June 1, 2010

Construction Labor Policy Update


Summer 2010

Recent developments in construction labor policy will change the labor practices of construction contractors who work on federal projects. Although Congress is unlikely to enact new labor legislation anytime soon, federal agencies are changing labor policy by adopting new regulations and reinterpreting existing regulations.

Employee Free Choice Act

If enacted, the Employee Free Choice Act (the "EFCA") would make it easier for unions to organize employees (through "card-check"), remove an employer's right in most situations to negotiate a labor contract with a union, and increase the penalties for unfair labor practices committed by an employer. The card-check provision is the most prominent part of the EFCA because it would often do away with the traditional secret-ballot election to determine whether employees support a union. Under the provision, if a union got a majority of bargaining unit employees to sign authorization cards and the National Labor Relations Board (the "NLRB") validated the cards (its card-check), the union would be certified as the employees' representative.

Although it was expected that some form of the EFCA would become law in 2009, setbacks kept that from happening. Throughout most of 2009, congressional focus was on health insurance reform. Also, a handful of Democratic senators announced their opposition to the EFCA, and a key supporter, Ted Kennedy (D-MA), passed away.

Last fall, a group of senators reportedly agreed to eliminate the card-check provision with the hope that without card check the EFCA would gain momentum. But their efforts fell short, and subsequent election losses by union-backed Senate candidates has made passage of any version of the EFCA unlikely. Despite the setbacks, union leaders have not given up and have recently disclosed a new strategy of looking for an unrelated bill to which all or part of the EFCA could be attached. That, along with the recent appointment of a former union lawyer to the NLRB, means that the battle is not over.

New Disclosures

The Department of Labor (the "DOL") recently issued a rule requiring contractors and subcontractors on federal projects to display posters informing employees of their right to join a union and engage in other activities protected by federal labor laws. The posters, which are published by the DOL, must be placed in conspicuous places in and around contractors' worksites and offices. If a contractor posts notices to employees electronically (e.g., on a Web page), the contractor must also post the labor notice electronically. The rule applies to federal construction contracts entered into after June 21, 2010. Penalties for noncompliance include contract termination and debarment.

The DOL has also proposed amending its interpretation of rules requiring the disclosure of information related to the hiring of consultants to assist employers in union campaigns and other labor disputes. Currently, employers and consultants must disclose the amount of any payments to consultants and similar information to the DOL if the consultants are hired to persuade employees not to vote for a union. But disclosure is not required if the consultant has no direct contact with employees and only provides advice to the employer. The proposed DOL interpretation would require disclosure even if a consultant had no direct contact with employees and only provided advice.

Another rule on the DOL's rulemaking agenda would require employers to provide workers with written disclosures about how their pay is calculated and their right to overtime pay. For exempt employees, the employer would have to perform a written exemption analysis, disclose the analysis to the employee, and keep a copy available for DOL enforcement agents. The DOL says that the rule will enhance transparency and help prevent the misclassification of employees as independent contractors to evade minimum wage and overtime requirements.

Project Labor Agreements

The Federal Acquisition Regulation Council recently issued a final rule that encourages the use of project labor agreements ("PLAs") on federal construction projects of $25 million or more. PLAs are agreements between prime contractors and labor unions that are sometimes required by owners (in this case, federal agencies). PLAs usually require the prime contractor and all subcontractors to abide by the terms of a common labor agreement for the duration of the project. Nonunion contractors subject to PLAs are essentially converted to union contractors for projects on which PLAs are used.

The new rule allows federal agencies to mandate that prime contractors submit fully executed PLAs when bids are due, prior to award, or after award. The mandate will give unions significant leverage in negotiating the terms of the PLA since failure to provide a fully executed PLA when mandated will be a breach of contract by the prime contractor. Although the rule does not require the use of PLAs on every project, it is expected to significantly increase their use.

Contractors who do business with the federal government should be implementing practices to deal with the new labor policy changes. Waiting until after award of a contract to consider these issues could result in contract termination or worse. Contractors should consult with legal counsel for advice on their specific situation.

For more information on this topic, please contact marketing@jordanramis.com or call (888) 598-7070.


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