Whether Jersey City can require developers to enter into project labor agreements as a condition of receiving tax exemptions or abatements is still an open question per the Third Circuit Court of Appeal. The federal appellate court held that the city was acting as a regulator, and not as a market participant, and its ordinance must be viewed in that context. Thus, the lower court must now consider whether the city ordinance is consistent with or runs afoul of various federal laws. Given the narrow holding, and remand of this case back to the District Court, we may not yet have the final word.

The New Jersey laws (long-term exemption, and five-year exemption and abatement) allow local governments to provide favorable tax treatment to private developers undertaking projects in areas marked for redevelopment. A Jersey City ordinanceimposed an additional requirement: that developers, in order to qualify for favorable tax treatment, execute a PLA unless the Jersey City Business Administrator determines that a PLA is not appropriate due to the “nature, size, and complexity of the project.” This was challenged by the NJ chapter of Associated Builders and Contractors together with some open shop contractors. They argued that the city ordinance violated various federal laws, including the NLRA, Commerce Clause (of the Constitution), ERISA, and the Due Process and Equal Protection Clauses of both U.S. and NJ constitutions.

The lower court determined that the city was enforcing its ordinance as a market participant, thus getting around any restrictions imposed by the NLRA, ERISA and Commerce Clause, and dismissed the lawsuit. ABC and the open shop contractors appealed.

The Court of Appeal, though, has held that Jersey City was not acting as a market participant. It noted that a tax exemption is not the equivalent of the government buying or selling goods or services. Rather, it simply addresses how taxes are to computed or assessed. The appellate court remanded the case on this narrow basis, holding that the city was acting as a regulator and not a market participant. Thus, the ordinance will need to be considered in light of whether it is subject to or otherwise runs afoul of the federal laws. We will undoubtedly hear more about the Jersey City ordinance in the future. The case is Associated Builders & Contractors N.J. Chapter v. City of Jersey City, 2016 U.S. App. LEXIS 16654 (Sept. 12, 2016), available here (LEXIS subscription required).