Although 2023 has just begun, governments at all levels, Local, State, and Federal, have made it clear that it will be a challenging year for merit shop contractors. We’ll discuss just a few of the specific challenges below:
City and county governments across the Commonwealth are interested in adopting so-called Responsible Contractor Ordinances (RCOs.) It is well-established law that public projects in Pennsylvania must generally be awarded to the lowest responsible bidder. An RCO is an attempt by the local governmental unit to add requirements that must be met by a contractor to be deemed responsible. In theory, such an approach may make sense. Still, in practice, the RCOs currently being considered and adopted by places like Reading and Centre County have been designed to exclude most merit shop contractors from the bidding process. All contractors must pay attention to what is happening in their area and alert ABC if they hear that an RCO is being considered.
Based on his actions as Attorney General, we can expect Governor Josh Shapiro to continue to target the merit shop construction industry. One of his areas of focus as Attorney General was the enforcement of Act 72, known as the Construction Workplace Misclassification Act. There is no question that the practice of some unscrupulous contractors of classifying all of their workers as “independent contractors” harms not only those workers but all legitimate contractors who find it difficult to compete. On December 1, 2022, the joint task force on misclassification of employees issued its final report, which included some alarming statistics regarding the problem’s scope and a host of recommendations for legislative and regulatory changes. In addition, there are several steps that all ABC contractors should take immediately to avoid unintentional violations of ACT 72. These include:
• Draft a “real” contract and use it with all independent contractors. Include many of the same provisions in any other contract, such as indemnification, insurance requirements, etc.
• Avoid, if at all possible, payment terms based on an hourly rate.
• Don’t use the same independent contractors so often that they can’t demonstrate that they also work for other contractors.
• The larger the “independent contractor,” the better.
• Periodically monitor your use of independent contractors.
As discussed previously, the Biden Administration is moving ahead on several fronts to continue to fulfill the President’s promise to be the most pro-union president in history. The National Labor Relations Board is in the process of not only undoing many of the more pro-employer decisions issued by the Trump Board but has outlined an agenda that would re-write seventy years of labor law. Some of these changes involve “minor” issues, such as the limits employers may place on the speech and conduct of employees in the workplace. Others, however, could impact critical issues such as the ability to prevent labor unions from picketing neutral employers as part of a dispute with the employer with whom they have the dispute. Many of you may be familiar with the “Two Gate” system which construction industry employers have used since the Board first established this principle in its Moore Dry Dock decision in 1950. That longstanding decision is now in jeopardy.
While these cases work their way through the legal system, employers should review their existing employee handbooks or rules to ensure they don’t provide a union an easy target for an unfair labor practice charge.
With all these pending threats, it is essential to remember the sage advice that Sgt. Phil Esterhaus gave the police every week on Hill Street Blues: “Let’s be careful out there.”
Posted March 2, 2023