- Project Labor Agreements in Public and Private Contracting
- November 29, 2016 | Author: Jonathan R. Mayo
- Law Firm: Smith, Currie & Hancock LLP - Atlanta Office
Finding and hiring qualified construction workers is a growing challenge for contractors across North America. One method of securing labor is through a Project Labor Agreement (PLA). A PLA is a pre-hire agreement between a project owner or contractor and one or more labor unions that establishes the terms and conditions of labor employment for a construction project. PLAs allow owners or contractors to negotiate with construction unions on employment terms, such as working hours and overtime pay, in a single agreement before workers are hired on the project. Use of PLAs is controversial. They are encouraged in some parts of the country and discouraged in others. The purpose of this article is to explain the working of PLAs, not to weigh in either for or against the use of PLAs.
The Purpose of PLAs
PLAs are most commonly used on large and complex construction projects that require multiple contractors, with the aim of standardizing the terms and conditions of employment among all of the contractors and their laborers. PLAs purport to improve project efficiency in four ways:
(1) preventing “[s]trikes, work stoppages, slowdowns, and other disruptions” that have “obvious economic costs” in the construction context because, prior to commencing work, laborers will have agreed (under the PLA) to not strike or otherwise disrupt the flow of work unless the contractor violates a provision in the PLA;
(2) helping manage and coordinate construction by including terms regarding hours of work, shift times and scheduling, overtime and premium pay, break times, holidays, and management rights;
(3) managing the availability of laborers by securing access to a large pool of laborers; and
(4) providing a uniform mechanism for resolving labor disputes.
When are PLAs used?
Both public and private construction projects use PLAs. On private projects, the project owner makes the initial decision on whether to enter into a PLA, but the owner may also delegate that decision to its prime contractor. On government contracts, federal regulations give federal agencies the option to use PLAs, while state law varies on whether PLAs are optional or prohibited for use by state and local agencies.
PLAs on Private Projects
In the private sector PLAs can be made in two ways. First, a contractor may be awarded a project where the owner has already entered into a PLA with a union representative, and the contractor will be required to sign the agreement prior to commencing work. Second, an owner may direct its prime contractor to negotiate the terms of a PLA with a union representative. Comparatively, the latter is the better option for the contractor because it allows the contractor to negotiate the terms of the PLA directly as opposed to being required to sign a PLA negotiated by the owner, who may have different priorities.
PLAs on Government Projects
In the public sector, whether PLAs are used depends on the law governing the contract. Where permissible, agencies often negotiate PLAs with labor organizations, and then require contractors to sign the negotiated PLA as a condition to being awarded the contract. For Federal construction projects, agencies are encouraged, but not required, to use PLAs in certain contexts. A February 2009 Executive Order, later implemented into the Federal Acquisition Regulations on April 13, 2010, encourages, but does not require, federal agencies to use PLAs on large-scale direct Federal construction projects with a total anticipated cost of $25 million or more, where the use would “advance the Federal Government’s interest in achieving economy and efficiency in Federal procurement, produc[e] labor-management stability, and ensur[e]compliance with laws and regulations governing safety and health, equal employment opportunity, labor and employment standards, and other matters.”
Laws governing state and local projects vary on whether various government entities may use PLAs. Currently, about half of the states have either enacted legislation, or standing executive orders, that prohibit or limit state agencies from requiring the use of a PLA on public projects. For example, in 2013, the Georgia legislature passed a law (Georgia Code § 50-5-72) prohibiting state agencies from either requiring or barring PLAs on state projects, instead leaving the decision on whether to use a PLA to the bidding contractors. States with similar laws include South Carolina, Idaho, and Louisiana.
Other states, such as New Jersey, openly encourage the use of PLAs. New Jersey authorizes any public entity in the state to use a PLA on a public works project, and specifically notes that the use of a PLA “shall not be deemed to unduly restrict competition if the public entity finds that the project labor agreement is reasonably related to the satisfactory performance and completion of the public works project....” (New Jersey Statutes § 52:38-3). California also authorizes the use of PLAs by state agencies as long as the agreement contains certain “taxpayer protection provisions.” (California Public Contract Code § 20162).
Debate over the Use of PLAs
Much debate exists over the effectiveness of PLAs and whether PLAs are overly restrictive of competition. Those in favor of using PLAs argue, in part, that PLAs enable project owners to control costs and obtain uniform work terms and conditions on large projects with multiple unions; provide contractors with a reliable and uninterrupted supply of qualified workers at predictable costs; and ensure that there are no disruptions to the construction schedule by prohibiting strikes and lockouts and including binding procedures to resolve labor disputes.
However, a number of groups, such as the Associated Builders and Contractors and the Associated General Contractors of America, are opposed to PLAs because the agreements discriminate against non-union contractors, fail to improve efficiency or reduce costs on construction projects, and are anti-competitive. Generally, those opposed to PLAs argue PLAs are a special interest scheme that discourage fair competition from non-union contractors by requiring a project to be awarded only to contractors and subcontractors that agree to recognize unions as the representatives of their employees on that job; use the union hall to obtain workers; obey the union’s restrictive apprenticeship and work rules; and contribute to union pension plans and other funds in which their non-union employees will never benefit unless they join a union.
In both the public and private sector, contractors should determine whether the project owner will require the use of a PLA prior to bidding. Where an owner has already negotiated a PLA, interested bidders should request a copy of the PLA and carefully review its terms prior to submitting a bid. If possible, contractors should encourage project owners to allow the contractor to negotiate the PLA directly with labor unions to better represent its needs for project performance. Contractors should keep in mind that, by entering the agreement, it is essentially limiting itself to employing union laborers. While some PLAs may allow hiring non-union workers to some extent, tension could rise between the union and non-union laborers, increasing the likelihood of a strike or other work-related disputes—and PLAs generally limit how those disputes could be resolved. Thus, while there may be advantages for owners and even contractors in some contexts, unless the advantages are clear, contractors may wish to avoid PLAs where possible.