control, ownership, profits, and value to ensure that “shell,” or fake, contractors are not being established in order to sneak by TERO. Once the company has this list, they may either negotiate directly with a contractor or open their contract for a competitive bid. If the company chooses to negotiate directly, they must negotiate with all TERO-certified companies before beginning any negotiations with non-certified companies. TERO must be notified when this occurs. If a company opens their contract for a bidding process, they must contact all contractors in that field, as well as the TERO office, and notify them of the pending bid process, possibly one of the most important rules in TERO. TERO-certified companies must be awarded the bid if they are within 2% of the lowest bidding price. All bids must be submitted to the TERO office.

In addition to overseeing the conduct of companies, TERO also outlines the power the TERO office has to enforce these regulations. These regulatory and enforcement powers are quite broad, and range from obtaining documents for investigation to bringing sanctions against companies that fail to comply with TERO. These comprehensive powers are essential to the success of TERO’s goals. TERO regulations are not enacted by state or federal governments, but are derived entirely from the sovereign authority of the tribes. As the sole enforcement agency, TERO officers must have all the investigative power needed.

With TERO regulations and their power of enforcement in place, it would seem as if a reservation’s population is ensured successful employment. Despite TERO’s good intentions, however, non-Indian owned companies continue to siphon work away from qualified, TERO-certified firms. Many TERO-certified companies report that they are never notified about opportunities to bid on contracts and it is seldom that they are solicited for work. These violations illustrate why TERO requires companies to notify contractors about work. Oil field work, as anyone who has been involved may understand, is often a “good ol' boy’s club,” where past relationships, not technical qualifications and merit, are key to getting and maintaining contracts. TERO attempts to change that, though it appears to be having little success.

Some of the problems concerning TERO can be found in the complications of its implementation within the oil industry. The first issue is that tribal government is in a position in which they are asked to balance two competitive interests, both of which have serious implications for all tribal members. On one hand, they are asked to enact policies that help their workforce and ensure employment of their people. On the other, they have the opportunity to lease tribal land for mineral extraction, bringing in needed revenue for the tribe. Most governments, not just tribal, have been eager to cater policies in favor of the oil industry for fear of scaring away development with perceived over-regulation, potentially losing significant amounts of money. This conflict of interest is only the beginning, however.

The second problem with TERO pertains to its enforcement. On the Fort Berthold reservation, in particular, the sudden surge of people and businesses due to mineral extraction is well-known, and tribal government has struggled to keep up. TERO compliance officers are expected to monitor companies to ensure that they’re following all applicable policies, but they simply don’t. A Cease and Desist Order made publicly available on the Three Affiliated Tribes’ TERO website confirms this by stating that they know there are “flagrant and continued violations” occurring on the reservation and that violators, “are ordered to immediately self-report…” [emphasis added] This seems unlikely. As mentioned earlier, TERO lies solely within the realm of a tribe’s sovereignty and, as such, is not required to follow the same Freedom of Information Act guidelines as federal and state governments. This means that the TERO office isn’t required to disclose anything, making it almost impossible to submit their work to an audit or inspection that would confirm any of its failures or successes.

These problems persist due to one of the most significant issues with TERO: the continuing lack of TERO commission appointments. The TERO commission serves as an independent oversight committee for the director and, as such, is one of the only sources of redress for harms caused, or allowed, by the TERO director. It seems TERO’s policy may be that if there is no TERO commission, then no one can file a complaint with them. Because of this, certified companies that are qualified to do work on the reservation will continue to lose business, or even shut down all together. Industry has been taking advantage of these failings, and conducting business in a way that is abusive, illegal, and continues to perpetuate high unemployment on the reservation.

Abuses committed by industry mainly relate to control exerted over contractors, directly affecting the working conditions and work availability for employees. This control comes in two forms: the first is through off-the-record requirements, and the second is through the use of Master Service Agreements, or MSAs. This control negatively affects the contractor by effectively making the contractor an employee of the hiring company. The IRS, using a common-law definition of employee, explains the difference between the two as follows:

You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.

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Two court cases outline this discretion clearly: Alexander v. FedEx Ground Package System Inc., --F.3d--, 2014 WL 4211107 (9th Cir. Aug. 27, 2014) and United States v. Silk, 331 U.S. 704 (1939). In both of these cases, delivery drivers were responsible for providing and maintaining their own vehicles. In Alexander v. FedEx decided that FedEx’s drivers were employees, not contractors, because FedEx mandated driver attire, appearance, delivery vehicle appearance, set a de facto schedule for drivers by mandating when their vehicles would be loaded and when they had to be finished, had to approve assistants hired by drivers, and many other factors of the drivers’ operations. FedEx maintained that several aspects of driver operations were outside of their control, but the court held that, “FedEx’s lack of control over some parts of its drivers’ jobs does not counteract the extensive control it does exercise.”

In United States v. Silk, Albert Silk’s company sold coal from his coal yard in Topeka, Kansas. Unlike the FedEx drivers, however, Silk’s drivers were free to come and go as they pleased, facing no penalty. Additionally, they were free to drive for others as they wished and were not instructed as to how to make their deliveries. Further, Silk’s drivers were not assigned routes, but were simply assigned jobs based upon whose turn was next, and paid a flat rate per ton of coal delivered based upon a payment schedule worked out individually with Silk’s company. The Supreme Court ruled that, due to this lack of control over the drivers, they were contractors, not employees.

Many contractors on the Fort Berthold reservation are experiencing the same sort of excessive control as that of FedEx’s drivers. Companies are dictating when contractor crews may work, who may be on those crews, and paying contractors hourly, not by the job. Much of this control is exerted informally, through conversations or over the phone, leaving little paper trail. Contractors are reluctant to publicly claim that they’re experiencing these problems for fear of losing more work. This fear would not exist if TERO were being properly utilized.

Master Service Agreements, on the other hand, are documented forms of control over the contractor, as well as helping companies dodge TERO complaints. MSAs are not contracts for a job and do not guarantee work, but their existence does allow a company to say, “Look at all the MSAs we have with TERO companies; we aren’t discriminating against them.” The MSAs also lay out general guidelines for fault in the event of an accident and force contractors to submit to the will of the hiring company, effectively changing the HR policies of both contractors and the tribe. The online sample MSA provided by EOG’s website, an operator in the Bakken, reveals many forms of this subversive control. Below are some examples from various sections of the sample MSA:

• Contractor shall abide by all of Company's policies, rules, guidelines and procedures applicable to the Services, including without limitation those related to safety, substance abuse, environmental conditions and conflict of interest…

• Contractor further covenants, warrants and represents that all Services performed by it hereunder shall be conducted in accordance with all safety manuals or publications issued by Company…

• Contractor will replace, at its sole expense, any of its employees whose replacement is requested by Company for any non-discriminatory reason.

• Contractor agrees to comply with Company’s Code of Business Conduct and Ethics for Vendors and Contractors…

These examples clearly reveal control exerted over contractors. The MSA forces contractors to agree to policies and procedures that mandate work be done in a specific way.

This brings us to the crux of the employment problem: legally mandated discrimination forced upon contractors. Hiring companies illegally force contractors to submit to zero-tolerance drug polices, drug testing, and background checks. With this information, the hiring company can, as shown above, mandate that, “Contractor will replace, at its sole expense, any of its employees whose replacement is requested by Company for any non-discriminatory reason.” An arrest for drug possession can be claimed as a non-discriminatory reason, even if the employee is not addicted, not currently using, and has never used drugs on the job. Any arrest will do. Now these workers, instead of providing for themselves and their families through gainful employment, are sidelined and unable to bring home a paycheck. For those dealing with addiction, this is especially problematic.

According to Michelle Alexander in her book, The New Jim Crow: Mass Incarceration in the Age of Colorblindness, “Even beyond the need to comply with the conditions of parole, employment satisfies a more basic human need—the fundamental need to be self sufficient, to contribute, to support one’s family, and to add value to society at large. Finding a job allows a person to establish a positive role in the community, develop a healthy self-image, and keep a distance from negative influences and opportunities for illegal behavior. Work is deemed so fundamental to human existence in many countries around the world that it is regarded as a basic human right. Deprivation of work, particularly among men, is strongly associated with depression and violence” (253).

The relationship between drug users, employment, and crime is complicated. Research shows that steady employment is essential to recovery, let alone avoiding addiction all together, and an individual’s increasing drug or alcohol use is found to be largely a symptom of poverty and unemployment. This flies in the face of stereotypes that exist from the War on Drugs, that drug users are “criminals,” whose lack of character led them to end up as social pariahs. This stigma is racially biased; the evidence lies in looking at, despite TERO’s best intentions, who is getting work and who isn’t.

Drug use and unemployment are not the results of a morally corrupt society, but are symptoms of systemic problems within that society. The regulations within TERO are sound, they simply need to be enforced. Tribal members want to work and provide for their families, they just need to be given the hours and contracts. The Fort Berthold reservation has the potential to have some of the lowest unemployment rates anywhere in the U.S.; we simply need to work together. Inordinately high unemployment levels on Fort Berthold are a fact. This is public knowledge. The people of the Three Affiliated Tribes need to demand that their leaders will work for the interests and betterment of their communities. Good employment policies—and effective enforcement of them—will not only help individuals, but will help the tribe as a whole.

Roger Birdbear has a degree in Petroleum Engineering Management and received his Juris Doctor from the Sturm College of Law at the University of Denver. He currently works as an advocate for criminal defense, landowner, and Indian civil rights issues on and off the Fort Berthold Reservation in North Dakota. He can be reached through his website,