An Analysis of Public Owner Construction Project Labor Agreements Second Edition The Associated General Contractors of America, Inc. is the nation's largest construction industry trade association, representing some 7,500 general contractors and 25,000 industry specialty contractors, subcontractors, suppliers, and professional services member firms in 100 AGC chapters nationwide. AGC member firms provide the highest quality services to public and private sector clients in the commercial and public building, highway, heavy industrial and municipal utility construction markets, as well as in international markets. AGC represents equally construction firms that operate with collective bargaining agreements and those that operate on an open shop basis. The Associated General Contractors of America, Inc. 1957 E Street, N.W. Washington, D.C. 20006 © Copyright, The Associated General Contractors of America, Inc., Washington, D.C., February 1998 Acknowledgements The second edition of An Analysis of Public Owner Construction Project Labor Agreements was produced by the AGC of America’s Legal Department. It updates and expands upon the first edition produced for AGC by Murphy, Smith & Polk, Chicago, Illinois, in November 1994. AGC extends its appreciation to Charles E. Murphy and Robert P. Casey of Murphy, Smith & Polk for their expertise and effort in producing the original edition that constitutes the foundation of this publication. This publication is intended to provide information about current developments on a controversial public policy and legal topic. However, it is not intended and should not be relied upon for making judgments about the legality of specific proposals in any particular jurisdiction. The Associated General Contractors of America and Murphy, Smith & Polk do not intend that any of the information in this publication will be relied upon for specific legal advice or as a substitute for attorney/client consultation, and assume no responsibility for any use of this publication. Table of Contents Page No Introduction ................................................................................................................................... iii Executive Summary ........................................................................................................................ v I. What Are Public Owner Project Labor Agreements?......................................................... 1 II. Why Are Public Owner PLAs So Controversial? .............................................................. 2 III. What's Wrong With Public Owner PLAs? ......................................................................... 2 IV. What Strategies Are Available to Counter Proposed PLAs?.............................................. 3 A. Public Owner PLAs Operate As Top-Down Organizing Tools For Construction Trade Unions And Violate The Principle That Public Owners Should Not Become Involved In Private Sector Labor Relations............... 3 B. Public Owner PLAs Also Assist Union Organizing ("COMET") Initiatives ........... 4 C. Many Public Entities in the U.S. Don't Want To Operate Under Union-Only PLAs Χ They Increase The Cost of Construction And Provide No Real Benefit to the Public Entity ........................................................... 7 D. Public Owner PLAs Raise A Host of Legal Problems That Will Generate Litigation for Years to Come .................................................................................... 11 V. Legal Issues Surrounding Public Owner PLAs .................................................................. 12 A. Understanding Boston Harbor.................................................................................. 12 B. Preemption Issues ..................................................................................................... 13 1. National Labor Relations Act Preemption....................................................... 13 2. Employee Retirement Income Security Act Preemption................................. 14 a. The "State Law" Requirement................................................................ 14 b. Cases Finding Preemption...................................................................... 14 C. State or Local Competitive Bid Statutes................................................................... 15 1. Successful Challenges ..................................................................................... 15 2. Unsuccessful Challenges................................................................................. 18 D. Federal Competitive Bid Statute............................................................................... 20 E. Hot Cargo and Pre-hire Issues .................................................................................. 21 F. Restraint of Trade Concerns ..................................................................................... 21 G. State Constitutional and Local Charters or Ordinance Issues................................... 22 H. Administrative Rulemaking ...................................................................................... 22 I. Union Security (Union Dues) Issues ........................................................................ 22 J. Union Hiring Halls.................................................................................................... 23 i Page No K. Jurisdictional Issues .................................................................................................. 23 L. Derivative Contractor Liability................................................................................. 23 VI. State Executive Orders on PLAs ........................................................................................ 24 VII. The Presidential Memorandum on PLAs for Federal Construction ................................... 25 A. Minimum Standards for Negotiating PLAs .............................................................. 26 B. Minimum Standards for any PLA............................................................................. 27 C. When a Contractual Requirement for a PLA Would Be Appropriate ...................... 27 D. GSA Standards for PLAs.......................................................................................... 28 VIII. Conclusion ......................................................................................................................... 29 Exhibits 1. Construction Industry Union Wage and Benefit Rate in Dollars/Union Representation Rate in Percentage (Bureau of Labor Statistics and Construction Labor Research Council Data) ........................................................................................... 35 2. Union Representation in the Construction Industry 1973-1996 (Bureau of Labor Statistics Data; AGC Graphics) ............................................................. 37 3. National Institute of Governmental Purchasing Board of Directors Resolution Against In-State Or Local Bidding Preferences In Awarding Public Contracts................. 39 4. National Institute Of Governmental Purchasing Board Of Directors Resolution Against Preferential Public Procurement Practices.......................................... 41 5. U.S. Department of the Army Corps of Engineers Letter Rejecting a Proposed Project Labor Agreement.................................................................................................... 43 6. Construction Labor Research Council Cost Analysis Of Various Proposed Public Project Labor Agreements ...................................................................................... 45 7. AFL-CIO Building and Construction Trades Department Standard Project Labor Agreement.................................................................................................... 51 8. Proposed Model Union Security Clause Published By The National Labor Relations Board (57 Federal Register 43644, Sept. 22, 1992) ........................................... 61 9. Presidential Memorandum on PLAs for Federal Construction .......................................... 63 10. GSA Acquisition Letter on PLAs....................................................................................... 67 Endnotes.......................................................................................................................................... 71 ii INTRODUCTION This analysis was produced by AGC in support of its policy opposing public owner project labor agreements. This policy is subscribed to by AGC member firms that operate with collective bargaining agreements and by those that operate on an open shop basis. AGC policy is founded on the well-established and widely accepted principles that taxpayer financed construction must be open to competition among all qualified firms regardless of their labor policy or their employees' collective bargaining choices and that competitive collective bargaining agreements are best achieved through employer-negotiated agreements free of public agency interference. AGC's policy position on Project Labor Agreements for publicly funded construction projects is as follows: • The Associated General Contractors of America reaffirms its commitment to free and unrestricted construction markets. • Fundamental to this principle is that publicly financed contracts are to be awarded without regard to the labor relations policy of the contractor. • AGC opposes any action that interferes unlawfully or improperly with a contractor's or awarding agency's full and free exercise