The US Sixth Circuit Court of Appeals held today that Michigan’s Fair & Open Competition in Governmental Construction Act – which restricts the use of project labor agreements on publicly funded construction projects – is not preempted by the National Labor Relations Act (“NLRA”). The opinion was rendered in Michigan Building & Construction Trades Council v Snyder, ___ F3d ___ (6th Cir 2013). It reverses the district court’s judgment and vacates the injunction that permanently enjoined the act's enforcement.
Project labor agreements (“PLAs”) are contracts that set common terms and conditions of employment for large construction projects involving multiple subcontractors and unions. Parties to PLAs on public projects include the governmental unit funding the project (or its general contractor) and the labor union. PLAs frequently "incorporate terms from individual local union collective bargaining agreements," and all of the contractors and subcontractors on the project – including non-union contractors – must agree to abide by the PLA’s terms in order to work on the project. It has been observed by one federal court that “a PLA effectively unionizes an entire construction project because all union and non-union contractors must comply with certain union protocol and procedure.” There has been significant debate over the extent to which PLAs are beneficial and detrimental.
The Michigan legislature originally passed the Fair & Open Competition in Governmental Construction Act in 2011, and amended it in 2012. As amended, it bars governmental units from entering into PLAs; forbids governmental units from discriminating against bidders on public projects based on whether the bidder had entered into a PLA; and allows a governmental unit to award a contract, grant, tax abatement, or tax credit to a private owner, bidder, contractor, or subcontractor who enters into or who is party to a PLA "so long as entering into that PLA 'is not a condition for award of the contract, grant, tax abatement, or tax credit . . . .'"
Following the passage of the Fair & Open Competition in Governmental Construction Act, various associations of labor organizations filed suit seeking to stop its enforcement. They were ultimately successful and in February of 2012, the US District Court for the Eastern District of Michigan – Southern Division ruled that the act, “impermissibly interferes with the comprehensive regulatory scheme established by the NLRA. It is preempted.” The district court also permanently enjoined enforcement of the act. Governor Snyder appealed.
The Sixth Circuit Court of Appeals observed that the state was merely, “seeking to preserve taxpayer resources by encouraging open competition among potential contractors and subcontractors. It is not banning PLAs, and contractors who enter into PLAs can compete on equal footing with non-PLA contractors for public contracts. Private entities, including contractors working on government projects, remain free to enter into PLAs. The law’s effect is limited to forbidding governmental units from entering into PLAs and then forcing the terms and conditions found within on bidders, contractors, and subcontractors.” Holding that “the act furthers Michigan’s proprietary goal of improving efficiency in public construction projects, and the act is no broader than is necessary to meet those goals,” the court concluded that “the law is not preempted by the NLRA.”
- Disclaimers -
Project labor agreements (“PLAs”) are contracts that set common terms and conditions of employment for large construction projects involving multiple subcontractors and unions. Parties to PLAs on public projects include the governmental unit funding the project (or its general contractor) and the labor union. PLAs frequently "incorporate terms from individual local union collective bargaining agreements," and all of the contractors and subcontractors on the project – including non-union contractors – must agree to abide by the PLA’s terms in order to work on the project. It has been observed by one federal court that “a PLA effectively unionizes an entire construction project because all union and non-union contractors must comply with certain union protocol and procedure.” There has been significant debate over the extent to which PLAs are beneficial and detrimental.
The Michigan legislature originally passed the Fair & Open Competition in Governmental Construction Act in 2011, and amended it in 2012. As amended, it bars governmental units from entering into PLAs; forbids governmental units from discriminating against bidders on public projects based on whether the bidder had entered into a PLA; and allows a governmental unit to award a contract, grant, tax abatement, or tax credit to a private owner, bidder, contractor, or subcontractor who enters into or who is party to a PLA "so long as entering into that PLA 'is not a condition for award of the contract, grant, tax abatement, or tax credit . . . .'"
Following the passage of the Fair & Open Competition in Governmental Construction Act, various associations of labor organizations filed suit seeking to stop its enforcement. They were ultimately successful and in February of 2012, the US District Court for the Eastern District of Michigan – Southern Division ruled that the act, “impermissibly interferes with the comprehensive regulatory scheme established by the NLRA. It is preempted.” The district court also permanently enjoined enforcement of the act. Governor Snyder appealed.
The Sixth Circuit Court of Appeals observed that the state was merely, “seeking to preserve taxpayer resources by encouraging open competition among potential contractors and subcontractors. It is not banning PLAs, and contractors who enter into PLAs can compete on equal footing with non-PLA contractors for public contracts. Private entities, including contractors working on government projects, remain free to enter into PLAs. The law’s effect is limited to forbidding governmental units from entering into PLAs and then forcing the terms and conditions found within on bidders, contractors, and subcontractors.” Holding that “the act furthers Michigan’s proprietary goal of improving efficiency in public construction projects, and the act is no broader than is necessary to meet those goals,” the court concluded that “the law is not preempted by the NLRA.”
- Disclaimers -
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