2021 Update: Courts Rule in Favor of #NoPLA Laws Promoting Fair and Open Competition

0 February 17, 2021  Featured, Federal Construction, State & Local Construction

Numerous courts continue to uphold pro-taxpayer federal and state laws and/or executive orders prohibiting anti-competitive and costly government-mandated project labor agreements. Advocates of government-mandated PLA schemes have been unsuccessful in challenging such laws in the courts.

As discussed in this February 4, 2021, letter to the Biden administration, ABC supports fair and open competition laws and opposes government-mandated PLAs on government-financed and procured projects because hardworking taxpayers deserve more efficient and effective policies that will encourage all qualified contractors and their skilled workforce to compete to build long-lasting, quality projects at the best price.

When mandated by government entities, PLAs have a history of increasing construction project costs by 12% to 20%, reducing competition, and discriminating against experienced construction companies and qualified local employees that compose more than 87% of the U.S. construction industry because they choose not to be affiliated with a union.

Federal PLA Policies Litigated

In the 1993 landmark Boston Harbor case, the U.S. Supreme Court held that government-mandated PLAs are not prohibited by the National Labor Relations Act, 29 U.S.C. §§ 151-169.

As discussed in the case, sections 8(e) and (f) of the NLRA, 29 U.S.C. §§ 158(e) and (f), make special exceptions from other requirements of the NLRA in order to permit employers and unions in the construction industry to enter into PLAs.

The court was not asked to decide whether government-mandated PLAs violate competitive bidding laws at either the federal or state level, which other PLA-related court cases have focused on to varying degrees and outcomes.

As a result, nothing in the Boston Harbor decision requires or prohibits government entities from imposing PLAs on government construction contracts, if the government entity is acting as a market participant for services it is procuring.

Presidential policies addressing the use of government-mandated PLAs on federal and federally assisted construction projects have oscillated since President George H.W. Bush’s October 23, 1992, Executive Order 12818, “Open Bidding on Federally Funded Construction Projects,”  was issued in response to the ongoing proceedings of the Boston Harbor court case.

President Clinton’s Feb. 1, 1993, Executive Order 12836, “Revocation of Certain Executive Orders Concerning Federal Contracting” rescinded President George H.W. Bush’s Executive Order 12818 (see the White House signing statement). After winning a second term, President Clinton proposed an executive order encouraging federal agencies to mandate PLAs on all federal projects on a case-by-case basis under certain conditions, but political pressure forced President Clinton to abandon the EO and issue a June 5, 1997 memo encouraging the use of PLAs on federal contracts exceeding $5 million.

On Feb. 17, 2001, President George W. Bush issued Executive Order No. 13202, “Preservation of Open Competition and Government Neutrality Towards Government Contractors’ Labor Relations on Federal and Federally Funded Construction Projects.” This order revoked the Clinton administration’s pro-PLA policies and declared that neither the federal government, nor any agency acting with federal assistance, shall require or prohibit construction contractors to sign union agreements as a condition of performing work on federal and federally assisted construction projects. Executive Order 13208 was issued April 6, 2001 to clarify some provisions in the previous EO.

Essentially, through these executive actions, the federal government took a position of neutrality towards a contractor’s decision to use PLAs on federal and federally assisted construction projects and decided that government and hardworking taxpayers benefited from fair and open competition byall qualified contractors.

The Bush administration order was challenged by PLA proponents in a lengthy legal case, Building and Construction Trades Department, AFL-CIO et al., v. Joe M. Allbaugh, Director, Federal Emergency Management Agency, et al. Construction unions contended that the Bush executive orders conflicted with the NLRA. The case cited the 1993 Boston Harbor case, which allowed a state agency to impose a PLA in the absence of any law or order prohibiting such a requirement as a matter of market participation.  In January 2003, the U.S. Supreme Court denied certiorari in the Allbaugh case, upholding the U.S. Court of Appeals for the District of Columbia Circuit decision upholding President Bush’s Executive Orders 13202 and 13208.

The Allbaugh case remains the controlling case in similar litigation.

Under President Bush’s executive orders, the federal government awarded $147.1 billion worth of federal construction contracts without government-mandated PLAs, and tens of billions’ of dollars’ worth of federally assisted construction projects were built without PLA mandates. During the eight years of the Bush administration, research found there were no significant labor-related problems on federal construction projects, such as work delays, cost overruns or similar problems, even though there were no government-mandated PLAs.

The Bush administration orders were repealed by President Obama on Feb. 6, 2009, and replaced with the pro-PLA Executive Order 13502, which encourages federal agencies to mandate PLAs on federal projects exceeding $25 million in total costs on a case-by-case basis. It also allows—but does not formally encourage—federally assisted projects procured by state and local governments to require PLAs under certain circumstances. Government-mandated PLAs on federally assisted projects had been strongly encouraged by some federal agencies, lawmakers and bureaucrats during the Obama administration.

In response, ABC vigorously attacked President Obama’s pro-PLA order and achieved great success defeating federal PLA mandates and did so without filing a direct legal challenge against the Obama order.

Instead, ABC spearheaded contractor bid protests with the Government Accountability Office against attempted federal agency PLA mandates. This forced federal agencies to rescind PLA mandates in all five cases where ABC employed this strategy and chilled the use of discriminatory PLA mandates across federal agencies in order to benefit hardworking taxpayers.

Fair and Open Competition Laws Prevail in State Litigation

It is estimated ABC’s efforts to enact state FOCA laws prevented government-mandated PLAs on $633 billion worth of construction capital outlay through the end of 2019.

In addition, all legal challenges by PLA advocates to such state measures have ultimately failed.

In September 2011, the U.S. District Court for the Southern District of Iowa upheld an executive order signed by Iowa Gov. Terry Branstad (R) in 2011 that restricted government-mandated PLAs.

In September 2013, the U.S. Circuit Court of Appeals for the 6th Circuit overturned a lower court ruling and upheld Michigan’s right to ban government-mandated PLAs on taxpayer-funded construction projects.

In May 2015, a federal court in the Eastern District of Louisiana that Louisiana’s 2011 law banning government-mandated PLAs was neither unconstitutional nor preempted by the NLRA.

In September 2015, the U.S. Court of Appeals for the 9th Circuit ruled in favor of Idaho’s law restricting state agencies or political subdivisions from requiring contractors to enter into PLAs as a condition of performing public work stands.

On March 11, 2019, a federal judge dismissed a 2017 lawsuit by the Arizona State Building and Construction Trades Council that aimed to block enforcement of parts of pro-taxpayer Arizona laws passed in 2011 and 2015 restricting government-mandated PLAs and similar anti-competitive schemes. A December 8, 2020, decision dismissed a new lawsuit against Arizona’s FOCA law because the construction union plaintiff’s lacked standing.

ABC filed supporting legal briefs in all of these pivotal cases concerning state laws reforming government-mandated PLA policy and will continue to defend any challenges to existing or new state or federal laws and executive orders. In addition, ABC will continue to oppose laws requiring or encouraging the use of PLA mandates, such as a discriminatory Jersey City law that forced developers to enter into a PLA with construction trade unions as a condition of receiving tax abatements on certain projects.

The Fight Against Government-mandated PLAs Continues In Some Markets

Unfortunately, some municipalities and states controlled by union-friendly Democrats have enacted legislation or executive orders promoting the use of government-mandated PLAs on state, state-assisted and local public works projects, shutting out qualified contractors on certain public works contracts in states such as in California, Connecticut, Hawaii, Illinois, New Jersey, New York and Washington—and major municipalities including ChicagoHonoluluLos Angeles, New York City, and Philadelphia—from opportunities to rebuild their own communities. Many of these taxpayer-funded projects received federal assistance, and some have suffered from poor outcomes, despite the alleged benefits of government-mandated PLAs touted by PLA advocates.

For example, the media called the Highway 99 tunnel mega-project underneath Seattle’s downtown waterfront the West Coast’s “Big Dig,” named after Boston’s notoriously delayed and budget-busting series of tunnels that were also procured with a government-mandated PLA. It has been plagued by delays, cost overruns, union strikes, featherbedding and labor disputes, a poor safety record, employees working on the jobsite while drunk, sexual harassment allegations and violations of state and federal minority contracting rules.

The extent of the use of government-mandated PLAs on federally assisted projects is unknown, but snapshots of data suggests it is significant. For example, according to a U.S. Department of Transportation Federal Highway Administration January 2021 report, state and local lawmakers mandated PLAs on 513 state and local construction projects, totaling an estimated $12.88 billion, which received federal assistance and formal approval from the FHWA.

Since former President Obama issued Executive Order 13502 in 2009, 26 states have responded to the threat of discriminatory PLA mandates and preferences by enacting Fair and Open Competition Act legislation prohibiting government-mandated PLAs on state and local taxpayer-funded construction projects to some degree. These measures send a message to the federal government that PLA requirements are not welcome on locally procured taxpayer-funded projects, even if they receive federal assistance.

Unfortunately, some of these states have rolled back common-sense FOCA measures following democratic party takeovers of state government, bringing the total number of current states with active pro-taxpayer FOCA measures to 25.

 

When mandated by governments, PLAs typically force contractors to hire most or all of their craft employees from union hiring halls, follow inefficient union work rules, hire apprentices exclusively from union apprenticeship programs, and pay into union benefit plans on behalf of employees, even if they have their own, qualified benefits programs. PLAs force employees to pay union dues, accept unwanted union representation and forfeit benefits earned during the life of a PLA project, unless they join a union and become vested in union benefit plans.

Federal, state and local lawmakers pursuing policies restricting anti-competitive and costly government-mandated PLAs should be confident knowing the judicial system supports efforts to ensure taxpayers get the best possible construction product at the best possible price. Such laws create a level playing field in the procurement of government construction contracts, increase competition, help small businesses grow, curb construction costs and spread the job-creating benefits of federally funded contracts throughout the entire construction industry.

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