Project Labour Agreements: Is having one important for the success of your project?
Project Labour Agreements have been around for many decades. They originated with large infrastructure projects like the construction of the St. Lawrence Seaway. Given the massive capital expense and the strategic importance for trade for both Canada and the U.S. having construction governed by a set of predictable labour terms and conditions made a whole lot of sense. Paramount was the need for labour stability to protect the project from any disruptions due to strikes or other disruptions.
Today many large mega-projects are governed by some form of Project Labour Agreement. In recent times we have seen some innovation whereby part of a project might be governed by an agreement while other parts are left as “open site” to allow for bidders from all types of contractors, i.e. those who are signatory to the Building Trade unions and those who are not. We have also seen some organizations in the power sector and in the Oil and Gas industries develop blanket Project Labour Agreements to cover multiple capital projects over a protracted period of time. For example, Manitoba Hydro had entered into an agreement with the Building Trade Unions called the Burntwood Nelson Agreement governing many Hydro projects in the province.
Regardless, Project Labour Agreements are of limited utility and in today’s market of labour scarcity and may actually be counter-indicated because they limit a project owners’ ability to contract with organizations that are aligned with one labour model and shut out the rest.
A Project Labour Agreement is negotiated between the accredited employer bargaining agent(s) and the Building Trades Council in the region in which the project is being built. There are variations on how such agreements are to be negotiated and executed from province to province. However, in general most Project Labour Agreements call for the exclusive use of contractors who are signatory to the Building Trade Unions. In fact, there are virtually no mechanisms for putting a Project Labour Agreement in place that will allow other non-BTU contractors to participate.
In practical terms this means that only about 15% of the available construction workforce will be eligible to participate. The percentages vary from province to province but the point remains the same. The vast majority of workers will not be eligible for work on a project governed by a Project Labour Agreement. This creates a significant risk to the project’s budget and schedule. In times of a labour surplus this might be a moot point. However, given the current climate of labour scarcity limiting one’s ability to access as wide a pool as possible makes little sense.
To be fair we ought to look at the advantages of a Project Labour Agreement and weigh those against this increased risk. The number one reason for such agreements is to ensure no strikes and therefore labour stability. However, the incidence and duration of strikes in the construction sector is pretty low. There were indeed several strikes in Ontario during the 2022 bargaining year however in our view those remain the exception. Nevertheless, the other reality is that the risk of strikes (including wild cats which have become almost extinct) is a phenomenon restricted to the Building Trades. There have not been any significant work stoppages amongst alternative unions like CLAC whatsoever. Of course, with non-union (i.e. Merit contractors) labour there is no risk of a strike. So, one could access 85% of the marketplace and reduce the risk of a strike to zero through a comprehensive and yet still mixed contracting strategy. Moreover, in an environment of competition there could only be further pressure against the efficacy of a strike which would also help reduce the potential incidence of disruptions.
A Project Labour Agreement could help reduce costs through dictating specific work rules that address key elements of the collective agreements that drive costs. For example, an agreement might be reached that eliminates clauses that call for double time on overtime hours on Saturdays and Sundays. This makes some sense given that double time payments are somewhat unique to BTU Agreements in the Industrial. Commercial and Institutional sector of the construction industry. However, there are alternatives. Competitive pressures and so-called enablement clauses found in all BTU collective agreements do allow unions to make agreements with their signatory contractors to alter any terms of the collective agreement as necessary to allow the contractor to be competitive. It makes sense for the project owner to not interfere directly with these processes and allow the contractors and the unions to work out what best suits their needs to be competitive and their desires.
Project Owners can develop guidelines on what they expect from bidders and simply leave it to the contractors to sort things out for themselves. After all, most owners would prefer not to be involved in the labour relations issues of their contractors.
We have seen Project Labour Agreements that have discounted labour rates. We do not advocate for negotiating such concessions at any time. In a scarce labour market, it simply makes no sense at all to engage in any kind of concessionary bargaining. We do not believe the elimination of double time to be a concession per se as it is a punitive practice meant to curtail the use of continuous schedules that cross weekend. This made sense in the context of small-scale construction which takes place over the normal work week (Monday to Friday) but makes no sense for megaprojects where scheduling across weekends is a benefit for both the project owner and for the workers. Hence in our view this is simply correcting a historic anomaly that has become passe.
On the other hand, Project Labour Agreements might contain wage premiums (the Burntwood Nelson Agreement is an example of this). Unfortunately, this locks in a cost that may also be counter-productive. In our view the collective bargaining regime ought to result in competitive wages, that is the intent. If market conditions change rapidly an owner can work with the contractors and the unions to apply a premium to wages if conditions warrant it without all the baggage of a Project Labour Agreement.
Notwithstanding we have always advocated that the biggest bang for the buck is to focus on methods and practices that enhance productivity. We have seen attempts made to create more flexible arrangements around the use of multi-skilled crews whereby jurisdictional rules are relaxed in an attempt to improve productivity. We have also seen agreements that allow for alteration of journeyman-apprentice ratios to help in this regard. However, it is simply impossible to negotiate agreements that will actually have a practical impact on improving productivity.
Rather productivity improvements are inherent in the fundamental flexibility ingrained in the given labour model. “All employee”[1] approaches allow for the greatest flexibility and therefore the greatest opportunity to optimize productivity in construction.
In truth the Project Labour Agreement has become a tool for the BTU to capture and secure marketshare, especially during times of labour scarcity. However, the direct hiring model of all employee bargaining units and non-union contractors offers the greatest opportunity to ensure labour supply because it is not restricted by a set of archaic rules and conventions such as govern the BTU Hiring Halls. With such a high demand for construction labour the Hiring Hall does not provide the benefits to the worker in terms of job security over the alternative arrangements of direct hire. There is plenty of work available for all trades people and it is likely to remain that way for many years to come.
So, we are not left with many arguments in favour of the Project Labour Agreement. They really only have utility for those who believe that no one but the BTU contractors can perform work on substantial projects. This however is a fallacy that continues to be maintained by too many people and restricts our collective ability to ensure Canada’s capital projects get built on time and on budget.
While these arguments are decidedly in favour of alternatives to the Building Tarde Unions we strongly believe that there is a not only room for all players but a need for variety in the representation of workers. This is what competition is all about. It ultimately creates efficiency and better economic outcomes for everyone. It has come time to move away from old practices and embrace new approaches that encourage greater participation and flexibility while maintaining safety and good earnings for Canada’s construction workers.
[1] An “all employee unit” is one organized under the normal rules found in the Labour Relations Act(s) rather than the Construction rules and encompassed all employees of all trades. Under the Construction rules each trade (electrician, plumber, carpenter, etc.) has a separate bargaining agent.