$3.5 trillion budget resolution could increase penalties for labor violations

The framework for a $3.5 billion budget resolution that was approved by Congress last month could include a provision that will have major impacts to the ways that construction firms relate to their workers.

Although some lawmakers such as Sen. Bernie Sanders, I-Vt., have pushed for aspects of the PRO Act to be included in the reconciliation, most won’t make their way into it, multiple sources told Construction Dive, due to the rules surrounding what provisions can be included in budget resolutions. But one idea from the PRO Act that could make it through is a change to the penalties and the process employers and company owners face for committing unfair labor practices.

House committees are currently drafting the major parts of the budget resolution, and are expected to complete their portions by Sept. 15.

This would mean employers could face civil penalties, sanctions and other damages, including personal liability for directors and officers, for even small labor violations, Christopher Horton, partner at construction law firm Smith Currie, told Construction Dive.

Labor violations that could be impacted by the provision, according to Horton, include:

• Promising employees benefits if they reject a union.
• Taking negative action against an employee for filing an unfair labor practice grievance.
• Failing to provide notice and an opportunity to bargain over workplace changes.
• Refusing to bargain collectively.

“Under current law, the fine you pay for a parking ticket is greater than the fine companies pay for violating workers’ right to organize a union,” wrote Rep. Bobby Scott, D-Va., in a July release supporting the provisions’ inclusion in the budget process. “Creating financial penalties for unlawful anti-union activity will finally deter employers from violating the law and will better protect workers’ rights.”

Damages

Should the provision go into effect, businesses committing labor violations such as those above would face punitive damages, personal liability and consequential damages, in addition to penalties for violations. Employers involved in labor disputes could see civil penalties from $50,000 to $100,000 in cases of repeat violations, Horton said.

Before, these concerns could be raised with the National Labor Relations Board, which would then begin the process of resolving the issue and, as multiple sources put it, “making the employee whole” — or to rule the employer must pay or award the plaintiff their owed wages or other lost funds, as though the violation had never happened. The ability to seek penalties in civil court is a novel addition to the process.

Major contractor groups, such as Associated Builders and Contractors and the Associated General Contractors of America, staunchly oppose the measure.

“Reports have indicated that the bill could seek to insert harmful labor provisions in the reconciliation package, which could include increased monetary penalties for employers that ‘interfere’ with workers’ union rights, leading to unwarranted and frivolous lawsuits that could have a devastating impact on construction employers,” Kristen Swearingen, ABC vice president of legislative and political affairs, wrote to House members last month.

The opposition

AGC and ABC have made it clear: they believe this provision is bad for businesses, particularly small contractors who make up the majority of construction firms in the country. To avoid labor violations, some contractors may decide to give unions more leverage.

“The provision would cripple small businesses and vastly increase unions’ leverage—meaning more employers will yield to union demands to forgo secret ballots for union representation elections and recognize a union based on ‘card check,'” Swearingen told Construction Dive. “It will also mean more employers will yield to union demands at the bargaining table — even if those demands put the company’s long-term competitiveness at risk.”

The “card check” to which Swearingen refers is a practice in which workers sign their name to verify their request for a union, rather than solely using a secret ballot. Contracting groups fear that this may create undue pressure on some to ratify the union.

Contractors may yield to unions more as a way for company owners to avoid the increased civil penalties.

“Usually, when a business is held liable, it’s not the person running the business,” said Jimmy Christianson, vice president of government relations for AGC. “That is a new twist, which would change the norm and increase a business’ risk profile.”

If an employee sues his or her employer, on top of asserting charges with the NLRB, the plaintiff can recover attorneys’ fees and costs if they prevail in court, in addition to the punitive damages, Chad Wishchuk, attorney and partner at Finch, Thornton & Baird, told Construction Dive.

The goal

The concept behind the provision is simple: reduce labor violations by making the punishments for them more severe than in the past.

“The driving force behind these provisions is the goal of strengthening workers’ rights to organize and collectively bargain,” Wischuck said. “It certainly goes very far from the historical approach under the National Labor Relations Act.”

President Joe Biden has made it clear he supports unions and workers’ rights, and he has championed the PRO Act.

Horton added that in addition to increasing deterrents to labor violations, it could also provide another means for funding the country’s massive infrastructure goals.

The implementation of the penalties would likely increase both oversight as well as litigation, Horton said. As some companies face stiff penalties for labor violations, others would put obstacles in place to avoid having to face them.

When push comes to shove

Though owners and executives may now be liable in civil court, it’s important to note that they should only lose cases in which they are directly responsible for labor violations.

“While the (National Labor Relations) Board has significant discretion under the PRO Act in pursuing personal liability against directors and officers, the Board must still determine a causal relationship between the violation and the director or officer,” Horton said.

An example could be that the owner directly influenced or enacted the labor violation policy.

That reality doesn’t necessarily calm contractor groups, however.

“The reality is opening that up especially in an environment of increased enforcement, wanting to make more examples of businesses — the opening of Pandora’s box is bad enough for us here,” Christianson said