The Sixth Circuit Court of Appeals found that Michigan’s Fair and Open Competition in Governmental Construction Act was not preempted by the National Labor Relations Act (NLRA). This means that all branches of Michigan government, from the city, county to the state, may not enter into project labor agreements on any construction project.

Michigan passed its first version of the Act in 2011. The Act bared governmental units from entering or expending funds on a project if the contract or subcontract contained a PLA. It also prohibited the governmental units from awarding grants, tax abatements, or tax credits while under a PLA, and forbade governmental units and their agents from placing any PLA terms in bid specifications, project agreements, or other controlling documents.

State and local trade councils claimed that the act was preempted by the NLRA, which permitted the use of PLAs. The federal court sitting in Michigan found that the law was preempted by the NLRA and granted the injunction. Michigan then amended the Fair and Open Competition Act. The federal court again enjoined the law from going into effect. Michigan appealed the trial court’s ruling.

On September 6th, the Sixth Circuit Court of Appeals reversed the trial court, finding that the Act was not preempted by the NLRA. Specifically, the court found that the act furthers Michigan’s proprietary goals of improving efficiency in public construction projects. Importantly, the Act did not prohibit a governmental unit from awarding a contract to a contractor who enters into or is a party to a PLA so long as the PLA is not a condition for award of the contract. So, PLAs may exist on a governmental project, but not at the mandate of the government.

This is a big win for merit shops throughout Michigan. It will be interesting to see if other states follow suit and pass their own Fair and Open Competition Acts.