Third Circuit Deals Blow to Jersey City Ordinance Requiring PLAs on Privately Funded Projects in Exchange for Tax Abatements

Jersey City's Municipal Code offers real estate developers generous tax exemptions that are designed to spur the City's economic growth, but the tax incentives have strings attached. Specifically, to receive a tax exemption, even on a privately funded project, the developer must agree to use the City-approved project labor agreement ("PLA"), which is a pre-hire agreement that favors unionized contractors and subcontractors. On September 12, 2016, the Third Circuit Court of Appeals reinstated claims against Jersey City that its tax exemption ordinance mandating PLAs is preempted by the National Labor Relations Act and the Employee Retirement Income Security Act, and violates the dormant Commerce Clause of the U.S. Constitution. Now the case returns to the District Court for a determination whether Jersey City's PLA requirement is unlawful. The Court was careful to explain that its ruling has nothing to do with public construction projects, and is limited to the City's attempted regulation of privately funded projects. Associated Builders and Contractors v. City of Jersey City, No. 15-3166 (3rd Cir. Sept. 12, 2016).

For a more in depth discussion of the Court's decision and its implications for municipalities that offer tax abatements in exchange for PLAs, click here. Questions relating to this important decision may be directed to any partner in our firm's Labor Law Practice Group - James McGovern III, Patrick McGovern, Douglas Solomon, and John Vreeland.