Driving the Low Road in the Construction Industry: New Research on the Associated Builders and Contractors (ABC)

What to Tell Your Senators and Representative: With increasing stridency, the Associated Builders and Contractors (ABC) is conducting misleading public relations and legislative advocacy campaigns that are intended to:
1. Prohibit public agencies from having the ability to utilize project labor

agreements (PLAs); 2. Weaken or repeal construction prevailing wage statutes; 3. Promote wildly inaccurate and negative impressions and stereotypes about the joint labor-management construction industry; 4. Establish the ABC as "the voice" of the U.S. construction industry. Today, thanks to some in-depth research from political scientist Dr. Thomas Kriger, we now have a clearer picture of the ABC - which calls into question the ABC's attempt to present itself as a serious voice of contractors in the construction industry. On closer examination, the ABC appears to be just another Beltway political advocacy group with policy statements it borrows from organizations like the American Legislative Exchange Council (ALEC). It prepares standard form political statements for its chapters which consist of a small number of contractors and a mix of fast food companies, auto dealerships, and other businesses hoping to sell products and services to the construction industry. In sum, the ABC emerges not as a grass roots, democratic association of construction contractors, but as an organization without real roots at all an Astroturf political group like so many others that increasingly degrade public debate. BACKGROUND The Associated Builders and Contractors, better known as ABC, is a trade association based in Alexandria, Virginia that represents merit-shop or anti-union interests in the American construction industry. The ABC fiercely defends what is best characterized as a low road strategy for labor relations and employment policies in which its contractors are more than likely NOT providing health insurance or pensions; where they increasingly misclassify their workers as independent contractors to avoid paying benefits, workers compensation insurance and taxes; and where they are frequently cited for the illegal use, and abuse, of undocumented workers. Further, the ABC has no real interest in training or safety measures. ABC MEMBERSHIP

ABCs membership of 23,000 merit shop construction and construction related firms amounts to only 0.03% of all construction establishments in one of the most diverse industries in the US. In no state does the number of ABC contractors (sub-contractors and general contractors) exceed 6% of the total number of licensed or registered contractors in that state. In almost half of the states surveyed (46%), ABC contractors comprised less that 1% of the state total. In the remaining states (54%), ABC contractors amounted to between 1% and 6% of the state total. With a membership that includes less than 6% of total contractors in any state, or just 0.03% nationally, these figures raise serious doubts about ABCs often repeated claim that it functions as the voice of the construction industry. And within ABCs membership, there are scores of non-contractors, including: 44 Chevrolet dealers; 673 insurance brokers/dealers; 59 banks. Among the construction related firms in the ABC membership are the Land & Sea Restaurant in Corpus Christi, Texas, Freddie's BBQ in Sapulpa, Oklahoma, the Rose of Sharon European Florist in Jacksonville, Florida and Diamond State Party Rentals of Wilmington, Delaware. TO TRAINING AND SKILLED WORKFORCE

LACK OF COMMITMENT DEVELOPMENT

In recent years, leaders of the nations largest construction users have repeatedly expressed great concern over the state of open shop training and its implications for the industry. After forty years of support for the open shop, they seem to have developed a case of buyers remorse over the long-term effects of the low road strategy. In a June 2004 report (Confronting the Skilled Construction Workforce Shortage), the Construction Users Roundtable (CURT) expressed concern over a growing gap between demand and supply of skilled construction labor. Calling this shortage a major problem facing the construction industry, the CURT report found that demographics and a poor industry image were hurting the industrys efforts to recruit new workers. The report attributed part of this demographic trend to the decline in union density. From 2002-2009, joint labor-management apprenticeship training committees (JATCs) turned out roughly 351,000 apprentices, while the ABC trained just 19,000 during that same eight-year period. According to CURT's report, Owner companies should only do business with contractors who invest in training and maintain the skills of their workforce."

In addition, the CURT report recommended that Where practical, contractors should actively support these joint labor/management training programs.

In summary, ABCs low road strategy for labor relations and employment has had a detrimental impact on the construction industry and our society as a whole. In the construction industry today, there are too many low skill, low wage jobs, where working men and women receive minimal training. The end result has been a de-valuation of the skilled trades as a career. ABCs aggressive advocacy of the low road has contributed to the growing inequality in American society. As a result of this new and important research, our hope is that you will understand that the ABC does not speak for the U.S. construction industry and that their policy positions undermine the successful joint labor-industry model of America's Building Trades and our contractor partners. You can learn more by visiting www.KnowYourABC.com

Immigration
What to tell your Senators and Representative: We must work together to reform our broken immigration system. Comprehensive Immigration Reform The Building and Construction Trades Department (BCTD) joined a unified labor movement in urging Congress to pursue a solution to our broken immigration system that is comprehensive and that puts workers first. Without reform, workers will continue to suffer at the hands of exploitive and unscrupulous employers. The BCTD supports immigration reform that will create an independent process that is informed and not arbitrary in its assignment of visas numbers for legal entry, both temporary and permanent; consists of a plan for the operational control of our borders; implements a fair and efficient worker authorization and verification system; creates a practical and humane system to adjust the status of unauthorized immigrants; and reforms, but not expands, existing temporary worker programs, like H-2B. H-2B Reform Each year, U.S. employers hire up to 66,000 temporary foreign workers through the H2B visa program to perform non-agricultural work. Workers who are hired by employers and travel to the U.S. can stay for a maximum of 12 months. In theory, H-2B workers can be hired only in cases where an employer has been unable to find local workers available for the job and where the pay and working conditions are good enough so that they will not undercut the wages of U.S. workers performing similar jobs. In order to fulfill the legislative mandate of protecting workplace standards, the U.S. the Department of Labor (DOL) has issued regulations regarding the wages that must be paid for H-2B foreign workers and regulated the process regarding the recruitment procedures that must be implemented in order for an employer to be certified to hire H2B foreign workers. Until recently, the DOL has admitted workers into the program using regulations adopted during the Bush Administration that do not provide adequate protections for workers, domestic or foreign. With minimal recruitment requirements and lax enforcement, local workers do not find out about jobs and have a very narrow window for applying for them when they do. In addition, the system for calculating a wage that would not have an adverse impact on U.S. workers is so favorable to employers that many times the H-2B workers are paid only the federal minimum wage.
H-2B Wages

Until 2005, H-2B program rules required employers to advertise and pay wage rates set by reference to long established laws (the Davis-Bacon Act and Service Contract Act) to prevent employers from depressing wages by relying on a pool of exploitable workers. The Bush Administration changed this practice by allowing employers to

ignore Davis-Bacon and Service Contract wage rates and instead pay H-2B workers the lowest of a multi-tiered wage scale that employers essentially controlled. Not surprisingly, the result was a significant decrease in the wages advertised to U.S. workers and paid to H-2B workers, making it more desirable to hire workers willing to accept lower wages rather than recruiting or hiring U.S. workers. The DOL's prevailing wage determination process subsequently became the subject of a lawsuit brought by workers advocates. The lawsuit resulted in the issuance of a new wage rule; however that rule failed to be enacted due to administrative delay and legislative interference. We must remain vigilant and urge the Obama Administration and Congress to revisit H2B wages and return to the practice of advertising and paying Davis-Bacon wages in H2B.
H-2B Recruitment

Through regulation, the Department of Homeland Security (DHS) delegated to the DOL the authority to grant, when appropriate, labor certification and enforcement authority for the H-2B program. As part of its labor certification responsibilities, the DOL's Employment and Training Administration (ETA), Office of Foreign Labor Certification (OFLC) determines whether U.S. workers capable of performing the jobs for which employers are seeking foreign workers are available, and whether the employment of the foreign workers will adversely affect the wages and working conditions of similarly employed U.S. workers. The DOL's Wage and Hour Division (WHD) enforces compliance with conditions of an H-2B petition and DOL approved temporary labor certification. The Obama Administration has recently issued regulations that make changes to the H2B program to address the critical issue of U.S. worker access to jobs for which employers seek H2B workers through a re-engineered program design which focuses on enhanced recruitment and strengthened worker protections. We should urge Congress to protect and not interfere with these important regulatory improvements.

Innovative Finance
What to tell your Senators and Representative: Innovative proposals to finance infrastructure must include important protections for workers and taxpayers. Increasingly, federal, state, and local governments have utilized non-traditional methods of financing infrastructure and energy projects. When Congress passed the original Davis-Bacon Act in 1931, direct contracting or assistance in the form of grants where commonly the only method of financing government construction. Since that time, however, the methods of assistance have grown exponentially. Some of these financing methods, like some loan guarantee programs, are effective, others, like some privatization schemes, are acts of desperation by cash-strapped governments. The reality is that current budget concerns will prevent needed investments in infrastructure, and that will force governments to look for alternative means of financing construction. Public-Private Partnerships (PPPs) PPPs are agreements between governments and private corporations where governments agree to forego some part of a revenue stream in exchange for private dollars that may go to maintenance, operations, or new construction. It is important that participating governments retain oversight and control over certain aspects of the PPP. If not, PPPs can present serious problems for workers and the public. For more information on PPPs, visit the National Council of State Legislatures website for a thorough primer on different models and the implications for workers.
http://www.ncsl.org/issues-research/transport/public-private-partnerships-for-transportation.aspx

Infrastructure Banks (I-Banks) There has been increased interest in proposals to create a National Infrastructure Bank, and many states have created their own state banks. I-banks, depending on their structure, allow governments to use a wide array of financing tools, like PPPs, loan guarantees, or revolving loan funds, to generate the greatest amount of infrastructure investment possible. A National Infrastructure Bank has a distinct advantage over state banks, because an Ibank would finally offer a method for the rational development of projects with regional significance. Those projects often are the most important to the health, security, and development of the nation, but are ill served by our current financing arrangements. Like PPPs, I-banks must not be used as a means of circumventing labor standards. Ibanks provide assistance to projects that the private sector would otherwise not invest or build, and thus, Davis-Bacon should be consistently applied to all projects funded through an I-bank.

Department of Energys Title XVII Loan Guarantee Program Created by the 2005 Energy Policy Act, the Title XVII loan guarantee program supports the deployment of innovative energy technologies that reduce greenhouse gas emissions. The program provides qualified project sponsors with confidence that credible projects can receive a federal loan guarantee, which is important for complex and innovative energy projects.

Jobs
What to tell your Senators and Representative: The first priority of Congress must be to enact legislation to invest in our nation's infrastructure that will create jobs for building trades members and improve the long-term competitiveness of our national economy. With unacceptable levels of unemployment and enormous public infrastructure needs, Congress spent too much time on unproductive budget battles and insufficient attention on job creation for most of 2011. There were positive developments last fall with the introduction of President Obama's "American Jobs Act" and the Senate surface transportation bill. While congressional Republicans scuttled the infrastructure parts of the "American Jobs Act", President Obama has continued to call for infrastructure investments. Yet, despite Congress' lack of action, there is evidence of additional job creation in more parts of the country. It is clear, however, that far too many skilled craftspeople are sidelined, and it is imperative for Congress to do its work so that our members can get back to work. We are ready to rebuild America. Surface Transportation Reauthorization At the end of March, Congress passed its ninth extension of SAFETEA-LU, the last Surface Transportation Authorization. This extension will expire on June 30. , . Failure to enact a surface transportation bill and to continue with additional short-term extensions is estimated to result in the loss of 500,000 construction jobs. That is unacceptable. Despite the fact the Senate overwhelmingly passed a new reauthorization, Moving Ahead for Progress in the 21st Century (MAP-21), the House refuses to vote on the Senate proposal and has instead spent months trying to pass a partisan, and wildly unpopular bill. On April 18, the House approved a second surface transportation extension bill that will serve as the House vehicle to conference with the Senate. We encourage the House and Senate to move quickly to appoint conferees so that work can commence to produce a final conference report. The BCTD, and our affiliated unions, fully support the bipartisan Senate bill. The bill maintains current funding levels and provides State DOTs with far greater predictability than continued extensions, resulting in more project starts and greater job creation. Clean Water Reauthorization Wastewater and drinking water infrastructure has been financed since 1987 through State Revolving Funds (SRF), which are capitalized by federal dollars, provide lowinterest loans to local water authorities, and fund new projects when the previous loans are retired.

Due to a number of factors, the application of Davis-Bacon to loans issued by the State Revolving Funds had been piecemeal. When the SRFs were created by President Reagan, they were sold as state programs that would become self-sufficient. That has not been the case, and they have continually benefited from federal assistance. In the 2013 Consolidated Appropriations Act, passed last December, Davis-Bacon was applied to all loans originating from federally-assisted Clean Water SRFs. The Environmental Protection Agency rightly determined that SRFs were not intended as a means to circumvent labor standards and should not be used as such.

While this is a huge victory, fifteen years in the making, federal investments in water infrastructure continue to be inadequate, and Congress must renew its commitment to this vital component of public health. Fortunately, funding can now be pursued without qualification. FAST Act Last fall, Senator Sherrod Brown and Representative Rosa DeLauro introduced the FAST Act -"The Fix America's Schools Today Act" - (S. 1597, H.R. 2948). The FAST Act was also a component of President Obama's American Jobs Act. The FAST Act seeks to clean our nation's schools of mold and asbestos, improve energy efficiency, and reduce childhood asthma and other health problems. With an initial capitalization of $25 billion, the FAST Act could create hundreds of thousands of jobs for construction workers across the country renovating and modernizing school buildings, and it includes both Davis-Bacon and Buy America provisions.

Project Labor Agreements, Community Workforce Agreements, and Project Stabilization Agreements PLA/CWA/PSA
What to tell your Senators and Representative: Support the Project Labor Agreement (PLA) option and oppose congressional mandates to restrict this important construction management tool. What are PLAs? Project Labor Agreements, Community Workforce Agreements, and Project Stabilization Agreements are all terms for pre-hire collective bargaining agreements that enhance efficiency and quality of construction projects for the private sector as well as local, state, and federal government (s). These agreements facilitate the efficient completion of projects by establishing the terms and conditions of employment upfront and a framework for cooperation that will apply to all workers and their respective crafts involved in a construction project. PLAs are crafted to address the specific needs of the project and the community, including provisions for local hiring, minority and at-risk targeted training programs, minority-owned small businesses, apprenticeship ratios, scheduling, work rules, safety, cost-containment, management-rights and specialized procedures. These agreements enable community groups and schools to partner with local unions to connect people from low-income neighborhoods with training and a career in the building trades.

These agreements have been under attack in Congress and in State Legislatures across the country. Last year, the U.S. House of Representatives defeated, with bipartisan opposition, several attempts to impose a congressional mandate to prohibit the use of Project Labor Agreements. Preserve the PLA option by opposing harmful antiPLA amendments to the fiscal year 2013 appropriations bills. Lets set the record straight - PLA's ensure quality work by highly qualified labor PLAs WORK! PLAs are praised by many companies such as Walmart, Toyota, and Boeing because they provide many benefits:

Serve as an effective tool for ensuring that large and complex projects are completed on time Provide contractors with access to a highly skilled & properly trained workforce Encourage employment of local residents and veterans Establish rigorous safety standards that save time and lives Establish a single procedure for handling all workforce disputes regardless of the craft Provide access to union apprenticeship training programs which help open the doors for advancement and new opportunities - wages and benefits quickly circulate in local economies.

Correcting the Myths about PLAs PLAs Do Not Exclude Non-Union Workers

The PLA business model does not mandate or pre-determine a workforce to be union or non-union. It allows for the project owner, such as the government or private sector entity, to establish the workforce standards for both union and non-union workers. In fact, federal law prohibits employers from discriminating against employees based on whether they are union members. The Federal Government Does Not Mandate Use of PLAs.

President George W. Bush issued an Executive Order that prohibited the federal government from requiring the use of a PLA on its own construction or construction for which it was providing any form of financial assistance. President Obama lifted those restrictions, and replaced them with a policy that encourages all federal agencies to consider the use of PLAs when they undertake construction projects that will cost the federal government $25 million or more. Executive Order 13502 states that federal agencies may (not shall) require PLAs to be used on construction projects where the total cost to the federal government is $25 million or above. For more information on PLAs go to: plaswork.org

Worker Misclassification
What to tell you Senators and Representative: Support HR 4123/ S 2145, the Fair Playing Field Act 2012, and curtail the misclassification of construction workers as independent contractors. What is Worker Misclassification? Worker Misclassification is a practice employed by unethical construction contractors to avoid taxes, insurance costs, and adherence to normal payroll procedures by intentionally misclassifing workers as independent contractors. Employers pay in cash lump sums and claim they will report workers annual earnings on IRS Form1099. Once construction workers are misclassified as independent contractors, they are no longer covered under the National Labor Relations Act, the Davis-Bacon Act, the Occupational Safety and Health Act (OSHA) or any other law designed to protect employees." The 1099 scheme allows companies to sidestep normal payroll procedures which allow the employer to evade federal law, therefore paying no Social Security or Medicare, workers compensation, unemployment insurance, or overtime all of which are required by law. Employers can profit from this scheme by grossly underbidding on projects to win more contracts. These bad actors can potentially save 30% or more on labor costs, which allows for undercutting of honest, law-abiding, taxpaying contractors, and it supports an environment in which workers, who fit the legal definition of being an employee, are exploited. The Safe Harbor Provisions The Safe Harbor provisions of the Tax Code (Section 530) were put in the Revenue Act of 1978 as a temporary measure to protect employers from the perceived threat of retroactive assessments due to rules the IRS was preparing on the misclassification of workers. Though it was supposed to be temporary, the Safe Harbor was made permanent in 1982. The Safe Harbor protects employers from employment tax liability for workers whom they are not treating properly as either full-time employees or as independent contractors. Congress has prohibited the IRS from making rules on the proper classification of workers and forbidden the IRS from issuing opinions or fines when a business misclassified workers according the classification tests the IRS has had in place for decades. Since 1978, the number of misclassified workers has grown steadily. The Safe Harbor makes it easy for employers to misclassify workers as either independent contractors or full-time employees, makes it hard for workers who have been misclassified to become properly reclassified, and greatly limits penalties for misclassifying employees. The broad effect of the Safe Harbor and gagging the IRS has been to create an un-even playing field in the construction industry and has denied g workers access to federal workplace protections. HR 4123/ S 2145, the Fair Playing Field Act 2012

There are now several million misclassified workers, mostly in the building trades and service sectors. President Obama's budget once again proposes a fix to the misclassification of workers and scores the fix at $8B in net revenues while helping both businesses who play by the rules and workers alike. Bill Provisions: 1. The bill requires the IRS to issue rules on the classification of workers and the Safe Harbor is repealed after the new rules are issued. 2. The original reason for creating the Safe Harbor in 1978 was the concern over retroactive assessments after IRS rules are issued. The Fair Playing Field Act of 2012 clearly and comprehensively forbids retroactive assessments for misclassification for the period prior to rules being issued. 3. The bill allows the IRS to levy reasonable penalties as it deems appropriate for the prospective classification of workers. 4. The bill preserves the current list of exclusions (for aptitude test monitors, for example) since they are narrow and are not the focus of any policy issues that the misclassification bill needs to address.