Hahn Proposal Would Require City Contractors to Provide Benefits

By HOWARD FINE
Staff Reporter

In a move likely to shore up labor support during a tough re-election campaign, Los Angeles Mayor James Hahn is proposing to require union-scale benefits and the hiring of union workers on virtually all city construction projects.

The proposed project labor agreement would be one of the largest of its kind in California. Like similar deals in place, it would also set up grievance procedures that offer private contractors on public works projects some assurance of labor peace.

In a recent memo to city managers, Hahn said he has asked City Attorney Rocky Delgadillo to draft an ordinance that could go to the City Council late this year or early next year.

Council approval is expected prior to the March mayoral primary. However, there is the possibility that negotiations could drag on past the election since two of Hahn's opponents, Bernard Parks and Antonio Villaraigosa, are council members.

Parks, in particular, has opposed union-backed positions on several issues this year. He said he has not taken a position on the issue of a citywide PLA, but he has many concerns that would need to be addressed before he would consider supporting it.

"I'm concerned that major projects would only go to a small cadre of contractors and I'm especially concerned that minority and women-owned businesses who happen to be non-union might find themselves shut out of the process," Parks said.

Through spokesman Joe Ramallo, Villaraigosa said he supports the concept of a citywide PLA but wanted to see the details of Hahn's plan before making a final decision.

The Hahn proposal has already stirred up intense opposition from non-union contractor groups that argue it would discourage their members from bidding on city projects. A reduced bidding pool would drive up project costs, they say, without any corresponding guarantee that work stoppages would be avoided.

"This proposal is fiscally irresponsible and it will increase the cost of public works projects around Los Angeles," said Steve Friar, co-director of the Coalition for Fair Employment in Construction, a group opposed to the spread of project labor agreements.

"This is all about Hahn fighting for his political life in an upcoming election," Friar added. "It's hardly surprising that during an election year, the mayor would be steering the council in this direction."

Hahn spokesman Yusef Robb denied any political motivation on Hahn's part.

"Our office has been exploring this for years," Robb said. "The mayor has consistently supported economic development policies that treat workers fairly, that create jobs and generate revenues for the city."

Union push

Project labor agreements or PLAs have been on the increase thanks to a nationwide push by unions to secure public-sector work.

The agreements typically require contractors to pay union-scale wages and benefits, hire local workers and make payments into union-run apprenticeship programs. In exchange, unions pledge to keep labor friction at a minimum and not resort to work stoppages or strikes that could knock projects off schedule and drive up costs.

A sweeping PLA, similar to the one envisioned by Hahn, was signed in early 2000 in Orange County, covering all public works projects funded by the county government.

In Los Angeles, PLAs have been used on specific projects, such as Pier 400 at the Port of Los Angeles, and within the Department of Public Works. A PLA has also been proposed for construction work on the planned renovation of Los Angeles International Airport, though it cannot be finalized until the master plan is approved.

Locally, the largest PLA was enacted in 1999 at the Los Angeles Unified School District. It originally covered $2 billion in construction projects associated with Proposition BB bonds; it has since been expanded to include more than $12 billion in additional bond projects.

Officials at the School District concede that many contractors have decided not to bid on projects. "That lack of competition has probably brought an associated cost with it," said Guy Mehula, deputy chief facilities executive for new construction at LAUSD.

However, Mehula likened the PLA to an insurance policy. "One major labor dispute could also be very, very expensive," he said. "That's an avoided cost that's hard to calculate up front."

Even so, a few projects, such as the one to expand San Francisco International Airport, have endured work stoppages despite a PLA.

The Hahn administration is in talks with union groups over the exact scope and details of the proposed ordinance. "Project labor agreements benefit everyone workers are guaranteed fair treatment and city taxpayers will see crucial infrastructure projects completed efficiently," Hahn said in his memo.

Health benefits

Since the city already has a living wage policy and a 2002 state law mandates that prevailing wages be paid on all projects that have state or local funds, the main concerns for contractors would be in areas such as health benefits.

Under the existing prevailing wage law, contractors often pay a higher cash rate to their workers, who can then purchase health insurance themselves. In a typical PLA, the contractor must either provide union-level health insurance or pay into a union health fund. On some PLAs, contractors are simply required to pay into the fund.

"If a contractor already pays its core workers health benefits, they now have to pay twice into benefit plans for those same workers: once into their own plan and once into the union plan," said Gavin Spector, president of the Los Angeles/Ventura chapter of Associated Builders and Contractors, which represents non-union, or "open shop" contractors.

Even if there is no such duplication, contractors would have to spend significantly more on health and pension benefits, as well as training payments, Gavin said. They would also have to limit their hiring on city public works projects to the pre-approved union hiring halls.

He noted that the percentage of union workers in the construction trades has steadily declined over the years and now stands at about 15 percent.

"As currently proposed, this PLA would discourage 85 percent of qualified contractors from bidding on city projects," Gavin said. "Those contractors that do bid would face much higher expenses and have to give up certain rights as an employer."

But union officials say contractors can actually save money under a PLA. The union health fund payments are tax-deductible, while cash payments to workers are not, according to Richard Slawson, executive secretary of the Building Trades Council of Los Angeles and Orange County, one of the groups in discussions with Hahn. Also, Slawson said, streamlined grievance procedures can save employers time and money.

"Most importantly, study after study has shown that workers under PLAs are far more productive than workers who are not covered under PLAs," Slawson said.

Another benefit of PLAs, Slawson said, is that they discourage contractors from violating wage and hour laws. "A lot of contractors make low bids and then cheat on their wages or hours," he said. "With a PLA in place, it's awfully hard to do that, and if there are any issues there, the PLA sets up a grievance procedure for the workers."

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