When state and local governments act as “market participants,” paying for a particular project or service (instead of acting as a “regulator” setting the rules for everyone), they can require higher labor standards from the recipients of that public funding. In other words, the government has a greater say over working conditions on a project when the government is paying for that project – and employers are more likely to play by the rules if they know their public funding depends on how they treat their workers.
The “market participant” exception comes with its own limitations. The Supreme Court has established that state and local governments can intervene in labor relations when they have a direct stake in the project. Different approaches to this are protected to varying degrees. Community benefits agreements are one option that provides flexibility for local government while still creating a strong enforcement mechanism for the labor and community groups that are signatories.
New Flyer, one of the nation’s largest electric bus manufacturers, won a $500 million procurement contract in 2013 with the Los Angeles Metro public transit authority. As part of the contract, New Flyer committed to creating 50 full-time positions that paid living wages. When a community and labor advocacy organization, Jobs to Move America, questioned whether the company was providing the jobs it had promised, it led to litigation and eventually a 2022 community benefits agreement (CBA) requiring enhanced company reporting to LA Metro and covering New Flyer’s manufacturing facilities in Alabama and California.
The CBA established hiring goals “of 45 percent of new hires and 20 percent of promotions at each facility of individuals from groups who have historically been underrepresented or underserved and have had limited access to good jobs in American manufacturing,” such as women, people of color, and veterans. It also committed New Flyer to a stronger process for handling complaints about harassment and discrimination, additional safety training, higher wages, new training opportunities, and protections against retaliation.