Chicago City Council Passes Ordinance Requiring Nonprofit Contractors to Enter into Labor Peace Agreement with Unions

By Jennifer Dunn, David Johnson and Michael Warner - Franczek P.C.

April 5, 2023

On March 15, 2023, the Chicago City Council overwhelmingly voted to approve an ordinance requiring labor peace agreements between workers and Chicago-funded nonprofit organizations providing critical public health and social services to Chicago residents and communities. The measure, called the Human Service Workforce Advancement Agreement, was passed after more than three years of internal debate and external opposition from a coalition of nonprofit organizations. In essence, the ordinance requires that certain nonprofit service providers contracting with the city of Chicago enter into formal labor peace agreements with unions at their workplaces, though the specific provisions of such an agreement are not laid out in the ordinance; in turn, unions may not engage in strikes, boycotts, or other activity that may interfere with service delivery.

What is a labor peace agreement?

In general, a labor peace agreement is an arrangement between an employer and a union in which one or both sides agree to waive certain rights under federal law with respect to union organizing and labor activity to ensure the uninterrupted delivery of services, and to refrain from activities that would interfere with those services. Such agreements may be made voluntarily, though some state and local governments—including, recently, the city of New York and the state of New Jersey—require labor peace agreements between private sector employers and unions as a condition of doing business with the government. Historically, labor peace agreements have been used primarily within the construction industry on large public works projects. In 2017, the Chicago City Council approved a measure that required companies doing business at O’Hare and Midway airports to enter into a labor peace agreement with unions as a condition of their license to provide services at the airports.  

What are the requirements under the new Chicago ordinance?

The Human Service Workforce Advancement Agreement mandates that large human and social services providers who contract with the city of Chicago must agree to enter into labor peace agreements with unions that represent or seek to represent their employees in order to ensure that labor disputes, work stoppages, and other means of dispute resolution that may hinder the provision of taxpayer-funded essential services will not take place. The ordinance applies to any nonprofit organization with 20 or more employees whose services are funded and/or administered by the Chicago Department of Public Health (DPH) or the Chicago Department of Family and Support Services (DFSS). Hospitals are exempt; religious organizations are not exempt.  

The ordinance requires that any contract between DPH or DFSS and a covered nonprofit contractor must include the following:

1) A provision requiring the contractor to comply with this ordinance as a condition of the contract;  
2) A provision mandating that written notice be immediately provided by the contractor to the DPH or DFSS Commissioner administering the contract in the event of
        a) a strike, work stoppage, or other concerted activity;
        b) employees joining a union, seeking to be represented by a union, or self-organizing for the purpose of engaging in concerted activity;
        c) a union providing notice that it represents or seeks to represent the contractor’s employees, or
        d) the expiration or breach of any labor peace agreement.
3) A provision requiring the contractor to guarantee that it will not interfere with employees’ First Amendment or federal or state statutory rights. 

The ordinance does not require contractors to change the terms and conditions of employment for its employees, recognize a union as the bargaining representative for its employees, adopt any particular recognition process, or enter into a collective bargaining agreement with a union.

Within 60 days of the passage of this ordinance, commissioners will submit rules and regulations for review to the Committee on Health and Human Relations for review. A public hearing will be held within 30 days of the submission of rules and regulations. Within 30 days of the public hearing, the DPH or DFSS Commissioners will require that all contracts comply with the terms of the ordinance on or after the effective date of its publication.  

Potential impact and legal issues

Nonprofits and Chicago government officials who challenged the ordinance prior to the vote expressed concerns that the ordinance would interfere with nonprofits’ ability to efficiently provide critical services to vulnerable populations in Chicago. Supporters of the measure countered that organizations would become more efficient, saving dollars and time that would have been potentially lost on long, drawn-out battles with unions, which would in turn benefit workers and clients.  

The new ordinance likely will be subject to legal challenges. In New York, a coalition of 170 nonprofit organizations filed a lawsuit in federal court against the city over the labor peace agreement legislation that the City Council passed in 2021. The lawsuit, filed in the Southern District of New York, argued that the legislation unfairly allowed union leaders to decide which nonprofits receive contracts with the city and unfairly blocked social service workers from striking. The lawsuit also contended that the city legislation is preempted by the federal National Labor Relations Act (NLRA). Both sides submitted briefs to the court, which has not yet made a final decision on the case.  

A key issue in the lawsuit is whether the city of New York can invoke the “market participant” exception to NLRA preemption. Labor relations within the private sector typically is the exclusive province of federal law. The United States Supreme Court has consistently held that the NLRA preempts state law and that states and local governments are not permitted to regulate activities that are either expressly permitted or forbidden by the NLRA or reserved by the NLRA “for market freedom.” However, as the Supreme Court has held in the 1993 case Building Trades Council v. Associated Builders and Contractors (also known as Boston Harbor), if state or local governments act as a “market participant” by pursuing their own “purely proprietary” economic interests rather than directly regulating labor policy (which would interfere with federal law), courts will likely find that the NLRA does not preempt their actions, including legislating labor peace agreements with private sector entities.  

While the New York legislation is broader in scope than the Chicago ordinance, the Chicago ordinance includes similar language emphasizing its own economic interests as a market participant, as “a strike or other labor dispute resulting in economic interference…would be extremely costly to the City and burden taxpayers with additional costs.” It remains to be seen whether this issue will be raised in court, and if so, how a court would rule in this case.

We anticipate that many of our clients may be impacted by this new ordinance. We will continue to monitor the implementation of the ordinance and provide you with updates and information. Please reach out to a Franczek attorney with any questions in the meantime.

*Also authored by Jenny Lee, a Law Clerk at Franczek P.C.

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