Project Labor Agreements (PLAs) - A Case for California

What is a PLA Project Labor Agreement?

A Project Labor Agreement (PLA) is a pre-hire collective bargaining agreement typically negotiated between a project owner, construction manager or general contractor and an appropriate labor organization, usually an area or State Building and Construction Trades Council for the purposes of advancing the economical and efficient completion of the construction project.

That means basic terms and conditions for labor are established in advance for everyone involved in the project: the public sector employer, contractors and subcontractors, and the labor force.

Unlike most pre-hire agreements, PLA's are project specific and last only as long as the project.

A typical PLA includes no-strike, no lock-out agreements and procedures for settling quickly and any problems or disputes that might develop during a project. Consequently, PLA's eliminate hidden costs and cost overruns by eliminating unexpected wage demands or disputes during the life of the project.

Common Myths About PLA's

PLA's require the use of Union Contractors only.FALSE

PLA's never restrict bidding solely to union contractors. In fact, in the $750 million MWD Reservoir Project 75% of all contracts went to non-union contractors.

PLA'S require the use of union only labor.FALSE

Public-owner PLA's do not exclude non-union labor.

PLA'S are new to public sector construction. FALSE

PLA's have been used for more than 60 years. The Shasta Dam; Cape Kennedy Space Center; Grand Coulee Dam, Los Angeles LRT system, MWD Eastside Reservoir; and the Lawrence Livermore Laboratory, to name just a few, were all built through the use of a PLA.

PLA's force public entities to pay the higher Union wage. FALSE

California law already requires that the prevailing wage be paid on all public works projects.

PLA's discriminate against minorities. FALSE

PLA's create a level playing field for all bidders, and the use of joint labor-management apprenticeship programs actually increase minority participation also, some PLA's include provisions targeting job training opportunities at individuals with disadvantaged backgrounds.

U. S. Supreme Court and the California Supreme Court
Unanimously Uphold PLA's On Public Projects

The use of PLA's as a construction management tool has been unanimously endorsed by the U. S. Supreme Court as advancing the purposes of Federal Labor Law, and similarly endorsed by the California Supreme Court as consistent with State procurement law policies requiring the selection of the most qualified contractors at the lowest price to do the job in the manner considered best by the public agency.

In short, the courts held the following:

The United States Supreme Court held in Building Trades Council v. Associated Builders and Contractors, 507 U.S. 218 (1993), that the use of Project Labor Agreements by public agencies is consistent with the National Labor Relations Act. The unanimous court observed that such agreements are used "to ensure an efficient project that would be completed as quickly and effectively as possible at the lowest cost." 507 U.S. at 232.

The California Supreme Court held in Associated Builders and Contractors v. San Francisco Airports Commission 21 Cal. 4th 352 (1999), that a public agency may utilize a Project Labor Agreement. The unanimous decision rejected arguments that a Project Labor Agreement is inconsistent with competitive bidding laws or other state constitutional or statutory provisions, and concluded that the San Francisco Airport Commission's decision to require a Project labor Agreement was "in furtherance of legitimate governmental interests . . . these interests include those of preventing costly delays and assuring contractors access to skilled craft workers." 21 Cal 4th at 374.

 

Economic Advantages To PLA's

  • Standardized conditions and predetermined wages which eliminate any uncertainty with respect to supply of and cost of labor for the life of the project.
  • Elimination of all work stoppages for the duration of the project which assures productive labor relations.
  • Evaluation and re-negotiation, if necessary, of local conditions to meet special needs of a project.
  • Reduced likelihood of cost over-runs and change orders as the result of greater certainty of estimated costs.
  • Jobs are more likely to be completed on schedule due to the contractors access to an immediate supply of skilled labor.
  • Increased productivity and job site safety also results from the skills of workers trained through join labor-management apprenticeship programs.
  • The ability to target training and job opportunities at individuals with disadvantaged backgrounds.
  • In some cases, lowered workers' compensation costs through the use of collectively-bargained Alternative Dispute Resolution (ADR) and managed care procedures.

The MWD Experience

** "The uncontroverted evidence establishes that the APL's specialized Workers' Compensation ADR system has resulted in substantial cost-savings."

The MWD's owner-controlled insurance program and specialized workers' compensation ADR system created through a PLA have resulted in the following cost cutting:

  • "33% reduction of workers' compensation losses since 1994."

** "$6.4 million reduction in its workers' compensation premiums, which is $9 million below the standard (manual) that MWD would have paid without the owner-controlled program."

** "ITT Hartford estimates MWD will save an additional $5 million to $7 million through the streamlined medical and claims management process."

** "As a result of the first year's experience under the ADR system, MWD received in excess of $2 million in returned advance payments on premiums."

** MWD estimates total workers compensation savings between $20 and $35 million for the life of the project.

  • Source: California Division of Workers Compensation.

** Source: MWD brief to the Court, Associated Builders and Contractors Inc. v. Metropolitan Water District.

Courts Across the Country
Reject Challenges to PLA's

Summary of Court Decisions on Public Project PLAs

Courts at the federal level and in 13 states have issued opinions in litigation challenging the legality of project agreements under the U.S. or state constitutions, and a variety of state procurement and competitive bidding laws. The challenges for the most part have been rejected. The following is based in part on material in a motion for a temporary restraining order filed by the Ohio State Building and Construction Trades Council, and summarized the courts' activities.

FederalPhoenix Engineering Inc. v. MKFerguson of Oak Ridge Co. (6th Cir. 1992), 966 F.2d 1513, cert. denied (1993), 507 U.S. 984, 113 S.Ct. 1577) 123 L.Ed.2d 146 (rejecting assertions that PLA was preempted by the NLRA and that it violated the federal competitive bidding statute).

Alaska Laborers Local No. 942 v. Lamphin(Alaska 1998), 956 P.2d 422, 157 LRRM 2985 (rejecting assertions that PLA violated the borough's competitive bidding code and the equal protection takings, and freedom of association clauses of the state constitution).

CaliforniaAssociated General Contractors of America, San Diego Chapter, Inc. v Metropolitan Water District of Southern California (9th Cir. 1998), 159 F.3d 1178, 159 LRRM 2588 (rejecting assertion that PLA was preempted by ERISA); Associated Builders & Contractors Inc, Golden Gate Chapter v San Francisco Airports Commission (Calif. 1999), 21 Cal. 4th 352, 981 P.2d 499, 87 Cal. Rptr.2d 654, 161 LRRM 3166 (rejecting assertions that IA was precluded by the NLRA and that it violated the freedom of association clause of the U.S. constitution, the equal protection clauses of the U.S. and State Constitutions, and state competitive bidding, labor, and anti-kickback statutes).

ConnecticutConnecticut Associated Builders & Contractors, Inc. v. Anson (Conn. Supr. Ct. 1998), 1998 WL779563 (rejecting assertion that PIA violated State competitive bidding statute).

IllinoisColfax Corp. v. Illinois State Toll Highway Authority (7th Cir. 1996), 79 F.3d 631 (rejecting assertion that PLA was preempted by NLRA).

MassachusettsBuilding & Construction Trades Council of the Metropolitan District v. Associated Builders & Contractors of Mass.R.I., Inc. (1933), 507 U.S. 218, 113 S.Ct. 1190, 122 L.Ed.2d 565 (rejecting assertion that PLA was preempted by the NLRA); John T. Callahan & Sons, Inc. v. City of Malden (1999), 430 Mass. 124,713 N.E.2d 955 (rejecting assertion that PLA violated State competitive bidding statute); Utility Contractors Association of New England, Inc. v. Commissioner's of Mass. Department of Public Works (Mass. Super. 1996), 153 LRRM 2297 (rejecting assertions that PLA violated State competitive bidding statute, state prevailing wage law, state public employees collective bargaining law, state civil rights law, and state administrative procedures act, that it constituted an unlawful usurpation and delegation of power in violation of the state constitution, and that it violated the due process clause of the State constitution).

MissouriHanten v. School District of Riverview Gardens (8th Cir. 1999), F.3d - - 161 LRRM 2584 (rejecting assertions that PLA violated freedom of association and due process clauses of the U. S. Constitution and State competitive bidding statute).

NevadaAssociated Builders and Contractors, Inc. v. Southern Nevada Water Authority (Nev. 1999), 979 P.2d 24, 161 LRRM 2537 (rejecting assertions that PLA violated state freedom of association, competitive bidding and right-to-work statutes).

New JerseyTormee Const. V. Mercer County Improvements Authority (N.J. 1995), N.J. 143, 669 A.2d 1369 (while PLAs were not per se illegal under the laws of that state, the PLA at issue was declared invalid because it "impermissibly restricts contractors to a union only workforce", such agreements may be required only in exceptional circumstances).

New YorkNew York State Chapter Inc., Associated Gen. Contractors of Am. v. New York State Thruway Authority (N.Y. Ct. App. 1996), 88 N.Y.2d 56,666 N.E.2d 185, 643 N.Y.S.2d 480 (rejecting assertion that PLA violated State competitive bidding statute).

OhioState, ex rel. Associated Builders and Contractors, Cent. Ohio Chapter v. Jefferson County Board of Commissioners (Jefferson App. 1995), 106 Ohio App. 3d 176 (rejecting assertion that PLA violated state competitive bidding statute), appeal denied (I 996), 74 Ohio St.3d 1499; Enertch Electric, Inc. v. Mahoning County Commissioners (6th Cir. 1996), 85 F.3d 257 (rejecting assertions that PLA violated due process clause of the U.S. Constitution and State competitive bidding statute).

OregonAssociated Builders and Contractors Inc. v. Tri-County Metropolitan Transportation District of Oregon (Or. Cir. Ct. 1998), No. 981007174 (rejecting assertion that PLA violated the state competitive bidding statute).

PennsylvaniaA. Pickett Construction Inc. v. Luzern County Convention Center Authority (Pa. Commw. Ct. 1999), A.2d 1999 WL 652431 (rejecting assertion that PLA violated State competitive bidding statute).

 

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