Posting this for two reasons. First, folks apparently really liked the lien and bond chart I posted a few weeks ago. Second, I want mix things up and mess around with video as a medium for discuss. So, I am going to do series of video blog posts over the next few weeks. Next week back to more labor law with a video discussion – sans power point I promise – on union employee grievances.
Another one from the archives. This was a very popular webinar. This is from 2013 (I have now been practicing for 17 years!) and some of the regulations have changed slightly. But, most of the information is still relevant and the cost of non-compliance is still huge. Email me with questions.
In what is nothing short of a monumental decision, on January 11, 2019, the Pennsylvania Commonwealth Court in Allan Myers L.P. v. Department of Transportation ruled that nearly all project labor agreements in Pennsylvania are illegal under the Commonwealth’s procurement code.
What are Project Labor Agreements?
In short, Project Labor Agreements (PLAs) are pre-hire agreements that set the working conditions for all employees of contractors working on a construction project. Typically, a PLA is entered into between an public or private construction project owner and certain local building trade unions. PLAs require the use of union labor that is to be hired exclusively through the hiring halls of the unions who are parties to the PLA. PLAs are controversial because, among other reasons, while not expressly excluding non-union contractors from performing work on the project, they require non-union firms to use union members instead of their regular employees.
Legality of Project Labor Agreements
Generally, whether a PLA is legal mostly depends on the law of the state where the project is being located. (However, there are several compelling arguments that PLAs are invalid under current U.S. Supreme Court precedent.) Seven states, including New Jersey, have statutes that expressly permit PLAs. Twenty-four other states have statutes that expressly prohibit PLAs from being utilized. The remainder, including Pennsylvania, have no statute expressly addressing the legality of PLAs.
Allen Myers LP v. Dept of Transportation
The case involved a PLA that PennDOT had negotiated with the Philadelphia Building and Construction Trades Council (the “Unions”) for a project in Montgomery County known as the Markley Street Project. The PLA obligated bidding contractors to hire craft labor personnel through the Unions and to be bound by the Unions’ collective bargaining agreements. Allan Myers, a non-union contractor, filed a bid protest challenging the legality of the PLA. Allan Myers raised several arguments against the PLA including that the PLA was discriminatory because it unduly favored union contractors over non-union contractors.
PennDOT responded to the challenge arguing that case law authorized the use of a PLA in bids for public construction projects and that because the PLA provided that “any qualified contractors may bid or perform work on this Project” regardless of their union affiliation or lack thereof. Therefore, PennDOT contended that Allan Myers could bid on the Markley Street Project.
However, the Court ruled in Allan Myers’ favor and held that PLAs are contrary to Pennsylvania’s competitive bidding requirements. The Court held that it was well settled that under the Commonwealth Procurement Code contracts are to be awarded by competitive sealed bidding to “the lowest responsible bidder.” The Court then recited the purpose of competitive bidding which is to guard against “favoritism, improvidence, extravagance, fraud, and corruption in the awarding of contracts,” and to place contractors on “equal footing” so as to promote open and fair competition. The Court then noted that “where there is no common standard on which bids are based, “[t]he integrity of the competitive bidding process is violated and the purpose of competitive bidding is frustrated.”
The Court then applied these principals to the PLA and found that the PLA does not place nonunion contractors “on an equal footing” with union contractors because a nonunion contractor that bid on the Markley Street Project could not use its own experienced workforce. Rather, it was required to hire its employees on the Project through the Unions’ hiring halls. Therefore, Allan Myers would essentially be required to bid on a project with an unknown workforce.
For the moment, any Commonwealth project with a project labor agreement attached to it is ripe for a challenge. Thus, any non-union contractor interested in bidding on a project subject to a PLA in Pennsylvania should consider a challenge. However, the question remains as to how long this holding lasts. One would suspect that PennDOT would appeal this decision to the Pennsylvania Supreme Court. There, given the Courts current make up, the legality of PLA’s may be viewed more favorably. As such, the Myers decision may have the unintended effect of cementing the legality of PLAs in Pennsylvania until the legislature acts.
Found an old chart I made summarizing the various deadlines for filing Pennsylvania, New Jersey, and Federal Lien and Payment Bond Claim that I used to give out to clients. It was pretty popular and I am not sure why I stopped giving it out. Anyway, I updated it and am making it available to anyone on the interwebs that wants to use it. Of course, this is a very topical summary and you should check with me (or your current attorney first) before filing a lien and bond claim and to understand your rights. You can also download a pdf version here – Summary of Bonds and Liens Law_Updated
On December 27, 2018, the National Labor Relations Board enforced a decades old policy that a union’s unqualified threat to picket a neutral employer at a “common situs” a/k/a a construction site is a violation of the National Labor Relations Act.
The case involved area standards picketing by the IBEW of a project owned by the Las Vegas Convention and Visitors Authority (LVCVA). The IBEW sent a letter to various affiliated unions who were working on the project advising them of its intent to engage in area standards picketing at the project directed to the merit shop electrical subcontractor performing work there. The IBEW also sent a copy of the letter to the LVCVA.
The Board held that it has been the Board’s policy for over 50 years that if a union notifies a neutral employer at a common situs project that it intends to picket the primary employer then “the union had an affirmative obligation to qualify its threat by clearly indicating that the picketing would conform to the Moore Dry Dock standards, or otherwise be in uniformity with Board law.” Importantly, the Board held that “a union’s broadly worded and unqualified notice, sent to a neutral employer, that the union intends to picket a worksite the neutral shares with the primary employer is inherently coercive.” The Board continued stating that “an unqualified threat communicated to a neutral at a common situs is an ambiguous threat, and such an ambiguous threat enables a union to achieve the proscribed objective of coercing the neutral employer to cease doing business with the primary employer – the very object a union seeks to achieve when it makes a blatant unlawful threat to picket or unlawfully pickets a neutral.”
The holding established a de facto strict liability regime when a union threatens area standard picketing against a neutral employer. On a larger scale, the holding marks the first big step by the Trump Board in walking back the pro-union rulings of the Obama Board as they relate to construction sites. Indeed, the Board’s holding breathes life back into the “coercive” part of Section 8(b)(4). It is hard to jibe the Board’s holding in this case with the Board’s holdings the bannering cases and those cases are now throw into doubt. Certainly, the Board is indicating that neutral’s should aggressively pursue unfair labor practice charges against a union that threatens an area standards campaign.
A Minnesota federal court recently entered summary judgment in favor of a plaintiff and against a Teamsters local and entered judgment in the amount against for $1,238,315 for the Teamsters’ illegal picketing of plaintiff’s facility.
In the case, Sysco Minnesota, Inc. v. Teamsters Local 120, a Teamsters Local – Local 41 – who had no bargaining relationship with plaintiff and did not represent plaintiff’s employees picketed plaintiff’s food distribution facility for one day in November 2017. However, Local 41 did have a bargaining relationship with plaintiff’s sister company that was located in Missouri. That sister company, however, was a wholly separately owned and operated company. In response to Local 41’s picket line, plaintiff’s employees, who were represented by Teamsters Local 120, refused to cross the picket line. Plaintiff was unable to make its food deliveries to commercial customers preparing for the upcoming Thanksgiving holiday. Plaintiff suffered more than $1.2 million in lost profits and lost customers as a result of the picketing and sympathy strike. Importantly, Local 120 did not have any labor grievance with plaintiff and had just begun a new four year contract with plaintiff.
Plaintiff brought suit against Teamsters Local 120 for violating the CBA which contained a no strike clause that stated “there shall be no lockout, strike or any other interference with the operation of the business during the life of this Agreement.” Both sides moved for summary judgment. Local 120 raised two defenses on summary judgment in support of its claim that the case should be dismissed. First, it argued that plaintiff’s claims were subject to an arbitration provision in the agreement. Second, it argued that the CBA’s no strike clause permitted sympathy strikes.
The Court first addressed Local 120’s arbitration argument. While not the thrust of the Court’s opinion, the Court’s decision on Local 120’s arbitration argument is nonetheless important. The Court ruled that Local 120 waived arbitration by engaging in extensive discovery and not filing a timely motion to compel arbitration. This ruling is a reminder for anyone that has an arbitration provision in any contract – whether it be a CBA or an ordinary construction contract – to timely raise arbitration.
Sympathy Strikes and the No Strike Clause
The Court then moved to Local 120’s main argument that the no strike clause did not prohibit so called sympathy strikes. A sympathy strike is where a worker not part of the striking unit shows “sympathy” or solidarity for the strikers and refuses to cross a picket line and thereby goes on strike herself. As the Court noted, the National Labor Relations Act (“NLRA”) protects the right of unionized workers to engage in sympathy strikes, unless the CBA clearly and unambiguously waives employees’ sympathy-strike rights.
While the no strike clause did not expressly reference sympathy strikes, it did state that “there shall be no lockout, strike or any other interference with the operation of the business during the life of this Agreement.” The Court believed that this language was clear. Particularly, the Court believed that the clause “any other interference” included sympathy strikes. Therefore, the Court concluded that Local 120 breached the CBA when it engaged in a sympathy strike in support of Local 41.
A primary reason that employees enter into collective bargaining agreements is for labor stability which includes no work stoppages and strikes during the term of the agreement. Therefore, it amazes me that in negotiating a CBA that employers do not always expressly state that sympathy strikes are included in the no strike clause. Here, while plaintiff was ultimately successful, if it had simply expressly stated that sympathy strikes were included in the no strike provision it would have not given Local 120 any wiggle room whatsoever and its actions would be indefensible.
I received several emails regarding the expose by Caitlin McCabe and Erin Arvedlund in the Philadelphia Inquirer titled “Rotting Within.” The story outlines the epidemic of defective stucco and other “building envelope” issues in Southeastern Pennsylvania that is causing homes to literally rot from within. Having litigated several of these cases, they are frustrating for both the attorneys that handle them and the homeowners who must deal with the reality that their home is rotting away. The story points to the multiple (and all too common) causes for the epidemic: unskilled subcontractors, lack of oversight and care, and poor construction drawings. The is no quick solution to the crisis and litigation regarding these defects is sure to proliferate.
However, there is one potential solution that the story does not cover and which could help alleviate some of the challenges homeowners face in recovering damages for their claims. The Pennsylvania Legislature must act to change the insurance laws in Pennsylvania to make defective construction covered by a developer’s, contractor’s, and subcontractor’s commercial general liability policy (“CGL”). Most homeowners and many attorneys incorrectly assume that defective construction is covered by insurance. This assumption makes sense. If someone operates a car in a negligent manner and hits your car and causes damage, the negligent driver’s insurance company with cover your loss. In reality, Pennsylvania courts follows a minority of states that holds that generally speaking defective workmanship is not a “covered occurrence” under an insurance policy. (There are several exceptions to this rule and thorough discussion is beyond this blog post and would probably bore you.)
Why is coverage for defective workmanship so important (beyond the obvious reasons)? First, many contractors and subcontractors are small businesses with little to no assets. Therefore, even when liability is clear, many times plaintiffs are faced with the prospect of a judgment but no ability to collect on it. However, insurance policies contain an indemnification provision that require the insurance company to pay a judgment against its insured. Second, most insurance companies take the position that because the claims are not covered by a policy they have no indemnification and, therefore, no obligation to pay a judgment against their insured. This means insurance companies feel no pressure to settle a claim. The insurance companies believe they will not be required to pay a judgment anyway, so why settle.
Critics (including most contractors and home builders) will howl that making coverage of defective workmanship claims mandatory will increase the cost of insurance with the cost being passed on to the home buyer. They are right. But, I doubt the homeowners that have been impacted by this crisis would mind paying a few dollars more for a home knowing an insurance company would step up to the plate to cover their damages. (Plus,any additional cost would be negligible anyway when prorated over the a typical thirty year mortgage).
Until then, I hope the attorneys mentioned in the article that are prosecuting these claims get their clients the justice they deserve.
I am pleased to announce that I will be speaking in an upcoming Strafford live webinar, “Negotiating Project Labor Agreements: Key Terms for Managing Costs, Limiting Risks” scheduled for Thursday, November 29, 1:00pm-2:30pm EST. Because of your affiliation with my firm, you are eligible to attend this program at half off. As long as you use the links in this email, the offer will be reflected automatically in your cart.
Our panel will provide construction practitioners with practical insight into drafting PLAs. The panel will discuss key contract provisions for owners, contractors and labor providers and best practices for avoiding pitfalls in their use in public and private construction projects, including what a municipality and a union can legally do through a PLA and what is not legal under a PLA.
After our presentations, we will engage in a live question and answer session with participants so we can answer your questions about these important issues directly.
I hope you’ll join us.
Or call 1-800-926-7926
Ask for Negotiating Project Labor Agreements on 11/29/2018
Mention code: ZDFCA
Back in June, I posted about changes coming to the Pennsylvania Contractor and Subcontractor Payment Act (CAPSA), 73 P.S. Section 501, et. seq. The Act applies to virtually all private construction projects in Pennsylvania. As of last week (Oct. 10), those changes are effective. While there is some argument to the contrary, these changes are NOT retroactive and apply to all projects going forward from that date. To recap, here are some of the important changes you need to be aware of:
- Contractual waivers. Parties cannot waive the applicability of the act through contract. Therefore, any clause in a contract purporting to waive the Payment Act’s applicability is void.
- Suspension of work. Unpaid contractors and subcontractors have always enjoyed a common law right to suspend performance until payment was made. Now, they also have a statutory right to do so. Section 5 of the Payment Act ads a subpart (e) which states that an unpaid contractor or subcontractor can suspend performance without penalty if it is not paid.
- Written notice of deficiency items. Owners or contractors seeking to withhold payment must now do so in writing and with a written explanation of its good faith reason for non-payment within 14 days of receiving an invoice that it intends not to pay in whole or in part.
- Waiver of defense to payment. Perhaps the most critical change to the Payment Act is the part that says failure to provide written notice explaining non-payment within 14 days shall constitute a waiver of the basis and necessitate payment in full for the invoice. As it stands, if notice is not timely and properly provided a contractor or subcontractor could file a complaint, get an admission that written notice was not provided, and move for judgment on the pleading or summary judgment. In essence, failure to provide the required notice makes an owner or contractor strictly liable. (I cannot underscore enough how important this change is. Going forward you must be hyper vigilant about providing written notice to a contractor or subcontractor the reason you are withholding payment.)
- Retainage. If retainage is to be withheld beyond 30 days after final acceptance of the work, then an owner or contractor, as the case may be, must provide written notice as required for deficiency items.