10 May 2019

Contractors Performing Highway, Road, Airport or Bridge Construction Work in Michigan Should Be Careful When Executing Subcontracting Agreements

In the aftermath of a labor dispute impacting road construction in Michigan, the Michigan Union Contractors Group (MUCG), a new group of unionized road contractors in Michigan, signed a new labor agreement with the International Union of Operating Engineers Local 324.  That new labor deal may have significant impact on both union and non-union contractors in the highway, road, airport, and bridge construction industry.

Under the new MUCG-Local 324 collective bargaining agreement, to subcontract covered work, a signatory to that agreement must require a subcontractor to “agree[ ] that in the performance of the work [it] will comply with all the rates, terms and conditions, and fringe benefit contributions” in the new Local 324 collective bargaining agreement.  Although union recognition itself is not required to comply with the subcontracting terms, the agreement does include provisions for union contractors to avoid potential liability for their subcontractors’ failure to comply if those subcontractors also agree to become a direct “party” to the Local 324 collective bargaining and voluntarily recognize the union.

These contractual requirements apply to projects bid after April 6, 2019, and the only subcontractors excepted from them are “Certified Disadvantaged Business Enterprise (DBE) Contractors Under U.S. Department of Transportation Regulation (49 CFR 26).”

The impact of this new agreement may be significant, and it will depend on each contractor’s circumstances.  Any Miller Johnson client performing this type of construction work is encouraged to contact the authors below or your labor counsel to discuss how this new collective bargaining agreement might impact your operations and to develop a strategy to protect against any unintended consequences of continuing to bid and perform this type of work.