United States: NYC ‘Labor Peace' Order May Clash With Federal Law

Last Updated: August 10 2016
Article by Robert C. Nagle

Robert C. Nagle authored the Law360 article, "NYC 'Labor Peace' Order May Clash With Federal Law." 

On July 14, 2016, New York Mayor Bill de Blasio issued Executive Order No. 19, titled "Labor Peace For Retail Establishments at City Development Projects," which is designed to facilitate union organizing at retail and food service establishments within city development projects that receive financial assistance from the city of New York.

While the stated aim of the order is to ensure "labor peace" at development projects in which the city has a financial or propriety interest, the law undercuts the rights of covered employers and employees to make their own decisions regarding union representation.

Key Concepts/Mechanics of the Order

The order applies to (1) developers who receive certain kinds of financial assistance in connection with "city development projects" and (2) employers who operate retail or food service establishments within such projects that employ, or are anticipated to employ upon opening, 10 or more employees, and who occupy in excess of 15,000 square feet on the premises of the project (covered employers).

A "city development project" is a project subject to an agreement between the New York City Department of Housing Preservation and Development or a "city economic development entity," on the one hand, and a developer that receives at least $1 million of financial assistance from the city, on the other hand, where the project is expected to be larger than 100,000 square feet, or, in the case of a residential project, larger than 100 units.

The order states that any developer within the ambit of the order must agree to a "labor peace clause," binding it to require each covered employer operating on the premises of a city development project to enter into a "labor peace agreement" with a union seeking to represent "covered employees" working on such premises. Covered employees include all full-time and part-time employees of the covered employer, excluding supervisors and professional employees.

The labor peace agreement between the covered employer and union, must, at a minimum, require that the union and its members agree to refrain from picketing, work stoppages, boycotts and other economic interference, and that the covered employer maintain a "neutral posture" with respect to efforts by the union to represent covered employees. In other words, the labor peace agreement prevents covered employers from advocating against the unionization of their covered employees.

Policy Rationale/Impact Upon Covered Employers

As noted above, the asserted objective of the order is to prevent disruption at "city development projects" and protect the city's proprietary interests in such projects. While this may be true, the requirement that covered employers adopt a "neutral posture" with regard to organizing efforts by a union seeking to represent their employees substantially increases the likelihood that such employees will unionize, at which point the employer will lose the ability to deal directly with its employees regarding wages, benefits, hours of work, and other terms and conditions of employment.

Unsurprisingly, organized labor strongly supports the mayor's action. Representatives from the Retail, Warehouse and Department Stores Union (RWDSU), which is actively organizing workers at retail stores in the city, and which stands to benefit from the order's neutrality requirements, have publicly praised the order.

Does the Order Conflict with Federal Law?

Elements of the law appear to conflict with the National Labor Relations Act, the federal labor law governing labor-management relations in the private sector. Among other things, the NLRA protects the right of employees to choose their own representatives for collective bargaining — or to eschew union representation altogether. The NLRA also grants employers the right to communicate with their employees regarding the "pros and cons" of unionization and collective bargaining.

By mandating that covered employers enter into a labor peace agreement with a union even before the employer has hired any employees, the law would seem to interfere with these rights. Under the principle of federal preemption, to the extent that the order is construed as a regulatory measure that conflicts with Congress's integrated framework of regulation embodied in the NLRA, the order seemingly would be vulnerable to a court challenge.

However, the U.S. Supreme Court has ruled that a more permissive legal standard applies in cases where a local government is acting not in a regulatory capacity, but as a "market participant." In Building & Construction Trades Council v. Associated Builders and & Contractors of Mass./R.I. Inc., 507 U.S. 218, (Boston Harbor), the Supreme Court ruled that a public entity acting in its capacity as a purchaser or "customer" was on the same footing as any private employer dealing with its subcontractors and their labor force, and therefore was permitted to require contractors to enter into a prehire agreement as a condition of participating in the public project.

Following Boston Harbor, courts evaluating whether a government's condition of funding constitutes permissible "market participation" and not proscribed "regulation" apply a two-part test. First, does the challenged funding condition serve to advance or preserve the state's proprietary interest in a project or transaction, as an investor, owner or financier. Second, is the scope of the funding condition "specifically tailored" to the proprietary interest?

Applying this test, one federal court of appeals has upheld a local law requiring developers to secure "labor peace" on projects receiving taxpayer incentive financing as a condition of receiving such financing.[1] Additionally, the state of New York has its own "labor peace" law covering hotels and convention centers in which a state agency asserts a proprietary interest.

However, not all "labor peace" requirements imposed by local governments have been upheld. In one such case, the Seventh Circuit found that Milwaukee County's "labor peace" requirements upon certain business contracting with the county went far beyond its asserted interests in the efficient delivery of services covered by the contracts and amounted to impermissible regulation of private employers' labor relations, and thus was preempted by the NLRA.[2]

Immediate Effect/Long-Term Ramifications

The order takes effect immediately, although it does not apply to projects authorized, or financial assistance provided, prior to July 14, 2016. Developers' obligations under the labor peace clause shall remain in effect for a minimum of 10 years from the commencement of the project, or the term of financial assistance provided by the city, whichever is longer.

Barring a successful legal challenge to the order, which is by no means assured, retail and food service businesses planning on opening in new development projects should prepare for "labor peace" on the terms imposed by de Blasio. In particular, developers who accept city financing will be obligated to require food service and retail tenants to sign neutrality agreements with union(s) which will virtually ensure unionization of their employees, if the union elects to pursue this objective.

In turn, these businesses will have to weigh the potential costs associated with unionization against the benefits of having a presence in the particular project. Notably, covered employers will retain their NLRA rights to bargain over substantive terms and conditions of employment for their employees if a majority choose union representation, but as a general matter, they can expect higher labor costs than if they were operating nonunion.

Also, having a union relationship in one location may expose the employer's other stores to unionization, insofar as the union may demand that the collective bargaining agreement include "additional stores" language or similar provisions designed to facilitate organizing at other locations operated by the employer. Lastly, it is not clear whether the restrictions imposed upon picketing, strikes and boycotts — the quid pro quo for the "neutrality" obligations imposed upon covered employers — would continue to apply during negotiations for a collective bargaining agreement. Collectively, these considerations may cause some prospective tenants to avoid projects within the ambit of the order.

In summary, while the mayor's action may have been animated by a quest for "labor peace" in development projects in which the city has a financial and proprietary interest, it seems clear that unions representing employees in the retail and food service industries will be the primary beneficiaries. Developers and employers will need to undertake their own evaluation of the costs and benefits of compliance with the order, and some are likely to find that the price for labor peace is more than they are willing to bear.

[1] Hotel Employees & Restaurant Employees, Local 57 v. Sage Hospitality Resources LLC, 390 F.3d 219 (3d Cir. 2004)

[2] Metropolitan Milwaukee Association of Commerce v. Milwaukee County, 431 F.3d 277 (2005).

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.

Authors
Robert C. Nagle
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
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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.

Disclaimer

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.

General

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