April 23, 2010

Shortly after President Barack Obama took office in 2009, he signed an Executive Order authorizing federal government agencies to require every contractor or subcontractor on a large-scale construction project to negotiate or become a party to a Project Labor Agreement (PLA) with one or more labor organizations.  The Defense Department, General Services Administration, and National Aeronautics and Space Administration, which together maintain the Federal Acquisition Regulation council, have published a final rule, amending the FAR, to implement the Executive Order.  The rule is available at http://edocket.access.gpo.gov/2010/pdf/2010-8118.pdf.  The rule is effective May 13, 2010.

Government-funded projects covered by the rule are “construction, rehabilitation, alteration, conversion, extension, repair, or improvement of buildings, highways or other real property” where the total cost to the federal government is $25 million or more.  

The Policy
A PLA is a pre-hire collective bargaining agreement between contractors and one or more labor organizations that establishes the terms and conditions of employment for a specific construction project. 

The rule provides that agencies may use PLAs to “promote[] economy and efficiency in Federal procurement.”  Agencies are instructed that they may use a PLA with every contractor or subcontractor if, consistent with law, such use would “advance the Federal Government’s interest in achieving economy and efficiency in Federal procurement, producing labor-management stability, and ensuring compliance with laws and regulations governing safety and health, equal employment opportunity, labor and employment standards, and other matters….”

Factors to Consider
The rule provides that the government entities will consider the following six factors in deciding whether a PLA is appropriate for a construction project:

1. The project will require multiple construction contractors and/or subcontractors employing workers in multiple crafts or trades.
   
2. There is a shortage of skilled labor in the region in which the construction project will be sited.
   
3. Completion of the project will require an extended period of time.
   
4. Project labor agreements have been used on comparable projects undertaken by Federal, State, municipal, or private entities in the geographic area of the project.
   
5. A project labor agreement will promote the agency’s long term program interests, such as facilitating the training of a skilled workforce to meet the agency’s future construction needs.
   
6. Any other factors that the agency decides are appropriate.

Requirement of PLAs
The rule provides that a PLA shall:

1. Bind all contractors and subcontractors engaged in construction on the construction project to comply with the project labor agreement;
   
2. Allow all contractors and subcontractors to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements;
   
3. Contain guarantees against strikes, lockouts, and similar job disruptions;
   
4. Set forth effective, prompt, and mutually binding procedures for resolving labor disputes arising during the term of the project labor agreement;
   
5. Provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health; and
   
6. Include any additional requirements as the agency deems necessary to satisfy its needs.

Implications for Employers
The final rule leaves open many questions. Jackson Lewis partner Thomas Walsh notes, “Most commonly, for example, the agency seeking bids establishes the PLA with the local Building Trades unions.  Today, non-union contractors are often uninterested in participating in PLA jobs.  There is nothing in this rule that provides any encouragement for open-shop contractors.”

Andrew Peterson, a partner with Jackson Lewis, observes, “This is yet another area in which the Obama Administration is attempting to repay organized labor for its campaign support.  Failing on the major legislative initiative, colloquially referred to as ‘card-check,’ this rule favors companies with union affiliations or induces non-union employers to affiliate with unions, even if for a single job.  This is, of course, a boost to construction unions.  Even single-job contracts typically require employers to make payments to multi-employer funds ran by unions, many of which are now in dire financial condition.” 

Construction industry employers need not automatically avoid jobs subject to PLA requirements.  They should, however, proceed with caution.  If employers understand the legal and practical pitfalls, and opportunities, associated with work subject to PLAs, it might be possible for them to be profitable while minimizing the risk of adverse consequences to their labor relations practices.

Jackson Lewis attorneys are available to discuss this and other workplace laws.