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Tuesday, October 19, 2010

Project Labor Agreements

Gerald Mayer
Analyst in Labor Policy

The National Labor Relations Act (NLRA) gives most private sector workers the right to join or form a labor union and to bargain collectively over wages, hours, and working conditions. The act allows workers in the construction industry to enter into a collective bargaining agreement before a project begins. A project labor agreement (PLA) is a collective bargaining agreement that applies to a specific construction project and lasts only for the duration of the project.

In February 2009, President Barack Obama signed an Executive Order (EO) that encourages federal agencies “to consider requiring” the use of PLAs on large-scale construction projects. The EO defines a large-scale project as one where the total cost to the federal government is $25 million or more. The order states that agencies are not required to use PLAs. Regulations implementing the EO went into effect in May 2010.

A PLA generally specifies the wages and fringe benefits to be paid on a project, and it usually includes procedures for resolving labor disputes. PLAs generally include a provision that unions agree not to strike and contractors agree not to lock out workers. A PLA may require contractors to hire workers through a union hiring hall. If not, it may require employees to become union members after being hired. A PLA applies to all contractors and subcontractors on a project.

Opponents and proponents of PLAs disagree on the economic effects of PLAs. Supporters argue that the agreements provide uniform wages, benefits, overtime pay, hours, working conditions, and work rules for work on major construction projects. They maintain that PLAs provide contractors with a reliable and uninterrupted supply of workers at predictable costs for wages and benefits, and they argue that a PLA makes it easier to manage a large project, which ensures that it will be completed on time and on budget. Supporters also say that PLAs help train workers and improve worker safety.

Opponents argue that PLAs have several disadvantages. They argue that PLAs increase construction costs. Because a PLA sets standard labor costs and work rules, nonunion contractors cannot win bids based on lower costs. In addition, nonunion contractors may not bid on projects that are covered by a collective bargaining agreement, resulting in fewer bids and higher costs. If a PLA requires contractors to hire workers through a union hiring hall, contractors may not be able to use their own workers. A nonunion contractor’s workers may have to join a union and pay union dues. If a contractor has to pay into a union pension plan, employees may not be on the project long enough to vest in the plan. Opponents of PLAs also argue that nonunion contractors can operate more efficient worker training programs and that evidence does not indicate that nonunion construction projects are less safe than union projects.

Much of the research on the effect of PLAs on the costs of construction is inconclusive. In part, it can be difficult to find similar projects where some use a PLA and the others do not. Instead of comparing similar projects, economists often use statistical models that attempt to control for differences in the characteristics of the projects. It can be difficult, however, to control for all the factors that affect the costs of construction. For example, if the Davis-Bacon locally prevailing wage is the local union wage, contractors may pay workers the union wage whether or not the project is covered by a PLA. In addition, statistical models may not take into account the quality of construction, whether projects are finished on time, or the safety records of different projects. Finally, the relationship between PLAs and construction costs may be interdependent. PLAs may affect construction costs, but the size and cost of construction may also affect the use of PLAs.

Date of Report: October 4, 2010
Number of Pages: 12
Order Number: R41310
Price: $29.95

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