2/2/08

Discouraging non-union labor in Los Angeles

In difficult economic times, it might seem foolhardy to pass up contracts, but that’s precisely what Dennis Furden is looking at doing. As chief financial officer for Tri-Signal Integration Inc., a Sylmar-based “open shop” – or non-union – electrical contracting firm, Furden is bracing for the spread of union-sponsored project labor agreements on local public works projects.

That will leave him with what he sees as an unenviable choice: pay more out-of-pocket or pass up dozens of contract opportunities. “Either way, this hurts our bottom line,” Furden said.

A project labor agreement, or PLA, is a deal reached between the building trades unions and a public agency; it requires contractors to hire workers for major construction projects through union-sponsored hiring halls and pay fees into special benefit funds largely operated by unions. In exchange, the unions promise not to strike or otherwise disrupt the work. PLAs have been around in some form since the major dam-building public works projects of the 1930s.

Union officials claim these agreements save taxpayer dollars by speeding up projects and guaranteeing quality workers. But non-union contractors say conditions in these agreements inflate the cost of contracts and provide strong financial disincentives for bidding, thereby reducing competition.

In the next few months, a series of project labor agreements are expected to win approval in the Los Angeles area, including at two big Los Angeles city agencies – the Community Redevelopment Agency and Department of Public Works – and possibly two other cities. Assuming all of these win approval, they will represent the largest expansion of project labor agreements in L.A. County since 1998, when the Los Angeles Unified School District approved a project labor agreement for most of its construction and renovation projects.

And that’s not the end. Union leaders aren’t shy about their larger goal. “We would like to see these agreements negotiated with all public entities that are engaged in major construction projects in the region,” said Richard Slawson, executive secretary and treasurer of the Building Trades Council of Los Angeles and Orange Counties.

The net effect would be to enlarge the pie for union contractors, and literally force non-union contractors to either deal with unions or go elsewhere – perhaps outside the county – for work.

“Companies that cannot meet these requirements simply won’t bid on PLA’s,” said Kevin Korenthal, director of government affairs for Associated Builders and Contractors.

Pension plans

One such company is L.A.-based BergElectric Corp., one of the nation’s largest electrical contractors.

Briscoe says PLAs are being used by the building trades unions to preserve the union workforce at the expense of non-union contractors. If PLAs come into the city of Los Angeles, he said he will bid in projects in other cities without PLAs.

“We will not bid on a PLA project because the PLA requires you to pay into union pension plans,” said President Don Briscoe. “We have our own benefits and pension plan. It’s not competitive to have to pay into two plans.”

Furden pegged that additional cost at about $6 per hour per worker.

But Slawson disputed contentions of non-union contractors that project labor agreements cost more. He noted that under existing prevailing wage laws in California, contractors must already pay union-scale wages and benefits to workers hired for these projects. He said the purpose of requiring non-union contractors to pay into a benefits fund is to ensure that benefit dollars are there for employees once the project finishes and they are laid off.

What’s more, Slawson said that project labor agreements allow non-union contractors to hire a certain number of apprentices at significantly lower pay scales than standard workers. Most of the apprentices, however, are trained through the building trades unions, which means non-union contractors must go through union hiring halls to gain access to them.

One of the trade groups representing non-union contractors, Associated Builders and Contractors, is trying to set up its own apprentice training program, but that effort is in its infancy.

One thing is for sure, the PLAs are hitting the non-union contracting industry at the worst possible time, when the residential construction market has slowed and the commercial construction market is slowing. Contractors are now more reliant on public sector projects than they have been in years.

Both the Department of Public Works and the Community Redevelopment Agencies have been approving PLAs on a project-by-project basis since about the year 2000. Both agencies claim these PLAs have resulted in projects coming in at or ahead of deadlines, with a minimum of labor disruptions.

Now, each agency is trying to standardize their PLAs and apply them to their larger projects.

“We want to come up with an agreement that will cover the bulk of the work where we have a great desire to finish in a timely fashion,” said John Reamer Jr., inspector of public works for the Department of Public Works.

The department doles out more than $400 million per year in projects. A dollar threshold for the PLAs has not yet been established.

Minimizing impact

In an attempt to stop – or at least blunt the impact of – these project labor agreements, non-union contractors have been furiously lobbying public agencies.

They have won some minor concessions: For example, the Los Angeles Community Redevelopment Agency has agreed to allow non-union contractors to keep a certain number of non-union workers on projects. And the Department of Public Works has pledged to take their concerns into consideration while crafting its PLA in the next several weeks.

“Our goal is to spend more time with the opponents of PLAs and make sure that in the end, this is a sound document,” said Julie Gutman, a Public Works commissioner and labor law attorney who is helping the agency craft its PLA.

Moving these PLAs forward represents a major victory for the region’s building trades unions, which have been pushing for agency-wide agreements in the City of Los Angeles and in other cities around the county for almost a decade.

Slawson said that besides the Los Angeles Unified School District, PLAs are already in effect in Carson and San Fernando and that negotiations are in process with two other cities in L.A. County. He would not name the cities, saying it was up to those cities to disclose the negotiations through their own public meetings processes.

Furden said passage of additional PLAs would likely mean Tri-Signal would pull back from some projects, just as it has when other PLAs were struck.

“As a non-union contractor, these PLAs force us to do things and spend money that union contractors don’t have to do and we can’t compete for these contracts,” Furden said. “It eliminates the open market. I view it as legalized corruption and graft for the protection of labor unions.”

(labusinessjournal.com)

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