On January 10, 2024, Associated General Contractors of America and the Louisiana Associated General Contractors filed suit to enjoin President Biden’s Executive Order 14063 (Use of Project Labor Agreements (PLA) for Federal Construction Projects) and the final agency rules enacted to implement that order.

The PLA Mandate originated on February 4, 2022, when President Biden signed the order, which directed (with specific exceptions) that government contractors—general contractors and subcontractors—who work on federal construction projects with an estimated cost of $35 million or more must “agree, for that project, to negotiate or become a party to a project labor agreement with one or more appropriate labor organizations.” The order states that the use of PLA mandates will “avoid labor-related disruptions on projects by using dispute-resolution processes to resolve worksite disputes and by prohibiting work stoppages, including strikes and lockouts.”

The order directed the Federal Acquisition Regulatory Council to implement the order by enacting regulations that would apply to all appropriate federal projects once the FAR Council’s final agency rules took effect. The council proposed regulations in August 2022 for public comment. After receiving thousands of comments, the council issued its final rules on December 28. The regulations are to go into effect on January 22, 2024. The final rule did not make significant changes to the proposed rule.

The final rule commands federal agencies to “require the use of a project labor agreement for Federal construction projects with a total estimated construction cost at or above $35 million, unless an exception applies.” The exemptions are limited to projects in which:

• • the procurement officer makes a written determination that a project labor agreement would not advance the federal government’s interests in achieving economy and efficiency in federal procurement;
  • market research indicates that requiring a project labor agreement would substantially reduce the number of potential offers to such a degree that adequate competition at a fair and reasonable price could not be achieved; or
  • requiring a project labor agreement would otherwise be inconsistent with federal statutes, regulations, executive orders, or presidential memoranda.

On federal construction projects to which the PLA Mandate applies, the prime contractor must “[n]egotiate or become a party to a project labor agreement with one or more labor organizations for the term of the resulting construction contract” and “[r]equire its subcontractors to become a party to the resulting project labor agreement.”

The PLA Mandate requires any PLA to:

• • bind the prime contractor and subcontractors engaged in construction on the construction project to comply with the PLA;
  • 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 that might arise during the term of the agreement;
  • provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health; and
  • fully conform to all statutes, regulations, executive orders, and agency requirements.

Notably, the final rule specifically states that the required PLA will not modify the prime contract “or provide for any price adjustment by the Government.”

The lawsuit challenges the President’s authority to implement the PLA Mandate. The plaintiff contractor associations argue that the President and FAR Council had “wrongly read” the “Procurement Act” (Subtitle I of Title 40 of the United States Code) as giving the President authority to enact a PLA Mandate. They further argue there is no constitutional authority that would empower the President to implement a PLA Mandate and, in issuing the order, the President violated the principle of separation of powers. They also argue that the council violated the Administrative Procedure Act by enacting the final rule.

The Associated General Contractors and Louisiana General Contractors also contend that the PLA Mandate will “disrupt both labor-management relations in the construction industry and the procurement of the federal government’s largest and most complex projects.”

Notably, the plaintiffs represent both “open shop” contractors (those that are not signatory to any unions) and “signatory” contractors (others that are signatories). The national association contends that the PLA mandate will disqualify both open shop and signatory contractors from being able to compete on large, federal construction projects:

The PLA Mandate will give the Unions enormous leverage over access to the multibillion-dollar market for the construction of Large-Scale Federal Projects. To comply with the terms and conditions of any collective bargaining agreement likely to result from the one-sided “bargaining” that the new measures contemplate, Open Shop Contractors will have to make fundamental changes to the way they manage the construction process and, in particular, to the way they assign work.

The national association further contends that signatory contractors will “waive their rights to apply or enforce their existing agreements with one or more of the Unions, … recognize or otherwise deal with not only the Unions signatory to their existing agreements, but also other Unions, including ‘stranger’ Unions with whom they have no prior relationship, … enter into a new and different agreement with the Unions with whom such Contractors already have agreements, and … enter into these new agreements on terms and conditions without any meaningful opportunity for negotiation.”

The association argues that many subcontractors, especially those in rural communities (such as the ones represented by the Louisiana plaintiff), will decide not to participate because the unions will have no incentive to negotiate. The complaint argues that “[t]he required ‘negotiations’ between the Unions and the Contractors contemplated by the PLA Mandate will make a mockery of the concept. They will last only as long as the Unions require to say ‘take it or leave it.’ The Unions have no economic or other interest in whether any one Contractor qualifies for a contract or subcontract to construct all or part of any Large-Scale Federal Project.” The Associated General Contractors of America contends that “[m]ost of the subcontractors in those rural areas are Open Shop and few of them are willing to sign collective bargaining agreements of any kind, let alone an agreement imposed on them as a ‘take it or leave it’ mandate. To make matters worse, few of the craft workers in those areas are union members or otherwise interested in union representation.”

The complaint maintains that the purpose of the lawsuit is not to advocate for non-union contractors over union contractors, but that the association would:

oppose any federal or other measures that would change the congressionally intended balance of bargaining power between labor and management in the construction industry. To that end, AGC of America opposed the position taken by President George H. W. Bush, in 1992, when he issued Executive Order 12818. That order categorically prohibited federal agencies from requiring PLAs on federal construction projects. AGC of America opposed that prohibition, just as it now opposes the PLA Mandate.

The association said it further recognizes that all contractors (union and non-union) “are heavily dependent on specific subcontractors with whom they have worked in the past. To the extent that the PLA Mandate causes these subcontractors to withdraw from the market for such projects, these general contractors will have to depend on a different and unfamiliar set of subcontractors with whom they have little or no prior experience, who will necessarily employ individuals with whom the general contractors have no familiarity. In and of itself, this will create enormous but unquantifiable risks of loss for the general contractors that continue to compete for such projects. Even if they continue to compete for such work, these general contractors are likely to be more selective, and to compete for fewer projects.”

The complaint emphasizes the impact to skilled labor or craft workers that have made a lawful decision not to join a labor union, arguing that “[t]he PLA Mandate puts the Unions in a position to lawfully demand, for example, that agreements include exclusive hiring hall or other provisions ensuring that the Unions’ members get the work, even if the successful bidder for the work, and all of its subcontractors, are Open Shop Contractors, each with their own existing workforce of skilled craft workers. The Unions have no obligation or incentive to even consider the resulting impact that such provisions would have on the craft workers that the successful bidder and its subcontractors already employ.”

Associated General Contractors has filed a motion to enjoin (that is, prevent) implementation of the PLA Mandate. The federal government has not yet answered the complaint or the motion. We anticipate the federal government will oppose the association’s motion for a preliminary injunction and seek to dismiss the complaint.

Schwabe intends to monitor the AGCA’s lawsuit. Note that the Oregon-Columbia Chapter of the Associated General Contractors has challenged a “Community Workforce Agreement” (similar to a Project Labor Agreement) that was mandated by the Oregon Department of Transportation. On January 2, 2024, the Oregon Court of Appeals denied ODOT’s motion to dismiss the petition for judicial review and is considering whether the department has the authority to enact rules that require contractors on certain ODOT projects to enter into Community Workforce Agreements. AGC OR is represented by Schwabe in that action.

This article summarizes aspects of the law and does not constitute legal advice. For legal advice on your situation, you should contact an attorney.