A friend came to me with a question regarding a case he was working: “can a public owner require that bidders use a specific brand name product?”  “Of course not,” I said “proprietary specifications are illegal.”  Or, at least that’s what I assumed.  To my surprise, the law in the Commonwealth of Pennsylvania is not as clear as it is in other jurisdictions.

What is a proprietary specification?

A proprietary specification lists a product by brand name, make, model and/model that a contractor must (shall) utilize in construction.  A basic example of a proprietary specification would state:

“Air Handlers shall be “Turbo Max” as manufactured by Chiller Corp.”

There are two problems with a proprietary specification (other than potentially being illegal): (a) they limit competition, and (b) invite steered contract awards.  They limit competition because it limits the type of material that can be used on the project.  In the example above, there could be equivalent air handlers available at a better price but the contractor could not use that lower priced product in its bid.  Thus, the taxpayers end up paying more for tile.  Also, contractors may not be able to secure a certain brand name product because of exclusive distribution agreements.  Again using the example above, contractor A’s competitor may have the exclusive distribution agreement with Chiller Corp.

Besides being more costly, this situation invites favoritism and fraud, which public bid laws are designed to prevent.  If the design professional that is drafting the specification knows that a certain favored contractor has the exclusive right to distribute a product, the design professional can draft the specification in a way that steers the bid to that favored contractor.

Federal Law

Most federal agencies prohibit proprietary specifications.  For example, with limited exceptions, FHWA regulations prohibit contracting state transportation agencies receiving federal funds from requiring the use of a patented or proprietary material, specification, or process.   Likewise, under FAR’s “Material and Workmanship Clause,”  “[r]eferences in the specifications to equipment, material, articles, or patented processes by trade name, make, or catalog number, shall be regarded as establishing a standard of quality and shall not be construed as limiting competition. The Contractor may, at its option, use any equipment, material, article, or process that, in the judgment of the Contracting Officer, is equal to that named in the specifications, unless otherwise specifically provided in this contract.”

New Jersey Law

Many states have also banned proprietary specifications.  In New Jersey (where I frequently practice), the Local Public Contracts Law bans local government agencies from using proprietary specifications.  However, on NJDOT projects that do not receive federal funding, proprietary specifications are not per se prohibited.  But, a contractor can request substitution of the specific product.

Pennsylvania State Projects

In contrast, Pennsylvania does not expressly address proprietary specification by statute.  However, under Department of General Services’ guidelines, which apply to state projects including PennDOT, proprietary specifications are strictly limited.  Section 205.1 of DGS’s Project Procedure Manual states:

“Specifications for DGS projects are “or equal” specifications, and products available from a single manufacturer, or a limited number of manufacturers, are not to be used in project designs. DGS requires at least three (3) manufacturers of an available product to be specified, but bidders may use equal products/manufacturers as approved by the Professional, as per the General Conditions to the Construction Contract.”

Pennsylvania Local Projects

Pennsylvania Municipal and County projects are not subject to DGS’s guidelines.  Instead, a patch work of statutes applying to Pennsylvania’s Byzantine system of Cities/Township of the First/Second/Third class, govern procurement at this level.  All of those statutes require that bids be awarded to the lowest responsive and responsible bidder.  However, none specifically restrict the use of proprietary specifications.

Therefore, bidders facing a proprietary specification at this level must rely upon the Pennsylvania common law public policy of assuring the best price possible for the taxpayers and guarding against favoritism, extravagance, fraud, and corruption in the awarding of municipal contracts.

What to do about it?

If you encountered a proprietary specification, whether on a Federal, New Jersey, or Pennsylvania contract, you need to act before the time of bidding or your claim may be barred by statute or waived.  When and how that objection is lodged depends on the project and contracting authority.  If the bids have been opened and a proprietary specification has resulted in you losing the award, the potential still exists to challenge the award but the burden could be higher.  Therefore, understanding how to spot a proprietary specification and what the law is in the area is the best chance at successfully challenging it.

Last week’s Boston Globe has a story about the recent dismissal of a criminal case against two Boston city officials for their involvement with an alleged union extortion scheme designed to pressure non-union businesses to give work to members of the local Teamsters Union.  (The reporters were kind enough to seek my comments for the article.)  The case in Boston is notable because its outcome diverges from similar cases brought in Philadelphia and New York, which resulted in convictions.

A.  Background on the Hobbs Act.

Federal indictments under the Hobbs Act, 18 U.S.C. Section 1951, for actions taken to “entice” non-union contractors and developers to hire union members is a subject matter that I have written about on this blog.  The reason for my interest is not only because I represent a number of merit shop contractors and developers (as well as union contractors) but because of several recent high profile cases indicting union officials for extorting contractors and developers into hiring union members.  Those in Philadelphia are aware of the indictments involving Ironworkers Local 401, which involved its use of “goon squads” and other tactics to obtain work for its members and signatory contractors.  That indictment ultimately lead to the conviction of several Ironworkers, including its President.  That case came on the heals of a similar case involving the Operating Engineers.

The Hobbs Act makes it a federal crime to extort or attempt to extort a business or individual engaged in interstate commerce.  However, the common understanding of extortion differs from the technical meaning of extortion found in the Hobbs Act.  Under the Hobbs Act “the term “extortion” means the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.”  (The reason for my highlighting of these terms will become clear in a minute.)

For years, because of a U.S. Supreme Court Case U.S. v. Enmons, the prevailing view was the unions and their officials were immune from liability under the Hobbs Act.  In Enmons, the Supreme Court explained that a Hobbs Act violation involves two things: (1) actual threatened force, violence, or fear (means) and (2) the obtainment of property of another (ends).  So, the means and the ends must be illegitimate before a Hobbs Act violation can occur.  The Court in Enmons reasoned that the property that was allegedly extorted was higher wages for union members and since the union had a legitimate claim to those wages it could not extorted “the property of another.”  The Court made clear that the union’s means “force, violence, and fear” could still be prosecuted under state law, but for a federal law to be broken the both elements would need to be met.

Subsequent decisions, including decisions in the Ironworkers and Operating Engineers cases, walked back the seemingly broad breadth of the holding in Enmons.  Several courts noted that Enmons should be limited to its facts.  Those being where a union was engaged in an active strike against an employer with whom it had an existing collective bargaining relationship.  Compared to a situation, such as with the Ironworkers and Operating Engineers, where there was no such relationship between the unions and the victims.

Now, as I discuss in the Boston Globe, the federal court’s decision to dismiss the indictments against the two Boston officials and the previous ruling by the 1st Circuit Federal Appeals Court could make it harder for federal prosecutors to indict union officials or it could just further clarify the contours of the Hobbs Act intersection with federal labor law.

B.  The Boston Teamsters Case: The Ends and the Means.

In United States v. Burhoe (1st Cir., 2017), the president of the local Teamsters union and an associate were indicted for extorting non-union businesses into employing Teamsters on projects.  After a six-week trial, the jury found them guilty, under the Hobbs Act and related federal charges.  The defendants appealed their convictions under the Hobbs Act and the 1st Circuit Court of Appeals overturned their convictions reasoning that their conduct in pressuring non-union firms to employ Teamsters did not rise to extortion under the Hobbs Act.

The Court reasoned that under the Hobbs Act both the ends and the means of the extortion must be unlawful.  Thus, as in Enmons, to be guilty under the Hobbs Act the defendant must have no legitimate claim to the property obtained and his means of obtaining it must also be wrongful.  The Court noted that threats of violence or physical harm are almost always a wrongful means under the Hobbs Act.  The Court also said threats of economic harm could be wrongful.  It becomes wrongful when the defendant has no legitimate right to the property sought.

The Court then examined the indictment as it related to the non-union firms.  The indictment alleged that the defendants extorted wages for imposed, superfluous, and unwanted labor through the threat of economic harm and physical harm to the company and others.  The Court then examined the underlying cases of extortion.  While in each case the union officials were aggressive and blunt and threatened a picket line, the Court noted that no bodily harm or property damage was threatened or occurred.

Defendants challenge to the conviction hinged on whether the trial court properly instructed the jury on extortion.  Defendants argued that the trial court should have instructed the jury that the labor was superfluous, unwanted, and fictitious.  In other words, the wages extorted (the ends) would have to be in return for no show jobs.  The Court reasoned that if the union members actually worked, there could be no Hobbs Act violation, at least when the pressure was limited to threats of picketing.  The Court held that picketing to pressure an employer to hire union members was protected under the National Labor Relations Act (this is not correct but it was not a central issue in the case).  Thus, the Court reasoned anytime a union set up a picket line to protest non-union work it could result in a Hobbs Act violation if the employer ultimately caved to the union’s demands.

C.  The Ironworkers and Operating Engineers Cases.

In contrast, the federal courts in the Dougherty and Larson cases reached different conclusions regarding the intersection of the Hobbs Act and the National Labor Relations Act.  These cases are also in contrast in two ways.  First, in both cases, the union’s means was threats of and actual violence and property damage (in the Doughtery case the Ironworkers were alleged to have burnt down a Quaker meeting house).  Second, neither court held that the wages extracted had to be for fictitious or no-show services for their to be a Hobbs Act violation.

The Larson case goes further and shows the divergence on the issue of a legitimate claim to property.  In Larson, members of the Operating Engineers were indicted under the Hobbs Act – and related federal criminal statutes, including RICO.  The indictment alleged that the union members sought to obtain wages and other property interests from non-union firms using the means of actual violence, sabotage of property, and threats.

The defendants moved to dismiss the indictment under Enmons arguing since the ends were legitimate the means were irrelevant.  The magistrate judge recommended dismissal of the indictment based on Enmons.  But, the district judge disagreed.

In contrast to the Burhoe ruling, in Larson the trial judge rejected the argument that flipping non-union jobs to union jobs was a legitimate union objective.  The trial judge succinctly framed the issue in labor union extortion cases stating:

 If the union acts in furtherance of a legitimate labor objective, the use of force or violence incident to the pursuit of that objective is not subject to Hobbs Act liability (although it might be subject to prosecution under other provisions). However, if a union’s objective is not legitimate, Enmons will not protect it from prosecution under the Hobbs Act.

As the Court explained, “[i]n a legitimate strike situation, the union has a lawful platform on which to seek higher wages and better terms for its members. However, when a union pursues agreements with new employers through primary tactics of violence, threats, and intimidation, it does not have a lawful platform on which to claim the property of the employer. The use of such tactics is therefore “wrongful” under the Hobbs Act.

D.  Do the means matter?

Burhoe’s ultimate conclusion that a union official does not commit extortion simply by threatening a picket line is not the problem.  In fact, that conclusion is probably correct.  The problem for prosecutors at least in the 1st Circuit is that it concluded that the wages extorted must be for fictitious work, at least in part. In Burhoe, the Court stated “It follows that the district court erred in instructing the jury that it could find extortion where the defendants sought to obtain “imposed, unwanted, superfluous or imposed, unwanted, and fictitious work” by using “fear of economic loss,” which encompasses picketing protected under the NLRA.”  The Court continued by explaining “the disjunctive construction impermissible relieved the government from having to prove that the work was “fictitious” and thus could have allowed the jury to find a violation merely because the union sought to turn around nonunion jobs to maintain the prevailing wage through such a threatened picket, and the employer did not want to use the union workers to perform the work.”

On one hand it could be said that under Burhoe is limited to its facts.  Thus, when the means are limited to threats of and actual “peaceful” picketing, then the government must show that the ends were for no-show work.  In other words, contrary to Enmons, the means do matter.  Larson may actually shed some light on this when it held that when a union is attempting to obtain work for its members it “may [not] use an unlimited array of coercive tactics to secure such an agreement with an employer.”

However, on the other hand, if Burhoe is limited to its facts, then the Court’s analysis does not make any sense because if the ends are legitimate property then, as Enmons holds, the means to obtain it, while potential violating other laws, does not violate the Hobbs Act.  So, it would not matter if the means were peaceful picketing or a threat to break the legs of an owner of a non-union firm.  Therefore, under Burhoe’s reasoning any conduct, including property damage or physical harm, that results in a non-union employer agreeing to hire union members is not punishable under the Hobbs Act.  As in Enmons, the violence to property and body may be punishable under state law, but the conduct does not violate the Hobbs Act.

Ultimately, this seemingly inherent contradiction in Enmons must be resolved by Congress or the Supreme Court.  Before then, case law suggest the means do matter.  Threatened an actual violence to person or property is going to be grounds to indict under the Hobbs Act, while aggressive behavior and threats of a picket line may prove more challenging.

Last summer, my pro bono representation of a group of University of Pennsylvania graduate students caused a bit of a brou-hah-hah among the SWJ‘s leading the unionization of Penn’s graduate schools.  (It also garnered me the most gracious complement ever from the American Federation for Teachers, who sent out a mass email calling me a “destructive force.”  I cannot thank the AFT enough for that comment it has been great for marketing.)

Late yesterday, it was learned that the AFT had withdrawn its petition to organize the graduate students at Penn.  News comes on the heals of similar actions at Boston College and Yale.  As much as I would like to think it was because of my “destructive force” abilities as a lawyer, alas, I had nothing to do with it.  The withdraws are a strategic attempt by the unions to prevent the National Labor Relations Board from overturning the Obama-era Columbia University decision that granted graduate students the right to organize.  By withdrawing the petitions, the unions hope to prevent an appeal which would offer the NLRB the opportunity to overturn Columbia University.  The unions appear to be content to play the long game and hope the current Republican majority make up of the Board changes in five years in which case they could continue unionization efforts of graduate students using the intact Columbia University precedent.  It is an interesting tactic and we will see how it plays out.  Of course, the NLRB can still its little used rule making authority to sua sponte overturn Columbia U.

There is a common misconception that all Philadelphia Public Works projects must be performed pursuant to a project labor agreement with various members of the Building and Construction Trades Council.  This common misconception is even shared by the current Mayoral administration, who I saw in a recent court filing testified under oath that “project labor agreements are required for all construction projects in Philadelphia with a value of at least five million dollars.”  (As is discussed below this is flat out false.)

No one has yet to step forward to challenge Philadelphia’s project labor agreement scheme.  However, if someone did, I think the challenge would be successful for three reasons.  First, contrary to the Mayor’s representative’s statement, there is no requirement that all projects in excess of $5 million be subject to a project labor agreement.  Second, Philadelphia’s project labor agreement excludes signatories to collective bargaining agreements with the United Steel Workers (USW) from participating,which violates public bid laws. Third, the exclusion of the USW, also gives rise to a challenge that federal labor law preempts the project labor agreement.

A. Background on the Philadelphia PLA.

Under a project labor agreement (PLA), a contractor wishing to perform work on a project agrees to be bound by the terms and conditions of employment established by the public owner and certain construction unions.  Each PLA varies, but typically PLA’s will require a contractor’s employees to become members of a union – if they are already not members – in order to work on a project or will require a contractor to hire labor from a union hiring hall.  PLA’s are controversial because they exclude non-union contractors from performing work on a project subject to a PLA, unless of course that contractor agrees to become “union” for purposes of that project. For reasons beyond this blog post, a merit shop contractor would be crazy to do that.

The “Philadelphia PLA” that Mayor Kenney believes is required for all public projects over $5 million was instituted by Mayor Nutter through a 2011 Executive Order (Executive Order No. 15-11, Public Works Project Labor Agreements).

B. The Language of the Philadelphia PLA.

Few people, including the current Administration, have apparently actually read the Executive Order.  If they did, they would realize that not only does it not require PLA’s it expressly states that they are not required.  This subject is made clear in Section 3(c) of the Executive Order:

What it does require are certain prerequisites before a public project is subject to a PLA.  Prerequisites that the current Administration and the one before it have ignored.

According to the Executive Order before any project is subject to a PLA, it must be reviewed to determine if a PLA would be appropriate for that particular project.  The review must be performed by the City Agency procuring the contract and a written finding concerning the appropriateness of a PLA must be forwarded to the Mayor’s Office.

 

 

My understanding is that these City Agency evaluations backed by a written finding have never been done for any project in Philadelphia subject to a PLA.  (However, if anyone has seen such a finding, please forward it to me.)

Moreover, the written recommendation that the City Agency makes must go further than simply saying “we think a PLA is good.”  The Executive Order requires the Agency to “describe how it will benefit and enhance the interests of the City on the basis of costs, efficiency, quality, safety, and/or timeliness” and “shall specifically address” a number of other factors, including, safety, costs, dispute resolution, the need to skilled labor, and “the opportunity to provide significant employment opportunities for qualified City residents, including minority males and women, and for women – and minority owned businesses.”  Basically, the exact opposite of the demographics of the unions in Philadelphia.

Once an Agency makes this written determination, the Mayor’s Office is supposed to review it and consult with the Agency.  The City is also required establish a PLA “Advisory Committee” which is supposed “monitor and evaluate” PLA’s and “make periodic evaluations to the Mayor regarding the use of [PLA’s].”  To my knowledge this Advisory Committee does not exist.

C. Challenge Pursuant to Public Bid Laws.

Because Philadelphia is not following its own law before instituting PLA’s, any project that is advertised as being the subject of a PLA is susceptible to a challenge. If a provision in bidding specifications denies the public the benefit of a fair and just competitive process, a taxpayer may bring a challenge.

D.  The USW Issue.

The model PLA which is attached to the Executive Order states that the collective bargaining agreements of members of the Philadelphia Building and Construction Trades Council (BCTC) shall govern, notwithstanding the provisions of Local or International Agreements which may differ.  Not every union is a member of the BCTC.  Notably, the USW is not.  Despite the name, the USW does not only represent steelworkers.  In fact, they represent construction workers of varying trades.

A contractor signed with the USW wishing to bid on a Philadelphia Public Works project, finds itself in an irreconcilable predicament.  If it agrees to the PLA, it will be in violation of its collective bargaining agreement with the USW which already governs the terms and conditions of its employees’ employment.  Therefore, it cannot agree to be bound to another union’s agreement.  Thus, Philadelphia PLA has the effect of excluding contractors who have CBA’s with the USW.

Pennsylvania public bid laws state that a public agency cannot exclude bidders from bidding on a project by “imposing conditions on one prospective bidder, which are not imposed upon all.”  Requiring a a signatory to the USW to breach its CBA with the USW imposes such a condition.

Excluding the USW posses another issue.  Under the National Labor Relations Act, employees have the right to form or be represented by a union.  Under the Act, if the union is properly designated as the employees representative, an employer must deal exclusively with the union.  Therefore, the Philadelphia PLA is in conflict with federal labor law.  Why?  Because a USW member cannot work on a Philadelphia Public Works project and be represented by the union of its chose.  Also, a USW contractor would be forced to ignore the USW as the bargaining agent of its employees in order to work on a Philadelphia project.  If a state or local ordinance has this effect, the Supreme Court has held it is preempted by the National Labor Relations Act.  The Philadelphia PLA appears to have that effect.

 

 

During a recent review of the NLRB dockets, I came across an interesting filing.  The Sheet Metal Contractors Association (SMCA), who is the multi-employer association that bargains with Sheet Metal Workers Local 19.  Local 19 has apparently filed an unfair labor practice charge against it.  The docket is scant on precise details but it appears to be an issue over SMCA refusal to bargain with Local 19’s .  Many collective bargaining agreements expire this year.  If Local 19’s is one of them it would likely expire on April 30.  The union’s charge could indicate problems between Local 19 and the SMCA over the terms of a new agreement.  If an agreement cannot be reached by that date, it could mean Local 19 will strike, which would impact several projects in Philadelphia.  This is worth keeping an eye on.

On construction projects owned by the Commonwealth of Pennsylvania, a contractor may make a claim with the Board of Claims.  But first, you must be aware of two limitations periods that could cause you to waive your claim if they are not met.

  1.  The six month limitation period.

The first limitations period that you need to be aware of is the six month limitations period.  Under the Procurment Code, a contractor must first file a claim with the contracting officer within six months of the claim accruing.  The Commonwealth Court has said that a claim accrues when (1) you are first able to litigate your claim, e.g., “when the amount due under the claim is known and the claimant is capable of preparing a concise and specific written statement detailing the injury,” and (2) the owner affirmatively and unequivocally notified you that it will pay you. Wayne Knorr, Inc. v. Dep’t of Transp., 973 A.2d 1061, 1087–88 (Pa.Cmwlth. 2009).

Thus, once you put in a claim for payment and the Commonwealth affirmatively denies your claim, you have six months to file a claim with the contracting officer contesting the refusal to pay.  If you do not make a claim with the contracting officer within six months, you waive your claim plain and simple.

 2.  The 15/135 day limitations period.

Like I said, but wait there’s more.  Once you make your claim with the contracting officer, he or she has 120 days to make a decision on the claim.  Once the claim is denied, you have 15 days from the mailing date of the denial to make a claim with the Board of Claims.  However, the code also says that the claim must be made within 135 days of first making the claim with the contracting officer.   For example, if you make a claim on June 1 and you receive no decision from the contracting officer and no extensions have been agreed to, then you must make your claim with the Board of Claims by November 6.  You cannot sleep on your claim with the contracting officer.

Again, if any of these deadlines are missed you are deemed to have waived your claim and even meritorious compensable claims will be dismissed.

Ah yes, retainage, what could represent your profit on a project and something frequently abused by owners on private and public projects alike.  Fortunately, Pennsylvania law offers public works contractors some protection from retainage abuse.  The Public Prompt Payment Act dictates when retainage can be withheld and when it must be released.  Agencies that fail to follow the Prompt Payment Act’s retainage rules can end up owing you interest, penalty, and attorneys fees.

The Prompt Payment Act’s Retainage Provisions

The Prompt Payment Act deals with retainage in two sections: 3921 and 3941.  Section 3921, 62 Pa.C.S.A. 3921, authorizes a government agency to withhold retainage.  But, in general, it limits the amount of retainage withheld to 10%, which is industry standard.  However, Section 3921 states that at 50% completion, the government agency must release 50% of the retainage withheld and retainage must be reduced to 5%.   There are a two caveats.  First, in order to receive the retainage reduction, there must not be a reason to hold retainage at 10%.  Second, where the Department of General Services (DGS) is the owner, retainage is capped at 6% and must be reduced to 3% at 50% completion.

Section 3941, 62 Pa.C.S.A. 3941, the project’s architect or engineer must make a final inspection of the work within 30 days of your final payment request.  If the work is found to be substantially complete, the government agency is required to make payment within forty-five days.  If the architect or engineer finds certain work is incomplete, it must identify that work in detail and the government agency may withhold 1.5 times the amount to complete that work.  The architect and engineer must also identify the estimated cost to complete the work.

The Prompt Payment Act’s Retainage Penalties

Under Section 3941(b), 10% interest is tacked on to retainage that is not paid within forty-five days of substantial completion.  Under Section 3935, if the government agency is found to have withheld retainage in bad faith, it may be liable for a additional interest at 1% per month and reasonable attorneys fees.

Payment of Retainage to Subcontractors

The Prompt Payment Act contains an important provision regarding payment of retainage to subcontractors.  Prime contractors are required to pay retainage to subcontractors within twenty days of receiving retainage from the owner.  Therefore, if you are a subcontractor and have not received at least a 50% retainage reduction and you know the project is more than 50% complete, you need to start asking questions of the prime contractor.

 

Much of the Eastern United States is just now emerging from a historic two week cold snap.  In much of the Northeast and Mid-Atlantic, the temperature stayed below freezing for 15 days straight.  Cities recorded the lowest temperatures in a quarter century.  Winter Storm Grayson reeked havoc along the Eastern Coast bringing snow to places like Charleston and a crippling blizzard to Boston.

The record cold snap also impacted the construction industry.  Delivery delays, the inability to apply weather sensitive applications (like cast in place concrete), and the unavailability of labor are just a few things that extreme weather can cause on a construction project.  If they happen at the wrong time, delays can destroy project schedules and make previous delays even worse. Delays cost money and can mean the difference between a profitable project from both the owner and contractors perspective.

In order to determine what relief you are entitled to because of the Little Ice Age’s impacts to your project, you need to determine three things.  First, is the delay compensable. Second, is the delay excusable.  Third, is the delay critical.

Is it compensable?

Many contractors contain so called “no damages for delay” clauses that limit a contractor’s right to recover for project delays to an extension of time only.  That means a contractor will be entitled to relief from the agreed upon substantial completion date but is not entitled to additional money for the delay.  There are exceptions to no damages for delay clause, as I discussed in this blog post, back in the day.  But, you need to prove those exceptions first.

Is it excusable?

Weather related delay are rooted in the common law rule of impracticability or impossibility of performance.  This means that the weather delays are only compensable when they are so unusual that neither party could have reasonably anticipated them at the time of contract.  Of course, it is reasonable to assume that one should expect cold weather in the Northeast during the winter.  However, what about extreme cold weather for two weeks, like we just had.  Better yet, what about the extreme cold in the Southeastern Conference portion of the United States?

Where weather related delays often become an issue is when they compound other delays.  For example, a general contractor may have anticipated cold weather in the winter when it agreed to the schedule.  However, it did not anticipate that other project delays would cause its ready mix contractor to have to pour in the winter rather than the fall, as it was anticipated.  In that situation, the delay because an issue both for the general contractor and the subcontractor.

Is it critical?

From the prime contractor’s perspective, the delay must be on the critical path for it to matter. For example, a delay by an interior painting contractor will probably not impact the schedule to a large extent.  However, a contractor whose completion is critical to multiple follow trades, like a structural steel contractor, is almost certainly on the critical path.

What about notice?

Assuming the delay is excusable and it is critical, you need to assure that you are giving proper notice to your counter party.  Even if your contract contains a no damages for delay clause, you still want to seek an extension of time to avoid a liquidated damage claim.  Many contract, however, require you to give notice within a certain amount of time of first learning about the delay.  That means if the weather has impacted your schedule and you believe you will require additional time to perform YOU NEED TO GIVE WRITTEN NOTICE IMMEDIATELY.  Otherwise, you will end up waiving your right to claim additional time or additional compensation.

 

The strategy to avoid union salts is rather simple.  But, simplicity does not mean easy.  The process requires discipline.  A salt is a paid union organizer that attempts to gain employment with a non-union employer for the purpose of either (a) organizing the employers workforce or (b) bringing a costly unfair labor practice charge for discriminatory hiring practices.

A “covert salt” is someone who conceals his union affiliation in order to gain employment with a non-union employer for the purpose of starting a union organizing campaign.  Actually, conceal is an understatement.  Covert salts actively lie to gain employment with a non-union employer.  Covert salts apply for jobs under false names, social security numbers, and use bogus resumes.

An “overt salt” is someone who proudly announces his union affiliation for the opposite reason.  He hopes you do not hire him because of his union affiliation.  The National Labor Relations Act prohibits employers from refusing to hire someone because of his or her union affiliation or sympathizes.  Unions count on novice employers to make the mistake of believing that they can refuse to hire a union member if they are a non-union employer.  Even if the person applying for the job stated purpose is to organize your company, you cannot refuse to hire them on that basis.  If the National Labor Relations Board determines that you discriminated against an individual based on his union affiliation, it can order you to hire the individual and worse order you to pay the individual (who is also being compensated handsomely by the union) the salary you would have paid him if you had hired him.

Believe it or not, the Supreme Court has declared the practice of salting legal.

However, while the deck is certainly stacked in favor of the unions, employers can still avoid union salts.  But again, it takes discipline.  Why is discipline so important in avoiding union salts? Because the steps you take to avoid union salts must be uniformly applied.  Otherwise, a practice deployed only against a suspected salt will be evidence of your intent to discriminate.

  1. Show no animus towards unions.

First and foremost, if a overt salt applies for a job position and they are remotely qualified, you should interview him.  However, the person conducting the interview cannot show any animosity towards the union whatsoever.  A good initial interviewer would be someone that has the personality of drywall.  Union salts are trained professionals.  The will attempt to bait the interviewer into making a comment that proves your company has an animus towards organized labor.  The person performing the initial interview should be trained to keep it boring as heck.  Ask basic questions about employment history, skill level, desire salary, ect.  Any questions posed to the interviewer about unions should be met with a blank stare or vague reply.  By simply granting the covert salt an interview, you have significantly undercut the unions ability to bring a unfair labor practice charge against you.

    2.  Keep accurate records of ALL interviews.

The point is critical.  Why?  Because if the union files an unfair labor practice charge against your firm, you will be given an opportunity to convince the NLRB investigating office that the charge is meritless. If the agent agrees, no complaint will be filed.

It is important to keep records of all interviews not just interviews of overt salts because you need to be able to show uniform application of the interview process.  Employers may even consider the bold step on audio or video recording interviews.  However, before doing this you should confirm what your individual state law is on audio and video recording.  Some states require consent for the person being recorded.  (Stating that you record all interviews could be enough to scare away salts.)

It is also important to keep records of subsequent interaction with the overt salt.  Typical overt salts do not actually want to work for your firm.  Instead, they exist solely to trigger an unfair labor practice charge against you based on your alleged discrimination against them.  Knowing this, you can use some reverse psychology by actually offering the overt salt a job.  Usually, the overt salt offered a position will not call your office back.  However, that will not deter the union from filing an unfair labor practice charge anyway. But, armed with records that you attempted to contact the salt and the boring interview where you showed no emotion concerning unions, it becomes almost impossible for the union to have a valid salting charge.

3. Follow up with references.

For those not bold enough to offer the salt a job, then employment must be denied on some neutral basis.  Salts often fabricate resumes and employment history.  Therefore, you need to call each reference and alleged former employer and ask about the salt.  Of course, when performing this task, do not forget about step 2.  Make sure to keep records of your contact with former employers.  Also, this policy must be implemented with ALL applicants.  You cannot simply chose to call former employers of suspected union salts.  If the union salt’s references do not pan out or do not reply to your inquires (both highly likely) you can legally deny the salt employment because of your neutral policy of employing only those with positive feedback from former employers.  Again discipline is key, the policy has to be applied consistently and with every applicant.

 4.   Institute a dishonesty policy.

For those without the ability to conduct adequate reference checks on each applicant, a dishonesty policy provides another avenue to prevent the employment of a covert salt that lies.  This policy should be in writing and state that false information supplied to the employer on an application is grounds for immediate termination.  It should be disclosed to the applicant at the time of the interview.  I recommend having the applicant sign an acknowledgment of the policy.  However, it does not end with simply having a policy.  Remember the rule of uniformity.  The policy cannot only be invoked against overt salts.  Anyone who provides knowingly false information on an application has to be terminated and you need to be able to establish that you have terminated other based on this policy.

There are only a few of the steps you can take to prevent union salts from causing havoc.  Of course, I am not going to give away all of my countermeasures in this blog post.  But these are start.

 

Yes. There seems to be common misconception that a contractor, subcontractor, or supplier, has six months from its last day of work on the project to file a mechanics lien.  I frequently see mechanics liens whereby the claimant states “Claimants last day of work on the project was X.”  However, Section 1502 (49 P.S. Section 1502) of the Pennsylvania Mechanics Lien is clear that a lien must be filed within six month of “the completion of his work.”  Under the Lien Law, “completion of the work” is a defined term and means “means performance of the last of the labor or delivery of the last of the materials required by the terms of the claimant’s contract or agreement, whichever last occurs.”

This distinction is significant because it means a contractor, subcontractor, or supplier must complete all of the scope of work in its contract before it files a mechanics lien.  This also means that a contractor, subcontractor, or supplier must continue to work even if it is not being paid in order to maintain its lien rights.

The Superior Court has spoken on the issue and made this very clear.  In Philadelphia Const. Servs., LLC v. Domb, 2006 PA Super 184, ¶ 18, 903 A.2d 1262, 1268 (Pa. Super. Ct. 2006) (full disclosure I represented the owner-appellant in this case and argued that a contractor needed to complete all of its work before it filed a mechanics lien), the Court held that a contractor must complete its work in order to perfect its mechanics lien rights, even if the contractor is not getting paid.  As the Court held, the Lien Law “mandates an aggrieved subcontractor must serve preliminary notice prior to “completion of the work” and then finish the job so they can perfect the lien within four months of “completion of the work.””  The Court recognized that “such a mandate may seem fundamentally unfair because it forces a subcontractor to render full performance even when the other party already has breached the contract in order to be afforded the remedy of a mechanics’ lien.”  However, the Court also recognized the uniqueness of a mechanics lien, calling it an “extraordinary remedy” and, therefore, opined that the result was reasonable.

The takeaway?  From an owner’s perspective, if a contractor or subcontractor walks off a job because of non-payment (as was the case in Philadelphia Construction Services) and file a lien, preliminary objections should successfully strike the lien.  From the contractor’s perspective, you have to make the Hobbesian choice of working for free to perfect your mechanics lien rights or walking off the job and pursuing an ordinary breach of contract claim.