|
 | |
|
NLRB Rejects Project Labor Agreements for New Power Plant Negotiated Under Threat of Regulatory Interference
|
|
September 17, 2007
|
|
|
|
Thelen Reid Brown Raysman & Steiner LLP
The National Labor Relations Board has issued a decision on the enforceability under the National Labor Relations Act of two project labor agreements (PLAs) made in connection with construction of a power plant: one between the general contractor and a council of construction trade unions; the other between the plant owner and the same council of unions. Glens Falls Building and Construction Trades Council, 350 NLRB No. 42 (July 31, 2007).
The agreements provided that the owner and general contractor would ensure that the subcontractors, which would actually employ the workers, used union labor throughout the project. The parties entered into the PLAs only after unions made clear they would otherwise complicate the regulatory proceedings and permit approvals needed to begin construction.
The NLRB held that such agreements were unenforceable under the National Labor Relations Act. As a result of the decision, project owners and general contractors should re-evaluate the validity of any existing PLAs they have negotiated under similar circumstances and exercise caution before entering into these agreements with unions in the future.
Background
In Glens Falls, the plant owner, Indeck, was a developer of cogeneration power plants and wanted to build several plants in Upstate New York in the early 1990s. Construction of such plants required multiple levels of regulatory approval. During regulatory proceedings for Indeck's planned project in Corinth, New York, local labor unions filed objections. In response, Indeck engaged in discussions with the Glens Falls Building and Construction Trades Council and expressed its intent to build the Corinth plant with union labor. Indeck referred the unions to its general contractor, Sirrine, for further discussions.
Based on the perceived slow pace of negotiations, the unions solicited and received from Indeck a letter in which Indeck represented that it would ensure any subcontractor on the project used union labor. Indeck executives testified that this letter was sent in exchange for the unions' commitment to refrain from attempts at "intervening to try and kill the [Corinth] project" in regulatory proceedings.
Sirrine eventually reached an agreement with the unions on use of union labor at the Corinth project. This agreement provided that all of Sirrine's subcontractors would execute a PLA binding them to use union labor and pay union-scale wages on the project. Notably, Sirrine itself was not to directly employ any employees engaged in construction at Corinth.
Complications developed when a dispute arose between Indeck and Sirrine. As a result, Indeck terminated its contract with Sirrine and retained another company to serve as general contractor on the Corinth project. That firm was not a signatory to the PLA and, in fact, completed construction of the Corinth plant using both union and non-union labor. The unions later sued Indeck in federal court, alleging that it breached its agreement to build the Corinth plant using union labor. In its defense, Indeck argued that any agreement it had with the unions was unenforceable under §8(e) of the National Labor Relations Act. That statute provides:
It shall be an unfair labor practice for any labor organization and any employer to enter into any contract or agreement, express or implied, whereby such employer ceases or refrains or agrees to cease or refrain from handling, using, selling, transporting or otherwise dealing in any of the products of any other employer, or to cease doing business with any other person, and any contract or agreement entered into heretofore or hereafter containing such an agreement shall be to such extent unenforceable and void: Provided, That nothing in this subsection shall apply to an agreement between a labor organization and an employer in the construction industry relating to the contracting or subcontracting of work to be done at the site of the construction, alteration, painting, or repair of a building, structure, or other work. [Emphasis added]
The U.S. District Court stayed the unions' lawsuit pending resolution of the unfair labor practice charge filed by Indeck against the unions concerning enforceability of the agreement.
The Decision
The NLRB concluded that Indeck's agreement with the unions was "within the scope of the prohibitions of Section 8(e) because it constitute[d] an implicit agreement by Indeck not to do business with another person - specifically, any contractor who would subcontract to nonunion subcontractors."
Thus, the central issue left for NLRB to decide was whether the agreement fell within the safe harbor language of §8(e) (highlighted above) known as the "construction industry proviso."
NLRB noted that the unions bore the burden of proving coverage under the proviso. The unions argued that Indeck and Sirrine were employers in the construction industry and that both the Indeck and Sirrine agreements were reached through collective bargaining. In the alternative, the unions argued that the agreements were negotiated with the intent to resolve potential labor disputes that might have arisen at the construction site if union and non-union employees were allowed to work side-by-side. The unions drew support for this argument from dicta in a U.S. Supreme Court decision, Connell Construction Co. v. Plumbers Local Union 100, 421 U.S. 616 (1975), suggesting that such agreements might be valid outside the collective bargaining context if "they were directed toward the reduction of friction that may be caused when union and nonunion employees of different employers are required to work together at the same jobsite."
NLRB rejected both of the unions' assertions. First, as to the collective bargaining claim, NLRB emphasized that nothing in either agreement "purported to relate to terms and conditions of employment for any Indeck or Sirrine employees." NLRB observed that "it was understood that Sirrine and Indeck would not be employing any workers in the building and construction trades on the... jobsite." In the NLRB's view, the sole purpose of the unions' agreements was to "bind Indeck to select a contractor who, in turn, would subcontract work only to employers who signed the... PLA."
Next, NLRB considered the unions' claim that the Indeck and Sirrine agreements were valid under §8(e) because they were intended to reduce potential labor strife at the jobsite. NLRB declined to resolve this novel issue on the ground that the unions had failed to prove that either agreement had as its purpose the reduction of labor conflict. Rather, NLRB found the record showed both "that Indeck's purpose was to remove the threat of union opposition to Indeck's efforts to secure regulatory approval of its cogen construction plant" and that "the [unions] wanted a labor monopoly at a major construction site to provide employment for their out-of-work members." As a result, NLRB ruled that both agreements were unenforceable and issued an order compelling the unions to dismiss their breach of contract action against Indeck in federal court.
Impact of the Decision
For more than a decade, developers seeking to build power plants have struggled with union interference in the regulatory permitting process. Unions often insist upon PLAs as the price of their cooperation with a project. PLAs effectively guarantee work for union members and also allow developers to increase their chances of obtaining the necessary permits. Glens Falls may limit the ability of unions to achieve their goals through these agreements. At the very least, developers will have to act carefully if they wish to enter into enforceable PLAs.
If you would like to receive legal reports and updates more quickly, by e-mail, click here and fill out the mailing list form.
For more information about the issues covered in this report, please contact Linda S. Husar in our Los Angeles office at 213-576-8017 or at lshusar@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
©2007 Thelen Reid Brown Raysman & Steiner LLP
|
| | |
