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Project Labor Agreement Law Resurrected

July 10, 2012

Last year, Michigan enacted 2011 PA 98, the Fair and Open Competition in Governmental Construction Act. Several trade groups successfully challenged the law in Michigan Building and Construction Trade Council v Richard Snyder , 192 LRRM 3320 (2012). In that case, the court held that 2011 PA 98 effectively prevented contractors and subcontractors, who have signed project labor agreements, from bidding on public projects. The court held that the Act was preempted by the National Labor Relations Act (NLRA).

On June 29, 2012, Governor Snyder signed 2012 PA 238 (Act) into law. It amends 2011 PA 98 by adding a new section 2 to the Act. Section 2 attempts to clarify that the State is acting in its proprietary capacity and not attempting to regulate labor issues. This is an attempt to avoid one of the issues the court relied upon in Michigan Building and Construction Trade Council when finding that the Act was preempted by the NLRA. Where a state is acting in its proprietary capacity, its actions are not preempted by federal law. However, if it is acting to regulate some activity regulated by federal law, like labor relations, its actions are preempted by federal law. The addition of the language of Section 2 attempts to avoid any argument that the State is attempting to regulate labor relations.

The Act also amends Sections 5 and 7 of the Act. Section 5 and 7 still prohibit bidders, offerors, contractors or subcontractors (contractors) from entering into or adhering to agreements with labor organizations (unions) in regard to the project. It also prohibits discrimination against contractors for becoming, remaining or refusing to become a party to an agreement with a union. However, these prohibitions are subject to a new Section 8. Section 8 makes it clear that the Act does not prohibit governmental units from awarding contracts, grants, tax abatements, or tax credits (contracts) to contractors who are parties to agreements with unions so long as becoming a party or adhering to an agreement with a union is not a condition for awarding the contract. Section 8 also prohibits a governmental unit from discriminating against a contractor based upon its status as a party to an agreement with a union.  Finally, Section 8 makes it clear that a contractor may enter into or comply with an agreement entered into with one or more unions in regard to a contract with a governmental unit or funded by a governmental unit.

The Act also amends Section 9. The original wording in Section 9 of 2011 PA 98 prohibited a governmental unit, a construction manager or other contracting entity acting on behalf of a governmental unit from including any provision prohibited by Section 5 of the Act in bid specifications, project agreements or other controlling documents. The Amended Section 9 permits the head of a governmental unit to exempt a particular project contract from the requirements of any or all of the provisions of section 5 or 7 if the governmental unit finds, after public notice and a hearing, that special circumstances require an exemption to avert an imminent threat to public health or safety. The possibility or presence of a labor dispute is not a special circumstance.

If you have any questions about 2012 Act 238 or project labor agreements, you may contact Thomas P. Brady at (313) 965-8192 or , Marshall W. Grate, (616) 608-1103 or or another member of Clark Hill's Labor and Employment, Municipal and School, and Construction groups.

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