New Jersey Law Allows Labor Commissioner to Audit Federally Regulated Apprenticeship Programs and Strip Affected Contractors of the Right to Perform Public Work

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On January 18, 2022, New Jersey’s Public Works Contractor Registration Act, 34 N.J.S.A. 34:11-56.56, et seq. (the “Act”) was amended to give the commissioner of the New Jersey Department of Labor and Workforce Development (NJ DOLWD) authority to audit federally regulated apprenticeship programs.  What’s more, the new law enables the NJ DOLWD to strip away the rights of construction contractors to perform public work if it determines that a targeted apprenticeship program does not meet federal standards.  Despite the existence under federal law of a legal framework for doing so, New Jersey has neither sought nor been granted permission by the U.S. Department of Labor (DOL) to involve itself in the affairs of federally regulated apprenticeship programs.

Current Apprenticeship Landscape in New Jersey

The Act was amended in 2019 to require that public works contractors participate in a DOL-approved apprenticeship program to obtain or renew their Public Works Contractor Registration certificates.  To satisfy this requirement, contractors can choose to sign a collective bargaining agreement with a trade union that maintains an apprenticeship program (as virtually all do), join an employer association/industry group that maintains apprenticeship programs, or create their own program.  Regardless of the option chosen, all programs must be approved by the DOL, with little or no involvement of the NJ DOLWD.  When applying for or renewing their registration, contractors must attest to their participation and make available documentation evidencing same should NJ DOLWD request it.  The NJ DOLWD has no other involvement in the registration, oversight or deregistration of the underlying apprenticeship program in which a contractor participates.  Those tasks are within the exclusive province of the DOL pursuant to federal law, which contains an established process for a state to seek special designation as a state apprenticeship agency capable of performing these important workforce development functions.1  New Jersey has never sought designation as a state apprenticeship agency, but rather has historically relied on the personnel and expertise of the DOL’s Office of Apprenticeship to build the strong network of apprenticeship programs that exists today in the Garden State.

Amendments to the Law

The latest amendments to the Act give the commissioner of the NJ DOLWD power to investigate and determine whether a federally registered program in which a contractor participates meets certain standards related to the approval and ongoing viability of apprenticeship programs, notably C.F.R §§29.3 - 29.7.  If the NJ DOLWD determines that a program is non-compliant with federal standards, it can now deny registration to any contractors that relied or are relying on participation in the program at issue to satisfy the Act.  That means union-signed contractors and members of employer associations/industry groups alike can lose their ability to perform public work based on technical non-compliance of the apprenticeship programs with which they are involved (but likely have no involvement in operating).  The amendments require no consultation by the NJ DOLWD with the DOL, the agency responsible for registering, deregistering and monitoring apprenticeship programs.  They do not mandate that either the NJ DOLWD or the DOL provide the apprenticeship program at issue with technical assistance designed to bring a program back into compliance, as the federal law does.2 

The amendments also provide that any contractor that willfully makes or causes to be made “false, deceptive or fraudulent” statements during the contractor registration process is guilty of a disorderly persons offense, can be fined between $2,500 and $25,000 and can be disqualified from bidding on or engaging in public works for up to three years.  Further, where the applicant contractor is also an apprenticeship program sponsor, the officer or employee completing the contractor registration application can be subject to punishment by fine and/or imprisonment.

Challenges Likely

Some groups are crying foul over the new law and see it as a gift to the state’s building trades unions to make up for the unintended consequences of the 2019 amendments to the Act.3  Those amendments could have led to significantly increased unionization in the NJ construction industry, as thousands of non-union public works contractors scrambled to find ways to comply and might have sought refuge in apprenticeship programs operated by most of the state’s building trades unions.  Instead, it prompted many of the state’s non-union contractors to join groups like the Associated Builders and Contractors (ABC), an organization which has a history of operating federally approved apprenticeship programs, and which espouses a merit shop philosophy – one which encourages open competition regardless of labor affiliation.  

Another consequence of the 2019 amendments has been a steep drop in the number of registered contractors available to perform public construction.  Since 2019, that number has dropped from more than 10,000 to approximately 6,400 today.  With an anticipated sharp uptick in public works stemming from the 2021 federal infrastructure bill, some fear that NJ DOLWD initiatives that could preclude even more contractors from competing for public works will undermine the state’s public bidding system, which is designed to foster competition in order to produce the best value for the taxpaying public.

Important To-Do’s

In the face of increased scrutiny of federal apprenticeship programs by the state, program sponsors should review and assure their compliance with existing federal standards. Sponsors may also want to consider reviewing legal options for contesting NJ DOLWD jurisdiction to audit their federally registered apprenticeship programs.  In addition, unions, employer associations and trade groups that maintain apprenticeship programs should prepare their signatory contractors and/or members for the possibility that NJ DOLWD oversight could endanger their public works registration status.

Footnotes

1 C.F.R §29.13.

2 C.F.R §29.8(b).

3 See Samantha DeAlmeida and John Harmon, Legislation would harm taxpayers, minority contractors, NJ.com (Jan. 6, 2022).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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