Why Union construction Contractors need RELIEF

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Mandated COVID Paid Leave Hurts CA’s Union-Signatory Construction Employers  

SB 114 was implemented with companion legislation that provided narrow tax relief in the form of Net Operating Loss (NOL) and Research & Development (R&D) tax credits to offset the costs of the COVID Paid Leave. However, neither of these tax credits are accessible to union construction businesses, leaving them holding the bag for the high costs of providing COVID Paid Leave.   

In addition, union construction is uniquely, negatively impacted by mandated COVID Paid Leave in the following ways:  

Mandated COVID Paid Leave Makes Union Construction Employers Less Competitive Than Non-Union Construction Employers 

Union-Signatory construction employers pay significantly higher wages than non-union construction employers. These wages take into account unpaid time off for illness and other unplanned time away from work. The new COVID Paid Leave law inadvertently disregards that union contractors have already negotiated higher wages to supplement unpaid time off or illness. Mandated Paid COVID Leave inadvertently requires union contractors to pay their employees twice for the same leave, making them less competitive.   

Mandated COVID Paid Leave Doubles Labor Costs for Union-Signatory Contractors  

For most CA businesses, an employee out on leave simply delays goods or services to the customer; however, construction firms are affected much differently. California’s union construction businesses face significant contractual obligations for project completion timelines, including the risk of liquidated damages. Additionally, contractors who fall behind in the project schedule face back-charges if the delays cause other trades not to be able to perform their work.   Working shorthanded is not an option on a construction site. Another worker must replace every worker who is out on leave. As a result, the Paid COVID Leave mandate requires contractors to pay twice. In other words, for every ten employees out on COVID Paid Leave, the construction employer must pay twenty people to get the job done on time. And unlike most other businesses, construction businesses operate on fixed-price contracts and have no way to recoup or pass on these cost increases.    

Providing Financial Relief to Premium Wage Employers Protects Union Workers and High Road Employers  

California’s legislative leaders should be applauded for their efforts to reduce COVID rates while protecting workers. However, if California wants to provide Paid COVID Leave for high wage hourly workers, the state should utilize funds earmarked explicitly for COVID issues or utilize funds from the largest fiscal surpluses in our state’s history to pay for it. California should do so through a dollar-for-dollar state tax credit or a Grant Program accessible to premium wage paying businesses to offset the costs of the employee leave. Doing so ensures that workers dealing with a COVID-related issue unrelated to the workplace can stay home without unjustly burdening high-road employers, including union-signatory construction contractors, with the significant costs associated with the paid leave.    When you protect union-signatory contractors, you protect good union jobs in CA and ensure union-signatory construction employers can continue meeting our state's vital infrastructure needs.