The Truth About Project Labor Agreements

TheTruthAboutPLAs.com readers have been sending emails and comments about recent reports that Wal-Mart has signed a multi-store project labor agreement (PLA) with Chicago area building trades unions for about $1 billion worth of construction during the next five years. The construction of “several dozen” stores in 19 Illinois counties is expected to create 10,000 permanent jobs and 2,000 construction jobs.

TheTruthAboutPLAs.com,

Is it true that Wal-Mart signed a union-only PLA on future Chicago stores? Say it ain’t so? I’ve worked on numerous Wal-Marts in the Illinois area and I’m worried that work will dry up because of the PLA, as we are merit shop. What’s the real story?

– Paul M., Chicagoland

It’s true, on June 16 Wal-Mart signed a PLA with the Chicago Building and Construction Trades Council that will cover the construction and remodeling of all Wal-Marts, Sam’s Clubs and distribution centers located in 19 counties in northern Illinois.

Chicago-style politics played a crucial role in forcing Wal-Mart to sign this PLA.

It is unlikely Wal-Mart would freely cut competition from qualified contractors and their skilled employees, as well as voluntarily increase construction costs, without external political pressure and fear of bad publicity resulting from Big Labor’s potent anti-corporate campaigns (pdf). Waste doesn’t exactly fit Wal-Mart’s low-cost business model. The economics of Wal-Mart accessing a new and lucrative urban market likely allowed the retail giant to absorb the inflated construction costs that often accompany anti-competitive and discriminatory PLA schemes.

For years, Wal-Mart’s attempts to break into the Chicago-area market were foiled by Big Labor’s City Council allies over the issue of wages.

According to news reports, in 2004 a bitterly divided City Council gave Wal-Mart zoning approval to build its first Chicago store in Austin (it opened in 2006), but handed the retailer a one-vote defeat of approval for a new store in Chatham. The controversy gave birth to the big-box minimum wage ordinance that Mayor Daly vetoed in 2006. Organized labor subsequently spent millions to elect a more union-friendly City Council that could override Daley’s veto (“Wal-Mart offers $8.75-an-hour wage, union balks,” 6/21).

This spring, after months of negotiations, Wal-Mart and Big Labor bosses cut a deal that allowed the City Council Zoning Committee and eventually the full City Council to approve the second Chicago Wal-Mart in a South Side development known as Pullman Park.

On July 28, council members voted 41-4 to allow the retailer to build a third store in the West Chatham neighborhood about five miles northwest of the Pullman location. It’s likely to open sooner than Pullman Park because site development is further along (“Third Chicago Wal-Mart Approved by City Council,” 7/28).

The Pullman Park Wal-Mart deal included a $20 million community investment by Wal-Mart to provide “job training and economic programs” and some wage increases for retail workers, but the union-only PLA was a key component of the deal, according to Chicago Sun Times reports (“How Wal-Mart Finally Broke the Chicago Barrier,” 6/26):

All we heard was one store, one store. When they made it $1 billion worth of construction and a couple dozen stores, that put more pressure on us to make a deal and do the right thing,” said retiring Chicago Federation of Labor President Dennis Gannon.

Another piece of the puzzle was Wal-Mart’s decision to sign a 20-county “project labor agreement” with a Chicago Building Trades Council that has 30 percent to 40 percent of its members out of work. That means all new Wal-Mart stores in the area will be union built.

“They heard from their members. They’ve got mortgages. They’ve got kids in school. And I feel sorry for all of ’em. They just want jobs. When you start building things … you get a feeling that maybe the economy can pick up,” Daley said Friday while taping the WLS-AM program “Connected to Chicago.”

According to the following Bloomberg article, the Chicago Building Trade Unions have come under fire for “selling out” unions representing store employees in order to secure a union-only PLA (“Wal-Mart Cracks Chicago by Splitting Union, Non-Union Workers,” 7/22):

“Wal-Mart played on the whims of the building trade unions, and the rest gave in,” Reverend Booker Vance, a spokesman for Good Jobs Chicago, a coalition of local unions, congregations and community groups, said in a telephone interview. “You have a lot of smoke and mirrors, and Wal-Mart would like to give the impression that they acted in good faith, but they have not.”

Nelson Lichtenstein, director of the Center for the Study of Work, Labor, and Democracy at the University of California at Santa Barbara and author of “The Retail Revolution: How Wal- Mart Created a Brave New World of Business,” agreed with Vance.

The United Food and Commercial Workers International Union and the Chicago Federation of Labor, an umbrella organization representing 300 unions in the area, were “sold out by the building trades, who are still pretty powerful in the city,” Lichtenstein said in a telephone interview.

“The UFCW lost this battle,” Lichtenstein said.

Breaking solidarity with unions representing retail workers isn’t the only source of discord produced by this agreement. Much to the chagrin of nonunion contractors and their employees, AFL-CIO Building Construction Trades Department (BCTD) President Mark Ayers has been aggressively promoting PLAs by circulating a memo to politicians and private developers:

June 29, 2010

Dear Building Trades Leaders:

Last week, it was announced that Wal-Mart will construct a new store in the Pullman Plaza on the South Side of Chicago under a Project Labor Agreement (PLA).  Not only that, but the world’s largest corporation also agreed to use PLAs to construct any future planned stores in the Chicagoland area, as well as 20 additional Northern Illinois counties.

This is HUGE NEWS, and gives us a very compelling argument to counter the never-ending distortions being bandied about by the Associated Builders and Contractors when it comes to the issue of PLAs.

And that’s because we are talking about WAL-MART!  Wal-Mart’s culture is a key source of its competitive advantage…and it is a culture that is founded upon a never-ending, almost fanatical commitment to maximal efficiency and lower costs.

Efficiency and lower costs?  Where have we heard that before?  Oh yeah, right…those are the fundamental traits of Project Labor Agreements.  And if they are good enough for Wal-Mart…they are good enough for the rest of America.

Sincerely and fraternally,

Mark H. Ayers
President, BCTD

Manufacturing myths is Big Labor’s well-honed tactic of convincing public and private construction owners that the fundamental traits of PLAs are “efficiency and lower costs” In reality, these claims are absurd.  Big Labor and its political allies routinely delay private projects and threaten to kill them if developers don’t agree to their demands for a PLA and a union-only workforce.

For example, in California, Big Labor’s “Astroturf” groups extort PLAs out of energy developers in exchange for a pledge by these phony environmental interest groups to drop environmental complaints and permit litigation that would delay or cancel the construction of a project. It’s called Greenmail.

In Boston, Big Labor bosses and their family members moonlighting as state representatives threatened to withhold approval of liquor licenses that were critical to the success of a retail development unless union demands for a union workforce were met. It’s called Boozemail.

Unable to compete based on cost and quality, Big Labor leverages political influence to extract PLAs from public and private construction owners in an effort to choke competition from merit shop contractors.

If Wal-Mart didn’t sign the PLA, it wouldn’t have received approval from Chicago politicians to move forward with construction.

Contents of Wal-Mart PLA

Another common myth promoted by Big Labor is that a PLA allows any contractor, regardless of union affiliation, to compete for contracts on a PLA project. In some cases, that myth is technically true as it is illegal for contractors on public contracts to be barred from bidding becaues they are nonunion (it is not illegal to prohibit nonunion contractors from bidding on private projects); however, in reality, the presence of a PLA makes it almost impossible for nonunion contractors to bid on PLA contracts due to onerous terms and conditions that harm nonunion contractors and their employees and favor union contractors.

This particular Wal-Mart PLA doesn’t even allow nonunion contractors to bid on covered projects. Provision 1 of this PLA requires contractors to be “signatory or willing to become signatory to the applicable area-wide collective bargaining agreement(s) with the union(s) or the appropriate trade/craft union(s)…” in order to work on these projects.

This PLA is very short and differs from standard PLAs (most are more than 30 pages long). Provision 2 defers to union collective bargaining agreements (CBAs) for provisions not addressed in the PLA. Who knows what costly terms and conditions lurk in the Chicago-area trade union CBAs, which typically are full of inefficient union work rules that increase costs? It is one of the reasons why nonunion contractors are more competitive than union contractors, even when both union and nonunion contractors have to pay the same wages and benefits mandated by local, state or federal prevailing wage laws.

Finally, the PLA is a financial windfall for Chicago area building trades in numerous ways. Provision 15 indicates the union-run Chicago & Cook County Construction Industry Labor-Management Cooperation Committee Trust that negotiated this PLA will charge contractors a dime per manhour worked through May 2011 and will receive a nickel raise for every year after. This money is in addition to regular dues paid by employees to individual unions, as well as fees and employee benefit contributions paid to local unions and benefit plans by employers.

Chicago politicians will be one of the eventual beneficiaries of this union financial windfall in the form of future campaign contributions and political support from Big Labor.

Sadly, a similar scheme is common in public sector construction in Illinois.  Thanks to a pair of executive orders by Gov. Quinn (Executive Order 03 of 2010 covering Illinois projects) and President Obama (Executive Order 13502 encourages federal agencies to require PLAs on federal projects exceeding $25 million in cost), many state and federal government construction projects in Illinois will be saddled with union-favoring PLAs. As a result, merit shop construction contractors and their skilled employees won’t be the only ones hurt by PLAs. Taxpayers also will bear the cost, as provisions within typical PLAs result in reduced competition, double benefit costs and inefficient union work rules that typically increase labor costs by up to 20 percent.

PLAs are nothing more than a shakedown designed to funnel lucrative construction contracts to Big Labor. It is too bad that Chicago politicians cannot see that these anti-competitive and discriminatory measures will impose major costs on taxpayers in the public sector and deal a fatal blow to the job growth the city so desperately needs.

Unfortunately, catering to special interests at the expense of the greater good is ingrained in the DNA of Chicago politicians and it is up to the citizens of Illinois to remove corrupt public officials in the next election and deliver fair and good government to all.