Last month, NYC Mayor Bill de Blasio issued an executive order requiring property developers receiving at least $1 million in “financial assistance” to require any large retail and food service tenants on the premises to accept “labor peace" agreements.
These so-called "labor peace" agreements would prohibit the companies on these premises from opposing the union organization of employees. These kinds of agreements already exist in the state's Public Authorities Law, which requires hotels, convention center operators and certain contractors to negotiate a "labor peace" agreement with corresponding labor organizations.
The law applies specifically to all "retail or food establishments" on the premises of any "city development project" that is expected to be larger than 100,000 sq. ft, that (a) sells goods, food, or drinks, (b) that employs, or will employ 10 or more workers and (c) occupies, or will occupy, over 15,000 gross sq. ft. on the premises.
The executive order defines "financial assistance" as discretionary assistance for the improvement or development of real property, economic development, job retention and growth, or other similar purposes provided either (a) by the city, or (b) indirectly by a city economic development entity. This includes:
- cash payments or grants;
- bond financing;
- tax abatements or exemptions;
- tax increment financing;
- filing fee waivers; and
- energy cost reductions,
The executive order also defines a "city development project" as those projects subject to an agreement between a developer and the NYC Department of Housing Preservation and Development or a "city economic development entity" (such as a local development corporation, not-for-profit corporation, or a public benefit corporation or like entity that provides discretionary economic development benefits) where the property developer receives, or is expected to receive, at least one million dollars of "financial assistance" form the sources described above.
The order applies only prospectively from July 14 and does not apply retroactively to any existing businesses where this executive order would apply or for any ongoing development projects started prior to that date.
In our opinion, this order is yet another obstacle for business development in New York City and another win for organized labor. First, developers that have to follow this executive order may have difficulty in attracting "anchor" businesses who would otherwise lease newly-developed large spaces if not for this requirement.
Additionally, the executive order may face a challenge, as we can foresee details in the federal labor laws, such as the National Labor Relations Act and subsequent decisions from the National Labor Relations Board, preempting this executive order. For example, according to some sources critical of these types of agreements,"labor peace" required employers to waive certain federally-protected rights in order to avoid future labor disruption.
We will continue to monitor issues surrounding these controversial agreements.
_____*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.
Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.