Supplemental Conditions

Construction Company Executives Indicted for Running Double Breasted Operation

Posted in Unions

The United States Attorney for the District of Massachusetts announced that it indicted two construction company executives for running what the Department of Justice calls  “a fraudulent “double breasted shop” scheme.”   The DOJ charged Christopher Thompson and Kimberly Thompson on 18 counts of mail fraud, one count of benefit fund embezzlement, and 18 counts of filing false documents with an ERISA fund.  A copy of the indictment can be found here.

The facts set forth in the indictment are not ground breaking.  One company, Air Quality Experts, Inc., was an asbestos abatement contractor established in 1987.  Air Quality was not a signatory to any collective bargaining agreement.  In 2005, the owners of Air Quality set up the creatively named AQE, Inc., which signed a collective bargaining agreement with the Massachusetts Laborers District Council.  According to the indictment, AQE operated out of the same office, used the same equipment, operated under the same management, and, critically, used the same employees, as Air Quality.  However, AQE did not submit fringe benefits for the members of the Laborers Union for the work they performed for the non-signatory entity, Air Quality.

While the facts of this indictment are not groundbreaking, the fact that the Department of Justice indicted the owners of the improperly established and maintained double breasted operation is tremendous.  Normally, an improperly established and maintained double breasted operation would result in a civil lawsuit by a union seeking to recover fringe benefits owed for work performed by the non-union entity.  While the civil liability in those cases can be significant, it never meant jail time for the owners of the double breasted firms.  Therefore, this case significantly ups the ante for firms that have double breasted operations, but who fail to properly maintain them.

There is nothing wrong or illegal about a double breasted operation per se.  In fact, both firms can even have common ownership.  However, they never can have common employees, common equipment, and common management.  That is what apparently did in the owners of AQE and Air Quality.

SOCIETY HILL PLAYHOUSE OF THE ABSURD

Posted in Construction Law

monorail-425x272The saga involving Toll Brothers’ Society Hill Playhouse project shows that something is rotten in the state of Philadelphia’s development process.  This rottenness has resulted in a project that is ultimately worse practically and aesthetically for the neighborhood.  Even worse, apparently the neighborhood is fine with this.

This story begins with Toll Brothers’ plans to demolish the Society Hill Playhouse and replace it with apartments.  The current zoning of the property allows Toll Brothers to build a four story multifamily building by right.  This means Toll Brothers does not have to request a variance from the Zoning Board of Adjustment to construct a four story building.  But, more on that later.  The economics of a four story building mean that it cannot have a dedicated on-site parking garage.  So, Toll Brothers sought to build a five story structure with indoor parking.  However, a five story structure would require a variance.  The process to request a variance is where the absurdity of this story unfolds.

Years ago, Philadelphia established a system that required developers to meet with neighbors to receive input on proposed development.  The reason for this was two-fold.  First, the City’s long outdated zoning code required almost all modern projects to obtain a zoning variance.  Rather than turning the ZBA hearing into even more of a circus than it already is, officials decided that it would be a good idea for developers to address concerns directly with neighbors before coming before the ZBA for a variance.  Second, in theory, it prevented developers from running rough shot over neighborhoods.  However, the road to hell is paved with good intentions.

A well intentioned process to have developers meet with neighbors about development has spawned a quasi-governmental leviathan known as “registered community organizations.”  RCO’s, as they are known, are the key to obtaining a zoning variance.  Many RCO’s are well-organized and come complete with their own zoning committees and zoning boards.  Many RCO’s require developers to present their projects before these zoning committees before it will support a project.  The problem with RCO’s is that they are beholden to no one and are not required to follow any established procedures.  RCO officials are not elected so they cannot be held accountable at the ballot box.  Moreover, RCO meetings are not required to follow any sort of established procedures.  If you feel you are treated unfairly or unequally before an RCO, too bad.

While the law does not explicitly require the support of a RCO in order to obtain a variance, economics does.  This is because our system allows anyone with an axe to grind to appeal a decision of the ZBA.  So, even if a developer is successful in obtaining a variance for a project from the ZBA, the RCO or any neighbor can file an appeal with the Court of Common Pleas which asks the Court to overturn the ZBA’s decision.  If the RCO is not successful at the trial court level, it can appeal it to the Commonwealth Court and from there the Pennsylvania Supreme Court.  This process can take years and a project is held in limbo while the matter works its way through the system.  Therefore, it is important for a developer to propose a project that the RCO agrees with.  This is where the problem lies.

Toll Brothers presented its five story project that included indoor parking to the Washington Square West RCO.  However, neighbors raised objections to the plan because of the height of the proposed structure.  Toll Brothers tried to work with the neighbors to ally their concerns, however, the neighbors (who are probably opposed to any development in any form)knowing the power they hold still objected.  So, rather than have its proposed five-story project held up on appeal for years, Toll Brothers decided to simply build what it was allowed to do by right.  The absurd mentality of the anti-development luddites is best summed up by this quote from Jared Brey’s story about the project:

“I support the city’s goal of reducing the cars, the congestion and the terrible expense of maintaining the roads and everything that goes with that,” she said. “Full disclosure: we have a parking space. But if we didn’t have a parking space we wouldn’t have a car.”

In other words, it’s ok for me to have parking and a car, but not you, so I will object to your project. (I bet this person also supports laws restricting “carbon emissions” but has Bigfoot sized carbon footprint.)  As a result, 80 new cars will be added to the on street parking in the community, which lies just North of already congested South Street.  Furthermore, the new project does away with a setback and more aesthetically pleasing brick façade cladding.

Ultimately the neighborhood fell victim to the runaway power of RCO’s and neighbors to arbitrarily stop a project they do not agree with for any reason.  Toll Brothers tail is not isolated and the result here will repeat itself unless the process is fixed.

So what can be done?  First, RCO officials must become elected officials who must answer at the ballot box for their decisions.  Second, the City must establish formal written rules of procedure that apply to RCO meetings regarding development project.  Third, the hurdle to appealing a ZBA variance needs to be raised substantially and we need to consider requiring an unsuccessful appellant to pay for a developer’s attorneys fees in defending the appeal.  Only then can some sanity be brought to the way properties are developed in the City.

Court Affirms Injunction Against Mass Picketing …. For Now

Posted in Picketing, Unions

The Pennsylvania Superior Court gave general contractors and non-union real estate developers a early Christmas gift and a bit of positive news going into the New Year in a recent decision that upheld (for the most part) a trial court’s preliminary injunction enjoining labor unions from engaging in mass picketing and gate blocking of a construction site.

In Turner Construction v. Plumbers Local 690 (the case name contains a hyperlink that will take you to a copy of the opinion), the Pennsylvania Superior Court was asked to consider whether a preliminary injunction that prohibited picketing within twenty-five feet of the entrance to a construction site and limited the number of picketers to five was overly broad.  In short, the Superior Court held that the twenty-five feet restriction was a reasonable condition to prevent the picketers from blocking ingress and egress to the site.  However, the Court held that the restriction that limited the number of picketers to five was an unreasonable restriction on the picketer’s First Amendment rights.

The case is important for general contractors using both union and non-union subcontractors and real estate developers for two reasons. First, it reaffirms when a trial court may issue an injunction against a labor union’s picketing activity.  Second, it provides guidance on how far a trial court may go in restricting a union’s picketing.

An abbreviated version of the facts is as follows.  Turner was the general contractor on a project owned by Children’s Hospital of Philadelphia that was being built in Montgomery County.  Turner subcontracted with both union and non-union subcontractors.  However, its plumbing subcontractor was a non-union firm.  Members of Plumbers Local 690 began picketing the site to “protest” the horror of a non-union firm performing work on the project.  One day the Plumbers held a rally at the site which blocked anyone from entering the project, prevented deliveries, erected the ubiquitous inflatable rat, and trespassed onto the project. The local police were called and responded. (However, they did not do much concerning activity that would have landed you or me in jail.)  Turner immediately filed a complaint with the Montgomery County Court of Common Pleas seeking an injunction preventing such activity.  As usually, the union had no defense to its clearly illegal activity and agreed to a stipulated preliminary injunction.  That injunction prohibited picketing within 25 feet of the project’s entrance and limited the Plumbers to five total picketers.

Typically, the Plumbers ignored the court’s injunction.  Then, the Plumbers held a “rally” with two other unions, the Sprinkler Fitters and Insulators.  The rally had over 180 participants.  The 180 participants blocked the project’s entrances and prevented deliveries.  The participants even struck a festive tone and erected a tent with a cooler and food right in front of the entrance (Note: I have noticed that the refreshment tent is a picketing trend.  The coffee tends to be very good and the pretzels fresh.  Also, why not replace the rat with a band?)   The local police and Montgomery Sheriff’s Department were called to intervene but they would not dampen the revelers’ mood and the project ground to a halt.

Thereafter, Turner moved to amend its complaint to include the two unions who participated in the rally and sought a preliminary injunction against them as well. After a hearing on the matter, the trial court entered an injunction against the the Sprinkler Fitters and Insulators unions.  That injunction extended the original injunction to those unions.  In doing so, it limited the total number of picketers from all three unions to 5 (or as the Superior Court expressed 1.66 picketers per union).   The unions appealed.

On appeal, the Superior Court addressed the following issues:

1.  Did the union’s activities amount to a “seizure” under Pennsylvania’s Anti-Injunction Act?

2.  Was the injunction overly broad in violation of Pennsylvania’s Anti-Injunction Act?

Injunctions Under the Pennsylvania Anti-Injunction Act

Under Pennsylvania’s Anti-Injunction Act, courts are prohibited from issuing injunctions enjoining activities arising out of a labor dispute, unless one of the enumerated exceptions applies.  One exception is when a labor union “seizes” an employer’s plant.  Commonwealth Courts have repeatedly held that a seizure occurs when a labor union’s actions block lawful ingress and egress into a project.  Relying on a body of case law, the Superior Court ruled that the unions’ actions amounted to a seizure of the project thus excepting the matter out of Pennsylvania’s Anti-Injunction Act.  Given the well settled law in this area, this part of the Court’s decision was not a surprise.

However, the Court then clarified what is an apparent area of confusion.  It held that when obtaining an injunction against mass picketing that blocks access to a project, the court should apply general equity rules rather than the more stringent rules from an injunction set forth in the Anti-Injunction Act.

Moreover, and perhaps more importantly, the Superior Court held because the Anti-Injunction Act does not apply to mass picketing injunctions, the restrictions of when an injunction can apply listed in Section 206f also do not apply.

The Breadth of the Injunction

The Court then addressed whether the injunction’s prohibition on picketing within twenty five feet of a gate and limitation on the number of picketers unnecessarily impinged on the union’s free speech rights.  First Amendment considerations are always present when seeking to enjoin picketing.  Court’s must balance a party’s right to protest a grievance, albeit through unsavory and annoying means, with a party’s property and personal rights.  Thus, any injunction must be narrowly tailored to achieve the purpose of maintaining order.  As to the distance restriction, the Court held that it was narrowly tailored and reasonably necessary to prevent the unions from blocking access to the project.  However, as to the number of picketers, the Court held that it was overly broad and unnecessary restricted the union’s free speech rights.  The Court did not dissolve the injunction.  Rather, it remanded the case to the trial court to tailor a less restrictive number of picketers to achieve its goals.  The Court does not state the minimum number of picketers necessary to pass the restrictive test.

The Future of the Decision

While this decision is important, it may be short lived.  The unions have already asked the Superior Court to rehear the case, en banc, that means in front of all 9 Judges instead of 3.  If that request is denied or if the en banc panel reaches the same decisions as the 3 judge panel, then the unions will no doubt appeal it to the Pennsylvania Supreme Court.  That is where things get interesting.  This week 3 new justices will be sworn in to the Pennsylvania High Court which will tilt the balance of power on the Court 4-3 in favor of Democrat judges.  The 3 new Justices were heavily supported by organized labor in their election efforts.  What impact, if any, on an appeal of this case will have to be seen, but it cannot be ignored.

The Take Away (for now)

  • Pennsylvania courts can issue injunctions prohibited picketing that blocks entry to a project.
  • Pennsylvania courts can limit the scope and location of the picketing to achieve the goal of maintaining access to the project.
  • Normal equity rules apply in deciding to issue a preliminary injunction enjoining mass picketing at project gates rather than the more restrictive test articulated in the Anti-Injunction Act.

 

Is Philadelphia’s New (and Old) Ban the Box Ordinance Constitutional?

Posted in Construction Law

A twitter follower recently posted an interesting question “How is Philadelphia’s new ‘ban the box’ law constitutional?”  So called “ban the box” laws, prohibit employers from asking job applicants about criminal convictions during the job interview process.  In 2011, Philadelphia passed a “ban the box” law that prohibited private employers from asking applicants about or requiring applicants to disclose any criminal convictions in the application process or during the first job interview.  The law only applied to employers of 10 or more.

Last week, Mayor Nutter signed into law a bill expanding the breadth of Philadelphia’s “ban the box” law.  First, the new law applies to virtually all employers because it applies to any employer of “one or more” employees.  Second, in addition to banning an employer from asking questions about prior convictions during the initial interview, it bans employers from asking about convictions until after a conditional offer of employment is extended.  Moreover, employers must ignore convictions occurring more than seven years ago.  (So, say hello to the rapist in the next cubicle, just don’t ask him about his rape conviction!)  For a complete run down of the new rules, check out the blog post from employment law gurus Littler.

Philadelphia is one of several municipalities and states that have passed “ban the box” ordinances in the last few years.  However, I am not sure any go quite as far as Philadelphia’s new ordinance.  Proponents of these laws claim they are anti-poverty initiatives aimed at bringing felons into the workforce and offering them employment. Opponents believe that these rules are simply the by product of the left wing mindset that refuses to confront uncomfortable truths and refuses the see the world as it is.

But I digress, back to the constitutional question.  Employers have the same First Amendment right to free speech as individuals.  Prohibiting an employer from asking certain questions is a restriction on speech.  Whenever a law seeks to restrict a fundamental constitutional right, like free speech, Courts will apply a strict scrutiny test to the law. Under that test the law will survive only if it is narrowly tailored to advance a compelling state interest.  If the Philadelphia’s ban the box law were ever challenged, it may not survive strict scrutiny because the City would bear the burden of showing that its restrictions actually would advance its interest in gaining employment for criminals. Moreover, the law is not narrowly tailored in that it prohibits a wide range of speech during the application and interview process.

We will have to see if a brave employer challenges Philadelphia’s new law or if Philadelphia will be permitted to treat the Bill of Rights as a menu of rights it can choose from rather than a collection of rights guaranteed to all citizens.

 

House Passes Game Changing Bill for Vet Owned Construction Firms

Posted in Disadvantage Business Enterprises (DBE)

Yesterday, the House of Representatives – by a wide margin-  passed the “Fairness to Veterans for Infrastructure Investment Act of 2015.” Simply put, the Bill amends the DOT DBE regulations to include veteran owned small businesses (VOSB) within the definition of disadvantaged businesses.  If this Bill is signed into law, this means that VOSB’s could be used towards a prime contractors DBE hiring goal on projects receiving any form of DOT funding assistance.

This change in the law is something I have long petitioned for.  This Bill opens the door to lucrative subcontracts to veteran owned businesses.  By creating a new pool of eligible firms, the Bill also helps prime contractors, who often struggle to meet qualified minority and women owned firms, in meeting their DBE subcontractor goals.

While the federal government has long maintained rules giving preference to veteran owned firms, the breadth of those rules was limited mainly to construction projects owned by the Veteran’s Administration.  This Bill gives veteran owned firms preference on any project receiving some form of funding through the DOT.  These project include airports, transmit systems, and highway projects.

UPDATE – City Council Revises Bill Requiring Notification to RCO’s

Posted in Construction Law

In my previous post, I discussed proposed legislation that would require notification and meetings with RCO’s even when a “by-right” permit is issued.  I understand that the Bill has been amended.  (A copy of the revised bill is available here: Bill No. 15064301, As Amended (1).)  Under the amended Bill, developers will NOT be required to meet with an RCO even for by right permits.  However, the Bill still requires L&I to:

“Send by email to all Registered Community Organizations and
all councilmembers a notification of the zoning permit that
includes the date of issuance, the name of the permit holder, and
the address, zip code, and council district of the permitted
property.”

While this is significantly better than requiring a meeting with the RCO, the problem still remains that an RCO or City Councilmember can unnecessarily hold up a by right permit by filing an appeal with the Court of Common Pleas.  Therefore, the Bill remains superfluous.  The RCO and City Councilmember are still involved with the by right permit.  If so what is the purpose of the zoning code?  Does by right mean by right or just by not having to go to the ZBA?

Philadelphia City Council Moves to Scrap Zoning Code and Private Property Rights

Posted in Construction Law

MarxAny developer unlucky enough to need a zoning variance in the City of Philadelphia knows it is an arduous process. Needing a zoning variance means your project is not in compliance with the zoning code and you essentially need an exemption.  One of the first steps in the process is presenting your project to the Socialist Registered Community Organization, which consists of a group of un-elected individuals who more or less tell you how to build your project – despite having no development experience themselves.  Moreover, if the RCO politburo simply doesn’t like the developer no amount of compromise will garner their support.

On the other hand, sometimes developers propose a project in full conformity with the zoning code (the law) and obtain what is known as a “by right” permit to build.  It is known as a by right permit because the zoning code grants you to the right to construct what you are proposing on your property.

The general purpose of zoning codes is to set out an overall plan for a community where most projects are built by right – and thus according to the plan – and projects by variance are the exception.  For many years, this was nearly impossible in Philadelphia because the zoning code had not changed since the 1950’s.  So, the plan that would have to be followed was one for an industrial city rather than the modern city we have become.  In 2012, after many years of hard work by a dedicated group of volunteers, Philadelphia overhauled its zoning code with an eye towards increasing by right building that suited the City’s 21st Century development plan.  However, City Council recently introduced legislation to scrap all of that hard work.

On Monday, City Council’s Rules Committee moved legislation to the floor of City Council that would require developers (or any property owner for that matter) to appear before the RCO cabal even when they have THE RIGHT under the zoning code to build what they are proposing on their property.  If this legislation passes, the zoning code is effectively rendered meaningless because a developer would still need to obtain the permission of the RCO before it could construct a project that the zoning code grants it a right to build.

How could an RCO be permitted to nullify the zoning code?  Because for $100 an individual or an RCO can appeal a building permit issued by the Department of License & Inspection even when that permit is issued by right.  In other words, the RCO can file an appeal with the Philadelphia Court of Common Pleas saying that L&I was wrong to issue the permit and that the Court should supplant its judgment for that of the plan inspector that issued the permit.  If the RCO is unsuccessful at the Court of Common Pleas, it can appeal the decision to the Commonwealth Court and, if it is unsuccessful there, it can file an appeal to the Supreme Court.  Then, if it is lucky, two years after it was issued a permit to build what it had the right to build on property that it owned, a developer can move forward with its project.

I appreciate – but do not entirely agree with – the process that requires a developer to present its project to the community when it is asking for an EXEMPTION from the zoning code.  But, requiring a developer to obtain permission from the “community” before it proceeds with developing its private property according to the law, leads me to wonder if the concept of private property even exists in the minds of some of our elected officials in Philadelphia.

 

My Comments to the Media

Posted in Unions

In the past week, members of the media greatly overestimated my legal abilities and thought they were sufficient enough to quote me in recent articles.  If you care to read them they can be found by clicking here and here.  (One of the reporters recorded our interview and I am happy to say I don’t sound like a complete dunce.)

What the Bill Removing Exemptions for Union Violence Means for the Construction Industry

Posted in Unions

In a move that I never would have expected, Pennsylvania Governor Tom Wolf signed into law HB 874 which removes exceptions to the offenses of stalking, harassment and threatening to use a weapon of mass destruction from those involved in labor disputes.  This move is shocking because Big Labor heavily supported Governor Wolf’s election campaign and the bill itself was opposed by nearly all Democrats in the Pennsylvania Senate.

As I have argued, the exemptions from prosecution for the crimes of stalking and harassment had become perverted from there original intent.  Passed when the labor movement was in its nascency, the exemptions were meant to prohibit criminal codes from being used to thwart organizing efforts and chill protected speech.  However, over the years the exemptions moved from being a shield to a sword that (much like the Supreme Court’s Enmons decision) organized labor wielded in conducting a host of objectionable – and now criminal – actions, such as following their adversaries’ children to school, videotaping them getting on the school bus, and outright assaulting non-union managers.

A favorite slogan of regressives progressives in passing laws is “common sense.”  Typical that slogan is used to justify them taking away more and more of your rights.  However, with the signing of HB 874 a progressive has actually done something that is actually common sense.  HB 874 makes it no more difficult to join a union or organize a work place to become union, and union members can continue to protest non-union companies vocally and visibly.  What they cannot do is engage in conduct that has no place in any civil society, which, indeed, makes common sense.

Pa. Senate votes to close loophole on union intimidation

Posted in Construction Law

The Philadelphia Business Journal reports, that Pennsylvania State Senate approved a measure that eliminates a loophole in Pennsylvania’s Crimes Code which prevents law enforcement from intervening in situations involving stalking, harassment and threatening someone with weapons of mass destruction if the perpetrator is a party to a labor dispute.

The Pennsylvania State Senate approved a measure that would eliminate a loophole in Pennsylvania’s Crimes Code that prevents law enforcement from intervening in situations involving stalking, harassment and threatening someone with weapons of mass destruction if the perpetrator is a party to a labor dispute.