There are few issues that can polarize the construction industry like project labor agreements do.
On their face, there seems little with which to argue — attractive wages set as a baseline, guaranteed worker benefits, a designated union representative to deal with labor disputes and, for the owner, a steady stream of skilled labor.
PLAs are tools that mandate a well-trained union workforce, which increases the safety and efficiency of a project, said Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York. PLAs, he said, often result in projects being completed on time and under budget and can help individuals develop a career that allows them to better provide for their families.
However, opponents of construction PLAs, which are typically negotiated between a building trade union and the project owner, say they restrict competition for nonunion contractors even though supporters like LaBarbera point out that nothing in PLAs prevents nonunion participation.
The cost of working under a PLA, detractors say, is just too expensive because of the higher wages, benefits and other fees that must be paid and often requires contributions to benefit funds that nonunion workers will never receive back.
Peter Dyga, president and CEO of the Associated Builders and Contractors Florida East Coast Chapter, said that participating in a PLA project can add 15% to 27% to the cost of a nonunion contractor.
PLAs pop up on public and private projects, although they are more common in areas of the country that have a strong union presence. Some government agencies require them. Private owners often use them when the project is high profile and if they are receiving tax breaks or other benefits. They also sometimes require the project use some percentage of local workers and contractors.
President-elect Joe Biden campaigned, in part, on providing good union jobs as part of a massive infrastructure plan, so discussion around PLAs could ratchet up a notch. Nevertheless, some smaller unions are against PLAs, or at least the way they are negotiated.
Kevin Barry, a director of the United Service Workers Union, which represents workers in a wide variety of industries including building and construction, alarm and electrical and service and maintenance, said larger unions that usually are involved in putting together PLA deals restrict the inclusion of smaller unions like his.
“PLAs give the exclusive right to the building construction trade union,” he said. “That’s it.”
So, if nonunion contractors and subcontractors, as well as union companies that are not affiliated with the union that negotiated the PLA want to participate in a PLA project, what should they consider?
That depends on what’s in the agreement and how much risk they’re willing to take.
Wage rates and benefits
PLAs always specify that workers be paid at least the minimum prevailing wage for the area, said attorney G.M. Heitman with Nason Yeager Gerson Harris & Fumero P.A., and contractors should include those rates in their bids if they don’t usually pay that much on projects.
Contractors, he said, also need to make sure they have either the in-house or outsourced accounting resources or software to maintain their payroll records so that they can provide proof that they paid their workers the correct amounts. For most federally funded projects, contractors will have to submit certified payroll forms in accordance with the Davis-Bacon Act.
“There's a lot of paperwork involved in showing that you have complied with the law, and you could be audited,” Heitman said. “And there could be substantial fines and penalties if you do not comply with the requirements of the law or the contract.”
Contractors also need to factor in the cost of benefits like health insurance, vacation pay and sick leave.
As part of some PLAs, said attorney Sean Beiter with Goldberg Segalla, contractors are allowed to achieve savings on benefits and give their employees the balance.
For example, he said, if the wage rate specified in the PLA is $60 per hour and the benefits package is $40 per hour, that means the employer must pay out $100 per employee per hour. That doesn’t change. But if the employer can cut the amount it pays in benefits to $30 through savings on its own health insurance plan when compared to the one the union will provide, then the employee is entitled to the extra $10.
The first thing construction firms should consider, Beiter said, is they won’t be required to sign a joint employer benefit agreement or join a joint employer fund.
“Those things could be potentially underfunded and could result in the withdrawal liability,” the lawyer said. “A good project labor agreement that's been negotiated by someone with experience should have a provision that provides that the employers who signed the [PLA] are not required to sign any other documents.”
Manning clauses include such details as work and overtime rules, local hiring requirements and how much of a contractor’s crew must be hired through the union.
Contractors need to determine through a careful reading of the bid documents, which will include a copy of the PLA, Heitman said, if they will be obligated to accelerate the schedule on demand, which could significantly increase labor costs. Or, he said, the PLA terms could require contractors hire 50% of their crews through the union.
There are exceptions, though, said Beiter. A contractor typically can supplement its PLA project crews with its own workers if the union does not have the manpower available.
The contractor’s workers could also be required to join a union unless prohibited by state law. Currently, 27 states have right-to-work laws that prevent workers from being forced to join a union as a condition of employment, according to the National Conference of State Legislatures. This is also where contractors will find requirements related to disadvantaged or minority business participation.
Meeting MWBE requirements can be a burden for contractors that do not have a pipeline of certified firms, but, Beiter said, a PLA can help everyone meet those project goals. In fact, he added, unions labor referrals can help MWBE firms ramp up their workforces.
“The projects were generally able to meet their affirmative action goals as a result of that,” he said.
Strong crew management
So, are there any deal breakers? Is there one thing that should send nonunion contractors in the other direction when presented the opportunity to work on a project with a PLA?
“I think it is a matter of how strong their superintendent and project management team is,” Beiter said. A strong team could find it’s easier to manage a skilled crew hired from the union, with the contractor’s own workers manning non-PLA projects.
And there’s another advantage to approaching a PLA that way, Beiter said.
“A lot of nonunion contractors aren't going to want to expose their non-union crews to working side by side with tried-and-true union employees who will try to organize them the whole time that they're there,” he said.