7. Project Labor Agreements

PLAs are agreements between contractors and their employees that establish employment terms and conditions for all persons and firms working on a project. PLAs are collective bargaining agreements negotiated between the owner of a construction project, the construction manager, and the labor unions who represent construction workers. PLAs typically include broad prohibitions on strikes and lockouts, requirements that hiring be conducted through union hiring halls, uniform work rules and hours, dispute resolution protocols, and the wages applicable to each craftsman. PLAs supersede inconsistent provisions in other collective bargaining agreements. They do not exclude nonunion Contractors, although nonunion contractors and workers would be subject to the provisions of the PLA. State and federal agencies have used PLAs for large public works projects for more than 50 years and many states and local agencies require them. Private companies also use them, although state laws do not appear to compel private companies to use them.

SCDCL proposes that the Commission adopt a rule requiring that all utility construction projects be subject to PLAs. SCDCL states such agreements promote stable and cooperative relationships between labor and contractors by prohibiting strikes and lock-outs, and providing for mandatory grievance procedures. PLAs, according to SCDCL, supersede other bargaining agreements and may therefore simplify terms of employment by, for example, setting forth holidays and work periods. PLAs are usually limited to the duration of project construction.

SCDCL believes PLAs provide opportunities for apprenticeship and training and to assure an adequate supply of skilled labor for a project SCDCL states that any person or firm, union-signatory or non-union, may bid for a contract that requires a PLA.

PG&E, SCE, Verizon, SBC, and SDG&E/SoCalgas filed replies to SCDCL's proposals, strongly objecting to them². SBC, SCE, SDG&E/SoCalGas and PG&E object to the proposal asserting that it is untimely and outside the scope of the proceeding. Verizon adds that state entities are preempted by the National Labor Relations Act (NLRA) from regulating the substantive terms and conditions of employment and any activities within the jurisdiction of the National Labor Relations Board (NLRB). Verizon argues that the NLRA permits PLAs but does not provide any authority for an employer to be compelled to enter into such agreements.

Discussion

A Project Labor Agreement harmonizes various contractors' work rules and practices that may otherwise present barriers to coordinating the contractors' work schedules. A PLA provides uniform work rules where uniformity can maximize efficiency. Typically, PLAs include uniform work schedules and grievance procedures and include no-strike clauses. The function of a PLA is to prevent and facilitate the resolution of disputes to insure a fast, smoothly operating construction project and on-time and on-budget completion.

As discussed above in the prevailing wages section, the Commission's broad authority to regulate utilities, ensure adequate service and promote ratepayers benefits and the public interest allow the Commission to consider the adoption of rules requiring project labor agreements in utility construction projects if those PLAs are otherwise consistent with the law. As a matter of state law, the use of project labor agreements in public and private contracting have been upheld as permissible. In Assocated Builders and Contractors, Inc. v. San Francisco Airports Comn. (1999) 21 Cal.4th 352 the California Supreme Court denied the contractors' petition for a writ of mandate challenging the legality of a project labor agreement requirement for contractors bidding on San Francisco airport projects. There the Court was primarily concerned with the treatment of the core employee exemption in the San Francisco airports requirements and upheld the requirement as not preempted under federal labor laws because the employer was allowed an unlimited number of core employees without resort to a union hiring hall, thereby avoiding any discriminatory conduct that might offend federal labor law. Similarly, the preference we establish here for the use of PLAs in substantial utility construction projects is also neutral and does not require the hiring of unionized employees. Thus, this preference is flexible enough to avoid any infringement of employer collective bargaining prerogatives and is not preempted by federal labor law. Building & constr. Trades Council v Associated Builders & contractors of Mass./R.I., Inc., 507 U.S. 218 (1993) ("Boston Harbor").

SDG&E argues that PLAs are poor policy because they deny employees the ability to choose whether or not to join a union. We have never understood that PLAs require that employees join a union, but only provide the terms and conditions of employment during the term of the construction contract. We note that PLAs often provide for the hiring of workers through union-operated hiring halls, but such hiring procedures cannot exclude non-union registrants. Materials appended by SCDCL confirm that.

PG&E and SCE state that imposing a requirement that they use PLAs will undermine their negotiating leverage and result in more costly contract terms that will be passed on to ratepayers. This may be a concern, although PG&E and SCE provide no data that this is in fact the case, but such concerns must be balanced against the benefits of PLAs. There may be reasonable objections to a requirement that they be used in all cases.

On the other hand, the SCDCL makes a reasonable case that, on balance, PLAs provide a more stable work environment and promote high quality workmanship. The more stable work environment results from a prohibition on slowdowns, lock-outs and strikes, and having work conditions and grievance procedures spelled out in advance. This stability can contribute to timely project completion and reduce the costs associated with labor unrest, grievances, unclear work conditions, and discordant work schedule.

The use of industry standards for wages and employment conditions also promotes a highly-skilled and more professional workforce, increasing the likelihood of corresponding work performance and quality workmanship. Studies of PLAs used on public works projects do not find a necessary relationship between PLAs and higher contract costs. Moreover, there may be adequate offsetting cost-savings from the standpoint of project reliability, durability and integrity. Thus, the use of PLAs can decrease overall project costs, while projects without PLAs can experience delays in project completion, increasing not only construction costs but also depriving ratepayers of the benefits and cost savings from completed infrastructure projects during the delay.

For these reasons, we herein establish a preference for respondent utilities to include, as a condition of any contract for construction projects over $1 million, the use of PLAs by prime contractors. PLAs would establish uniform terms and conditions of employment for employees of contractors that bid on and obtain construction work from the utilities. Those PLAs shall not discriminate against non-union labor or contractors that do not have unionized workforces, consistent with the requirement for public works projects, but shall use union hiring halls. As non-union and union contractors both can perform work under PLAs, such a preference for PLAs does not appear to be discriminatory within the context of federal labor law. It appears to us from the studies reviewed and the discussion of the benefits of PLAs contained in relevant caselaw that substantial efficiencies in construction accrue from the use of PLAs.

We are mindful of the comments of the utilities that PLAs may not provide a net benefit to ratepayers in certain circumstances. Moreover, we would benefit from the development of a more robust record on the potential benefits and costs of PLAs in utility construction as specific construction projects arise. In situations where utilities choose not to use PLAs, the utility shall file with the Commission to demonstrate why the PLA is not in the ratepayers' best interest. In Phase II of this rulemaking we will focus on the adoption of a requirement for the use of PLAs in all utility construction of a substantial size and we will benefit from the record developed in practice as the utilities choose to use PLAs or file with the Commission in those instances when the utilities believe that PLAs should not be used. Also in Phase II we will consider what incentives, if any, should be developed to encourage the use of PLAs where project efficiencies and cost benefits accrue.

For construction projects costing less than $1 million, the utilities shall continue to have discretion to require PLAs without any further filing at the Commission.