Throughout the United States, tribal governments and businesses employ thousands of non-Native Americans.  Indeed, in many rural counties, the largest employers are tribal.  Like their non-tribal peers, these entities regulate their workplaces through carefully developed employment policies.  When an employee violates those policies or threatens business interests, tribal employers may discipline the employee, seeking redress in tribal court if necessary.  But when the employer is tribal, employees who are not members of the tribe often seek to avoid punishment by turning to federal court and arguing the tribal entity has no jurisdiction to regulate their wrongdoing or adjudicate their violations. That path of avoidance may close with the Ninth Circuit Court of Appeals’ opinion in Knighton v. Cedarville Rancheria of Northern Paiute Indians. On March 13, 2019, the court held that tribes have the authority to regulate workplace misconduct and bring claims in tribal court for torts their non-member employees commit in the scope of their employment.

Knighton follows the Ninth Circuit’s 2017 opinion concerning tribal jurisdiction over employment claims in Window Rock Unified School District v. Reeves, 861 F.3d 894.  In Reeves, employees of an Arizona school district operating on land leased from the Navajo Nation filed wage and employment preference complaints before the Navajo Nation Labor Commission, a tribal administrative agency.  The district moved to dismiss the complaints, challenging the Labor Commission’s jurisdiction over the matter.  Instead of waiting for the Labor Commission to decide the issue, the district filed a federal lawsuit, asking the court to declare the Commission lacked the necessary subject matter jurisdiction.  The federal court granted that request.

The Ninth Circuit, however, disagreed when the case was appealed.  Because the district’s schools operated on tribal land, the Commission’s jurisdiction was at least colorable and the district had to exhaust its tribal remedies by allowing the tribal forum the first opportunity to evaluate its own jurisdiction.  As such, Reeves left open at least three important questions for tribal employers:  (1) if the party challenging tribal jurisdiction had exhausted its tribal remedies, how would the court have held?; (2) what if the relevant employment occurred off tribal land?; and (3) if the situation were reversed, and the employer was the tribal entity and the plaintiff, how far would jurisdiction extend?  Knighton helps answer some of those questions.

Background

The employee in this case worked as Tribal Administrator for the Cedarville Rancheria of Northern Paiute Indians but was not a member of the Tribe.  The Tribe’ employee personnel manual prohibited certain employee misconduct, and stated the Tribal Council would directly oversee discipline of the tribal administrator.  Tribal employees, including the employee, were made aware of these policies.  

According to the Tribe, throughout her employment, the employee repeatedly violated the Tribe’s personnel policies.  At one point, acting as the Tribe’s agent, she negotiated to purchase a building from a California nonprofit at above-market rates.  In doing so, she failed to disclose she had a conflict of interest as she moonlighted for the same nonprofit.  She eventually resigned her position with the Tribe, but not before cashing out almost $30,000 in vacation and sick pay in violation of Tribal policy.  She also allegedly claimed that the Tribal chairperson had approved her request.  When leaving, she took Tribal files and the office furniture and computer she had used.  The Tribe later determined that she had recklessly misallocated Tribal investments, causing the Tribe to lose over $1 million.

To recover for her wrongdoing, the Tribe filed a lawsuit in Tribal Court for fraud, breach of loyalty, and other torts.  The employee, like the district in Reeves, moved to dismiss based on the Tribal Court’s supposed lack of jurisdiction.  Unlike the district, the employee allowed the Tribal Court to answer the question before challenging its decision in federal court.

Ninth Circuit’s Decision

On appeal, the Ninth Circuit held in favor of the Tribe, concluding that “the tribal court has jurisdiction to adjudicate tribal claims against its nonmember employee[s].”  

The Ninth Circuit based its jurisdictional holding on several grounds.  As in Reeves, the Tribe had the inherent jurisdiction to regulate the employee’s employment given how closely it related to Tribal land.  But the court went further, ruling that the Tribe would have jurisdiction even if the land were private.  In reaching that conclusion, it relied on the benchmark case, United States v. Montana, where the United States Supreme Court held that Tribes may regulate non-member conduct on private land in two circumstances—when it threatens tribal well-being, and when it arises from a consensual relationship between the non-member and the Tribe. 

Regarding the first basis, the Ninth Circuit held that the employee breached her loyalty to her Tribal government employer, including her abuse of Tribal funds that threatened the Tribe’s well-being.  Admittedly, this holding may be limited to serious torts committed by employees of tribal governments.

But the court’s application of the second Montana circumstance went much further, recognizing jurisdiction regardless of where the misconduct or employment took place.  By accepting employment, the employee had entered a consensual relationship with the Tribe.  In the course of that relationship, she knew the Tribe had certain employment policies, codified in the personnel manual, that applied to her conduct on the job.  She should have foreseen her employer might enforce those policies, in Tribal court if necessary.  Accordingly, the Tribe had regulatory and adjudicate jurisdiction over her employment, and could exercise it through workplace discipline or, if it chose, through tort litigation.

How Does this Decision Affect Employers?

After Knighton, it will be far more difficult for nonmember employees working for Tribal governments or businesses to claim the Tribe’s administrative agencies or courts lack jurisdiction to address their wrongdoing and thus evade workplace discipline.  Tribal employers may consider expanded hiring now that they can more easily discipline non-Native employee misconduct should the need arise.  They may similarly consider revising their employee manuals, confident that Tribal courts may provide a more guaranteed forum to recover for violations.