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.

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.

Background

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.

Holding

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.”

Takeaway

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.

Arbitration

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.

Takeaway

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.

One of the most powerful weapons in labor’s arsenal is a strike.  Like most powerful weapons there is a dichotomy in a strike. On one hand, it can bring about concessions from management that labor seeks.  On the other hand, it can permanently change the relationship between management and labor.  However, one thing is certain, strike are – to put it mildly – chaotic.

During this chaotic period, employees and employers may wonder what rights they have during union-initiated strikes. We provide some brief explanations below, along with how union litigation can help enforce your rights.

Employers can Not Fire or Threaten Striking Employees

 The National Labor Relations Act expressly protects union workers who engage in lawful strikes.  Therefore, except in limited circumstances, employers cannot fire striking workers.  Indeed, even in the limited circumstances under which an employer can lawfully terminate a striking employee, such as when employees engage strikes unendorsed by unions or when there exists a “no strike clause,” employers should proceed with caution before terminating the striking employee. Terminating an employee who strikes lawfully may result can result in an award of back due to the employee and immediate reinstatement of employment.

Lawful strikes are those that occur at the conclusion of a collective bargaining agreement and relate to economic conditions (an economic strike) or arise from an alleged unfair labor practice the employer has committed (an unfair labor practice strike).  Workers can also potentially lawful strike over unsafe workplace conditions.  Unlawful strikes are those which endorse violence, block workers from entering a facility, or promote unfair labor practices.

An employer can hire replacement workers.

Employers have the right to hire replacement workers for their striking employees.  The striking employees have the right to reinstatement at the conclusion of the strike.  The extent of the striking worker’s reinstatement rights depends on whether the strike is an economic strike or an unfair labor practice strike.  If the strike is an economic strike, the employer has the right to hire permanent replacement workers.  At the conclusion of the economic strike, the striking working is not entitled to unconditionally receive her old job back.  Instead, she is placed on a preferential hiring list.  On the other hand, if the strike is an unfair labor practice strike, the employer may only hire temporary replacement workers.  At the conclusion of the unfair labor practice strike, the striking workers are entitled to their old positions back if they make an unconditional offer to return to work.

Conclusion

Regardless of the union that is striking, issues without an amicable resolution will undoubtedly turn into a long legal dispute spanning months. Employees may go without pay, employers may fall behind in production schedules, and innocent persons who cross picket lines will find themselves accosted by union members vying for better treatment.

Strikes are tough on employers, unions, and employees who brave the elements to stand up for workplace values. There are no wrongs or rights in strikes, but laws do protect the interests of all involved. Employees concerned about strike pay, employers concerned about legalities, and unions that wish to remain compliant would find retaining an attorney beneficial during any contentious argument.

The Buffalo News has an article that shows that unionization is not the rainbows and unicorns that organizers promise.   The story involves the Ironworkers organizing of a company call Wendt Corp.  Over a year ago, Wendt’s employees voted in favor representation by the Ironworkers.  But, Wendt and the union still have yet to agree on a contract.  As we often tell employees thinking about organizing, voting in favor of the union and receiving the benefit of what the organizers promises are different things.  An affirmative vote means only that the employer must bargain in good faith with the union.  It does not mean the employer is forced to sign a collective bargaining agreement containing all of the goodies the union promises employees.

The article also shares some important statistics.  According to Cornell University:

reaching a first contract took an average of 378 days. Research showed 40 percent of contracts were settled within a year, 63 percent within two years, 70 percent within three years and 75 percent within four years.

That means a whopping 60% of union elections took over a year to result in a contract. It also means 25% (1 in 4) still had no contract in four years.  Why is that important to your employees?  Because while negotiations are ongoing, Section 8(a)(5) of the National Labor Relations Act prevents any changes in benefits.  That means no wages increases or other raises during that time period.  For Wendt’s employees, this means they have not appreciated the benefits of rising wages that other employees in the construction industry have seen. If I told you had a 1 in 4 chance of not getting a raise for four years if you did something, would you do it?   Not surprisingly, 20% of Wendt’s employees have left or retired.  They no doubt realized that in a tight labor market they could make more money elsewhere while not being beholden to the union’s negotiations.

What the article doesn’t say is if given the chance to do it over again, would Wendt’s employees vote for the union?  My suspicion is they would not.  And, neither would your employees if they knew that after a vote for a union money does not rain from the sky.

 

Bad omen. Last week, I wrote about a Appeals Court decision that affirmed a contractor’s escape from an over $600,000 withdrawal liability assessment from the Laborers Union.  The next day the Third Circuit (which covers PA, NJ, and DE) handed down a decision affirming a federal court’s decision to assess withdraw liability.  This one shows the dark side of not reading and understanding your CBA.

The belligerents in the litigation were, Penn Jersey, a construction material supplier, and Teamsters Local 676.  Their collective bargaining agreement contained a clause purportedly covering withdrawal liability.  Specifically, the clause stated “should the Employer withdraw from the Agreement in the future, there will be no withdrawal liability.  The CBA expired and Penn Jersey did not renew its agreement with the Teamsters.

The Teamsters Pension Fund later notified Penn Jersey that the company had incurred withdrawal liability amounting to $961,281.59—more than half of which had accrued after Penn Jersey withdrew from the Fund.  The Fund sued Penn Jersey, Penn Jersey sued the Teamsters (the Pension Fund and the Union are separate entities).  Penn Jersey argued that  the CBA absolved the company from making payments to the Fund and that responsibility for doing so shifted to the Local. (Sound familiar).  Importantly, Penn Jersey maintained that the withdrawal liability clause remained operational even after the expiration of the CBA.  Thus, Penn Jersey argued that the clause have it perpetual protection from any withdrawal liability.

The District Court granted summary judgment to the Teamsters and Penn Jersey appealed.  On appeal, the Third Circuit affirmed.  The Court reasoned that ordinary principles of contract interpretation should apply generally to collective-bargaining agreements. The Court then stated “[o]ne traditional principle of contract interpretation is that ‘contractual obligations will cease, in the ordinary course, upon termination of the contract.  The Court held that the Supreme Court noted that “an expired bargaining agreement has by its own terms released all its parties from their respective contractual obligations, except obligations already fixed under the contract but as yet unsatisfied.” 

Against this backdrop, the Court held that the CBA in question did not contain a “survival” clause—a provision which explicitly indicates which duties or obligations will continue beyond the life of a contract, and how long those obligations or duties are to endure.  The Court also ruled that the clause was silent on whether its duties and obligations continued past the life of the agreement.

The Takeaway

You have to feel for Penn Jersey who no doubt thought it was free to walk away from the CBA without recourse.  However, as we saw in last weeks post, the drafting of language of a CBA demands precision.  In this instance, that lack of precision swung in favor of the union.  Sadly, had Penn Jersey insisted on clarity with one additional sentence stating that the clause survived termination it would have save itself $1,000,000.

 

Withdrawal liability is a huge issue facing unionized employers.  According to Bloomberg, 93% of the Top 200 largest pension plans are underfunded by a combined $382 billion.  Contractors that withdraw from a multi-employer pension plan can face hundreds of thousands or millions of dollars in assessed withdrawal liability.  However, employers may be able to avoid that liability, plus the legal and consulting fees to fight it, by simply reading their collective bargaining agreement.

In Laborers’ Pension Fund v. W.R. Weis Co., Inc., 879 F.3d 760, 762 (7th Cir. 2018), a contractor escaped an over $600,000 withdrawal liability assessment based on a common ambiguity found in a CBA.  In that case, W.R. Weis was a party to a CBA with the local Laborers Union that required it to contribute to a multi-employer pension plan for each hour worked by Laborers union members.  Gradually, W.R. Weis started assigning work that the Laborers traditionally performed to marble setters, who were covered by a collective bargaining agreement with the Bricklayers Union.  Finally, in 2012, W.R. Weis stopped using Laborers totally and formally terminated its CBA with the Laborers, thereby triggering withdrawal liability.

After the Laborers Union assessed liability, W.R. Weis challenged it under the construction industry exception.  Under that rule, a construction industry employer is liable for withdrawal liability only if “it continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required,” or resumes works within five (5) years after ceasing to do so.

The Union argued that the collective-bargaining agreement required pension-fund contributions for all “employees doing covered work.”  Thus, it did not matter if the employee performing covered work was a Laborers Union member.  In the Union’s eyes, if the work was covered by the CBA a contribution was owed. Conversely, Weis argued that the CBA required contributions only for “hours worked by Laborers [union members]”

The CBA required the Weis to “make a pension contribution of $8.57 per hour for each hour worked by all Employees covered by this Agreement in addition to the wages and welfare payments herein stipulated.”  However, the CBA also stated that Weis “agree[d] to be bound by the Agreements and Declarations of Trust establishing the Laborers’ Pension Fund, as well as any amendments thereto, and agree[d] to be bound by all actions taken by the Trustees of that fund pursuant to the Agreements and Declarations of Trust.”

The Fund trust agreement defined “Employee” “(1) any person “covered by a Collective Bargaining Agreement between an Employer and the Union or any of its local affiliates who is engaged in employment with respect to which the Employer is obligated by the Collective Bargaining Agreement to make contributions to the Pension Fund”; or (2) any person “employed by an Employer who performs work within the jurisdiction of the Union as said jurisdiction is set forth in any applicable Collective Bargaining Agreement or by any custom or practice in the geographic area within which the Employer operates and his Employees perform work.”

The Court explained, the term “Employee” in the collective-bargaining agreement implies that “Fund contributions are only required for employees who are laborers[ ] because the agreement is between [the] employer[ ] and the General Laborer’s District Council of Chicago and Vicinity.”  On the other hand, the Fund documents acknowledges that “Employees” for whom pension-fund contributions are made may well be workers covered by the agreement and anyone who performs work within the jurisdiction covered by the agreement. The Court concluded this created an ambiguity requiring evidence of the course of dealing between the parties to clarify it.

The Union admitted during trial that the Fund does not collect contributions from an employer who has already contributed to another union’s pension fund for the same work.  Thus, although the Bricklayers members were performing work that was within the work jurisdiction of the Laborers, historical practice showed that the Laborers treated the CBA narrowly and required contributions only for work actually performed by Laborers members.  The arbitrator concluded that contributions for work within the gamut  of the CBA were not required because the Laborers Union had not “previously required” contributions for work performed by members of a different union.

The Takeaway

Weis escaped an over $600,000 withdrawal liability not with expensive actuaries and consultants, but by arguing a common ambiguity found in collective bargaining agreements and trust fund documents.  So, whether it be a withdrawal liability assessment or just a demand for fringe benefit contributions, examine your CBA and trust documents first.

 

 

 

 

 

Like many areas of federal labor law, there are different rules for construction industry employers.  One major difference is in how employers become unionized.  Typically, under Section 9(a) of the National Labor Relations Act, a union becomes a collective bargaining agent of employees only after a majority of employees show support for union representation.  In other words, the employees chose whether to be represented by a particular union.  However, under Section 8(f) of the NLRA, construction industry employers can chose to become union without any showing of majority support by employees. In fact, construction industry employers don’t need to have any employees at all to sign a “8(f) agreement.”  Thus, these agreements have become known as pre-hire agreements.

Section 8(f) is said to have arisen to address the unique nature of the construction industry where the size of an employer’s workforce can fluctuate from project to project, where projects can be short term in nature, and where employees migrate to different construction industry employers frequently.

The formation of an 8(f) agreement is but one difference between it and a 9(a) agreement.  Another concerns the duty imposed on the employer at the conclusion of the agreement.  Under a 9(a) agreement, that is one where the employees have indicated majority support for the union, after the bargaining agreement expires, an employer has a duty to continue to bargain with the union in good faith for a new agreement.  However, under a 8(f) bargaining agreement, once the agreement expires the employer has no such duty and is free to become merit shop (non-union) or to enter into an agreement with a different union.

Being able to walk away from an 8(f) agreement at its expiration bestows obvious major benefits on an employer and works to the detriment of the union.  Therefore, many Section 8(f) agreements will contain language that attempts to convert them to Section 9(a) agreements by stating that the employer agrees that a majority of its employees support the union.

Last week in Colorado Fire Sprinkler, Inc. v. NLRB, the DC Circuit set forth the parameters of how a Section 8(f) agreement can be converted into a Section 9(a) agreement.  In that case the contractor signed a collective bargaining agreement with a local union.  The Court noted that the agreement was a standard multi-employer agreement negotiated between the local and a multi-employer association, the National Fire Sprinkler Association, which the Court referred to as “cookie cutter.”  As such, the employer did not negotiate any specific terms with the union.  The agreement contained language that stated “the Company acknowledged the Union’s status as the exclusive bargaining representative of its employees pursuant to Section 9(a) of the National Labor Relations Act.”  The contractor renewed the agreement on several occasions until 2010 when the employer did not renew the agreement.  The union then filed unfair labor practice charges against the employer claiming that it had unilaterally changed the terms and conditions of employment and refused to continue contributing to the union’s health and welfare benefit fund.

Both the administrative law Judge and the National Labor Relations Board found that the agreement had been converted into a Section 9(a) agreement.  However, on appeal, the DC Circuit reversed.  In addition to clarifying the test for when an 8(f) agreement is converted to a 9(a) agreement, the Court also took a very pro-worker view of the National Labor Relations Act.

The Court started its opinion by noted that the NLRA is designed to empower the “employees to freely choose their own labor representatives.”  (Its hard for me to write this as I lost a case on appeal in the Third Circuit concerning an 8(f) agreement where I strongly emphasized this point.)  The Court noted that Section 8(f) does not change this simply because it permits the employer to chose whether its employees are unionized or not.  Accordingly, the Court recognized that an 8(f) agreement is to presumed to be an 8(f) agreement – freely terminable by the employer at its expiration – unless there is clear evidence that the employees have independently chosen to convert it into a Section 9(a) agreement.

The Court then held that “‘contract language’and the ‘intent’ of the union and company alone generally cannot overcome the Section 8(f) presumption, and certainly not when ‘the record contains strong indications that the parties had only a section 8(f) relationship.'”  Instead, the record must indicate clear acts by the employees to indicate the desire to convert an agreement, such as signing authorization cards, signing a petition, or informally voting to confirm the union’s majority status.

The Court was clear that the union must present evidence of affirmative employee acts indicating majority support.  In doing so, the Court invalidated the Board’s test that required only that the union offer to show evidence of support.  In sum, the Court held “while an employer and a union can get together to create a Section 8(f) pre-hire agreement, only the employees, through majority choice, can confer Section 9(a) status on a union. So to rebut the presumption of Section 8(f) status, actual evidence that a majority of employees have thrown their support to the union must exist and, in Board proceedings, that evidence must be reflected in the administrative record.”

Takeaways

  • Never sign a Section 8(f) agreement that contains language purporting to claim a majority of employees support the union.
  • At the conclusion of an 8(f) agreement, do not merely accept a claim by a union that they have majority support.
  • While 8(f) agreement can be terminated by an employer at the expiration of the term, most collective bargaining agreements have some mechanism stating how that must be done.  Otherwise, the agreement automatically renews.