WRF to Release "Job-Buying" Study
As part of its project investigating and bringing to public attention the denial of workers' fundamental right to freedom of association, the WRF commissioned Project Director Ray Pennings to investigate the role of Job Targeting Programs (JTPs) and assess their impact on the construction industry in Canada.
The study, which took place in the latter part of 1997 and into 1998, is due to be released shortly. It is based on 40 interviews conducted with individuals familiar with the operation of JTPs, including staff and members of locals administering JTPs; contractors benefitting from as well as those targeted by JTPs; and "industry insiders" who provided insight on the effects of these programs.
JTPs are one of a variety of tactics used by some traditional craft unions to address the decline of their "market share" in the construction industry. In some cases, these unions formerly enjoyed a near-monopoly position.
JTPs were pioneered in the United States. But their prominence has declined in recent years in that country, due in part to litigation mounted against these programs.
The operation of a JTP involves a union local establishing a fund to which a contribution is made for every hour worked by a member of the local. In some cases, this contribution is deducted from members' wages and receipted as union dues for taxation purposes. In other cases, it is remitted by the employer in a similar manner as contributions to other union funds. The fund is typically administered by the union.
Employers who are party to these arrangements (usually formalized through a collective agreement provision or through a separate letter of understanding) are eligible to make an application to this fund if they are bidding on a project against competitors not bound by the union agreement. Just prior to the bid closing deadline, the union reviews the bid application and offers the applicant employer a subsidy. Employers can incorporate this amount into their bid in the hope of being more competitive, and thus become the successful bidder.
The criteria and amounts of a subsidy vary widely by plan. However, the common objective of these funds is to access work for union members and contractors which they would not otherwise achieve.
It is estimated that cumulatively, more than $100 million are administered annually by JTPs in Canada. Of the jobs studied, subsidies granted ranged from $1.50 to $19 per hour. Although conclusive results cannot be measured, evidence suggests that JTPs have helped some unions halt their decline in market share. Most expect JTPs to continue as a feature of the construction industry for some time.
In many areas, JTPs are successful because they benefit from a significant cross-sectoral subsidy. Large industrial clients (where the affected locals have effective protection from competition) pay a premium in exchange for labour peace. The JTP funds generated by this work are used to "buy" jobs for union members in other subsectors.
As the construction owners' community is becoming more aware of how JTPs work, there is some evidence that the integrity of the bidding process is being compromised. Various steps are being taken in an attempt to attract JTP funds to particular projects.
A review of the Competition Act suggests that the overall JTP structure might reasonably be deemed as an example of abusive dominance, for which the Act provides civil remedies. A labour exemption clause may provide a defence against an abusive dominance allegation, however, the relevant sections have not yet been tested and so there is no jurisprudence to guide an interpretation.
The study paid particular attention to the various statutory concerns which have been raised surrounding JTPs and their appropriate taxation treatment. A legal opinion commissioned for this study suggests that the practice of receipting JTP contributions as union dues—as appears to be the practice in almost one-third of cases—may be in violation of Revenue Canada's guidelines. While this tax incentive assists union representatives in "selling" JTPs to union members, there are no net effects on overall government revenues.
While JTPs are usually defended as a means for unionized workers and contractors to compete on a "level playing field," the study concludes that in practice JTPs are guided by other motives in addition to cost competition. They are part of an attempt to defend a particular system of craft organization in the construction industry.
The social cost of this system includes prescribing union choices for workers. The system naturally tends toward monopoly control of the labour pool. The effects of JTPs are to introduce other uneconomic considerations into the bidding process. More importantly, they seriously affect freedom of association for Canada's construction workers. The continued prevalence of JTPs has significant potential to hurt the image of the industry and to erode confidence among participants.