United States: General Contractor May Be Liable For Subcontractor’s Failure To Assign Work As Required By Project Labor Agreement

Last Updated: May 8 2014
Article by F. Keith Covington

In Sheet Metal Workers Int'l Ass'n Local Union No. 27 v. E.P. Donnelly, Inc., the United States Court of Appeals for the Third Circuit (the court supervising federal trial courts in Pennsylvania, Delaware, and New Jersey) recently held that a general contractor on a project governed by a Project Labor Agreement ("PLA") may be held liable for the failure of its subcontractor to assign work as required by the PLA. This case serves as an important reminder that a general contractor or construction manager who is a signatory to a PLA must be diligent to ensure that its subcontractors are in full compliance with the PLA's requirements.

Sambe Construction Company, Inc. ("Sambe") was the general contractor on a project for the construction of a community center for Egg Harbor Township in Atlantic County, New Jersey. The Township adopted a PLA governing the terms and conditions of the project's construction. All contractors on the project were required to become signatories to the PLA. Sambe executed the PLA and subcontracted the roofing work on the project to E.P. Donnelly, Inc. ("Donnelly")

The PLA required Sambe to require its subcontractors "to accept and be bound by the terms and conditions" of the PLA by executing a letter of assent, and imposed on Sambe an obligation to "assure compliance" with the PLA by its subcontractors. Sambe obtained the letter of assent from Donnelly, who further agreed that any party it selected to do the roofing work would also be required to become a signatory to the PLA.

Despite this letter of assent, Donnelly selected the United Brotherhood of Carpenters and Joiners of America, Local 623 ("Carpenters Local") to perform the roofing work, even though Carpenters Local was not a signatory to the PLA. The Sheet Metal Workers' International Association, Local 27 ("Sheet Metal Local"), which was a signatory, protested the work assignment, arguing that Carpenters Local could not continue the roofing work because it had not executed the PLA. Donnelly had previously signed a separate collective bargaining agreement with Carpenters Local and refused to reassign the work on the project to Sheet Metal Local.

Sheet Metal Local initiated arbitration under the PLA and an arbitrator issued a decision awarding the roofing work to Sheet Metal Local. Carpenters Local threatened to picket the project if Donnelly did not continue to assign the work to Carpenters Local. Donnelly then filed an unfair labor practice charge with the National Labor Relations Board ("NLRB") alleging that Carpenters Local's threats to picket violated the National Labor Relations Act ("NLRA").

In the meantime, Sheet Metal Local filed a lawsuit in the U.S. District Court for the District of New Jersey, seeking enforcement of the arbitration award, a reassignment of the roofing work to Sheet Metal Local, and declaratory and monetary relief against Sambe, Donnelly, and Carpenters Local for breach of contract under Section 301 the Labor Management Relations Act.

After a hearing, known as a 10(k) hearing, on the work jurisdiction dispute, the NLRB issued a decision resolving Donnelly's unfair labor practice charge. The NLRB entered an order awarding the disputed roofing work to Carpenters Local.

Notwithstanding the NLRB's award, Sheet Metal Local continued to pursue its Section 301 lawsuit. Donnelly then filed a second unfair labor practice charge with the NLRB, this time against Sheet Metal Local, claiming that Sheet Metal Local's continued maintenance of the lawsuit against Sambe and Donnelly violated the NLRA because it sought reassignment of the roofing work in contravention of the NLRB's 10(k) award in favor of Carpenters Local. Following a hearing, an administrative law judge found that Sheet Metal Local's continued pursuit of the Section 301 lawsuit was a violation of the NLRA.

After the project was completed, Sheet Metal Local amended its Section 301 suit. Sheet Metal Local now sought monetary damages against Sambe and Donnelly for breach of contract under the PLA. The U.S. District Court entered summary judgment against both Sambe and Donnelly and awarded Sheet Metal Local $1 in nominal damages against Sambe and (after a bench trial) $365,349.75 in compensatory damages against Donnelly.

The NLRB ultimately confirmed the administrative law judge's decision that Sheet Metal Local's Section 301 lawsuit, as against Donnelly, was an unfair labor practice because that lawsuit "directly conflict[ed]" with the NLRB's 10(k) award and it ordered Sheet Metal Local to withdraw the lawsuit against Donnelly in its entirety. However, it reversed the administrative law judge's decision as to Sambe, finding that the lawsuit against Sambe, the general contractor, did not violate the NLRA.

In consolidated appeals, the Third Circuit reviewed both the U. S. District Court's rulings in the Section 301 suit and the NLRB's decision on Donnelly's unfair labor practice charge. The Third Circuit upheld the NLRB's decision that Sheet Metal Local's Section 301 suit against Donnelly constituted an unfair labor practice. The Court expressly noted, however, that its holding applied only to a suit against an employer making the disputed work assignment and not to those against non-assigning general contractors (like Sambe). In making this distinction, the Court found significant that only the employer actually making the work assignment is subject to the conflicting demands of the Section 301 suit for damages, on the one hand, and the NLRB's 10(k) order, on the other.

The Third Circuit then found that the District Court had erred in finding in favor of Sheet Metal Local on its contract claim against Donnelly, vacated the $356,349.75 award, and remanded to the U.S. District Court with instructions to enter judgment in Donnelly's favor. The Third Circuit stated that this result was compelled by its decision to enforce the NLRB's order on Donnelly's unfair labor practice charge because, under that decision, Sheet Metal Local was "prohibited from the continued maintenance of [its] Section 301 suit."

The Third Circuit also held that the District Court's order granting summary judgment against Sambe on Sheet Metal Local's breach of contract claim was improper. However, instead of ordering a judgment in Sambe's favor, it remanded the claim against Sambe to the District Court for a determination on the issue of contract liability. Relying again on the fact that Sambe was not the employer who actually assigned the disputed work, the Third Circuit refused to find that Sheet Metal was prohibited from pursuing the Section 301 suit against Sambe on the basis of the NLRB's 10(k) award. Instead, in deciding the issue of contractual liability, the District Court was ordered to make a factual determination as to whether Sambe had acted sufficiently to "assure compliance" of the hiring requirements by Donnelly as required by the PLA. The Third Circuit did not specifically address the issue of damages and it is unclear whether the District Court will limit its damage award to the $1 in nominal damages previously awarded in the event it ultimately concludes, on remand, that Sambe breached the PLA.

What is clear is how important it is for a general contractor to make sure its subcontractors are in full compliance with the terms and conditions of a governing PLA. It is likely not sufficient simply to have the subcontractors sign the PLA. The general contractor should also take affirmative steps to ensure that its subcontractors are actually assigning work as required by the PLA and otherwise complying with the terms of the PLA. Such steps could include obtaining appropriate representations and warranties – along with a right to indemnity for breach – from the subcontractors. Otherwise, and somehow ironically, it will likely be the general contractor who actually "pays the price" if one of its subcontractors ignores the PLA's requirements.

Read or download the Construction and Procurement Newsletter Q4 2014 >>

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions