Trenton Okays State And Local Government Use Of Project Labor Agreements On Public Works Projects

Genova Burns LLC
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Genova Burns LLC

For many years construction contractors that bid on public works projects have had to contend with complying with prevailing wage and benefit, apprenticeship program, certified payroll, and Labor Commissioner registration requirements. Now add to these requirements the risk that a bidding contractor must sign onto a project labor agreement as a condition to performing on a medium or large sized public works project.

On April 30, 2021, Governor Murphy signed Bill S.3414/A.5378 into law, which took effect immediately and allows state, county and municipal governments and agencies, including school districts, to require public works projects they fund to be subject to a project labor agreement (“PLA Law”). A project labor agreement on a public works project (“PLA”) is a pre-hire agreement that is entered into between a government entity and one or more trade unions or a building trades council or association, and establishes the major terms and conditions of employment for work at the project site, other than the wages and benefits dictated by the applicable prevailing wage determination. Of key importance is a PLA’s requirement that every contractor performing any project work, union or non-union, must sign the PLA and comply with its terms while working at the project site. Generally, this means that the contractor will be required to source most if not all its labor through one or more union hiring halls, although the PLA Law gives the public entity flexibility to permit contractors and subcontractors to retain an unspecified percentage of their workforces to perform the project work.

The PLA Law mandates that any PLA adopted by the public entity include at a minimum the following provisions: no-strike and no-lockout prohibitions; an expedited dispute resolution procedure; mandatory applicability to all contractors and subcontractors working on the project; apprenticeship programs; compliance with specified set-aside goals for women- and minority-owned businesses; and provisions for the financing needed for apprenticing women, minorities and members of disadvantaged communities.

The PLA Law applies only to public works projects where the total cost is at least $5 million exclusive of land acquisition costs. The public entity can decide to negotiate the PLA itself, or engage a construction manager to do so, and ask the Labor Commissioner to step in to “facilitate” the negotiations. The public entity can also ask the Labor Commissioner to review and approve the final PLA, although it is not clear that the Commissioner’s approval is mandatory.

The social engineering aspects of the PLA Law cannot be overstated. One of the factors that a political subdivision must consider when deciding to impose a PLA on the project is promoting employment of residents of the political subdivision. Also, any PLA covered by the PLA Law must develop and release to the public a plan that accounts for the number of project jobs and apprenticeship positions for minorities, women and members of disadvantaged communities, and the labor unions must agree to these numbers. The plan must include the specific measures and programs the unions will implement to reach these job and apprenticeship numbers, including priority in referral and placement, on-the-job and off-the-job outreach and training, and hiring and placement incentives. Monitoring of the plan will be done by the public entity which must report on its monitoring to the public or to a state agency.

The most unusual provision of the PLA Law relieves a contractor or subcontractor from having to hire union-represented employees who are covered by a union trust fund that has not adopted ERISA’s building and construction industry exemption. Small solace. Affected labor unions can address this by ensuring that their pension trust funds adopt the ERISA exemption.

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