Recent developments in Minnesota, however, threaten to derail good and established privacy rules, by subjecting contractors and subcontractors who work on public projects to data practices laws that traditionally apply only to the government.
Sunshine laws creep into the private sector.
The United States and each of the 50 states have enacted “sunshine laws.” (These are sometimes called open records or data practices laws—the federal version is known as FOIA, or the Freedom of Information Act.) Sunshine laws generally require government entities to supply data to inquiring members of the press or the public, with a few exceptions. These laws are intended to open government to public scrutiny.
In response to increasing privatization of government, a few states have extended these laws to private contractors performing “government functions.”
Minnesota is one such state. It amended its Data Practices Act in 1999, requiring the government to include terms in its contracts that make it clear that private parties who contract with the government “to perform any of its functions” must follow the statute.
This requirement was largely ignored for 14 years. Then, in 2013, the Minnesota Supreme Court decided a case where a newspaper publisher sought a copy of a subcontract between two private businesses building and renovating several public schools in St. Louis County. Helmberger v. Johnson Controls, Inc., 839 N.W.2d 527 (2013). The court decided that the statute simply required contract terms, not actual disclosure of data. The court suggested that the statute should be changed if the legislature had a different intent.
In response, the legislature did change the statute. As of May 29, 2014, the relevant part of the statute now says:
If a government entity enters into a contract with a private person to perform any of its functions, all of the data created, collected, received, stored, used, maintained, or disseminated by the private person in performing those functions is subject to the requirements of this chapter and the private person must comply with those requirements as if it were a government entity.
Minn. Stat. § 13.05, subd. 11(a) (2014) (emphasis added).
State agencies have also started responding to the 2013 Helmberger decision by revising their contract documents to contractually require disclosure of contractors’ project data. For example, the 2014 MnDOT Standard Specifications for Construction include a new Section 1701.1—Data Practices, which states:
Bidders are advised that all data created, collected, received, maintained, or disseminated by the Contractor and any subcontractors in performing the Work contained in this Contract are subject to the requirements of MN Statute Chapter 13, the Minnesota Government Data Practices Act (MGDPA). The Contractor shall comply with the requirements of the MGDPA in the same manner as the Department. The Contractor does not have a duty to provide access to public data to the public, if the public data are available from the Department, unless otherwise required by the Contract.
These changes are extreme and unprecedented. How these changes will be applied remains open to serious debate. How these changes will impact the industry remains to be seen.
Is construction a “government function” subject to the Minnesota Data Practices Act?
These new mandates place a heavy burden on contractors and subcontractors performing “government functions.” The question is, what exactly is a government function?
The majority in the 2013 Helmberger court needlessly endorsed an overly broad view of what constitutes a government function, citing a 60-year-old decision that a government function simply “involves the exercise of power conferred by statute.”
The problem with that definition, as noted by Justice Page in his concurring opinion, “is that there are very few services, if any, that a private entity might contract to perform that would not constitute a government function.” Indeed, state and local governments have countless powers “conferred by statute,” including furnishing public works.
Fortunately, the majority’s view of what constitutes a government function is not binding law. Nevertheless, state agencies and courts will look to that view for guidance.
Are there legal alternatives?
Absolutely. As one alternative, Justice Page proposed a few factors to assess whether a contractor is performing a government function, such as “the degree to which the government entity has delegated decision-making authority to the private person.” Justice Page believed that construction and design services “are too attenuated from the actual function” of the government (which in that case was “to furnish school facilities”) and he concluded that construction was not a government function.
The U.S. Supreme Court has also provided guidance by addressing what “state actions” are subject to Constitutional limitations like free speech and equal protection. The Supreme Court applies a higher, narrower standard, often involving complex issues like whether the private party performs an “integral part” of a public function, whether the state and business are in positions of “interdependence,” and whether the state and business are a “joint enterprise” or have a “symbiotic relationship.”
While courts will have to work harder and answer more questions to avoid taking the easier “every contract” approach, they can and should limit public records rules to only those who perform traditional “government” functions, not everybody who enters into any contract with the government, and certainly not low-bid construction contractors.
What should contractors do now?
The law is unsettled and its application needs serious debate. As it currently stands, the statute is vague with respect to what constitutes a government function. The “every contract” approach was unnecessary to decide the Helmberger case, does not further the objectives of the Data Practices Act, and goes far beyond what any other state has done.
Although I disagree with imposing data practices requirements on private contractors, and I believe that the enforceability of new contract requirements is questionable, unfortunately ignoring these developments could carry enormous risks.
For now, contractors and subcontractors on public projects should know what their contracts say, learn about categories of public and confidential data under the law, keep track of all project data, segregate all highly sensitive and confidential data, and be prepared to vigorously object to requests for their private data. Legal counsel may be needed to assist with specific situations.
Over the next several years, I expect the law to be properly interpreted by the courts and amended by the legislature as needed. This will require a clear and sustained response by contractors insisting that we maintain established rules of privacy.
Build it right. Keep it real.
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