Tag Archive for California Apprenticeship Council

A Small Electrical Apprenticeship Program Tries to Overcome Rigid State Government Control of Apprenticeship Programs for the Construction Trades in California

UPDATE: On September 18, 2013, the Independent Training and Apprenticeship Program (I-TAP) lost its appeal to the U.S. Court of Appeals for the Ninth Circuit in Independent Training v. California Department of Industrial Relations. As the decision noted, “The panel affirmed the district court’s judgment in favor of the defendants in a suit seeking declaratory and injunctive relief on the ground that the California Department of Industrial Relations’ actions were inconsistent with federal Fitzgerald Act regulations governing the employment of apprentices on public works projects qualifying as ‘Federal purposes.'”

Construction trade unions are sometimes accused of misusing the government-regulated apprenticeship structure as a tool to control who, how, and how many people enter the construction workforce. Sponsors of proposed apprenticeship programs who aim to compete against existing union programs have long endured legal obstacles in states such as Washington, Oregon, and Nevada.

But as usual, California takes the prize for the best use of government to cut competition and freedom of choice in the marketplace. From 2002 to 2007, the U.S. Department of Labor threatened to punish – and then proceeded to punish – the State of California for failing to follow federal laws meant to encourage the construction industry to train the future American workforce through apprenticeships.

Now a California-based training program for apprentices, approved by the federal government in 2004 to train electrical workers, is suing the State of California because the state takes a very narrow interpretation of the federal punishment – so much so that the punishment is effectively meaningless. This apprenticeship program contends that its apprentices have lost a substantial number of opportunities to get on-the-job training on state and local construction projects as a result of this inappropriately narrow interpretation.

Background of How the State of California Has Traditionally Regulated Apprenticeship for the Construction Trades

California Labor Code Section 1777.5 outlines the statutory requirements for construction contractors regarding apprenticeship when these companies work on public works projects of $30,000 or more. These contractors must request apprentices from state-approved training programs. Contractors must employ these apprentices in a ratio not less than one hour of apprentice work for every five hours of journeyman work (with a few exceptions).

Because they are less than fully trained, apprentices are the only workers on a public works project to whom contractors can pay less than the full “journeyman” prevailing wage. For trades such as electrical inside wireman, the pay rate for apprentices increases in conjunction with the progress of the apprentice through classroom instruction and on-the-job training.

The state generally understands that a contractor is required to request apprentices from a program approved by the Chief of the Division of Apprenticeship Standards to train workers for that trade in the county where the work is performed. Contractors are required to make payments designated for “apprenticeship and training” in the state-mandated prevailing wage rate to the program or programs that provided the apprentices, or (if not enough apprentices are dispatched to fulfill the 5:1 ratio) to any program approved to train workers for that trade in the county where the work is performed, or to the California Apprenticeship Council.

Under California Labor Code Section 1773.1(a)(6), contractors are able to take a “credit” for the payments for apprenticeship and training against the total hourly state-mandated “prevailing wage” rate, provided that the amount paid to the program is reasonably related to the cost of the program. In other words, the state-mandated hourly wage to a worker is reduced by the amount paid for apprenticeship and training, but the contractor cannot pay an excessive amount to a training program’s trust fund.

When does the reasonable cost for apprenticeship and training become an issue? The state sets the standard employer payment amounts for apprenticeship and training based on the applicable union collective bargaining agreement for that trade in that geographical region, so a competing program not affiliated with that union might charge a contractor a different rate for apprenticeship and training than the amount designated in the applicable state-mandated prevailing wage rate.

Under California Labor Code Section 3075 (a), the Director of the Division of Apprenticeship Standards is authorized to approve three categories of apprenticeship programs: (1) those run by unions and their affiliated contractor associations through joint apprenticeship committees, (2) those run by non-union contractor associations through unilateral apprenticeship committees, and (3) programs run by individual corporate employers. Unions had a complete monopoly on apprenticeship training in the California construction trades until 1988, and they still monopolize apprenticeship training for many trades in many geographic areas.

Why the Federal Government Took Away California’s Authority to Regulate Apprenticeship for Federal Purposes

President Franklin Delano Roosevelt signed the National Apprenticeship Act (the Fitzgerald Act) into law in 1937. This law authorizes the U.S. Department of Labor to “formulate and promote the furtherance of labor standards necessary to safeguard the welfare of apprentices and to cooperate with the States in the promotion of such standards.”

California is one of 27 states that exercise an option to perform their own oversight and regulation of apprenticeship programs, rather than leaving it to the U.S. Department of Labor’s Office of Apprenticeship Training, Employment and Labor Services (OATELS). They are commonly called “SAC states” – that is, states with State Apprenticeship Councils.

In 1999, Governor Gray Davis signed into law Assembly Bill 921, a union-backed bill that amended California Labor Code 3075 in order to establish a stringent “needs test” that a proposed apprenticeship program or an apprenticeship program seeking to expand to a new trade or geographic jurisdiction must fulfill before the program can be approved or expanded.

Construction unions have exploited this language to block the approval of new programs or programs expanding into new trades or geographical regions, thus cutting competition in training and limiting the choice in comprehensive training programs for people seeking a career in the construction trades. The law also creates confusion about who has the authority to approve or reject applications for new or expanding apprenticeship programs: the Chief of the California Division of Apprenticeship Standards or the California Apprenticeship Council.

In response to this needs test, the U.S. Department of Labor in 2002 began the process of “derecognition,” or taking away the State of California’s authority to regulate apprenticeship for federal purposes. The California Division of Apprenticeship Standards under the Davis Administration and the union-controlled California Apprenticeship Council both challenged the derecognition process.

In January 2007, a U.S. Department of Labor Administrative Review Board ruled that the U.S. Department of Labor has the right to “derecognize” California’s authority to regulate apprenticeship for federal purposes. The decision upheld an earlier Administrative Law Judge decision noting that the “needs test” in Section 3075 of the California Labor Code used by unions to prevent new or expanded apprenticeship programs “does not promote competition among programs, does not consider the needs of individuals seeking apprenticeship training, and limits training opportunities for apprentices.”

At the demand of the State Building and Construction Trades Council of California, the California State Legislature has stopped four bills that included a provision to repeal the needs test: Assembly Bill 2660 in 2006 (sponsored by Associated Builders and Contractors (ABC) of California), Assembly Bill 947 in 2007 (sponsored by the Schwarzenegger Administration), Assembly Bill 734 in 2008 (a bipartisan bill amended at the very end to eliminate the repeal provision), and Senate Bill 362 in 2012 (sponsored by ABC of California). (Note: I was State Government Affairs Director of ABC of California when these bills were introduced and considered.)

What’s the Practical Effect of Derecognition? The Independent Training and Apprenticeship Program (I-TAP) Seeks to Clarify the Meaning through a Lawsuit

The U.S. Department of Labor’s Office of Apprenticeship Training, Employment and Labor Services (OATELS) approved the Independent Training and Apprenticeship Program (I-TAP) to train apprentices on federal projects in January 2004. This unambiguously means that contractors can classify and pay workers dispatched from the I-TAP program as apprentices on purely federal projects. The workers would also be unambiguously classified as apprentices in states that have not exercised the option of preempting apprenticeship regulatory authority from the U.S. Department of Labor.

The ambiguity about the legality of I-TAP providing on-the-job training to its apprentices working on state and local government projects results from the meaning of “derecognition” and the meaning of “federal purposes” in a state that had long claimed statutory and regulatory authority over apprenticeship.

For a few years after the U.S. Department of Labor’s 2007 derecognition of California’s authority to “register and oversee” apprenticeship policies for federal purposes, electrical contractors requested apprentices from I-TAP, employed them on the job at apprenticeship rates, and made payments on behalf of the apprentices to I-TAP under the belief that the derecognition allowed them to do so. Officials of the California Department of Industrial Relations (DIR) made occasional preliminary inquires about contractors’ compliance with state laws when using I-TAP as a source of apprentices, but did not take further action after contractors justified their use of I-TAP on the new conditions resulting from derecognition.

But in the fall of 2010, the California Department of Industrial Relations threatened to assess back wages and penalties against a contractor – Gray Electric Company – for classifying workers dispatched from I-TAP as apprentices on school construction projects in Marysville and in Grass Valley. Gray Electric had requested apprentices from I-TAP, employed them on the job at apprentice wage rates, and made payments on behalf of the apprentices to I-TAP. The contractor argued that it could regard these workers as apprentices because the project received federal financial assistance and I-TAP was a federally-approved program.

To avoid further controversy, Gray Electric ultimately withdrew from its agreement to train with I-TAP. Then, a labor-management cooperation committee affiliated with the International Brotherhood of Electrical Workers (IBEW) submitted a wage complaint to the California Department of Industrial Relations because another electrical contractor – Harold E. Nutter & Son, Inc. – was classifying workers dispatched from I-TAP as apprentices on a Stockton school construction project.

Harold E. Nutter & Son, Inc. and the individual apprentice argued that because the federal government has “derecognized” the state under the federal Fitzgerald Act and thus deprived the state of its authority to regulate apprenticeship policies for federal purposes, contractors on federally-funded projects are legally permitted to pay apprenticeship-level wages and take credits against the prevailing wage rate for payments to an apprenticeship program, even if the program is only approved by the federal government and not the state.

The California Department of Industrial Relations disagreed and assessed back wages and penalties against the contractor (Harold E. Nutter & Sons, Inc.) for paying apprentice-level wages to its worker enrolled in the federally-approved I-TAP. It did not recognize the I-TAP apprentice as a legitimate apprentice for purposes of state law. It also disallowed payments for “apprenticeship and training” to I-TAP as valid payments under the state prevailing wage law that could be taken as a credit against the total hourly wage.

As a result of the DIR crackdown on contractors classifying I-TAP apprentices as journeymen on projects not exclusively funded by the federal government, several contractors have ended their agreements to train with I-TAP, and apprentices in the program have lost paid on-the-job training opportunities. Some have dropped from the program.

Time for a Lawsuit

On May 19, 2011, the California Department of Industrial Relations (DIR) was sued by three parties: an apprentice indentured in the Independent Training and Apprenticeship Program, an employer with an agreement to train apprentices in the I-TAP program (Harold E. Nutter & Son, Inc.), and the I-TAP program itself. The case is Independent Training and Apprenticeship Program et al. v. California Department of Industrial Relations et al.

This is an interesting case probing the meaning of the U.S. Department of Labor’s “derecognition” of the authority of the State of California to regulate apprenticeship for federal purposes.

The plaintiffs complain that when the DIR alleges a contractor has violated prevailing wage laws for using I-TAP apprentices, the agency does not take responsibility to determine if a construction project is receiving federal funding and thus falls under “federal purposes” under derecognition, but leaves it to the contractor to determine the sources of funding.

The federal financial assistance for the Grass Valley and Stockton school construction projects was provided in the form of “Buy America Bonds,” which are subsidized by the federal government throughout their tax-exempt status. But the plaintiffs in this lawsuit went even further, contending that the federal Fitzgerald Act in essence makes any policies providing “apprenticeship opportunities” as a “federal purpose.”

The Outlook for This Case, and How You Can Help

A federal district court sided with the California Department of Industrial Relations against the I-TAP plaintiffs. However, the I-TAP plaintiffs have appealed to the U.S. Ninth Circuit Court of Appeals.

Obviously there are numerous entrenched interests that don’t want to see the California Department of Industrial Relations (DIR) lose its regulatory control over apprenticeship training opportunities on the construction projects of state and local governments. In contrast, the I-TAP plaintiffs are alone, but they see this case as a higher pursuit of freedom of choice in training for workers and the improvement of apprenticeship training as a whole through greater competition.

I-TAP plaintiffs are looking for funding for their lawsuit, amicus briefs to be submitted to the court in support of their case, and any assistance or evidence that provides additional backing for their arguments. For more information, contact Carolyn Nutter, Training Coordinator for the Independent Training & Apprenticeship Program, at (916) 332-3332 or via email.

Documents Related to Federal District Court Case

  1. 2011-04-18 I-TAP Complaint & Exhibits to District Court
  2. 2011-05-19 I-TAP Notice of Motion & Motion for Preliminary Injunction to District Court
  3. 2011-05-19 I-TAP Memo of Points & Authorities to District Court
  4. 2011-05-19 I-TAP Compendium of Evidence to District Court
  5. 2011-05-19 I-TAP Request for Judicial Notice and Exhibit A
  6. 2011-05-19 I-TAP Exhibits B C and D
  7. 2011-05-23 I-TAP Case – I-TAP Notice of Errata to Complaint to District Court
  8. 2011-06-27 DIR Opposition to Preliminary Injunction to District Court
  9. 2011-06-27 DIR Objections to I-TAP Evidence
  10. 2011-06-27 DIR DAS Director’s Declaration to District Court
  11. 2011-07-01 I-TAP Reply to DIR Opposing Motion for Preliminary Injunction to District Court
  12. 2011-07-01 I-TAP Declaration to District Court Rebut DAS Director’s Declaration
  13. 2011-08-15 District Court Order Denying Motion for Preliminary Injunction
  14. 2011-10-31 I-TAP Stipulation and Proposed Order

Documents Related to Ninth District US Court of Appeals Case

  1. 2012-04-20 I-TAP Opening Brief to Appeals Court
  2. 2012-06-22 DIR Brief to Appeals Court
  3. 2012-08-03 I-TAP Reply Brief to Appeals Court
  4. 2013-09-09 Ninth Circuit US Court of Appeals Decision I-TAP v DIR

Attention Embattled Sonoma County Taxpayers: Prepare for Sonoma County Board of Supervisors to Vote on Costly Project Labor Agreement Policy

In California, the battle continues at county governments over requiring all contractors to sign Project Labor Agreements with unions as a condition of working on taxpayer-funded construction. In the future, the Dayton Public Policy Institute will produce and post a chart summarizing all Project Labor Agreement activity at California’s 58 county governments since the unions’ government-mandated PLA movement started in the 1990s. In the meantime, here is a report on the latest county to be targeted by unions: Sonoma County, in the San Francisco Bay Area.

Like the unions’ recent unsuccessful pushes for Project Labor Agreements in Santa Barbara County and Ventura County, the campaign for a Project Labor Agreement policy in Sonoma County began with an unsubstantiated union claim that the county needed a local hire policy. Union lobbying to solve this non-existent problem in Sonoma County was underway in August 2011. Soon the unions dropped their pretense and began openly campaigning to get a Project Labor Agreement policy.

On December 20, 2011, Sonoma County staff convened the first of a series of joint meetings with local representatives of the construction industry and with union officials to try to develop a Project Labor Agreement that served the needs of the county while being acceptable to contractors and unions. Subsequent meetings occurred on January 17, February 24, March 26, and on May 16, 2012.

I attended the last meeting on May 16. Representing the unions were Lisa Maldonado (Executive Director of the North Bay Labor Council), Jack Buckhorn (a California Apprenticeship Council commissioner and Business Manager of the International Brotherhood of Electrical Workers (IBEW) Local No. 551), and Tom Mattis (Field Representative for Carpenters Union Local No. 180). Representing contractors were Keith Woods (executive director of the North Bay Builders Exchange) and two contractors belonging to that group, along with Eric Christen of the Coalition for Fair Employment in Construction. (Nicole Goehring of the Golden Gate Chapter of Associated Builders and Contractors was unable to attend this particular meeting.) Caught in the crossfire were County Administrator Veronica Ferguson and several members of her staff.

Ferguson held these meetings because she had some success in 2007 reaching a compromise between contractor representatives and unions for a revised Project Labor Agreement policy at Solano County. Neither side particularly liked the outcome. (Does this indicate a good compromise?) Worse for the contractors, the Solano County Board of Supervisors simply overrode the policy for individual projects when the unions demanded control of the work.

Not only was that compromise undesirable to the two opposing construction industry factions, but economic circumstances have changed dramatically from 2007 to 2012. Opportunities for work are few and infrequent, and construction union leaders see Project Labor Agreements as essential to cutting competition and guaranteeing work for their members.

In addition, to me it appeared there was no hope for compromise or even reasonable discussion as long as the North Bay Labor Council’s leader Lisa Maldonado was present in the meeting. Coming from outside the “business unionism” culture of the building trades, she seemed more interested in an ideological crusade against capitalism than in pragmatic discussions concerning the county’s bid specifications for construction projects and how a Project Labor Agreement would be implemented by employers and the county in practice. Maldonado is a participant and teacher in the Bay Area Troublemakers School Workshops and knows that the power of government must be wielded to suppress reactionary elements.

After a couple hours of bickering, ripostes, and accusations revolving around a compromise proposal produced by Veronica Ferguson, Maldonado and Buckhorn declared they had no further interest in meetings and discussions and were simply going to lobby the Sonoma County Board of Supervisors to get the three votes for the Project Labor Agreement policy they wanted. Raw political power will be the deciding factor.

Project Labor Agreements are about politics, not logic. As I left the county administrative building, the three union officials were walking into the supervisors’ offices to take care of business and get what they wanted: a costly union monopoly on county construction projects.

Attention Embattled Sonoma County Taxpayers: prepare for the vote about how YOUR money will be spent. Here are the email addresses of the five elected members of the Board of Supervisors:

Supervisor Valerie Brown – Valerie.Brown@sonoma-county.org
Supervisor David Rabbitt – David.Rabbitt@sonoma-county.org
Supervisor Shirley Zane – Shirlee.Zane@sonoma-county.org
Supervisor Mike McGuire – MikeMcguire@sonoma-county.org (notice, no period between first and last name)
Supervisor Efren Carrillo – Efren.Carrillo@sonoma-county.org

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.