LABOR-PEACE AGREEMENTS IN EMERGING INDUSTRIES

Labor unrest poses serious challenges to the development of new industries and to the implementation of public investment projects such as the Inflation Reduction Act. One way to converge the interests of employers, workers, and the public is through labor-peace agreements (LPAs). Because federal and state government actors are some of the biggest investors in the recent development projects, proponents of LPAs argue that these federal and state government actors should have the power to require, or at least incentivize, LPAs on the projects they invest in. To that effect, former President Joseph Biden issued an executive order that requires project labor agreements, a form of LPAs unique to the construction industry, on federally funded projects worth $35 million or more.

But opponents claim that this act is preempted by federal labor law, and the federal courts of appeals have split on what state action constitutes permissible nonregulation. While the circuits agree that there is a market participant exception to federal labor preemption, they disagree as to the test—and whether other forms of nonregulation can survive. This Note demonstrates why the Seventh Circuit’s interpretation—which allows conditional spending to circumvent preemption so long as it’s not coercive—is the most consistent with Supreme Court precedent in the field of labor preemption and other similar doctrines.

The full text of this Note can be found by clicking the PDF link to the left.

∗ J.D. Candidate 2025, Columbia Law School. Thank you to Professor Kate Andrias for invaluable guidance throughout law school. Thank you also to the editors of the Columbia Law Review for excellent editorial support. All mistakes are my own.

Introduction

On August 16, 2022, President Joseph Biden signed the Inflation Reduction Act (IRA) 1 Pub. L. No. 117-169, 136 Stat. 1818 (2022) (codified as amended in scattered titles of the U.S.C.). into law to “deliver[] progress and prosperity to American families.” 2 Joseph R. Biden Jr., President, Remarks by President Biden at Signing of H.R. 5376, The Inflation Reduction Act of 2022 (Aug. 16, 2022), https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/08/16/remarks-by-president-biden-at-signing-of-h-r-5376-the-inflation-reduction-act-of-2022/ [https://perma.cc/7VQE-NPXQ]. The IRA allocates billions of dollars for investment in clean energy infrastructure. 3 Chris Chyung, Sam Ricketts, Kirsten Jurich, Elisia Hoffman, Frances Sawyer, Justin Balik & Kate Johnson, How States and Cities Can Benefit From Climate Investments in the Inflation Reduction Act, Ctr. for Am. Progress (Aug. 25, 2022), https://www.americanprogress.org/article/how-states-and-cities-can-benefit-from-climate-investments-in-the-inflation-reduction-act/ (on file with the Columbia Law Review). As a result of this statute, a tremendous amount of money is now flowing to states to undertake major infrastructure projects. 4 See Summary of Inflation Reduction Act Provisions Related to Renewable Energy, EPA, https://www.epa.gov/green-power-markets/summary-inflation-reduction-act-provisio
ns-related-renewable-energy [https://perma.cc/NT8W-5KA9] (last updated Jan. 28, 2025) (noting that money from the IRA will flow to states in the form of investment and tax credits). But what will the jobs look like on such projects? And, in an era of rising labor unrest, 5 See Margaret Poydock & Jennifer Sherer, Econ. Pol’y Inst., Major Strike Activity Increased by 280% in 2023 (2024), https://files.epi.org/uploads/279299.pdf [https://perma.cc/5VQY-7ANK] (“Last year saw a resurgence in collective action among workers.”). to what extent will labor peace be assured on such projects?

Labor-peace agreements (LPAs) can serve as key tools in achieving good jobs, ensuring labor peace, and procuring timely completion of large-scale projects. Project labor agreements (PLAs), a type of LPA specific to the construction industry, can help in the initial stages of the implementation of the IRA by “promoting efficient, timely construction of clean energy projects.” 6 The Inflation Reduction Act and Qualifying Project Labor Agreements, DOL, https://www.dol.gov/general/inflation-reduction-act-tax-credit/project-labor-agreements [https://perma.cc/9UXK-ZPV7] (last visited Oct. 5, 2024). Neutrality and card check agreements, common provisions in LPAs, can provide fair terms for laborers to select unions to represent them in a less hostile environment for all parties. 7 See James J. Brudney, Neutrality Agreements and Card Check Recognition: Prospects for Changing Paradigms, 90 Iowa L. Rev. 819, 827 (2005) (“[M]ore than 90% of the agreements called for some form of dispute resolution, most often arbitration, to address differences about unit determination or allegations of non-neutral conduct by one of the parties.”); James Y. Moore & Richard A. Bales, Elections, Neutrality Agreements, and Card Checks: The Failure of the Political Model of Industrial Democracy, 87 Ind. L.J. 147, 157 (2012) (noting that neutrality agreements may prevent employers and unions from making negative comments against each other or may require a hostility-free environment). Unlike PLAs, neutrality and card check agreements can exist in nonconstruction contexts. 8 See Howard Stutz, With Contracts Settled, Culinary Union Eyes Aggressive Growth in 2024, Nev. Indep. (Mar. 31, 2024), https://thenevadaindependent.com/article/with-contracts-settled-culinary-union-eyes-aggressive-growth-in-2024 (on file with the Columbia Law Review) (reporting on a culinary union’s neutrality agreements with restaurants in Las Vegas).

Some governmental units have attempted to achieve these ends by requiring LPAs. 9 See, e.g., Chi., Ill., Ordinance SO2019-9497 (Dec. 18, 2019) (requiring labor-peace agreements for Chicago-funded nonprofits that provide health and social services to Chicago residents and communities). These mandates have faced significant legal challenges. 10 See, e.g., Airline Serv. Providers Ass’n v. L.A. World Airports, 873 F.3d 1074, 1077 (9th Cir. 2017) (“The associations contend that [the municipal provision requiring LPAs] . . . is preempted by two federal labor statutes . . . .”); N. Ill. Chapter of Associated Builders & Contractors, Inc. v. Lavin, 431 F.3d 1004, 1005 (7th Cir. 2005) (“An association of non-union contractors (and one of its members) filed this suit . . . seeking a declaratory judgment that the requirement of a project labor agreement is preempted by federal law.”). Opponents argue that the National Labor Relations Act (NLRA) 11 National Labor Relations Act of 1935, Pub. L. No. 74-198, 49 Stat. 449 (codified as amended at 29 U.S.C. §§ 151–169 (2018)). preempts states, localities, and federal executive agencies from engaging in or requiring these agreements. 12 See, e.g., Robert C. Nagle, NYC ‘Labor Peace’ Order May Clash With Federal Law, Law360 (Aug. 9, 2016), https://www.law360.com/articles/826157/nyc-labor-peace-order-may-clash-with-federal-law (on file with the Columbia Law Review) (explaining that an LPA could be challenged on the grounds of being a local regulatory measure in conflict with the NLRA). But in Building & Construction Trades Council v. Associated Builders & Contractors of Massachusetts/Rhode Island, Inc. (Boston Harbor), the Supreme Court held that the NLRA doesn’t preempt states or local governments when they act as market participants. 13 Bldg. & Constr. Trades Council v. Associated Builders & Contractors of Mass./R.I., Inc. (Boston Harbor), 507 U.S. 218, 227 (1993) (“We have held consistently that the NLRA was intended to supplant state labor regulation, not all legitimate state activity that affects labor.”). Since that case was decided, the federal circuits have consistently recognized the market participant exception to the NLRA. 14 See, e.g., Johnson v. Rancho Santiago Cmty. Coll. Dist., 623 F.3d 1011, 1022–23 (9th Cir. 2010) (“In general, Congress intends to preempt only state regulation, and not actions a state takes as a market participant.”); Lavin, 431 F.3d at 1006 (“A city or state acting as proprietor, however, is a market participant rather than a market regulator.” (citing Boston Harbor, 507 U.S. at 230–31)); Hotel Emps. & Rest. Emps. Union, Loc. 57 v. Sage Hosp. Res., LLC, 390 F.3d 206, 213 (3d Cir. 2004) (“But a state will not be subject to preemption analysis when it acts as a ‘market participant.’”); Bldg. & Constr. Trades Dep’t v. Allbaugh, 295 F.3d 28, 34–35 (D.C. Cir. 2002) (recognizing a market participant exception). But the circuits split on how broad that exception is and what test they use to determine if the government is acting as a market participant or as a regulator. 15 See Chelsea Button, Comment, “Fair and Open Competition” or Death to the Union? Project Labor Agreements in Today’s Politically Contentious Atmosphere, 52 UIC J. Marshall L. Rev. 531, 561 (2019). This circuit split causes uncertainty for federal, state, and local policymakers, 16 See Michael John Garcia, Craig W. Canetti, Alexander H. Pepper & Jimmy Balser, Cong. Rsch. Serv., R47899, The United States Courts of Appeals: Background and Circuit Splits From 2023, at 7 & n.47, https://crsreports.congress.gov/product/pdf/R/R47899 (on file with the Columbia Law Review) (last updated Apr. 1, 2024) (observing that circuit splits may “lead to greater uncertainty,” result “in the non-uniform treatment of similarly situated litigants,” and affect governmental bodies “responsible for implementing statutes and regulations subject to conflicting judicial rulings”). which in turn decreases the use of innovative labor-peace tools that could help workers obtain protections while efficiently providing public benefits.

The courts of appeals have applied three different market participant tests. The Third Circuit interprets Boston Harbor to require two jointly necessary conditions. 17 See Associated Builders & Contractors Inc. v. City of Jersey City, 836 F.3d 412, 418 (3d Cir. 2016) (“Only if both conditions are met is a government acting as a market participant.” (citing Sage, 390 F.3d at 216)). First, the state or municipality must have a proprietary interest. 18 Sage, 390 F.3d at 216. Second, the policy must be narrowly tailored to avoid a regulatory effect. 19 Id. The Ninth Circuit uses essentially the same conditions but holds that they are independently sufficient—a state need only have a proprietary interest or narrowly tailor its policy to avoid regulatory effects. 20 See Johnson v. Rancho Santiago Cmty. Coll. Dist., 623 F.3d 1011, 1024 (9th Cir. 2010) (“[S]tate action need only satisfy one of the two . . . prongs to qualify as market participation not subject to preemption.”). The Seventh Circuit’s Northern Illinois Chapter of Associated Builders & Contractors, Inc. v. Lavin 21 431 F.3d 1004 (7th Cir. 2005). decision is a third wing of the circuit split. Lavin held that even when a state doesn’t act as a proprietor, it can nonetheless condition spending in a way that may avoid preemption under the principles of Boston Harbor. 22 See id. at 1006 (distinguishing between conditional spending and regulation). The court explained that preemption prevents conflicting regulation, and conditional spending is almost never regulation under the Supreme Court’s precedent. 23 See id. (“The question ‘is a condition on the receipt of a grant a form of regulation?’ comes up frequently, and the answer almost always is negative.”). The D.C. Circuit has not offered a clear test, instead opting for a piecemeal approach to the market participation exception.

This Note provides two primary contributions. First, it offers a resolution to the circuit split regarding the market participant exception to federal labor preemption. Second, it demonstrates how that resolution could enable actors in all levels of government to use LPAs to support laborers in emerging industries.

Part I considers the types and benefits of labor-peace agreements, then provides a few examples of how these agreements appear in emerging industries. Part II explains NLRA preemption and the circuit split regarding the market participant exception. Part III offers a resolution to the split by looking at other constitutional doctrines. Finally, Part IV applies the resolution in Part III to modern uses of labor-peace agreements in emerging industries.