Best Practices Construction Law : Construction Lawyer & Attorney : Matthew DeVries : Stites & Harbison Law Firm : Green Building & LEED Litigation

Last Sunday, the headline from the Tennessean read "Unions shrink but stay active."  Although the article focused on the use of union labor on Nashville's convention center project currently underway, it provided a glimpse of the bigger picture of what is happening with labor groups in the construction industry.

In Tennessee, the percentage of work force represented by unions has decreased from 10% to 6.6% over the past ten years.  Union work on the Music City Center has shown signs of promise, as organized labor won a spot in three major subcontracts (electrical, steel and plumbing) estimated to be worth more than $100 million in work.

But what is the real lesson behind these figures and reports?  I think two driving factors on use of union labor are locality and project type.  Here is what I mean:

• A state's labor laws dramatically affect union participation.  While this may be a no-brainer, consider Tennessee's right-to-work laws, which provide that workers do not have to be union members to hold a particular job.  The law states: "It is unlawful for any person, firm, corporation or association of any kind to deny or attempt to deny employment to any person by reason of such person's membership in, affiliation with, resignation from, or refusal to join or affiliate with any labor union or employee organization of any kind." Tenn. Code. 50-1-201.  The right-to-work laws can be a huge incentive for business, since owners and developers won't have to negotiate with union.
• The type of project can also dramatically affect use of union labor.  For example, just last week the AGC of America helped persuade the U.S. Army Corp of Engineers to withdraw its project labor agreement ("PLA") requirements on a project at the Patrick Air Force Base in Florida.  According to the letter sent by the AGC, government mandates for PLAs for the construction of publicly funded projects is not in the best interests of the selection process.  A federal project may implement certain labor requirements, which ultimately may be determined by the contracting agency.  At the local level, there are instances where unions attempt to invest in the project through their pension funds in an effort to secure a portion of the construction work.

In the end, organized labor on a construction project will depend largely on the type of project (state or federal; public or private) and the applicable right-to-work laws, as well as the business clout and influence the particular union may have. 

 Image: National Right to Work Legal Foundation

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The Obama administration is scheduled to issue a final rule today that allows federal agencies to require public contractors to use public labor agreements (PLA) on large public construction projects. PLAs are collective bargaining agreements that establish the terms and conditions of employment for a specific construction project.  They have been used on private jobs, as well as state and local projects, including the construction of schools, hospitals, roads, bridges, power plants and airports.  The rule was first issued as Executive Order 13502 (pdf) "Use of Project Labor Agreements for Federal Construction Projects." The final rule due out today implements the Executive Order. 

What are the benefits of PLAs? According to Jared Bernstein, a White House economist who writes at the Middle Class Task Force Blog, PLAs provide "structure and stability" to large construction projects:

PLAs also help ensure compliance with laws and regulations governing workplace safety and health, equal employment opportunity and labor and employment standards. The coordination achieved through PLAs can significantly enhance the economy and efficiency of Federal Construction projects.

Bernstein reported that as of last summer, 21 out of 25 major Department of Energy construction projects were (or slated to be) covered by PLAs.

Sounds good for the construction industry, right?  Not according to a number of critics, including Rep. John Kline (R-MN), the U.S. House Education and Labor Committee’s senior Republican member, who warned that the new rule "will reduce competition and drive up costs for taxpayers."  Kline pointed to the U.S. Department of Labor’s decision last year to cancel a Job Corps Center construction project in New Hampshire as evidence of the dangers PLAs pose to federal job creation and project efficiency. The New Hampshire project was canceled after a local contractor raised a legal challenge to the project's PLA requirement, arguing it was discriminatory and would disqualify most contractors in the state.

Other critics, such as the Workforce Fairness Institute, suggest that the rule forces small businesses "to adhere to costly and non-competitive schemes, [which] will only result in lost jobs."  According to Katie Packer, executive director of WFI, “[e]nding fair and open bidding for federal contract work will disqualify employers from competing and increase the costs of projects just as our nation’s debt skyrockets."

Finally, groups like the Associated General Contractors of America flatly oppose any government mandated labor agreement, primarily because they negatively impact small companies, non-union companies, and disadvantaged businesses who frequently become excluded from contracting opportunities by such agreements.

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