labor relations - michael brady files...prestige fit into the pecking order of the labor market....

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Introduction

From a purely cost standpoint, labor is the single largest component of any major civil construction project, including most, if not all, megaprojects. We refer here, of course, not to the design professionals, planners, politicians, regulatory agencies, and other in-dividuals whose efforts also represent a portion of the project costs, but rather to the construction labor that directly contributes to the “brick and mortar” components of the project. A typical rule-of-thumb estimate holds that one-third of a construction con-tract’s price to an owner is the cost of craft labor. Obviously then, efficiency and produc-tivity considerations of that labor should be of paramount concern to all participants. Construction contractors will also freely acknowledge that their single greatest risk to cost overruns on a project revolves, around labor productivity.

Objective measurements of construction labor productivity are notoriously difficult to quantify, making comparisons difficult. This is partly a result of the fact that each project is unique, and while a class of laborers may perform the same task on numerous projects year after year, no project is designed or built exactly the same as the previ-ous one. Likewise, and probably more importantly, no two projects are sequenced and managed exactly alike. Therefore, any attempt to assess labor productivity is often an assessment of construction management efficiency. Notwithstanding the influence of management and leadership on labor productivity, there is no substitute for an intel-ligent, cooperative, and flexible workforce. Accordingly, it is in the financial interests of an owner to take steps that promote those positive attributes in the workforce.

Despite the difficulties of objectively measuring productivity, the general perception of the industry is that labor productivity has fallen, or at best has remained flat, over the last 30 years, compared to a generally increasing trend in other sectors of the economy.1 Many of these same studies show that a typical craftsman’s actual productive time over the course of a construction project amounts to no more than 3½ hours out of a typical 8-hour day involved in direct labor. The balance, almost 60 percent, of the craftsman’s time is consumed by unproductive tasks, such as administrative delays, inefficient work

CHAPTER 8

Labor RelationsJoseph Dennis, Esq., ArupTom Farina, Parsons BrinckerhoffDavid H. Corkum, Esq., Donovan Hatem LLP

The Göltzsch Valley Bridge (Göltzschtalbrücke) in Saxony, Germany, is the largest brick bridge in the world. A railway bridge built between 1846 and 1851 (and still in use), it contains more than 26 million bricks and is 574 meters long and 77 meters at its highest clearance above the valley. Photo © 2009 by André Karwath.

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methods, labor jurisdiction disputes, and other work restrictions. Accordingly, it would appear the greatest potential for increase in labor productivity is not with the worker but with the management of that worker’s environment, scheduling, materials delivery, etc.

A project’s design can either intentionally or inadvertently require a greater or lesser amount of labor to accomplish a particular task. Consider for example the use of a pre-cast segmental tunnel lining compared to a cast-in-place lining. Similarly, one design may favor one craft over another, such as in the case of a post-tensioned segmental concrete bridge versus a steel bridge. Some construction techniques may be impossible or completely impracticable to implement, given the available labor force. Attempting a New Austrian Tunneling Method (NATM) tunnel, for example, without an experienced and trained crew, each member of which knowing instinctively how to react to situa-tions in the field, could prove to be a disaster. If the local labor force objects to import-ing such a proven crew, then the owner should consider rejecting the proposed tech-nique. Owner decisions about contract packaging strategies will also have an impact on the labor force size and makeup. A number of smaller contract packages will likely result in a higher total workforce, as the efficiencies of scale are not realized when using mul-tiple employers. A strategy that promotes numerous smaller packages may also favor local small businesses and contractors and their existing labor force.

Labor considerations are not just about money and the cost of a project. An owner, particularly a public owner about to embark on a megaproject, wields a powerful so-ciological stick. Within limits, the owner can dictate labor force preferences, such as a preference for local citizens, disadvantaged citizens, or workers of specific gender and ethnic backgrounds. It can dictate community outreach and training programs. The Helmets-to-Hard-Hats program, which seeks to engage veterans in the construction trades, has gained in popularity across the nation. The megaproject owner also has a significant political trump card, which it can choose to hold or trade for future favors.

Not only are labor considerations important to the bottom line cost of the mega-project and the political/social aspirations of the megaproject owner, but they can also have a significant impact on the community in general. A depressed area with a high unemployment rate will be hostile to a project that it perceives as benefitting residents of other, “outside” areas. Similarly, a megaproject requiring thousands of workers may upset the balance of the existing economy in an area if contractors begin to offer higher-paying jobs than the local market currently supports.

Background

In considering the available labor force for a project, there are two broad categories, union or nonunion, that serve as proxies to define the roles and expectations of the em-ployer and employee. It is the employer, the construction contractor, that decides in the

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first instance whether it will operate as a nonunion (or open-shop) contractor, or else bind the company to collective bargaining agreements that are the hallmark of a union shop. Each type of operation has its proponents and detractors, and the validity of their arguments varies from region to region within the country.

In an open-shop arrangement, a construction contractor hires and fires its labor force as it sees fit and pays at a rate that the market will bear, including fringe benefits, which are also a function of market forces. The contractor has no set expectation as to the skill level, training, and experience of its hired workers and can tailor its compensation and benefit package accordingly.

A variation on a pure open-shop arrangement is referred to as merit-shop, which is more typical for the larger nonunion construction contractors with a national book of business. These merit-shop contractors adhere to policies and procedures of contrac-tor associations, such as the Associated Builders and Contractors, Inc. The merit-shop worker has the ability to move from project to project and from contractor to contractor throughout the affiliated merit-shop organization, and his portfolio of past project per-formances will be recognized among the contractors within that organization.

An open-shop — and particularly a merit-shop — labor force probably has a closer affiliation with the management of the construction company, and both benefit from successful completion of projects. The open-shop/merit-shop contractor enjoys a degree of flexibility and freedom in deploying its labor force and is unrestricted by jurisdiction-al rules that require certain crafts to perform certain types of activity. The construction contractor is fully responsible for training and developing the skill level of the workers, and its motivation to develop such skills is justified by the greater efficiency and produc-tivity of that individual worker.

Union-shop construction contractors agree to be bound by collective-bargaining agree-ments with one or more of the labor unions for the construction trades. These collec-tive-bargaining agreements are typically negotiated between the labor union and a rep-resentative group of construction contractors operating in the region. The agreements set the hourly rates, working conditions, hiring protocol, training programs, and benefits associated with each worker in each category within the craft, i.e., journeymen and ap-prentice. Most importantly, the construction contractors agree to hire workers direct-ly from the union rather than seeking employees on their own. In this way, the union controls the referral of workers to the contractor organizations. Each local union is, of course, organized to support a particular craft. The workers within each local are skilled in that craft or, if an apprentice, have some base level of skill and are in the process of being trained to be full-fledged journeymen. Partly because of the referral system in an industry that generally does not retain workers 12 months out of the year, union labor-ers tend to align their loyalties with the union rather than the construction contractor. Laborers recognize that their future employment depends on that referral from the union

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and that such referrals will be lacking if they fail to adhere to recognized union rules.The local unions are typically affiliated with an international union in some form of

association. These international associations have the power to issue or revoke the local union charter but typically do not involve themselves with the day-to-day operations of the union or the collective bargaining of that local. With a large number of construc-tion trade unions currently in existence, it is unavoidable that there are disputes among unions as to who “owns” a particular type or category of work. The contractors, particu-larly out-of-town contractors not used to working with the union, may end up assigning a particular type of work to one union that is claimed to be under the jurisdiction of another union. Such an assignment, no matter how innocently made, can result in la-bor unrest and declining productivity, work slow-downs, or strikes as the two disputing unions focus on the issue and old wounds, to the exclusion of all else. Resolving the dis-pute can be expensive and time-consuming, and it is rare that all sides are fully satisfied with the resolution. The efficient and effective utilization of labor on any constructed project requires diligent project management in order to integrate the labor with the availability of material and equipment in the planned-for sequence. Labor disputes will challenge management to reach beyond the nuts and bolts of construction skills and demonstrate an expertise in counseling and psychological analysis.

Issue

An adequate supply of skilled labor, ready and willing to fill the construction job openings, is critical to the success of a project. For a megaproject, the demand could eas-ily outpace the supply, which would result in slower progress or lower quality of work-manship. An owner and its consultants must take stock of the available workforce and attempt to shape and manage the project so that it is feasible within the constraints of that workforce.

Analysis and Discussion

Simply put, a megaproject owner has too much at stake to dismiss labor availability, quality, and cooperative disposition as being only a contractor issue. Bad habits and un-safe practices developed on one project with one contractor can infect the entire project and haunt the owner in the form of low productivity, poor quality, and a high accident rate for the duration of that project.

The owner needs to understand how its project and the anticipated pay, benefits, and prestige fit into the pecking order of the labor market. During the 1848–1849 Califor-nia Gold Rush, sailing ships piled up and rotted in San Francisco as the sailors deserted to hunt for gold. A pulp and paper company in Maine refused to develop and exploit


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economical mineral deposits because of fear that the higher-paying mining jobs would decimate its efforts to harvest timber. In a tight market, the owner needs to promote its project and offer the incentives to attract the desired labor. The owner also needs to foresee what the impact of its project will be on the community so that support for the project is not undermined. A large number of transient workers, for example, may strain relations with the local community. Similarly, the project may drain workers from local businesses, causing distress to the status quo.

For a publicly funded project where there are many stakeholders, the owner may find itself under pressure to engage in unsupportable levels of social engineering, by man-dates to hire disadvantaged persons. These goals or mandates are often negotiated early in the life of the project and should be carefully considered before being accepted.

Throughout history, immigrant labor has been a factor for many megaprojects. In much of the world even today, and particularly in the Middle East, immigrant labor makes up the construction labor force of large projects. In North America, the number of young people choosing construction as a career continues to decline, and if current trends con-tinue, construction projects may need to begin importing its labor force. Indeed, immi-grant labor makes up a large percentage of the generally open-shop housing construction labor force. This sector of the labor force is usually considered low-skill and low-pay and not suitable for a contractor’s demands on a modern megaproject. If an owner is going to rely on this sector of the market, then it will likely need to establish aggressive training programs targeting the requisite skills very early in the life of the project.

The owner’s team also needs to evaluate whether it is possible and/or desirable to pre-fabricate large components or modules off-site and then transport and erect them on-site. Such practice is most feasible where barge access to the site is possible and would facilitate large portions of the project being completed in another labor market, perhaps another country. This practice can take advantage of cheaper labor but may introduce strife and discontent if that cheaper labor displaces underutilized local labor. A cost sav-ings for one contractor may result in strikes, slowdowns, or stoppages for others.

Recommended Practices

• Survey the existing labor force either through direct outreach to unions and la-bor organizations or through discussions with construction contractors operating in the area. Develop an understanding of whether there is a clear preponderance of union versus non-union labor that will likely contribute to the project, but be aware that the sources of information on the union/non-union preponderance are likely skewed toward the correspondent’s bias.

• Survey other owners, both public and private, to determine which projects will be competing with your project for the available labor force. Recognize the “pull” of


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desirable projects in other geographic areas that could deplete the workforce you are counting on.

• Evaluate the need for arrangements to import labor with special skills, e.g., divers or NATM miners, and their ability to work harmoniously with local labor. If that is not feasible, mandate designs that can be accomplished with the existing labor force.

• Consider the scheduling and sequencing of the project in a manner that is sup-portable by the available labor force.

• Promote and support training and skills development of the existing labor force if that level is unacceptably low. Absolutely promote and demand that contractors provide safety training.

Regulatory Framework

In 1935, Franklin D. Roosevelt signed the National Labor Relations Act (NLRA) protect-ing the rights of workers in the private sector to organize labor unions and to engage in collective bargaining. The act specifically allowed workers and unions to initiate and take part in strikes or other work-related activities to further their negotiating positions or en-force agreements. The act was amended in 1959 to validate and protect master collective-bargaining agreements that would bind all contractors and subcontractors upon a con-struction project. The 1959 amendment recognized the special arrangement and needs of the construction industry to coordinate a variety of skilled labor crafts and promote har-monious interaction among the crafts and with management throughout the life of a proj-ect. These master agreements, or project labor agreements, were particularly important for large and long-duration projects over which a number of specific collective- bargaining agreements with individual unions would expire and be renegotiated. The problem, of course, was that each renegotiation was an opportunity for a strike and picket by the union, which could impact or stop the work of a number of other crafts and contractors.

The NLRA’s recognition of the construction industry’s need for unique considerations derives from that industry’s differences from other typical labor-management arrange-ments. In the construction industry, employment tends to be for shorter periods of time. Workers often move from employer to employer as that contractor wins, executes, and completes projects. For union workers, long-term relationships with their union halls are stronger than the employer-employee bond considered important for non-union construc-tion companies. Moreover, post-hire bargaining is not practicable between a contractor and its labor force. Rather, the practice of pre-hire collective bargaining is the norm, where con-tractors bidding for work know the cost of labor in advance of retaining that labor force.

The construction industry is also unique in that a number of different crafts and sub-contractor employers are compelled to work in close proximity and often in interdepen-


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dent manner. NLRA sections (a), (e), and (f) specifically recognize this unique arrange-ment and allow for project labor agreements.

Project Labor Agreement

Project labor agreements (PLA) are multiparty agreements that establish the param-eters of the relationships between ownership, management, and labor for the duration of a particular project. The agreement is negotiated between the project owner or its agent and the representatives of the local labor force, typically the unions whose charter grants them jurisdiction over the geographic area and type of work involved in the proj-ect. This PLA sets the ground rules for all labor relations on the project. The owner may require, as a condition precedent to awarding a contract, that all contractors submitting bids agree to become signatory to the terms and conditions of the PLA. The contractor and the labor unions are thus bound by that agreement for the duration of the project. That agreement has absolutely no effect on other contracts or projects that are not de-fined within the scope of the PLA.

During the course of project construction, the parties to the PLA generally include the project owner, the general contractor(s), all levels of construction subcontractors, and the labor trade unions. In essence, the project stakeholders establish the basic terms and conditions which describe how labor issues will be addressed through the course of the work. They establish these terms prior to commencing the work.

While sometimes characterized as a form of prehire collective-bargaining agreement (CBA), project labor agreements differ from CBAs in several important respects. First, although either may be used in the context of a construction project, PLAs are site- specific, while CBAs generally are not. PLAs include all labor crafts as parties to the agreement, while CBAs are generally executed with the crafts individually. In addition, the term of a PLA is generally for the duration of a project, while CBAs are generally ef-fective for a defined period of years.

When utilized on complex construction projects, which are characteristically multi-year, multitrade, multimillion dollar investments, whether public or private, PLAs can bring a degree of certainty to the parties with respect to some of the inevitable labor-related risks associated with such work.

Project Owners’ Perspective

PLAs have been utilized on complex construction projects in the United States for de-cades. This country’s first PLA is generally thought to have been executed for the Grand Coulee Dam in Washington State. Shortly thereafter, a similar agreement was drafted for the Shasta Dam in California. These two Bureau of Reclamation megaprojects helped


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pull the western states out of the Great Depression and provided enormous flood con-trol, irrigation, and power production benefits for the region. The government relied on PLAs for a number of domestic Department of War installations during World War II. More recently, the Kennedy Space Center at Cape Canaveral, Florida, was constructed under a PLA. Privately funded megaprojects such as the Trans-Alaskan pipeline, Flori-da’s Disneyland, and a number of the large nuclear plants and other power installations constructed in the 1960s and 1970s routinely utilized project labor agreements

Whether a public or private entity, the interests of an owner of a complex construc-tion project are primarily focused on efficient delivery as defined in terms of cost, sched-ule, safety, and quality of the work. Each of these important measurements of project performance may be optimized by including the requirement of a project labor agree-ment in the bid specification. A PLA will typically be used to establish wage rates and benefits for the duration of the project. Unexpected wage demands or disputes, which have a tendency to arise during the course of a long-term project, are effectively elimi-nated by such agreements.

No matter how well-meaning the parties may be, complex long-term construction projects inevitably give rise to labor-related problems or disputes. Schedule risks re-sulting from job actions, in the form of work slowdowns or stoppages caused by labor disputes, are minimized through PLA provisions that deal with the swift resolution of disputes and by the inclusion of no-strike, no-slowdown clauses. By minimizing disrup-tions and enhancing the likelihood that the project will be delivered on time, the owner may also realize lower finance costs and other benefits from getting the project in com-mercial operation as quickly as possible.

Enhanced quality and safety are generally a reflection of a stable and well-trained workforce. PLAs foster the establishment of such stability, which may also be reflected in reduced rework and insurance costs for the project.

These benefits are balanced against the increased cost of labor of a unionized labor force as opposed to open-shops. Opponents of PLAs argue that they have the practical effect of eliminating competition from merit-shop contractors and that the decrease in the number of bidders increases the costs of projects. Contractors argue that their com-panies would be discouraged from bidding on projects resulting from a PLA’s effect of discriminating against their employees. The view from this group is that PLAs increase the cost of construction by mandating inefficient and archaic union work rules and limit the pool of potential quality bidders, without any increased economy or efficiency to procurement. A Beacon Hill Institute study, released in 2009, analyzed Massachusetts school construction during a period (2001–2008) when government-mandated PLAs were prohibited. The study controversially concluded that PLAs increased federal project construction costs and their absence showed no material instances of labor disruption or significant project delays.2


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Contractors’ and Subcontractors’ Perspectives

Contractors and subcontractors share some of the same interests as the owner of a construction project, particularly with respect to cost, schedule, safety, and quality of the work. To further those interests, PLAs offer the same potential benefits to all levels of contractors as they do to owners.

In the context of the owner’s source selection process, contractors and subcontrac-tors are typically required to submit their bids and await the owner’s decision regard-ing contract award before they begin the process of hiring their workforce. As a prehire agreement, the PLA is often negotiated among the owner, the contractor, and the labor unions as representatives of the employees prior to the employees being hired. The PLA permits construction subcontractors at any tier to establish what their costs will be for specific labor classifications. The PLA provides the basis for their bids. Upon award, con-struction subcontractors execute letters of assent, whereby they agree to be bound by the terms of the PLA.

In most construction projects, subcontractors providing differing labor trades work side by side on the job site. For example, employees of a plumbing subcontractor may be present with the employees of a specialty welder. Carpenters may work alongside elec-tricians, masons, or plasterers. The job may call for the installation of underground and above-ground piping. Absent a single agreement that includes all of the project partici-pants, such an environment has the potential for giving rise to many issues. In projects where the different trades have individual labor agreements, the probability is greater for disputes to arise between the trades about issues such as jurisdiction over the work. The implementation of project labor agreements minimizes the likelihood of such dis-putes by establishing the jurisdictional parameters of each trade for the project. In the event disputes do arise, the PLA defines an agreed-upon resolution process with mini-mal disruption of the work.

PLAs and the Workforce

Project labor agreements typically create a labor policy that will apply uniformly to all construction workers involved in a specific project. Proponents claim that PLAs create and enhance a stable environment for the workforce by establishing a systematic treat-ment of wages and benefits, including overtime, starting time, holidays, health benefits, and overall working conditions for the duration of the project. In addition, PLAs pro-vide for the peaceful settlement of disputes between labor and management, through the use of an agreed-upon dispute resolution process, which minimizes the potential for disruption of the work by specifying that there will be no strikes or lockouts.

The terms of each PLA are unique to each project, and some do require the use of


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union labor. Under the National Labor Relations Act, construction contractors and their employees may choose whether or not to unionize. While there are certainly so-called “union-only” PLAs — those which exclude merit- or open-shops — PLAs need not limit their participation to unionized labor. While a PLA may require all employees to be hired through a union hiring hall, the hiring hall may not discriminate between union and non-union workers. It is not a necessary element for a PLA to require workers to join the local union in order to be referred for work, nor is it a general requirement that non-union workers must pay union dues, as they would with a collective-bargaining arrangement.

Effect on the Community

The execution of megaprojects requires the mobilization of a workforce that may con-tain many different job classifications with a wide array of skill levels. While the com-munity is not a party to a PLA, such agreements arguably benefit the community in the vicinity of the project by turning the need to fill those positions into employment opportunities for local residents. PLAs may include provisions that require the project workforce to have a composition of certain percentages of local hires. They may also require that local residents receive priority over non-residents in hiring for specific job classifications. In addition, PLAs may require the establishment of a certain number of apprentice-level positions and the sponsorship of training or mentoring programs to encourage the long-term development of the skills of the local labor pool. They may also establish subcontracting goals based on contract dollar values or percentages of project capital cost for the participation of specific levels of minority, women-owned, and small disadvantaged business enterprises.

The proportion of union to non-union labor in the United States construction indus-try peaked in the mid to late 1970s. Since that time the number, and perhaps more im-portantly, the political influence of merit-shop construction contractors has increased. With a continuing rise in numbers and influence, merit-shop contractors began to ques-tion the legality of project labor agreements on public projects. These non-union con-tractors objected to being precluded from competing on these publicly funded projects and challenged them through the courts.

Legality of PLAs

The legality of a public owner choosing to enact such an agreement was fairly well settled by the Supreme Court in the Associated Builders and Contractors challenge to Massachusetts Water Resources Authority’s project labor agreement for the Boston Har-bor Project.3 Since that decision, three states — Montana, Utah, and Missouri — have enacted legislation that prohibits project labor agreements on state-procured projects.


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Minnesota and Arkansas are states where PLAs are prohibited through executive order of the governor. Illinois, New York, and New Jersey, on the other hand, are states where the legislature has taken steps to encourage PLAs on state and municipal construction projects. Notwithstanding the politics of a state’s or its governor’s apparent predisposi-tion for or against using a PLA in situations where a project labor agreement has been successfully challenged, the opponents of a PLA are usually able to demonstrate that the public owner failed to demonstrate “more than a rational basis” for implementing it.

Not satisfied to allow the legality of project labor agreements to be decided in the court system, nor to allow the advisability of employing such agreements to be left to the construction project administrators, four presidents have weighed in on the use of project labor agreements for publicly funded construction projects. In 1992, President George H. W. Bush issued an executive order forbidding project labor agreements on any federally funded projects. Within a month of taking office in 1993, President Bill Clinton rescinded the executive order of his predecessor and, over the course of his administra-tion, supported and promoted project labor agreements for federal construction projects. Indeed, the Clinton administration attempted to enact legislation that would require all of his administrative agencies to utilize project labor agreements. President George W. Bush demonstrated that turnabout is fair play by cancelling Clinton’s order within one month of becoming president. His February 17, 2001, executive order stated in part:

Section 1: To the extent permitted by law, any executive agency awarding any construc-tion contract after the date of this order, or obligating funds pursuant to such a con-tract, shall ensure that neither the awarding government authority nor any construc-tion manager acting on behalf of the government shall, in its bid specifications, project agreements, or other controlling documents:

(a) Require or prohibit bidders, offerors, contractors, or subcontractors to enter into or adhere to agreements with one or more labor organization on the same or other related construction project(s); or

(b) Otherwise discriminate against bidders, offerors, contractors, or subcontractors for becoming or refusing to become or remain signatories or otherwise to adhere to agreements with one or more labor organizations on the same or other related construction project(s).

(c) Nothing in this agreement shall prohibit contractors or subcontractors from volun-tarily entering into agreements described in subsection (a).

. . .

Section 3: To the extent permitted by law and executive agency issuing grants, provid-ing financial assistance, or entering into cooperative agreements for construction proj-ects shall ensure that neither the bid specifications, project agreements, nor other con-trolling documents for construction contracts awarded after the date of this order by


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recipients of grants or financial assistance or by parties to cooperative agreements nor those of any construction manager acting on their behalf, shall contain any of the re-quirement prohibitions set forth in sections 1(a) or (b) of this order.

And on February 8, 2009, less than three weeks after his inauguration President Obama signed Executive Order 13502, entitled “Use of Project Labor Agreements for Federal Construction Projects.” This new and latest order revokes President George W. Bush’s Executive Order 13208 and announces a policy that encourages executive agen-cies to consider using project labor agreements in connection with large-scale con-struction projects in order to promote economy and efficiency in federal procurement. Obama’s executive order only encourages the use of PLAs in such large-scale projects, it does not mandate them: “Executive agencies may, on a project-by-project basis, require the use of a project labor agreement by a contractor where use of such an agreement will . . . advance the Federal Government’s interest in achieving economy and efficiency in Federal procurement.” Under the order, the government cannot compel a contractor to enter into an agreement with any particular labor organization, and it does not explic-itly exclude non-union contractors from competition.

Key Attributes of Project Labor Agreements

The modern project labor agreement has taken on a fairly familiar form with a gener-ally expected set of terms and conditions. The key attribute from management’s per-spective is the so-called “no-strike” and “no-walkout” provision. This provision requires that trade work continue in the face of disputes, removing the risk of delay and disrup-tion that might otherwise be experienced. Subsidiary to this “no-strike,” “no-walkout” provision is a mechanism for resolving disputes, both those between labor and manage-ment and also the more common jurisdictional disputes between various trade unions. Using binding arbitration or designated third-party neutrals, preselected to hear and resolve disputes, accomplishes this element of the agreement on an expedited basis.

From labor’s perspective, the “must-have” attribute is the requirement that all con-tractor hiring on the project be accomplished through the applicable local union’s hiring hall. This is not a requirement that union-only labor be utilized, which would be patent-ly illegal for a publicly procured project, but rather that the hiring hall, and its protocol for referring workers to various construction projects, be the clearinghouse for all labor assigned to the project. Non-union workers can register at the hiring hall alongside of union workers, and the hiring halls cannot discriminate between union and non-union workers when making referrals to contractors. Approximately half of the states in the United States are so-called “right-to-work” states, which prohibit the excluding of work-ers based on their non-affiliation with a particular union. PLAs in those states will re-


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inforce this point of law, as well. Federal and state laws also prohibit discrimination on the basis of race, gender, age, etc., and these nondiscriminatory statutes are typically reinforced in a project labor agreement. Contractors signatory to a PLA are required to recognize the local unions as the representative of all workers on the project.

The PLA also generally provides that management’s rights to manage are not usurped by the agreement. Contractors are entitled to establish and enforce reasonable work rules and to introduce labor-saving techniques, processes, equipment, and materials without objection from the labor force or its union representation. Similarly, non-union contractors awarded contracts on the project are allowed to import, engage, and employ their own key employees for the project. The size of this core group of employees differs from agreement to agreement. The purpose, however, is to allow a non-union contractor to execute its construction tasks with first-line supervision and key laborers in the man-ner in which it is used to working.

The final key element of nearly all project labor agreements permits the standardiza-tion of shift starting and ending times, rules for overtime, holidays, breaks, show-up times, and travel time, etc. Wages and benefits are also set at union scale and, for pub-licly procured projects, at no less than the minimum prevailing wage rates for the state. Similarly, classes of worker, the rate structure for apprentices versus journeyman, and the proportion of each within a crew can be negotiated in the PLA. For all practical pur-poses, an owner has very little hope of negotiating more favorable labor rates because it is about to become a very large procurer of labor. Certain project labor agreements have included prescribed rate increases over the life of the project, eliminating one source of uncertainty. An owner may be in a position to eliminate some of the arcane work-force requirements, work rules, or overtime policies of some local unions that seem to be most abhorrent to proponents of open-shop/merit-shop contractors. Yet, it is these same hard-won benefits that the unions are notoriously stubborn to concede.

The owner should strive to anticipate the needs of its contractors over the entire life of the project and address these needs in the agreement. For example, there may be a need for a contractor to resort to a 24-hour-a-day, 7-day-a-week operation for an ex-tended period of time. A shift-crew schedule of rolling four–10s, or four–12-hour days plus three–12-hour days, or other nonstandard arrangement may be impossible or pro-hibitively expensive to implement after the PLA has been signed.

Issue

Whether or not an owner chooses to enter into a PLA for a megaproject will undoubt-edly spark an emotional debate within the community. The main protagonists in that de-bate with the loudest and most influential sway over public opinion usually prove to be extremely self-interested in wanting their positions to prevail. The sides generally align


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behind the union proponents and the non-union opponents. Each side will support their arguments with biased studies and slippery-slope public policy predictions. The owner responsible for the decision will be forced to cut through the rhetoric, objectively weigh the evidence, and carefully consider the political ramifications in order to make a sound decision. As with all major decisions, the owner will likely rely on its planning and project management consultants to assist in this decision. Many owners also turn to public policy consultants for recommendations concerning the impact of enacting such an agreement.

Analysis and Discussion

Unlike some of the earliest PLAs for public construction projects, union-only agree-ments are no longer legal in the United States. While a privately funded project’s owner is free to contract in any manner it desires, if state or federal funding is used in the project, then both union and non-union contractors must be allowed to bid on contracts being executed under a project labor agreement. Those bidders will be instructed that as a condition precedent to awarding a contract, that winning bidder must sign on and agree to the terms and conditions of the previously negotiated PLA. In the early 1990s, in the face of anticipated challenges to the legality of its project labor agreement, the Massachusetts Water Resources Authority’s precedent condition stated only that the responsible low bidder had to demonstrate that it was able to promote and maintain labor harmony on the project, and that one way of demonstrating such harmony was to execute the project labor agreement. All contractors executed the PLA.

In those states where they are not prohibited from doing so, public owners and (at least for the pendency of the current administration) federal agencies are free to con-sider whether a PLA makes sense for their project. Notwithstanding the legislative or administrative preferences, restrictions, or guidance on them, PLAs have also been re-peatedly challenged by private court actions. In those situations where a project labor agreement has been successfully challenged, the opponents of the agreement were usu-ally able to demonstrate that the public owner’s inclusion of a PLA represented a viola-tion of the public bidding laws. In a case brought by non-union subcontractors in New York and often cited by PLA opponents, the court found that the owner had failed to demonstrate “more than a rational basis” for implementing the PLA.4 For a public own-er to show that a PLA is necessary or desirable for its particular project, it will likely be required to demonstrate that the PLA would somehow fulfill its governmental objectives of achieving the best constructed project for the lowest price without running afoul of the public procurement laws. The standard of review is that there must be more than a rational basis for that owner believing that a PLA is in the best interest of the public. In order to satisfy this standard, articulated in the New York State Thruway Authority case, the court stated:


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The standard of more than a rational basis cannot be based on loose projections, un-verifiable calculations, or a project which lacks unique history or complexity such that otherwise applicable provisions of the General Municipal Laws should be ignored. Here, the legislature based its decision on unverifiable dollars, lack of history of labor unrest, and a lack of showing of any type of unique complexity to this project. These omissions make it impossible for the County to establish that their action was even reasonable let alone more than rational.

PLAs have been upheld in all cases except those in which the public owner failed to properly document that it carefully considered the decision to adopt a PLA and perform the due diligence necessary to demonstrate the economic benefit of the agreement to the public. The legality of PLAs, in the absence of specific state legislation to prohibit them, has seemingly been settled. Executive orders of presidents and governors come and go. The real debate over whether or not a PLA makes sense for a project seems to re-volve around public policy issues. That debate typically focuses on the following issues: (1) Is it fair to require contractors to agree to the terms of a PLA? (2) Will the PLA de-crease the competition from the contractors in discouraging the non-union contractors from bidding on the work? (3) Will the PLA actually drive up the cost of construction? (4) Does a PLA amount to discrimination against non-union construction workers?

Recommended Practices

• First and foremost, the owner’s decision whether or not to enter into a project labor agreement will be a function of the location and timing of the project. Mega-projects in the heavily unionized Northeast during an active construction market are more likely to benefit from a PLA than those in Southern or Midwestern states during a slow construction market.

• Second, the attributes of the particular megaproject, how geographically diverse it is, and whether the various contracts are piled one on top of the other or are spread out over time and space affect labor relations. The more congested the site and the tighter the schedule, the greater the risk of labor unrest affecting the proj-ect and the more attractive a PLA’s no-strike clause will be to an owner. On the other hand, if the disgruntled craft or labor force can be isolated from the rest of the project, the no-strike provision is of less value to the owner because the strike is of less consequence.

• Consider the entire spectrum of pros and cons, not just the immediate unit cost of labor. Consider the collateral impact that adopting a PLA will have on the commu-nity, i.e., whether it will bolster or detract support for the project.

• Negotiate the most positive terms possible. Union representatives will be hard


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pressed to give up any of their hard-won work rules, but other provisions, such as mandatory drug and alcohol testing at the point of hiring and dismissal “for cause” or suspicion during the execution of a project, will promote project safety. Requir-ing certification of safety training, such as an OSHA 10-hour course, is a reasonable expectation of a labor force on a megaproject. If unions are to be the brokers and labor referral agents for the project, these two safety precautions should be doctrin-ally noncontroversial. Push for a reasonable number of key contractor travelers to be assigned to the project without being held up in the generally accepted referral protocol. If there is a need for specialized labor forces, such as NATM miners for a portion of the project, carve out the ability to specially and specifically assign work-ers with unique skills for that particular project. Anticipate the needs of contractors over the life of the project and address their labor needs as best you can.

• If the owner decides to adopt a PLA, then it must do so in a manner that is unas-sailable by opponents. Retaining a third-party consultant to study and determine that the PLA is in the best interest of the public and consistent with procurement laws, rather than a rush to sign an agreement, will eliminate the expensive and embarrassing court challenge that, if the opponents prevail, could severely disrupt the project.

Notes

1. Haas, C., Borcherding, J., Allmon, E., & Goodrum, P. (1999). U.S. Construction Labor Productivity Trends, 1970–1998. Center for Construction Industry Studies Report No. 7. Austin: The Univer-sity of Texas.

2. Tuerck, D., Glassman, S., & Bachman, P. (August 2009). Project Labor Agreements on Federal Construction Projects: A Costly Solution in Search of a Problem. Boston: Beacon Hill Institute, Suf-folk University. Retrieved on March 14, 2010, from http://www.beaconhill.org/BHIStudies/PLA2009/PLAFinal090923.pdf.

3. Building & Construction Trades Council of the Metropolitan District v. Associated Builders & Contrac-tors of Mass./R.I. (91-261), 507 U.S. 218 (1993).

4. New York State Thruway Auth., 207 A.D. 2d 26 (3d Dept. 1996).


labor relations - michael brady files...prestige fit into the pecking order of the labor market....

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