A new rule recently published in the Federal Register encourages federal agencies to consider the use of project labor agreements in connection with large-scale construction projects. The new rule, which becomes effective on May 13, 2010, implements Executive Order 13502, signed by President Obama on February 6, 2009. This rule will establish additional requirements for federal contractors and increase the role of unions in the federal contracting process.

A project labor agreement is a pre-hire collective bargaining agreement (an agreement reached before the employees who will work on the project are hired) with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project. Under the new rule, a “large-scale construction project” is defined as “a construction project where the total cost to the Federal Government is $25 million or more.”

The rule sets forth several factors that federal agencies may consider in deciding whether the use of a project labor agreement is appropriate for a particular construction project, including whether:

  • the project will require multiple construction contractors and/or subcontractors employing workers in multiple crafts or trades
  • there is a shortage of skilled labor in the region in which the construction project will be sited
  • completion of the project will require an extended period of time
  • project labor agreements have been used on comparable projects undertaken by federal, state, municipal, or private entities in the geographic area of the project
  • a project labor agreement will promote the agency’s long-term program interests, such as facilitating the training of a skilled workforce to meet the agency’s future construction needs
  • any other factors that the agency decides are appropriate

The rule provides that an agency may set forth the terms and conditions of the project labor agreement in the project bid solicitation and requires the successful contractor to enter into a project labor agreement that contains such terms and conditions. Subcontractors performing work for a prime contractor subject to a project labor agreement will also be required to agree to the terms of the agreement.

The rule also provides that any project labor agreements entered into shall:

  • bind all contractors and subcontractors engaged in construction of the project to comply with the project labor agreement
  • allow all contractors and subcontractors to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements
  • contain guarantees against strikes, lockouts and similar job disruptions
  • set forth effective, prompt, and mutually binding procedures for resolving labor disputes arising during the term of the project labor agreement
  • provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety and health
  • include any additional requirements as the agency deems necessary to satisfy its needs  

Both prime and subcontractors should be aware of the impact of this recent policy development, as the new rule will almost certainly increase the role of unions in federally funded construction projects.