Are You Impacted by the Project Labor Agreement Executive Order?Client Alert
A primer on PLAs and what you need to know
What are Project Labor Agreements?
Project Labor Agreements (PLAs) are a quasi-collective bargaining agreement between employers and unions. They establish the terms and conditions of employment, including dispute resolution. They are put into place on specific projects and apply to the contractor, whether it is union or non-union. Employees hired on the project will be treated as union.
Why do I need to know about Project Labor Agreements?
President Biden, on February 4, 2022, issued an executive order mandating that all federal construction projects valued at $35 million or more must use a PLA. The terms of the PLA will apply to all contractors associated with the project.
What was the purpose for the Executive Order?
According to the President’s order, the purposes of the PLA mandate are to improve timeliness, lower costs, increase quality, implement consistent labor terms, and establish a common dispute resolution mechanism.
Why are PLAs mandated now?
PLAs have been encouraged (but not required) since 2009 on federal construction projects worth $25 million or more. However, PLAs were infrequently used under the Obama administration, and never under the Trump administration. Biden has repeatedly promised measures to increase union membership, and this executive order falls in line with that goal.
Are there overall problems with PLAs?
Historically, PLAs diminish competition. Many contractors, including most small contractors and subcontractors, have not had any experience dealing with unions and collective bargaining agreements. The non-union contractors will stay away from projects with PLAs. According to the Bureau of Labor Statistics, approximately 86% of people working in construction in 2021 were either not a member of a union or not represented by a union. If the non-union contractors and subs avoid the federal projects, the level of pricing competition will be significantly diminished. Additionally, with the limited availability of construction workers in general, it will be difficult to overcome the labor shortage by disincentivizing contractor participation. The executive order allows for exceptions in unusual and compelling situations, such as the lack of bidders.
What are practical problems with PLAs?
A PLA implements a set of rules which must be followed in directing your workforce. That set of rules can be simple or can be comprehensive. The enforcement of the rules by the trade unions can be informal or can be strict and demanding. The overall relationship with the trade unions can be mutually beneficial or can be adversarial. The problem is that, nonunion employers and PLA newbies will not know what disruptions a PLA can cause.
What should contractors consider with PLAs?
Many projects with PLAs go through bidding to completion without any issues whatsoever. Others have on-going disruptions, followed by unionization efforts at the conclusion of the project.
For contractors who are willing to enter into PLAs in exchange for the federal construction work, the expected limit of competition should lead to higher bids which would alleviate the potential disruption of a PLA.
Additionally, PLAs should be negotiated by the project manager or general contractor. Ordinarily, those entities will have experience with the trade unions and can negotiate common sense provisions.
Finally, many PLAs are not too disruptive. The most important provisions are on wages, benefits, hours of work and overtime. The standard deviation between union and non-union is rarely severe.
As long as a contractor understands the terms of the PLA, negotiates best terms when applicable, and always maximizes the benefits, it can be used to the contractor’s benefit.