Labor & Employment Law Daily Wrap Up, GOVERNMENT CONTRACTS—Or. Sup. Ct.: Community workforce agreement a ‘rule’ for purposes of Oregon’s Administrative Procedures Act, (Apr 11, 2025)

By Todd Harrison, J.D.

Because the agreement is a “rule” under the APA, the Oregon Department of Transportation was required to follow the APA’s rulemaking procedures before adopting its policies.

A majority of justices on the Oregon Supreme Court determined that a community workforce agreement (CWA), which applies to federally funded community benefit projects, is an Oregon Department of Transportation (ODOT) statement that prescribes policies that generally apply to its community benefit program. This makes it a “rule” under the APA, and ODOT was required to follow the APA’s rulemaking procedures, including notice-and-comment procedures, before it adopted those policies. In a dissent, Justice Masih, joined by Justice James and Chief Justice Flynn, concluded that there was nothing contained in the statutory scheme under which ODOT was operating that required it to follow the APA’s rulemaking procedures in this instance (Oregon-Columbia Chapter of the Associated General Contractors of America v. Department of Transportation, No. S071452 (Or. Sup. Ct. Apr. 10, 2025)).

Community benefit project. In 2021, the state legislature enacted a statute that addresses a specific type of public improvement project, known as a community benefit project. That statute defines community benefit project as a “public improvement project that is subject to the terms and conditions of a community benefit contract.” A “community benefit contract,” in turn, is defined as a “public improvement contract that includes, but is not limited to, the elements described in subsection (3)(b)” of that statute.

The statute goes on to state that it: (1) authorizes contracting agencies to adopt rules or other measures to designate public improvement projects as community benefit projects; (2) describes elements that those agencies “may include” in the contracts for those projects; (3) requires those agencies to notify contractors in the “solicitation documents” that the project is a community benefit contract and “identify conspicuously” all the provisions that a contractor must meet to comply with the requirements of the community benefit contract; and (4) specifically requires agencies to comply with the Public Contracting Code in soliciting bids and awarding community benefits contracts.

ODOT’s community benefit rule. After the law took effect, ODOT adopted a rule establishing its community benefit program which, among other things, states that ODOT’s director “may designate a public improvement contract as a community benefit contract” if certain conditions are met. Its rule specifically authorizes ODOT to enter into CWAs with labor organizations to develop material provisions that ODOT may include in a community benefit contract.

CWA. Once the law was enacted, ODOT began negotiating the terms of a CWA with various trades council and labor unions, leading to the execution of an initial CWA on October 20, 2022. The stated purpose of that CWA was to provide “additional terms and conditions for certain ODOT public improvement projects that qualify as ‘Covered Projects’” as defined in the CWA. The CWA defined a “Covered Project” as “a set of ODOT-administered public improvement projects delivered through a prime contract that is procured by ODOT” and listed eight specific projects that would be considered “Covered Projects.”

Lawsuit. The Oregon-Columbia Chapter of the Associated General Contractors of America (AGC) filed a petition for judicial review in the Court of Appeals, seeking review of the CWA under state law, which permits challenges to agency rules. AGC contended that the CWA is a “rule” that is invalid because ODOT adopted and agreed to use it in its community benefit program without complying with the notice-and-comment rulemaking procedures in the APA. The Court of Appeals certified the case to the state high court.

Directive or standard. First, ODOT argued that the CWA was not a rule under the APA because it was not an ODOT directive or standard. The court was not persuaded, finding that such an argument was contrary to the text of the APA’s definition of “rule.”

Under the statute, the definition of “rule” is not limited to directives and standards, explained the court. Rather, the term is defined more broadly as “any agency direc­tive, standard, regulation or statement of general applicability that implements, interprets or prescribes law or policy” of an agency. Thus, an agency’s “statement of general applicability” that “prescribes policy” can also meet that definition of a rule even if it is not a “directive or standard,” said the court.

General applicability. Next, ODOT contended that the CWA was not a rule because the statements of policy included in the CWA were not statements of “general applicability,” given the fact that they only applied to eight community benefits contracts. The court was again unpersuaded.

Although there are only eight projects currently designated as community benefit projects, state law expressly authorizes ODOT to designate additional projects as community benefit projects, observed the court. Further, the CWA’s definition of a “covered project” includes all projects that are so designated, not just the eight that are currently designated as so. Thus, if ODOT designates additional community benefit projects in the future, those projects will be “covered projects” under the CWA. This is enough to make the rule one of general applicability, said the court.

Solicitation documents. This does not mean that notice-and-comment procedures are required before a contracting agency can define the terms and conditions in the “solicitation documents” for a public improvement contract, explained the court. Those terms and conditions typically would not be statements of general applicability that prescribe agency policy so they would not meet the statutory definition of “rule.” In addition, the requirements for the solicitation and award of a public improvement contract—including the solicitation and award of a community benefit contract—are exempt from notice-and-comment rulemaking under state law.

Here, in contrast, the CWA is a statement of general applicability that prescribes ODOT’s policies for its community benefit program. The CWA itself is not the solicitation and award of a public improvement contract. Rather, it is the precursor to the solicitation and award of such a contract and applies to all current and future ODOT community benefit contracts.

As such, the CWA is a statement of the policies that will govern ODOT’s community benefit program. Those policies describe in detail the terms and conditions that ODOT will include in contracts it designates for that program. That makes the CWA a rule that is subject to notice-and-comment procedures, concluded the court.

Dissent. Justice Masih, joined by Justice James and Chief Justice Flynn, dissented from the majority opinion. Justice Masih argued that the text of the statute was written in permissive terms and does not provide that rulemaking is the sole means by which a contracting agency like ODOT can act. Further, she contended that the entire bid solicitation and award process for public improvement contracts has historically been expressly exempted from APA rulemaking requirements. Finally, she found that the legislative history indicated the legislature was intending to grant contracting agencies the authority to set the terms of community benefit contracts based on the needs of the specific public improvement project.

The case is No. S071452.

Judge: Bushong, S.

Attorneys: Joshua Dennis (Schwabe, Williamson and Wyatt) for Oregon-Columbia Chapter of the Associated General Contractors of America. Jona Jolyne Maukonen, Office of the Attorney General, for Department of Transportation.

Companies: Oregon-Columbia Chapter of the Associated General Contractors of America

Cases: GovernmentContracts Procedure StateLawClaims OregonNews GCNNews