FUNDAMENTALS OF MERIT SHOP BUSINESS PRACTICES

1. FUNDAMENTALS OF MERIT SHOPBUSINESS PRACTICES Presented By: Attorney Jeffrey A. Risch Wessels Sherman 2035 Foxfield Drive St. Charles, IL 60174 (630) 377-1554 phone (630) 377-1653 fax www.wesselssherman.com

2. Associated Builders & Contractors of Illinois • About Us • Established in 1975. We aggressively promote and protect the free enterprise system and the Merit Shop Philosophy. • A construction trade association representing over 400 member companies involved in the commercial and industrial construction markets in Illinois. • One of 78 chapters of the national Associated Builders and Contractors, Inc. (ABC), one of the most influential merit shop trade associations in the United States.

3. Associated Builders & Contractors of Illinois (continued) • What We Do? Offer a voice with the legislative, executive and judicial branches of the federal government and with state and local governments. Advance the merit shop construction philosophy, which encourages open competition and a free-enterprise approach that awards contracts based on merit. Provide members with an organization to deal with issues on an industry-wide basis. (Examples: government regulation, legal advocacy, education, training, workforce development, technology, recognition through national and chapter awards programs, employee benefits, guidance on best practices).

4. The Merit Shop Contractor • What is a “Merit Shop” Contractor? - It’s a belief… Construction projects should be awarded on merit to the most qualified and responsible low bidders.

5. Challenges of a “Merit Shop” Contractor • Project Labor Agreements • Illinois Responsible Bidder Requirements • Prevailing Wage Laws • Industry Misconceptions & Myths - #1Challenge

6. Project Labor Agreements (PLA’s) • What is a PLA? Generally… a project labor agreement is a “union-only” contract requiring contractors and/or subcontractors to sign collective bargaining contracts with labor unions as a condition of performing work on a particular construction project. Such contracts typically require the employer to subject its employees to exclusive union representation for all work performed on the project, to pay union wage rates and benefits, to adhere to union work rules and classifications, to utilize a union hiring hall, and to subcontract only with other union contractors.

7. PLA’s (continued) • Are PLA’s Valid? The U.S. Supreme Court and the National Labor Relations Board have held that a union-only PLA is permitted on private projects under Section 8(e) of the National Labor Relations Act, so long as the signatory to the project agreement is a construction industry employer who is engaged in collective bargaining with the union. In the Boston Harborcase (1993), the U.S. Supreme Court held that government-mandated PLAs were not preempted by federal labor law, so long as the government involved was acting as a “market participant” and not a regulator. The majority view of the state courts seems to be that government-mandated union-only agreements are permitted under state and federal laws, provided that they are not "regulatory" in nature, that they are supported by studies demonstrating legitimate need for the type of construction at issue, and are tailored to meet legitimate procurement objectives.

8. PLA’s (continued) • Are PLA’s Required? There’s no law that REQUIRES the use of PLA’s on all public or private projects. The CHOICE is up to the Developer, Builder, or Procurement Entity, Etc… EXCEPT: In May 2003, Illinois Gov. Rod R. Blagojevich (D) signed Executive Order 2003-13, “Executive Order on Project Labor Agreements.” --- On a project-by-project basis, a state department, agency, authority, board or instrumentality, which is under the control of the Governor, shall include a project labor agreement on a public works project….”  Note: President Bush issued a federal Executive Order banning union-only PLAs from federally funded construction projects. Election ’08 could reverse this.

9. ABC’s Approach to PLA’s • ABC’s Advocacy 1. Education 2. Media Campaigns 3. Political Influence 4. Legal Opposition Ex. ABC Northern Illinois v. Lavin, 7th Cir., No. 05-2174).

10. Illinois Responsible Bidder • What is it? The Illinois Procurement Code sets forth certain requirements that a bidder on a State construction contract must comply with. As such, a bidder must be able to present evidence or documents to substantiate that it is a “Responsible Bidder.” The State (most State agencies) are required to procure services from “RESPONSIBLE BIDDERS” --- However, local public bodies are VOLUNTARILY adopting local responsible bidder ordinances.

11. Illinois Responsible Bidder (continued) • What is a RESPONSIBLE BIDDER? (1) The bidder must comply with all applicable laws re: conducting business in Illinois. (2) The bidder must comply with all applicable provisions of the IL Prevailing Wage Act. (3) The bidder must comply with all applicable EEO laws. (4) The bidder must have a valid Federal Employer Identification Number or, if an individual, a valid Social Security Number. (5) The bidder must have a valid certificate of insurance showing the following coverages: general liability, professional liability, product liability, workers' compensation, completed operations, hazardous occupation, and automobile. (6) The bidder and all bidder's subcontractors must participate in applicable apprenticeship and training programs approved by and registered with the United States Department of Labor's Bureau of Apprenticeship and Training.

12. Illinois Responsible Bidder (continued) • ABC’s Advocacy: 1. Establishing Strong Relationships with Insurance Brokers, Labor/Employment Law Firms (i.e. Wessels Sherman). 2. Establishing & Maintaining & Growing… Apprenticeship and Training programs approved by and registered with the United States Department of Labor's Bureau of Apprenticeship and Training.

13. Prevailing Wage Laws • Federal Law: Davis-Bacon The Davis-Bacon Act establishes employment standards for laborers and mechanics working on public construction projects under federal contracts for amounts in excess of $2,000 (this amount pertains to the amount of the prime contract, not the amount of the individual subcontracts). If a contract is one that falls under the purview of the Davis-Bacon Act (and related laws), it must specify the minimum wages to be paid to the various classes of individuals working on the project. These wages may mirror area collective bargaining agreements (note: the prevailing rate is what’s prevailing amongst all contractors performing the work regardless of union affiliation).

14. Prevailing Wage Laws (continued) • State Law: Illinois’ Prevailing Wage Act Generally speaking, the Illinois Prevailing Wage Act (820 ILCS 130/0.01 et. seq.) (the “Act”) requires contractors and subcontractors to pay laborers, workers and mechanics employed on “public works” projects in Illinois no less than the general prevailing rate of wages (consisting of hourly cash wages plus fringe benefits) for work of similar character in the locality where the work is performed (note: union collective bargaining agreements set IL prevailing wages).

15. Prevailing Wage Laws (continued) • ABC’s Advocacy: 1. Education! 2. Compliance Assistance. Example: ABC has established drug-free workplace programs designed to comply with new Illinois law concerning mandatory drug-free programs and testing on IL Prevailing Wage projects.

16. Industry Misconceptions & Myths • #1 Challenge for Merit Shop Contractors Common Myths: Merit Shop Workers Are Not Skilled Merit Shop Workers Cannot Work Along Side Union Workers Merit Shop Workers Do Not Receive Adequate Training Union Workers Must Always Leave Jobsites When Merit Shop Workers Are Present Merit Shop workers are not safe

17. Industry Misconceptions & Myths (continued) • ABC’s Advocacy: 1. Education (most common lesson… teaching others on how to deal with protests, pickets, strikes, boycotts, etc…)

18. Industry Misconceptions & Myths (continued) • The Rights of Employers and Employees during a Strike Just as employees have the right to strike, a struck employer has the right to continue to operate its business. While the employer may not discharge or take other adverse action against employees who participate in a strike, there is nothing to prevent an employer from hiring replacements and/or continuing to operate its business. No Strike Clauses???

19. Industry Misconceptions & Myths (continued) • General Notes of Interest: Labor problems are normally best handled with an all union or all "merit shop" project. But, business realities do not permit this luxury. Section 8(b)(4)(B) of the National Labor Relations Act makes it an unfair labor practice for a union to attempt to involve neutral parties in a dispute between the union and a particular employer.

20. Industry Misconceptions & Myths (continued) • General Notes of Interest (continued): A union must direct picketing, strike appeals, and other pressures solely upon the employer with whom the union has a primary dispute. The union must limit its picketing and other pressures in order in order to avoid, to whatever degree possible, involvement of other contractors and their employees. An attempt to enmesh other companies and their employees in a dispute the union may have with a single company is unlawful. This is the crux of a "secondary boycott.“ Section 8(b)(4)(B) does not prohibit a union from taking direct action against a primary employer by appealing to its employees not to perform services in furtherance of a labor dispute with it. Section 8(b)(4)(B) does, however, prevent a union from indirectly pressuring the primary employer by bringing pressure on another employer commonly referred to as a secondary or neutral employer, to force that neutral employer to cease doing business with the primary employer.

21. Industry Misconceptions & Myths (continued) • General Notes of Interest (continued): Bottom Line:  The union is permitted to picket a primary employer with whom it has a labor dispute but runs afoul of the law if it pickets a neutral employer with a proscribed object of enmeshing the neutral employer in a controversy not its own.

22. Industry Misconceptions & Myths (continued) • The Law Governing a Construction Jobsite Picketing: The NLRB has established special guidelines for picketing of a "common situs" location, such as construction jobsites. In common situs situations, the Board has set special standards for determining whether picketing is undertaken for a unlawful secondary object. These standards were adopted and described in the landmark case of Sailors Union of the Pacific (Moore Dry Dock Company), 92 NLRB 547, 549 (1950): a. The picketing is strictly limited to times when the dispute is located on a secondary employer’s premises; b. At the time of the picketing, the primary employer is engaged in its normal business; c. The picketing is limited to places reasonably close to the location of the primary employer’s business; and d. The picketing discloses clearly that the dispute is with the primary employer.

23. Industry Misconceptions & Myths (continued) • Establishing A Reserved Gate System A reserve gate system is established by designating one gate for the sole and exclusive use of the picketed or primary employer’s employees, suppliers and visitors. Those persons must use that gate, and that gate only. Another gate or entrance is established for the use of all others not having any dispute with the picketing union.  If one of the primary employer’s employees attempts to go through the neutral gate, he must be turned away and sent to the primary gate. If an employee of one of the neutral employers attempts to go through the primary gate, he can be sent away and told to go through the neutral gate.

24. Industry Misconceptions & Myths (continued) • Establishing A Reserved Time System The concept of a reserved time system is based on the first and second requirement of Moore Dry Dock: that the employer with whom the union has a dispute is located on the premises and is engaging in its normal business on the premises. Picketing directed against an employer when the employer is not scheduled to be actually performing work or making or receiving deliveries on a construction site may be unlawful secondary activity. Reserved time or work schedules are often utilized when one or more contractors on a mixed trade construction site are able to schedule working times different from those of the contractors who are not the object of any primary union dispute.

25. Industry Misconceptions & Myths (continued) • Establishing A Reserved Time System (continued) Because nonunion subcontractors enjoy more flexible work rules, it is often possible to schedule nonunion subcontractors for work at different times than the union subcontractors. Proper notice must be given to the trade union having a primary dispute with the picketed contractor that the contractor will not be present at the site at a certain time. Picketing which occurs or continues when the primary contractor is absent from the site is then unlawful. In the absence of the primary employer, picketing at the jobsite against the primary is a secondary boycott of the contractors present and working on the jobsite.

26. Industry Misconceptions & Myths (continued) • Pros & Cons of Establishing a Reserved Gate System (HINT: Picketing usually continues!) • Pros & Cons of Establishing a Reserved Time System (HINT: Picketing usually ends!)

27. End of Presentation Thank you! Any questions… please don’t hesitate to contact ABC’s Illinois Chapter Labor Attorney Jeff Risch at (630) 377-1554; or jerisch@stch.w-p.com.