BILL ANALYSIS Ó
AB 1865
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Date of Hearing: May 4, 2016
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hernández, Chair
AB 1865
(Patterson) - As Introduced February 10, 2016
SUBJECT: Contractors: trust or custodial benefits plans:
health benefits
SUMMARY: Enacts provisions of law related to the provision of
health benefits by contractors on project labor agreements.
Specifically, this bill:
1)Defines a "project labor agreement" to mean a prehire
collective bargaining agreement entered into on or after
January 1, 2017 that establishes the terms and conditions of
employment for a specific construction project, as specified.
2)Provides that a contractor that bids on or has been awarded
work covered by a project labor agreement and provides health
care coverage to workers on the project, that includes
"essential health benefits" under the Affordable Care Act, and
that provides evidence of that coverage to the entity awarding
the contract, is exempt from a requirement to pay into a trust
or custodial benefit plan, designated by the project labor
agreement to provide health and welfare or similar benefits
for those workers, in an amount equal to the amount that the
contractor would have been required to pay into that trust or
custodial benefit plan for health care costs for those
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workers.
3)Provides that this bill does not apply to labor union members
covered by a multiemployer plan that provides health care
coverage who are dispatched by a federal labor union hiring
hall to a project awarded to a nonunion contractor.
FISCAL EFFECT: None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS: According to the author, this bill seeks to eliminate
a problem that causes an employer to make "double payments" for
health care coverage of employees who are sent to work on
certain public works projects even when the employee has
employer-provided health coverage that meets the standard of the
Affordable Care Act (ACA).
What is a Project Labor Agreement?
In general terms, a project labor agreement (PLA) is a
comprehensive pre-hire collective bargaining agreement that sets
the basic terms and conditions of employment for a specific
construction project. This is different than the general
concept of a collective bargaining agreement, which is
negotiated between a single union and an employer or association
of employers. For example, on any given construction site,
there may be workers covered under specific collective
bargaining agreements, or no agreement at all. A PLA, on the
other hand, sets forth the basic terms and conditions of
employment for all of the employees who will be engaged on the
project.
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A contractor generally is not required to be a union contractor
in order to bid for work on a project covered by a PLA. Any
contractor, either union or non-union, that is willing to abide
by the terms of the agreement, may bid for work under a PLA.
PLAs usually include an agreement by the union signatories to
not conduct any strikes or work stoppages, while the contractors
and their subcontractors agree to no lockouts during the length
of the construction project. Other provisions found in a project
labor agreement may include, but not be limited to, the
following:
A requirement that new employees, within a certain
period of time, pay dues to the union for representing
their interests before the employer ("financial core
members");
A requirement that contractors use a local, centralized
union job referral system or "hiring hall;"
Management rights, including hiring, promotion,
transfer, discipline or discharge of employees, and the
right to reject any job applicant referred by a union;
A uniform workday, workweek, overtime, holiday and
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payday schedules;
Standardized work rules and regulations posted on the
job site; and
Standardized and often very quick dispute resolution or
"grievance" procedures to resolve employee, contractor
and/or inter-union (jurisdictional) disputes.
Debate Regarding PLAs
Over the years, there has been significant debate and discussion
regarding the use of PLAs, particularly in public-sector
construction projects.
Opponents of PLAs generally contend that PLAs increase
construction costs to taxpayers, are anti-competitive by
excluding or discouraging non-union contractors from bidding on
public construction projects, and are an organizing tool to
coerce construction workers into union membership.
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Supporters of PLAs contend that PLAs reduce the risk of
construction delays (and increased costs) from worker shortages
or labor disputes through the no-strike provisions and
centralized referral systems or hiring halls. Proponents also
maintain that PLAs create cooperation between the construction
workforce and management, foster jobsite efficiencies and avoid
costly delays, and offer cost savings through certainty.
Author's Statement in Support of Need for the Bill
According to the author:
"The ACA is a mandate on individuals to obtain health
insurance coverage. Although employers are not required to
offer coverage, a penalty applies if the employer does not
offer minimum essential coverage or they offer such coverage
but it is deemed unaffordable or not meeting minimum standards
and an employee receives a subsidy on the Health Insurance
Exchange.
Certain project labor or community benefit agreements add
extra mandates that say a contractor must pay into a
union-operated health plan in order to bid or be awarded work
on that project - even if the contractor already has ACA
compliant health insurance coverage for their employees.
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If the contractor does not agree to follow that rule to avoid
paying twice, that company is barred from working or even
bidding on that project. This takes away the opportunity for
local contractors to provide solid, middle class jobs for
their employees.
The justification in the past by governments for these double
payments for health insurance coverage is that the non-union
plans are not deemed "quality" health plans in many cases.
However, since the implementation of the ACA, all employers
now have a clear standard of "government approved" quality
when it comes to healthcare plans. A high number of
construction companies currently provide ACA-compliant health
insurance coverage for their employees that include all of the
ACA essential health benefits (EHBs).
Since the ACA coverage is deemed by state and federal
government to constitute "quality" coverage for all Americans,
the policy question for the Legislature is why should
employers on state construction projects have to pay for
healthcare twice? [This bill] would fix that loophole in our
construction contracting processes."
PRIOR RELATED LEGISLATION
This bill is substantially similar to AB 842 (Patterson) from
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2015. AB 842 failed passage in this committee.
This bill makes two changes from the version of AB 842 heard
last year. According to the author:
"[This bill] is different in two ways, in order to address
concerns raised in regards to AB 842, by addressing the bills
impact on existing contracts and issuances where a union
member may be dispatched to work on a job site awarded to a
non-union builder. The first change is adding language to make
it clear that the provisions of this bill will only be
applicable to work covered by a PLA that was entered into on
or after January 1, 2017 so that there is no concern that the
bill will change or alter terms of existing contracts in
place.
The second change from AB 842 to [this bill] will exclude from
the exemption those instances where a union member covered by
a union-operated health plan is dispatched by a labor union
hiring hall to a project awarded to a nonunion contractor.
These changes were made to be responsive and address concerns
raised during the AB 842 hearing."
ARGUMENTS IN SUPPORT
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This bill is sponsored by the Associated Builders and
Contractors (ABC California), who states:
"While the debate over whether government can force anyone to
buy healthcare coverage continues on across America, no one is
suggesting that the government can make anyone buy healthcare
twice. [This bill] would fix that loophole in our
construction contracting processes.
The cost of health insurance has also increased every year
since ACA was implemented. Today, an employer can expect to
pay well over $6,000 to $9000 dollars per employee under a
group health policy according to recent Kaiser Family
Foundation, National Small Business Association and Covered
California website information and studies Forcing a
contractor to pay that amount twice for all employees
dispatched to jobs with project labor agreements just doesn't
pencil out. For every 10 employees dispatched to a year-long
job, like a new water project, that contractor pays out at
least $60,000 to $90,000 in duplicate health benefit payments.
Another example: In Santa Clara County - the International
Brotherhood of Electrical Workers health plan contribution
costs an employer $12.98 an hour, or $26,977 per employee per
year. However, the same employer may purchase an ACA "gold"
level plan from Covered California SHOP website for the
employee and dependents for approximately $4.69 an hour or
$9,755 per employee per year. This plan has much lower
co-pays and cost sharing for hospital, surgery and emergency
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room services, and significantly lowers maximum out-of-pocket
deductibles for employees and dependents."
They and other supporters argue that this bill is a common sense
solution to ensure that California employers are not required to
pay twice for expensive health care plans on certain taxpayer
funded public works projects. "Currently, taxpayer funded
projects covered by Project Labor Agreements require payments
into health programs operated by unions even if employers offer
existing health care benefits to their employees. This results
in the double payment of health care benefits in order to avoid
lapse in coverage, or the discouragement of the vast majority of
local contractors and small business owners from competing on
and winning such construction projects in their communities,
thus taking away the opportunity to provide solid, middle class
jobs for employees."
ARGUMENTS IN OPPOSITION
Opponents, including the State Building and Construction Trades
Council and the California Labor Federation, AFL-CIO state:
"Construction is an inherently dangerous industry where
workers also experience the brunt of economic downturns and
persistently confront the underground economy. The vast
majority of non-union workers do not have quality healthcare
coverage and unscrupulous contractors routinely break labor
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laws that place law-abiding contractors at a competitive
disadvantage creating even greater pressures and a race to the
bottom.
[This bill] does not present a solution to any of these
problems, instead its basis is the relentless opposition to
Project Labor Agreements (PLAs) otherwise known as Community
Workforce Agreements (CWAs). These labor agreements, between
public agencies and the Building Trades, support efforts to
draw more women, veterans, foster youth, people of color, the
formerly incarcerated or any targeted demographic group of
people into apprenticeship programs which offer the highest
level of training and provide an opportunity for a rewarding
career in the construction industry. Local governments and
public agencies throughout California are increasingly using
CWAs as a valuable tool to maximize taxpayer investment and
create career opportunities for local residents.
This bill would provide a contractor that has a health plan
that complies with the Affordable Care Act with an exemption
from the obligation to make per hour contributions to the
health and welfare trust required by the CWA even if the
contractor contributes less money per hour than the
contributions required by the CWA. In an industry plagued by
contractors cheating workers on their wages, this bill would
further give an unfair competitive advantage to contractors
that have lesser health benefits for their employees.
Furthermore, this bill is preempted by the National Labor
Relations Act because it purports to alter the terms of purely
private project labor agreements. The unions and contractors
that are parties to these CWAs may reach any agreements they
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choose about wages and benefits. In these instances, the
state is not a party to these CWAs and cannot interfere with
the parties' negotiations.
On public projects, this bill would undermine the prevailing
wage law by giving contractors that spend less money per hour
on health benefits a competitive advantage. Not
surprisingly, there is no provision that the contractor must
make up the difference in cash wages. Moreover, this bill
would illegally make health benefits dependent on whether a
worker chooses to be a 'union member.'
The bill states that it 'does not apply to labor union members
covered by a multiemployer plan authorized under Section
302(c)(5) of the federal Taft-Hartley Act.' But under
federal labor law, under the Supreme Court's decision in CWA
v. Beck, 487 U.S. 735 (1988), workers covered by a union
collective bargaining agreement (CBA) need not become 'union
members.' They can be non-members and pay agency fees
instead. Therefore, a worker may regularly use the union
hiring hall and be dispatched to work under a union CBA and be
covered by a multi-employer health plan for years but choose
not to become a 'union member. That is the worker's right
under federal labor law, and neither the union nor the
employers can discriminate against the worker. Under this
bill, the worker could lose his or her regular health benefits
unless he or she became a 'union member.'
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Similarly, a formerly non-union worker who is dispatched to
work on a CWA project can choose to become a union member or
can instead pay agency fees. The worker's health benefits
should not depend on whether the worker chooses to become a
union member or not because NLRA Section 8(a)(3) prohibits
both unions and employers from discriminating against workers
based on their membership status.
Construction workers are already exposed to the perils of job,
and the economy as they are the first to feel downturns and
the last to experience the rebounds as projects often take
years to break ground. Studies have found that one in six
California construction workers are impacted by wage theft and
that in 2011 alone it cost workers over $1.2 billion and
taxpayers another $774 million. [This bill] is yet another
attempt to undermine a useful tool that lifts people out of
poverty and into middle class careers that offer a good
standard of benefits and where a worker can retire with
dignity and respect."
REGISTERED SUPPORT / OPPOSITION:
Support
Air Conditioning Trade Association
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American Fire Sprinkler Association
Associated Builders and Contractors (sponsor)
Associated Builders and Contractors-San Diego Chapter
Central Solano Citizen/Taxpayer Group
Contra Costa Taxpayers Association
Fresno Chamber of Commerce
Inland Empire Taxpayers Association
Kern Citizens for Sustainable Government Board of Directors
Kern County Black Chamber of Commerce
Kern County Hispanic Chamber of Commerce
NOR Chamber of Commerce
Plumbing-Heating-Cooling Contractors Association of California
Salinas Taxpayer Association
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Salinas Valley Chamber of Commerce
San Joaquin County Taxpayers Association
Western Electrical Contractors Association
Opposition
California Labor Federation, AFL-CIO
State Building & Construction Trades Council
Analysis Prepared by:Benjamin Ebbink / L. & E. / (916) 319-2091