President Biden has claimed that he has been “America’s most pro-union president ever,” and he took a major step toward making good on that dubious distinction in his executive order of February 4. In it he announced strong steps to make sure that only firms that agree to hire union labor on jobs worth more than $35 million can land those contracts. The order, if and when implemented, is anticipated to cover $262 billion in federal contracts annually. As one might expect, the provision generated divided opinion, with Secretary of Labor Marty Walsh announcing his full-throated endorsement while construction firms have expressed their strong doubt about the proposal, which is bad as a matter of both law and economics.
There are two fatal flaws to his order. The first is that the executive order is in flat contradiction to the rules governing the formation of labor unions under the National Labor Relations Act (NLRA). The second is that the labor law defects are not cured by the general language of the Federal Property and Administrative Services Act of 1949, which at an abstract level is intended “to promote economy and efficiency.” Indeed, the entire mishmash is so far off base that employers and dissenting employees should be entitled to get a preliminary injunction so that the executive order never goes into effect at all.
Start with the key command of the executive order: each government agency “shall require every contractor or subcontractor engaged in construction on the project to agree, for that project, to negotiate or become a party to a project labor agreement with one or more appropriate labor organizations,” under a pre-hire agreement, that is, one that has to be negotiated prior to bidding. These contracts are supposed to contain safeguards against “strikes, lockouts, and similar job disruptions” and to “set forth effective, prompt, and mutually binding procedures” to resolve disputes.
There is no way to square this command for forced unionization on both employers and employees with the explicit command of Section 7 of the NLRA, which reads:
Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities.
This statutory scheme requires the union to line up sufficient support among workers to require the National Labor Relations Board to conduct an election whereby the workers, after hearing from both sides, are allowed to make their choice on whether or not to have a union, which is then under a duty to bargain in good faith with management. In his initial April 2021 executive order to study government contracts, Biden wrongly stated that the purpose of the law was to “encourage” unionization. Armed with that fundamental misconception, his recent order requires all potential applicants to find a union partner in order to enter the bidding process at all. For firms that are already unionized, the order imposes no new obligations. But for all nonunionized firms the order is draconian. The prospective union does not have to win any election, and there is no opportunity for workers to voice their dissent at any stage in the process. The order thus dictates that some union—it is not clear which—can force the employer to enter into a collective bargaining agreement with that union, even if it does not enjoy the support of a single worker inside the firm.
The most pro-union president ever is thus the most anti-employee president ever. But he is equally unfair to nonunion employers. The NLRA states that this duty to bargain in good faith “does not compel either party to agree to a proposal or require the making of a concession.” It seems perfectly clear that the government could not legally say that it will give $1 million in tax breaks only to those firms that agree to accept a union. Nor could it announce that it would impose a $1 million penalty on any employer that refuses to bargain with some union. The executive order represents a huge in-kind subsidy to unions and a huge penalty on employers, violating the government’s duty to remain neutral in these negotiations.
Without so much as mentioning the NLRA, the Biden executive order seeks to justify its broad command by pointing to the Federal Property and Administrative Services Act of 1949, which created the General Services Administration (GSA). Its mission statement reads:
GSA provides workplaces by constructing, managing, and preserving government buildings and by leasing and managing commercial real estate. GSA’s acquisition solutions offer private sector professional services, equipment, supplies, and IT to government organizations and the military. GSA also promotes management best practices and efficient government operations through the development of governmentwide policies.
The great challenge for the administration therefore was to articulate a set of reasons as to why the unionization of the construction industry could somehow achieve those stated efficiency ends. The most powerful objection to Biden is that if unions were as efficient as he claims, employers would eagerly join forces with them, instead of resisting them as strongly as they have. In face of this obvious objection, Biden’s limp effort to supply a rationalization for this statutory overreach starts by noting the obvious complexity of government projects, which he in turn claims makes it difficult to estimate and control costs, to coordinate the activities of many different contractors on the site, and to resolve disputes as they arise.
Unfortunately, from that simple observation he makes the huge, unjustified, leap of saying that using only unionized firms is the appropriate antidote to that unhappy state of affairs, without offering a shred of evidence in support. Thus, he points to no difficulties specific to nonunion firms on government projects, let alone any greater than those with unionized firms. Nor does he offer any reason why an open system of competitive bidding by all firms will not allow union firms to prevail if, as union leaders often claim, they provide superior services on both government and private construction projects. But how could any firm dragged into a forced marriage possibly compete well when forced to cope with a strong-willed union every step of the way?
All the available evidence, then, suggests that the Biden proposal will necessarily frustrate the aims of the GSA. In the fact sheet backing up his order, Biden praised unions for generating wage premiums of 13 percent, without noting that these were largely a consequence of their monopoly power. But he did not say a single word about the fact that higher union wages are paid for by higher taxes for ordinary Americans. Thus, at the very least, the so-called efficiency rationale will delay the bidding process and lengthen the timeline for project completion. Indeed, most sensible nonunion firms will not try to run the Biden gauntlet, which in turn means that the likely pool of reputable bidders for any given government job will shrink. The bottom line is inescapable: Biden’s ostensible efficiency rationale will yield lower output at higher costs.
So what is to be done to forestall this looming revolution in government contracting? At this point, the answer seems clear. Firms and nonunion workers subject to the Biden decree should seek a preliminary injunction to stop the movement before it destroys the overall operation of government procurement. The definitive test here is set out in the Supreme Court’s 2008 decision in Winter v. Natural Resources Defense Council:
A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.
Each of the relevant factors cuts strongly in favor of issuing that injunction. The likelihood of success on the merits is exceptionally high, given that the government has mangled its analysis of both the NLRA and the 1949 Services Act. The massive proposed changes in the bidding rules will cause large numbers of firms either to drop out of the bidding process or to enter into forced union arrangements, which will both damage their ability to bid and in all likelihood interfere with their other operations. The balance of equities tips sharply in their favor, as the Biden executive order does not articulate any particular problem that needs redress. Nor does it explain why an executive order, without any legislative authorization, should be able to redo the entire structure of American labor law. Indeed, by stripping an employer of all exit rights, the executive order might easily impose an unconstitutional condition on government bidding in its abuse of its own monopoly power. And it is surely not in the public interest to ignore the interest of every citizen who has to pay for Biden’s blatant partisanship and excessive union handouts.