Human Resource and Labor News

Contractor Bound to PLA Breached Contract by Assigning Work to Carpenters

February 19, 2010

A subcontractor that assigned roofing work on a project covered by a project labor agreement (PLA) to workers represented by a union that was not signatory to the PLA is liable for breach of contract under state common law, despite a National Labor Relations Board (NLRB) decision upholding the assignment under Section 10(k) of the National Labor Relations Act, the U.S. District Court for the District of New Jersey has held.

The case involves the construction of a public community center in Egg Harbor Township, NJ.  Pursuant to a state statute authorizing PLAs on public works, the Township required all parties working on the project to be signatories to a particular PLA.  The general contractor on the project, Sambe Construction Co., signed the PLA and subcontracted roofing work to E.P. Donnelly , Inc. (Donnelly), which signed a letter of assent binding it to the PLA.  Donnelly had an area-wide collective bargaining agreement (CBA) with the Carpenters and used employees represented by that union to install metal roofing and perform related tasks.  The Carpenters, however, were not signatory to the PLA, leading to a jurisdictional dispute with the Sheet Metal Workers, who claimed jurisdiction over the work under the PLA.  The Sheet Metal Workers filed a grievance and received a favorable arbitration award under the PLA procedures for resolution of jurisdictional disputes.  Prior to issuance of the arbitration award, the Carpenters threatened to picket if Donnelly reassigned the work, leading Donnelly to initiate 10(k) proceedings before the NLRB, and the NLRB ruled that the Carpenters were entitled to the work.  The Sheet Metal Workers later filed the present lawsuit against both Sambe and Donnelly in U.S. district court.

The court found that the Sheet Metal Workers established a breach of contract by showing that the PLA was a valid contract, that Sambe and Donnelly failed to meet their contractual obligations under the PLA, and that the union suffered damages.  In deciding that the contractors violated the PLA, the court relied on the arbitrator's decision, including findings regarding contractual requirements that all work must be assigned to a PLA signatory and must be made based on area practice.  In deciding that the PLA was a valid contract, the court relied on the NJ statute authorizing PLAs and on the seminal Boston Harbor case, in which the Supreme Court held that a PLA mandated by a state agency was not preempted by federal law because the agency was acting as a market participant rather than as a regulator. 

Having found that the PLA is a valid contract and that its obligations were unfulfilled, and that the Sheet Metal Workers' suffering of damages was undisputed, the court considered whether the PLA was enforceable.  Sambe and Donnelly argued that the PLA is unenforceable because enforcement would conflict the NLRB's 10(k) decision.  The court acknowledged that the arbitrator's and NLRB's decisions conflicted with regard to which union's members should have been assigned the work.  However, the court explained, the Sheet Metal Workers' lawsuit does not seek enforcement of that portion of the work (which was already completed by the Carpenters by this time).  Rather, it seeks only monetary damages for breach of the PLA. 

"Enforcement of the PLA with an award of monetary damages against Sambe and Donnelly does not conflict with the NLRB's 10(k) decision resolving the jurisdictional dispute," said the court.  The court noted that the NLRB's decision itself included the qualification that "an award of the disputed to work to [the Carpenters does] not…invalidate the PLA.  [Donnelly] continue[s] to be bound under the terms of the PLA, and the parties to the PLA…retain any rights they may have under state law to bring a suit for damages…for any breach of the PLA."  The NLRB further commented that both unions "have separate binding contracts with [Donnelly], and [Donnelly's] obligations under one contract cannot be used to void its obligations under the other." 

The court observed that the letter of assent signed by Donnelly is only a page long and contains only three substantive provisions of one sentence each:  that Donnelly agrees to be bound by the PLA, that Donnelly certifies that it has no commitments or agreements that would preclude compliance with the PLA, and that all project participants sign an identical letter of assent.  "Despite these simple terms," said the court, Donnelly signed the letter of assent with an existing conflicting commitment - its CBA with the Carpenters.  In response to Donnelly's defense that it never saw the PLA itself and was not aware that the Carpenters were not included, the court remarked, "Walking blindfolded through one's business affairs does not excuse the ensuing collision."

The case serves as a reminder to all contractors to carefully read all contracts to which they may become obligated and to ensure that, considering other contracts, they are not creating conflicting commitments.  With certain unions, especially the Carpenters, setting themselves apart from the other trades lately and refusing to sign some PLAs, this reminder becomes even more important. 

Sheet Metal Workers Local 27 v. E.P. Donnelly, Inc., Case No. 07-3023 (D. NJ, 12/3/09).