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.

 

A recent New York Times article about the unionization of digital media companies like Vox, (the now defunct) Gawker, and Thrillist provides important lessons for companies concerned about unionization, not just those in the digital media niche.

Employers should pay attention to the demographics of these firms.  Their employees are young and college educated.  Given those demographics, the move towards unionization is not surprising.  A Pew Poll found that at least 55% of so called millennials are receptive to unions. If one employee’s comments from the article are any indication, the employees have taken the union bait hook, line, and sinker.  The employee is quoted as saying she supported the union because it will bring “transparency on pay, having a decent pay scale that allows a ladder of sustainability where you can support yourself on such an income, and having due process and a guarantee of severance in the case of layoffs.”  The article also notes that the employees at these firms sounded a common (yet false) refrain when it comes to unionization – the belief that it would lead to better wages, benefits, and job stability.

Notice how the employee described what the union could offer.  Words like “transparency,” and “sustainability,” are the buzz words of a generation and show up in any marketing effort tailored towards millennials.  Union organizers know that the generally held ideals of this generation present fertile ground for their message.  As your workforce skews younger, how do you counteract an organizing message to a ground that is predisposed to receive it favorably?  By simply telling the truth.  The union cannot delivery on what they are promising.  There is no easier place to start then the claim that unionization will lead to job security and better wages.

   1. Job stability and security.

I have no idea why these employees think that having a collective bargaining agreement will make it less likely that they will be laid off.  If anyone knows of a CBA, that prohibits layoffs send it to me.  Sure, there are certain agreements that contain grievance provisions that an employee can invoke if they believe they have be wrongfully terminated, but in the interim they are still laid off.  Ditto with the guarantee of severance upon layoffs.

    2.   Unionization does not lead to better wages and benefits.

Unionization will lead to a pay raise is a tried and true organizers tactic.  The truth is that unionization can result in better, worse, or the same wages and benefits. A successful union vote guarantees only one thing – negotiating.  It does not result in the employer signing a CBA.  Employees erroneously think that their current wage and benefit package is the floor from which these negotiations begin.  This is false.  The truth is that at the bargaining table the parties are working from a clean slate.  Those negotiations can lead to wages and benefits that are better, worse, or the same as what employees currently have.  Furthermore, during negotiations, wages and benefits frozen.

Millennials have been exposed to anti-free market drivel since grad school.  So, employers cannot wait until a petition for election is being circulated to start telling their employees the truth.

 

The United States Court of Appeals for the 5th Circuit has been asked to review OSHA’s twenty year old “controlling employer” policy.  As many contractors are surprised to learn, under OSHA’s controlling employer policy, you can be given an OSHA citation even when your own employee is not exposed to the alleged hazard.

A.  The Controlling Employer Policy

OSHA’s current controlling employer policy has been effective since 1999.  That policy applies to multi-employer worksites, which means virtually all construction sites.  Under the policy, OSHA can cite the creating, exposing, correcting, or controlling employer.  A creating employer is one who creates the hazard to which workers are exposed.  The exposing employer is one who permits his employees to be exposed to the hazard, whether it created the hazard or not.  The correcting employer is one who is responsible with correcting known hazards. Finally, the controlling employer is one “who has general supervisory authority over the worksite, including the power to correct safety and health violations itself or require others to correct them.”  Most general contractors and CM’s are controlling employers.

Under OSHA’s policy, a contractor’s OSHA safety obligations hinges on whether it is a creating, exposing, correcting, or  controlling employer.  The creating, exposing, and correcting contractors obligations are fairly straightforward.  However, the controlling contractors obligations are more nuisanced.

If an employer creates a hazardous condition, it must immediately and effective steps to keep everyone away from the hazard and notify the party responsible for correcting the hazard.  If the creating employer is also responsible for correcting the hazard, then it should immediately take steps to correct it all while creating folks away from the hazard.  Pretty basic.

If the employer is the exposing employer, then a normal OSHA citation analysis applies.  The employer will be cited for exposing its employees to the hazard and OSHA must show that (a) the employer knew or should have known of the condition; (b) that the specified OSHA standard applies; and (c) that the employees were actually exposed to the hazard.

If the employer is the correcting employer, then, as common sense would suggest, it should correct hazards that are made known to it.  Also, the correcting employer should regularly inspect the site to make itself aware of hazards that it could correct.

The controlling employers duties are more subjective.  OSHA admits that the controlling employer’s “duty of reasonable care is less than what is required of an employer with respect to protecting its own employees.”  OSHA lists several factors evaluating whether a controlling employer exercised reasonable care.  The one constant is that a controlling employer should take some form of affirmative steps to (a) make itself aware of hazards and (b) enforce a policy to make sure known hazards are corrected.  In other words, the controlling employer cannot make controlling OSHA violations someone else’s problem.  This attitude is more prevalent than you think.

What should the controlling employer do?  Walk the site at regular intervals to inspect for obvious hazards, engage subcontractors with a strong record of safety, maintaining a worksite safety policy and enforce it.  In other words, just having a manual is not enough.

These steps really make all the difference. I recently navigated my client through an OSHA investigation which resulted in OSHA declining to issue a citation.  As much as I would like to say that my legal acumen saved the day, it was really what my client did long before my involvement, which is to credit. It regularly walked the site, it pointed out obvious hazards, it maintained a safety manual and program which it followed, and it hired subcontractors with strong safety records.  We were able to present all of this to OSHA during the investigation and it is what made the difference.

B.  Criticism of the Policy

The chief criticism of the policy is that it extends beyond the Congressional mandate that OSHA cite employers who expose employees to hazards.  Therefore, OSHA lacks the authority to cite a contractor when those exposed to the hazard are employed by someone else.  In 2007, in Sect. of Labor v. Summit Contractors, Inc., the OSHRC struct down the controlling employer policy. However, the 8th Circuit Court of Appeals overturned that decision and reinstated the controlling employer policy.  Now, the 5th Circuit is asked to review the policy.

C.  Takeaways

The bottom line is that every contractor on a construction site needs to be vigilant about safety in order to avoid ending up in OSHA’s cross-hairs.  Even if your employees are far from the hazard, the best approach is that if you see something say something and of course document it in writing.

 

Disadvantaged business enterprise (DBE) fraud in the construction industry is a topic frequently covered on this blog.  My posts on DBE fraud are some of my most read posts and the ones that generate the most questions from readers and inquiries.  Many of the posts cover the increased pace of criminal prosecutions involving DBE fraud. One case I blogged about involved the indictment of the steel erection contractor on the new World Trade Center project, DCM Erectors, Inc.

Earlier this month, a federal jury found the defendant in that case and DCM’s owner, Larry Davis, guilty of one count of wire fraud and one count of conspiracy to commit wire fraud for allegedly operating a DBE pass-through scheme for steel erection services on the WTC project.  Then, in a remarkable (to say the least) turn of events, the Judge granted the defense’s motion for acquittal and overturned the jury’s guilty verdict against Mr. Davis.

The Judge’s decision to acquit Mr. Davis hinged on the nuisances required to prove a wire fraud and conspiracy to commit wire fraud.   The case also cast doubt on the ability to prosecute individuals for DBE fraud not involving federally funded projects, like DOT, FTA, FAA, and VA projects.

I.  The Background

The scheme Davis was alleged to have engaged in was a fairly straightforward DBE pass through scheme.  As I have talked about before, a pass through scheme is where a certified DBE does not perform any commercially useful function and the work is actually performed by a non-DBE firm.  That is what prosecutors alleged Davis did.

The WTC project was subject to the New York and New Jersey Port Authority’s DBE program.  Like most DBE programs, the Port Authority’s program had a goal of seeing that DBE firms performed a certain percentage of the overall dollar value of the prime contract.

DCM executed two separate steel erection subcontracts for two different buildings at the project.  DCM was not a DBE firm.  However, on one contract it certified that it had subcontracted with a DBE firm to perform its payroll and survey services.  On the other contract, it entered into a joint venture with a DBE firm.

According to the indictment, no employees of the DBE firm performed work on the JV project.  On the other project, the indictment alleged that the DBE firm performed no survey work and the work and DCM employees actually performed the work.

The indictment alleged DCM and Davis defrauded the Port Authority by “fraudulently claimed MBE credit for One WTC and the WTC Hub in excess of $70 million based on the value of work Solera/DCM purportedly performed” on the World Trade Center project; and b) “fraudulently claimed WBE credit for $6.3 million of surveying and payroll management work GLS purportedly was performing as a subcontractor to DCM on One WTC and the WTC Hub.”

II.  The Wrinkle

There are some critical wrinkles in case that ultimately were important in the Judge acquitting Davis.  First, unlike the DOT’s program, the Port Authority’s DBE program was not the law, i.e. a legislative mandate.  Rather, the Port Authority’s program was its own self-created independent program.  Second, unlike many DOT contracts, compliance with the DBE program was not expressly made a material term of DCM’s contract.  The consequences of a contractor’s failure to comply with the program were apparently limited to potentially not being invited to bid on future projects or having its bid rejected as non-responsive.

III.  The Decision

The Court began its analysis by laying out the elements of a wire fraud claim: “(1) a scheme to defraud, (2) money or property as the object of the scheme, and (3) use of the mails or wires to further the scheme.”  The Court focused on what Courts have determined amounts to a “scheme to defraud” that satisfies the first element and its nuisances. The Court concluded that “where the purported victim received the full economic benefit of its bargain, an essential element of the bargain is not implicated, and thus the wire fraud statute does not apply.”  Therefore, the Court’s decision hinged on is whether DCM’s compliance with the Port Authority’s DBE requirements “was an essential element of the contracts.” 

The Court then stated that wire fraud goes to an essential element of the contract when (a) the fraud causes economic harm, or (b) where defendant fails to comply with an underlying law.  The Court cited several cases where the defendant’s conduct violated a law independent of the mail and wire fraud statues and where compliance with that law was incorporated into the contract.  The Court also cited several cases where the counter party “did not get what they paid for.”

The Court then noted that in contrast convictions for wire fraud have typically been reversed where “purported victim[s] received the full economic benefit of [their] bargain,”
Against this frame work, the Court analyzed the DBE fraud in question.  First, the Court looked to whether compliance with the Port Authority’s DBE program was an essentially element of the contract.  The Court concluded that it was undisputed that DCM had in fact performed all of its work under the contracts in a satisfactory manner. Therefore, the the Port Authority got exactly what it paid for.
Next, the Court determined that compliance with the Port Authorities DBE program was not an essential element of the contracts because the Port Authority’s program “is not the law.” The Court also noted that the parties stipulated that failing to comply with the Port Authority’s program was not a violation of the law by itself.  On this point, the Court noted its analysis might be different if the DBE program was the law or DCM’s violation of the program subjected the Port Authority to liability.
On this basis, the Court concluded the government’s evidence was insufficient to prove a wire fraud or conspiracy to commit wire fraud.
IV.  The Impact

The decision in U.S. v. Davis is interesting in two regards.  First, it provides one of the most thorough analysis of wire fraud as it related to DBE fraud that I have seen.  Second, it is a bit of an outliner.   Indeed, it is in opposite to Circuit Court opinions that have concluded that non-compliance with a DBE program, by itself, can satisfy the essential element prong of a wire fraud count.  However, those cases provide a much less detailed discussion than Davis.  And, those cases involved DBE programs that fell under the DOT’s DBE program, which, unlike the Port Authority’s program, is the law or where the contracts made compliance a material term of the contract.  Then again, those cases conclude “you used deceit to obtain the contract and payment and therefore the evidence is sufficient for a conviction.”  But, as Davis makes clear the analysis is more nuisanced.

While the Davis decision is significant, it still is only a District Court opinion.  So, it has no precedential value. Furthermore, it would appear to be limited to cases alleging DBE fraud involving a independent DBE program administered by a regional transportation authority, like the Port Authority, a county government, or local municipal government.  Those programs are not typically the result of some legislative action requiring them.

Also, even where program is not the result of a legislative mandate the contract language itself is important because the contract may still made compliance with a DBE program an essential element of the contract.  Many contracts do make compliance a material term.  Also, most construction contracts contain some general duty clause that states the contractor will perform its work according to all applicable codes, laws, and regulations.  It would be interesting to see if the Davis Court would reach the same decision if the DBE fraud were pursuant to a contract which made compliance mandatory (I think it would) or if the prosecution raised a the contract’s general duty clause, which I am sure existed.

It is nonetheless important for attorneys representing defendants in DBE fraud cases to (a) understand the legislative scheme (or lack thereof) giving rise to the program; and (b) to understand whether the contract or subcontract makes compliance with the program a material term.

It is also important, perhaps, more important, for appellate lawyers arguing that a conviction under for wire fraud is not supported by sufficient evidence where the defendant provided the essential services that were bargained for, which in mostly what happens in DBE fraud cases.

 

Probably.  Based on the City’s 2016 Disparity Study the City DBE program is no longer being used to remedy past discrimination but to further a political agenda designed to direct maximum public funds to female and minority owned businesses.  In doing so, the City’s current program runs afoul of the Supreme Court’s seminal decision in City of Richmond v. Croson Company, 488 U.S. 469, (1989) and its progeny, which blessed such programs.  However, they blessed them only when (a) there is evidence of discrimination, (b) the program is narrowly tailored to remedy that discrimination, and (c) all race neutral alternatives have been exhausted.

What are DBE Programs?

Like many public agencies, the City of Philadelphia maintains a program that is designed to funnel public fund to female and minority owned firms.  These programs are usually called “disadvantaged business enterprise” programs or DBE programs for short (Sometime they are referred to D/M/WBE the “M” standing for “minority” and the “W” for “woman.”)  DBE programs require that a prime contractor use its best efforts to subcontract a certain percentage of the contract price to DBE firms.  In certain cases, the public authority can restrict bidding to only DBE firms.

The DBE contracting goal will appear in the bid specifications.  (I have seen goals range anywhere from 4% to 30% of the contract.)  So, if a prime contractor is awarded a $1,000,000 contract and the DBE goal is 15%, the prime contractor will have to subcontract $150,000 of the prime contract to DBE owned firms.  In replying to the bid, the contractor will have to list the DBE owned firms it intends to enter into subcontracts with to meet the DBE goal.

The History of DBE Programs

One of the first DBE programs was the Department of Transportation’s DBE program, which is basically the godfather of all DBE programs.  All state and local DBE programs more or less track the DOT’s DBE program rules. The DOT’s DBE program started almost 40 years ago.  The program requires State Transportation agencies to establish a DBE program as a condition of receiving federal highway and transportation funding.

The DOT’s DBE program is an interesting paradox.  It is almost 40 years old.  It was designed to remedy past discrimination in the construction industry.  However, many of the firms and people that would have played a role in that discrimination are long gone.  Moreover, if the purpose is to remedy past discrimination and 40 years later discrimination still exists (dispute a rigorous regulatory scheme against it) then the program is doing a lousy job of achieving its goal.  Yet, DBE programs are more entrenched than ever.

City of Richmond v. J.A. Croson Co.

In Croson, the United States, Supreme Court provided the rules which all state and local DBE programs must be judged against. Richmond’s DBE plan required that prime contractors subcontract at least 30% of the dollar amount of the prime contract to certified DBE firms.  The Plan declared that it was “remedial” in nature, and enacted “for the purpose of promoting wider participation by minority business enterprises in the construction of public projects.”

The Supreme Court struck down Richmond’s program holding that Court’s must apply strict scrutiny to any racial preference program.  To survive strict scrutiny, a local or state authority advancing a DBE program must show that there exists a compelling state interest in the form of actual racial discrimination in the construction industry.  The agency must support its interest by evidence and it cannot be merely anecdotal.  Once the agency puts forth sufficient evidence of existing discrimination, then the remedy must be narrowly tailored to remedy that discrimination.  Finally, the agency must demonstrate that it exhausted race neutral means to remedy the discrimination.

In Croson, the Supreme Court first found that the City of Richmond introduced no evidence that there was racial discrimination in the Richmond area construction industry.  However, the Court said that if Richmond could show that there existed a significant statistical disparity between available minority owned firms and the percentage of subcontracts award to such firms that may support a finding of discrimination.  Second, the Supreme Court found that the 30% figure had no rational connection to the the alleged discrimination that it sought to remedy.  Indeed, the Court found the figure to be arbitrary.

Following Croson, state and local agencies that did not introduce statistical evidence of racial discrimination in the construction industry saw their DBE regimes struck down.  (One of those local government agencies that saw their DBE program struck down for lack of evidence was the City of Philadelphia.  Contractors Ass’n of E. Pennsylvania, Inc. v. City of Philadelphia, 945 F.2d 1260 (3d Cir. 1991))  Therefore, borrowing from Croson’s holding that a statistical disparity could be evidence of discrimination, local and state government began commissioning disparity studies to use as evidence to support their DBE program.  Preparing disparity studies has become a cottage industry.

While disparity studies come under attack for faulty methodology, if they tend to show a disparity between the number of minority firms available for subcontracting and the actual amount of subcontracted work, Courts tend to uphold them.  Thus, disparity studies showing an actual disparity usually satisfy the first prong of strict scrutiny that the government show that discrimination exists.  With the first prong satisfied, the government must then show that the subcontracting goal is narrowly tailored to remedy the discrimination.

Is it time to revisit Croson?

This bring us to the City of Philadelphia DBE program.  The program shows that it has been a resounding success in remedying any past discrimination that may have existed at least for public works (construction) projects.  For public works contracts, the City’s showing that there is an over-utilization of DBE firms.  This means the percentage of prime contract subcontracted to DBE firms exceeds the number of firms available.  The study makes no effort to hide this fact and highlights it in several areas.  This over-utilization is not an anomaly.  In fact, the over-utilization of DBE firms on public works contracts has now existed for several years.

However, if there is an over utilization of DBE firms on public works projects, what evidence does the City have to show that there is discrimination in the Philadelphia construction industry?  There appears to be none.  Without that evidence, the program would fail the first prong of strict scrutiny miserably.  Indeed, its hard to see how the program would survive a challenge applying Croson.

Yet, that has not stopped the City.  To the contrary, the City wants to increase the percentage even more. The City calls them “stretch” goals.  While maximizing DBE contracting might be good social policy, it is not “good constitution,” at least according to Croson.  Using a DBE program as a means to achieve a policy of increasing DBE participation to the maximum extent becomes untethered from Croson’s mandate that such programs be designed to remedy past discrimination and narrowly tailored to achieve those ends.  Croson rejects any percentage aimed towards “outright racial balancing.”  Other courts have held that the goal needs to be at the lower end of what is needed to bring the disparity into balance.  Thus, it is hard to see how the City’s current “stretch goals” could survive the narrowly tailored prong of strict scrutiny.

Conclusion 

The reality is while it appears to be completely unconstitutional and susceptible to a challenge, the City’s DBE program will likely remain in place.  The major players in the industry are too political entrenched to bring a case challenging a program designed to assist minority and female owned firms.  They risk being called “racist” at best and being blackballed by the City at worst.  However, if a brave enough firm wished to challenge the program it is ripe for the taking and would be likely see the Court require the City to pay its attorneys fees.

Businesses engage customers and clients online more than ever.  Now, your online strategy needs to include a plan to combat union organizing.  Unions have been ahead of the game on using social media and the internet to support their organizing campaigns.  One of the reasons for that was the cost involved with the campaign.  However, even small employers now have available to them powerful tools in the form of social media like Facebook, LinkedIn, and Twitter and micro-websites, that are either free or cost very little.

Employees are Demanding It.

While doing my share of labor work, I do quite of bit (and enjoy) trial work.  I have seen how the frequency of life being conducted online and the use of smartphones and tablets has effected juries.  Juries now demand some sort of visual interaction with the case. An attorney that uses technology (it could be as simple as a power point) to demonstrate her case to a jury not only is more engaging but appears better squared away than her adversary relying on paper documents, legal pads, and poster boards.

Moreover, while strictly prohibited, does anyone really think some jurors are not going home at night and googling the lawyers, the parties, and the issues in the case?  Sure, the Judge rightfully warns jurors against the use of the internet to research anything about the case during trial – and that includes when they are home – that is like telling someone not to think about a polar bear sitting on the beach drinking a pina colada.  Jurors – as many lawyers forget – are people.  (No, I am not advocating setting up an online strategy for potential jurors who may google your case against the Judge’s instructions.)

Winning a union election (or any election) is like a jury trial.  Its about persuasion.  Your employees that will decide whether you become a unionized workplace are no different than jurors or voters in a political election. Your side must engage and persuade.  Given the depth and breadth of political campaigns’ use of the internet and social media, which are just an uber-sophisticated version of a union organizing campaigns, it is surprising that more employers do not utilize the power of these vehicles to win an election.  Can you imagine a modern political candidate conducting an election without the use of some online strategy?

Furthermore, employees are likely fact checking everything use say about the unionization effort during a captive audience meeting by going online.  Employees are now doing their own independent research on the information both sides present to them.  However, unlike jurors, they are not prohibited from doing so.  In fact, employers that have the right social media and online tools in place should be encouraging employees to do so.  Therein lies the tremendous opportunity for employers.

Captive Audience Meetings are Not Enough.

The old school approach to opposing a union organizing effort was fairly predicable.  Employers would hold captive audience meetings, hope their employees paid attention, and discuss some aspect of the union that they think would cause an employee to vote No.  Following the presentation, some employers would give the employee some literature to review on the topic.  Employers would often use hokey handouts and play much maligned videos.

Captive audience meetings still play a role.  However, their effectiveness is placed on steroids when combined with an online and social media strategy.  At the conclusion of the meeting, employer should encourage employees to go online to learn more.  Employees can convey an exponentially more amount of information using this combined approach.  Employees can digest this information on their time and when they are ready to pay attention to it.

Employers need to remember the facts are on your side.  The trick is getting the facts to employees.

What does the approach look like?

First, employers need to engage all of their employees on social media and provide them with the same information they are providing in the captive audience meetings.  Nearly every employee is on some social media platform. Furthermore, they are not just using social media daily but several times daily.  Social media is 100% free and it provides the employer the opportunity to personally engage with the employee and provide him or her with specific information they feel is important.  If an employer does nothing else it should be to set up sites on Facebook, Linkedin, and Twitter to engage employees.  Of course, employers can’t just set it and forget it, they still must ENGAGE.

There is another benefit that comes with social media engagement.  It can be used as a tool to gauge the strength of your opposition campaign.  Polling or interrogating employees on how they intend to vote in an upcoming union election is an unfair labor practice.  If severe enough it could cause an employer be directed to bargain with a union. So, you cannot conduct an online poll through social media of your employees thoughts on unionization.

However, social media can act as a sort of de facto poll.  All social media tools have some sort of mechanism whereby the reader can “like” a post or follow your site.  Social media tools also provide for a person to forward the post to his or her followers in the form of a re-tweet or re-post.  Social media users can also comment on your posts.  Likes, follows re-tweets, follows, and positive comments can provide an employer within invaluable data on the effectiveness of its campaign.

Second, employers need to set up a webpage that provides employees with information on all of the reasons why they should vote No.  The webpage should have links where employees can find additional information about the union that is seeking to organize them.  But website are expensive, right?  Wrong.  Several blog platforms (I recommend WordPress) are free.  An employer could probably start an effective website dedicated to providing employees with information about the union for less than $100 and have it up and running in a few hours.

Again the key for these tools to be extremely effective is engaging users and generating great content.  Therefore, employers need to dedicate someone to making sure employees are engaged through social media, that the right information is reaching these employees, and the webpage contents powerful content.

Beyond the Basics

Being present and engaging on social media and online are basic but effective.  Employers looking to invest a bit more time and more (but not that much more) money can consider the following.

  • Targeted Facebook ads.  If you give Facebook a list of users they will target ads to them.  I have seen this run as low $30 per month.
  • Text messages.  You can send your employees text messages with information about the campaign.  Although, I would find these extremely annoying.
  • Encourage employees to set up their own pages.  While employers are prohibited from providing employees assistance in opposing the campaign, employers are free to encourage employees that oppose unionization to set up there own social media pages on Facebook, Linkedin, and Twitter.

One final thing.  The importance of using social media to engage employees is only going to grow with millennials entering the workforce.  This generation was weened online.  I have no data to support it but if you have a large younger workforce and you are not engaging employees online I bet you will lose a election 100% of the time.

Also, employers need to be careful with engagement.  Providing employees with information is perfectly legal. However, if employers make certain comments to employees or what will happen if the employer becomes unionized, they could face an unfair labor practice charge. While the mediums have changed, the message needs to stay the same.

 

 

 

Some of the most viewed topics on this blog are those concerning double breasted company.  That is a two separate firms, commonly owned, one that is a signatory to a union and the other that is merit shop.

An issue frequently encountered with double breasted construction companies is an union arbitrator’s jurisdiction over the non-signatory firm.  The issue usually goes something like this.  A signatory employer’s collective bargaining agreement contains language prohibiting double breasting (which could be invalid).  The collective bargaining agreement also contains an arbitration provision requiring all disputes concerning a breach of the agreement (a grievance) be decided by an arbitrator in private arbitration.  The union files a demand for arbitration claiming that the union signatory has breached the collective bargaining agreement’s anti-dual shop provision.  The union names the non-union firm as a party to the arbitration based on its status as an alleged “single employer.”

What should the non-union firm do?  It should ignore the arbitration demand or file an action in federal court to obtain a court order prohibiting the arbitrator from taking any action against it.  The law in most – if not all – jurisdictions is that an arbitrator has no jurisdiction over a non-signatory firm.  If the union obtains an arbitration award against the non-union firm, the District Court will vacate that award if the non-union firm requests relief.  The general rule is that only a court can determine whether a non-signatory is bound by a collective bargaining agreement.  Moreover, some courts have held that a court must determine that the union and non-union entities are a single employer before that will happen.  Because a single employer finding is fact sensitive, that cannot be done without discovery.

The take away.  If you own a dual shop firm and receive a demand from the union to arbitrate, you need to review your collective bargaining agreement, be prepared to fight the union, and win.