The Truth About Project Labor Agreements

Connecticut has seen a buzz of activity and hearings relating to wasteful and discriminatory project labor agreements (PLA) within the last week or so.

Here is the recap.

On March 10, a public forum to discuss whether a PLA mandate is appropriate for two school projects that are expected to cost approximately $200 million was held in Meriden, Conn. Of note, Congressman Chris Murphy and state House Speaker Chris Donovan appeared to speak in support of the PLA mandates. Both officials are candidates for higher office – Murphy is running for the U.S. Senate and Donovan is running for Murphy’s seat in the U.S. House of Representatives.

It should come as no surprise that both have taken union campaign contributions.  Here is an interesting bit of information from the Record-Journal in Meriden:

Through Dec. 31, Donovan had brought in $708,815 in campaign contributions, according to OpenSecrets.org, a website maintained by the Center for Responsive Politics. Of that amount, about $124,000 came from organized labor, including trade unions such as the Service Employees International Union, the International Brotherhood of Electrical Workers, Sheet Metal Workers Union and the Plumbers and Pipefitters Union. In total, industrial unions have contributed more than $30,000 to Donovan’s war chest, while building trade unions have given $22,500. Of his 20 largest donors this year, 12 are unions.

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Of the $3.4 million Murphy has raised for his Senate campaign, nearly $300,000 has come from unions, with more than $70,000 coming from building trade and industrial unions.

The merit shop construction industry was well represented at this event by Lelah Campo, president of the Connecticut Chapter of Associated Builders and Contractors (ABC), who called this more of a campaign event than an opportunity to learn the facts about PLAs.

This issue has arisen in part because of a petition to the Meriden City Council (initiated by union bosses) seeks a community workforce agreement mandate (a PLA by another name) on the construction of the two school projects. The City Council may not be required to take action on the petition because of a problem with its drafting. Regardless, the unions have successfully brought the issue to the forefront and the council is likely to consider a PLA mandate.

If adopted, this mandate will have a chilling effect on merit shop participation on these projects. In order to work on projects where contractors must agree to a PLA in order to perform work, contractors typically must recognize unions as the sole representative of their employees, hire from union hiring halls, pay into union pension and benefit plans, and follow wasteful union work rules.

From a practical standpoint, PLA mandates unfairly tip the scales in favor of unionized contractors. Merit shop employees, who make up nearly 80 percent of Connecticut’s construction workforce, are deprived of the opportunity to fairly compete for contracts and build projects funded by their own tax dollars.

In addition, these mandates have been found to increase construction costs.  A September 2004 study conducted by the Beacon Hill Institute at Suffolk University in Boston found that the use of PLAs on school construction projects in Connecticut increased the cost of the projects by nearly 18 percent.  The report concludes that the presence of a PLA increased the projects’ final base construction costs by $30 per square foot relative to non-PLA projects.

Unfortunately, the Meriden schools are not the only PLA threat in the state right now.

The Connecticut General Assembly’s Labor and Public Employees Committee held an informational hearing in Hartford on Monday, March 19, to learn more about wasteful and discriminatory PLA mandates.

Here is a great recap from CT News Junkies on what likely prompted the hearing:

The existence of PLAs, an issue that doesn’t come before the legislature very often, has come up in the wake of a January Connecticut Supreme Court decision. The decision gave standing to Electrical Contractors, Inc. (ECI), a nonunion Hartford company, that sued the Hartford Board of Education after winning a bid, but declining to sign a PLA for two school construction projects.

The Superior Court that first heard the trial decided that ECI did not have standing to bring the lawsuit, but the decision was overturned by the Supreme Court. It’s now back in trial court.

While the actual case may not be decided for years, the ruling on ECI’s standing creates the opportunity for other contractors to sue on account of PLAs.

Here is video of a few minutes of testimony by ABC Connecticut Chapter President Lelah Campo:

ABC was not the only group to speak out against PLAs at this hearing.  Connecticut’s Minority Construction Council wrote a strongly worded letter to voice its opposition to PLA mandates.  Here is an excerpt:

Not only do PLAs harm minority contractors who are not union contractors, they also harm non-union employees because if these employees work on a PLA project they must pay union benefits and become union members for each PLA project worked on. It is not fair for employees to pay into a union pension program they will never be able to collect from because they will never vest. This constitutes an unfair windfall for the union. Under current prevailing wage laws, fringe benefits are paid directly to the employee if the contractor he/she works for does not have benefit plans. It is better for employees under prevailing wage laws to be able to directly receive compensation in their paychecks for benefits rather than have their money go to a union’s irretrievable benefits program. The union benefits are payable to the union, even if the non-union employee is covered under the employer’s existing program (i .e., paying twice for the same benefit but only being able to collect to collect on one).

PLAs also harm minority contractors because the contractor has to get some or all of his/her employees from a union hall as opposed to directly hiring all employees. Consequently, a contractor is forced to bid a job without knowing his workforce or their work habits, because there is a great chance the minority contractor’s employees will come from the union hall as opposed to their regular workforce. Under this setup, the employee’s loyalty is to his union hall as opposed to the contractor. I can give you anecdotal evidence to support the harm suffered by minority contractors under a PLA because of union issues.

The merit shop construction community is concerned the General Assembly may take some action to undercut the ECI lawsuit or promote the use of anti-competitive and costly government-mandated PLAs on state and state-funded projects. Doing so would send a clear signal that Connecticut’s lawmakers are in the pockets of union bosses and special interests, and not looking out for the interests of taxpayers and free enterprise.

TheTruthAboutPLAs.com will be following the situation in Connecticut closely.

UPDATE: May 2, 2012, the Connecticut Senate passed a measure (SB 33) giving localities like Meriden the option to negotiate and require PLAs. According to local Meridan newspaper:

“City leaders have been wary of a PLA after the state Supreme Court allowed non-union Electrical Contractors Inc. to sue the Hartford Board of Education. ECI had submitted the lowest bid on a school construction project, but refused to sign the PLA. The new legislation, approved by the Senate 32-3, would disallow similar lawsuits as well as antitrust lawsuits.”

May 7, 2012, the Connecticut House passed this measure, 109-37.

July 10, 2012, Gov. Malloy (D) signed Public Act 12-70.

As suspected, this law while dealing primarily with design-build legislation, contained language permitting localities the ability to negotiate and mandate PLAs. It was designed to short-circuit the pending ECI lawsuit and clear the way for the use of more anti-competitive and costly PLAs mandated by local governments like Meriden.