Contractor is Bound to Laborers Throughout State Despite Union Indication That Agreement was for Project Only
The National Labor Relations Board has held that a contractor that signed a short-form agreement incorporating a statewide collective bargaining agreement must apply the CBA to all projects in the state, despite claims that the union mislead it to believe that the agreement was for one project only.
The contractor, Horizon Group of New England (Horizon), was performing demolition work on a school renovation project in Burlington, NJ, that was covered by a project labor agreement (PLA). The PLA required contractors to use labor referred by various unions and to be bound by various CBAs for work performed on the project. Horizon was not otherwise bound to any CBA and its employees were not represented by a union.
About a month after Horizon began performing work on the project using its own employees, a business agent for the Southern New Jersey Laborers District Council visited the site and asked Horizon’s project manager to use some of the union’s members to work on the project. The project manager replied that he would be happy to do so, since Horizon was covered by the PLA. The business agent then gave the project manager a copy of a “Short Form Agreement” (SFA) and a copy of the current collective bargaining agreement between the New Jersey Laborers District Councils and the Building, Site and General Construction Contractors and Employers (CBA). The project manager asked whether the SFA was part of the PLA, and the business manager said that it was. The business manager also said that if Horizon did not sign the SFA, then it would not receive any Laborers referrals on the job and that the union would cause “trouble” for Horizon with the school district and funding source. The next day, Horizon faxed a signed copy of the SFA to the union. Horizon performed the remainder of the project under the terms of the agreement.
The SFA stated that the signatory employer agreed to be bound by the terms of the CBA. The CBA contained a recognition clause providing that the employer recognizes various New Jersey Laborers district councils as its employees’ representative and a jurisdiction clause providing that the agreement is binding on all jobs in the State of New Jersey. The CBA also included a signature page stating, in bold print: “Note: This Agreement may not be limited to a Job Only Agreement without the written approval of the District Council Business Manager.”
When the project was complete, Horizon sent a letter to the union thanking it for its cooperation and labor supply on the project and announcing that the company was terminating the agreement pursuant to the CBA’s termination clause. The union did not respond. Over the course of the next several months, Horizon performed school renovation work on other projects elsewhere in New Jersey on an open-shop basis. The union complained that the SFA committed Horizon to apply the terms of the CBA throughout the state and eventually filed unfair labor practice charges with the Board.
Horizon asserted the defense of “fraud in the execution.” Such fraud occurs when one party’s deception causes another party to misunderstand the nature of an agreement, so that the deceived party does not know what he is signing or does not intend to enter into a contract at all. The defense applies when the party executes an agreement “with neither knowledge nor reasonable opportunity to obtain knowledge” of the agreement’s character or essential terms.
The Board denied the defense for three reasons. First, the Board found that Horizon failed to show that it actually relied on the union’s misrepresentation. It found that Horizon signed the SFA not because it believed that the contract applied only to the Burlington project but because it was afraid that the union would cut off referrals, preventing the company from meeting the requirements of the PLA, and would “cause trouble” with the owner. Second, Horizon failed to show that it did not know that the SFA was not limited to the Burlington project. The language of the SFA clearly incorporates the CBA, and the CBA clearly states that it applies to all jobsites in New Jersey and cannot be limited to a job-only agreement without written approval. Also, if the company believed that the SFA applied only to the one project, it would have had no reason to send the termination letter when the project ended. Third, even if Horizon did not fully understand the scope of the agreement, it failed to show that it did not have a “reasonable opportunity to obtain knowledge” of the agreement’s character or terms. The business agent left the documents with the project manager when he left the site, and the company had ample time to review them. Thus, the Board held, “even if the Union misrepresented the contents of the agreement, there Is no evidence that [Horizon] was impeded in its ability to read the entire contents of the agreement before signing. Had it done so, it would have ascertained the scope of the agreement that it was signing.” Horizon Group of New England, 347 NLRB No. 74 (July 31, 2006).
The Board’s decision in this case is consistent with other Board and court decisions in cases where a contractor argues that it should not be bound to an agreement that it signed because it was misled by a union and ignorant of the agreement’s terms. (See, e.g., Human Resource & Labor News, Issues No. 2-03, 10-02, 9-02, and 2-02.) Contractors are reminded to thoroughly review all of the terms of all labor contracts and to consult qualified labor counsel about any concerns before signing.
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