On February 4, 2022, President Biden issued Executive Order 14063, requiring certain federal construction contractors and subcontractors “to negotiate or become party to a project labor agreement with one or more appropriate labor organizations.”
The EO’s Project Labor Agreement (PLA) requirement applies to “large-scale construction projects,” defined to include domestic federal construction projects “for which the total estimated cost of the construction contract to the Federal Government is $35 million or more,” subject to adjustment based on inflation.
For federal construction projects below the $35 million threshold and projects receiving any form of Federal financial assistance (e.g., loans, loan guarantees, tax credits, and cooperative agreements), federal agencies have discretion to require PLAs because “[n]othing in [the EO] precludes an agency from requiring the use of a project labor agreement.”
Project Labor Agreements
PLAs are a form of collective bargaining agreement (CBA) that require construction firms competing for public contracts to pay wages and benefits, and comply with other terms and conditions, imposed by the local unions’ private CBAs.
In 2009, President Obama issued Executive Order 13502 permitting (but not requiring) PLAs on projects costing $25 million or more. President Trump did not repeal EO 13502, leaving FAR Subpart 22.5 and related contract clauses FAR 52.222-33 and 52.222-34 on the books to this day.
President Biden’s EO 14063 is largely a re-affirmation of Obama’s EO 13502, but it also expands upon it by creating a presumption that PLAs will be used, limiting federal agency discretion to “opt-out” of PLA requirements, and creating federal agency reporting requirements regarding “the use of project labor agreements on large-scale construction projects, as well as descriptions of the exceptions granted [by federal agencies].”
The White House explained that EO 14063 is necessary “to promote economy and efficiency in the administration and completion of Federal construction projects,” since “a labor dispute involving one employer can delay the entire project.”
Thus, the mandated PLAs must, among other things:
- bind all contractors and subcontractors on the project;
- contain guarantees against strikes, lockouts, and similar job disruptions;
- and set forth a mutually binding dispute resolution procedure.
The EO further claims that PLAs “advance the interests of project owners, contractors, and subcontractors, including small businesses,” reiterating that the “use of project labor agreements is fully consistent with the promotion of small business interests.” But because federal construction projects are typically subject to the Davis-Bacon Act (DBA), and any DBA wage determinations are likely already based on CBA wages and fringes in the relevant locale, it is not clear what added benefits there are to union or non-union construction workers if their employer is required to sign onto a PLA.
The EO authorizes a “senior official within an agency” to grant an exception to the PLA requirement, but only after “providing a specific written explanation of why” one of three enumerated circumstances exists warranting an exception to the PLA requirement. Exceptions may be permitted when requiring a PLA:
- “would not advance the Federal Government’s interests in achieving economy and efficiency in Federal procurement,” which determination must be based on:
- whether the project is “of short duration” and “lacks operational complexity;”
- whether the project “will involve only one craft or trade;”
- whether the project “will involve specialized construction work that is available from only a limited number of contractors or subcontractors;”
- whether requiring a PLA “would be impracticable” in light of the project’s “unusual and compelling urgency;” or
- whether the project “implicates other similar factors deemed appropriate in regulations or guidance” issued in accordance with the EO.
- would “substantially reduce the number of potential bidders so as to frustrate full and open competition,” or
- “would otherwise be inconsistent with statutes, regulations, Executive Orders, or Presidential Memoranda.”
Public Reporting Requirement
Unlike its Obama-era predecessor, President Biden’s EO 14063 also adds a new public disclosure requirement. Specifically, Section 6 requires “agencies [to] publish, on a centralized public website, data showing the use of project labor agreements on large-scale construction projects, as well as descriptions of the exceptions granted under section 5 of this order.” No federal contracting purpose is identified relative to this public disclosure requirement nor is any apparent from the language used. However, organized labor will likely appreciate the availability of a “one-stop shopping list” of non-union contractors to potentially target for future organizing campaigns.
Regulations and Effective Date
The EO directs the FAR Council to “propose regulations implementing the provision of this order” within 120 days (or by June 4, 2022). It is reasonable to assume that the FAR Council will make adjustments or refinements to the existing FAR Subpart 22.5 and, to the extent necessary, to the existing FAR 52.222-33 (Notice of Requirement for Project Labor Agreement) and FAR 52.222-34 (Project Labor Agreement).
The Executive Order is “effective immediately” and applies to “all solicitations for contracts issued on or after the effective date of the final regulations issued by the FAR Council.” Assuming the FAR Council issues its proposed regulations on or before June 4, 2022, it is likely that there could be “final regulations” by Labor Day 2022.
In the meantime, “agencies are strongly encouraged, to the extent permitted by law, to comply” with EO 14063 immediately and before the FAR Council issues final regulations.
Industry Challenges Ahead
Following its implementation, President Obama’s EO 13502 was met with a series of legal challenges, as well as contractor bid protests, which resulted in the PLA mandate being removed in some instances. In addition, at least half of the States have affirmatively restricted the use of PLAs.
Then, in 2018, the Supreme Court held in Janus v. American Federation Of State, County, And Municipal Employees, Council 31 that the First Amendment prohibits non-consenting public employees from being required to pay union “agency fees,” which is the amount a union charges non-member bargaining unit employees, in lieu of membership dues, for the purported cost of the union’s representation activities. As a result, no public employer’s CBA, including a PLA, may lawfully require such fees for non-union members who do not voluntarily agree to pay the fees.
In light of the legal challenges and protests levied against EO 13502, and the added risk that PLAs may run afoul of Janus if not carefully crafted, it is likely that Biden’s EO 14063 will face its fair share of legal challenges.
Non-Union Contractors Beware
Until the dust settles on any legal challenges to the EO and resulting regulations, non-union contractors considering bidding on large-scale federal construction projects should consult with counsel and carefully consider the implications of signing a PLA in evaluating the true value of the work to the company.
For example, PLAs often incorporate contracts and agreements requiring benefit fund contributions, and leaving those funds may come with expensive fees, fines, contributions, or other payments or liabilities. In addition, once known to unions through their work on a PLA-required project, those contractors may become targets for organizing campaigns or union protests on other projects.