Friday, February 29, 2008

The PLA Conundrum

Ah, Project Labor Agreements ("PLA"). Unions love 'em, non-union contractors hate 'em. For the uninitiated, a PLA is generally a contract between a project owner (public or private) and labor unions which requires that the project be awarded only to contractors and subcontractors who agree to: (a) recognize unions as the representatives of their employees on that job; (b) use the union hiring hall to obtain workers; (c) pay union wages and benefits; and (d) obey the union's oftentimes restrictive work rules, job classifications and arbitration procedures. PLAs typically increase construction costs by reducing competition for the work ... since everybody on the project has to pay the same union rates, there is no room for competitive pricing. They also tend to limit the types of contractors who will bid on a PLA project ... not every contractor wants to have a relationship, limited or otherwise, with a union. Of course, unions claim that PLAs are a "good thing" because they result in labor harmony and the payment of area standard wages and benefits.

In July, 2007, the National Labor Relations Board (the "NLRB") issued its decision in Glens Falls Building and Construction Trades Council, 350 NLRB No. 42 (2007). The case considered the enforceability under the National Labor Relations Act (the "NLRA") of two PLAs made in connection with the construction of a power plant. In what was a bit of a surprise decision, the NLRB held that the PLAs constituted prohibited "hot cargo agreements" under Section 8(e) of the NLRA. A "hot cargo agreement" is an arrangement pursuant to which an employer agrees to cease or refrain from dealing with a company with which the union has a disagreement or dispute.

There is a construction industry proviso (i.e., an exception) stating that Section 8(e) does not apply to an agreement between a union and an employer in the construction industry relating to the contracting or subcontracting of work. The proviso has been interpreted generally as excluding PLAs from the purview of the NLRA. Not so in the Glens Falls case. There, the NLRB held that the PLAs were not protected by the proviso since it applied only to agreements within the context of collective bargaining relationships. Inasmuch as the PLAs were, essentially, adhesion contracts (i.e., take it or leave it agreements) which were not subject to negotiation, they did not come within the ambit of collective bargaining and thus violated the NLRA.

Based on the holding in Glens Falls, one would think that all PLAs are prohibited "hot cargo agreements." Hold on, baba looey ... not so fast. The case may be limited to its specific facts (which I won't go into here in order to save you from undue boredom). Suffice it to say that it remains to be seen whether the Glens Falls case will be broadly or narrowly construed. Nonetheless, the holding may impact adversely on the ability of a union to insist on a PLA. That, too, may be a "good thing."

Stay tuned.

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