A project labor agreement (PLA) is a “pre-hire” collective bargaining agreement with one or more labor unions that establishes the working conditions on a specific, usually public, construction project. PLAs are controversial, not least because they typically restrict nonunion contractors from using their own workforce and require them instead to hire their workforce from the local unions’ labor pool, but their previous use on public projects in Pennsylvania has been upheld. However, in a recent case brought by two nonunion contractors, the Commonwealth Court has now invalidated the use of a PLA on a public highway project as a violation of Pennsylvania’s strict competitive bidding requirements for public contracts.
In December 2017, the Pennsylvania Department of Transportation (PennDOT) issued a bid for a highway improvement project for US Route 202 in Norristown. The bid required the winning contractor to sign a PLA with the Building and Construction Council of Philadelphia and Vicinity, which represented 11 local unions. The PLA required the winning contractor to hire their workforce through the local unions and to be bound by the local unions’ collective bargaining agreements. However, the PLA also specified that, if the winning contractor had a collective bargaining agreement with the United Steelworkers union, which was not one of the 11 local unions, then the contractor was permitted to use its own workforce.
Allan Myers, L.P. (Myers) and J.D. Eckman, Inc. (Eckman), two nonunion contractors, filed protests with PennDOT, challenging the use of the PLA. Myers and Eckman argued that the PLA was unlawful, arbitrary and discriminatory, as it disfavored nonunion contractors and unduly favored contractors affiliated with United Steelworkers. PennDOT disagreed, arguing that case law supported the use of a PLA on a public works project. The protests were denied, and Myers and Eckman then appealed to the Commonwealth Court.
On appeal, Myers and Eckman argued that:
PennDOT’s use of the PLA violates Pennsylvania’s competitive bidding laws because the three different classes of bidders, i.e., union contractors, nonunion contractors, and United Steelworkers contractors, will not be placed on an equal footing with respect to their ability to compete for the work.
In two decisions issued on January 11, 2019, the Commonwealth Court agreed with this primary argument, striking down PennDOT’s use of a PLA. The Commonwealth Court first reviewed the principles of competitive bidding, noting their importance and purpose in guarding against favoritism, fraud, and corruption, and distinguished prior PLA cases on grounds that they did not address the specific competitive bidding issue raised by Myers and Eckman. The Commonwealth Court then held that the mandated use of labor from the local unions and the exemption for United Steelworkers contractors improperly tilted the playing field:
We agree with Allan Myers that the exemption for United Steelworkers contractors tilts the playing field. If affiliated with United Steelworkers, a successful contractor can use its existing workforce. Other contractors, however, must hire their workforce through the Local Unions. In addition, the United Steelworkers collective bargaining agreement is not among the agreements appended to the PLA. Thus, it is not established that the steelworkers are bound by a no-strike provision. Stated otherwise, United Steelworkers contractors do not bid “on an equal footing” with other contractors. Hallowell, 490 A.2d at 957. In addition, by requiring the winning bidder to hire all craft labor personnel through the Local Unions, the PLA introduced “uncertainty in bidding the job” for prequalified nonunion contractors like Allan Myers.
The Commonwealth Court also noted that the PLA’s hiring restrictions for nonunion contractors like Myers and Eckman precluded their ability to bid:
Allan Myers cannot make its employees or subcontractors join a union. See Labor Relations Board v. Fabrication Specialists, Inc., 477 Pa. 23, 383 A.2d 802 (1978)(recognizing that an employee has a right to join, or decline to join, a union or other existing labor organizations). The PLA does not guarantee that the Local Unions will accept Allan Myers’ existing workforce as members or assign them back if they are accepted. Allan Myers cannot bid for the Project with an unknown workforce. The PLA has effectively precluded a nonunion contractor, such as Allan Myers, from participating in the bid solicitation.
The Commonwealth Court also highlighted how the favoritism afforded United Steelworkers contractors violated the rule of a “common standard” rule in competitive bidding:
The PLA favored contractors under agreement with United Steelworkers, and for this reason alone, there is no common standard on which bids are based. This violates “[t]he integrity of the competitive bidding process” and frustrates the “purpose of competitive bidding.” Ezy Parks, 454 A.2d at 932.
Nonetheless, despite its seemingly broad holding, the Commonwealth Court did not disallow the use of PLAs altogether, noting that: “The use of a PLA is permitted where the contracting agency can establish extraordinary circumstances…” [Emphasis added] Of course, it remains to be seen how a public agency can establish the extraordinary circumstances necessary to justify the use of a PLA.
Unless reversed by the Pennsylvania Supreme Court, the Commonwealth Court’s decision spells the virtual death knell for the continued use of PLAs on public works projects in Pennsylvania. Indeed, any public agency attempting to use a PLA after this decision will almost certainly face a challenge which will be virtually impossible to defeat.
The Myers decision can be found here. The Eckman decision can be found here.
If you need assistance with a public contracting issue, feel free to call or email me. I’ll be happy to assist in anyway possible.
Christopher I. McCabe, Esq.
