The PLA Conundrum

Ah, Project Labor Agreements ("PLA"). Unions love 'em, non-union contractors hate 'em. For the uninitiated, a PLA is generally a contract between a project owner (public or private) and labor unions which requires that the project be awarded only to contractors and subcontractors who agree to: (a) recognize unions as the representatives of their employees on that job; (b) use the union hiring hall to obtain workers; (c) pay union wages and benefits; and (d) obey the union's oftentimes restrictive work rules, job classifications and arbitration procedures. PLAs typically increase construction costs by reducing competition for the work ... since everybody on the project has to pay the same union rates, there is no room for competitive pricing. They also tend to limit the types of contractors who will bid on a PLA project ... not every contractor wants to have a relationship, limited or otherwise, with a union. Of course, unions claim that PLAs are a "good thing" because they result in labor harmony and the payment of area standard wages and benefits.

In July, 2007, the National Labor Relations Board (the "NLRB") issued its decision in Glens Falls Building and Construction Trades Council, 350 NLRB No. 42 (2007). The case considered the enforceability under the National Labor Relations Act (the "NLRA") of two PLAs made in connection with the construction of a power plant. In what was a bit of a surprise decision, the NLRB held that the PLAs constituted prohibited "hot cargo agreements" under Section 8(e) of the NLRA. A "hot cargo agreement" is an arrangement pursuant to which an employer agrees to cease or refrain from dealing with a company with which the union has a disagreement or dispute.

There is a construction industry proviso (i.e., an exception) stating that Section 8(e) does not apply to an agreement between a union and an employer in the construction industry relating to the contracting or subcontracting of work. The proviso has been interpreted generally as excluding PLAs from the purview of the NLRA. Not so in the Glens Falls case. There, the NLRB held that the PLAs were not protected by the proviso since it applied only to agreements within the context of collective bargaining relationships. Inasmuch as the PLAs were, essentially, adhesion contracts (i.e., take it or leave it agreements) which were not subject to negotiation, they did not come within the ambit of collective bargaining and thus violated the NLRA.

Based on the holding in Glens Falls, one would think that all PLAs are prohibited "hot cargo agreements." Hold on, baba looey ... not so fast. The case may be limited to its specific facts (which I won't go into here in order to save you from undue boredom). Suffice it to say that it remains to be seen whether the Glens Falls case will be broadly or narrowly construed. Nonetheless, the holding may impact adversely on the ability of a union to insist on a PLA. That, too, may be a "good thing."

Stay tuned.

Welcome New Subscribers

Just a note to welcome Cow Bay Contracting, Inc. and Greenlights For Nonprofit Success as new subscribers to this humble, little blog. It's nice to know that folks are actually reading and (hopefully) benefiting from its contents.

Amendment To New York Labor Law Section 220 - EFFECTIVE FEBRUARY 24, 2008

I know that I've posted about this issue a couple of times in the past, but here's one last post to make sure that everyone is on the same page. The new amendment to Labor Law Section 220 becomes effective on February 24, 2008.

The amendment is an addition to New York Labor Law §220(3-a)(a). It requires contractors and subcontractors to provide written notice to all laborers, workers or mechanics, on each pay stub, of the prevailing wage rate for their particular job classification. If the notice won't fit on the pay stub, the New York State Department of Labor (the "NYSDOL") advises that an accompanying sheet or attachment containing the information will suffice.

The amendment also requires contractors and subcontractors to post a Notice at the beginning of the performance of every public work contract on each job site. The Notice must include the telephone number and address for the NYSDOL as well as a statement informing laborers, workers or mechanics of their right to contact the NYSDOL if they are not receiving the proper prevailing rate of wages and/or supplements for their particular job classification. The required notification will be provided with each prevailing wage schedule and may also be obtained from the NYSDOL.

It is important to ensure that each worker receives a Notice on the pay stub or an accompanying sheet and that a Notice is posted at the job site. Failure to do either or both is a violation of the statute and could result in an inquiry by the NYSDOL. That's something which public works contractors do not want to happen.

Proposal To Further Expand FMLA Coverage

In addition to the expansion of coverage for military families under the Family and Medical Leave Act (the "FMLA") which I discussed here previously, the U.S. Department of Labor (the "DOL") today published a proposal to update its regulations under the FMLA. Proposed changes include increased notice obligations for employers so that employees will better understand their FMLA rights, and revising the employee notice rules to minimize workplace disruptions due to unscheduled FMLA absences. A link to the proposed rules appears here.

The DOL has invited comment on the Notice of Proposed Rulemaking.

Agressive Enforcement Of Employee Misclassification

As I posted here last year, New York Governor Eliot Spitzer signed Executive Order No. 17 which created an inter-agency strike force to address the problem of employers who classify employees as independent contractors or pay workers off the books as part of the underground economy. The Joint Enforcement Strike Force includes staff from: the Department of Labor, the Attorney General’s Office, the Department of Taxation and Finance, the Workers’ Compensation Board and the New York City Comptroller’s office.

Misclassification of workers occurs when an employer treats an individual as an independent contractor instead of as an employee. As a result, compliance with unemployment insurance, workers’ compensation, social security, tax withholding, temporary disability, and wage and hour laws may be compromised.

Enforcement of employee misclassification issues is getting very aggressive in a variety of areas. Just look at the various agencies included in the State's task force. The message here is that you can run, but you can't hide.

Expanded FMLA Coverage For Military Families

On January 28, 2008, President Bush signed the 2008 National Defense Authorization Act (the “NDAA”). The NDAA includes provisions which amend and significantly expand the Family Medical Leave Act of 1993 (the “FMLA”) with respect to the rights of military families having service members called to active duty in the armed forces. The NDAA took effect immediately.

Depending on whether a “serious illness or injury” is involved as defined by the new law, the NDAA permits an eligible employee (i.e., a spouse, son, daughter or parent) to take between 12 to 26 weeks of of FMLA leave to care for an injured service member. In addition, the NDAA creates a new category of employees entitled to FMLA leave to care for an injured service member. This new category, known as “next of kin,” is defined as the nearest blood relative to the service member. The NDAA contains several vagaries which will likely be addressed in regulations to be issued by the United States Department of Labor.

It’s nice to see the Feds finally get up to speed this issue. New York and a few other states were ahead of the curve in passing their own family military leave laws well-prior to the enactment of the NDAA.

Second Circuit Says "No" To Conditional Overtime

In Chao v. Gotham City Registry, Inc. (06-2432-CV - Decided: January 24, 2008), the United States Court of Appeals for the Second Circuit held, in a case of first impression, that an employer policy requiring prior authorization for overtime work does not relieve the employer from paying overtime absent such pre-approval.

The Gotham City case involved a Petition for civil contempt brought by the United States Secretary of Labor (the “Secretary”) for an alleged violation of a Consent Judgment requiring the employer (a temporary staffing agency providing nurses to hospitals) to pay overtime to its nurses. Prior to the Consent Judgment, the employer had paid straight time for all hours worked in excess of forty hours per week, thereby violating the Fair Labor Standards Act (the “FLSA”). After the Consent Judgment and consultation with counsel, the employer implemented a policy requiring its nurses to obtain authorization prior to working any overtime hours; under the policy, overtime would not be paid absent the employer’s prior authorization. The purpose of the policy was to prevent the employer from paying for unwanted overtime hours worked. The Secretary claimed the policy violated the provisions of the Consent Judgment; however, the District Court denied the Petition for contempt and the Secretary appealed.

The Second Circuit affirmed the decision of the District Court. Initially, the court goes through an exhaustive analysis of the FLSA and the definition of the term “work.” The decision is worth reading for that alone. The court then notes that the nurses typically lacked the opportunity to obtain prior approval for overtime given the critical nature of their work; indeed, during the course of their assignments at client hospitals, the nurses were asked to work overtime by hospital staff. Ultimately, the court held, among other things, that an employer has a duty to exercise control over its workers and to ensure that unwanted work is not performed. The court stated: “[t]he mere promulgation of a rule against such [overtime] work is not enough. Management has the power to enforce the rule and must make every effort to do so.”

As to the issue of civil contempt, the court affirmed the District Court’s denial of the Petition on the ground that the employer had made adequate efforts to comply with the Consent Judgment. The court noted that it was difficult for the employer to maintain control over its nurses given that they worked off-premises. It found that the employer had taken reasonable steps to ensure compliance with its overtime policy such as consulting with counsel prior to its implementation, making the nurses aware of the rule, discouraging them from accepting overtime shifts without seeking prior approval, and discouraging its clients from offering overtime shifts. Also militating against a finding of contempt was the fact that the employer negotiated with its client hospitals to procure an overtime premium retrospectively when its nurses worked overtime.

Based on the holding in Gotham City, an employment policy providing for conditional overtime in the Second Circuit appears to be a thing of the past.