REPORT TO THE CITY COUNCIL
DATE: Special Meeting of October 3, 2023
TO: Mayor and Members of the City Council
SUBMITTED BY: Patrick Tang, City Attorney
Christina Lawrence, Associate
SUBJECT: Overview of Project Labor Agreement Requirements
RECOMMENDED ACTION
Review and discuss report; provide direction to staff.
BACKGROUND:
At the Council meeting of August 8, 2023, the Council approved Council Member Dion Bailey’s request to schedule a discussion regarding project labor agreements for City construction and public works projects. A project labor agreement is a pre-hire collective bargaining agreement negotiated with local labor organizations that establishes terms and conditions of employment for a specific construction project or a class of construction projects. As a starting point for discussion, this report is intended to provide general information regarding project labor agreements, potential advantages and disadvantages associated with their use, and examples of local agency use.
DISCUSSION:
A project labor agreement (“PLA”) is a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment on a particular construction project or for certain construction projects. PLAs are often used on large, complex, long-term, multi-craft construction projects to achieve certain project objectives, such as avoiding labor disruptions, ensuring timely completion of the project, and providing employment opportunities for local residents.
Common PLA Provisions:
Public entities are authorized to use, enter into, or require contractors to enter into a PLA for a construction project, provided that the PLA includes certain taxpayer protection provisions, including provisions that: (1) prohibit discrimination, (2) permit all qualified contractors to bid for and be awarded work on the project, (3) include agreed-upon drug testing protocols for workers employed on the project, (4) guarantee against work stoppages, strikes, lockouts, and similar disruptions on the project, and (5) provide that disputes arising from the PLA will be resolved by a neutral arbitrator. (Pub. Con. Code § 2500.) In addition to the taxpayer protection provisions, a PLA will also typically include workforce referral procedures, including provisions that require that all workers for the project be hired through a union hiring hall, as well as standardized work rules and wage and benefit provisions. The specific terms of a PLA are negotiated by the contracting parties.
Once a PLA is in place for a project, it will apply to all contractors and subcontractors who successfully bid on the project. All such contractors and subcontractors must agree to be bound by the terms of the PLA, regardless of whether they are union or non-union.
Advantages & Disadvantages:
Proponents of PLAs claim that the agreements have several advantages, including ensuring timely completion of projects within budget; providing project stability by reducing labor disruptions; and promoting workforce development by establishing local hiring procedures and disadvantaged worker employment opportunities.
Opponents of PLAs argue that the agreements have several disadvantages, including discouraging competition; limiting choice and flexibility by requiring that non-union contractors follow union rules and hire workers exclusively through a union hiring hall; requiring workers to contribute to a union benefit fund regardless of whether those workers will receive those benefits later; and increasing project costs by requiring the payment of union wages and/or by limiting competition.
With respect to the criticism regarding increased project costs, most public works projects require the payment of prevailing wages (per the Labor Code) that are comparable to union wages, thus base labor costs may be the same with or without a PLA. However, there may be certain situations where a non-union contractor is subject to a “double payment” for pension contributions to both the union pension fund, under the terms of a PLA, and to its own retirement benefit fund for its employees, which may put the contractor at a competitive disadvantage and/or result in higher project costs.
Examples:
Agencies around the country, state, and region have used PLAs. For instance, Contra Costa County and cities such as Hayward, Martinez, Sacramento, San Francisco, San Jose, and Watsonville have used PLAs on individual projects. While the terms of PLAs vary based on the individual needs of each jurisdiction and each project, PLAs typically address wage irregularities and provide for local business participation, which may help local construction companies, service providers, and suppliers. A PLA was used for the Pinole-Hercules Wastewater Treatment Plant Project (Attachment 1).
Many of the jurisdictions referenced above have also adopted policies that require PLAs on public construction projects that meet certain criteria. Most of the PLA policies reviewed by staff have similar language but differ on certain requirements, such as the project cost thresholds, local hiring goals, and inclusion of disadvantaged resident programs. The City of Watsonville’s PLA ordinance is included as Attachment 2.
Cost thresholds for triggering the PLA requirement for various cities surveyed are as follows:
Berkeley $500,000
Hayward $1,000,000
San Leandro $1,000,000
Watsonville $600,000
Martinez $1,000,000
Steps for Further Consideration:
Cities often take the following steps to assess whether to adopt a PLA for a particular project or a PLA policy and to determine what terms should be included in any such PLA(s) or PLA policies:
1. Formation of council subcommittee to study the item in further detail;
2. Presentations and study sessions to the City Council;
3. When developing a PLA for a particular project(s), meetings between senior staff members of the city and local union groups where specific terms are negotiated for Council consideration; and
4. When developing a PLA for a particular project(s), preparation of a draft PLA for the Council to consider at a publicly held City Council meeting.
CONCLUSION:
If Council wishes to further explore the use of a PLA for particular City project(s) or the establishment of a PLA policy, direction will need to be provided to staff regarding the subject project or class of projects for use of a PLA, including any applicable cost threshold; the Council’s objectives or goals for a PLA or PLA policy; and the terms of the proposed PLA. Staff will then need to conduct additional analysis for Council’s further review.
FISCAL IMPACT:
There is no specific fiscal impact to this action, however, the establishment of PLAs for city projects would likely have a fiscal impact for future city construction projects. Some analysts say that PLAs result in higher project costs. Union leaders argue that PLAs reduce costs in the long run because the union is ensuring projects run smoothly. Additionally, staff would be impacted by having to negotiate, implement, and monitor complex PLA requirements.
Attachments:
PLA for Pinole-Hercules Wastewater Treatment Plant Project Title 7, Chapter 17 of the Watsonville Municipal Code, Project Labor Agreements for Public Works Construction Projects Project Stabilization Agreement for the City of El Cerrito