January 14, 2014
By
- A Third Circuit ruling in a case brought by a sheet metal workers union raises the possibility that general contractors may be liable if their subcontractors fail to assign work in accordance with the terms of a project labor agreement (PLA).
- The Donnelly case is a reminder that general contractors, construction managers and similar entities should ensure that PLAs are strictly enforced.
In Sheet Metal Workers
International Association Local Union No. 27 v. E.P. Donnelly, Inc., the
U.S. Court of Appeals for the Third Circuit (which has jurisdiction over the
federal courts in Delaware, New Jersey and Pennsylvania) issued a decision that
emphasizes the importance for general contractors, construction managers and
similarly situated entities signatory to project labor agreements (PLA) to assure
their diligent enforcement.
The case raises the specter
of a general contractor being held liable for the failure of one of its
subcontractors to assign work in accordance with the terms of the PLA. Since
the Third Circuit upheld the decision of the National Labor Relations Board, it
is reasonable to expect similar decisions in other parts of the country by the
NLRB.
Background
Sambe Construction Co., Inc.
was a general contractor on a public construction project subject to a PLA. The
PLA had typical provisions requiring that all contractors and subcontractors
become signatories to and be bound by the terms of the PLA and that the PLA and
any local arrangements incorporated therein superseded all other agreements.
Sambe subcontracted the roofing work on the project to E.P. Donnelly, Inc., and
Donnelly signed a letter of assent agreeing to be bound by the PLA and to
subcontract only to others who would become signatory to the PLA. Instead,
however, Donnelly assigned its work to carpenters who were not signatory to the
PLA, and a dispute arose when the sheet metal workers, who were signatory to
the PLA, claimed the work that had been assigned to the carpenters.
Donnelly not only failed to
require the carpenters to sign the PLA, but in addition, its collective
bargaining agreement with the carpenters specifically provided that it could
not be superseded by a PLA without the mutual consent of the carpenters and
Donnelly.
Competing Litigation
The sheet metal workers
initiated an arbitration under the PLA grievance procedure in order to resolve
the jurisdictional dispute, and the arbitrator awarded the work in dispute to
the sheet metal workers. The carpenters threatened to picket if the work was
reassigned, and Donnelly filed a jurisdictional dispute charge with the NLRB.
Over objection from the sheet metal workers, the NLRB decided it had
jurisdiction to hear the jurisdictional dispute notwithstanding the existing
arbitration award for two reasons. First, not all parties (i.e., the
carpenters) were bound to resolve the jurisdictional dispute through the PLA’s
grievance procedure and, second, whenever an employer has entered into
conflicting labor agreements, it necessarily follows that there is no
determinative agreed upon jurisdictional dispute resolution mechanism.
While the NLRB’s 10(k)
hearing progressed to resolve the jurisdictional dispute, the sheet metal
workers filed another grievance against both Sambe and Donnelly for failing to
abide by the arbitration award, and another award issued finding both in violation
and awarding substantial damages for which it held both Sambe and Donnelly
jointly and severally liable. The sheet metal workers then sued both Sambe and
Donnelly in federal court under section 301 of the Labor Management Relations
Act for breaching the PLA, seeking enforcement of the arbitration award
granting the work to the sheet metal workers and also enforcement of the award
of damages for the work that its members lost. Conversely, Sambe and Donnelly
sought to have the arbitration award granting the work to the sheet metal
workers vacated.
Eventually,
the NLRB awarded the work to the carpenters on the basis of its usual criteria,
namely employer preference, current assignment and past practice, and economy
and efficiency of operations. Sambe and Donnelly then filed an additional unfair labor
practice charge against the sheet metal workers alleging that the continued
pursuit of the 301 action, in the face of the NLRB’s award of the work to the
carpenters, constituted a further jurisdictional dispute violation because it
sought reassignment of the work to the sheet metal workers. The NLRB upheld
Donnelly’s position and found a further violation as to it, but not as to
Sambe.
Nuances of the Third Circuit’s Ruling
Ultimately, the Third Circuit
upheld the NLRB’s jurisdictional dispute award of the work to the carpenters
and vacated the arbitration award to the contrary. It also upheld the NLRB’s
ruling that continued maintenance of the federal lawsuit by the sheet metal
workers after the NLRB had awarded the work to the carpenters was a further
violation of the NLRA. In so doing, it rejected the sheet metal workers’
attempt to draw a distinction between seeking the work, which it had done
before the NLRB decision, and seeking pay for the work its members lost, which
is what it changed its position to after the NLRB decision. The NLRB found this
to be a distinction without a difference, since it was obviously intended to
put pressure on the contractor to reassign the work in order to avoid paying
twice for the same work. Seeking damages is the same as seeking the work, the
Third Circuit held.
However, the Third Circuit
was careful to clarify that its preclusion of a suit for damages only applies
to Donnelly, the employer who made the disputed work assignment. It does not
apply to Sambe, which was not responsible for making the disputed work
assignment, and, therefore, was not subject to the competing pressures from
which the jurisdictional dispute provisions are intended to shield
employers.
Practical Implications of the Case
Recommendations to general
contractors, construction managers and other similar entities include the
following:
- Assure that everyone working on a PLA project for you signs the PLA, including the subcontractors’ unions.
- Review your subcontracting agreements to determine if they might be improved with modifications to provide for a warranty from the subcontractor that it will sign and comply with the PLA on the project and assure that anyone it engages does so as well.
- Couple the warranty with an indemnification provision against any litigation costs or loss arising out of a failure to comply with the PLA.
- Review PLA agreements to determine whether any modifications would be helpful in addressing a potential problem.
Source: HKLaw.com
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