Project Labor Agreements and Public Contracting — A Controversial Topic

Whenever you think of public contracting, you think of the low bidder. In most public works projects — and on private projects, for that matter — the lowest qualified bidder is normally awarded the job. A trend is developing, however, among public contracting agencies, including some in Oregon and Washington, to include in their bidding specifications a requirement that contractors be signatories to Project Labor Agreements as a condition to being awarded public works projects. The requirement has sparked nationwide debate.

A Project Labor Agreement ("PLA") is a prebid contract between a construction project owner and a labor union (or unions) establishing the union(s) as the exclusive bargaining representative(s) with respect to rates of pay, hours of work, and other conditions related to employment and labor on the owner's project. What this means is that all bidders, union or non-union, must follow certain requirements in order to be awarded the contract. The requirements include such things as mandatory hiring of workers through union hiring halls; following specified dispute resolution procedures; complying with union wage, benefit, seniority, and apprenticeship rules; and contributing to union benefit funds.

In return, the unions promise labor peace throughout the life of the project. This means that on projects with tight time schedules and budgets, a PLA will promote labor stability by preventing strikes or other labor disturbances, while simultaneously establishing fixed rates of pay for the project's duration. In addition, by negotiating directly with the unions, an owner can receive other cost incentives such as reductions in the number of paid holidays, or flexible work weeks and starting times to reduce overtime pay.

PLAs have existed in the private construction sector for many years. In 1959, the National Labor Relations Act ("NLRA") was amended by Congress to permit employers in the construction industry to enter into agreements similar to PLAs. The purpose of this was to accommodate conditions specific to the construction industry, namely the needs of contractors for predictable costs and a steady supply of skilled labor, as well as the need of both contractor and labor for organized grievance procedures.

Non-union or "open shop" contractors and organizations have been the most outspoken opponents of PLAs. While PLAs do not require a contractor to be affiliated with a union, they do require that the labor used by the contractor become (or already be) union. While some PLA agreements allow open shop contractors to retain a limited number of non-union "core" employees, such contractors often contend PLAs force them to hire workers of unknown capability compared with that of their own employees, whose productivity and experience are more readily ascertainable. In addition, open shop contractors argue that lack of knowledge of jurisdictional union rules places them at a competitive disadvantage to union contractors. Finally, they argue that forced payments to union benefit funds and restrictive union hall hiring practices deny them, and the public, the right to free and open competition in the workplace.

The lines have been drawn, and on Capitol Hill and in state legislatures throughout the country, the issue of PLAs on public works projects is being debated. Both sides — union and open shop — have spent small fortunes lobbying Representatives and Senators. Some states, such as Montana and Utah, have already enacted laws prohibiting PLA requirements on public works projects. In the U.S. Congress, legislation has been introduced which would prohibit PLAs on federal projects. But much of the debate concerning PLAs has occurred in the courts, including the courts of Oregon.

On June 7, 1999, the Nevada Supreme Court, relying on similar decisions of the U.S. Supreme Court and of the highest courts of New York, New Jersey, and Alaska, unanimously upheld the inclusion of a PLA in a project offered for bid by the Nevada Water Authority. Following the reasoning of the other courts, the Nevada Court held that the valid concerns of the state agency, which precipitated the creation of the PLA, conformed to the objectives of the Nevada public competitive bidding laws. Those concerns were based on the critical requirements for timely completion of the water supply project and the fear of union-related work stoppages, which had slowed Nevada projects in the past. In addition, the Nevada Court held that the provisions in the PLA allowing seven "core" employees to remain with non-union contractors refuted any claims of violating Nevada's Right to Work or Freedom of Association laws.

The Oregon Court of Appeals will soon decide whether the dismissal of an action in Multnomah County Circuit Court that challenged the appropriateness of a PLA on the new Portland Airport Light Rail Project was proper. Unlike the Nevada case, the PLA in the Light Rail Project was a requirement which the design/build contractor included in the subcontract and was not a requirement of the public agency. The controversy surrounds the public agency's decision to exempt the project from the competitive bidding requirements under Oregon law, and whether doing so amounted to a ratification of the PLA. The Circuit Court determined that the public agency followed proper procedures in exempting the design/build contract, and referred to the PLA as a "private" contractual agreement for which the public agency is not responsible.

While PLAs will increasingly become an issue in public contracting law, the current trend in the courts appears to support PLA requirements by public agencies. What remains to be seen, particularly in Oregon and Washington, is whether public sentiment or political clout will sway the legislatures into promoting or condemning such requirements. With the legislative session complete in Oregon and not reconvening for at least a year, the Oregon Court of Appeals may have the temporary last word as to the viability of PLAs in Oregon and the Northwest. We will keep you informed.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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