U.S. Supreme Court’s Epic Decision Validates Class Action Waivers

On May 21 the U.S. Supreme Court resolved the question whether the National Labor Relations Act prevents an employer from enforcing an employee’s contractual waiver of the right to sue the employer on a class or collective basis. In a 5-4 decision, the Court held that arbitration agreements requiring the processing of claims one-by-one and prohibiting class actions must be enforced, and neither the Federal Arbitration Act’s saving clause nor the National Labor Relations Act “permits this Court to declare the parties’ agreements unlawful.”  Epic Systems Corp. v. Lewis; Ernst & Young v. Morris; NLRB v. Murphy Oil USA, Inc.

In each of these three cases, the employee signed a contract mandating the resolution of workplace disputes through arbitration on an individualized basis, and later brought collective action claims under the Fair Labor Standards Act for unpaid wages.  In seeking to void their class action waivers, the employees relied on the NLRB’s 2012 decision in D. R. Horton, Inc. and also argued that the FAA’s savings clause allowed the Court to deny enforcement of the arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract.”

In the D. R. Horton case, the NLRB ruled that the NLRA effectively nullified the FAA in cases where an employer seeks to compel arbitration of employee claims on an individual basis only, by expanding the definition of “concerted activity” to include the right to bring a class or collective action. The NLRB ruled that an agreement not to bring a class or collective action is unenforceable as violative of the NLRA, even though waivers of other NLRA rights are enforceable.

The Court majority rejected the NLRB’s holding and held that the NLRA focuses on the rights to organize unions and bargain collectively. The Court commented that it “has never read a right to class actions into the NLRA – and for three quarters of a century neither did the [NLRB].” Justice Gorsuch, writing for the majority, reasoned that it is “pretty unlikely” that the NLRA was intended to protect the right to bring class or collective actions, especially since the NLRA makes no mention of them, and as recently as 2010 the NLRB’s General Counsel opined that the NLRA does not protect these rights.

The Court also relied on the FAA’s policy favoring arbitration agreements and legal precedent acknowledging the “unmistakably clear congressional purpose that the arbitration procedure, when selected by the parties to a contract, be speedy and not subject to delay and obstruction in the courts.” To hold all such provisions unenforceable, the Court stated, would cause arbitration to “wind up looking like the litigation it was meant to displace.”

This sweeping decision will likely eliminate some of the reservations and indecision that the employer community has had regarding including in their new employee orientation paperwork agreements requiring arbitration of employment-related claims on an individual basis only.

For more information regarding the value that mandatory arbitration agreements and class action waivers may add to your organization and how to design and roll out arbitration procedures that will survive legal challenge, please contact one of the Partners in the firm’s Labor Law Practice Group: James J. McGovern III, Esq., at jmcgovern@nullgenovaburns.com, Patrick W. McGovern, Esq., at pmcgovern@nullgenovaburns.com, Douglas E. Solomon, Esq. at dsolomon@nullgenovaburns.com, or John R. Vreeland, Esq., at jvreeland@nullgenovaburns.com  — or call us at 973.533.0777.

N.J. Governor Orders Fresh Focus On Worker Misclassification

On May 3, 2018 New Jersey Governor Phil Murphy signed Executive Order No. 25 which authorizes a 12-person task force to review misclassification of workers as independent contractors in New Jersey, with a focus on the construction industry.  The Employee Misclassification Task Force will be responsible for examining misclassification enforcement, developing practices to improve enforcement of current law, making recommendations to encourage compliance with the law, and reviewing existing state law and applicable procedures related to worker misclassification.

The reasons advanced by the Governor for launching the Task Force are that misclassification as an independent contractor results in workers’ losing legal rights and employment related benefits, harms the State’s economy by non-payment of State and federal payroll taxes, serves as a barrier to union organizing, and provides non-compliant employers with an unfair competitive advantage over employers that properly classify their workers.

The Task Force will include three representatives of the State Department of Labor and Workforce Development, three representatives of the Department of the Treasury, one representative each of the Departments of Law and Public Safety, Agriculture, Banking and Insurance, Human Services, and Transportation, and a representative of the Economic Development Authority. Notably, the Task Force will have no representation from the plaintiffs’ or defense bars, at least at the outset.

In light of the State’s renewed crackdown, employers must be cognizant that the designation of a worker as an independent contractor in New Jersey is not a matter of semantics but must be defensible under legal precedent. Specifically, New Jersey adheres to the “ABC” test in distinguishing an independent contractor from an employee. This test presumes that a worker is an employee of the service recipient and places the burden on the service recipient to establish otherwise.

To meet this burden, an employer must show that:

  • The worker has been and will continue to be free from control or direction of the performance of the service, both in the service contract and in fact;
  • The worker’s service is either outside the usual course of business for the service recipient, or is performed outside of all the places of the business of the service recipient; and
  • The worker is engaged in an independently established trade, occupation, profession or business.

If any of these three criteria is not met, the worker is properly classified as an employee.  Accordingly, a New Jersey employer must carefully assess the status of its workforce in light of the heightened attention to misclassification at the state level.

For more information about Executive Order No. 25 and guidance as to what your organization should be doing in anticipation of this new enforcement priority, please contact one of the partners in the firm’s Labor Law Practice GroupJames J. McGovern III, Esq., at jmcgovern@nullgenovaburns.com, Patrick W. McGovern, Esq., at pmcgovern@nullgenovaburns.com, Douglas E. Solomon, Esq. at dsolomon@nullgenovaburns.com, or John R. Vreeland, Esq., at jvreeland@nullgenovaburns.com  — or call us at 973-533-0777.

DACA Program Preoccupies Courts and Confounds Congress

Since September 2017 when the Trump Administration announced the termination of the Deferred Action for Childhood Arrivals Program (DACA), litigation and Congressional inertia have contributed to the creation of an uncertain future for DACA Program enrollees. On January 9, a federal district court enjoined the Administration from ending DACA on March 5, 2018, and at least until the case makes its way through litigation. This decision prompted the U.S. Citizenship and Immigration Services to restart the DACA program, which currently means that DACA program enrollees whose status expired on or after September 5, 2016 may now file a renewal application. Further, DACA program enrollees whose DACA status expired or terminated prior to September 5, 2016 may file new DACA applications. The order does not, however, allow new applications by persons who never had DACA status and does not permit persons in the DACA Program to travel outside the U.S. in advance parole status.

The Department of Justice appealed the federal court’s order, and the U.S. Supreme Court has agreed to hear the Justice Department’s appeal on an expedited basis, which allows the Court to issue a decision by mid-February. The Court also ruled that the Department of Homeland Security is not required to turn over documents relating to the Administration’s decision to end DACA, at least for now.

Meanwhile, the Second Circuit Court of Appeals is reviewing an order by a federal district court in Brooklyn that allows the court to review the Administration’s decision to terminate the DACA program.

While these DACA program-related cases proceed through the courts, Congress is attempting to legislate a resolution. A bipartisan group of Senators sent a DACA proposal to the President who rejected it, reportedly because it failed to end the family preferences provisions of current immigration law Most recently, 30 Democrats joined their Republican counterparts to end a three-day government shutdown by passing a temporary spending bill, but failed to negotiate a deal on DACA.  Senate Majority Leader Mitch McConnell committed to bring a DACA bill to the Senate floor if DACA and border security legislation has not been passed by the Senate by February 8 when the current funding legislation expires.

For questions about the DACA Program and how it could affect your employees and your business, contact Patrick W. McGovern, Esq., Partner in the firm’s Immigration Law Practice Group, at pmcgovern@nullgenovaburns.com, or by phone at 973-535-7129.

Republican Majority at NLRB Brings Important Pro-Employer Decisions

The recent, temporary Republican majority at the NLRB brought several important changes to Board decisions issued during the Obama Administration. In early December Republican appointees of President Trump briefly held a majority of the seats on the Board. This status continued until December 16 when Board Chairman Miscimarra’s resignation took effect. However, in the weeks leading up to Miscimarra’s resignation, the three Republican Board members penned pro-employer decisions that for the most part return to Board precedent in effect prior to 2009. On December 22, 2017, President Trump appointed Board Member Marvin E. Kaplan as Acting Board Chairman. The President is expected to nominate management labor attorney John Ring to fill the vacancy created by Miscimarra’s resignation. But before Miscimarra exited, the Republican-majority issued several decisions that rolled back prior Board precedent and set the stage for more pro-employer decisions. A few examples are as follows.

On December 14, the Board issued two decisions, Boeing Co. and Hy-Brand Industrial Contractors, that address facially neutral workplace rules and the joint employer standard.  In Boeing, the Board revisited the 13-year old Lutheran Heritage standard which held that an employer that maintains a facially neutral workplace rule commits an unfair labor practice if an employee would reasonably construe the rule as prohibiting Section 7 activity. In Boeing, the company issued a workplace rule that prohibited cameras at work. The Board held that the Lutheran Heritage standard, under which the anti-camera rule was unlawful, failed to consider legitimate justifications for the polices, rules, and handbook provisions challenged. The Board found it particularly problematic that prior decisions applying the Lutheran Heritage standard found unlawful employer directives that employees “work harmoniously” and conduct themselves in a “positive and professional manner.”  In Boeing the Board announced it will now apply a two-pronged test that considers (i) the nature and extent of the rule’s potential impact on employee Section 7 rights and (ii) the employer’s legitimate justifications for the rule.

Also on December 14 the Board overruled the joint employer standard announced in its 2015 Browning-Ferris decision, which decreed that “even when two entities have never exercised joint control over essential terms and conditions of employment, and even when any joint control is not ‘direct and immediate,’ the two entities will still be joint employers based on the mere existence of ‘reserved’ joint control, or based on indirect control or control that is ‘limited and routine.’” In Hy-Brand Industrial Contractors, the Board held that a finding of joint employer status now requires proof that putative joint employers have actually exercised control over essential employment terms, and that the control is direct and immediate, not limited or routine.

On December 15, Miscimarra’s last day on the job, the NLRB issued two more pro-employer decisions — Raytheon Network Centric Systems and PCC Structurals, Inc.  In Raytheon, the Board revisited the Supreme Court’s 1962 decision in NLRB v. Katz and the case law applying Katz. The Court in Katz held that Section 8(a)(5) of the Act prohibits employers from making a change in mandatory bargaining subjects unless the employer gives the union advance notice and an opportunity to bargain over the proposed change. Later NLRB case law held that an employer may lawfully take unilateral action so long as it “does not alter the status quo.”  Raytheon provided an opportunity for the Board to clarify what constitutes a “change” from the “status quo” and to revisit the Board’s 2016 holding in E.I. du Pont de Nemours which re-defined what constitutes a “change” requiring notice to the union and bargaining prior to implementation. In DuPont the Board ruled that even if an employer continued to do precisely what it did for decades pursuant to a CBA, and even if the CBA permitted the employer’s past actions, once the CBA expires, taking the same action constitutes a “change.” Furthermore, if the employer’s action involved discretion and the employer took discretionary action, under DuPont this exercise of discretion was a “change.” In Raytheon the Board overruled DuPont as fundamentally flawed. The Board concluded that “an employer’s past practice constitutes a term and condition of employment that permits the employer to take actions unilaterally that do not materially vary in kind or degree from what has been customary in the past.” In Raytheon the Board held that since the employer routinely changed its employees’ benefits, premiums, deductibles, and copayments for health insurance in the past, Raytheon did not violate the Act when it made similar changes after the CBA expired. The Board held that its decision applied retroactively, but also cautioned this its holding had no effect on a union’s right to demand bargaining over mandatory bargaining issues.

On December 15 the Board returned to the prior standard for determining when a proposed unit is appropriate for collective bargaining. PCC Structurals Inc. The Board overruled its 2011 decision in Specialty Healthcare & Rehabilitation Center of Mobile and returned to its prior “community of interests” standard. The Board criticized the Specialty Healthcare standard for transferring too much responsibility from the Board to the organizing parties and deferring to the petitioned-for unit in all but a few narrow, highly unusual circumstances. In reverting to the community of interests standard, the Board stated, “It is the Board’s responsibility to determine unit appropriateness based on a careful examination of the community of interests of employees both within and outside the proposed unit.” Accordingly, employers will have greater participation in the determination of an appropriate unit for a union election. Conversely, union organizers are expected to have less success in gerrymandering the unit to conform to the employee groups they are targeting.

More pro-management changes are expected once the fifth Board member is confirmed. For example, the Board may revisit its blocking charge policy, which delays a union decertification election when a union files an unfair labor practice charge and essentially keeps the employees in the union until the election occurs, regardless of the charge’s merits.

For more information about how the changes at the NLRB affect unionization efforts at your company or your company’s implementation of work rules, policies or procedures, please contact one of the partners in the firm’s Labor Law Practice Group — James J. McGovern III, Esq., at jmcgovern@nullgenovaburns.com, Patrick W. McGovern, Esq., at pmcgovern@nullgenovaburns.com, Douglas E. Solomon, Esq. at dsolomon@nullgenovaburns.com, or John R. Vreeland, Esq., at jvreeland@nullgenovaburns.com  — or call us at 973-533-0777.

Third Time’s The Charm for Trump Travel Ban

On December 4 the U.S. Supreme Court cleared the way for the third version of President Trump’s travel ban to take effect, staying injunctions handed down by two U.S. District Courts in October. The Administration’s latest travel ban indefinitely suspends travel to the U.S. by nationals of Somalia, Syria, Libya, Iran, Yemen, North Korea, and Chad and certain officials of the Venezuelan government. Justices Ginsberg and Sotomayor dissented from the Court’s decision.

In two separate orders, the Court stayed injunctions granted by the Courts in Hawaii and Maryland. On October 17 the Maryland District Court issued a nationwide injunction blocking implementation of the ban, finding a likelihood of success on claims that the ban exceeds the President’s authority under the Immigration and Nationality Act (INA) and violates the Establishment Clause. The injunction protected only individuals with a bona fide relationship with a person or entity physically located in the U.S., such as immediate family members, and did not block the restrictions on U.S. entry by North Koreans and Venezuelans.

Three days later, the District Court in Hawaii issued a nationwide temporary restraining order finding a likelihood that the Plaintiffs would prevail on their claims under the INA. While the Court completely enjoined implementation of the ban with respect to persons traveling from the six Muslim majority countries, in November the Ninth Circuit pared the TRO back to protect only those with a bona fide relationship with a person or entity in the U.S. This includes “close familial relationships” which, according to the Ninth Circuit, include grandparents, grandchildren, brothers-in-law, sisters-in-law, aunts, uncles, nieces, nephews, and cousins.

In the latest development, the Trump administration argued to the Supreme Court that the third version of the ban is the result of an extensive review process designed to ensure that foreign national travelers do not pose a risk to national security. The Administration contends that anything but a complete stay of the lower court orders would undermine national security since “most immigrant-visa holders have a bona fide relationship with a person or entity in the United States.”

The Supreme Court apparently agreed, reconsidered its analysis of the prior version of the travel ban, and allowed the ban to take full effect while its legality is reviewed by the lower courts. Oral arguments are scheduled before the 9th Circuit Court of Appeals on December 6. The Maryland case will be argued before the 4th Circuit on December 8. At this time, there is no appeal pending before the Supreme Court relating to any version of the travel ban, but eventual Supreme Court review of travel ban 3.0 is likely.

If you would like to discuss the implications of the travel ban and the various court decisions affecting the ban for your employees, your hiring plans, and your business, please contact Patrick W. McGovern, Esq., Partner in the Firm’s Immigration Law Practice at 973-535-7129 or at pmcgovern@nullnullgenovaburns.com.

President Ends DACA Program, Gives Congress Six Month Deadline to Pass Long-Term Fix for Dreamers

On September 5 U.S. Attorney General Sessions announced that the Administration will end the Obama Administration’s Deferred Action for Childhood Arrivals program, known as DACA. The program has been in effect since mid-2012 and has allowed individuals brought to the U.S. as children or teens before 2007 to apply for work permits and avoid deportation. To be eligible to apply for DACA, an individual had to be under age 16 upon entry into the U.S. and no older than 31 as of June 15, 2012, must have lived in the U.S. continuously since 2007, either be enrolled in high school or college, or already have a diploma or degree, and have no felony criminal convictions, no significant misdemeanor convictions, no more than three other misdemeanor convictions, and not otherwise pose a threat to national security or public safety. If granted deferred action, the individual’s deportation would be deferred and received a work permit (EAD) valid for two years and renewable for additional two-year periods. These individuals are known popularly as dreamers.

Under the Trump administration program, anyone whose DACA status is set to expire by no later than March 5, 2018 will be able to apply for a final two-year permit by October 5, 2017, but all DACA program beneficiaries whose permits expire after March 5, 2018 are ineligible for a renewal. No new DACA applications will be processed. Any individual who has an EAD though the DACA program has no obligation to tell his or her employer that it is a DACA EAD. An employee whose EAD expires and is not renewable will be ineligible to work legally in the U.S. It is crucial that employers know when their employees’ EADs expire. Although there are indications that Congressional Democrats and President Trump are nearing a deal to save the DACA program, the official stance of the Administration is that Congress has six months to pass legislation to save the program. If Congress does not pass legislation by early March 2018, then DACA program enrollees whose EADs expire in the meantime will be subject to deportation.

For an employer that knows or believes it has employees with work permits through DACA, there is currently little they can do after the Attorney General’s announcement, other than advising these employees who are eligible to renew their EADs to do so by October 5, 2017. Employers cannot preemptively discharge these employees before their EADs expire. Doing so may expose the employer to claims of national origin discrimination. An employee whose EAD expires must be removed from the employer’s active payroll. Employers that refuse to release the employees who are not authorized to work in the U.S. can be liable for significant monetary penalties.

For questions about DACA and how it could affect your employees and your business, contact Patrick W. McGovern, Esq., Partner in the firm’s Immigration Law Practice Group, at pmcgovern@nullgenovaburns.com, or by phone at 973-535-7129.

Back to the Drawing Board for EEOC Wellness Program Rules

On August 22 the U.S. District Court in D.C. granted summary judgment to the AARP which challenged the EEOC’s rules governing employer wellness programs. The rules allow an employer to offer or impose on an employee financial incentives or financial penalties depending on participation in an employer wellness program. The Court chose not to vacate the EEOC’s rules for the time being, but instructed the EEOC to explain its rationale for setting a 30% maximum on the incentive or penalty, which would be applied to the employee‘s premium cost,  to determine whether disclosure of the employee’s personal medical information is voluntary, instead of determining that any employer wellness program requiring disclosure of personal medical information is involuntary and therefore unlawful. AARP v. U.S. EEOC, (D.D.C. Aug. 22, 2017).

Under ACA, health insurance plans may lawfully offer an incentive of up to 30% of the cost of coverage, in exchange for the employee’s participation in a health-contingent wellness program. These employer-sponsored wellness programs often involve the collection of personal medical information, which implicates substantive protections of the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA), both enforced by the EEOC.

Both the ADA and GINA permit employers to collect personal medical information as part of a wellness program if the employee provides the information voluntarily. In May 2016, the EEOC issued an ADA rule stating that imposing a penalty or offering an incentive capped at 30% of the cost of self-only coverage that requires disclosure of ADA-protected information, does not render participation in the wellness program involuntary. Similarly, the EEOC issued a GINA rule allowing employers to offer the same 30% incentives for disclosure of a spouse’s medical information in the course of wellness program participation.

In 2016 AARP sought a preliminary injunction prohibiting enforcement of the ADA and GINA rules which became effective January 1, 2017. The EEOC’s arguments in opposition to the injunction were:

  • The 30% incentive level is in harmony with the ACA incentive level.
  • The 30% incentive level is a reasonable interpretation of “voluntary” based on current insurance rates.
  • The EEOC relied on comments submitted by the American Heart Association endorsing the 30% incentive level.

The Court determined that the EEOC provided inadequate explanation for determining that a 30% penalty or incentive is an appropriate measure of voluntariness. The Court remanded the rules to the EEOC but without vacating them to avoid disrupting current wellness programs. The Court ordered the EEOC to report back to the Court by September 21, 2017.

If you have any questions or would like to discuss how this decision or the EEOC’s wellness program rules affect you or your business, please contact Patrick W. McGovern, Esq., Partner in the Firm’s Labor Law Practice Group  at 973-535-7129 or pmcgovern@nullgenovaburns.com, Firm Counsel Gina M. Schneider, Esq. at 973-535-7134 or gmschneider@nullgenovaburns.com, or Firm Associate Ryann M. Aaron, Esq. at 973-387-7812 or raaron@nullgenovaburns.com.

September 18 Deadline Set By U.S. Citizenship and Immigration Services for Employers to Use Revised Form I-9

Currently, every employer that recruits, hires, or refers employees for a fee in the U.S. is required to complete the Form I-9, Employment Eligibility Verification process within three days of a new employee’s hiring.  On July 17 the U.S. Citizenship and Immigration Services approved a revised version of Form I-9.

The revised Form I-9 changes the prior form by, among other things, adding Consular Reports of Birth Abroad to the List of Acceptable Documents. Two other clarifications relate to the timing of completion. First, Section 1 of Form I-9 must be completed no later than the first day of employment, as opposed to a previous command that it must be completed “no later than the end of the first day of employment.” Second, persons employed for fewer than three days must present their original I-9 documentation to the employer no later than the first day of employment. The employer must still complete its review of the employee’s employment eligibility documentation within three business days of hiring.

No later than September 18, 2017, all U.S. employers must use the new Form 1-9.  Employers may continue using the prior Form I-9 through September 17, 2017 but should prepare to modify their hiring process to include the revised Form I-9.  Alternatively, employers may choose to use the new Form I-9 right away.  For any existing Form I-9s, employers must continue to comply with the existing separate filing and document retention rules.

The new Form I-9, its instructions, supplements, and translations are available for download here.

For any questions on the new Form I-9 and the I-9 employment eligibility verification process, contact Patrick W. McGovern, Esq., Partner in the firm’s Labor Law Practice Group, at pmcgovern@nullgenovaburns.com, or by phone at 973-535-7129.

Hawaii Court Enjoins Trump Travel Ban For Excluding Non-Immediate Family Members of US Persons and DHS-Approved Refugees

In June the Supreme Court enforced temporarily President Trump’s travel ban to the extent it excludes persons without a “bona fide relationship” to a person or entity in the U.S. The Court expressly identified wives and mothers-in-law as persons who have a bona fide family relationship to a person in the U.S.  Following the Court’s decision, the Trump administration interpreted “bona fide relationship” narrowly, to include only fiancés, spouses, children, parents and siblings of the U.S. person. On July 13 a federal judge in Hawaii loosened the travel ban by entering a nationwide injunction that orders the Trump administration to exempt from the ban grandparents, grandchildren, aunts, uncles, brothers-in-law, sisters-in-law, nieces, nephews, and cousins of persons in the U.S. U.S. District Judge Derrick Watson criticized the Administration’s narrow definition of bona fide family relationship as “the antithesis of common sense,” which “dictates that close family members be defined to include grandparents.”

Additionally, Judge Watson enjoined enforcement of the ban to the extent it excludes from entry refugees who have formal assurance from a U.S. resettlement agency. Judge Watson reasoned that such assurance “meets each of the Supreme Court’s touchstones: it is formal, it is a documented contract, it is binding, it triggers responsibilities and obligations, including compensation, it is issued specific to an individual refugee only when that refugee has been approved for entry by the Department of Homeland Security, and it is issued in the ordinary course, and historically has been for decades…Bona fide does not get any more bona fide than that.”

Immediately, the Justice Department appealed Judge Watson’s ruling to the Ninth Circuit and simultaneously filed motion papers with the Supreme Court requesting clarification. In its motion, the Justice Department argues that Judge Watson’s interpretation of the travel ban “empties the Court’s decision of meaning,” because it includes “not just ‘close’ family members, but virtually all family members…Treating all of these relationships as ‘close familial relationship[s]’ reads the term ‘close’ out of the Court’s decision.” The Justice Department asked the Court to stay the effective date of the Hawaii court’s order until the Court resolved the motion to clarify the Court’s June ruling. The Justice Department’s motion, which remains pending, may be viewed here.

If you would like to discuss the implications of the travel ban and the various court decisions affecting the ban for your employees, your hiring plans, and your business, please contact Patrick W. McGovern, Esq., Partner in the Firm’s Immigration Law Practice at 973-535-7129 or at pmcgovern@nullgenovaburns.com.

Jersey City’s PLA Ordinance Found Preempted by NLRA and ERISA and Void Ab Initio

On June 15 U.S. District Court Judge Wigenton determined that Jersey City’s ordinance, in effect since 2007 and providing for tax abatements for real estate developers that sign Project Labor Agreements (PLAs) is preempted by the National Labor Relations Act and void ab initio. The Jersey City Ordinance mandated that tax abatement recipients sign PLAs that contain no-strike and no-lockout provisions and therefore Jersey City’s Ordinance “directly intrudes on §7 and §8 of the NLRA.” The Court also held that the PLA ordinance’s attempt to regulate the operation and reporting of apprenticeship programs intruded upon and therefore was preempted by the Employee Retirement Income Security Act. Associated Builders and Contractors Inc. v. Jersey City, No. 14-5445 (D.N.J. 2017).

This order is the most recent development in the action’s two-year history, as the case has bounced from court to court. In August 2015 the Contractors association, made up of non-union or “merit shop” contractors, brought suit alleging that Jersey City’s PLA ordinance was preempted by federal law. In August 2015 the District Court dismissed the complaint finding that Jersey City acted as a market participant, and not as a market regulator, and therefore the federal preemption doctrine did not apply to the ordinance. An appeal to the Third Circuit followed and in June 2016 the Court of Appeals reversed the lower court and held that Jersey City was, in fact, a market regulator in its enforcement of the PLA ordinance. The Third Circuit found that the preemption analysis should be applied to the ordinance and remanded the case back to the District Court to apply the preemption analysis. Associated Builders & Contractors Inc. v. Jersey City (3d Cir. 2016). On remand, the Contractors association moved the District Court for judgment on the pleadings. Judge Wigenton granted the motion, voided the ordinance ab initio and ruled that “enforcement of the PLA Ordinance on any tax-abated project is enjoined.”

The practical impact of this ruling is to level the playing field for non-union and unionized developers and construction contractors competing for work on tax-abated projects. The Contractors association claimed that the PLA ordinance had the effects of setting 100% of the tax-abatement project work aside for 15% of the construction workforce, and driving up construction costs, which Jersey City’s taxpayers had to bear in the form of tax abatements. Now, Jersey City cannot require developers or construction contractors to sign PLAs with the Hudson County Building and Construction Trades Council in exchange for tax abatements and the opportunity to work on tax-abated projects. The Court voided the PLA ordinance ab initio, not prospectively. This suggests that on tax-abated projects that are now under way with PLAs in place, general contractors will revisit the process for selecting subcontractors with more discretion to select non-union subcontractors to perform project work.

Also an open question is how Judge Wigenton’s decision will affect similar tax-abatement ordinances in other municipalities that impose PLA requirements. Questions relating to this important decision and the path forward for developers and contractors 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.