On February 4, 2022, President Biden signed an Executive Order that mandates the use of project labor agreements ("PLAs") on federal construction projects valued at or above $35 million. PLAs are pre-hire collective bargaining agreements between contractors and labor unions that set the terms and conditions of employment for a specific construction project, such as wages, hours, working conditions, worker qualifications, and dispute resolution processes. Thus, under a PLA, the government or a general contractor negotiates with one or more unions to set the terms of the project before the project starts.
And while the Order does not require construction companies to unionize, it does require federal construction contractors to adhere to the terms of PLAs. Under the Order, PLAs must include guarantees against strikes and lockouts, prompt and mutually binding procedures for resolving labor disputes, and mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health.
In announcing the Order, the White House said the PLA requirement will benefit taxpayers, contractors, and workers because it will: (1) alleviate coordination challenges on large, complex projects; (2) raise quality standards for contractors bidding on federal projects; (3) reduce uncertainty in the contracting process by standardizing the work rules, compensation costs, and dispute settlement processes on construction projects; and (4) increase training for the federal contracting workforce. Proponents of the Order say it will boost wages on federal construction projects, guarantee work for unions, and prevent labor disputes and worker shortages. Critics say it will reduce competition among contractors and raise construction costs.
Over the last several years, union membership in the construction industry has steadily declined. Indeed, according to the Bureau of Labor Statistics, only 12.6% of workers in the construction industry were union members in 2021, compared to 14% in 2011. This has forced organized labor to look for different ways to improve their market share of total construction projects, and pushing the Administration to mandate the adoption of PLAs is one way to do so. The White House claims it is keeping a promise made to deliver a shot in the arm to unions.
Biden's Order only applies to direct federal procurement, meaning that it does not apply to projects funded by federal grants to non-federal entities, such as state and local governments. As a result, the bulk of the projects funded under the $1.2 trillion Infrastructure Investment and Jobs Act will not be covered. Nonetheless, based on FY2021 figures, the Order could affect $262 billion in federal government construction contracting and nearly 200,000 workers on federal construction contracts. The Order directs the Federal Acquisition Regulatory Council to propose regulations implementing the provisions of the Order within 120 days, to consider and evaluate public comments on the proposed regulations, and to promptly issue a final rule.
President Biden has stated he will be the most pro-union president ever, and it remains to be seen what the Administration will attempt next to advance labor union membership. In the meantime, employers should stay tuned for further developments on this front. For more information on the Executive Order or any other related topic, please do not hesitate to reach out to your favorite Seyfarth attorney or any member of Seyfarth's Labor & Employment Team.
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