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.
What’s next?
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.
Wally Zimolong
Wally represents contractors (and subcontractors) and developers. His clients build and develop residential, commercial, and industrial properties nationwide. Wally enjoys working with the owners of the businesses he represents because they tend to be entrepreneurs and all around interesting people.
