How Obama Affected the Construction Industry

Since I will be speaking to a group of NARI (National Association of Remodeling Industry) leaders about labor and employment issues since Obama took office, I was thinking about how his Executive Orders have impacted the construction industry more than probably any other industry.  Here is a brief recap of what those Orders are and how they affect the construction industry.

  • Federal contractors will no longer be reimbursed for educating their employees about the benefits and detriments of forming a union.  The Notification of Employee Rights Concerning Payment of Union Dues or Fees was revoked and replaced with Notification of Employee Rights under Federal Labor Laws.  Federal contractors are no longer required to post instructions on how employees could opt out of union dues earmarked for political purposes.  As such, the Office of Federal Contract Compliance Programs has discontinued onsite visits to union employers during compliance reviews.  These on site visits involved a review of required postings, contracts and purchase orders, facility accessibility for individuals with disabilities, veterans and disabled recruitment efforts and an I-9 inspection.  This rule effectively mutes contractors that only do federal construction projects because all of that contractor’s money is trailed back to the government.  This Order may face a constitutional challenge, especially since the intent of the National Labor Relations Act was to manifest a clear intent to encourage free debate on labor relations issues and because Congress explicitly intended for noncoercive employer speech to remain unregulated.


  • The Nondisplacement of Qualified Workers Under Service Contracts Order creates rights for employees of federal contractors when a  contract changes hands – which frequently happens.  Contracts must now contain a specific provision granting employees of a federal contractor that has lost the service contract the right of first refusal for employment with the successor contractor.  Essentially, the new contractor cannot hire hourly workers until all employees of the predecessor contractor have been offered employment, and if the contract goes from a unionized company to a non-union company, the non-union company must offer employment to all those union workers (and all of their added costs and restraints) first and has to bargain with the union even though it has not been certified as the employees representative.  Contractors who willfully violate this Order will be disbarred from federal contracts for 3 years.


  • Project Labor Agreements on construction projects costing more than $25M.  Obama’s Order overturned President Bush’s ban on the federal government requiring PLAs on such projects.  Whether a PLA was used would normally be wholly dependant on your town’s political make-up.  However, projects using some of the roughly $800M earmarked in the stimulus bill for federal construction will likely be PLA-only work.  PLA work typically adds 20% to the cost of the project.  PLA really means labor union-only work as unionized companies are typically  the only ones forced to abide by the PLA strictures.  And unionized construction companies make up less than 10% of construction companies, so effectively, this Order eliminates 90% of the companies from performing federally funded construction work.

Tuesdays are EFCA Update Days

I’ll start off with a whopper today:  Both the Communist Party USA and the Democratic Socialists of America are strong supporters of EFCA.  After thinking about it, we shouldn’t be surprised, but still, it’s discomforting to see it in black and white.

Mickey Kaus, famed blogger on, Harvard Law School Grad, and son of former Democratic California Supreme Court Justice, opined that card check is worse then originally thought.  According to Kaus, “The arbitration parts of the card check bill are so vaguely drawn that nobody knows who the arbitrators will be.  The job appears to be delegated entirely to the Federal Mediation [and Conciliation] Service.  The FM[C]S might decide to use its own employees.  It might decide to use arbitrators from the private sector selected along more traditional lines…. Since thousands of arbitrators might quickly be needed for the expected explosion of mandatory arbitration, it’s unlikely they would all be newly hired GS-12s.”  Kaus continues, “The bill would have the effect of freezing in place hierarchies and job categories both across industries and withing individual firms.  You want to start an innovative job structure that, say, collapses six gradations of pay and authority into one?  You think workers will be happier and more productive if they’re delegated authority in this more non-hierarchical arrangement?  Sorry-if the union objects, then the arbitrator is likely to uphold the old regime on the grounds that that’s the way it’s always been done (and the way everyone else does it).  A recipe for rigor mortis!”

According to economist Anne Layne-Farrar, who studied the card check system in Canada, EFCA would result in 600,000 lost jobs following every 3% gain in union membership.  With this statistic, Ms. Layne-Farrar agrees with me that EFCA will make it harder for the unemployed to find jobs.  Binding arbitration will erase the union’s desire to bargain for a contract, but rather, the union’s unreasonable demands will be the starting point for the arbitrator.  Since FMCS (i.e. the government) will likely be the arbitrators and will impose wage and benefit levels for a 2-year period regardless of the economic consequences, a neo-Nixonesque government wage and price controls on private companies is not too far away.

Another academic found that unionized companies suffer not only lower profits but lower investment in physical and intangible capital and slower growth.  According to economic  Professor Barry Hirsch of Georgia State University, unionized firms tend to lose market share to nonunionized firms, whether foreign or domestic.  Furthermore, companies can survive unionization as long as every other competitor faces the same "tax" or if markets are notcompetitive at all.  “This is why government is the only area where unionization has been growing.”

Following up on Prof. Hirsch’s analysis that unionization only works if it’s the only game in town, Professor Gary Chiason, professor of industrial relations at Clark University in Massachusetts, speculated that if EFCA passed, unions would focus on organizing low-unionization states, i.e. right to work states, making those states less attractive to businesses.  Accordingly, “it’s in Michigan’s interest that Alabama become more unionized.”  Conversely, the Mackinac Center for Public Policy believes that EFCA would likely strengthen unions in Michigan more than other states.  According to the Mackinac, EFCA is bound to lead to the establishment of unions in workplaces where union support is weaker and weaker union support in the workplace means more union opponents who would probably opt out of joining the union and paying union dues, an option that is available in right to work states but not Michigan.  for unions, there will be a strong incentive to focus on states like Michigan where they can be assured of receiving dues from all workers, even if support in the workplace is weak.  “Secondly, because card check is vulnerable to abuse, unions will be tempted to resort to intimidation to secure signed authorization cards.  Intimidation is both easier to engage in and more tempting when one has the advantage of numbers.  Intimidation tactics are also harder to resist when one cannot be sure that the powers that be will protect you.  Michigan, with its sizable number of labor officials and politically entrenched unions, is prime territory for rough recruiting methods.”  I tend to agree with the Mackinac analysis.  How about you?

The Chambers of Commerce in Right-to-Work States agree with Chaison (and not Mackinac).  Specifically, they have 181 Chambers in right to work states have banded together to urge Congress not to pass EFCA.  According to this group, “While some have suggested that businesses in right-to-work states would not be significantly affected by EFCA, nothing could be further from the truth…  Even though workers in right-to-work states do have the right to refuse to pay union dues, if the workplace is organized, they must give up their right to deal directly with their employer.  Likewise, employers would be forced to accept arbitration agreements that may impose conditions inconsistent with established business models and impede the ability to compete.”

I started this post with reminding us all that EFCA is favorable to communists and socialists, so I’ll end it with a little levity.  Last week the AFL-CIO claimed that “Union members aren’t the only ones supporting the Employee Free Choice Act.  This week in Wisconsin, Milwaukee-area business owners got together to talk about why they support EFCA.”  The AFL-CIO’s blog hypertexted “Milwaukee-area business owners,” just like how I hypertext words in this blog that you can click on for more information.  So I clicked on those words on the union’s website and was directed to the below picture.  Correct me if I’m mistaken, but there’s 7 people on a panel and only 1 person in the audience!  So much for that non-union support! 🙂

WI: Business Panel by aflcio2008.

Misc. Mondays: Unions Hurt the Economy and Cause Unemployment

I am tired of hearing all of the pro-union propaganda that unions create job security.  While it is true that unions eliminate the employment-at-will doctrine, and employees can only be terminated for just cause, that does not create job security.  Rather, a joint study conducted by two liberal universities, Princeton and UC Berkeley, examined the effect unionization has on corporate performance, and thus the economy.  The entire text of the study can be found here.  Without reading the report – written by highly educated economists – here are some of its conclusions:

  • New unionization is associated with a reduction in a company’s market value totaling approximately $40,500 per worker eligible to vote.
  • The negative effects of unionization on the equity value of firms appears fairly stable over time.
  • An examination of the balance sheets and income statements of both sets of companies reveals that union wins are associated with relatively lower growth.

You have all heard me rant how the auto industry and the steel industry are prime examples of union-ladened industries and how they are not only not profitable, but nearly non-existent.  We can quickly add the newspaper industry to this list.  Newspaper employees are heavily unionized, and print newspapers are filing for bankruptcy at record paces.  The Philadelphia Inquirer, Seattle Post Intelligencer, Tribune (Chicago Tribune and LA Times), Connecticut’s second largest newspaper, Miami Herald, Hearst Corp. (San Francisco Chronicle), and Minneapolis Star Tribune have all either filed or are teetering on the brink of filing for bankruptcy.  There may be more.  In addition to the bankruptcies, 1500 people from almost 50 different newspapers were laid off in February, alone – most of them members of a newspaper union.

My sentiments are not just management oriented, either.  Obama’s Director of National Economic Council, Larry Summers, who wrote the “Concise Encyclopedia of Economics” stated in his book:  “Another cause of long-term unemployment is unionization.  High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy.  Also, those who lose high wage union jobs are often reluctant to accept alternative low-wage employment.”

Misc. Mondays: Middle Class Task Force Update

More than half of all Americans – about 160 million – think of themselves as middle class according to a 2008 Pew survey.  However, Washington, especially the White House, view only one tenth of those people as middle class.  Specifically, only the 16 million union workers are considered by our Federal government to be in the middle class.

VP Biden was in Philadelphia a few weeks ago holding his first Middle Class Task Force town meeting – next up is Minnesote, home of anti-union Target.  According to an editorial in the Philadelphia Inquirer, it is “apparent that the administration’s policies are not friendly to most of the middle class.”  For back up, the author cited Obama’s Executive Order that repealed the right for employees to know whether labor officials use their dues to support political candidates and the Order that encourages project labor agreements for union construction workers, including for construction as a result of the stimulus plan effectively eliminating 85% of the construction workforce.  Most striking, though, according to the author, is the “green jobs” legislative language “being touted on Capitol Hill is little more than union giveaways in a shiny new wrapper.”  I couldn’t agree more.

Follow Up Friday: Stimulus Funds will Blacklist Non-Union Workers

By now we’ve all heard about Obama’s Executive Ordersaimed at pacifying labor until EFCA rolls into town.  Now, any unfair labor practice charges leveled against a contractor – perhaps during a union organizing drive – could be used to bar the contractor from competing for taxpayer-funded federal work.  According to National Right to Work, “Now that union operatives at DOL have the power to blacklist a company from federal contracting simply by lodging a few spurious (even unadjudicated) charges, it’s pretty clear union bosses are in for a massive payday when the “stimulus” bill passes.”

For many years, I have seen first hand how union-filed prevailing wage complaints against non-union contractors cost them locally and state funded work, even if the charge doesn’t have merit or is settled for pennies on the dollar.  Unfortunately, the filling of such charges is a one-way street.  Non-union contractors, for some reason, don’t file charges against union contractors.  Assuming non-union contractors continue to not file charges – whether for prevailing wage violations or unfair labor practice charges for harassment on job sites – only non-union companies will be blacklisted from performing some of the $188 billion worth of federal work currently earmarked in the stimulus package.

Union Inflatable Rats

A union’s inflatable rat is an often used propaganda piece meant to intimidate non-union companies and drive non-union companies into either agree to sign a union contract or go out of business because of negative publicity.  Here’s a picture of the rat I’m talking about:

Unfortunately, there’s not a lot you can do if this creature shows up at your workplace.  Historically, rats were used exclusively in the construction arena to let everyone know that non-union labor was on the job site.  The National Labor Relations Board has routinely held that rats are a permissive way of signal picketing, meaning when the rat shows up, union workers walk off the job site.  Frequently, the rats are put in parking spaces on the road and a couple of union workers feed the meter all day.  For a picture of what that looks like, click here.

The best thing for a company owner to do is to make a joke out of the rat.  Like with any other type of bully, if they’re not getting a reaction from what they’re bullying, they’ll move on.  Don’t bother calling the police – they won’t get involved unless you are successful in getting an injunction, which is pretty much impossible to do.  I have heard the argument that on a very windy day, the rat could become a safety hazard, akin to an untethered Macy’s Parade Balloon.

The rat just won another round of litigation, this time in New Jersey where NJ Supreme Court ruled that the rat is a constitutionally protected form of free speech.  In that case, the rat showed up at a health club’s grand opening because the club did not employ unionized workers to build the club.

Ironically, union rats are made by a non-union company!  Big Sky Balloon and Searchlights in Chicago makes a few different types of rats, a “greedy pig,” “cockroach,” “skunk,” and a “corporate fat cat” strangling a construction worker.  Click here to look at those balloons.

Misc. Mondays: More Union Corruption

Like with organizing drives and union elections, I don’t normally cover union-thugs getting arrested or pleading guilty to racketeering or violent crimes.  But, sometimes a story will catch my eye that I will want to share with you, and this is one of them.

Robert Walston, the president of Teamster Local 743, who made $150,000/year from the Teamsters (thank you LM-2s), abruptly resigned from his job in the summer of 2007 incidating he wanted to spend more time with his family.  What – is he a professional athlete or coach?  Being a Local president is a routine job with routine hours.  Apparently he wanted to spend more time with his family before being taken away to jail because just days after his announcement, his cohorts were charged by federal authorities with rigging two union elections in favor to Mr. Walston’s slate.  But it doesn’t end there.

Mr. Walston was just charged with cocaine-trafficking after authorities in Texas seized $135,000 from him, which he intended to use to purchase the power. 

What’s interesting about this story is that it’s just another example of corruption inside unions.  Think what you want about bank CEOs and others who may make a lot of money running failing businesses, but they aren’t getting arrested for massive drug deals; they aren’t getting in trouble for rigging elections; they don’t have to lie about why they’re stepping down from their position; they don’t disgrace their extended family and friends; and with the exception of a few criminal masterminds, company owners don’t find themselves behind bars in federal prison.

On a related subject:  Here is an old news video of the link between the Teamsters and the Mob from 1988 when the Federal Goverment tried to take over the Teamsters.