Open-shop workers, which are 80% of the construction industry, are undermined by union-only PLAs

Under a standard PLA:

Open-shop workers are forced to register with a trade union in order to work on the project. The open shop worker cannot work on the job without union approval, which usually goes to senior members of the union, leaving him or her temporarily out of work. Open shop workers lose their pension, health fund, and apprenticeship monies to the union. These fees and other benefits paid by the employer will go directly to the labor unions, and the open shop workers cannot recoup their share unless they stay in the union for up to 10 years to become vested in the union’s plan. Open shop workers can lose valuable health coverage and be forced to change medical plans and doctors when they are forced to transfer to union-sponsored plans. Open shop workers are significantly shortchanged under PLAs (see chart below). In order to prevent harming the worker under a PLA, open shop employers have to pay twice into duplicate funds (the current employee’s plan and then the union's) for pension and medical benefit coverage. For example, one contractor estimated a PLA would cost the company an additional $80,000 per month for pension coverage and an additional $50,000 per month to keep employees covered under current medical benefits.

Example: Group 6 Operator (rubber tire backhoe worker) on Non-PLA and PLA job.

Open-shop Worker on Open Bid Job
Employer pays $41.55 wages/fringes per hr
Worker takes home $27.25/hr
$14.42/hr goes toward fringe benefits for worker -all $14.42 goes directly to worker funds

Open-shop Worker on PLA Job
Employer pays $41.55 wages/fringes per hr
Worker takes home $27.25/hr
$14.42/hour goes toward fringe benefits - $5.20 for worker - $9.22, now required to go directly to union funds*

*To prevent shortchanging the worker, the employer will have to pay $9.22 twice (to the union’s fund and the current employee’s plans).

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How it all began

Indiana's focus on PLAs began with major private construction projects such as the Toyota truck manufacturing plant in Gibson County and the AK Steel facility in Spencer County. Gaylor said he does not like his group's contractors getting locked out of the bidding process but admits there's little that can be done about such projects. Keith White, a labor attorney with Baker & Daniels, said "private entities can do whatever they want." A 1997 statement from Attorney General Jeff Modisett showed that he thought PLAs were legal and opened the door for the marriage between public construction projects and PLAs. "That was the straw that broke our back," Gaylor said. "That opinion accelerated the use of PLAs on public jobs." State bidding statutes in the Indiana Code say contracts shall be awarded to the "lowest and best bidder who submits a bid for the performance of the work" and to "the lowest responsible and responsive contractor." White argues that that does not happen when PLAs are in place. "When the government is paying out our tax dollars, it should not unnecessarily limit the field of who can do the job", he said. "It's basic economics. If you limit the supply, what happens to the price? It goes up."

PLA conditions

Legally, PLAs do not prevent any contractor from bidding on a project. In reality, it is union contractors or nothing.

Here's why: 

• Contractors awarded a job have to sign collective bargaining agreements with the union trades. This means they must pay union fringe benefits in addition to their own benefits. 
• Union jurisdictional rules apply. Workers would have to be hired from union employee halls, breaking up existing work crews. On the other hand, if an apprenticeship program is in place, union apprentices would have to be used. 
• Individual workers are not forced to join the union, but after eight days they have to pay into union pension and health plans. Of course, they will likely never receive any of these benefits.

"You're not going to find anybody who is going to go for that kind of a deal," Gaylor said.

PLA promises

Why are the PLAs becoming so popular? Promises of ceasing work stoppages and safer, more efficient projects are the two arguments cited in their defense. Federal statistics show strikes are much less of a threat than they were in the late 1970s. Through the 1990s, the percent of working time spent idle as a result of strikes has ranged from 0.01 to 0.02 percent (compared to 0.09 to 0.12 percent 20years ago). White said labor disruptions can occur no matter the makeup union or non-union - of the contractors. If a problem occurs between union and non-union contractors, he said there is an effective, lawful way to ensure business continues as close to normal as possible. He said he has been involved in many situations in which a reserve gate was set up. "This allows work to continue on the project," White said. "There can be lawful picketing, but if unions violate the reserve gate, that's unlawful. The problem is there's an unstated threat by unions to government entities that their project will be slowed down if they do not sign project labor agreements." As for the work itself, there is no evidence that union or non-union contractors perform more safely or efficiently. "You've got building codes and government regulations protecting every job going up. The construction owner is getting nothing they couldn't get in the open market," Gaylor said. "We're not asking for any special consideration. If a union company brings the better price to the table, they should get the job."
Written By: Tom Schuman
Biz Voice Indiana Chamber of Commerce

Currently

PLAs - Government Welfare for Unions

Union-only PLAs have a discriminatory effect because their requirements state that as a condition of awarding the contract, the successful bidder must agree that they and their subcontractors will become subject to a union agreement, pay union wages and benefits, follow union work rules, use workers referred through a union hiring hall, and forfeit your right to classify, evaluate, hire and fire your worforce. These requirements are meant for contractors to operate like union firms and disrupt the merit shop contractor's entire way of doing business, which essentially rules them out from the bidding process. This makes no sense in a state like Indiana where two-thirds of all construction workers and contractors are not signatory to a union contract. So by signing these agreements, unions are allowed to win millions dollars of work with little competition and artificially supplied jobs (welfare) at the expense of the majority of workers and taxpayers in this state. What could be more burdensome, costly, and wasteful than locking more than two-thirds of the construction industry out of the bidding process? Welfare for the unions is not cheap. ABC will be the only construction association willing and able to fight this injustice, and to do so, we will need your extra support.

INFORMATION LINKS

http://www.abc.org/pla

www.plawatch.com

http://www.opencontracting.com/

J.R. Gaylor at - (317) 596-4950

Public Service Research Foundation
David Denholm
320-D Maple Avenue East
Vienna, Virginia 22180
Phone (703) 242-3575
Fax (703) 242-3529
http://www.psrf.org/

Wharton School University of Pennsylvania
Professor Herbert Northrup