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In early February 2022, President Biden signed an executive order requiring project labor agreements (PLAs) on all federal projects over $35 million. This means contractors working on eligible projects should expect to pay more in labor and benefits and may have to enroll their workers with a union, even if they’re an open shop. This could affect $262 billion in federal government construction contracting as well as nearly 200,000 workers on federal construction contracts. But what is a PLA, and how can it affect construction jobs and wages?
What is a project labor agreement?
A project labor agreement, or PLA, is a prehire collective bargaining agreement that sets the wages and benefits for all workers on a project. The agreement is project-specific and is only in effect for the duration of the project work. It basically guarantees that the project it applies to will use union labor.
A project labor agreements set wage rates for workers on projects and often requires all workers to join a union before beginning work, even if they work in a nonunion shop.
PLAs are only allowed in construction projects, both new construction and alterations. The National Labor Relations Act (NLRA) prohibits prehire agreements in any other industry, and a 1993 Supreme Court decision ruled that union-only prehire agreements were allowed under the NLRA.
PLAs are used on both public and private construction projects, and the terms apply to all contractors and subcontractors working on the project.
The federal government has tried several times to encourage the use of PLAs in federal projects, but they have never been required — until now. President Barack Obama encouraged federal agencies to use PLAs on projects over $25 million, but they weren’t required. Now, Biden’s executive order makes PLAs mandatory for projects over $35 million.
Not everyone agrees with the use of PLAs. There is considerable debate between the opponents and proponents of PLAs.
Proponents of PLAs say they ensure decent wages for workers, a quality workforce, and timely completion of projects while staying on budget.
Opponents say PLAs are anti-competitive and increase costs. In a statement regardingBiden’s executive order, the Associated General Contractors of America (AGC) responded in opposition to PLAs:
“Government-mandated project labor agreements undermine the collective bargaining process by imposing a separate agreement in a specific region that applies only to a limited number of construction firms and unions. These imposed PLAs undercut the benefits of the collective bargaining agreements that were negotiated in good faith between employers and labor unions and will likely prompt many firms to think twice about participating in the bargaining process in the future.”
Agree or disagree, with the passage of the 2021 federal infrastructure bill, many large federal projects will be coming to bid — and many will be subject to the PLA requirement.
Contractors must be aware of this when bidding on these projects because they can raise costs and directly affect how contractors recruit workers for federal projects.
Common provisions in a project labor agreement
Wages and benefits
PLAs can be used to specify the wages and fringe benefits that must be paid to each worker classification. Additionally, according to the White House statement on the executive order, as of January 30, 2022, federal contractors in new or extended contracts must pay a $15/hour minimum wage.
Aside from that, wage and benefit amounts are generally set based on local union averages.
For example, the PLA for the Multnomah County Courthouse project in Portland, Oregon, specified that workers were to be paid “prevailing wages and fringe benefits by craft as determined by the applicable BOLI [Bureau of Labor and Industry] prevailing wage publication.”
PLAs may also specify that workers are to be paid according to the Davis-Bacon Act, which requires certain pay rates and fringes for federally funded projects. Many public projects may also be subject to local prevailing wage laws. When present, prevailing wage laws require that contractors and subcontractors on public jobs must pay the majority of their workers no less than the local, prevailing wage rate.
The agreement may specify procedures for resolving potential labor disputes during the course of the project. It may require mediation, arbitration, or some other form of dispute resolution.
In the example of the Multnomah Courthouse PLA, it specifies the creation of a “labor-management-community Oversight Committee to discuss and resolve issues and/or concerns which may arise during the life of the project.” The committee is made up of one representative from each contractor, union, and the owner.
Work stoppage and strikes
Most PLAs will have a clause stipulating that all parties agree not to strike or lockout workers during the project. Workers or contractors who participate in activities that may lead to a strike or lockout may be subject to discipline as per the agreement.
The agreement may require all workers on the project to join a union before beginning work. The agreement may contain language specifying how workers are assigned to the project through the union, as well as language encouraging the use of local workers whenever possible.
Health and safety
The agreement may provide guidance on health and safety requirements specific to the project and the work to be performed.
Community workforce agreements
There may be language that provides information on workforce and apprenticeship requirements, including journeyman to apprentice ratios and diversity goals.
Common arguments in favor of PLAs
- PLAs provide union wages, benefits, overtime, working conditions, and working rules.
- They provide a reliable and uninterrupted supply of workers at a predictable cost.
- Standard PLAs are easier to manage than separate agreements with each union with different wages, benefits, and expiration dates.
- A PLA will help ensure projects will be completed on time and on budget through stable wage rates.
- They help provide training to new workers through union-sponsored apprenticeship and training programs.
- By providing safety rules and requirements, they improve safety on projects.
- PLAs ensure compliance with labor standards, and health and safety laws.
Common arguments in opposition to PLAs
- Using a PLA leads to increase costs due to reduced competition from nonunion contractors.
- PLAs impede the use of a contractor’s own workers.
- They require workers to pay union dues without vesting into the plan.
- Nonunion training programs may be more efficient at training workers.
- There is no evidence that nonunion projects are less safe.
- Work health and safety standards are already enforced on all projects through the Wage and Hour Division and OSHA.
According toDaniel Hogan, chief executive of the Association of Union Constructors (TUAC), PLAs can “streamline the negotiation process and gives employers access to a highly skilled pool of craftworkers.”
On the other side, according to the AGC statement: “A recent analysis of federal construction procurement decisions by the Department of Defense during the Obama administration that we obtained via a Freedom of Information Act request – during a time when federal officials were being pressured by a similar executive order – found that in 99.4 percent of construction projects where a PLA could have been imposed, nonpartisan federal officials found no benefit to taxpayers from imposing one.”
Working under a Project Labor Agreement? Plan accordingly
Regardless of personal opinions on PLAs, it’s important to know the requirements where they apply. When bidding federal contracts under a project labor agreement, contractors must be aware of the additional costs of these projects. Adjust your cost estimates to include higher wages and increased benefit costs to meet the requirements of the contract.
To ensure that you have enough cash to pay your employees, you can take advantage of financing to pay for materials or mobilization costs.
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