The Truth About Project Labor Agreements

By Emilio Colón-Zavala, PE

According to the data provided by the Federal Bureau of Labor and Statistics (“BLS”), labor unions in the construction industry have seen a reduction in their participation in the US market. This participation has fallen from 19.5% in 1997 to 14.0% in 2017. In addition, it is estimated that 80% of construction employees and their employers have opted not to join. In an effort to retain their membership, they have resorted to promoting what is known as Project Labor Agreements (“PLAs”).

A study published by the American Bar Association in 2013 indicates that this is one of the ways in which these unions try to ensure survival through the closed workshop. In jurisdictions where these agreements have been mandatorily established, the practical result has been the unionization of these employees. In the United States, the experience has been that 24 states have prohibited PLAs while only eight have required them. Puerto Rico appears to be the ninth jurisdiction after the signing of Executive Order 2018-033 last July 30th. Proponents of these agreements support these initiatives as they see them as a way to complete projects on time and on budget. However, there are several conflicts documented as a result of them. Among the problems caused by these agreements are delays in projects, cost increases, less competition, poor hiring of local employees, occupational safety issues among others. A few years ago, the Beacon Hill Institute found that these agreements increased construction costs in Massachusetts, Connecticut and New York. Other studies determined that the costs of building schools in California increased by 15% and in Ohio by 13.12%, due to the limitations in competition caused by PLAs.

Unfortunately, in an environment such as that of Puerto Rico’s construction industry, we must ask ourselves if this type of measure makes sense. After the 2017 hurricanes, it is important to understand that establishing initiatives that cause increases in costs as well as delays is not the appropriate way to use the federal funds that lie ahead. In an environment in which it is imperative to execute projects in a limited timeframe in order not to lose the allocated federal funds, the experience reported with this type of agreement points out that the results could be counterproductive.

The reality is that the issue of labor relations in the 2010’s is very different from what existed 40- 50 years ago. Not only do we now have legislation and regulations that have leveled labor management relations, but the employer’s mentality towards their human resources has focused on understanding that it is the most important asset they possess. It is important to understand that the solutions traditionally applied are not necessarily adapted to the realities of the 21st Century.

Historically, in the indexes of global competitiveness published by the World Economic Forum (WEF), one of the biggest problems in Puerto Rico is precisely the existing restrictive labor regulations. Therefore, establishing mandatory labor agreements per project seems a step in the wrong direction.

Let us work to solve the problems from its root. Let’s choose to have a properly trained and certified workforce. We need to implement initiatives that stimulate free competition, innovation and optimize processes that result in reconstruction projects being performed in an agile manner.