Understanding Core Workforce Provisions in Project Labor Agreements

0 April 7, 2014  Featured

Among the many reasons why most merit shop contractors oppose government-mandated project labor agreements (PLAs) is language requiring contractors to hire all trades employees for a PLA jobsite directly from union hiring halls.

Sample language from a typical PLA: “Article 7.01. – For Unions having a hiring hall or job referral system in their local agreements, the Employer agrees to be bound by such system and it shall be used exclusively by the employer.”

This provision prevents contractors from using their existing craft employees to build a PLA project. This is problematic because successful construction firms invest resources into their workforces to improve jobsite safety, productivity and quality in order to deliver value to customers and develop a competitive advantage in the marketplace.

Many contractors believe hiring unfamiliar workers of unknown quality through union hiring halls is a needless risk that could delay time- and cost-sensitive construction schedules. They contend an unfamiliar workforce makes it difficult to make accurate labor cost and project schedule estimates. They say it harms existing employees economically, and undermines the benefits of having a loyal workforce focused on the success and growth of a company in a customer-service business. (See comments from contractors and employees below).[1]

In short, using an unfamiliar workforce creates uncertainty about the ability of a contractor to attract and retain experienced employees and deliver a quality, on-time and on-budget construction product to customers.

What Is a Core Workforce Provision?
Some PLAs contain language, known as a core workforce or a tag-along provision, permitting contractors to use a token number of its existing craft workforce on a PLA jobsite.

Varying from PLA to PLA, the amount of “core” or “tag-along” craft employees permitted is usually capped at a very small number or percentage of a contractor’s workforce for each specific trade on a PLA jobsite.

Not in a Union

In order to work on a PLA project for their current employer, core employees must meet certain qualifications and follow procedures articulated in the PLA and/or in a local union’s applicable hiring hall rules, with which merit shop firms and employees can have difficulty navigating and complying.[2] These “core” employees typically must be dispatched back to their current employer through union hiring halls, adding a needless level of bureaucracy and interference into existing employer-employee relations.

Some lawmakers and PLA proponents think they are acting in a non-discriminatory and even favorable manner toward nonunion construction workers and businesses by allowing merit shop contractors to use a limited number of core tag-along employees.

However, core workforce provisions introduce a number of new problems and risks for merit shop contractors and their employees. These provisions fail to alleviate opposition to government-mandated PLAs by the merit shop contracting community.

The following problems arising from a typical core workforce provision in a PLA will ultimately increase labor costs and discourage competition from qualified contractors and their experienced employees.

1. Fringe Benefits Contributions to Union Plans
Typical PLAs require nonunion companies to pay fringe benefits to union trust funds for health, retirement, vacation, sick and other benefits on behalf of tag-along employees, even if companies have their own benefits plans. Workers cannot access any of their benefits accrued in union plans during the life of the PLA project unless they decide to leave their nonunion employer, join a union and remain with the union until vested.[3]

If the employee does not join a union and remains with its existing employer once the PLA project is completed, union benefits plans receive a windfall of the confiscated fringe contributions and the worker will not receive any benefits earned during the life of the project.

However, because few nonunion employees choose to join a union after working on a PLA project, merit shop companies often end up paying benefits twice: once to the union plans and once to the existing company plans, to ensure employees are receiving retirement and other benefits. Nonunion contractors have to factor this double benefit cost into their bid, which needlessly increases costs and puts them at a competitive disadvantage against union contractors that are not saddled with these unnecessary costs.[4]

In addition, paying into underfunded and mismanaged union-affiliated multi-employer pension plans may expose merit shop contractors to considerable pension withdrawal liabilities and litigation. Depending on the health of a union-managed multi-employer pension plan, signing a PLA could bankrupt a contractor or prevent it from qualifying for construction bonds needed to build future projects for clients.[5]

In short, this provision has the potential to harm tag-along employees economically and increase risks and costs to contractors.

2. Inefficient Union Work Rules
PLAs require contractors to follow union work rules outlined in union collective bargaining agreements, which changes the way they otherwise would assign tag-along employees to specific job tasks—requiring contractors to abandon an efficient labor utilization practice called “multiskilling” and instead assign work based on inefficient and archaic union craft jurisdictional boundaries that increase labor costs.

Merit shop contractors achieve significant labor cost savings through multiskilling, in which workers possess a range of skills that are appropriate for more than one work process and are used flexibly across multiple trades on a project or within an organization. This practice has tremendous labor productivity advantages for contractors, but it is forbidden by typical union work rules and, by extension, PLAs.[6]

3. Forced Union Dues and Union Representation
Depending on the PLA, tag-along employees must pay nonrefundable union dues and/or fees and/or join a union to work on a PLA project, even though they have decided to work for a nonunion employer.

In addition, PLAs require unions to be the exclusive bargaining representative for workers during the life of the project. When participating on a PLA project, the decision to agree to union representation is made by the employer rather than the employee.[8] Construction employees often argue that forced unionization and/or representation—even for one project—is an infringement of their workplace rights and runs contrary to their intentional decision not to join a union.   

Recommendation: Know Your PLAs, CBAs, Fringe Benefits Plans and Hiring Hall Rules
Some PLAs have made concessions to union fringe benefit plan contributions, union work rules and union dues/representation and other terms harmful to merit shop contractors and employees.

However, unions rarely agree to these concessions because these costly and discriminatory provisions discourage nonunion contractors from competing for public projects. Unions negotiating PLAs contend they deserve something in return for agreeing to squeeze inefficiencies from their existing collective bargaining agreements related to labor peace, work schedules and other provisions that are the cornerstones of the alleged benefits of a PLA.

Union-favoring PLA proponents require these discriminatory provisions because they are crucial to reducing competition and ensuring union contractors have an unfair advantage over nonunion contractors and union tradespeople enjoy a virtual monopoly building taxpayer-funded projects.

Lawmakers and merit shop contractors are advised to read the final PLA, and request copies of all relevant union collective bargaining agreements, fringe benefits plans and hiring hall rules referred to in the PLA before deciding whether to mandate a PLA or sign a PLA.

Comments From Merit Shop Employees on Tag-along Provisions
“If I work on a PLA project, the union steals all of my fringe benefits unless I join a union and become vested. They call me a scab, charge me union dues, and claim to represent me even though I have chosen not to join a union and work for a nonunion company. They say I am unqualified, even though I have the same, if not better, training than they do. But the minute I sign a union card, I’m magically high quality. It’s a scam. Union officials say they represent the interests of workers, but they only look out for themselves, union institutions, union members and unionized contractors.”  – Mike P., Roofer, Camden, N.J.

“The concept of lawmakers requiring a PLA because it is good public policy is absurd. A PLA would result in me, a local constituent, effectively working without benefits unless I join a union. On the other hand, if my company continues to pay into our company benefits plans, the PLA needlessly increases our bid and makes it difficult for us to win more contracts to keep us working. Companies lose or taxpayers lose. There is no way around it: It’s either forced unionism or cronyism. Both outcomes are bad for everyone except unions and politicians relying on union support.” – Darnell J., Electrician, Sacramento, Calif.

“I have no problem working on a project alongside union members. I do have a problem when they tell me I can’t help during downtime on a job by picking up a broom, driving equipment or pitching in where I can because “that is not your job” when I have the skills and training to do so. When they tell me to slow down so they can make the project last longer and earn more money, you know union members are not being efficient and they aren’t looking out for the best interests of our company and the customer.” – Scott D., Pipefitter, Clifton Park, N.Y.

Comments From Merit Shop Contractors on Tag-along Provisions
“Using union employees from union hiring halls is risky. My workforce has the latest safety, equipment and field training. I know how quickly my workforce can complete tasks without sacrificing safety or quality. I know the output of my workforce on an hourly basis, which I use to estimate labor costs as part of our bid. With a PLA, I have unfamiliar workers and crews, even if I can use tag-along employees. So I am essentially bidding blindly, which impacts quality, customer satisfaction, and our ability to make a profit. It also hurts my employees in their wallets.” – Electrical Contractor, Virginia

“The local union my competitors are signatory to has been trying to put me out of business for 25 years. If I sign a PLA, do you really think they will send me their best workers? The union will send me their least productive members to slow down the project, do shoddy work, sabotage equipment, file frivolous legal complaints and increase my costs. Any of my tag-along workers will be subjected to harassment by union officials and they will earn less than they would if they worked on a non-PLA project.” – Specialty Contractor, New York

“Our company is a family-run business and we take care of our employees. We invest in our workforce by offering outstanding benefit plans, the latest training, and excellent wages to attract and keep top talent. Our personnel is our company’s best asset. Under a PLA, tag-along employees would lose benefits unless I continue paying into our current plans, which increases my costs needlessly. On a PLA, I would be forced to tell some or all of my loyal craft workers they can’t work. Hopefully, we would have other jobs to keep them employed, but in this economy, forcing us to hire union guys instead my guys will hurt the quality of the project and harm the families of my existing workforce and the health of our company in the short and long term.” – Mechanical Contractor, Pennsylvania

“Allowing tag-along employees on a PLA jobsite really isn’t doing our company or my workforce any favors. I have yet to hear a compelling case why subjecting my employees to forced union dues, hostility from union officials at the hiring hall or workplace, and the union-theft of benefits my team has rightfully earned on a PLA is a win-win.” – Concrete Contractor, Maryland

“Due to desperate economic times, we did one PLA project as a general contractor and it was a terrible experience and we will never do one again. We elected not to self-perform any craft work, so we subcontracted everything to firms willing to sign a PLA. As a result, we had a significantly smaller pool of subcontractors to work with in most trades. Less competition means higher prices. Subcontractors that used tag-along employees told me the PLA didn’t allow them to give us their best price because of union work rules, duplicative benefits costs and uncertainty about the quality of the union labor. The union subcontractors we used were not as productive as the merit shop subcontractors we normally use for this type of work. There were problems with the quality of the work in some instances, and we saw no evidence that unionized contractors and workers were more productive than merit shop firms and employees. All of these added costs were passed along to taxpayers upfront and our company turned a smaller profit than expected because of them.” – General Contractor, Connecticut

“In my experience, some union workers and leaders are not interested in the health and competitiveness of signatory employers. Our employees are all rowing in the same direction and understand the more work our company wins, the more they can work and earn. All successful businesses are run this way. In contrast, union hiring halls create a culture where union workers drag out projects because they don’t know when they will work again and it might be for another union-signatory contractor. They are all paid the same wages and the union bosses will protect them at all costs, resulting in no accountability. There are no incentives for unions to maximize productivity and help employers make money.” – General Contractor, Ohio

“As a firestop contractor, we work for the drywall, HVAC, plumbing, electrical, mechanical masonry and telecommunication contractors. The unions do not have the trained firestop installers to perform the firestop correctly. If the firestop on the project is not claimed by a single union, then a firestop specialty contractor would have to belong to all the unions that apply for the different trades, with separate foreman and installers and bookkeepers for each union. We would have to follow each union’s work rules, benefit plans and CBAs flawlessly or face stiff penalties. Then we would have to train these unfamiliar union members how to do the work. Our tag-along employees would not be able to multi-skill. It would be a nightmare.” – Specialty Subcontractor, North Carolina

See more comments on the impact of PLAs on contractors here: http://thetruthaboutplas.com/wp-content/uploads/2012/12/Contractor-responses-to-PLA-survey-for-FAR-PLA-NPRM-081309.pdf

[1] Comments from national survey of ABC members and employees on impact of PLA mandates, June 2013.

[3] An October 2009 report by Dr. John R. McGowan, The Discriminatory Impact of Union Fringe Benefit Requirements on Nonunion Workers Under Government-Mandated Project Labor Agreements, finds that employees of nonunion contractors forced to perform under government-mandated PLAs suffer a reduction in their take-home pay that is conservatively estimated at 20 percent. PLAs force employers to pay employee benefits into union-managed funds, but employees will never see the benefits of the employer contributions unless they join a union and become vested in these plans. Employers that offer their own benefits, including health and pension plans, often continue to pay for existing programs as well as into union programs under a PLA, making their labor costs needlessly more expensive. See www.TheTruthAboutPLAs.com, New Report Finds PLA Pension Requirements Steal From Employee Paychecks, Harm Employers and Taxpayers, 10/24/09.

[4] The McGowan report found that nonunion contractors are forced to pay in excess of 25 percent in benefit costs above and beyond existing prevailing wage laws as a result of “double payment” of benefit costs.

See www.TheTruthAboutPLAs.com, New Report Finds PLA Pension Requirements Steal From Employee Paychecks, Harm Employers and Taxpayers. 10/24/09.

[6] See www.TheTruthAboutPLAs.com, Understanding the Merit Shop Contractor Cost Advantage. 5/17/10.

[7]The legality of clauses in typical PLAs that require compulsory union membership and payment of union dues and fees to unions by workers in order to work on a PLA project depend on the state’s Right to Work law status. See www.TheTruthAboutPLAs.com, Understanding PLAs in Right to Work States, 7/20/09.

[8] Workers normally are permitted to choose union representation through a card check process or a federally supervised private ballot election. PLAs are called pre-hire agreements because they can be negotiated before the contractor hires any workers or employees vote on union representation. The National Labor Relations Act generally prohibits pre-hire agreements, but an exception in the act allows for these agreements only in the construction industry. In short, PLAs strip away the opportunity for construction workers to choose a federally supervised private ballot election or a card check process when deciding whether union representation is right for them.

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