Can a Minnesota city require successful bidders on a municipal construction project to sign a project labor agreement with construction trade unions?

Plain-English summary

The City of International Falls was soliciting bids for substantial additions to its municipal building and community building/library. The City Council was considering a bid specification requiring successful construction bidders to enter into a prehire collective bargaining agreement (project labor agreement, or PLA) with construction trade unions. City Attorney Joseph M. Boyle asked whether such a PLA requirement was lawful under Minnesota's competitive bidding laws.

The AG answered yes, with important qualifications. A city may include PLA specifications if the city is acting "for economic reasons as a purchaser of contractor services, and not in its regulatory capacity."

The legal framework had three pieces:

(1) The "lowest responsible bidder" rule. Minnesota's competitive bidding statutes require school districts (§ 123.37, subd. 1), towns (§ 365.37, subd. 2), counties (§ 375.21, subd. 1), and statutory cities (§ 412.311) to award most construction contracts to the lowest responsible bidder. The uniform municipal contracting law (§ 471.345 (1992)) covers all political subdivisions and requires contracts over $25,000 to be let by sealed bids. The Minnesota Supreme Court has long read the lowest-responsible-bidder rule to require specifications drafted so as to permit "free and open bidding by all interested parties" (Coller v. City of St. Paul, 223 Minn. 376, 384, 26 N.W.2d 835, 840 (1947)). Specifications had to give "all bidders an equal opportunity without granting an advantage to one or placing others at a disadvantage" (Foley Bros., Inc. v. Marshall, 266 Minn. 259, 264, 123 N.W.2d 387, 391 (1963)).

(2) The older AG opinions on "union labor" requirements. Prior AG opinions (Op. Atty. Gen. 707-A-4 (May 10, 1957) and 270-d (February 28, 1940)) held that political subdivisions could not require bidders to use only union workers. The reasoning followed the general rule that contracts requiring use of union labor or union-label goods tended to suppress competition and were void where competitive bidding was required (citing McQuillin on Municipal Corporations § 29.48 (3d ed. 1971)). But the 1957 opinion also recognized that in determining the lowest responsible bidder, a council could consider "facts such as the ability of the individual bidders to promptly and satisfactorily complete the contract with freedom from interference, as well as the financial responsibility of such bidders," and could justify awarding to a higher bidder if "favorable labor conditions or labor relations" supported timely completion.

(3) The Boston Harbor case and PLAs in particular. A PLA is a project-specific collective bargaining agreement entered into before any workers are hired. The U.S. Department of Labor and labor relations treatises describe PLAs as a long-standing tool for large public-works projects (the St. Lawrence Seaway, the Alaska Pipeline, and dozens of Minnesota projects including the Hubert H. Humphrey Metrodome, the Minneapolis Convention Center, the Hennepin County Government Center, and several wastewater treatment facilities). PLAs typically include recognition of building-trades unions, a union security clause, a hiring-hall procedure, a project-specific dispute resolution mechanism, a no-strike/no-lockout commitment for the duration of the project, and a requirement that all contractors and subcontractors be bound.

The National Labor Relations Act (NLRA) explicitly accommodates PLAs. Section 8(f) (29 U.S.C. § 158(f)) authorizes prehire agreements in the building and construction industry. Section 8(e)'s "construction industry proviso" permits agreements between a labor organization and a construction-industry employer relating to subcontracting at the construction site.

In 1993, the U.S. Supreme Court held unanimously in Building and Construction Trades Council of the Metropolitan District v. Associated Builders and Contractors of Massachusetts/Rhode Island, 113 S. Ct. 1190 (1993) (the Boston Harbor case), that public owner-developers, like private owner-developers, may use PLAs without running afoul of the NLRA. The Court explained that "to the extent that a private purchaser may choose a contractor based upon the contractor's willingness to enter into a prehire agreement, a public entity as purchaser should be permitted to do the same." The Court even suggested that state regulation barring public owner-developers from using PLAs might itself be preempted by the NLRA.

Reading those three pieces together, the AG concluded that Minnesota cities could include PLA specifications in construction bids when acting as economic purchasers of contracting services, with four caveats:

1. The opinion addressed only public works construction projects, not other "union labor" requirements.
2. Any PLA requirement had to be narrowly tailored to the specific project, not a city-wide labor policy. Contractors with any labor practice elsewhere had to be eligible to compete, as long as they would abide by the project's PLA on this project.
3. The PLA could not require terms outside the NLRA's section 8(e) and 8(f) exceptions, such as forbidding employees from decertifying the union or deauthorizing dues checkoff.
4. The economic justifications had to be legitimate and not a pretext for setting general labor policy. If a city stepped out of its market-participant role into a regulator role, the PLA requirement would face a strong NLRA preemption challenge.

International Falls's PLA proposal was therefore lawful under Minnesota law, provided the city followed the four caveats.

Currency note

This opinion was issued in 1993. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical context: what the AG concluded

The opinion's timing is notable. The U.S. Supreme Court decided Boston Harbor in March 1993, and the AG addressed International Falls's PLA question in July 1993. Boston Harbor settled what had been an open question (whether public PLAs were preempted by the NLRA) and the AG opinion translated the federal holding into Minnesota state law terms.

The opinion was careful to distinguish PLAs from the "union labor" requirements that older Minnesota AG opinions had condemned. A flat requirement that bidders use only union labor was a regulatory imposition that suppressed competition. A PLA, by contrast, was a project-specific arrangement that bound the successful bidder and its subcontractors to specified labor relations terms for the duration of the project. Any contractor, union or open shop, could submit a bid; the contractor only had to agree to abide by the project's labor terms.

The opinion's market-participant / regulator distinction tracked the Boston Harbor doctrine. When a state or city acts as a buyer in the market, it is treated like a private market participant and can impose contract terms for the same economic reasons private buyers can. When a state or city acts as a regulator, it imposes legal rules on private actors and runs into preemption when those rules conflict with federal law.

The AG identified dozens of Minnesota PLA projects that predated the opinion, including the Metrodome (which had explicit legislative authorization under 1977 Minn. Laws ch. 89, sec. 10, subd. 3(t)). The footnote noted that most of the other listed projects had no explicit legislative authorization, suggesting that the practice was already widespread when the AG opined.

The lowest-responsible-bidder framework limited but did not foreclose PLA use. The AG's reading of Coller and Foley Bros. was that specifications had to give all bidders an equal opportunity, but a project-specific labor framework that all bidders could agree to fell within that limit. The 1957 Minnesota AG opinion had already recognized that labor relations were a legitimate factor in determining the lowest responsible bidder; PLAs operated at the specification stage, before bids were evaluated, but pursued the same underlying interest in labor stability and timely completion.

Common questions

Q: Did the opinion authorize cities to require all construction work to be done by union labor?
A: No. The opinion was specifically about project labor agreements, which are project-specific. A city-wide requirement that all bidders use only union labor would face the older AG opinions' invalidation and the NLRA preemption issues the AG flagged.

Q: Could a city require a PLA on a small repair project?
A: The opinion did not turn on project size, but the economic justifications for a PLA were typically tied to larger projects with extended timelines and multiple trades. A PLA on a small project might be harder to justify as serving the city's economic interest as a purchaser.

Q: Was a non-union contractor barred from bidding?
A: No. The AG's specification was that "all contractors are eligible to compete for the work regardless of their labor practices elsewhere, as long as they agree to abide by the agreement's requirements while performing work on the project." Non-union contractors could bid and, if they won, would operate under the PLA only for that project.

Q: Could the PLA require all workers to join the union?
A: A union security clause was a standard PLA feature, typically requiring employees to become union members within seven days of employment. Section 8(f) of the NLRA permits such clauses in construction-industry prehire agreements.

Q: What was the threshold for "economic purchaser" versus "regulator"?
A: The opinion did not draw a bright line. The AG signaled that the city needed legitimate, documentable economic reasons (timely completion, labor peace, predictable cost structure for a multi-trade project) and that a PLA requirement could not be a pretext for general labor policy. The Boston Harbor case left room for case-by-case scrutiny.

Q: Did this opinion affect the lowest-responsible-bidder analysis after the bid was submitted?
A: The PLA operated at the specification stage. Once specifications included the PLA, all bidders had to comply, and the lowest responsible bidder among compliant bidders won. The PLA itself did not displace the lowest-responsible-bidder rule; it set a condition all bids had to meet.

Background and statutory framework

Minnesota's competitive bidding framework lived in several statutes governing different political subdivisions:

• Cities (statutory cities under Minn. Stat. § 412.311): contracts for over a threshold dollar amount to the lowest responsible bidder.
• Counties (Minn. Stat. § 375.21, subd. 1): same framework.
• Towns (Minn. Stat. § 365.37, subd. 2): same.
• School districts (Minn. Stat. § 123.37, subd. 1): same.
• Uniform Municipal Contracting Law (Minn. Stat. § 471.345 (1992)): contracts over $25,000 must be let by sealed bids and awarded "pursuant to the law governing contracts by the particular municipality or class thereof."

The Minnesota Supreme Court's body of law on competitive bidding emphasized (1) the public's right to the lowest obtainable price from a responsible contractor (Griswold v. Ramsey County, 242 Minn. 529, 535, 65 N.W.2d 647, 649 (1954)), (2) the equal-opportunity rule for specifications (Coller v. City of St. Paul, Foley Bros., Inc. v. Marshall, Carl Bolander & Sons Co. v. City of Minneapolis, 451 N.W.2d 204 (Minn. 1990)), and (3) the broad discretion local officials retained in determining responsibility (Johnson v. City of Jordan, 352 N.W.2d 500 (Minn. Ct. App. 1984)).

The NLRA's construction industry provisions were the federal backdrop. Section 8(f) (29 U.S.C. § 158(f)) authorized prehire agreements in the construction industry as an exception to the general rule that an employer cannot recognize a union without majority status. Section 8(e)'s construction-industry proviso allowed agreements between a union and a construction-industry employer "relating to the contracting or subcontracting of work to be done at the site of the construction, alteration, painting, or repair of a building, structure, or other work."

Boston Harbor (1993) was the U.S. Supreme Court's unanimous endorsement of public-entity PLAs in the market-participant role. It cleared away the preemption challenges that had clouded public PLA use through the 1980s.

The AG's opinion translated those federal authorities into Minnesota state law, telling cities they could use PLAs as long as they did so as economic purchasers, not regulators.

Citations and references

Statutes:
- Minn. Stat. § 123.37, subd. 1 (school district bids)
- Minn. Stat. § 365.37, subd. 2 (town bids)
- Minn. Stat. § 375.21, subd. 1 (county bids)
- Minn. Stat. § 412.311 (statutory city bids)
- Minn. Stat. § 471.345 (1992) (Uniform Municipal Contracting Law)

Session laws:
- 1977 Minn. Laws ch. 89, sec. 10, subd. 3(t) (metropolitan sports facilities, project labor agreement authorization)

Federal law:
- 29 U.S.C. § 158(e) (NLRA § 8(e), construction industry proviso)
- 29 U.S.C. § 158(f) (NLRA § 8(f), prehire agreements)

Cases:
- Building and Construction Trades Council of the Metropolitan District v. Associated Builders and Contractors of Massachusetts/Rhode Island, 113 S. Ct. 1190 (1993) (Boston Harbor)
- Griswold v. Ramsey County, 242 Minn. 529, 65 N.W.2d 647 (1954)
- Schwandt Sanitation v. City of Paynesville, 423 N.W.2d 59 (Minn. Ct. App. 1988)
- Coller v. City of St. Paul, 223 Minn. 376, 26 N.W.2d 835 (1947)
- Foley Bros., Inc. v. Marshall, 266 Minn. 259, 123 N.W.2d 387 (1963)
- Carl Bolander & Sons Co. v. City of Minneapolis, 451 N.W.2d 204 (Minn. 1990)
- Johnson v. City of Jordan, 352 N.W.2d 500 (Minn. Ct. App. 1984)
- Jim McNeff, Inc. v. Todd, 461 U.S. 260, 103 S. Ct. 1753 (1983)
- Woelke & Romero Framing, Inc. v. NLRB, 456 U.S. 645, 102 S. Ct. 2071 (1982)

Other AG opinions referenced:
- Op. Atty. Gen. 707-A-4, May 10, 1957
- Op. Atty. Gen. 270-d, February 28, 1940

Treatises and reports:
- McQuillin on Municipal Corporations § 29.48 (3d ed. 1971)
- D. Quinn Mills, Industrial Relations and Manpower in Construction 40 (1972)
- U.S. Department of Labor, Labor Management Services Administration, The Bargaining Structure in Construction: Problems and Prospects, at 14 (1980)
- M. Stakes, Labor Law in Contractors' Language 195 (1983)
- C. Borda & R. Levitt, Union and Open-Shop Construction 107-08 (1980)

Source

• Landing page: https://www.ag.state.mn.us/Office/Opinions/
• Original PDF: https://www.ag.state.mn.us/Office/Opinions/707a-19930727.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

CITIES: MUNICIPAL CONTRACTS: ADVERTISING FOR CONSTRUCTION BIDS: City may include project labor agreement specifications if motivated by economic reasons as purchaser, and not in regulatory capacity.

707a
Cr. Ref. 63b-2; 469a-2
July 27, 1993

Mr. Joseph M. Boyle
City Attorney
City of International Falls
235 4th Avenue
International Falls, MN 56649

Dear Mr. Boyle:

In your letter you present substantially the following:

FACTS

The City of International Falls is in the process of soliciting competitive bids for the construction of substantial additions to its municipal building and community building/library. The City Council is considering a request for a bid specification which would require that successful construction bidders enter into a prehire collective bargaining agreement with labor unions, as is common practice in the construction industry.

You then ask substantially the following:

QUESTION

May a city soliciting competitive bids for a construction project require that construction bidders agree to enter into a lawful prehire collective bargaining agreement with building trade unions prior to the commencement of construction?

OPINION

We answer your question in the affirmative, so long as the city is doing so for economic reasons as a purchaser of contractor services, and not in its regulatory capacity.

As you know, political subdivisions in Minnesota are required either by statute or home rule charter to award most construction contracts to the "lowest responsible bidder." See Minn. Stat. §§ 123.37, subd. 1 (school districts), 365.37, subd. 2 (towns), 375.21, subd. 1 (counties), and 412.311 (statutory cities). The purpose of the "lowest responsible bidder" requirement is "to give all contractors an equal opportunity to bid and [to ensure] to the taxpayers the best bargain for the least money." Griswold v. Ramsey County, 242 Minn. 529, 535, 65 N.W.2d 647, 649 (1954); Schwandt Sanitation v. City of Paynesville, 423 N.W.2d 59, 64 (Minn. Ct. App. 1988).

A necessary corollary of the "lowest responsible bidder" requirement has been the rule "that the plans and specifications be so framed as to permit free and open bidding by all interested parties." Coller v. City of St. Paul, 223 Minn. 376, 384, 26 N.W.2d 835, 840 (1947). As the supreme court has explained:

The basic purpose of competitive bidding is to give to the public the benefit of the lowest obtainable price from a responsible contractor. As a part of the fulfillment of that purpose, the discretion of public officials is limited or removed so as to avoid fraud, favoritism, and extravagance . . . . Essentially, the specifications must be so drawn as to give all bidders an equal opportunity without granting an advantage to one or placing others at a disadvantage.

Foley Bros., Inc. v. Marshall, 266 Minn. 259, 264, 123 N.W.2d 387, 391 (1963); see also Carl Bolander & Sons Co. v. City of Minneapolis, 451 N.W.2d 204, 206-07 (Minn. 1990); Johnson v. City of Jordan, 352 N.W.2d 500, 503-504 (Minn. Ct. App. 1984).

Consistent with that view, this office has previously opined that political subdivisions seeking bids for construction contracts may not specify that successful contractors agree to use only union workers on a project. Op. Atty. Gen. 707-A-4 (May 10, 1957); Op. Atty. Gen. 270-d (February 28, 1940). As the 1957 Opinion explains:

Although there is authority to the contrary, it is the prevailing judicial view that a proposal or advertisement limiting bidders to those who agree to employ union labor, or to furnish goods bearing the union label, is invalid. There is no question that a contract by a municipal corporation for public work or a municipal ordinance or resolution requiring the party undertaking the performance of such work to use only union labor is void, and the same is true whether there is a statute requiring competitive bidding or not, the general rule being well settled that all contracts in which the public are interested which tend to prevent competition, where a statute or known rule of law requires competition, are void.

Op. Atty. Gen. 707-A-4, at 1 (May 10, 1957), quoting McQuillin on Municipal Corporations, § 29.48 at 428 (3d ed. 1971) (citations omitted).

That same opinion, however, emphasizes that, in determining the lowest responsible bidder on an individual project, a local government may consider labor relations issues before awarding the contract:

In determining who is the lowest responsible bidder, the council may, in the exercise of its honest judgment and discretion, take into consideration facts such as the ability of the individual bidders to promptly and satisfactorily complete the contract with freedom from interference, as well as the financial responsibility of such bidders. It may be, therefore, in individual cases, that the award of a contract to a bidder who was not the lowest in amount would not be discriminatory but would be justified where it appears to the council that, due to favorable labor conditions or labor relations, such bidder is in a better position to assure the timely completion of the contract than is the lowest bidder.

Id. at 4 (emphasis added).

One method both public and private owners interested in getting construction projects done on time and on budget have long utilized to assure peaceful working conditions is the so-called "project labor agreement," where general contractors or construction managers enter into collective bargaining agreements with building and construction trade unions prior to any employees being hired. As a leading treatise describes the arrangement:

Project agreements: For large projects involving a considerable volume of construction at a single site (or interrelated group of sites) over a period of years, a special agreement will sometimes be negotiated. It may involve the owner of the project as well as his contractors, or it may be sought by the contractor at the owner's insistence. These agreements normally attempt to guarantee the progress of the work without interruption by strikes and to establish special mechanisms for dispute settlement; sometimes they provide means for determining wages and conditions at the projects.

D. Quinn Mills, Industrial Relations and Manpower in Construction 40 (1972).

The United States Department of Labor has likewise explained how the economic concerns of owners and contractors on large projects prompted the development of project labor agreements:

[T]he project agreement developed as a response to problems peculiar to the construction industry. The typical local agreement seldom meets the needs of massive projects such as the construction of the St. Lawrence Seaway or the Alaska Pipe Line, which last for several years, pose special problems of manning and work rules, and involve huge sums of money, a consortium of several contractors, and a great deal of public interest and often public funds. Contractors on such projects, and their eventual owners, want continuity of production, more favorable treatment of costs such as travel and overtime pay than local agreements typically provide, uniform shift and other conditions for all trades and the help of national union officials experienced in securing manpower and administering agreements on large projects . . . For contractors and owners, one of the chief attractions of such agreements has been their recent inclusion of a clause promising no strikes for the duration of the project.

U.S. Department of Labor, Labor Management Services Administration, The Bargaining Structure in Construction: Problems and Prospects, at 14 (1980).

Project labor agreements typically include provisions such as the following:

recognition of the local building construction trades council and affiliated labor organizations as the exclusive bargaining representative for all craft employees on the project;

a union security clause, requiring all employees to become union members within seven days of their employment;

a commitment to rely primarily on designated union hiring calls for the project's skilled labor force;

a project-specific dispute resolution procedure;

a no strike/no lockout agreement for the duration of the project; and

a requirement that all contractors and subcontractors agree to be bound by the agreement.

It is our understanding that dozens of major public works projects in Minnesota have been completed under project labor agreements containing similar provisions, including the Hubert H. Humphrey Metrodome, the New University of Minnesota Hospital, the Minneapolis Waste-to-Energy Plant, the Minneapolis Convention Center, the Nicollet Mall project, the Hennepin County Government Center, the St. Paul Civic Center, the Ramsey County Courthouse renovation, and the Seneca, Blue Lake and Empire wastewater treatment facilities.

From the beginning, the National Labor Relations Act (NLRA) accepted those prehire agreements as lawful. From its enactment in 1935 through 1947, the National Labor Relations Board (NLRB) simply did not exercise jurisdiction over the construction industry, see S. Rep. No. 1509, 82nd Cong., 2d. Sess. 4 (1952), citing In re Brown and Root, Inc., 51 NLRB 820 (1943), and established labor relation practices in construction were left unregulated. After the 1947 Taft-Hartley amendments, however, the NLRB did assert jurisdiction and invalidated union recognition clauses in construction pre-hire agreements on the theory that the unions had not demonstrated majority status in a bargaining unit before obtaining recognition. See S. Rep. No. 1509, 82nd, 2d Sess. 4-5 (1952).

The resulting dislocation in the construction industry led both unions and employers to seek legislation validating their traditional collective bargaining practices. After several bills failed in the 1950's, Congress finally amended the NLRA in 1959 to re-establish customary labor relations practice in the construction industry.

Section 8(f) of the NLRA now provides that:

It shall not be an unfair labor practice under subsections (a) and (b) of the section for an employer engaged primarily in the building and construction industry to make an agreement covering employees engaged (or who, upon their employment, will be engaged) in the building and construction industry with a labor organization of which building and construction employees are members . . . because (1) the majority status of such labor organization has not been established under the provisions of section 9 of this Act prior to the making of such agreement . . . . Provided . . . that an agreement which would be invalid, but for clause (1) of this subsection, shall not be a bar to a [decertification] or deauthorization petition filed pursuant to section 9(c) or 9(e).

29 U.S.C. § 158(f) (1988); see generally Jim McNeff, Inc. v. Todd, 461 U.S. 260, 103 S. Ct. 1753 (1983).

Section 8(e), also added that year, imposed an explicit ban on so-called "hot cargo" clauses, labor contract provisions where employers agree to cease doing business with any nonunion company, but then added the so-called "construction industry proviso":

[N]othing in this subsection (e) shall apply to an agreement between a labor organization and an employer in the construction industry relating to the contracting or subcontracting of work to be done at the site of the construction, alteration, painting, or repair of a building, structure, or other work.

29 U.S.C. § 158(e) (1988); see generally, Woelke & Romero Framing, Inc. v. NLRB, 456 U.S. 645, 102 S. Ct. 2071 (1982). Section 8(e) therefore permits a general contractor's prehire agreement to require an employer not to hire other contractors to perform work on the project unless they agree to be bound by the terms of the labor agreement.

Therefore, there has been no question that private owner-developers may insist on project labor agreements as a specification when letting bids without running afoul of the NLRA. Likewise, as the U.S. Supreme Court unanimously held this year in Building and Construction Trades Council of the Metropolitan District v. Associated Builders and Contractors of Massachusetts/Rhode Island, 113 S. Ct. 1190 (1993), public owner-developers may do the same. As the Court explained:

There is no reason to expect these defining features of the construction industry to depend upon the public or private nature of the entity purchasing contracting services. To the extent that a private purchaser may choose a contractor based upon the contractor's willingness to enter into a prehire agreement, a public entity as purchaser should be permitted to do the same.

Id. at 1198 (emphasis in original). Indeed, the Court went further, and suggested that any state regulation "denying an option to public owner-developers that is available to private owner-developers might itself be pre-empted by the NLRA." Id.

That possibility simply reinforces our opinion that local governments in Minnesota may include project labor agreement specifications in their offers for bids on construction projects without running afoul of state competitive bidding requirements, if such specifications are in that governments' economic interest as a purchaser of contracting services.

It may be important to identify what this opinion does not address. First of all, we do not address the propriety of any "union labor" requirements for anything other than public works construction projects. Second, we emphasize that any such requirement must be narrowly tailored to confine its impact to particular projects. Any project labor agreement requirement should specify that all contractors are eligible to compete for the work regardless of their labor practices elsewhere, as long as they agree to abide by the agreement's requirements while performing work on the project. Third, we do not suggest that local governments may insist on collective bargaining terms that would fall outside the exceptions described in sections 8(e) and 8(f) of the NLRA, e.g., not permitting a majority of the employees in the unit to decertify the union or deauthorize the checkoff of union dues. Finally, fourth, the economic justifications for the bid specification must be legitimate, and not a pretext for an effort to set general labor policy. Once a local government steps outside of its role as "market participant" and becomes a "regulator," any "union labor" requirement would face a strong NLRA preemption challenge.

With those qualifications, your question is therefore answered in the affirmative.

Very truly yours,

HUBERT H. HUMPHREY III
Attorney General