California State Legislature Considers Repeal of Provision in California’s Design-Build Authorization Laws that Encourages Project Labor Agreements

0 January 14, 2010  State & Local Construction, Uncategorized

Merit shop contractors in California continue to go on the offense whenever possible with state and local policy initiatives that prohibit project labor agreements and guarantee or restore fair and open bid competition.  We were pleased on Tuesday, January 12, 2010 to see a committee of the California Assembly consider thoughtful state legislation that repeals bad public policy that costs money for taxpayers.

The Assembly Business and Professions Committee considered a set of three bills sponsored by Associated Builders and Contractors of California and introduced by Assemblyman Martin Garrick (R-Carlsbad) that would have removed unfair and discriminatory union-backed provisions from design-build authorization language in the California Public Contract Code and Education Code.  Design-build is a construction delivery system that is an alternative to the traditional design-bid-build system.  Under design-build, a government agency in California can select a contractor through the use of weighted “best value” criteria rather than selecting the lowest responsible bidder.

The committee spent almost an hour hearing testimony, asking questions, and making comments about the implications of these three bills.  One of those bills, Assembly Bill 1064, would have repealed a provision that creates an artificial incentive for local governments to require contractors on taxpayer-funded design-build projects to sign project labor agreements with construction unions.  It would have repealed the following strikethrough language in the five sections of California law that authorize state and local governments to use design-build:

If a [government entity] elects to proceed under this section, the [government entity] shall establish and enforce, for design-build projects, a labor compliance program containing the requirements outlined in Section 1771.5 of the Labor Code, or it shall contract with a third party to operate a labor compliance program containing the requirements outlined in Section 1771.5 of the Labor Code. This requirement shall not apply to any project where the [government entity] or the design-build entity has entered into any collective bargaining agreement or agreements that bind all of the contractors performing work on the projects.

Here at, we do not object to the requirement that an entity using design-build establishes a labor compliance program, but we DO object to the exemption immediately following this requirement: “This requirement shall not apply to any project where the [government entity] or the design-build entity has entered into any collective bargaining agreement or agreements that bind all of the contractors performing work on the projects.”

Note that “a collective bargaining agreement or agreements that bind all of the contractors performing work on the project” is the definition of a project labor agreement, which would require a nonunion contractor to pay employee benefits to union trust funds instead of its own benefit plan, require its employees and apprentices to come from union dispatching systems, and require its workers to pay union dues and fees.

We are not aware of any credible argument as to why there is no need for a labor compliance program if there is a project labor agreement.  And we do know the arguments.  The official committee bill analysis for AB 1064 stated why unions support the exemption:

Opposition.  The California State Pipe Trades Council, California State Association of Electrical Workers, and the Western States Council of Sheet Metal Workers write in opposition, “If a design-build entity has entered into a valid collective bargaining agreement, it obviates the need for a labor compliance program because such mechanisms are already in place to ensure that the design-build entity is complying with all applicable California labor laws.”

This claim is consistent with President Obama’s executive order encouraging federal agencies to use project labor agreements.  That executive order allows executive agencies to require a contractor to sign a project labor agreement under the rationale that use of such an agreement will result in “ensuring compliance with laws and regulations governing safety and health, equal employment opportunity, labor and employment standards, and other matters…”

I have read most of the government-mandated project labor agreements passed in California since 1993, when the modern manifestation of project labor agreements as a market recovery tool for unions began after the U.S. Supreme Court’s Boston Harbor decision.  Never once have I seen a project labor agreement that contained a “mechanism” specifically regarding labor law compliance investigations and enforcement.

In fact, a legitimate labor compliance program as defined under California Labor Code Section 1771.5 includes specific operational requirements and has to be approved, as specified in state regulations, by the Director of the California Department of Industrial Relations.  No such requirements or approval for any type of labor compliance is specifically mentioned in Project Labor Agreements considered in California.

In addition, a recent investigation of contractor labor compliance on a library project in Milpitas covered by a project labor agreement shows that the claim is not valid that a project labor agreement negates the need for labor compliance.  The California Department of Apprenticeship Standards (DAS) has finished its review of 56 separate apprenticeship violations reported by ABC – California Cooperation Committee (ABC-CCC) following an independent audit of public records.  All of the contractors cited by ABC-CCC had not fully complied with state reporting requirements, and eight contractors were found to have directly violated California labor law by failing to request apprentices or by using apprentices in a manner contrary to the requirements under the respective trade.

How is this project labor agreement exemption in state law implemented by unions on the local level?  Merit shop contractors have seen this exemption used as a selling point by unions to encourage local governments to adopt project labor agreements on design-build projects.  The claim is that project labor agreements will save money by eliminating the need to fulfill a costly state mandate to implement a labor compliance program.  In other words, unions and their allies in the state legislature force local governments to adopt a costly state mandate, but then turn around and give them an opportunity to evade the mandate if unions get a monopoly on the work through a project labor agreement.

Such sales pitches based on this artificial financial incentive for a project labor agreement have been heard at board meetings of Santa Rosa Junior College and San Jose Unified School District.  Staff for San Joaquin County acknowledged at a July 3, 2007 meeting of the San Joaquin County Board of Supervisors that their project labor agreement for the county’s new administrative building was adopted because of design-build authorization language approved by the legislature for counties.

Who proposed this language exempting design-build entities from labor compliance programs when a project labor agreement is used?  As the analyst for the Assembly Local Government Committee wrote in a January 16, 2007 analysis of Assembly Bill 642:

The design-build language in current law is based on a compromise struck in 2000 among local officials, labor groups, and contractors … Labor unions wanted to ensure that counties pre-qualify employers to protect workers’ interests …

Unfortunately, that “compromise” did not involve or seek input from merit shop contractors – a common occurrence in the days when Governor Gray Davis was in office.  It’s to be expected that the State Building and Construction Trades Council was allowed to insert language that disadvantages merit shop contractors.

It was also to be expected on January 12 that all three bills to reform design-build authorization laws, including Assembly Bill 1064, were defeated on party-line votes: Republicans in support, Democrats in opposition.

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