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New Laws Affecting Public Works Construction: Are They Good For California?

by Carlo Paciulli, Esq.

In October 2011, Governor Brown signed into law two bills regarding project labor agreements, or PLAs, that will impact public works construction. These new laws reflect a pro-union orientation in the California legislature and Governor’s office.

A PLA is an agreement between a public entity and organized labor that requires that compensation on a project be in accord with the agreement between the public entity and one or more unions. Contractors working on public works subject to a PLA will have to make sure workers are paid the compensation and benefits set forth in the PLA. Further, a contractor and its subcontractors will need an agreement with the relevant labor union pursuant to which they will act as if they were a union member for that project alone.

Some argue that a PLA is an anti-competitive and costly scheme designed to steer construction contracts to unionized contractors while cutting out qualified non-union contractors. They say that PLAs cost taxpayers more money by inflating the cost of public-works construction. Those favoring PLAs say that PLAs ensure workers are properly paid and, in turn, that projects will be built efficiently and on time.

Several local California governments previously prohibited government- mandated PLAs, taking the position that doing so saved taxpayer money. The first new law prohibits local governments from banning PLAs on public-works contracts. Similarly, if a charter city elects not to use a PLA, the state may cut off funding to that city.

The second new law provides a powerful incentive to use a PLA by requiring local governments to pay fees to the state for labor compliance, unless their construction contractors sign a PLA, in which case the fee is waived.

Time will tell whether these laws will benefit California taxpayers and public entities.

Carlo Paciulli is an Associate Attorney with Hunt Ortmann, a leader in California construction law. If you have any questions about this bulletin or the new laws pertaining to public works, please contact him at paciulli@huntortmann.com.

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