Third Circuit Deals Blow to Jersey City Ordinance Requiring PLAs on Privately Funded Projects in Exchange for Tax Abatements

Jersey City’s Municipal Code offers real estate developers generous tax exemptions that are designed to spur the City’s economic growth, but the tax incentives have strings attached. Specifically, to receive a tax exemption, even on a privately funded project, the developer must agree to use the City-approved project labor agreement (“PLA”), which is a pre-hire agreement that favors unionized contractors and subcontractors. On September 12, 2016, the Third Circuit Court of Appeals reinstated claims against Jersey City that its tax exemption ordinance mandating PLAs is preempted by the National Labor Relations Act and the Employee Retirement Income Security Act, and violates the dormant Commerce Clause of the U.S. Constitution. Now the case returns to the District Court for a determination whether Jersey City’s PLA requirement is unlawful. The Court was careful to explain that its ruling has nothing to do with public construction projects, and is limited to the City’s attempted regulation of privately funded projects. Associated Builders and Contractors v. City of Jersey City, No. 15-3166 (3rd Cir. Sept. 12, 2016).

By imposing the PLA requirement on privately funded projects that sought tax abatements, the Third Circuit found that Jersey City “require[d] that an employer negotiate with a labor union and that all employees be represented by that labor union as part of the negotiations— even if the developers, contractors, and subcontractors do not ordinarily employ unionized labor and the employees are not union members.” In addition, the City’s standard PLA requires that employers and unions agree not to strike or lock-out during construction, and agree to sponsor or participate in apprenticeship programs.

The Court of Appeals found that the three laws allegedly violated by Jersey City’s ordinance — the NLRA, ERISA and the Commerce Clause — “share the same threshold requirement before their constraints are triggered: that the allegedly unlawful act by the state or local government be regulatory in nature,” as opposed to action by a market participant. The Court determined that Jersey City is not a market participant because the City “is not selling or providing any goods or services with respect to Tax Abated Projects, nor acting as an investor, owner, or financier with respect to those projects.” Invoking Supreme Court precedent, the Court rejected the City’s claim that offering tax abatements gives the City a proprietary interest in the project. The Court found that the City acted instead as a market regulator and since the ordinance strips employers and employees of the economic weapons of strikes and lockouts, and relates to employee benefit plans, the City’s ordinance may indeed be preempted by the NLRA and by ERISA. Finally, by enacting “regulatory measures designed to benefit in-state economic interests by burdening out of state competitors,” the ordinance arguably violates the dormant Commerce Clause.

Absent a request for rehearing or a petition for rehearing en banc, this case will return to the District Court for a determination whether the PLA requirements in the City’s tax exemption ordinance are enforceable. The larger questions are whether PLAs now in place on privately funded projects in Jersey City will remain in effect and, if not, whether this affects developers’ tax exemptions. Also an open question is whether the Third Circuit’s decision affects similar tax exemption ordinances in other municipalities that impose PLA requirements. Questions relating to this important decision and the path forward for developers in Jersey City and elsewhere in the state may be directed to any partner in our firm’s Labor Law Practice Group – James McGovern III, Patrick McGovern, Douglas Solomon, and John Vreeland.

Jersey City Employers Must Provide Sick Time

Beginning today January 24, 2014, businesses in Jersey City with 10 or more employees must provide up to 40 hours of paid sick time to each employee each calendar year, including part-time and temporary employees who work at least 80 hours in the year. Jersey City employers with fewer than 10 employees must provide unpaid sick time to their employees, including part-time and temporary employees who work at least 80 hours in the year.

Generally, employees accrue one hour of sick time for every 30 hours worked beginning on the first day of employment. However, employees may not use sick time until the 91st day of employment. Sick time may be used for one of the following reasons: the employee’s health care, the care of a family member, the closure of the employee’s place of business due to a public health emergency, or to care for the employee’s child whose school is closed due to a public health emergency. Sick time may be taken in hourly increments or the smallest increment that the employer’s payroll system uses to account for absences or use of other time, whichever is smaller.

Employers that already have a paid leave policy in place that provides at least an equal amount of paid leave for the same qualifying events covered by the ordinance are not required to provide additional paid sick time, but should have their leave policies reviewed carefully by counsel to ensure that their policies comply. Jersey City’s new law provides for carry-over of accrued but unused sick time from one calendar year to the next, however employees are not required to pay employees for accrued but unused sick time at the time of separation from employment.

Employers must provide written notice to new hires, display a poster approved by the Jersey City Department of Health and Human Services, and retain records of employee pay and sick time usage for three years. Employers who violate the notice and posting requirements may face fines up to $100 for each employee who did not receive a notice and up to $500 for each establishment where a poster was not displayed. This new law also prohibits retaliation, and employers found in violation can face a fine of up to $1,250 and/or up to 90 days of community service per violation.

Some Frequently Asked Questions about Jersey City’s new law can be found here.

For more information on the new ordinance, or for information on paid sick time laws in other jurisdictions, please contact Patrick W. McGovern, pmcgovern@nullgenovaburns.com, or Rebecca Fink,rfink@nullgenovaburns.com, in the firm’s Labor Group.

Jersey City Business Owners Must Provide Paid Sick Time

On September 25, 2013, Jersey City became the first municipality in the state of New Jersey to pass legislation mandating that businesses provide paid sick time to their employees. Jersey City joins San Francisco, Washington, D.C., Seattle, Portland, Ore., and New York City. The city of Newark, New Jersey is also considering similar sick time legislation.

Beginning on January 24, 2014, businesses in Jersey City with 10 or more employees must provide up to 40 hours of paid sick time to each employee each year, including part-time and temporary employees.  Under the ordinance, an employee accrues one hour of sick time for every 30 hours worked beginning on the first day of employment. However, employees may not use sick time until after completing 90 days of employment. Employees may use the sick time for their own health care or the care of a family member. Employers who already have a paid leave policy in place that provides at least an equal amount of paid leave as required by the ordinance are not required to provide additional paid sick time.

Major requirements of the law include:

  • Paid sick time is carried over to the next calendar year, but an employer need not carry over more than 40 hours of sick time in any calendar year, and employees may only use 40 hours of sick time in any calendar year, regardless of carryover.
  • Employers are not required to pay out accrued but unused sick time at the time of an employee’s separation from employment.
  • Employees must provide only oral notice to their Employer of their need to use sick time “as soon as practicable.”
  • Employers may not require an employee using sick time to find a replacement worker to cover his or her shift.
  • Sick time may be used in the smaller of hourly increments or the smallest increment that the employer’s payroll system uses to account for absences or use of other time.
  • Employers may require reasonable documentation from the employee for sick time of more than 3 consecutive days.
  • The ordinance prohibits retaliation against employees for using sick time.
  • Use of paid sick time may not count as an absence for purposes of discipline or any other adverse action.

The ordinance also requires Employers to provide written notice to new hires, to display a poster approved by the Jersey City Department of Health and Human Services, and to retain records of employee pay and sick time usage for three years. The ordinance prohibits retaliation, and Employers found in violation of the ordinance can face a fine of up to $1,250 and/or up to 90 days of community service per violation. Employees who feel their employer has violated the ordinance may complain to the Department of Health and Human Services and/or may bring a cause of action in a court of competent jurisdiction.

For more information on the new ordinance, or for information on paid sick time laws in other jurisdictions, please contact John R. Vreeland, jvreeland@nullgenovaburns.com or Rebecca Fink, rfink@nullgenovaburns.com, in the firm’s Labor Group.