The Harms Case Invalidates Project Labor Agreements As A Bidding Requirement On Public-Works Projects

On July 7, 1994, the Supreme Court of New Jersey, in a case in which Connell Foley LLP represented the lead plaintiff, invalidated project-labor-agreement (PLA) bidding requirements where the public agency designates the particular labor unions who are to be signatories to the specified PLA. George Harms Const. v. Turnpike Auth., 137 N.J. 8 (1994) The Court concluded that such a bidding specification violated state bidding law in that: (1) a unionization requirement is inconsistent with the public agency's duty to award contracts to the "lowest responsible bidder;" and (2) such a "sole source of labor" requirement conflicts with the primary goals of "unfettered competition".

Advocates of PLAs have sought to limit the Harms ruling to union-specific, as opposed to union-neutral, bidding requirements, i.e. they argue that bidding specifications which allow the bidder to select the union signatories to the specified PLA would be valid under our bidding laws and perfectly consistent with Harms. In a recent unreported case brought by the Utilities Contractors Association ("UTCA"), Middlesex County had issued bidding specifications which required that an undefined PLA be executed with the "appropriate" labor unions. The trial court rejected the UTCA's challenge to this specification based upon its interpretation of Harms as being confined to union-specific PLAs. The Appellate Division, while agreeing with the trial court's narrow view of Harms, nonetheless invalidated the bidding requirement as unduly vague in communicating which unions and what PLA terms would be acceptable to the County.

Although unreported and, consequently, not binding precedent, the Appellate Division ruling in the Middlesex County case undoubtedly will encourage the future public sector use of a union-neutral PLA bidding requirement. The initial difficulty faced by proponents of such a requirement will be in its drafting. Such a requirement would have to be formulated so as not to, in some other fashion, due violence to our bidding laws, and in such efforts, the public agencies must be mindful of the Appellate Division's admonition in Middlesex County that, if a facially union-neutral PLA bidding requirement represents a de facto union-specific requirement because only one group of unions is actually capable of providing the specified PLA, then the specification is invalid under Harms. An additional hurdle for those who continue to promote PLAs on public-works projects is the strong suggestion in Harms that such a bidding requirement may be violative of the State Constitution. This issue was not addressed in the Middlesex County case.

The Supreme Court of New Jersey has recently elected to re-visit the subject of the legality of PLAs and it is anticipated that the Court will specifically address the issue whether a union-neutral PLA bidding requirement will survive scrutiny under the bidding laws of New Jersey and, if so, whether they run afoul of guarantees under the New Jersey Constitution. This review arises out of a facially union-neutral PLA bidding requirement on a Mercer County, New Jersey, school construction project. A bid protest in that matter (not handled by Connell Foley LLP) was summarily rejected by the trial court and an emergent stay application was denied by the Appellate Division; both rulings were unreported. A decision of the Supreme Court is anticipated at the end of 1995 or early 1996. Connell Foley LLP believes that the Middlesex County case reflects a misreading of Harms and has given false hope to advocates of public-works PLAs. Even union-neutral PLA bidding requirements are incompatible with the duty to award such contracts to the "lowest responsible bidder" and unfairly tend to tilt the playing field for public-works competition in favor of union contractors.

For further information about this subject, please contact Paul Fader or John F. Neary directly, who represented Harms in the case discussed in this article.