Archive for Apprenticeship and Training

West Sacramento School District Uses Union-Only Apprenticeship Policy to Boot Lease-Leaseback Contractor

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Tonight (April 23, 2015), the board of trustees for the Washington Unified School District (in West Sacramento) will reject a construction company from a lease-leaseback contract because unions will not agree to dispatch apprentices to the company.

The staff report for “Adopt Resolution 1415-22 for the Bryte Career Technical Education Campus Phase #1 Project (Implement the Capital Investment Program for Sustainability Initiatives / Facility Improvements through Measure V Funds)” states the following:

Bid #3, Landmark Construction, was highest bid by almost $1,000,000 (17%). Bidder #1 and #2, the point spread between them was significant (10%) and after the formal interviews the team felt that the best value of the three (3) submittals received was from Bobo Construction (bidder #2). The team began contract negotiations with Bobo Construction to finalize a lease lease-back (LLB) document. Unfortunately, during contract negotiations it was determined that the District’s pre-apprenticeship requirements could not be met by Bobo Construction. As a result, the team is reaching out to Landmark Construction in an effort to negotiate and finalize a contract.

At various times over the past 15 years, construction trade unions have lobbied Northern California local governments for local apprenticeship policies that supplant existing state law. Of course those self-interested policies are meant to cut bid competition and limit workers’ freedom of choice in training programs.

Those policies have been rejected by elected boards at some local governments and passed by others, often after amendments. But until now there has not been a high-profile case in which a construction company lost a major project because of such a policy.

The Washington Unified School District board of trustees quietly passed the union-backed apprenticeship policy in November 2013 that requires all contractors to obtain apprentices from union-affiliated programs. Now unions have been able to use this policy as the basis to get the school district to deprive a Merit Shop construction company of a contract. This action raises the cost of the project by $1 million (17%).

Here is the discriminatory policy: Washington Unified School District Resolution #1314-10 – Resolution Establishing Apprenticeship Graduation and Local Hire Requirements for Hiring on School Construction Projects.

For details, see the email below from the Coalition for Fair Employment in Construction to the elected board and administrators of the Washington Unified School District.

From: “Eric Christen”
Date: April 23, 2015 at 9:40:01 AM PDT

Board of Trustees,

As your staff and legal counsel have been unresponsive to our earlier email I am now forwarding this issue on to you.

The Washington Unified School District has implemented illegal pre-qualification requirements and is arbitrarily using these requirements to favor certain construction contractors, certain state-approved apprenticeship programs, and certain apprentices at the expense of others.

On April 21, 2015, the Coalition for Fair Employment in Construction (CFEC) learned that your selected (but not contracted) lease-leaseback contractor Bobo Construction will not be working on the district’s Bryte Culinary Arts project or on the District Office project. The vague reason given by a district consultant for this decision: “During contract negotiations, it was determined that the District’s Apprenticeship requirements could not be met by Bobo Construction.”

We inquired with Bobo Construction representatives, who informed us they left voice mails and sent emails to the Washington Unified School District asking specifically what requirements it did not meet, how the district determined that it could not meet the requirements, and who determined it could not meet the requirements. Suspiciously but not surprisingly, there has been no official response from the school district.

This unusual and disturbing incident, based on both the current situation and previous attempts to discriminate against non-signatory firms using similar tactics leads us to conclude that unions have engineered this latest episode so as to benefit its members. We will be submitting a public records request to confirm the involvement of union officials in these discussions leading to this decision and to determine specifically why the district ceased communication with Bobo Construction.

Bobo Construction had submitted a pre-qualification questionnaire and was approved and deemed eligible to work on these projects. It also submitted bids by the deadline. We will be checking on this to ensure Bobo Construction complied with every requirement.

Bobo Construction representatives say they typically request Carpenters and Laborers apprentices from the state-approved unilateral apprenticeship programs operated by the Northern California Chapter of Associated Builders and Contractors (ABC). These programs are approved by the California Division of Apprenticeship Standards to train apprentices on public works projects in Yolo County.

But the Washington Unified School District insists in its regulations that its contractors have to request and train apprentices exclusively from programs overseen by Joint Apprenticeship Training Committees (JATCs) affiliated with trade unions. Unilateral (union-free) apprenticeship programs are not regarded as eligible or legitimate training programs. The attached resolution, that the board approved in November of 2013, is where this language comes from.

Apprentices in these JATC programs pay union dues and fees and their fringe benefits indicated in prevailing wage determinations are paid into union-affiliated trust funds. The district’s decision to only accept apprentices from those programs is clearly favoritism for union apprentices, for union-affiliated apprenticeship programs overseen by Joint Apprenticeship Training Committees, and for construction companies that have agreements to train through union-affiliated apprenticeship programs overseen by Joint Apprenticeship Training Committees.

Nevertheless, to try to keep the peace and comply with this illegal requirement, Bobo Construction contacted representatives of the Carpenters and Laborers unions to arrange for a one-job subscription agreement to use union apprentices on Washington Unified School District projects. By refusing to arrange such agreements (an illegal action), these union officials disqualified Bobo Construction.

Basically, the Washington Unified School District has given union officials the power to decide which contractors get construction contracts at the district. Unions – not contractors – have the authority to dispatch apprentices. A union apprenticeship program can withhold its apprentices from being dispatched to any contractor (including a union contractor) and thus disqualify it.

Subcontractors for Bobo Construction are now reportedly being told that Bobo Construction was “kicked off the job” because it was non-union, and anyone wanting to work at the district better be unionized. Reportedly union officials had been lobbying the elected board of trustees and district administrators and contractors to deny the work to Bobo Construction. We will be submitting a public records request to confirm the extent of these communications.

The Coalition for Fair Employment in Construction is committed to ensuring that all capable and responsible bidders and their capable and qualified workers are able to work on taxpayer-funded construction projects. Following are the next steps we will be taking to ensure that all contractors, workers, and apprentices are treated equally and fairly:

Submission of the aforementioned public record request the goal of which is twofold: Show who in 2013 gave you the discriminatory language you voted to approve and secondly, what special interests have been involved in seeing that Bobo Construction was rejected in favor of a signatory firm whose bid was $1 MILLION HIGHER.

Undertake a public relations campaign to inform community leaders, the general public, and area media about how staff and elected officials of the Washington Unified School District are breaking the law and manipulating the district’s bidding process to raise construction costs and benefit union special interests. Your decision to choose Landmark Construction over Bobo alone will cost the District $1 million!

We will be researching the origin of this discriminatory apprenticeship requirement(s) and will expose it to the public.

Should this issue not be resolved by the board at your meeting tonight (April 23rd) we will recommend that Bobo Construction file a lawsuit against the Washington Unified School District over its patently illegal apprenticeship requirements.

Finally, a stench of corruption envelopes this entire process. CFEC has been protecting the rights of contractors, workers, and apprentices in California for almost 16 years and I have never seen such a blatant political power play as I have witnessed in the past few days. CFEC will do everything within its considerable resources to see to it that whomever is behind this attempt to play favorites using taxpayer dollars will be held accountable to the people for those actions, especially if public records or other documents unearthed in various stages of litigation reveal what the District has done in pursuit of political ambition.

In conclusion, we encourage you to work with Bobo Construction, which is a well-established company willing to resolve reasonable differences in order to perform the outstanding work that your district expects. The alternative is getting to deal instead with this organization, exceptional for its zeal to expose the bidding corruption eroding many school districts in California.

We look forward to hearing that Bobo Construction is back performing the best work at the best price for the taxpayers and students of the Washington Unified School District. We also look forward to hearing that the Washington Unified School District will no longer implement illegal policies that favor unionized contractors, unionized apprenticeship programs, and unionized apprentices. It’s not necessary, it’s wrong, it’s not desired by the public, and it’s illegal.

You are encouraged to contact me at xxx or xxx.

Eric Damian Christen
Executive Director
Coalition for Fair Employment in Construction

Federal Judge Declines to Throw Out New Union-Sponsored California Prevailing Wage and Apprenticeship Mandate Bill for Refineries

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Today (March 5, 2014), in the U.S. District Court for the Eastern District of California – Sacramento Division, Judge John A. Mendez rejected a petition from construction contractors and construction workers to suspend Senate Bill 54, signed into law by Governor Jerry Brown on October 13, 2013. This occurred after 90 minutes of oral arguments.

It was a victory for the State Building and Construction Trades Council of California, the sponsor of Senate Bill 54. Enacted under the guise of promoting public health and safety, this law fulfills on the state level the 30-year unsuccessful effort of construction trade unions in Contra Costa County to gain control of the construction contract workforce at petrochemical refineries.

What Is Senate Bill 54?

Alleged “findings of the legislature” in the preface to SB 54 provide the justification for the law. “Unskilled and untrained workers” at petrochemical refineries are a risk to public health and safety. In addition, outside contractors are a high risk to public health and safety because “they generally will be less familiar with the operations of the facility and its emergency plans” and because “the owner or operator of the facility will have less incentive to invest in their training.”

Therefore, the state now requires refinery contractors to pay workers “at least at a rate equivalent to the prevailing journeyperson wage for the occupation, or be registered in a state-approved apprenticeship program.” And in a phased plan, contractors will eventually need to have 60% of their journeypersons be graduates of a state-approved or federally-approved apprenticeship program.

Why Is Senate Bill 54 a Problem for Some Contractors?

Prevailing Wage

Senate Bill 54 attempts to graft state-mandated prevailing wage rates implemented for public works projects onto exclusively private construction projects. A contractor employing workers in trades for which the contractor is not signatory to a union Master Labor Agreement will likely have to increase wages to incorporate the various employer payments included in state determinations of the general prevailing rate of per diem wages. (For example, the employer payments for “Other” as indicated in California Labor Code Section 1773.1(a)(7-9) are not excluded from the refinery contractor wage requirement, although employer payments for travel and subsistence and holiday pay are specifically excluded.)

Industrial contractors that choose to entangle themselves with this complicated law will pass the increased costs in bids to refineries. Refineries will then pass the increased costs to consumers through higher gasoline and jet fuel prices. In turn, these higher gas prices change consumer behavior in ways some legislators regret, but other legislators appreciate.

This prevailing wage requirement in SB 54 appears to be a violation of the 1995 decision of the U.S. Court of Appeals for the Ninth Circuit in Chamber of Commerce of the U.S. v. Bragdon. In that decision, the court ruled that an ordinance enacted by the Contra Costa County Board of Supervisors in 1990 (“Prevailing Wages for Industrial Construction”) requiring employers to pay state-mandated prevailing wage rates to their trade workers on wholly private construction projects was preempted by the National Labor Relations Act (NLRA).

Apprenticeship Training Requirements

Two training requirements are of more immediate concern to refinery contractors and their employees who are independent of unions. One provision of SB 54 requires trainees to be enrolled in a state-approved apprenticeship program. Another requires a significant percentage of the skilled journeypersons employed by a contractor to be graduates of a state-approved or federally-approved apprenticeship program.

In the counties where most refineries are located (Contra Costa and Solano, Kern, and Los Angeles), unions have a monopoly on training through state-approved apprenticeship programs for many construction trades. To complicate matters, state law requires contractors on state or local public works projects to train workers only through state-approved apprenticeship programs, so the presence of federally-approved apprenticeship training programs in California is minimal.

Apprenticeship training is highly politicized in California, because it can be used to control who and how many people enter the construction workforce. In particular, unions use the notorious “needs test” in the California Labor Code to block approval of new programs or expansion of existing programs. Getting a new program approved generally requires years of administrative actions and litigation costing hundreds of thousands of dollars.

For more details about the needs test, see my March 5, 2007 article in entitled: California Law Discourages Vocational Education, But the Feds Are Cracking Down.

Arguments of the Plaintiffs (Contractors and Workers)

Attorneys for the contractors and the employees did not hold back from asserting that SB 54 was a law carefully designed to favor union contractors and union workers on refinery projects. The State of California sets prevailing wage rates based on union Master Labor Agreements. Unions monopolize state-approved apprenticeship programs for most construction trades and aggressively exploit state law to fight any threats of competition in training. Unions outside of the traditional construction trades are excluded from the state’s prevailing wage and apprenticeship system.

They argued that Senate Bill 54 is causing imminent harm by forcing companies now to make business decisions that relate to future bids that fall under the requirements of the new law. Contractors either have to begin adjusting their workforce and their hiring and training practices to comply with SB 54 or begin a long process of challenging SB 54 as unconstitutional.

Meanwhile, employees who are not graduates of an apprenticeship program become “suspect” despite having significant experience and skills. If unions monopolize apprenticeship training for their trade, these employees may eventually need to apply to union apprenticeship programs to pursue years of classroom work and on-the-job training – even the plaintiff in this case who has 31 years of experience working in the trade.

Attorneys presented a scenario in which a contractor lacking employees who graduated from a state-approved or federally-approved program would need to lay off workers and then try to find replacement workers who met the requirement, either by requesting a union to dispatch workers or by advertising for workers in places and ways (such as a newspaper advertisement in Texas) that would encourage workers who met the requirements to apply for the jobs.

If a contractor or group of contractors decided to establish new apprenticeship programs and seek approval from the state to operate them in order to comply with SB 54, unions would immediate challenge the approval by declaring that the existing union programs could serve all training needs and therefore a new program was not justified under state law.

Arguments of the Defendants (State of California and Construction Trade Unions)

Not surprisingly, the arguments of the State Building and Construction Trades Council of California were condescending and dismissive of refinery contractors that are not unionized or have Master Labor Agreements with unions outside of the building trades, such as the Steelworkers. They insinuated that construction trade unions already have skilled workers and adequate wages, while non-union contractors were resisting SB 54 because it would prevent them from bringing untrained workers from out-of-state at low wages into the refineries.

Defendants pointed out that SB 54 did not make any distinctions between union and non-union workers. They claimed that union training programs dispatch apprentices to non-union contractors. They claimed that workers who graduated from a union apprenticeship program and then subsequently resigned their union membership might be looking for jobs.

A theme from defendants was that it was quite possible for contractors to comply with SB 54, but these contractors simply chose not to do it. In addition, defendants argued that SB 54 could not be shown to affect bid awards. “Maybe the refineries don’t want to hire them under their own free will” and will make future decisions to spurn non-union contractors and award bids to union contractors without consideration of SB 54.

If refineries end up succumbing to union demands for Project Labor Agreements on all future construction contract work, “freedom of choice in the market” will surely be the claim from unions.

Comments from the Judge

Throughout oral arguments, Judge Mendez expressed concern that the plaintiffs did not have standing in the case because they had submitted nothing for the record that clearly showed injury was “concrete and particularized” and “actual or imminent, not conjectural or hypothetical.” He pointed out how plaintiffs frequently used the words “maybe” and “may.” He noted there was no evidence of a refinery bidding any work under SB 54 or any employees looking for a new job or being threatened with termination because of SB 54.

Of importance to Judge Mendez was the lack of participation in the case by refineries, which were the primary regulatory target of SB 54. “Should I be concerned?” he asked. Judge Mendez asked how harm could be proven if the refineries did not make a declaration for the record.

Finally, Judge Mendez warned that the power of a federal court to throw out a law approved by the state legislature and governor, with a stated reason for enactment, should be used sparingly. He saw possibilities – but not evidence – of harm to the contractors and employees. It’s “not impossible to come into compliance” with SB 54.

Senate Bill 54 continues to be state law. And as the State Building and Construction Trades Council of California stated in an October 14, 2013 bulletin following the signing of SB 54, “we encourage all affiliated trades to take this opportunity to unionize non-union contractors that are now working in the refineries.”

The case is Timec Company, Inc. v. Brown, Case No. 2:13-CV-02521 JAM DAD.

Timec Company, Inc. v Brown – Filed Memorandum of Points and Authorities

Plaintiffs were three companies (Timec Company, Inc., Petrochem Insulation, Inc., SSP Industrial Plant Reclamation, a Joint Venture), and two employees, Anthony Gillespie and Rodolfo Lopez.

Defendants were Director of the Department of Industrial Relations Christine Baker, Chief of the Division of Apprenticeship Standards Diane Ravnik, and Secretary for Environmental Protection Matt Rodriguez.

On February 10, 2014, the judge dismissed initial defendants Governor Jerry Brown, Attorney General Kamala Harris, and the California Environmental Protection Agency.

On February 3, 2014, the judge granted permission for the State Building and Construction Trades Council of California, AFL-CIO to intervene as a defendant in the case.

Project Labor Agreement Negotiations Fail, Government Transparency Is Restored, Ferry Agency Resumes Fair and Open Bid Competition

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Fair and open bid competition on a $22 million ferry project funded by California taxpayers was preserved after unions would not agree to provisions proposed by the San Francisco Bay Area Water Emergency Transportation Authority for a Project Labor Agreement. Background about the failed union negotiations was revealed when a government affairs representative for non-union construction trade associations pointed out how the agency board planned to discuss the negotiations out of public view in closed session, in violation of state law.

A short time schedule contributed to the failure of Project Labor Agreement negotiations. On May 1, 2013, the City of Vallejo, the San Francisco Bay Area Water Emergency Transportation Authority, and the private developer Lennar Mare Island (LMI) issued a joint press release announcing a new $22-million maintenance, administration, and passenger facility to be built on Mare Island, a part of the City of Vallejo that was the Mare Island Naval Shipyard until 1996.

Despite its potential for prosperity based on a beautiful Bay Area water location and climate, its historic and heritage districts, and its Mare Island redevelopment, the City of Vallejo has been troubled. It filed for Chapter 9 municipal bankruptcy in 2008, primarily because of excessive commitments to its public employee unions. The city’s political leadership is notorious for catering to the interests of labor unions. Construction trade union officials have lobbied elected officials to ensure that contractors must sign Project Labor Agreements as a condition of working on major public works construction in Vallejo, whether the projects are built by Solano County, the City of Vallejo, the Vallejo City Unified School District, or the Solano Community College District.

This new project – now known as the North Bay Maintenance and Operations Facility – was an obvious union target. At the May 23, 2013 meeting of the WETA board of directors, the agency’s executive director informed the board that Ben Espinoza, president of the Napa-Solano Building and Construction Trades Council, had contacted her about the upcoming contractor bidding for the ferry facility. Union officials wanted the WETA board to require construction companies to sign a Project Labor Agreement with the Napa-Solano Building and Construction Trades Council as a condition of working on it.

According to the May 23, 2013 WETA board meeting minutes, the executive director told the board that the unions’ “preferred language was currently under review and that she would keep the Board informed on the status of the item.” In response to a question from one board member asking how the agency would implement the Project Labor Agreement, the executive director said that the agency would meet with union officials to negotiate an agreement for the board to approve at its June 2013 meeting. If a final agreement was not ready when the agency released bidding information for the project, the agency would subsequently add it through an addendum.

Agency negotiations with the unions had to be completed quickly. The project would be funded in part by State Transportation Improvement Program (STIP) funds obtained for the City of Vallejo through the Solano Transportation Authority. In order to use the STIP funds allocated to this project, the San Francisco Bay Area Water Emergency Transportation Authority would have to award the contract no later than August 31, 2013.

At the June 27, 2013 meeting, despite the opposition of the Northern California Chapter of Associated Builders and Contractors, the WETA board unanimously voted for a resolution requiring construction companies to sign a Project Labor Agreement. The resolution authorized the agency to modify a draft Project Labor Agreement within 24 hours for inclusion in the bid specifications.

Following the meeting, the executive director of the agency added a modified draft Project Labor Agreement to the July 3, 2013 bid specifications for the project. The Request for Proposals noted that “The final PLA will be released in an addendum to this RFP upon execution by the parties, which we anticipate will occur no later than 10 days prior to the date that proposals are due. A PLA acknowledgement form is also included in this RFP as a form required for submission.”

Here is the text of the Water Emergency Transportation Authority – North Bay Operations and Maintenance Facility – Draft Project Labor Agreement as included in the July 3, 2013 bid specifications. Figuring this would be a done deal, I dutifully added it to the list of Copies of All Project Labor Agreements on California Government Projects (1993-2013) on the web site. I would ultimately have to remove it.

A few weeks later, the first posted July 18, 2013 meeting agenda for the board of the San Francisco Bay Area Water Emergency Transportation Authority (created on July 12, 2013) did not refer to any Project Labor Agreement negotiations. But a revised meeting agenda (created on July 15, 2013) included a closed session item to discuss the agency’s Project Labor Agreement negotiations with the Napa-Solano Building and Construction Trades Council.

A July 15, 2013 letter from the WETA executive director to the Napa-Solano Building and Construction Trades Council president explains the negotiating difficulties leading to this item. Here are some key excerpts:

We have a funding deadline that requires us to be in contract no later than the end of August or we lose significant funding for the North Bay Maintenance and Operations Facility project. We released an RFP for the Phase 1 work two weeks ago that includes the PLA in unexecuted format. However, we cannot go to award of a contract without having finalized the agreement and having it fully executed.

Based on your legal counsel’s representation, it would appear that I have no alternative other than to go to my board at its meeting this Thursday and advise them we will have to pull the PLA from the procurement set. If you think further discussions would be productive, given that I have a limited ability to make further changes, please get back to me immediately. We need to resolve open issues no later than the end of the day on Wednesday…

Please get back to me immediately if you see value in further discussions. Otherwise I have no option other than to advise the WETA board to delete the PLA from the North Bay Operations and Maintenance Facility project procurement.

On behalf of Western Electrical Contractors Association (WECA), Air Conditioning Trade Association (ACTA), and the Plumbing-Heating-Cooling Contractors Association of California (CAPHCC), Richard Markuson submitted a July 16, 2013 letter to WETA pointing out that discussion of the Project Labor Agreement negotiations in closed session was a violation of the California Ralph M. Brown Act, a law meant to insure government transparency and accountability.

The agency changed its plans. Created on July 16, the revised July 18, 2013 meeting agenda was “corrected” to place the Project Labor Agreement in open session as an “urgency item for consideration.”

At the July 18 WETA board meeting, representatives of the Northern California Chapter of Associated Builders and Contractors (ABC) and the Western Electrical Contractors Association (WECA) called for the agency to negotiate certain provisions into the Project Labor Agreement so that Merit Shop contractors would not be discouraged from bidding. But more stunning was the infighting among representatives of various trade unions, which revealed why the discussion was originally intended for closed session.

A representative of the Northern California Carpenters Regional Council spoke against the Project Labor Agreement in its current draft form. The Sheet Metal Workers Local Union No. 104 and the Teamsters union also opposed the draft language.

WETA’s executive director recommended that the board dismiss the Project Labor Agreement. After a month of negotiations, the agency could not reach an agreement with the Napa-Solano Building and Construction Trades Council. The attorney with Thompson Coburn law firm negotiating the Project Labor Agreement on behalf of WETA was resisting inclusion of off-site hauling (to and from the job site) and off-site fabrication in the Project Labor Agreement because he believed including these activities would violate the National Labor Relations Act (NLRA).

Meanwhile, the law firm of Weinberg, Roger and Rosenfeld, negotiating the Project Labor Agreement on behalf of the Napa-Solano Building and Construction Trades Council, has historically upheld a strict model of a Project Labor Agreement that includes off-site work and militantly rejects any provisions that acknowledge the existence of a non-union construction sector. Speaking on behalf of the unions, Sharon Seidenstein of Weinberg, Roger and Rosenfeld even objected to WETA changing a provision to allow apprentices to be dispatched from any state-approved apprenticeship program (including programs operated by companies or non-union Unilateral Apprenticeship Committees), rather than exclusively from a program operated by a union-affiliated Joint Apprenticeship Training Committee (JATC).

WETA’s legal counsel asked the union lawyer for case studies to back her position, which she was unable to do because reportedly no party has yet challenged the inclusion of off-site hauling (to and from a job site) or inclusion of off-site fabrication in a Project Labor Agreement. WETA board members tried to convince union representatives to accept the draft Project Labor Agreement and even recommended limiting apprentices on the project to those from union programs. In the end, the WETA board voted that if the unions did not sign the draft Project Labor Agreement by close of business on July 19, 2013, contractors would not be required to sign a Project Labor Agreement to work on Phase 1 of the project.

On July 19, 2013, unions informed the agency that it would not sign the Project Labor Agreement, and the agency removed the requirement from the bid specifications through an addendum. State taxpayers will now benefit from fair and open competition on this project.

News Media Coverage:

Labor Agreement Could Be in Place for New Ferry Facility on Mare IslandVallejo Times-Herald – June 27, 2013

WETA Adopts Disputed Labor Agreement for Vallejo Ferry Facility – Vallejo Times-Herald – June 28, 2013

Vallejo Ferry Hub Accord in Jeopardy – Vallejo Times-Herald – July 27, 2013

Latest Scheme for Career Technical Education: School Districts Borrowing Money with “Social Impact Bonds” – Unions on Board

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On March 19, 2013, California State Senate Pro Tem Darrell Steinberg led a press conference to promote Senate Bill 594 (California Career Pathways Investment, also known as the High School Dropout Reduction & Workforce Development Bond Act of 2013) meant to encourage partnerships among school districts, corporations, and unions for career technical education in California K-12 schools and community college districts.

Senator Steinberg also promoted this bill on March 22 at Redevelopment Forum: Revitalizing our Neighborhoods in a Post-Redevelopment Era, hosted by the San Diego Foundation. SB 894 is apparently a serious initiative.

It establishes an unfunded mandate for K-12 school districts and community college districts to create a new pool of money called a “Career Pathways Investment Trust Fund.” These districts can borrow money for the program by selling “Social Impact Bonds” (a concept promoted by the “progressive” Center for American Progress) for which investors can earn “Career Pathways Investment Credits.” This will be overseen by a new state government board called the “California Career Pathways Investment Committee.” The appointments of the Assembly Speaker and Senate Rules Committee to this committee will likely be union officials.

Senate Bill 594 exemplifies the foolishness of governance in the California State Legislature:

  • bizarre and incomprehensible financing schemes
  • borrowing money (with interest) without consideration of cumulative debt service
  • unfunded state mandates
  • forcing the state’s local governments to create and manage another pool of money
  • inviting more corruption at local governments
  • creating another state government board
  • tax breaks to corporations for ambiguous purposes
  • intrusion of corporations and unions into the public school system
  • brilliant suggestions that freed-up funds from a few cuts in the state budget can be transferred to pay for it
  • lack of concrete evidence that there is a problem (in fact, testimony during the press conference suggested the big problem is a lack of jobs, not lack of training)
  • government solutions for something that could be handled by the free market if there was real demand

When Governor Schwarzenegger promoted his Career Technical Education initiative in 2007, he considered it worthy enough to propose paying for it out of the general fund through the annual state budget. His efforts were not deemed worthy of mention at the SB 594 press conference.

Here’s my March 20, 2013 article in about the press conference and Senate Bill 594: Businesses Can Make a “Social Impact Bond” with Unions – – March 20, 2013.

The Sacramento Bee posted an article on March 21, 2013 about Senate Bill 594, Steinberg Pushes Privately Funded Career Training Program, which quotes me as a skeptic:

But skeptics wonder how the career readiness programs would be funded.

“They need to stop coming up with new funds and new schemes paid for by borrowed money,” said Kevin Dayton, head of the consulting firm called Labor Issues Solutions. “New things like this are just a big distraction. If they want to do career education they should fund it in the general budget.”

I posted these comments under the article:

Do you want your K-12 school district or community college district to establish a “Career Pathways Investment Trust Fund” and oversee yet another pool of money? It’s a mandate.

Let’s create another state government board: the “California Career Pathways Investment Committee!” The appointments of the Assembly Speaker and Senate Pro Tem will certainly be union officials.

Do you want your K-12 school district or community college district to sell “Social Impact Bonds?” Who will pay the interest on these bonds? Who will make the money on the interest?

“Career Pathways Investment Credits” – how about just focusing on an efficient, responsible government with a simple tax structure?

As another comment indicated, “the State has funding for apprentices (it contributes about 5% of the cost to train an apprentice – the rest coming from employers)…”

I also mentioned this in my comment:

One is led to believe Senate Bill 594 is needed because California businesses can’t find skilled workers. But notice the nurses’ association representative says the problem is that trained nurses can’t find jobs in California and therefore need to move out-of-state. And is there really a shortage of skilled construction workers in California right now? Are there no longer 20%-30% unemployment rates in the building trades? Or is SB 594 for training disadvantaged union workers to build the California High-Speed Rail under the Project Labor Agreement?

Los Angeles Times columnist George Skelton wrote positively about the general concept of encouraging career technical education (he avoids the politically correct phrase and simply calls it “shop”), but his column (Reinvigorating ‘Career Tech’ a Worthy Goal – Los Angeles Times – March 20, 2013) also reveals that the supporters don’t understanding the funding scheme:

Steinberg’s legislation is a bit convoluted — at least the financing part — and needs much work…Steinberg is suggesting several financing methods, including tax credits and foundation grants. But the main money source involves bonds. The state would sell “workforce development bonds” — say, for $1 million a crack — to businesses in areas “with the greatest potential for high-wage job growth.” The bond revenue would pay for the career-tech programs. The bond-buyers would earn a rate of return based on a program’s results, as judged by some committee. “I’m not sure I completely understand it,” Zaremberg [Allan Zaremberg, President & CEO of the California Chamber of Commerce] told me. “Why don’t we just fund this out of existing resources? Is this not a priority? … like Zaremberg, he [Jack Stewart, President of the California Manufacturers & Technology Association] doesn’t quite grasp the bond idea.

Dan Walters is another California commentator who has written much over many years about the need for stronger career technical education programs in California public schools. (For example, see Technical Education Fight RagesSacramento Bee – November 19, 2007)  I look forward to reading his perspectives on Senate Bill 594.

Board of Emeryville Unified School District Approves Union-Only Community Benefit Agreement for Idealistic Center for Community Life

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Construction trade unions are getting a monopoly on building a multi-government collaborative San Francisco Bay Area project tangled up in trendy “progressive” concepts about how government should require private companies to create and operate their businesses.

As an item on the consent calendar of its “special meeting” agenda on December 17, 2012, the board of trustees of the Emeryville Unified School District approved a “Community Benefit Agreement” to be incorporated in a lease-leaseback contract signed by the prime contractor for the construction of the Emeryville Center for Community Life. This project is coordinated by the City of Emeryville and the Emeryville Unified School District and “touted as a model for the 21st century urban environment.”

Unions and other activist organizations routinely pressure local governments in urban areas of California to require developers to sign a “Community Benefit Agreement” as a condition of providing a permit or financial assistance for a project. Not surprisingly, these Community Benefit Agreements usually include a requirement for developers or contractors to sign a Project Labor Agreement with construction unions or adopt some other program (often a “First Source Hiring” program) that gives construction unions control of the work.

California has been on the cutting edge of local governments forcing developers to support union political agendas; in fact, four California regional think tanks backed by labor unions and other interests came together as the “California Partnership for Working Families” to develop a guidebook on using Community Benefit Agreements. These policy organizations are the East Bay Alliance for a Sustainable Economy (San Francisco Bay Area), Working Partnerships USA (San Jose), Los Angeles Alliance for a New Economy (aka LAANE), and the Center on Policy Initiatives (San Diego). The work of these groups to make “economic development subsidies more accountable and effective” generally goes unchallenged, as California is devoid of free market-oriented policy institutes that study state and local union interference with commerce.

The Community Benefit Agreement for the Emeryville Center for Community Life was developed by a consulting firm called A Squared Ventures, which worked with community “stakeholders” including the Residents United for a Livable Community (RULE), a group “concerned that the City has handed out tens of millions of public dollars to large developers without asking for many benefits for the community in return.” This same group has worked with the East Bay Alliance for a Sustainable Economy and UNITE-HERE Union Local No. 2850 to seek a Community Benefit Agreement for Phase II of the Bay Street project in Emeryville.

This Community Benefit Agreement for Emeryville’s Center for Community Life does not include a Project Labor Agreement, nor does the Community Benefit Agreement contain provisions that resemble provisions in a traditional pre-hire labor agreement. Instead, this Community Benefit Agreement sets employment goals for the project and simply requires the prime contractor and its subcontractors to obtain their workers through the union hiring hall dispatching process. For example, it requires contractors to “utilize name call procedures with the representative union hiring halls” to obtain workers classified as journeymen. Although it does not specifically indicate that contractors must request or obtain apprentices from union-affiliated Joint Apprenticeship Training Programs, this is apparently assumed in the additional provision that requires the prime contractor to “work with the construction trade unions to identify and implement local apprentice worker rotation opportunities” on a quarterly basis.

In addition to requiring contractors to obtain trade workers from unions, the Community Benefits Agreement requires the prime contractor to encourage Emeryville Unified School District students and their parents to attend recruitment events and meetings for a 16-week pre-apprenticeship program run by the Cypress Mandela Training Program, an organization with close ties to construction trade unions.

All of these requirements are intended to find jobs for people who live in certain zip codes in Emeryville, Berkeley, and Oakland, or within a wider “East Bay Green Corridor.”

But that’s not all. The prime contractor will be required to set up a “Learning Lab” on the job site to show students how the project achieves “environmental sustainability.” The Community Benefits Agreement requires contractors to pay the state-mandated prevailing wage to their trade workers (but that was required by state law anyway). There is a “living wage” requirement for workers not in the construction trades, based on the City of Emeryville’s living wage ordinance. The prime contractor will commit to using subcontractors and other construction-related contractors that are local small businesses.

California law allows school districts to choose “lease-leaseback” contractors using somewhat subjective “best value” criteria, rather than awarding the contract to the lowest responsible bidder. Surely the school district will chose its prime contractor based on its proposal to fulfill the requirement of the Community Benefits Agreement. A Project Labor Agreement is likely to be part of any proposals for the lease-leaseback contract.

Which developers and contractors will agree to meet these government-mandated conditions (or at least make it look like they’re going to meet these conditions)? I’m guessing a lot of the activists behind the Community Benefit Agreements expect these businesses to reduce their profit margin (and not increase the price) to fulfill these conditions for the good of the People, just like contractors allegedly have reduced their profit margins for the honor of working under the union Project Labor Agreement for the San Diego Unified School District. It will be interesting to see how the cost of the Emeryville Center of Community Life compares to other similar projects in the San Francisco Bay Area.

You are invited to go to the web site “dedicated to sharing information and encouraging an open conversation about the Emeryville Center of Community Life.” As it says, “From here you can participate in the emerging community dialog and gain access to current and background information that will help inform the exchange of ideas and allow for an authentic community engagement process.” You can share conversation and dialogue about fiscal responsibility, capitalism, free markets, profit, private property, etc.

Editorial Comments

1. I was surprised to see the provision in the Community Benefit Agreement requiring the prime contractor and the unions to rotate apprentices among various tasks, because union leaders like to claim that their apprenticeship programs provide comprehensive training for many tasks to their indentured apprentices, while non-union unilateral apprenticeship training programs exploit their apprentices by making them do the same task over and over again, in violation of their own program standards. Inclusion of this requirement suggests to me there is a problem with the scope of on-the-job training for union apprenticeship programs, at least in Alameda County.

2. Wouldn’t it be better to eliminate economic development subsidies altogether? Ask defeated California Assemblyman Chris Norby, author of Redevelopment: The Unknown Government, who was not rewarded for being alone in this position at the California state legislature. As government power has grown at the state and local levels in California, one of the easiest ways for corporations to make big money in this state is to avoid competing in the messy, insecure free market and instead feed off the compulsory tax payments of ordinary citizens and small businesses. In response, unions and other leftist groups pressure government officials to impose costly and burdensome requirements on these corporations, who in turn pass these costs along to consumers, and the cycle of crony capitalism continues at the expense of the fleeing middle class.

The Superintendent of the Emeryville Unified School District reported on April 10, 2012 that “because rent in the Bay Area is expensive and unemployment remains high, approximately 30 families in EUSD have been so impacted by the recession that they have opted to relocate to other cities.” It’s not a friendly place for ordinary families.

3. Which investors plan to buy the $95 million in bonds that 1,982 Emeryville voters authorized in November 2010 to be sold through Measure J in order to borrow money to pay for projects such as the Emeryville Center for Community Life? Interest and transaction fees for Measure J bond sales seem to be a loophole that allows the One Percent to make money off of this project. Or maybe the People’s Republic of China will buy the bonds.

A Small Electrical Apprenticeship Program Tries to Overcome Rigid State Government Control of Apprenticeship Programs for the Construction Trades in California

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UPDATE: On September 18, 2013, the Independent Training and Apprenticeship Program (I-TAP) lost its appeal to the U.S. Court of Appeals for the Ninth Circuit in Independent Training v. California Department of Industrial Relations. As the decision noted, “The panel affirmed the district court’s judgment in favor of the defendants in a suit seeking declaratory and injunctive relief on the ground that the California Department of Industrial Relations’ actions were inconsistent with federal Fitzgerald Act regulations governing the employment of apprentices on public works projects qualifying as ‘Federal purposes.'”

Construction trade unions are sometimes accused of misusing the government-regulated apprenticeship structure as a tool to control who, how, and how many people enter the construction workforce. Sponsors of proposed apprenticeship programs who aim to compete against existing union programs have long endured legal obstacles in states such as Washington, Oregon, and Nevada.

But as usual, California takes the prize for the best use of government to cut competition and freedom of choice in the marketplace. From 2002 to 2007, the U.S. Department of Labor threatened to punish – and then proceeded to punish – the State of California for failing to follow federal laws meant to encourage the construction industry to train the future American workforce through apprenticeships.

Now a California-based training program for apprentices, approved by the federal government in 2004 to train electrical workers, is suing the State of California because the state takes a very narrow interpretation of the federal punishment – so much so that the punishment is effectively meaningless. This apprenticeship program contends that its apprentices have lost a substantial number of opportunities to get on-the-job training on state and local construction projects as a result of this inappropriately narrow interpretation.

Background of How the State of California Has Traditionally Regulated Apprenticeship for the Construction Trades

California Labor Code Section 1777.5 outlines the statutory requirements for construction contractors regarding apprenticeship when these companies work on public works projects of $30,000 or more. These contractors must request apprentices from state-approved training programs. Contractors must employ these apprentices in a ratio not less than one hour of apprentice work for every five hours of journeyman work (with a few exceptions).

Because they are less than fully trained, apprentices are the only workers on a public works project to whom contractors can pay less than the full “journeyman” prevailing wage. For trades such as electrical inside wireman, the pay rate for apprentices increases in conjunction with the progress of the apprentice through classroom instruction and on-the-job training.

The state generally understands that a contractor is required to request apprentices from a program approved by the Chief of the Division of Apprenticeship Standards to train workers for that trade in the county where the work is performed. Contractors are required to make payments designated for “apprenticeship and training” in the state-mandated prevailing wage rate to the program or programs that provided the apprentices, or (if not enough apprentices are dispatched to fulfill the 5:1 ratio) to any program approved to train workers for that trade in the county where the work is performed, or to the California Apprenticeship Council.

Under California Labor Code Section 1773.1(a)(6), contractors are able to take a “credit” for the payments for apprenticeship and training against the total hourly state-mandated “prevailing wage” rate, provided that the amount paid to the program is reasonably related to the cost of the program. In other words, the state-mandated hourly wage to a worker is reduced by the amount paid for apprenticeship and training, but the contractor cannot pay an excessive amount to a training program’s trust fund.

When does the reasonable cost for apprenticeship and training become an issue? The state sets the standard employer payment amounts for apprenticeship and training based on the applicable union collective bargaining agreement for that trade in that geographical region, so a competing program not affiliated with that union might charge a contractor a different rate for apprenticeship and training than the amount designated in the applicable state-mandated prevailing wage rate.

Under California Labor Code Section 3075 (a), the Director of the Division of Apprenticeship Standards is authorized to approve three categories of apprenticeship programs: (1) those run by unions and their affiliated contractor associations through joint apprenticeship committees, (2) those run by non-union contractor associations through unilateral apprenticeship committees, and (3) programs run by individual corporate employers. Unions had a complete monopoly on apprenticeship training in the California construction trades until 1988, and they still monopolize apprenticeship training for many trades in many geographic areas.

Why the Federal Government Took Away California’s Authority to Regulate Apprenticeship for Federal Purposes

President Franklin Delano Roosevelt signed the National Apprenticeship Act (the Fitzgerald Act) into law in 1937. This law authorizes the U.S. Department of Labor to “formulate and promote the furtherance of labor standards necessary to safeguard the welfare of apprentices and to cooperate with the States in the promotion of such standards.”

California is one of 27 states that exercise an option to perform their own oversight and regulation of apprenticeship programs, rather than leaving it to the U.S. Department of Labor’s Office of Apprenticeship Training, Employment and Labor Services (OATELS). They are commonly called “SAC states” – that is, states with State Apprenticeship Councils.

In 1999, Governor Gray Davis signed into law Assembly Bill 921, a union-backed bill that amended California Labor Code 3075 in order to establish a stringent “needs test” that a proposed apprenticeship program or an apprenticeship program seeking to expand to a new trade or geographic jurisdiction must fulfill before the program can be approved or expanded.

Construction unions have exploited this language to block the approval of new programs or programs expanding into new trades or geographical regions, thus cutting competition in training and limiting the choice in comprehensive training programs for people seeking a career in the construction trades. The law also creates confusion about who has the authority to approve or reject applications for new or expanding apprenticeship programs: the Chief of the California Division of Apprenticeship Standards or the California Apprenticeship Council.

In response to this needs test, the U.S. Department of Labor in 2002 began the process of “derecognition,” or taking away the State of California’s authority to regulate apprenticeship for federal purposes. The California Division of Apprenticeship Standards under the Davis Administration and the union-controlled California Apprenticeship Council both challenged the derecognition process.

In January 2007, a U.S. Department of Labor Administrative Review Board ruled that the U.S. Department of Labor has the right to “derecognize” California’s authority to regulate apprenticeship for federal purposes. The decision upheld an earlier Administrative Law Judge decision noting that the “needs test” in Section 3075 of the California Labor Code used by unions to prevent new or expanded apprenticeship programs “does not promote competition among programs, does not consider the needs of individuals seeking apprenticeship training, and limits training opportunities for apprentices.”

At the demand of the State Building and Construction Trades Council of California, the California State Legislature has stopped four bills that included a provision to repeal the needs test: Assembly Bill 2660 in 2006 (sponsored by Associated Builders and Contractors (ABC) of California), Assembly Bill 947 in 2007 (sponsored by the Schwarzenegger Administration), Assembly Bill 734 in 2008 (a bipartisan bill amended at the very end to eliminate the repeal provision), and Senate Bill 362 in 2012 (sponsored by ABC of California). (Note: I was State Government Affairs Director of ABC of California when these bills were introduced and considered.)

What’s the Practical Effect of Derecognition? The Independent Training and Apprenticeship Program (I-TAP) Seeks to Clarify the Meaning through a Lawsuit

The U.S. Department of Labor’s Office of Apprenticeship Training, Employment and Labor Services (OATELS) approved the Independent Training and Apprenticeship Program (I-TAP) to train apprentices on federal projects in January 2004. This unambiguously means that contractors can classify and pay workers dispatched from the I-TAP program as apprentices on purely federal projects. The workers would also be unambiguously classified as apprentices in states that have not exercised the option of preempting apprenticeship regulatory authority from the U.S. Department of Labor.

The ambiguity about the legality of I-TAP providing on-the-job training to its apprentices working on state and local government projects results from the meaning of “derecognition” and the meaning of “federal purposes” in a state that had long claimed statutory and regulatory authority over apprenticeship.

For a few years after the U.S. Department of Labor’s 2007 derecognition of California’s authority to “register and oversee” apprenticeship policies for federal purposes, electrical contractors requested apprentices from I-TAP, employed them on the job at apprenticeship rates, and made payments on behalf of the apprentices to I-TAP under the belief that the derecognition allowed them to do so. Officials of the California Department of Industrial Relations (DIR) made occasional preliminary inquires about contractors’ compliance with state laws when using I-TAP as a source of apprentices, but did not take further action after contractors justified their use of I-TAP on the new conditions resulting from derecognition.

But in the fall of 2010, the California Department of Industrial Relations threatened to assess back wages and penalties against a contractor – Gray Electric Company – for classifying workers dispatched from I-TAP as apprentices on school construction projects in Marysville and in Grass Valley. Gray Electric had requested apprentices from I-TAP, employed them on the job at apprentice wage rates, and made payments on behalf of the apprentices to I-TAP. The contractor argued that it could regard these workers as apprentices because the project received federal financial assistance and I-TAP was a federally-approved program.

To avoid further controversy, Gray Electric ultimately withdrew from its agreement to train with I-TAP. Then, a labor-management cooperation committee affiliated with the International Brotherhood of Electrical Workers (IBEW) submitted a wage complaint to the California Department of Industrial Relations because another electrical contractor – Harold E. Nutter & Son, Inc. – was classifying workers dispatched from I-TAP as apprentices on a Stockton school construction project.

Harold E. Nutter & Son, Inc. and the individual apprentice argued that because the federal government has “derecognized” the state under the federal Fitzgerald Act and thus deprived the state of its authority to regulate apprenticeship policies for federal purposes, contractors on federally-funded projects are legally permitted to pay apprenticeship-level wages and take credits against the prevailing wage rate for payments to an apprenticeship program, even if the program is only approved by the federal government and not the state.

The California Department of Industrial Relations disagreed and assessed back wages and penalties against the contractor (Harold E. Nutter & Sons, Inc.) for paying apprentice-level wages to its worker enrolled in the federally-approved I-TAP. It did not recognize the I-TAP apprentice as a legitimate apprentice for purposes of state law. It also disallowed payments for “apprenticeship and training” to I-TAP as valid payments under the state prevailing wage law that could be taken as a credit against the total hourly wage.

As a result of the DIR crackdown on contractors classifying I-TAP apprentices as journeymen on projects not exclusively funded by the federal government, several contractors have ended their agreements to train with I-TAP, and apprentices in the program have lost paid on-the-job training opportunities. Some have dropped from the program.

Time for a Lawsuit

On May 19, 2011, the California Department of Industrial Relations (DIR) was sued by three parties: an apprentice indentured in the Independent Training and Apprenticeship Program, an employer with an agreement to train apprentices in the I-TAP program (Harold E. Nutter & Son, Inc.), and the I-TAP program itself. The case is Independent Training and Apprenticeship Program et al. v. California Department of Industrial Relations et al.

This is an interesting case probing the meaning of the U.S. Department of Labor’s “derecognition” of the authority of the State of California to regulate apprenticeship for federal purposes.

The plaintiffs complain that when the DIR alleges a contractor has violated prevailing wage laws for using I-TAP apprentices, the agency does not take responsibility to determine if a construction project is receiving federal funding and thus falls under “federal purposes” under derecognition, but leaves it to the contractor to determine the sources of funding.

The federal financial assistance for the Grass Valley and Stockton school construction projects was provided in the form of “Buy America Bonds,” which are subsidized by the federal government throughout their tax-exempt status. But the plaintiffs in this lawsuit went even further, contending that the federal Fitzgerald Act in essence makes any policies providing “apprenticeship opportunities” as a “federal purpose.”

The Outlook for This Case, and How You Can Help

A federal district court sided with the California Department of Industrial Relations against the I-TAP plaintiffs. However, the I-TAP plaintiffs have appealed to the U.S. Ninth Circuit Court of Appeals.

Obviously there are numerous entrenched interests that don’t want to see the California Department of Industrial Relations (DIR) lose its regulatory control over apprenticeship training opportunities on the construction projects of state and local governments. In contrast, the I-TAP plaintiffs are alone, but they see this case as a higher pursuit of freedom of choice in training for workers and the improvement of apprenticeship training as a whole through greater competition.

I-TAP plaintiffs are looking for funding for their lawsuit, amicus briefs to be submitted to the court in support of their case, and any assistance or evidence that provides additional backing for their arguments. For more information, contact Carolyn Nutter, Training Coordinator for the Independent Training & Apprenticeship Program, at (916) 332-3332 or via email.

Documents Related to Federal District Court Case

  1. 2011-04-18 I-TAP Complaint & Exhibits to District Court
  2. 2011-05-19 I-TAP Notice of Motion & Motion for Preliminary Injunction to District Court
  3. 2011-05-19 I-TAP Memo of Points & Authorities to District Court
  4. 2011-05-19 I-TAP Compendium of Evidence to District Court
  5. 2011-05-19 I-TAP Request for Judicial Notice and Exhibit A
  6. 2011-05-19 I-TAP Exhibits B C and D
  7. 2011-05-23 I-TAP Case – I-TAP Notice of Errata to Complaint to District Court
  8. 2011-06-27 DIR Opposition to Preliminary Injunction to District Court
  9. 2011-06-27 DIR Objections to I-TAP Evidence
  10. 2011-06-27 DIR DAS Director’s Declaration to District Court
  11. 2011-07-01 I-TAP Reply to DIR Opposing Motion for Preliminary Injunction to District Court
  12. 2011-07-01 I-TAP Declaration to District Court Rebut DAS Director’s Declaration
  13. 2011-08-15 District Court Order Denying Motion for Preliminary Injunction
  14. 2011-10-31 I-TAP Stipulation and Proposed Order

Documents Related to Ninth District US Court of Appeals Case

  1. 2012-04-20 I-TAP Opening Brief to Appeals Court
  2. 2012-06-22 DIR Brief to Appeals Court
  3. 2012-08-03 I-TAP Reply Brief to Appeals Court
  4. 2013-09-09 Ninth Circuit US Court of Appeals Decision I-TAP v DIR