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Last month, the U. S. District Court for the District of New Jersey found that a 2007 Jersey City ordinance requiring project labor agreements (PLAs) on private projects receiving tax abatements is preempted by the National Labor Relations Act (NLRA).

“The ruling will create a level playing field for all qualified contractors competing for work on Jersey City tax-abated projects,” said Associated Builders and Contractors Vice President of Regulatory, Labor and State Affairs Ben Brubeck. “It also calls into question the legitimacy of similar anti-competitive local ordinances imposing PLA requirements as well as ordinances requiring contractors to participate in apprenticeship programs.”

The case involved a Jersey City ordinance encouraging private developers to invest in the city by offering tax abatements for private developments on the condition developers require construction contractors to enter into a PLA to perform work on a project.

In August, 2015, the New Jersey Chapter of ABC (ABCNJ) led a group of merit shop contractors in filing a suit, arguing the ordinance was preempted by federal law and Jersey City was acting as a market regulator and not a market participant. See Associated Builders and Contractors Inc., New Jersey Chapter et al. v. Jersey City, New Jersey, No. 2:14-cv-05445 (D.N.J. 2015).

After the District Court dismissed the complaint on the grounds that the preemption doctrine did not apply to the city, the chapter brought the case to the Court of Appeals for the Third Circuit in June 2016. In September 2016, the appeals court reversed the decision of the lower court, holding that Jersey City was, in fact, a market regulator in its enforcement of the PLA ordinance and remanding the case to the District Court for preemption analysis. See Associated Builders & Contractors Inc. v. Jersey City (3d Cir. 2016).

The June 15, 2017, decision came from District Court Judge Susan Wigenton, who determined that the ordinance “directly intrudes on § 7 and § 8 of the NLRA,” according to her opinion. See Associated Builders and Contractors Inc. v. Jersey City, No. 14-5445 (D.N.J. 2017).

The Court also held that the PLA ordinance’s attempt to regulate the operation and reporting of apprenticeship programs intruded upon and therefore was preempted by the Employee Retirement Income Security Act.

When mandated by a government agency on a taxpayer-funded project, PLAs drive up the cost of construction projects by between 12 percent and 18 percent, according to a series of academic studies. PLAs typically ensure construction contracts are awarded only to companies that agree to recognize unions as the representatives of their employees on that job; use the union hiring hall to obtain workers at the expense of existing qualified employees; obtain apprentices through union apprenticeship programs; follow inefficient union work rules; pay into union benefit and multi-employer pension plans workers will never benefit from unless they meet vesting requirements; and force workers to pay union dues and/or join a union as a condition of employment.

ABCNJ was represented by Russ McEwan of Littler Mendelson P.C.