August 1, 2007

Top Down Organizing Through Project Labor Agreement Ruled Illegal


Summer 2007

Last week the NLRB released its long-awaited (and long-delayed) decision in Glens Falls Building and Construction Trade Council, invalidating a project labor agreement (PLA) on a private project.

PLAs are agreements between owners (governments or private entities) and labor unions that establish rules for utilization of labor on specific projects. The typical PLA binds all contractors and subcontractors on the project (or site) to the terms and conditions of a common labor agreement. Union-only PLAs are controversial because non-union contractors (supported by a number of research studies) contend that they exclude certain contractors from bidding and inflate costs. Unions, on the other hand, contend that PLAs lead to labor harmony and payment of area standard wages and benefits.

The Glens Falls case arose in the context of private power cogeneration projects in New York being constructed by a company called Indeck. The local union building trades council filed objections to Indeck's environmental impact statement for one of the projects and told Indeck that it would stop every Indeck project in New York unless the projects were built with union workers. Indeck wrote a commitment letter to the unions indicating that it would instruct its contractor to execute a PLA with the unions. In return, the unions agreed to withdraw their environmental challenges.

Indeck then contracted with a company that negotiated an agreement with the unions requiring all contractors and subcontractors on its project to utilize union labor. Before construction began, Indeck terminated the union contractor and hired a non-union replacement. Indeck did not require the new contractor to become signatory to the union agreement. The unions then filed a breach of contract lawsuit against Indeck, and Indeck defended on the basis that its agreement with the unions was unenforceable and void under Section 8(e) of the National Labor Relations Act. Indeck subsequently filed an unfair labor practice charge with the NLRB against the unions.

Section 8(e) of the NLRA provides that it is an unfair labor practice for a union and an employer to enter into a "hot cargo" agreement — where the employer agrees to cease or refrain from dealing with a company with which the union has a disagreement or dispute. However, the so-called construction industry proviso states that "nothing in this subsection (e) shall apply to an agreement between a labor organization and an employer in the construction industry relating to the contracting or subcontracting of work to be done at the site of the construction, alteration, painting, or repair of a building, structure, or other work".

In its Glens Falls decision, the NLRB ruled that the Indeck commitment letter and its contractor's agreement with the unions were not protected by the construction industry proviso of 8(e) and were, instead, prohibited by 8(e). The Board's rationale was that the construction proviso "extends only to agreements in the context of collective bargaining relationships", and the Indeck commitment letter and its contractor's agreement with the unions were not part of a collective bargaining relationship. Neither agreement related to the terms and conditions of employment for Indeck or its contractor's employees. Furthermore, the Board noted that the unions failed to prove that the agreements were executed to avoid tensions that might arise if union and nonunion workers of different employers were to work side-by-side — a purpose which might have saved the agreements. In fact, the record showed that the purpose was to remove the threat of union opposition to the project, provide a steady source of workers, and provide the unions with a labor monopoly on large construction projects.

Some commentators are saying that the case holds that a construction labor union and an owner cannot lawfully agree to require the owner's construction contractor to sign a PLA. A close reading of the case indicates that the ruling may not go that far. It remains to be seen if the case will be limited to the facts surrounding the obviously coercive attempts by the unions to force a labor agreement on Indeck. The NLRB did not expressly rule on whether Indeck was an "employer in the construction industry", and so left open arguments advanced in other cases that allowed PLAs in certain situations. At the very least, Glens Falls reduces the ability of unions to monopolize a project by pressuring owners into agreements under which the owner agrees to require its contractors to sign PLAs.

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