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Section 6

Building Worker Power in Cities & States:
Government Procurement and Spending Authority

By CLJE Lab 09/01/2024

Background

As the largest purchaser of goods and services in the world, spending over $2 trillion annually, the U.S. government wields considerable leverage at all levels of the economy.1 Many of the core activities of government at the state and municipal level, such as building and maintaining infrastructure, involve purchasing goods and services from the private sector. By conditioning subsidies and bids for public contracts on compliance with strong labor standards, cities and states can procure quality goods and services on a timely basis while supporting high-quality jobs.

Objective of State Intervention: Building Pro-Worker Conditions into Publicly Funded Projects

States and cities can condition the award of public money on transparency requirements, compliance with labor standards, and other measures to assure timely, quality performance by the contractor. In designing these requirements, it is important to ensure they promote the state or city’s procurement interest for quality, cost-effective provision of goods or services. If a city or state is using the procurement system to accomplish labor policy objectives beyond its procurement interests, it runs the risk of having the initiative invalidated in a legal challenge on preemption grounds.

Preemption Risk

State action designed to promote the state or city’s procurement interest in providing quality, cost-effective goods or services has generally survived preemption review when the ordinance, project labor agreement, request for proposal, or other action has applied to public projects, financed by the locality or state (whether through bonds, tax increment financing, or otherwise). In order to avoid preemption, states and localities stipulating pro-worker conditions that implicate the NLRA’s jurisdiction in grants, subsidies, or contracts must establish that they are not acting in a regulatory capacity. They most often do so by showing that they are acting in a proprietary capacity. In Boston Harbor,2 the Supreme Court established a two-pronged test for determining proprietary interest: 1) whether the action furthers a state’s interest in efficient procurement of goods or services, or addresses conduct unrelated to that interest; and 2) whether the action seeks to set a broad policy in the state or is sufficiently narrow to foreclose that inference.

Options for State or Local Action

Examples of pro-worker initiatives that promote the state and city’s procurement interests include the following.

I. Project Labor Agreements (PLAs)

PLAs are agreements between construction contractors and building trades unions that establish the terms of employment for a particular construction project. PLAs are “pre-hire” agreements, meaning that they are negotiated before workers are hired and work begins on a project. By establishing terms and conditions of employment in advance, contractors — and cities and states — have more control over their labor costs and supply, allowing projects to be completed in a timely and cost-effective manner. Because of these advantages, cities and states can (and do) condition awards for construction projects on the use of PLAs.

II. Prevailing Wage Laws (PWLs)

PWLs — which are in effect in 26 states, some municipalities, and at the federal level — set wages and benefits for a number of similarly employed workers in a given geography. In the context of public projects, PWLs aim to ensure that the government’s procurement power does not undermine local wages and benefits or provoke a race to the bottom among contract bidders.3 As a result, these laws can protect worker power by safeguarding standards negotiated within the private sector.4 

III. Community Benefit Agreements

These agreements between a contractor or developer and community organizations contain the contractor/developer’s commitments to benefit the community through the project in question, such as hiring locally and addressing other community impacts. Community benefit agreements often include important transparency requirements, allowing the public to monitor whether the contractor’s commitments to the community are being met. To ensure the responsible use of public funds, cities and states can require bidders to have community benefit agreements as a condition of public funding.

IV. Labor Requirements Linked to Financing Mechanisms

Cities and states have also conditioned labor requirements on projects where governments use contracting or financing mechanisms — such as tax abatements, tax increment financing, and other tax advantages — that establish proprietary interest in a project. For example, in Hotel Employees & Restaurant Employees Union v. Sage Hospitality Resources, the city survived preemption review in making tax increment financing conditional on the acceptance of a labor peace agreement.5 

V. Job Quality Considerations

State and local governments can also build job quality considerations into the procurement process. Indeed, the Departments of Commerce and Labor specifically include worker empowerment and representation (as defined by the ability to “form and join unions …, engage in protected, concerted activity without fear of retaliation …, [and] contribute to decisions about their work, how it is performed, and organizational direction”) in their Good Jobs framework for publicly funded projects.6 Federal agencies have required, incentivized, or simply encouraged a number of good jobs provisions in their grant agreements, ranging from Project Labor Agreements and Community Benefits Agreements to Joint Labor-Management Training or Health-and-Safety Plans and neutrality provisions.7

Resource

Check out the Aspen Institute Economic Opportunities Program’s (EOP) Job Quality Tools Library, which features practical frameworks and resources for a wide range of stakeholders interested in improving job quality. Learn more about EOP’s work by exploring their Job Quality Center of Excellence.

Policy tools such as facility workforce plans or U.S. employment plans allow governments to include job quality as a factor when evaluating bid proposals for public contracts.8 As such, companies that plan to provide higher wages and benefits or commit to abiding by workers’ right to organize and bargain collectively without interference can earn extra credit in the procurement process. Commitments companies make in their bids can then become part of the contract with the government, allowing the government to hold the company accountable to their job quality commitments.

Spotlight: Building Worker Power Through Enforcing Transparency, Jobs to Move America

Credit: Jobs to Move America

High-road job quality standards in federal grants are of limited use if employers are not obligated to clearly disclose whether they meet contract terms. In cases where contracts mandate transparency and employers do not comply, workers and their organizations may file fraud claims on behalf of the government. In 2018, Jobs to Move America (JMA) brought a whistleblower lawsuit under the False Claims Act against bus manufacturer New Flyer of America. JMA alleged that New Flyer overstated the wages and benefits paid to its workers under its contract to supply up to 900 buses to the Los Angeles Metropolitan Transportation Authority. New Flyer was found to have violated the terms of their contract related to wages and benefits. The company subsequently reached a settlement with JMA that included a community benefits agreement covering the company’s workers in both California and Alabama.

VI. State and Local Contract Labor Advisors 

In February 2023, following a recommendation from the White House Task Force on Worker Organizing and Empowerment, the Office of Management and Budget and Department of Labor issued a memo requiring all federal agencies to designate agency labor advisers within their procurement offices. This aimed to improve the implementation of contract labor standards, as regulated by laws including the Service Contract Act (SCA), the Contract Work Hours and Safety Standards Act (CWHSSA), and Davis-Bacon and Related Acts, and facilitate greater coordination with enforcement agencies across the government. This approach could be replicated to support state and local governments working with contractors to ensure compliance with contract labor standards and regulations.

VII. Other Recommendations

  • Adopt “little service contract acts” at the state and local levels equivalent to the federal SCA, which extends prevailing wage requirements to service contractors and subcontractors working under public contracts.9 This would ensure workers are paid fairly for their work on publicly funded projects.
  • Implement rules promoting the retention of incumbent contract workers at the state and local level, per the DOL’s rule requiring federal contractors to offer first right of refusal to incumbent workers when a contract expires and a follow-on contract is awarded for similar services. This would ensure greater stability for existing workers.
  • Extend provisions similar to the General Services Administration’s (GSA) final rule, which grants union and worker organizations access to federal contractor workforces for state and local contracts, facilitating better communication and support.
  1. Maureen Conway & Mark G. Popovich, Procurement with Purpose: Improving Job Quality and Equity Through Public Procurement Reform, The Aspen Institute (Dec. 2022), https://www.aspeninstitute.org/wp-content/uploads/2022/12/Procurement-with-Purpose-Improving-Job-Quality-and-Equity-Through-Public-Procurement-Reform.pdf. ↩︎
  2. Building & Constr. Trades Council of the Metro. Dist. v. Associated Builders & Contractors of Mass./R.I. (Boston Harbor), 507 U.S. 218 (1993). ↩︎
  3. Malkie Wall, David Madland & Karla Walter, Prevailing Wages: Frequently Asked Questions, Center for American Progress (Dec. 22, 2020), https://www.americanprogress.org/article/prevailing-wages-frequently-asked-questions/. ↩︎
  4. Karla Walter, Malkie Wall & Alex Rowell, A How-To Guide for Strengthening State and Local Prevailing Wage Laws, Ctr. for Am. Progress (Dec. 22, 2020), https://www.americanprogress.org/article/guide-strengthening-state-local-prevailing-wage-laws/. ↩︎
  5. Hotel Employees & Restaurant Employees Union, Local 57 v. Sage Hospitality Resources, LLC, 390 F.3d 206 (2004) (ordinance conditioning grant of TIF financing on acceptance of a labor neutrality agreement was proprietary). ↩︎
  6. U.S. Department of Labor, Good Jobs Principles (2022), https://www.dol.gov/sites/dolgov/files/goodjobs/Good-Jobs-Summit-Principles-Factsheet.pdf; Karla Walter, Government on Workers’ Side: How State and Local Policymakers and Advocates Can Raise Standards for Publicly Supported Work, Ctr. for Am. Progress (Jan. 31, 2024), https://www.americanprogress.org/article/government-on-workers-side/. ↩︎
  7.  U.S. Department of Labor, The Good Jobs Initiative Impact (2024), https://www.dol.gov/general/good-jobs/gji-impact. ↩︎
  8. CHIPS Program Office, Workforce Development Planning Guide: Guidance for CHIPS Incentives Applicants, Jobs to Move America provides language for incorporating job quality and equity into the procurement process — including provisions obligating employers to report wages and benefits — in their federally-approved policy tool, the U.S. Employment Plan (USEP). See U.S. Employment Plan, Jobs to Move America (2020), https://jobstomoveamerica.org/resource/u-s-employment-plan-2/. ↩︎
  9. Wage and Hour Division, McNamara – O’Hara Service Contract Act, Department of Labor, https://www.dol.gov/agencies/whd/government-contracts/service-contracts. ↩︎

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