Tag Archive for Building and Construction Trades Department AFL-CIO v. Allbaugh

Workers’ Compensation Reform Bill Sent to Governor Jerry Brown Has One Change to Union-Exclusive Alternative Dispute Resolution Carve-Out Program

On August 31, 2012 (the last day of the 2012 California legislative session), the California State Assembly voted 72-5 and the California State Senate voted 34-4 for Senate Bill 863, a bill making various changes to California’s workers compensation system.

As is customary in the California State Legislature, the bill was created as a gut-and-amend at the last minute (amended on August 24, August 27, and August 30) and whipped through the legislative process to Governor Jerry Brown on August 31 without adequate review.

As Sacramento Bee columnist Dan Walters wrote in his September 2, 2012 column entitled The Legislative Process Does Count:

A 170-page overhaul of California’s multi-billion-dollar workers’ compensation system – hammered out during months of secret negotiations between business and labor union lobbyists – was dumped on the desks of 80 Assembly members late Friday after being whisked through two perfunctory committee hearings…

So is SB 863 good public policy or not?

One can’t really answer that question, and the same ambiguity envelops almost everything else that was done, and left undone, in the final days of the session.

SB 863 was one of countless measures that popped up during those days, entirely new bills that were hustled through the process with little or no detailed knowledge of what they really do, or whose interests they serve.

I looked at the final version of Senate Bill 863 to see if the bill changed the obscure alternative dispute resolution “carve-out” program authorized exclusively for the unionized construction industry. It does. For some reason (innocuous or sinister?), Senate Bill 863 eliminates this reporting requirement, which was part of the original 1993 authorization:

By June 30, 1996, and annually thereafter, the Administrative Director of the Division of Workers’ Compensation shall prepare and notify Members of the Legislature that a report authorized by this section is available upon request. The report based upon aggregate data shall include the following:

(1) Person hours and payroll covered by agreements filed.

(2) The number of claims filed.

(3) The average cost per claim shall be reported by cost components whenever practicable.

(4) The number of litigated claims, including the number of claims submitted to mediation, the appeals board, or the court of appeal.

(5) The number of contested claims resolved prior to arbitration.

(6) The projected incurred costs and actual costs of claims.

(7) Safety history.

(8) The number of workers participating in vocational rehabilitation.

(9) The number of workers participating in light-duty programs.

The division shall have the authority to require those employers and groups of employers listed in subdivision (c) to provide the data listed above.

Why was this language eliminated? The legislative analyses for the bill don’t say.

Background on Alternative Dispute Resolution in Carve-Outs for Unionized Companies

This program was established as California Labor Code Section 3201.5. It was part of a workers compensation reform enacted by Governor Pete Wilson in 1993. The program was expanded by reform legislation signed by Governor Arnold Schwarzenegger in 2004. (Section 3201.7 allows unionized employers in other industries to set up similar programs.)

An article in the March 10, 2006 Sacramento Business Journal (“Unionized Firms Save in Workers’ Comp Plan“) gave rare news media attention to this program, which is only available to construction companies in a collective bargaining agreement with unions or signatory to a Project Labor Agreement. I’m quoted in the article:

Too bad this kind of program is only allowed in the construction industry when companies and employees are part of a collective bargaining agreement, said Kevin Dayton, state government affairs director for Associated Builders and Contractors of California, a merit-shop group.

The California Department of Industrial Relations maintains a list of what are now 34 carve-out programs established to date. Unions have promoted this program as a benefit of unionization. For example, the California Commission on Health and Safety and Workers’ Compensation (CHSWC) – then (and now) chaired by California Labor Federation lobbyist Angie Wei – was able to commission what is now the University of California Miguel Contreras Labor Program to produce a 2006 report entitled How To Create a Workers’ Compensation Carve-Out in California: Practical Advice for Unions and Employers. The California Commission on Health and Safety and Workers’ Compensation has also hosted at least one conference on Workers’ Compensation Carve-Outs and Alternative Dispute Resolution.

Although I never hear carve-outs cited nowadays as a reason to require contractors to sign a Project Labor Agreement, unions and pro-union construction management firms such as Parsons Constructors used the existence of this alternative dispute resolution carve-out program as an argument in support of Project Labor Agreements for large infrastructure projects during the early years of government-mandated Project Labor Agreements in California (1993-2000). One example was the Project Labor Agreement for the U.S. Department of Energy’s Lawrence Livermore National Laboratory National Ignition Facility in Livermore, California. It was negotiated in 1997 between construction manager Parsons Constructors and officials of the Building and Construction Trades Department, AFL-CIO and the Building and Construction Trades Council of Alameda County.

Seeking Access to Alternative Dispute Resolution for Non-Union Contractors

In 1998, then-Senator Dick Mountjoy introduced Senate Bill 2019, sponsored by the California Business Properties Association (the contract lobbying firm at the time for three California chapters of Associated Builders and Contractors), which would have eliminated the requirement that alternative dispute resolution programs for workers compensation in the construction industry be part of a collective bargaining agreement. Opposed by unions and trial lawyers, the bill did not get out of committee, and since then there have been no attempts to expand alternative dispute resolution in the construction industry outside of the unionized arena.

Before the 2011 legislative session, I attempted on behalf of my former employer (Associated Builders and Contractors (ABC) of California) to develop language that would allow non-union contractors to reduce workers compensation costs through participation in an alternative dispute resolution program. I was unable to figure out a way to graft such a program onto the existing law, which is dependent on the models of union collective bargaining agreements and labor-management cooperation committees.

Trying to Eliminate Favoritism in California State Law for Bidders in the Union-Exclusive Alternative Dispute Resolution System

Various laws authorize state agencies and local governments in California to award contracts for construction projects with subjective “best value criteria” under the “design-build” alternative bidding procedure. Unionized contractors that are part of alternative dispute resolution carve-out programs get a special exemption from safety requirements.

Design-build authorization language throughout California law includes the following:

A bidder’s safety record shall be deemed acceptable if their experience modification rate for the most recent three-year period is an average of 1.00 or less, and their average Total Recordable Injury/Illness rate and average lost work rate for the most recent three-year period does not exceed the applicable statistical standards for its business category, or if the bidder is a party to an alternative dispute resolution system, as provided for in Section 3201.5 of the Labor Code.

So a bidder in an alternative dispute resolution system (under California Labor Code Section 3201.5) does not have to worry about the experience modification rate or injury/illness/loss rate. As noted above, Section 3201.5 only applies to contractors in either a collective bargaining agreement or a Project Labor Agreement. Non-union contractors cannot use this method of alternative dispute resolution.

On January 11, 2010, the Assembly Business and Professions Committee considered Assembly Bill 1063, introduced by Assemblyman Martin Garrick and sponsored by my former employer, Associated Builders and Contractors (ABC) of California. It would have removed language that allows a contractor with a poor safety record to be “acceptable” if it is part of an alternative dispute resolution program that by law is restricted to contractors in a collective bargaining agreement or project labor agreement.

ABC of California argued that all design-build entities should have a decent safety record, without exceptions. The Western Electrical Contractors Association stated that “A safety record should be based on safety – not the existence of a side-agreement over dispute resolution – the two have nothing to do with each other! There is simply no valid public policy served by this requirement.” But the California Labor Federation, AFL-CIO opposed AB 1063 by praising unions and their activities, which was sufficient for the bill to fail on a party-line vote (Democrats opposed, Republicans in support.)


Update, October 31, 2013: The California Department of Industrial Relations (DIR) issued a bulletin on October 28, 2013 announcing The Division of Workers’ Compensation (DWC) Approves Carve-Out Agreement Covering 22,000 Workers in Southern California between seven Southern California United Food and Commercial Workers (UFCW) local unions, Vons and Super A Foods. I sent this tweet in response:

A labor attorney representing management emailed me a response:

But Kevin this can only work under a union contract because the health plan workers comp plan and grievance process are combined. A good idea. Still, few unions have implemented as it is a lot of work to make it work…Impossible to do in a non-union setting as the grievance process side of things would be cost prohibitive and disruptive – only works in union setting as the grievance process is already in place, as is the trust health plan administration system which does double duty – that is reason for efficiencies. Maybe some giant corporation might try it non-union but doubt it – frankly most unions see the benefits but it is so much work and can cause employee dissatisfaction if a comp case goes wrong that not worth it. And then what do you do with claimants’s lawyers? – nice idea, but generally a no-go.

Sierra Club Seeks Accountability for Union Claims about Project Labor Agreement Imposed on Proposed Hydrogen Energy Power Plant in Kern County, California

Whether or not you agree with the vision and political agenda of the Sierra Club California, most people in politics would acknowledge that this group’s objections to proposed projects and activities under the California Environmental Quality Act, or CEQA (California Public Resources Code Section 21000 et seq. are genuinely based on environmental concerns. In other words, they don’t seek some kind of unrelated economic payoff from the project developer under the guise of environmental activism: they ARE environmental activists.

Sometimes the Sierra Club and other legitimate environmental groups find themselves on the same side with California Unions for Reliable Energy (CURE) or other coalitions of unions in opposing proposed projects. Surely this is an awkward relationship, because those unions will fight viciously on environmental grounds until they get their Project Labor Agreement or other union agreement. Then they suddenly announce that their environmental issues have been adequately addressed, and they SUPPORT the project, thus turning on the real environmental groups.

The awkwardness in the relationship between labor unions and environmental groups (the so-called Blue-Green Alliance) was revealed as early as 2004, in a Sacramento Bee article (“Pressure by Labor Group Alleged” – Sacramento Bee – September 19, 2004)

Some environmentalists who once welcomed CURE’s involvement now question its motives.

Sierra Club lobbyist V. John White once told the Contra Costa Times that CURE raises “valid issues and (moves) those issues forward.”

Interviewed for this story, White said he still thinks CURE has “done some good things.” But he’s troubled that CURE attacked an Imperial County geothermal plant [the Salton Sea Unit 6 Geothermal Power Plant, later called the Black Rock 1, 2, and 3 Geothermal Power Project – ed.] for which he has lobbied, a project designed to produce renewable energy from underground reservoirs of steam.

“They added costs and significantly delayed it, and the reasons had little to do with the environment,” White said.

Sierra Club Questions Claims of Project Labor Agreement Imposed on Proposed Hydrogen Energy California (HECA) Power Plant

The Sierra Club has long been concerned about the proposed Hydrogen Energy California (HECA) Power Plant, what it calls a “complicated and controversial project” near Buttonwillow in rural Kern County. This project has received extra attention because of up to $408 million in funding authorized for the project through the U.S. Department of Energy – much of it from the American Recovery and Reinvestment Act (ARRA), also known as the Obama stimulus package, or H.R. 1 from 2009. The www.Recovery.gov web site has more details about the $90 million in stimulus money already spent on Hydrogen Energy California (HECA), but as stated in this April 22, 2011 Federal Energy Regulatory Commission order on Hydrogen Energy California (HECA):

Hydrogen argues that the United States Department of Energy (DOE) has recognized the project’s importance to the nation and California by providing substantial financial assistance. According to Hydrogen, its project was awarded $308 million in financial assistance on September 28, 2009, in connection with DOE’s Clean Coal Power Initiative and an additional $100 million in financial assistance was added by DOE in September 2010.

Originally the project was planned by a joint venture of British Petroleum (BP) and Rio Tinto, but in 2011 the project was transfered to SCS Energy, based in Concord, Massachusetts (a socio-economic world away from Buttonwillow). In 2012, the Sierra Club became active in exercising its status as an approved intervenor in the California Energy Commission’s licensing process for the proposed Hydrogen Energy California (HECA) power plant. It submitted a letter dated August 2, 2012 to the California Energy Commission questioning numerous aspects of the proposed project and demanding more information.

One of the data requests in the Sierra Club’s August 2 letter on HECA to the California Energy Commission (which must be answered by the applicant for the project approval) questions the claims made about local hiring and employment under the Project Labor Agreement that the project’s prime contractor, Fluor Corporation, claims to have signed with the national Building and Construction Trades Department, AFL-CIO, the State Building and Construction Trades Council of California, and the Kern, Inyo, Mono Counties Building Trades Council.

Project supporters held a press conference with union officials in Buttonwillow on May 31, 2012 to tout the alleged benefits of the Project Labor Agreement. An article in the Bakersfield Californian posted on May 31, 2012 (“Hydrogen Plant Agrees to Union Labor“) reported on the Project Labor Agreement but noted a few less savory aspects of the agreement:

The agreement gives Hydrogen Energy California significant new support as it looks to state agencies for approval. It also takes HECA’s owner, Massachusetts-based SCS Energy, a step further than the previous partners, BP and Rio Tinto, which a project spokeswoman said were in talks with construction unions but never formalized a labor agreement.

A spokesman for the trade group Associated Builders & Contractors Inc. [of Central California in Bakersfield – ed.], Russell Johnson, said the labor agreement was unfortunate because it could raise the project’s costs and “shut out” the 85 percent of California construction firms that are not union shops.

The article did not mention that California Unions for Reliable Energy (CURE) had become an intervenor in the California Energy Commission’s licensing procedure for HECA. Nor did it mention CURE’s reputed history of blocking or delaying approval of proposed power plants using the California Environmental Quality Act (CEQA) until the developer or its agent signed a Project Labor Agreement. As you would expect, California Unions for Reliable Energy has not expressed any concerns about the environmental impact of this 400 megawatt project – that’s so strange considering how adamantly CURE objects to relatively innocuous small solar projects in the San Joaquin Valley!

Obviously the Sierra Club is skeptical about the union propaganda about “local hiring” concerning Project Labor Agreements for energy generation facilities in the San Joaquin Valley of California. Here is the excerpt from its August 2, 2012 letter, which speaks for itself:

Background: CONSTRUCTION TRAFFIC TRAVEL DISTANCES

The AFC, p. 5.1-9, states that trip distances for estimating off-site construction emissions were based on the assumption that workers and delivery trucks are traveling within Kern County. Appendix E-2, p. 35, shows that the AFC assumes off-site roundtrip distances worker commuting vehicles, delivery trucks, and import fill trucks of between 38.0 to 39.8 miles, i.e., it assumes that all vehicles operate only within a radius of less than 20 miles around the Project site. The AFC does not provide any support for these assumptions. A 20-mile roundtrip distance appears unrealistically short for both the construction workforce and the delivery/fill import vehicles and may therefore underestimate emissions associated with vehicle travel.

Data Requests:

25. According to the AFC, p. 5.8-15, the average size of the workforce over the approximately 49-month construction and commissioning period would be 1,159 workers (including construction workers and contractor staff); the peak month of construction would require 2,090 craft workers (on site) and 371 contractor staff. It appears unlikely that a sufficiently skilled construction labor force would be available in Kern County within a 20 mile radius of the Project site. Further, based on the 1982 report Socioeconomic Impacts of Power Plants by the Electric Power Research Institute, construction workers will commute as much as 60 miles daily to construction sites from their homes rather than relocate, and considerably further on a weekly basis. This indicates that the construction workforce would likely come from farther than 20 miles from the Project site. Elsewhere, the AFC states that approximately 60 percent of the workforce is expected to be hired from within Kern County but that it is possible that some portion of the labor force will be drawn from Los Angeles County. (AFC, pp. 5.8-3, -16 and -18.) In addition, HECA has recently signed a project labor agreement (“PLA”) with the National Building and Construction Trades Department, the State Building and Construction Trades Council of California, and the Kern, Inyo, and Mono Counties Building and Construction Trades Council. Thus, some of the construction workforce may come from Inyo and Mono Counties. The southern border of Mono County is more than 150 miles from the Project site.

a) Please provide a copy of the PLA and/or indicate whether the PLA contains a breakdown for the origin of the construction workforce by county.

b) Please provide a breakdown of the available construction labor workforce by county.

c) Please identify typical travel distances for the construction workforce by county.

d) Please discuss whether you anticipate that construction workers would commute from their residence on a daily or weekly basis or seek lodging closer to the Project site.

e) Please revise emission estimates for worker vehicle travel during Project construction according to your responses above.

Now more of the truth will come out about the union workforce locked in to build this power plant.

Author of Most Comprehensive Study on the Cost of Project Labor Agreements Speaks in Contra Costa County, California and Earns Inflatable Rat Balloon Greeting

UPDATE: see coverage of the meeting by Lisa Vorderbrueggen of the Contra Costa Times newspaper in “Political Blotter: Politics in the Bay Area and Beyond:”

Was that a Rat on Contra Costa Boulevard? – Contra Costa Times – May 18, 2012


This morning I went to a meeting of the Contra Costa Taxpayers Association featuring a presentation by Erik Bruvold, the President and CEO of the National University System Institute for Policy Research, based in San Diego. This institute describes itself as “a groundbreaking economic think tank that promotes high quality economic, policy, and public-opinion research to improve the efficiency and effectiveness of local governments.”

Bruvold is the lead author of “Measuring the Costs of Project Labor Agreements on School Construction in California.” Published in July 2011, this study is the most comprehensive statistical assessment ever done about the fiscal impact of government-mandated Project Labor Agreements (PLAs), with a sample size five times larger than any other study. The study takes into account several potential cost variables overlooked in earlier PLA studies, and it was reviewed for its credibility and accuracy by economists at The Keston Institute for Public Finance and Infrastructure Policy at the University of Southern California.

It was appropriate for Bruvold to make a major public presentation in Contra Costa County, located in the San Francisco Bay Area with a population of 1.1 million. For 20 years, Contra Costa County has been a hotbed of political and legal battles over government-mandated Project Labor Agreements. In fact, in some ways Contra Costa County has been a national leader in the union strategic effort to use government-mandated Project Labor Agreements as a tool to gain market share of taxpayer-funded construction.

For example, the Contra Costa County Board of Supervisors was the first government in California to require contractors to sign a Project Labor Agreement for a public project (the Contra Costa Regional Medical Center in 1994 – see background here). In 2001, the Contra Costa Building and Construction Trades Council and the City of Richmond (in Contra Costa County) joined the Building and Construction Trades Department, AFL-CIO in a court challenge to President George W. Bush’s Executive Order 13202 prohibiting federal funding on construction projects on which governments require contractors to sign Project Labor Agreements with unions as a condition of work. (The D.C. Circuit Court of Appeals rejected the lawsuit in Building and Construction Trades Department AFL-CIO v. Allbaugh, No. 01-5436.)

The Contra Costa Taxpayers Association describes itself as “a non-profit, non-partisan organization dedicated to promoting accountable, cost-effective and efficient government and opposing unnecessary taxes and spending.” This organization has long opposed government-mandated Project Labor Agreements – not surprising when the study “Measuring the Costs of Project Labor Agreements on School Construction in California” indicates a 13-15% increased cost of construction when the bid specifications of school districts require contractors to sign a PLA.

Obviously this study irks union officials. Several dozen union picketers and an inflatable rat balloon were in front of the Hyatt House in Pleasant Hill to greet the 93 meeting attendees.

In addition, two union officials (Aram Hodess, who is a California Apprenticeship Council commissioner and business manager of UA Plumbers and Steamfitters Local 159, and Kevin VanBuskirk, who is a business representative of the Sheet Metal Workers Local No. 104) were handing out this double-sided flyer at the front door of the hotel.

I felt Bruvold did an excellent job in explaining the following: (1) his institute spent a year collecting and confirming data from school districts, state governments, and the McGraw-Hill publishing company, (2) his institute’s study is exceptional for its large sample size and its effort to account for numerous potential variables, (3) California has rigid school construction standards that minimize cost variables and allow for reasonable comparisons, and (4) a weakness of the study is that it’s impossible to completely disentangle the increased costs of Project Labor Agreements from the increased costs of construction at the Los Angeles Unified School District. Bruvold also rebutted the argument that cost differences were the result of different government-mandated construction wage rates (so-called prevailing wages).

A bunch of union people attended the meeting and asked questions afterwards. Bruvold remained calm and objective throughout his presentation. He declined to speculate much on why school construction costs more under a Project Labor Agreement and why school construction costs more at the Los Angeles Unified School District.

I’ll tell you what I think. School construction costs more under a Project Labor Agreement because non-union contractors generally refuse to bid on projects with a PLA, and subcontractors generally refuse to participate in bids. Less competition means higher costs.

This common sense observation is confirmed by studies done by the Beacon Hill Institute at Suffolk University on school construction in Massachusetts, Connecticut, and New York, as well as anecdotal evidence from 15 projects across the country bid both with and without a PLA.

I contend that school construction costs more at the Los Angeles Unified School District because of what I call the “Urban Corruption Variable.” In fact, I encourage someone to commission the National University System Institute for Policy Research to perform the same research but try to isolate the Corruption Variable and rank the waste, fraud, and abuse at the state’s school districts from best to worst. Contact Erik Bruvold here to inquire about the cost of performing this study.