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UCANE vs. Fall River - What does this mean for engineers?

Type:  Announcements  

In November 2011, The Engineering Center Board of Directors met with leaders of the Utility Contractors Association of New England (UCANE) to discuss the recent Federal Court Decision striking down the construction contractor procurement practices of the City of Fall River.  At issue in that case were the City's attempt to impose residency requirements, mandatory health care benefits and pensions,and mandates regarding apprenticeships, all of which were found to be unlawful.  UCANE advised us that they intend to aggressively pursue other municipalities with similar practices.
 
Read more about this recent decision from UCANE:   http://www.ucane.com/news.htm


And from TEC Board Member Anatoly Darov

Federal District Court Overturns Municipal Responsible Employer Ordinance
by Anatoly M. Darov, PE, Esq., Partner, Burns & Levinson LLP
Posted with permission of the Boston Society of Civil Engineers Section/ASCE
Printed in the November 2011 BSCESNews
 
The US District Court of Massachusetts recently overturned the city of Fall River’s responsible employer ordinance (“REO”) on constitutional and statutory grounds. Specifically, the Court found that the city’s REO, in particular those amendments enacted in 2010 to a pre-existing ordinance, violated both the Massachusetts and the United States constitutions and unlawfully conflicted with federal ERISA law.
 
This decision should be noted by architects and engineers, especially those that provide project and program management services, that work in municipalities that have enacted and presently enforce similar ordinances. Responsible employer ordinances have been passed in approximately 30 municipalities and apply to both horizontal and vertical projects. Design professionals preparing construction documents on municipal projects must inform themselves about any REO that the city or town may have on the books and should inquiry with appropriate municipal officials and legal counsel regarding their intention to enforce the ordinance on the particular project. Enforcement of an REO may not only have an impact on the size of the bidder pool for a particular project, but may also seriously impact the project schedule if the REO is unlawful and subject to a legal challenge during the bidding process. Addressing these questions at the outset of the project will inure to the benefit of all parties.
 
The Fall River decision was issued as a result of a challenge by the Utility Contractors Association of New England’s (“UCANE”) to certain amendments, enacted in April 2010, to the city’s pre-existing REO. The 2010 REO required public construction contractors to meet certain mandates in order to bid on projects awarded by the city of Fall River. The offensive provisions pertained to residency requirements, apprenticeship, and health, welfare and pension plans. The residency provisions required, among other things, 100% of all apprentices and 50% of all other workers to be Fall River residents.
 
The apprenticeship provisions required contractors to have operated an apprenticeship program for at least three years prior to the date of submission of their bid on a project and, further, required the apprenticeship program to have met certain minimum graduation requirements. The REO also required contractors to furnish a pension plan for all employees on the project and required subcontractors to furnish hospitalization and medical benefits for all of their employees.
 
Residency Requirements. The Court held that the residency requirement in the Fall River REO violated the Privileges and Immunities Clause of the U.S. Constitution because it unlawfully impaired a protected privilege—in this case the fundamental right to pursue a livelihood—and the City could not show a compelling justification or reason for the discriminatory requirement.
 
Employee Benefit Requirements. The Court held that the pension plan requirements of the REO were preempted by the federal Employee Retirement Income Security Act (ERISA). ERISA preempts all state laws that relate to any employee benefit plans that provide medical, disability, death, unemployment, vacation, apprenticeship or training programs, day care, scholarship funds, prepaid legal services, retirement income, or results in a deferral of income. The Court noted in its decision that, although recent ERISA case law has tended to construe preemption issues more narrowly, the 2010 REO provisions clearly relate to employee benefits—specifically the health care and apprenticeship training benefits—and are therefore preempted by federal ERISA law.
 
In reaching its decision, the Court rejected the City’s argument that the 2010 REO should be permitted to stand under the “market participant” exception that applies in ERISA preemption cases where the contested activity is:
 
(1) essentially proprietary; and (2) so narrow in scope that “it defeats any inference that the challenged action was aimed at policy, not proprietary, goals.” Although the City argued that its REO requirements should be viewed as akin to purchasing goods and services in the marketplace, the Court found this argument to be unconvincing and noted the lack of any factual evidence that the city’s sweeping and overly broad 2010 REO was founded on marketbased economic policies or principles.
 
Summary. Responsible employer ordinances can be virtual mine fields for the unwary in the design and construction industry. Not only do these ordinances vary broadly from one municipality to another, but municipalities often enforce their provisions inconsistently. The impacts of the Fall River decision will also, in the short term, cause additional uncertainty as municipalities evaluate their REOs in light of the new case law. Engineers, architects, and program/project managers—especially those who are required by their respective contracts to prepare, review, or advise clients on front-end contract documents—must familiarize them  This selves with local responsible employer ordinances applicable to their project and urge their clients to seek early and clear guidance from legal counsel on the issue of whether the REO is lawful in light of the Fall River decision.
 
Note: This update is intended to call your attention to an important change in the law, but it does not attempt to summarize all relevant statutory and regulatory provisions or nuances affecting application of the law to specific situations.

 

Link to Court Decision

 

 
 
 
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