In a huge boon for organized labor, President Obama issued an Executive Order on February 6, 2009, that encourages federal agencies to use project labor agreements (PLAs) on construction projects valued at $25 million or above. A PLA governs the terms and conditions of all unions and employers working on the construction project. It allocates work among the building trades, applying the terms of the area union agreements. These labor agreements not only incorporate inflationary economic conditions (which are built into the prevailing wage laws), but assume minimum manning and other wasteful conditions that preclude employers from competitive bidding based on operational efficiencies.
PLAs exclude non-union contractors. The purported quid pro quo for this exclusion is a binding mechanism to resolve intra-union jurisdictional and other disputes that may interfere with the timely completion of the project. In return for artificially high wages and benefits, and other conditions that require excessive manning and abundant premiums, unions agree not to shut the job down because of internal squabbling. The taxpayer picks up the tab for this waste.
Although the Executive Order states that all contractors should be permitted to bid on contracts without regard for whether they are party to a labor agreement or unionized, the net effect is that non-union contractors will be forced to enter into agreements with the building trades. Use of PLAs is consistent with the President's avowed support for organized labor.
The Executive Order does not compel the use of PLAs, leaving the decision to federal agencies on a project-by-project basis. Nevertheless, the overwhelming likelihood is that most projects involving $25 million or more will be unionized under PLAs. Moreover, with the new stimulus package earmarking billions of dollars for construction and repair of buildings and roads, this Executive Order ensures that the building trades will receive a huge windfall of new work, guaranteeing full employment at maximum rates with minimum work demands. In addition, the Executive Order provides for further study, and in all probability, will set the stage for additional use of PLAs.
The Obama Executive Order specifically rescinds two 2001 executive orders issued by President Bush that prohibited federal agencies from using PLAs on projects subsidized with federal monies.
Prior to the Bush presidency, the governmental use of PLA's was challenged as violating the National Labor Relations Act because of its overt discrimination against non-union labor. The matter reached the United States Supreme Court in the Boston Harbor case, which held that when the federal government acts as a purchaser, as opposed to a regulator, it has the same rights as a private purchaser, and was permitted to enter into a PLA. Although an agency's decision to use a PLA in one project has been approved by the Supreme Court, the question remains as to whether a governmental policy favoring the use of PLAs would be protected. The current Executive Order attempts to sidestep this issue, by encouraging, but not requiring, agency use of PLAs.
The President has moved rapidly to revitalize the union movement through a series of Executive Orders. More far reaching legislative steps will soon follow – most notably the Employee Free Choice Act, which, as currently drafted, would:
- Require card check recognition of union majority status, thereby abrogating an employer's statutory right to an election and voiding the current protections against unions achieving representational rights based on fraud and coercion
- Require an employer to submit to binding interest arbitration if a first labor contract is not agreed to in short order, thereby authorizing an outsider to dictate economic and operational conditions to an employer with potentially disastrous results
- Provide increased monetary penalties and injunctive relief on behalf of in-house union organizers, thereby effectively insulating union proponents from normal discipline by increasing the cost/risk to employers in exercising their basic rights to control their workforce
Employers face a huge governmental challenge if they wish to maintain a merit-based culture based on quality, service and efficiency. This challenge is particularly troubling given the current recession and the ongoing battle for survival in an increasingly competitive global economy.
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