Federal Appeals Court Finds NLRA Could Preempt Jersey City Project Labor Agreement Ordinance

0 September 15, 2016  Featured, State & Local Construction

A federal appeals court has reversed the New Jersey District Court’s decision to uphold a Jersey City project labor agreement (PLA) ordinance that forced developers to enter into a PLA with construction trade unions as a condition of recieving tax abatements on certain projects. The decision paves the way to repeal Jersey City’s discriminatory and costly pro-PLA ordinance.

The New Jersey chapter of Associated Builders and Contractors (ABC) challenged the ordinance alongside three of its member companies, arguing that the National Labor Relations Act (NLRA) and the Employee Retirement Income Security Act (ERISA) preempt the ordinance. The chapter brought suit against Jersey City in 2014. The Appeals Court for the 3rd District has determined that the city was not acting as a market participant, but rather as a regulator, in which case the market participant exception within the NLRA and ERISA does not apply.

Also considered was the ordinance’s violation of the dormant Commerce Clause that bars a state from implementing policies that would negatively impact out-of-state economic interests for its own benefit. The dormant Commerce Clause also has a market participant exception, but it does not apply in this case.

The appeals court has reversed and remanded the decision to the lower court.

From Elliot Dube of Bloomberg Government:

“The NLRA doesn’t preempt state or local laws where the government is merely participating in the market, not regulating it. This market participant exception also applies with respect to the dormant Commerce Clause, and the Third Circuit assumed without deciding that the exception applies under ERISA, too.

A district court was wrong to find that Jersey City acts as a market participant when it enforces the ordinance with respect to tax-abated projects, the U.S. Court of Appeals for the Third Circuit concluded Sept. 12. It reversed and remanded the district court’s dismissal of the complaint by ABC and its members. The appeals court found that Jersey City was acting as a regulator but said it was offering ‘no comment’ on whether the ordinance was actually preempted or unconstitutional.”

Important to note with this decision is the absence of an impact on government neutrality legislation in other states that are protected under the 6th Circuit decision upholding Michigan’s law in 2013, and similar decisions in other courts across the country. The scope of this decision does not affect those existing statutes.

Following is the full press release from ABC of New Jersey:


Associated Builders and Contractors wins an appeal that could prevent private construction receiving tax abatements from triggering mandatory project labor agreements.

MOUNT LAUREL, N.J., Sept. 13— Associated Builders and Contractors (ABC) of New Jersey today applauded a federal court decision issued Sept. 12 that could end up prohibiting Jersey City, N.J., from mandating the use of union-only project labor agreements (PLA) on certain tax-abated construction projects. ABC has long maintained that PLAs reduce competition and drive up the cost of development.

“The court’s decision puts us one step closer to securing an opportunity for all contractors—including merit shop contractors—to participate in the vibrant Jersey City redevelopment effort,” said Russ McEwan, shareholder at Littler Mendelson, ABC’s counsel on the case. “We look forward to addressing the preemption issue before the District Court.”

“ABC seeks a level playing field for all contractors to bid and win work,” said Dominick Mondi, president of the ABC New Jersey Chapter. “We applaud this decision, that the city did not have a proprietary interest in tax-abated projects. This opens the door for these projects to possibly be bid on by a wider array of qualified contractors. This will increase competition and ultimately provide greater value to both the developers and the end users, which is to say the current and future residents of Jersey City.”

Jersey City passed a city ordinance designed to entice private developers to invest in the city by offering tax abatements for private developers if they agreed to require contractors to enter into a PLA to perform work on a project. The court ruled specifically that Jersey City was a regulator rather than a true market participant and remanded back to the District Court the final decision on whether the ordinance at issue was preempted by federal law or otherwise unconstitutional.


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