Sixth Circuit upholds a City’s contracting standards related to apprenticeship and employee benefits

On January 4, 2018, the Sixth Circuit court, which covers Michigan, Ohio, Kentucky and Tennessee, upheld a “Responsible Bidder Ordinance” (RBO) passed by the City of Cincinnati. The RBO required companies bidding for City projects to meet certain apprenticeship and employee benefit requirements. In a victory for workers and their unions, the court upheld the RBO because the City acted as a “market participant” rather than a regulator in passing the ordinance.  

After the RBO was passed, a local contractors’ association sued the City of Cincinnati claiming that three sections of the ordinance were “preempted” by the Employee Retirement Income Security Act (ERISA). By asking the court to determine the sections “preempted,” the contractors’ association was trying to get the court to say the City did not have the right to pass or enforce them. 

The challenged sections required contractors to do the following in order to win City water and sewer contracts:

(1) participate in an apprenticeship program that has graduated at least one apprentice per year for the past five years;
(2) certify whether they will provide health and retirement benefits to employees on the project as part of their regular compensation; and
(3) contribute 10 cents per hour to a City pre-apprenticeship fund established to recruit and train future workers for City projects.

The City of Cincinnati, as well as a local union that intervened in the matter, argued against preemption on several grounds, but primarily took the position that because the City passed the RBO in its capacity as a private owner and participant in the market for construction goods and services, the RBO was not subject to federal preemption because it did not constitute regulatory action. They argued the RBO implemented contracting requirements that were intended to improve efficiency and train workers for future City projects, as there was a documented shortage of skilled construction workers in the area. They argued that these were typical goals of a private owner establishing contracting standards for its proprietary projects, and therefore the City was not acting as a regulator in passing the RBO. Our law firm represented the local union that intervened on behalf of the City.

The court agreed with this position, finding that the City was acting as a proprietor rather than a regulator in passing the RBO. As such, the RBO was not subject to ERISA preemption. Notably, this is the first time the Sixth Circuit has applied the market participant doctrine in an ERISA preemption case. 

The decision is also notable because of its robust language describing the City’s “strong proprietary interest in developing a skilled workforce for its many future projects.” We hope the decision can be used favorably in future cases, and are pleased to have been given the opportunity to assist in this victory for working people and the labor movement.

Please contact your labor law counsel with questions or for further information. 

By Jolene Kramer | January 19, 2018

Legal Developments