In a December 13, 2013 opinion in Sheet Metal Workers Int'l Ass'n Local Union No. 27, AFL-CIO v. E.P. Donnelly, Inc., the US Court of Appeals for the Third Circuit held that an NLRB ruling in a jurisdictional dispute about the assignment of construction work trumped conflicting labor arbitration awards against the subcontractor that assigned the work to employees represented by one union rather than another union and the general contractor for the construction project. The Third Circuit also clarified that its precedent supports NLRB conclusions that pursuit of a Labor Management Relations Act (LMRA) Section 301 action that conflicts with an NLRB Section 10(k) order has an illegal objective and violates NLRA Section 8(b)(4)(ii)(D). As a matter of first impression in the circuit, the court held that while a union cannot lawfully sue a subcontractor employer that assigned disputed work consistent with an NLRB jurisdictional dispute decision under the LMRA, it can seek contractual damages against another employer that did not directly assign the work involved in the NLRB decision, such as a general contractor that selected the subcontractor and was a party to a project labor agreement (PLA) with, among others, the union (10-2201, (3d Cir. Dec. 13, 2013)).

The Third Circuit:

Multiple labor arbitrations, NLRB cases and federal court proceedings flowed from a dispute about the assignment of roofing work in a 2006-2008 New Jersey construction project covered by a PLA. A PLA is a pre-hire collective bargaining agreement (CBA) with one or more unions that sets the employment terms and conditions for workers of various contractors and subcontractors on a specific construction project. In this case, Local 27 of the Sheet Metal Workers had their CBA appended to the PLA, signed the PLA and claimed roofing work under it. The general contractor on the project, Sambe Construction Co., also signed the PLA. Sambe subcontracted roofing work to E.P. Donnelly, Inc., which signed a letter of assent providing that:

Donnelly, however, had an area-wide CBA with Local 623 of the Carpenters in which it agreed to use Carpenter-represented employees to install metal roofing. The Carpenters were not signatories to the PLA. Accordingly, Donnelly signed the letter of assent with an existing conflicting commitment and created a jurisdictional dispute between the Sheet Metal Workers and the Carpenters when it assigned the roofing work to the Carpenters.

The Sheet Metal Workers obtained an arbitration award granting them the disputed work in PLA-governed arbitration proceedings. Sambe and Donnelly participated in these arbitration proceedings while the Carpenters did not appear and, by letter, challenged the arbitrator's jurisdiction. The Carpenters threatened to picket the construction site if Donnelly assigned the roofing work to the Sheet Metal Workers.

Donnelly filed a ULP charge with the NLRB against the Carpenters, asserting that the Carpenters' threats were unlawful attempts to force it to assign the roofing work to its members rather than the Sheet Metal Workers' members (29 U.S.C. § 158(b)(4)(ii)(D)). However, Donnelly refused to reassign the roofing work to the Sheet Metal Workers. The NLRB held Section 10(k) proceedings to resolve the jurisdictional dispute (29 U.S.C. § 160(k)).

While the NLRB Section 10(k) proceedings were pending:

The Board awarded the disputed roofing work to the Carpenters (Local Union No. 623, 351 N.L.R.B. 1417 (2007)). Soon afterward, Donnelly filed another ULP charge, this time alleging that the Sheet Metal Workers were violating the NLRA by maintaining their LMRA lawsuit to seek reassignment of work through the arbitration awards that directly conflicted with the NLRB's Section 10(k) order. The NLRB issued a ULP complaint against the Sheet Metal Workers

While the ULP case against the Sheet Metal Workers was pending:

Later in the district court proceedings, and before the NLRB ruled in the ULP case against the Sheet Metal Workers, the district court:

(Sheet Metal Workers Int'l Ass'n Local Union No. 27, AFL-CIO v. E.P. Donnelly, Inc., 673 F.Supp.2d 313 (D.N.J. 2009) and Sheet Metal Workers Int'l Ass'n Local Union No. 27, AFL-CIO v. E.P. Donnelly, Inc., (D.N.J. Mar. 26, 2010))

These parties then filed their respective appeals and cross appeals to the Third Circuit, specifically:

On December 8, 2011, the NLRB found that the Sheet Metal Workers violated the NLRA by maintaining their LMRA suit against Donnelly after the NLRB's 10(k) decision awarded the roofing work to the Carpenters. The Sheet Metal Workers sought work or lost wages and benefits from work. The Board concluded that the lawsuit against Sambe did not directly conflict with the Board's decision in the Section 10(k) proceeding requiring that Donnelly assign the roofing work to the Carpenters because Sambe was not assigning the work. (Sheet Metal Workers' Int'l Ass'n, Local 27, 357 N.L.R.B. slip op. 131, (Dec. 8, 2011).)

The Sheet Metal Workers petitioned the Third Circuit for review of the NLRB's decision and order. The NLRB cross-petitioned for enforcement of its order.

The Third Circuit consolidated the three appeals from the LMRA lawsuit, the Sheet Metal Workers' petition for review and the NLRB's cross-petition for enforcement.

The Third Circuit:

The Third Circuit first considered the NLRB's December 8, 2011 decision and order. The Sheet Metal Workers offered two arguments that the December 8, 2011 decision is unenforceable, specifically:

The Third Circuit acknowledged that under NLRB precedent, the NLRB exercises NLRA Section 10(k) jurisdiction over disputed work:

The Third Circuit further acknowledged that under NLRB precedent, the third factor is not satisfied and the NLRB will therefore exercise Section 10(k) jurisdiction unless the employer assigning the work and each of the unions vying for the disputed work agree to be bound to the same work assignment dispute resolution process. In light of that precedent and more particular precedent that the third factor is not satisfied if one of the parties disputes that it is bound to a PLA dispute resolution process, the court held that the NLRB reasonably:

The Third Circuit held that the NLRB reasonably interpreted the NLRA to prohibit the Sheet Metal Worker's LMRA Section 301 lawsuit (to enforce the arbitration awards against Donnelly and/or seek damages related to loss of the disputed work allegedly promised under the PLA) which conflicted directly with the NLRB's Section 10(k) order. The Third Circuit:

An employer may escape LMRA Section 301 liability when it:

A general contractor that does not directly assign work that becomes part of an NLRB Section 10(k) order may be liable for a breach of PLA claim under the LMRA if it fails to require a subcontractor to assign work consistent with a PLA's work assignment provisions, resulting in a union losing work to which it would be entitled under the PLA.

The case serves as a reminder to all contractors to carefully read all contracts to which they may become obligated and to ensure that, considering other contracts, they are not creating conflicting commitments. Subcontractors and general contractors that participate in PLAs should recognize that extensive litigation may result if they do not: