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October 19, 2022 Feature

Executive Order 14063: Use of Project Labor Agreements for Federal Construction Projects

By Carol Chandler
Billions of dollars in federal construction projects will be impacted by the new requirement for a project labor agreement.

Billions of dollars in federal construction projects will be impacted by the new requirement for a project labor agreement.

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Consistent with his campaign pledge to be the most union-friendly president in U.S. history, President Biden’s Executive Order 14063, signed on Feb. 4, 2022, entitled Use of Project Labor Agreements for Federal Construction Projects, is likely to impact $262 billion in federal construction projects and 200,000 workers. E.O. 14063 requires the use of a Project Labor Agreement (PLA) for any federal construction contract within the United States estimated to cost $35 million or more.

A PLA is a pre-hire collective bargaining agreement negotiated between an owner’s general contractor or construction manager and one or more unions establishing working conditions and terms of employment for the project before it begins. It is important to note that PLAs are only available in the construction industry at the site of construction under a narrow exception contained in sections 8(e) and 8(f) of the National Labor Relations Act (NLRA). See Building & Constr. Trades Council v. Associated Builders & Contractors of Mass./R. I., Inc., 507 U.S. 218 (1993).

Generally, an employer is prohibited from recognizing and negotiating with a union until after a majority of the employer’s employees have affirmatively selected the union as their exclusive representative for purposes of collective bargaining. See Raymond Interior Systems, Inc. v. N.L.R.B., 812 F.3d 168 (D.C. Cir. 2016) (employer violated NLRA, §§ 8(a)(1) and 8(a)(2) when it recognized a union that did not represent a majority of employees).

Every contractor or subcontractor working on the project, whether its employees are unionized or not, is required to negotiate or become a party to a PLA with one or more appropriate labor organizations. E.O. 14063, § 3. At a minimum, the PLA must:

a) Bind all contractors and subcontractors on the construction project through the inclusion of appropriate specifications in all relevant solicitation provisions and contract documents;

b) Allow all contractors and subcontractors on the construction project to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements;

c) Contain guarantees against strikes, lockouts, and similar job disruptions;

d) Set forth effective, prompt, and mutually binding procedures for resolving labor disputes arising during the term of the project labor agreement;

e) Provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health; and

f) Fully conform to all statutes, regulations, Executive Orders, and Presidential Memoranda.

E.O. 14063, § 4.

In addition to the above requirements, agreements with the relevant union typically require compliance with the terms and conditions of underlying union contracts that include the requirement that all employees of the PLA signatory employers pay dues to a signatory union, and that the employer makes contributions to union health, retirement and other union benefit funds for each hour worked by project employees for the duration of the project. The PLA may also require that employers hire workers through a union hiring hall. Contractors unwilling to hire union labor or to have their employees join a union are unable to work on the PLA project.

E.O. 14063 applies to direct federal procurement and does not apply to projects funded by federal grants to non-federal agencies, such as state and local governments. Therefore, funding provided by the $1.2 trillion 2021 Infrastructure Investment and Jobs Act that is provided to state and local governments will not be covered.

E.O. 14063 allows for exceptions from its requirements for the following reasons:

a) Where use of a PLA would not advance federal interests in achieving economy and efficiency in procurement based on the following factors:

i. The project is of short duration or lacks complexity

ii. The project involves only one craft or trade

iii. The project involves specialized construction work available only from a limited num ber of contractors or subcontractors

iv. The need for the project is of such an unusual or compelling urgency that a PLA would be impracticable; or

v. The project implicates other similar factors deemed appropriate in regulations or guid ance issued under the E.O;

b) Based on inclusive market analysis, requiring a PLA would substantially reduce the number of potential bidders so as to frustrate full and open competition; or

c) Requiring a PLA would otherwise be inconsistent with statutes, regulations, Executive Orders, or Presidential Memoranda.

E.O. 14063, § 5.

While E.O. 14063 is technically in effect as of the date of publication (February 4, 2022), implementation will follow rulemaking by the Federal Acquisition Regulatory Council (FAR Council). E.O. 14063, § 8. Upon issuance of final regulations by the FAR council, E.O. 13502 (February 6, 2009) will be revoked. E.O. 14063, § 10.

The White House claims the PLA requirement is appropriate because it will benefit taxpayers, contractors, and workers by 1) alleviating coordination challenges on large, complex projects; 2) raising quality standards and wages, 3) reducing uncertainty in the contracting process by standardizing the work rules, compensation costs, and dispute settlement processes; and 4) increasing training for the construction workforce. Fact Sheet: Briefing Room, Statements and Releases (February 3, 2022).

There is considerable debate about the value and impact of PLAs. Proponents say PLAs prevent work stoppages by prohibiting, and, as a practical matter, unions will not picket an all-union project. Additionally, proponents claim that only unions can supply an uninterrupted supply of appropriately trained labor, and the use of union labor and uniform job site work rules make for efficiencies and cost savings. Opponents argue that PLAs increase costs by mandating union wages and work rules and inhibit competition because such requirements keep the overwhelming majority of US construction companies from bidding on the jobs. Bureau of Labor Statistics publications state that as of 2021, only 12.6 percent of construction workers in the US were union. Additionally, PLA opponents point to strikes on PLAs containing no-strike clauses.

Because PLAs undermine competitive bidding statutes, courts in various states have considered attempts by local governments to impose PLAs. Some decisions reference the Supreme Court’s decision in Building & Constr. Trades Council v. Associated Builders & Contractors of Mass./R. I., Inc., 507 U.S. 218 (1993), holding that where the government entity acts as a market participant, not a regulator, the PLA will be upheld. Other courts have rejected some attempts by government entities to impose PLAs. See Associated Builders and Contractors, Inc., New Jersey Chapter, et. al. v. City of Jersey City, New Jersey, 836 F.3d 412 (3d Cir. 2016) (where city lacked proprietary interests in project, it acted as regulator not market participant); Associated Builders and Contractors Mass. Chapter v. Town of Braintree, Mass. Sup. Ct., No. 2021CV00803 (Norfolk County, Sept. 10, 2021) (requiring that there be proof of a project’s significant size, duration, timing, and complexity to impose a PLA).

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By Carol Chandler

Carol Chandler is with Stoneman, Chandler & Miller LLP in Boston, Massachsetts.