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."   

Citation: Michigan Bldg. & Const. Trades Council v. Snyder, 729 F.3d 572 (6th Cir. 2013).

Federal Lawsuit Challenges Legality of Michigan's New PLA Legislation (PA 98)

Not unexpectedly, a federal lawsuit was filed on August 11, 2011 challenging the legality of the “Fair and Open Competition in Governmental Construction Act” (PA 98 of 2011). As we reported last month (here), PA 98 prohibits most project labor agreements.

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 against Michigan Governor Rick Snyder. 

Plaintiffs seek a declaratory judgment that PA 98 (a) is preempted under the Supremacy Clause; (b) violates the National Labor Relations Act; and (c) violates the Contracts Clause of the U.S. Constitution. 

The case is pending in U.S. District Court, Eastern District of Michigan, Case No. 11-cv-13520 before the Honorable Victoria A. Roberts. 

(Hat-tip: Courthouse News Service). 

New Michigan Law Prohibits (Most) Project Labor Agreements

On July 19, 2011, Michigan Governor Rick Snyder signed SB 165 into law as the “Fair and Open Competition in Governmental Construction Act” (PA 98 of 2011).

The Act prohibits a city, village, township or other governmental unit from awarding a public construction project, grant, tax abatement or tax credit based on whether or not a bidder, contractor or developer employs union or non-union labor. 

The Act generally prohibits a governmental unit from:

• Entering into or spending funds under a construction contract if the contract terms: (1) require or prohibit a bidder or contractor from entering into an agreement with a collective bargaining organization relating to the underlying construction project or related projects; or (2) discriminate against a bidder or contractor based on their willingness or refusal to enter into an agreement with a collective bargaining organization relating to the construction project or a related project.
• Conditioning a grant, tax abatement or tax credit on a requirement that the recipient include one of the terms listed above in a contract document.
•  A governmental manager or construction manager from placing the above terms in bid specifications, project agreements, or other construction documents.

The statute has one significant exception: The Act does not prohibit employers or other parties from entering into agreements or engaging in any other activity protected by the federal National Labor Relations Act.   

The law is effective immediately.

Click here for additional analysis of this new law.

Update: Not unexpectedly, a federal lawsuit was filed on August 11, 2011 challenging the legality of PA 98. 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 seeking a declaratory judgment that PA 98 (a) is preempted under the Supremacy Clause; (b) violates the National Labor Relations Act; and (c) violates the Contracts Clause of the U.S. Constitution. (Hat-tip: Courthouse News Service).