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Have Project Labor Agreements Been Taken Too Far? Content courtesy of Cook Brown, LLP

Thursday, August 29, 2019

By Dennis Cook and Steve McCutcheon of Cook Brown, LLP

For more than a century the interplay between labor and antitrust law has been a difficult one. Congress has attempted to strike a balance between protection of worker rights and prohibitions of anticompetitive activities.

Environmental laws, such as the California Environmental Quality Act (CEQA), are increasingly used to force developers to enter into union-only Project Labor Agreements (PLA). Similarly, the use of antitrust, RICO, and the prohibitions of unlawful boycotts under the National Labor Relations Act (NLRA) to address abusive behavior, are coming back to the forefront. 

Antitrust Laws

When most people think of antitrust law, they think of the Sherman Antitrust Act that prohibits "contracts, combinations or conspiracies in restraint of trade." It was adopted in 1890 to outlaw monopolistic business practices. After the Sherman Antitrust Act was applied to various forms of union activity, such as boycotts and strikes, Congress adopted the Clayton Act and Norris-LaGuardia Act to restrict courts from intervening in labor disputes. In 1935 Congress passed the National Labor Relations Act (NLRA) to protect the rights of workers to bargain collectively, and engage in strikes, picketing, and other concerted activities.

However, the pendulum had swung too far in the unions' favor. Congress recognized employers and individual workers needed protection from abusive and anti-competitive behavior, and passed the Labor Management Relations Act (LMRA) and Labor Management Reporting and Disclosure Act (LMRDA). These Acts prohibited unions from:
  • engaging in certain forms of boycotts,
  • threatening or coercing neutral employers from doing business with non-union companies, and
  • making "hot cargo agreements" (an agreement to not handle or deal with the products of anyone with whom the union has a dispute) except in the garment and construction industries.
Project Labor Agreements in Construction

Agreements between owners and unions that contain a commitment to use union-only Project Labor Agreements for all labor on a construction project appear to be among the types of anti-competitive behavior prohibited by the antitrust laws. However, exceptions to these laws are applicable to the construction industry. certain collective bargaining relationships have also opened the door to restrictive subcontracting clauses and the use of union-only PLAs.

Examples of Adopting PLAs

The use of PLAs is common in many parts of the country, and courts have provided guidance on how to avoid running afoul of the NLRA and the antitrust laws when adopting PLAs. For example, in Connell Construction Company v. Plumbers Local 100 the Supreme Court said coercive action by unions to obtain union-only agreements is exempt from antitrust only if the agreement is with an employer "in the construction industry and negotiated in the context of lawful collective bargaining agreements, or possibly to avoid jobsite friction from having union and non-union workers simultaneously on the jobsite." 

Similarly in Glens Falls Building and Construction Trades Council, et al., (Indeck Energy Services of Corinth, Inc.), unions used the threat of environmental opposition to a private project to coerce the private developer to execute a union-only PLA. After the unions withdrew their opposition, the developer filed an Unfair Labor Practice Charge with the National Labor Relations Board (NLRB) challenging the lawfulness of the union-only PLA.

The Board held that the agreement would be lawful only if the developer was considered "an employer in the construction industry" and the agreement was entered in the context of a bona fide collective bargaining relationship or had the purpose and effect of dealing with the "jobsite friction" issues of having union and non-union workers side by side. The Board found that the union's desire to acquire work for out of work members and achieve a labor monopoly, and the developer's desire to avoid union opposition to the project, were not related to avoiding "jobsite friction". 

PLA Challenges

Adherence to this guidance provided by the Connelland Indeck cases has been inconsistent and at times ignored. Sham environmental lawsuits, zoning and permitting challenges, and threats of boycotts against third parties used to coerce owners to enter into union-only PLAs, has exposed them to antitrust challenges. Agreements with owners and unions that contain a commitment to use a union-only PLA remain common in many parts of the country and are increasingly sought on publicly-owned projects.

Two suits recently filed by developers in Southern California may signal overreach in coercing developers to enter into PLAs, and increasing resistance to pressure to extract union-only agreements.

In Evans Hotels, LLC v. UNITE HERE! Local 30, San Diego County Building and Constructions Trades, et al., the developer, Evans Hotels, alleges that the unions are following a "playbook" to eliminate development of any hotels in San Diego that will not commit to using union labor to build and staff the hotels. When Evans Hotels refused to enter into agreements to use only union contractors, and enter into a card check agreement to facilitate organizing of hotel staff by UNITE HERE!, Evans Hotels alleged the unions implemented their "playbook" of:
  1. making sham environmental and zoning challenges;
  2. pressuring city officials to condition approval of the project on Evans Hotels' agreement to union demands;
  3. pressuring city officials to slow the approval process; and
  4. pressure Evans Hotels' business partners to withdraw from agreements.
After the city's processing of Evans' Hotels' applications for the project ground to a halt, and its business partner backed out of a joint venture, Evans Hotels filed suit in U.S. District Court. The suit alleged an unlawful boycott under the NLRA, an attempt to create a monopoly in violation of the Sherman Act, extortion in violation of RICO statutes, and related claims. Evans Hotels seeks lost profits in excess of $100,000,000 and treble damages under the antitrust laws, as well as injunctive relief.

Similar conduct is challenged by the developer in The Icon at Panorama, LLC v. Southwest Regional Council of Carpenters, LiUNA Local 300, et al. This project to redevelop a property that has been vacant for nearly 20 years in a disadvantaged part of Los Angeles was targeted by the unions for a PLA. The developer resisted demands on the basis that the rents that could be charged from the developed property would not justify the expense of using all union contractors.
In response, the unions filed sham environmental challenged under CEQA at every step of the city's approval process. The developer also alleges a conspiracy with others, including environmental firms, to assist the unions with using frivolous challenges designed to achieve a monopoly on construction services in the area. The developer has filed suit in Federal Court alleging that the unions and their environmental consultants have engaged in a pattern of sham environmental litigation and violated:
  1. the Sherman Act by attempting to form a monopoly and directing a boycott;
  2. the Clayton Act by conspiring to enter into an exclusive dealing arrangement;
  3. the NLRA by using coercion to force the developer to sign a PLA when it cannot lawfully do so; and
  4. RICO statutes by engaging in extortion through sham environmental litigation and mail fraud.
While the use of PLAs remain common in many parts of the country, we are starting to see more pushback from employers on the tactics some unions are using to try and coerce developers to enter into these agreements. 

Connect with WECA Industry Partner Cook Brown, LLP here.