PLAs and How They Can Affect Your Contracting Business

The contractor license is being signed by two people wearing a red hard hat.

When you bid on a large-scale private or public construction project, there’s a possibility that you will encounter a Project Labor Agreement. PLAs are often negotiated between property owners and trade unions to set specific terms for hiring, wages and benefits, and rules for workers on the project. Here’s how PLAs can affect you, your business and the people you hire.

What Are Project Labor Agreements?
Project Labor Agreements are basically a collective bargaining agreement made between the property owner and a group of professionals, usually a union. When you’re working on a large construction project, there is likely to be many different contracting businesses completing various aspects of the work. Governments (and some larger private organizations) take an interest in setting certain standards for the people doing the work, which includes you and your employees. A PLA governs the following factors:

Although the terms are usually set between a union and the property owner, the rules apply to nonunion contractors, as well. Although federal law does not allow organizations to set requirements to hire only union workers, nonunion contractors have to meet the standards of the PLA in order to bid.

Who Uses PLAs?
When and how PLAs are used depends largely on the state. In 2009, President Barack Obama signed an order requiring PLAs on all federal projects over $25 million. At the state level, 25 states have enacted bans on government-mandated PLAs. California is not one of them. PLAs generally come with public construction projects. Some private property owners with larger projects may also choose to negotiate a PLA.

Why Do Some People Support PLAs?
Many organizations support PLAs. They argue that the use of PLAs ensures that workers are paid a fair wage for the work they do. Advocates point to the fact that many jobs in construction require heavy labor and deserve reasonable compensation. They claim that without setting standards on behalf of workers, competition often translates into a race to the bottom as companies seek to outbid others. In an industry that is already suffering from a years-long labor shortage, keeping trained employees satisfied is important.

What Are the Potential Disadvantages for PLAs?
On the other hand, many in the construction industry see PLAs as an unnecessary barrier to competition. They argue that PLAs often require workers on a specific project to pay dues or even join a union as part of the agreement. Opponents of PLAs claim that a free market will be the better guarantee of fair wages and benefits, because the best workers will move to and stay with companies that provide it. They believe that setting minimum wages and benefits forces smaller businesses out of competition for good projects, which may hurt their ability to survive.

What Do PLAs Mean for Your Contracting Business?
There are strong views about PLAs on both sides, and you may prefer to stand with either one. If you’re not in the union that negotiated the PLA, you can usually still bid on the project. You just have to be willing and able to meet the terms of the agreement. PLAs often place emphasis on hiring local contractors, which may benefit you if you live and work in the area.

Working as a contractor in the construction industry means that you will operate within a lot of different environments. PLAs are just one aspect that you’ll need to understand before you set up shop. To learn more about starting your career as a contractor, contact CSLS today!