Aug 8 2007
The National Labor Relations Board has issued a long-awaited decision with national implications both for owners/developers of construction projects and for building and construction trades unions.
According to Richard Reibstein, a partner in WolfBlock's Employment Services practice who represented the owner/developer in this case, the unions had hoped that the NLRB would clear the way for them to lawfully use the environmental regulatory process to secure agreements with owner/developers so that large construction projects in the private sector would be built solely with union labor. The NLRB, however, found that this effort by construction unions violated the National Labor Relations Act.
The decision involved the Glens Falls (NY) Building and Construction Trades Council, a group of construction labor unions. When the Trades Council learned that the owner/developer, Indeck Energy Services, was placing a new cogeneration power plant project up for bids by construction management firms, the Trades Council informed Indeck that its union members would oppose the project on environmental grounds if the project was built with non-union labor. That led to an agreement between Indeck and the Trades Council in which Indeck would instruct its construction manager to use only union labor on the project. In return, the Trades Council agreed to support the project with the regulatory agencies.
Indeck then retained a construction manager and instructed it to use only union labor on the project. The construction manager negotiated a Project Labor Agreement with the Trades Council and began the engineering for the power plant. But after a dispute arose between Indeck and the construction manager over delays in the start of construction of the project, Indeck declared that the construction manager had defaulted and proceeded to secure bids from other contractors. The only construction firms that were willing to bid on the project were companies that would agree to build the project on an open-shop basis, meaning both union and non-union subcontractors would be used.
Although the project was eventually built predominantly with union workers, the Trades Council sued Indeck for $12 million, claiming that the new construction manager's failure to use only union subcontractors was a breach of contract on Indeck's behalf.
Indeck filed an unfair labor practice charge against the Trades Council with the NLRB, alleging that the lawsuit by the unions was illegal under the National Labor Relations Act. The Supreme Court of the United States had ruled in 1974 that unions could enter into valid agreements that construction projects could be built with all-union workers, but only if the agreement was negotiated in the context of the collective bargaining process.
According to Reibstein, Indeck alleged that the agreement it signed with the Trades Council was part of the political process and not part of the collective bargaining process. After two hearings before different Administrative Law Judges, the NLRB agreed, finding that the Trades Council's lawsuit was an illegal attempt to enforce an invalid agreement.
"The case could have changed the law of Project Labor Agreements if the NLRB had allowed the unions to sue owner/developers to enforce agreements negotiated outside of the collective bargaining process," said Reibstein.
"It would have represented the ultimate weapon in organized labor's effort to eliminate open shop construction projects in the private sector. A construction manager's use of even a single non-union subcontractor could have been used by unions as a ground to sue an owner/developer for millions of dollars," he added.
Because of the nationwide implications of the issues in the case, the AFL- CIO Building and Construction Trades Council had filed a "friend of the court" brief on behalf of the Glens Falls Trades Council, and the Associated General Contractors of America had filed a "friend of the court" brief on behalf of Indeck. It is anticipated that the Glens Falls Trades Council will appeal the decision, which could reach the U.S. Supreme Court once again.