Monday, March 05, 2012

Federal Court Strikes Down Michigan Law Barring Project Labor Agreements, Finds that National Labor Relations Act Preempts State Law (UPDATED)

On February 29, 2012, U.S. District Judge Victoria Roberts issued an Order striking down the "Michigan Fair and Open Competition in Government Construction Act" (PA 98 of 2011) finding that its limits on project labor agreements (PLA) violated the National Labor Relations Act. Judge Roberts also entered a judgment that permanently enjoins enforcement of the Act.
 

As we reported last August (here), shortly after PA 98 was signed into law by Governor Rick Snyder, the Michigan Building and Construction Trades Council (AFL-CIO) and Genesee, Lapeer, Shiawassee Building and Construction Trades Council (AFL-CIO) filed suit in U.S. District Court challenging the legality of the Act. The plaintiffs alleged that PA 98 was preempted by the National Labor Relations Act (NLRA) (29 USC 151, et seq). The Court ultimately agreed. 

In its ruling, the Court found that Section 7 of the NLRA, which allows employees to engage in concerted activity, protected employees' rights to negotiate project labor agreements.  The Court also found that Sections 8(e) and (f) of the NLRA allows for project labor agreements in the construction industry.  The court held that PA 98 effectively prohibited governmental units, construction managers, private contractors and subcontractors from entering into project labor agreements on state construction projects.

The court found that PA 98 was an impermissible obstacle to the employees' right under Section 7 of the NLRA to negotiate a project labor agreement.  The court also found that PA 98, by prohibiting activity allowed by sections 8(e) and 8(f) of the NLRA, regulated an area of labor law that Congress intended to be left "unregulated and to be controlled by the free play of economic forces" which violated the preemption principle announced by the U.S. Supreme Court in 1976 case. See, Lodge 76 International Association of Machinists and Aerospace Workers v Wisconsin Employment Relations Commission, 427 US 132 (1976).

The Court rejected the Governor's argument that Section 13 of the Act, which states that the Act should not be construed so as to interfere with agreements or other activity protected by the NLRA. The Court held that Governor's reading of the Act would render the entire Act a nullity.

The Court's decision in Michigan Building and Construction Trade Council, AFL-CIO v Synder permits local units of government and school districts to resume the practice of using project labor agreements on public projects.

For more about Michigan Construction Law Update, click here.

Update (3/7): Crain's Detroit Business reported today that Michigan Attorney General Bill Schuette plans to appeal Judge Roberts' decision to the 6th Circuit Court of Appeals. 

Update (3/9): Michigan Attorney General Bill Schuette filed a Notice of Appeal earlier today confirming earlier reports that Judge Roberts' decision would be challenged. See, Case No. 11-cv-13520, Doc #39. 

Update (9/15/13): On September 6, 2013, the 6th Circuit Court of Appeals voted 2-1 to uphold PA 98 of 2011. The Court noted in a 13-page published opinion that "The act furthers Michigan’s proprietary goal of improving efficiency in public construction projects, and the act is no broader than is necessary to meet those goals."