Client Bulletin #407

2.18.09

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President Barack Obama signed yet another pro-labor Executive Order this week. This most recent Order encourages (but does not yet require) federal agencies to use project labor agreements on federally funded construction projects that exceed $25 million. The Order is viewed as part of a continuing assault on merit shop construction businesses.

“Merit shop” companies are ones who hire and promote based on criteria designated by the companies rather than by labor agreements.

Project labor agreements, or PLAs, are pre-hire collective bargaining agreements that govern wages, benefits, work rules, and other terms and conditions of employment for specific projects. Typically the government agency makes it a bid requirement that every contractor and subcontractor be either a negotiating party or signatory to the PLA. PLAs also usually prohibit the parties on the project from engaging in strikes, lockouts, or other work disruptions.

Obama's PLA Executive Order allows federal agencies to require the use of PLAs where PLAs will "(i) advance the federal government's interest in achieving economy and efficiency in federal procurement, producing labor-management stability, and ensuring compliance with laws and regulations governing safety and health, equal employment opportunity, labor and employment standards, and other matters, and (ii) be consistent with law." The Order goes into effect immediately, but it also specifically directs the Office of Management and Budget and the Department of Labor to provide recommendations within 180 days as to whether the Order should be broadened.

Analysis

When signing the PLA Order, President Obama said, "I do not view the labor movement as part of the problem. To me, it's part of the solution." The PLA Order, along with the three other Executive Orders issued on January 30, clearly signal that the President means what he says: that he intends to make labor unions part of his “solution” to the nation's economic crisis, and that he rejects arguments from business that unions are part of the “problem” (citing, for example, Detroit's current situation). The PLA Order reverses policy and two specific Executive Orders issued by President George W. Bush, and reverts back to a similar policy under President William Jefferson Clinton. However, under the Clinton Administration, businesses did not face the looming threat of an extremely pro-union card-check law like the Employee Free Choice Act or the federal government’s use of billions of dollars in taxpayer money to attach pro-union requirements like PLAs.

Merit shop contractor industry associations, such as the Independent Electrical Contractors, Inc., strongly oppose the use of PLAs. According to Brian Worth, the IEC's Vice President for Government and Public Affairs, "PLAs clearly discriminate against the 84 percent of the construction workforce that does not belong to a labor union. In these tough economic times, it seems unconscionable to deny these employers and employees an opportunity to work on projects funded with their tax dollars simply because they have chosen to exercise their right to not a join a union." Worth and others fear these four pro-union Executive Orders are a clear sign that Obama will soon be pushing the EFCA as a component of his economic recovery plan.

To many businesses, it is difficult to understand how labor unions contribute to economic success. Herb Doyle, founder and president of Doyle Electric, Inc., a 200-employee merit shop and union-free electrical contractor in Tampa, Florida, reacted to the PLA Executive Order by saying, "How many industries can you show me that have historically been union-dominated that are now thriving? Autos? Airlines? Steel? What about government itself? There are none!"

In the text of the PLA Executive Order itself, Obama suggests that labor unions promote stability, efficiency, productivity, and compliance with equal employment and workplace safety and health laws. However, history shows otherwise. Moreover, there are significant legal challenges to the right of the government to require PLAs. Although some union supporters say that PLAs are legal, there remain strong arguments that PLA requirements are pre-empted by the National Labor Relations Act.

As this bulletin is being written, President Obama has signed into law an economic recovery bill that is valued at around $800 billion. It will be interesting to see whether President Obama will issue further Executive Orders requiring PLAs for contractors working on any projects funded in the stimulus bill. Stay tuned!

The three other Executive Orders, all signed on January 30, are available here, here, and here. Constangy has issued Client Bulletins on the Order revoking the Beck Rule and the Order disallowing reimbursement of union campaign-related expenses for cost-plus contractors.

Constangy will present a webinar on The Newly Implemented Executive Orders and Their Effect On Your Company on March 10, 2009.

Constangy, Brooks & Smith, LLP has counseled employers on labor and employment law matters, exclusively, since 1946. A “Go To” Law Firm in Corporate Counsel and Fortune Magazine, it represents Fortune 500 corporations and small companies across the country. Its attorneys are consistently rated as top lawyers in their practice areas by publications such as Chambers USA, Super Lawyers, and Top One Hundred Labor Attorneys in the United States. More than 100 lawyers partner with clients to provide cost-effective legal services and sound preventive advice to enhance the employer-employee relationship. Offices are located in Georgia, Florida, South Carolina, North Carolina, Tennessee, Alabama, Virginia, Missouri, Illinois, Wisconsin, Texas and California. For more information, visit www.constangy.com.

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