Construction Unions Try to Stem Job Losses

When labor attorney Paul Crost thumbed through the Yellow Pages two months ago in search of a union contractor to remodel his offices in Orange, he encountered what for him and other union advocates is stark reality. The first 10 or so contractors he called said, no, their workers were not union members.

Some thought his question amusing.

The incident betrays the weakness of the union movement in the construction industry of Orange County, one of the nation’s fastest growing areas that just a decade ago was solidly organized and the pride of the construction trades.

Although unionism always was sparse in Orange County’s other industry segments, construction once was the exception. Builders and general contractors, dependent on workers from union halls to convert broad expanses of barren land into large new communities, agreed to an ever-expanding package of wages and benefits. “When the unions said jump, we jumped,” recalled framing contractor George Romero.

On the Defensive

But no more. In Orange County and throughout Southern California, construction unions now are on the defensive, desperately trying to stave off an onslaught of so-called “merit-shop” contractors who employ non-union workers for wages and benefits that generally are substantially below union scale.

Several of the major construction trades and numerous sub-trades are renegotiating their contracts with management this year. Others have already reopened their contracts to make various concessions for union-affiliated contractors since the last round of master contract negotiations in 1983.

Most of the adjustments so far have been in the area of residential construction, where the unions have sustained their greatest loss of work. “We are not in a position to try to get more out of our signatory contractors,” said Bill Perry, secretary-treasurer of the Carpenters District Council of Orange County. Perry concedes that the carpenters’ “fringe benefit package is what killed us.”

“For the first time,” Perry said, the carpenters union and the contractors who remain affiliated with the union are “working together” to try to find a way to make union construction competitive in today’s market.

Consultant’s View

Jim Shuman, a labor consultant to the Building Industry Assn. of Southern California, said that unions are “finally becoming aware of just how acute the problem is from the contractors’ perspective.”

Having laid claim to the majority of residential construction in five years, the merit-shop movement now is making inroads into industrial and commercial development as well.

Unions still control the vast majority of high-rise office and public works projects in Southern California. But within the past three years, some of the nation’s largest commercial and industrial contractors who operate an “open shop,” and thus will hire either union or non-union subcontractors, have begun aggressively bidding for work in the area. And local general contractors and subcontractors who have an open-shop operation are graduating to ever-larger projects.

A survey recently published by the Construction Industry Research Board said that non-union general contractors accounted for 77.6% of residential and 34.1% of commercial and industrial construction in the 11-county Southern California region in 1984.

Increase Cited

The Associated General Contractors of Southern California reports that about 30% of the association’s statewide membership consists of contractors who are not signatory to union agreements, contrasted with an estimated 15% five years ago.

Some industry observers say the labor unions were “victims of the economy,” which turned sour in 1981, just after the unions had negotiated very generous salary and benefit contracts for their members.

Many residential builders, striving to build homes that would be affordable to a broader range of potential buyers, decided to open the competition for construction contracts to union and non-union contractors alike. The result was that non-union firms often landed the job by making the lowest bids.

As the advantage of non-union contracting grew apparent, long-time union contractors--from framers and bricklayers to cement masons--shed their union affiliation. Numerous other contractors, to the great consternation of union officials, never terminated their union agreement but set up what became known as a “double-breasted” operation. That meant that they kept their original, union-affiliated contracting company but did the bulk of their business through a new firm they established to operate as a merit shop.

Adverse Ruling for Unions

The unions were prevented from halting the loss of construction work to the non-union sector, and from staunching the flow of union workers to non-union jobs, in large part by the “two-gate system.”

Courts ruled that a union could only picket the gate on a construction job that was used by the trade with whom the union had a dispute. Workers in all other trades could pass through a second gate undisturbed and continue working. No longer could unions use pickets to shut down an entire job site.

The growth of merit-shop contractors also has been spurred by a general reduction in the skill level required in modern home construction and by a new tendency of developers to build smaller tracts at a time, making it easier to obtain a qualified labor force without relying on union hiring halls.

So, when the economy and residential construction rebounded in 1983, open-shop contractors were suddenly in control of a majority of the work. Jim Bailey, vice president of Newport Beach-based William Lyon Co., one of Southern California’s biggest builders, said that about 75% of the subcontractors it has hired for several years have been of the open-shop variety.

“We find we can build a house $2,000 to $3,000 cheaper if we use non-union workers,” Bailey said.

Advantages Told

Merit-shop contractors say that they can underbid their union competition by paying wages that are close to the union scale to a few key workers, who oversee many other workers who have lesser skills and are lower paid. Also, they say that they can save costs by not having to abide by cumbersome union rules related to trade jurisdictions and overtime.

Construction workers often say they have taken non-union jobs as a matter of necessity. “I was hungry,” said a plumbing foreman on a 535-unit apartment project in Laguna Niguel that is being built with open-shop labor. He would not disclose his name because he did not want to anger the union to which he has belonged for 15 years and from which he hopes to collect a pension someday.

Yet other workers say they are pleased to be free of union dues and restrictions. Robert Bryan, a 28-year-old cement mason working for a non-union contractor on the expansion of the Holiday Inn in Costa Mesa, said he earns more at his current job than when he was a union laborer because he can do a greater variety of tasks. A year after going to work for his present employer at $19 an hour, he said, he was able to buy his first house. “I’d never go back (to the union),” he declared.

But not everyone is pleased by the sometimes cut-throat competition that the scarcity of union contracts has engendered among contractors, who feel pressured to further reduce worker wages and benefits, increase productivity and lower their profit margins to underbid other non-union firms.

‘They Got Real Fat’

Steven D. Atkinson, a labor relations attorney for contractors, said that some of his clients “wish we had the good old days” when “everybody was union and they knew what everybody was going to bid and they got real fat. All of a sudden, they don’t know what anybody is going to bid. It is (a matter of) who can get men the cheapest and who can run them the hardest.”

Romero, who severed his framing company’s affiliation with the unions in 1977 and helped to found the Southern California branch of Associated Builders and Contractors, said that at first his company was able to increase its profit margin by going non-union and bidding against union firms. But now that his competitors are also open-shop operators, he said, his profit margin is no better than when the industry was an all-union operation.

Moreover, Romero said, he had to discontinue his company’s pension program last year to stay competitive. He said he realizes that his workers need pensions. “We have to do something about it . . . (but) I don’t know what the answer is,” he said.

In an attempt to re-establish a beachhead in home building, several of the construction trade unions, including carpenters, electricians and laborers, have adopted a wage and fringe scale for residential construction that is lower than the rate for commercial work.

Experiment Under Way

In addition, the carpenters have agreed on an experimental basis to virtually eliminate requirements for union-affiliated contractors to provide such benefits as pensions, vacations, and health and welfare insurance to employees working on residential tracts in specific parts of Orange and Los Angeles counties, including Anaheim Hills, Mission Viejo and the Palmdale/Lancaster area. The carpenters’ special area agreement will last until June 30, when the residential portion of the carpenters’ master contract will expire.

“Everyone’s got to understand this is just an experiment to see if we can get back the work,” said Perry of the Orange County Carpenters District Council. Perry said it is probable that union carpenters in residential construction will ultimately have to forfeit all benefits except medical insurance. “It is an ugly thing to think about when we had it (the full range of benefits) for years and years,” he said.

Larry S. Hatfield, president of an Anaheim framing company and president of the Residential Contractors Assn., formed in July of 1983 to represent union-affiliated framers in Southern California, said he hopes the new area agreements with the carpenters will give the union contractors an opportunity to prove to builders that they are more efficient and quality conscious than are the non-union contractors.

Although some construction locals in Southern California have lost membership because of the growth of open-shop operations in the residential area, labor union membership has been buttressed overall by a building boom, particularly in office and hotel construction where the unions are still strong.

Employment Sets Record

Construction employment, including both union and non-union workers, reached an all-time high of 49,600 persons in Orange County last year, according to the state Employment Development Department. Los Angeles County had a near-record construction work force of 118,000.

In 1983, the latest year for which EDD statistics are available, Orange County’s construction labor force was still about 89% organized. In July of 1983, there were 28,300 union members in the construction trades in the county, a figure that has since grown to about 32,000, according to the Orange County Building Trades Council.

Some industry observers, however, predict that when commercial construction inevitably hits a down cycle and high-rise office building comes to a halt, the unions will find to their dismay that open-shop contractors have tied up the smaller jobs. Already, they say, open-shop contractors are doing a brisk business in tenant improvements, small retail shopping centers, fast-food outlets and garden office buildings.

Non-union commercial subcontractors got a boost in 1983 when the unions agreed that if a project is valued at $2.3 million or less, a signatory contractor may hire non-union subcontractors in all but six basic trades--carpenters, laborers, cement masons, teamsters, ironworkers and operating engineers.

Friction Minimized

One result is that union and non-union subcontractors are frequently working side by side on commercial construction jobs, usually with little friction other than an occasional union picket.

David Conover, president of Tustin-based Davcon Inc., an open-shop commercial builder, said that in one instance, when a union picket prevented a union signatory concrete supplier from making deliveries at a Davcon construction site, he simply hired a non-union concrete supplier. “All the unions are doing (by such tactics) is losing their work,” he said. “It is not like you shut off the concrete and there is no place else to buy it.”

Another spur to the non-union subcontractors has been the recent entry into the Southern California market of large out-of-state, open-shop commercial and industrial builders who can utilize their services. Such firms, including Daniel International, Becon Construction Co. Inc., Brown & Root USA Inc. and KRI Constructors, have begun aggressively bidding for work in the area.

Norman Maultsby, vice president and division manager responsible for the Long Beach office of Daniel, an open-shop arm of the Irvine-based Fluor Corp., said: “California is definitely transitioning more to an open-shop marketplace and that is why we are here. We want to be on the front edge.”

Making Gains

And gradually, as local open-shop contractors develop more financial and skilled manpower resources, they are landing increasingly larger commercial projects. For example, Near Cal Corp., an open-shop contractor in Anaheim, is working on a 104-room addition to the landmark Newporter Resort in Newport Beach, and San Diego-based Lusardi Construction Co. has been chosen by Davis Developments of Newport Beach to construct a 6-story office building in Newport Beach for $20 million.

Open-shop contractors have made even greater headway in industrial construction. The largest open-shop industrial project in Southern California was a paper-recycling mill built last year in Ontario at a cost of more than $100 million by KRI Constructors of Houston, Tex.

In the face of these victories for the open shop, unions are mounting their own offensive.

Bob Balgenorth, executive secretary of the Orange County Building Trades Council, said that Orange County’s construction trade unions have just agreed to assess themselves to hire a full-time organizer. And after a long lull in union activity after the six-week carpenters strike in 1984, the county’s trade unions plan to revive picketing and leafleting efforts, he said.

Union Programs

Other self-sustaining approaches that unions are taking range from beefing up their worker-training programs to encouraging greater on-the-job productivity by their members.

On another front, Balgenorth said, the unions will make increased use of a program whereby they offer to help finance construction projects if developers agree to hire all-union labor.

But unions in Southern California “aren’t reacting fast enough to keep the work” in the commercial arena, according to Dick Munn, executive vice president of Associated General Contractors. “They don’t feel sufficiently threatened to bite the bullet,” he said.

David Harrigan, business manager for Local 22 of the bricklayers union, which covers Orange County, insists that “cutting wages is not the answer.” He said his union, after suffering a severe loss in membership, grew by 8% last year. Most of the gain, he said, came from “returnees” who were “tired of working for less, want health and welfare, and look forward to a pension.”

Harrigan says the unions have a responsibility to set a wage-and-benefit standard for the working place. “The non-union workers are terrified that if we drop our wages, down goes theirs.”