The Truth About Project Labor Agreements

Merit shop contractors and their skilled employees have a lot to worry about in today’s marketplace with the construction industry’s 20 percent unemployment rate, a slow economy, cut-throat competition, and reduced bank lending to businesses interested in purchasing construction services to grow their business and create jobs.

Surviving these tough market conditions is even more difficult thanks to anti-competitive and costly project labor agreements (PLAs) mandated by local, state and federal governments.  These PLA schemes are sweetheart deals for Big Labor, having the practical effect of handing unionized contractors and union tradespeople an unfair and unjustified advantage over merit shop businesses and employees in the competitive bid process for public works contracts.

President Obama’s Executive Order 13502, which encourages federal agencies to require PLAs on federal construction projects exceeding $25 million in total cost, was widely criticized as a payback to Big Labor for their continued political support.

There is a cost to taxpayers for such favoritism. Studies have found that reduced competition and workplace inefficiencies resulting from PLAs typically slap taxpayers with an additional 12 percent to 18 percent in construction costs, even when construction employee wage and benefit rates are held constant by government-determined rates mandated by the federal Davis-Bacon Act and similar state laws.

And the negative impact of PLA scams on communities is complemented by other Big Labor schemes — called job targeting or market recovery programs — designed to increase union market share, create union jobs, boost union membership and attack the principles of fair and open competition. 

What are union job targeting/market recovery programs ?

As documented succinctly by the Cement Masons and Plasterers Union Local 528 (pdf), job targeting schemes, also known as market recovery programs, collect fees from the dues of union members for the purpose of providing subsidies to union contractors on projects where they face competition from merit shop contractors.  Like PLAs, the subsidies are designed to give union contractors an unfair bidding advantage on projects.

The money collected from union workers is pooled into a Market Recovery Fund controlled by union bosses.  Typically, a union contractor reaches an agreement with the union bosses of the union they are signatory to that says that the Market Recovery Fund will subsidize the contractor $X for a specific job to underbid a merit shop competitor.  If the union-signatory contractor is successful and wins the job, the contractor receives job targeting money from the union, funded by past deductions from union workers’ wages, in exchange for using union labor and paying union rates.

Job targeting/market recovery programs have been used by almost all building trade unions. These programs often target specific contractors in a construction market and try to drive them out of business or out of a construction market forever by making it impossible for them to win a construction contract.

How is job targeting/market recovery hurting competition?

“My company has lost numerous contracts and millions of dollars in private and public works contracts because the local IBEW union and it’s signatory union contractors have used these job targeting schemes to underbid me on almost every public and private job in the area,” said an electrical contractor from the Midwest, who asked not to be named for fear of inviting additional attention from the unions. “I’ve had to lay off almost fifty percent of my existing workforce in the last 12 months because we can’t get work. Yes the economy is tough, but we have positioned ourselves to win these contracts if not for these job targeting schemes.” 

“The families of my current and former employees are really suffering because of this racket. It really needs to be outlawed.”

“Imagine the outrage from lawmakers and the media if my business and my competitors colluded and pooled resources with the intent of driving union contractors out of the market?” said an HVAC contractor from Tennessee, who also asked to remain anonymous. “Union contractors can’t compete against me in a fair and free market, so they cheat.”

“There is no reason on earth why unions should be able to use job targeting programs – which are nothing short of using kickbacks from a slush fund – to give them an unfair advantage over their competition,” said Jim Elmer, ABC 2009 chairman and president of James W. Elmer Construction Co., Spokane, Wash. “The bottom line is that job targeting hurts U.S. workers, taxpayers and the economy, and it’s a practice that should be stopped.”

If you think job targeting isn’t happening in your community or isn’t a widespread problem, think again.

An April 2009 study published by George Mason University’s John M. Olin Institute for Employment Practice and Policy found that construction industry unions spent more than $1 billion between fiscal year 2000 and 2007 in job targeting schemes.

In addition to this staggering number, according to this summary, the study also found that:

• Job targeting programs needlessly increase public construction costs.
• Job targeting programs give unions and their subsidy recipients an unfair advantage in the bidding process.
• Job targeting programs are often unknowingly funded by taxpayers.

Here is a presentation on key data from the study.

Is job targeting/market recovery legal?

Job targeting has long been criticized as unfair competition, and has been found to violate the Davis-Bacon Act, under some circumstances (when there is evidence that funding source for the program have been derived, in part, from wages paid to union members under the Davis-Bacon Act).

Remarkably, market recovery/job targeting has also been found to be a protected union activity, under other circumstances, by the National Labor Relations Board (NLRB). There are several pending legal cases which raise issues under state prevailing wage laws and antitrust laws.

What to do if you have been harmed by job targeting/market recovery programs.

After documenting job targeting programs that violate the law, contractors victimized by illegal job targeting programs often file a complaint with the NLRB or the U.S. Department of Labor with the assistance of an attorney specializing in labor issues.

They start by gathering evidence that a local union is engaged in job targeting/market recovery programs through internet research and interviewing local union and merit shop contractors and employees.

The Labor Management Reporting and Disclosure Act (LMRDA) requires unions to disclose job targeting expenditures on financial reports (known as LM-2s) filed with the U.S. Department of Labor’s Office of Labor Management Standards (OLMS).  The public can review these disclosure forms at the OLMS Public Disclosure Page and find contractors that have received job targeting money during the reporting year from a specific union or multiple unions.

Unfortunately, the forms do not require unions to disclose which jobs were subject to job targeting schemes in previous reporting years and the public won’t be able to tell which contractors received job targeting money in the current reporting year (and on specific jobs).

Next, contractors collect evidence that funds for the program have been derived, in part, from wages paid to union members under the Davis-Bacon Act.

Finally, contractors collect evidence that funds from the program are being paid to employers.

After filing complaints, some contractors have won judgements against unions and contractors party to these schemes, while other contractors complain that the NLRB and the Department of Labor don’t enforce their own laws.

Contractors dissuaded from expensive legal proceedings often raise awareness about job targeting with with local lawmakers, the media and local associations representing the construction industry.

Some states have passed measures to disclose or ban the practice of job targeting/market recovery funds on public works projects but these programs can be  poorly enforced, as is the case under the current Administration and the NLRB.

In the private construction market, contractors have educated customers about this practice and have successfully asked them to prohibit contractors from receiving and paying into job targeting funds on their projects because it distorts the competitive market and will eventually increase construction costs for all private construction owners. 

The free market meddling of job targeting/market recovery programs is another tactic similar to government-mandated PLAs that Big Labor utilizes to distort the free market and ensure that public works contracts are won by unionized contractors at the expense of taxpayers and qualified merit shop contractors and their skilled employees.

The anti-competitive and costly practice can be curtailed through legal, political and public relations strategies but it is a tough fight and one worth having.