June 2015

I write to urge you to support House Bill 874.  Pennsylvania’s criminal code currently declares harassment, stalking, and deadly threats to be protected activities when perpetrated by a party engaged in a labor dispute. House Bill 874 .

No one, management or labor, should be allowed to lawfully harass, stalk, threaten violence or make bomb threats. What starts as harassment can escalate to violence and destruction of property.  Such examples were highlighted in the recent federal indictments and convictions related to the December 2012 burning and vandalism of a Quaker church construction site in Philadelphia. Dozens of other incidents are depicted in the indictment, in which harassment and confrontational visits ended in violence and destruction of property. Had local law enforcement been able to successfully intervene earlier, the situation may not have escalated and federal intervention may not have been necessary.

I ask you to support this legislation and help ensure that Pennsylvania workers are safer and more secure at the workplace and in their communities.


Wally Zimolong

Recently, a colleague at lunch asked me if I was familiar with a case involving the constitutionality of Securities and Exchange Commission administrative law judge proceedings.  (Both the CATO Institute and the Wall Street Journal have covered the case.)  What appears to be an obscure constitutional case that lawyers talk about at lunch, could actual have a profound impact on the construction industry.

The case is question is a Northern District of Georgia case, Hill v. SEC.  The SEC charged the plaintiff with insider trading and brought an administrative cease and desist proceeding against him seeking a civil penalty and disgorgement of his profits on the alleged insider transaction.  SEC administrative proceedings are first adjudicated before an administrative law judge (“ALJ”), who hears evidence and renders an initial decision.

Hill brought an action in federal court seeking an injunction alleging that the ALJ’s appointment violated Article II of the United States Constitution.  For you non-constitutional scholars, Article II states which federal officials must be appointed by the President and confirmed by the Senate and which officers may be appointed by the President, the Courts, or the “Heads of Departments” alone.  The Constitution refers to the later as “inferior officers.”  The Plaintiff argued that ALJ’s were inferior officers and, therefore, could only be appointed by the President, the Courts, or the commissioner of the SEC and because they were not any action taken by them was unconstitutional.

Plaintiff claimed that SEC ALJ’s were inferior officers because they exercised “significant authority pursuant to the laws of the United States.”  On the other hand, the SEC argued that ALJ’s are merely employees and, therefore, do not need to be appointed pursuant to Article II of the Constitution.

In an opinion issued earlier this month, the Court agreed with the plaintiff that the SEC’s ALJ’s are inferior officers. Accordingly, the Court granted an injunction prohibiting the SEC’s ALJ from hearing the SEC’s case against the plaintiff.

So, how does this case impact the construction industry?  Because the Court’s rationale that SEC ALJs are inferior officers is not limited to SEC ALJ’s and should apply to all agency ALJ’s who are not appointed by the President, the Courts, or Heads of Departments, such as ALJ’s for the National Labor Relations Board.

NLRB ALJ’s function almost identically to their SEC counterparts.  Like their SEC counterparts, NLRB ALJ’s take testimony, conduct trials, rule on admissibility of evidence, can issue sanctions, and entering default judgment, all factors the Court in Hill found significant.  Also, like their SEC counterparts, NLRB ALJ’s are not appointed by the President, the Courts, or the head of the NLRB.  Rather, like SEC ALJ’s, they are selected through an open application process by the Office of Personnel Management.  Moreover, the NRLB is not a cabinet level agency, and, therefore, the NLRB commissioners can simply appoint all current ALJ’s to solve the problem.

Given the controversy surrounding the NLRB’s new ambush election rules and its pending joint employer rule and the willingness by construction industry trade associations to challenge these rules in Court, it might not be long before the constitutionality of the NLRB’s ALJ program is also challenged.

I was recently interviewed by 247Mass.com (http://247mass.com/expert-interview-with-wally-zimolong-of-supplemental-conditions-on-things-to-know-about-project-labor-agreements/)  as part of their Expert Interview program.  The interview is re-printed below.

Project Labor Agreements, or PLAs, are a hot and divisive topic in light of many states adopting Right To Work policies. Many big construction projects require some form of unionization before a construction industry professional can bid, making PLAs a fact of life for many.

We caught up with Wally Zimolong, a “rising star of construction litigation” according to Super Lawyer Magazine, to learn the ins and outs of PLAs. You can read more from Wally at the website Supplemental Conditions.

Project labor agreements come about when contractors refrain from unionizing when given the choice. What are some reasons that construction industry professionals are reluctant to join unions in your experience?

First, PLAs come about when union-backed politicians require them as a condition of working on publicly-funded projects. In turn, these union-backed politicians put the interest of the unions before the taxpayers.

Contractors are reluctant to sign collective bargaining agreements because unions hurt workers. A common myth is that unions are interested in helping their members and the middle class. To the contrary, unions are only interested in helping themselves and increasing the amount of money they receive in the form of forced union dues and from political contributions confiscated from union members’ paychecks. Unions also impose onerous work rules that reward individuals based on arbitrary measures like seniority, rather than merit and hard work.

Why is the government so concerned with working with unionized construction professionals?

Trade unions are by far the largest contributor to political campaigns. Politicians that receive these political contributions are the biggest proponents of project labor agreements. The “government” as a whole is not so concerned with working with unionized construction professionals; only those politicians that receive union support are.

It’s said the PLAs can cause construction projects to run long and over budget. What are some things about PLAs that cause budgets to go over?

Because PLAs require contractors to use a unionized workforce, taxpayers end up paying a premium over the market rate for labor costs. Also, onerous union work rules and inter-union jurisdictional disputes cost the project time. In construction, the more time spent on a project, the greater the cost.

You wrote a post on Supplemental Conditions about letters of assent not binding contractors to future CBAs, where you talk about PLAs containing language that can tie a contractor to future projects. Can you tell us what some of that language might be, so contractors can look out for it?

There are two types of PLAs. A limited PLA, which is the kind at issue in the case I discussed, binds a non-union contractor to a collective bargaining agreement for a specific project and is limited to one union and one specific contractor. A general PLA is a government mandate that any contractor submitting a bid on a public project become bound by the terms of a collective bargaining agreement. It applies to all contractors submitting bids on the project.

In a limited project labor agreement, contractors should make sure to include language that says specifically when the agreement shall terminate. Typically, termination is at the conclusion of the project.

It’s been suggested that PLAs can take away workers’ rights, with employers electing union representation rather than the workers. Can you talk about some of the risks of doing things in this way?

That is correct. Because PLAs require all employers to become bound by the terms of a CBA, workers are required to work under union work rules and are forced to pay over part of their wages to a union to which they do not belong.

In your experience or opinion, are there any benefits of construction professionals using a PLA?

No. None.

To learn more about construction litigation, visit 247mass.com today!

For more updates from Wally Zimolong and Supplemental Conditions, follow him onTwitter and connect with him on LinkedIn.

In a sea change, complicated buildings are going up with nonunion labor, and that is a fundamental challenge to New York City unions.

Source: www.wsj.com

Unless unions are ready to give up the 40% of union “wages” that go straight to the union – rather than the worker – to fund lavish union executive salaries and political campaigns, it hard to see how unions the can compete.

U.S. builders say they can’t find enough skilled craftsmen for a growing pipeline of work. Now they’re among the industries seeing signs of wage pressures.

Source: www.wsj.com

The interest subplot to this story is the rise of pre-fabricated construction components.  In an industry that changes at a snail’s pace, increased pre-fabricated construction could result in more projects that are on-time and on-budget.

In recent years, government regulators has stepped up enforcement actions against companies that wrongfully classify workers as independent contractors rather than employees.  According to the Wall Street Journal, those actions could sharply increase.  The Wall Street Journal is reporting that:

Last year, the Labor Department started awarding $10 million in annual grants to state labor regulators to focus more attention on worker misclassification. A portion of the grant money is awarded as bonuses to states that show gains in detecting such violations.

The article also notes that the companies in the construction industry in particular are finding themselves the targets of the worker misclassification audits.  By classifying a worker as an independent contractor rather than an employee, construction firms can avoid paying overtime and payroll taxes.  As the article notes, misclassifying a worker can have serious consequences.  Last year, the Department of Labor announced a $1.3 million settlement with several drywall contractors that the Department of Labor said wrongfully classified more than 1000 workers. Also, certain states are reporting almost a 100% audit rate for contractors.

Determining whether a particular worker is an independent contractor or employee is not always easy.  Indeed, different federal agencies, all use slightly different tests to determine whether someone is an independent contractor versus an employee.  For example, the IRS uses a 20-factor test, the NLRB a 10-factor test, and the Department of Labor a 6-part test.  Moreover, the tests are fact specific.  Generally, courts and administrative law judges focus on the amount of control the company exerts over the independent contractor, whether the individual controls the means and methods of performing his duties, whether the independent contractor is a recognized separate business, and whether the individual owns the tools and equipment necessary to perform his job.  However, a few things are certain, simply referring to an individual as an independent contractor and giving an individual a 1099 form at the end of the year are not evidence of independent contractor status.