Responsible Employer Ordinances (REOs) are a very public response to the frustration of municipal officials over the problems created by a handful of contractors that cheat on prevailing wages, workers’ compensation insurance and unemployment insurance. These bad actors undermine the bidding process and reduce the number of potential bidders by discouraging reputable contractors that play by the rules.
Nationwide, dozens of jurisdictions have adopted REOs, including 18 municipalities in Massachusetts alone. While the language of the ordinances vary, they all restate principles of existing state laws concerning workers’ compensation insurance, unemployment insurance and proper classification of workers to ensure tax compliance.
City officials who have adopted these ordinances believe that contractors who are willing to cut corners or violate statutory requirements are more likely to cut corners in other areas such as quality, schedule and performance.
Municipalities with REOs have chosen to create a level playing field for all bidders by insisting on the enforcement of clear and unambiguous rules as a matter of contract law, as well as removing violators from ongoing projects and debarring them from future bidding.
This leveling of the playing field achieves two primary objectives: It informs all potential bidders prior to bidding that the city is serious about enforcing statutory requirements, and it encourages reputable contractors to bid on municipal projects.
Massachusetts is unusual in that its Health Care Reform Act of 2006 requires all workers to have health-insurance coverage and all employers with 11 or more employees to meet certain requirements. REOs encourage such positive public-policy initiatives by supporting employee health-insurance coverage, retirement plans and bona fide apprenticeship programs.
All REOs in Massachusetts require bidders to maintain an apprentice-training program registered with the state. This is im- portant because apprentice training is key to promoting a middle-class standard of living for thousands of young workers. It also helps develop a skilled workforce in construction, which will be facing serious manpower shortages in the future. It also ensures the public receives a quality project.
Without state-established minimum standards, many apprentices will be denied proper training. This is a disservice to them and to the industry.
Opponents of REOs argue that they increase costs by discouraging nonunion contractors from bidding. Nothing could be further from the truth. REOs are not a union vs. nonunion issue. REOs establish standards that all responsible contractors can meet, regardless of union status.