The U.S. Court of Appeals for the Sixth Circuit (Ky., Mich., Ohio, Tenn.) has upheld a Michigan statute that precludes state agencies from requiring or prohibiting their construction contractors and subcontractors to adhere to a project labor agreement (PLA). The decision overturns a district court ruling that the Michigan Fair and Open Competition in Government Construction Act was invalid as preempted by the National Labor Relations Act (NLRA).
Since the U.S. Supreme Court’s landmark 1993 Boston Harbor decision, the primary issue in cases addressing the validity of laws mandating or prohibiting PLAs in government contracting is whether the government, through the law, is acting in a proprietary or a regulatory capacity. When the government is acting in a proprietary capacity, it may act as any other market participant may and its actions are not preempted by the NLRA.
The present court found the D.C. Circuit’s 2002 Allbaugh decision -- which upheld Pres. George W. Bush’s executive order restricting government-mandated PLAs on federal and federally assisted projects -- to be directly on point. Quoting the Boston Harbor decision, the Allbaugh court held that the relevant distinction in determining whether the state is acting in a proprietary or regulatory manner is whether the government “‘‘acts just as a private contractor would act’... or instead seeks to affect conduct ‘unrelated to the employer’s performance of contractual obligations.’” The court here noted that the Michigan statute is almost identical to Pres. Bush’s executive order in its effect on PLAs. The court further observed that Allbaugh and various other circuit court cases have drawn a similar line, holding that, to be proprietary, the law “must be aimed to achieve a proprietary goal and must be limited to the furtherance of that goal.” The Michigan statute “falls on the proprietary side of that line.”
The court found that the state is seeking to preserve taxpayer resources by encouraging open competition among potential contractors and subcontractors. The Act does not ban PLAs and it allows contractors who enter into PLAs to compete for public contracts on equal footing with contractors that do not, according to the court. “Private entities, including contractors working on government projects, remain free to enter into PLAs,” noted the court. “The law’s effect is limited to forbidding governmental units from entering into PLAs and then forcing the terms and conditions found within on bidders, contractors, and subcontractors.”
The court rejected labor’s argument that the statute is too broad because it doesn’t require consideration of projects on a case-by-case basis. “Private proprietors can and do act on an across-the-board basis without somehow becoming regulators,” stated the court. “The legislature permissibly decided that public resources would best be preserved by taking the PLA decision out of the hands of governmental units and leaving it to private contractors.”
Likewise, the court rejected the argument that the statute is too broad because it extends to government contracts funded by private or federal funds. The court found that the state has a proprietary interest in the efficiency of its projects even if they have outside funding. In fact, by focusing on state action instead of state funding, the statute allows private projects funded by state grants to use PLAs and further demonstrates that the state’s goal is efficiency in government construction rather than the wholesale elimination of PLAs, said the court.
Because the Act furthers Michigan’s proprietary goal of improving efficiency in public construction projects and is no broader than is necessary to meet those goals, the statue is proprietary and not preempted by the NLRA, held the court.
Mich. Bldg. and Constr. Trades Ccl v. Snyder, Case Nos. 12-1246, 12-2548 (6th Cir., 9/6/12).
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