Labor, Law and Lessons from California: The Debate Over Local Hiring and the Rezonings

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The Los Angeles skyline and San Gabriel mountains.

When Mayor de Blasio took office in 2014, he pledged to revamp the city’s workforce service system. He established the Office of Workforce Development, launched a task force to guide the administration’s reforms, and won praise for placing emphasis on the creation of career pathways for unemployed New Yorkers through investments in education and training. In 2015, he expanded and strengthened the city’s local hiring initiatives.

Yet as City Limits reported earlier this month, some advocates in potential rezoning neighborhoods say the city should go farther to ensure new construction leads to jobs for local residents. The city has raised concerns that more aggressive steps could be knocked down in court—though some other cities have pushed those boundaries and, so far, escaped legal challenges.

The primary issue is whether it’s possible for the city to mandate local hiring on city-subsidized development projects. De Blasio has already revamped a Bloomberg-era program, HireNYC, which required that certain projects funded by the Economic Development Corporation (EDC) make a “good faith effort” to hire local residents referred by the city’s workforce development programs.

Under de Blasio’s 2015 rules, HireNYC applies not only to permanent positions, but also to construction jobs. All projects with EDC contracts of over $1 million or Department of Housing, Preservation and Development (HPD) contracts over $2 million are required to make a “good faith effort” to hire workers making below 200 percent of the poverty level (about $63,000 for a family of four) who have been referred by the city’s Workforce1 centers. In effect, this means that the city is able to refer workers who reside near a project to a developer for consideration. A developer is said to make a “good faith effort” when they comply with the program rules, such as providing notice of hiring opportunities to the city, interviewing qualified referred candidates and reporting hiring data every quarter. Developers who fail can now face financial penalties.

It’s too early to assess the success of the city’s “good faith effort” policy, as many of the projects financed by EDC since 2015 have not yet reached construction phase.

When it comes to mandating such hiring, the administration has said that to go that far would open the city to lawsuits.

“There are several reasons why this wouldn’t be feasible. It would raise some complex legal questions if businesses were forced to hire particular job applicants. There could also be some operational challenges for an employer if [Workforce1] were unable to supply the number of qualified employees but the employer were bound to only hire ones it provides,” wrote Nick Benson, a representative for the Department of Small Business Services, which funds the Workforce1 centers, in an e-mail to City Limits.

Lessons from San Francisco

For sure, there are reasons to be cautious. Local hiring ordinances in other states have been subject to lawsuits under a variety of constitutional objections. EDC sites the “privileges and immunities clause,” under which a government cannot discriminate against residents of another state, as the reason New York City cannot impose legal mandates. But the risks of a lawsuit have not prevented several other cities from taking action.

In San Francisco, any construction project with a city contract worth at least $600,000 or on public land must ensure 30 percent of work hours per trade are performed by residents of San Francisco, of whom at least half are enrolled in apprenticeship programs. Those who fail to meet the requirements face penalties equal to the prevailing wage for each hour of work not offered to a local resident, though the city also offers contractors other ways of achieving compliance, like by making local hires on another, privately-funded project.

Of course, a city-resident hiring requirement may not seem sufficiently “local”—especially if applied to New York, which is six times the size of San Francisco and has 10 times its population. Yet Ken Nim, a workforce compliance manager for the city of San Francisco, says the city has been able to use the local hiring mandate, along with other policies, to ensure residents from particular ZIP codes have access to employment opportunities.

The city targets poorer neighborhoods for entry into workforce development programs like CityBuild Academy, a city-funded construction training program, and encourages contractors to ensure half of the local hires are “disadvantaged workers.” The results are mixed: San Francisco data shows that over a third of the roughly 3,400 San Franciscans hired for publicly funded construction projects in the past five years came from just two zip codes. One is among the city’s poorer zip codes, with a median income of $49,945, while the other is more middle-class, with a median income of $72,545 according to the US Census.

Nevertheless, San Francisco sees its policy as a success, and has been explaining its strategy at conferences across the country (including to members of the de Blasio administration, Nim says). Before 2011, when San Francisco had a policy requiring employers make a “good faith effort” to hire 50 percent of their employees from local residents, the rate of local hiring was in effect 20 percent, according to Eddie Ahn, a lawyer at Brightline Defense, an organization that advocated for the adoption of the policy. Today, employers are exceeding the 30 percent local hiring requirements, providing 45 percent of positions to local residents.

Nim says the city crafted their policy to avoid legal challenges, and has assuaged contractors by working hard to provide them with easy access to qualified employees. In general, courts have looked favorably on local hiring provisions when municipal governments can prove there is a legitimate justification for discriminating against non-state residents, and when the government can argue it is acting as a “market participant” rather than a “market regulator”—in other words, when the city is merely adding specifications to contracts, rather than trying to police commerce. Yet what constitutes a “market participant” is not sharply defined, with different US Supreme Court cases offering varying interpretations of the phrase.

San Francisco is not the only city with mandated local hiring requirements. Detroit requires that developers of construction projects funded wholly or in part by the city ensure 51 percent of the workforce lives in Detroit. Pasedena and Cleveland and specific projects in other cities have local hiring mandates for projects funded in part by the city. (Hoping to override Cleveland’s policy, the Ohio State legislature passed legislation earlier this year banning all local governments from instituting local hiring requirements for public projects. Cleveland is appealing the state law.)

What about private projects?

These policies suggest that at the very least, it is unwise for New York to outright dismiss the possibility of instituting some kind of legal requirement for local hiring. But rezoning neighborhood advocates have another demand, too: They want local hiring requirements tied not just to city-subsidized projects, but to all projects that benefit from an upzoning. The de Blasio administration has repeatedly expressed concerns about the legality of such requirements, but is currently awaiting the results of a feasibility study that will address the issue.

Los Angeles residents, however, just voted to approve a ballot initiative this November that ties local hiring efforts to zoning. Ballot “JJJ” requires that developers who apply for zoning changes provide affordable housing (similar to de Blasio’s mandatory inclusionary housing law), that they pay prevailing wages, and that they make a “good faith effort” to ensure 30 percent of their workers are Los Angeles residents.

Mariana Huerta Jones, an organizer with the Alliance for Community Transit Los Angeles, said that Los Angelinos got tired of waiting for their elected officials to take action on the issue. And JJJ’s victory may have been propelled by the perception that it was a more friendly alternative to a competing measure that will be put forth by other community groups this March. That measure calls for a moratorium on all market-rate housing development for two years until the city can come up with a citywide plan for future development that respects concerns and local community visions.

Developers oppose both measures, and the Real Deal reports that developers are seeking ways to challenge JJJ and the other ballot initiative.

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