The New Orleans City Council on Thursday unanimously approved a new set of laws to help ensure that city contractors are responsible, safe and abiding by labor and workplace laws.
The new law, created in partnership with Mayor LaToya Cantrell, will require the city to determine whether contractors are “responsible” before they’re hired, instead of relying only on things like price or, in the case of professional services contracts, past experience or the quality of a proposal.
It will require the city to investigate any complaint it receives about contractor violations and maintain a list of contractors found to be “non-responsible.” It adds a slew of new disclosure requirements for contractors. And it will allow the city to easily sever any contract with a firm that violates the new law.
The idea of a “responsible bidder ordinance” started receiving attention in New Orleans shortly after the October 2019 collapse of the Hard Rock Hotel building, which killed three workers, injured others, led to the demolition of three historic buildings, damaged nearby businesses and disrupted traffic and businesses surrounding the building for over a year.
In February 2020, the council held a hearing on how it could force contractors to be safer and better to their employees. Union leaders and labor advocates told the council that with the current state of contracting in the city, a disaster like the Hard Rock was inevitable.
“It’s almost like the wild, wild West,” Chip Fleetwood of the New Orleans AFL-CIO told the council last year. “It was only a matter of time before something like that happened. In the building trade’s opinion, we knew there was going to be a breaking point. And we’re at the breaking point now. If something isn’t done, if we don’t really hold contractors accountable, it’s going to happen again.”
The new law will apply to a wide range of city contracts. But it won’t apply to private construction projects that don’t involve the city, and it likely wouldn’t have had a direct effect on the Hard Rock construction process. But labor leaders argued that the city can set an example, and that the city’s massive annual spending could create reverberating effects in how contractors in New Orleans operate overall, even when they aren’t working with the city.
Fleetwood and others said there were problems with the city’s public bid laws, which often require the city to choose the firm offering the lowest price, especially on construction projects. He said that incentivizes contractors to cut corners. (Purchasing selection committees are allowed to consider additional factors aside from cost for professional services, a category that includes attorneys, architects, engineers and other highly specialized services.)
One of the best ways to save money on construction projects is particularly harmful to workers — misclassifying full-time employees as part time contractors. A 2008 study from Michigan State University found that employers can save between 20 and 40 percent on labor costs by misclassifying their workers and avoiding costs like paying into the state unemployment fund.
Misclassifying employees robs those workers of benefits like paid leave, unemployment benefits and overtime compensation. Fleetwood said that when some contractors cut costs by misclassifying employees, other firms have no choice but to adopt the same irresponsible practices in order to offer competitive prices.
“It’s not even just about the workers,” Fleetwood said on Thursday. “We have honest contractors out there who can’t compete because of the bad players.”
Several union and labor leaders spoke in support of the law on Thursday.
“Workers and our good contractors in this city have been cheated for far too long,” said Andy O’Brien with the Louisiana Building and Construction Trade Council.
The new law will become effective once the city creates a set of rules and regulations on how to enforce it, although there is no set timeline for how quickly the city has to do that.
What the law does
The main change in the new law is that it forces the city to establish whether prospective contractors are responsible employers before hiring them.
The city still needs to work out exactly how it will determine a contractor’s level of responsibility. But broadly, the law says it will be determined based on “business organization or structure, financial resources and responsibility, insurance, performance history, compliance with relevant laws and regulations, prior disputes, and business integrity.”
A significant part of that determination will come from a new questionnaire that contractors need to fill out, which the administration has to create and finalize in the next 90 days. The contractor will need to update that questionnaire consistently through the life of its contract with the city if any of the answers change.
The questionnaires will be submitted “under penalty of perjury.” If the city discovers a contractor lied on its questionnaire, it can terminate the contract.
If and when firms are found to be “non-responsible,” they will be added to a list maintained by the city, and remain on the list for three years.
The new law requires the city to investigate any complaint it receives about a contractor. If the city finds any violations, it has to issue a written notice to the contractor. If the violation isn’t corrected within 10 days, the city will terminate the contract and add the contractor to the “non-responsible” list.
The law requires contractors to inform the city within 30 days of being notified that any government agency has initiated an investigation that could find they violated any local, state or federal laws, particularly laws related to safety and labor rights. The same disclosure requirement exists for when a court or government agency actually determines the contractor violated any laws.
The new city law applies to public works contracts worth more than $25,000, as well as service contracts that have to go through a competitive selection process. The law also applies to any financial assistance contract valued at $100,000 or greater.
There are some exemptions, however, including contracts with another governmental entity, for emergency needs, for “unique” or proprietary goods or services and for restoration tax abatement credits for residential buildings with six units or less. The city also has the discretion to issue waivers for certain contracts “if the city makes a good-faith determination that the contracted services are necessary to the proper functioning of the city and that no reasonable alternative exists.”
Primary contractors will be responsible for the conduct of their subcontractors, according to the law. In order to ensure that subcontractors are included, the council passed a second ordinance on Thursday that requires construction contracts worth more than $50,000 to include language stating that subcontractors have to comply by the same rules, and that the primary contractor will be responsible for any of its subcontractors’ violations.
Mid-year budget adjustment
Also on Thursday, the City Council gave final approval to a request from the Cantrell administration to bolster the 2021 budget using $77 million in federal funds out of the $380 million it expects to get through the American Rescue Plan Act.
Two weeks ago, the council deferred voting on the request over a lack of details. Last week, after receiving more information from the Cantrell administration, the council gave partial approval to the request and greenlit $54 million. Some council members were concerned about the remaining $23 million and whether its proposed uses would comply with federal guidelines on how ARPA money can be spent.
On Thursday, Councilman Joe Giarrusso said they’d been assured by the Cantrell administration that it had clear legal opinions that the appropriations were in step with federal guidelines. The Council ended up approving the total $77 million request.