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Jan
2014
16

IMPLICATED: Court Rules General Contractors Liable for Subcontractor Behavior on PLAs

A Google search for "pass the buck" yielded this...

A Google search for “pass the buck” yielded this…

A ruling by the Third Circuit Court in the case of Sheet Metal Workers International Association Local Union No. 27 v. E.P. Donnelly, Inc. introduces the possibility of general contractors being held liable for their subcontractors’ actions if they are not properly directed to assign work in accordance with the terms of a Project labor Agreement (PLA). The case upheld a previous decision by the National labor Relations Board (NLRB):

Sambe Construction Co., Inc. was a general contractor on a public construction project subject to a PLA. The PLA had typical provisions requiring that all contractors and subcontractors become signatories to and be bound by the terms of the PLA and that the PLA and any local arrangements incorporated herein supersedes all other agreements. Sambe subcontracted the roofing work on the project to E.P. Donnelly, Inc., and Donnelly signed a letter of assent agreeing to be bound by the PLA and to subcontract only to others who would become signatory to the PLA. Instead, however, Donnelly assigned its work to carpenters who were not signatory to the PLA, and a dispute arose when the sheet metal workers, who were signatory to the PLA, claimed the work that had been assigned to the carpenters.

Donnelly not only failed to require the carpenters to sign the PLA, but in addition, its collective bargaining agreement with the carpenters specifically provided that it could not be superseded by a PLA without the mutual consent of the carpenters and Donnelly.

In upholding the ruling of the NLRB, the Third Circuit Court awarded the contested work to the carpenters and vacated the arbitration award to the contrary. The decision specifically ruled that liability was with the general contractor and not the subcontractor.  The practical implications of the case according to Mondaq.com are:

Assure that everyone working on a PLA project for you signs the PLA, including the subcontractors’ unions.
• Review your subcontracting agreements to determine if they might be improved with modifications to provide for a warranty from the subcontractor that it will sign and comply with the PLA on the project and assure that anyone it engages does so as well.
• Couple the warranty with an indemnification provision against any litigation costs or loss arising out of a failure to comply with the PLA.
• Review PLA agreements to determine whether any modifications would be helpful in addressing a potential problem

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