Local 14, a thorn in developers’ sides, may finally be yielding some ground

Construction cranes dot New York City’s skyline, the definitive sign that real estate is back. And inside each of those massive machines is a member of Local 14 of the International Association of Operating Engineers, one of the most powerful unions in North America.

On the jobsite, licensed crane operators singlehandedly set the pace of construction.

“On every one of those work sites, it is the crane operator who conducts the orchestra,” Ed Christian, president and business manager of Local 14, told The Real Deal matter-of-factly. “Our members set the tempo of the job; our members can shut down the job if the winds are too strong or conditions aren’t safe.”

How quickly a tower goes up, though, is only the most visible sign of the operators’ influence. Real estate insiders and labor experts agree that the union’s greatest power lies in its numbers, more than 900 members strong across the five boroughs, and its control over a crucial sector of the industry.

Local 14 has “a lot of leverage and power associated with their control over a vitally important supply of skilled workers,” said Jeff Grabelsky, director of the Construction Industry Program at Cornell University and the former national organizing director of AFL-CIO’s Building and Construction Trades Department. “Given the high level of skill and vital role they play, they are critically important partners.”

But with new licensing requirements for crane operators going into effect next month, few agree on whether the union’s strength is helping or hurting the construction industry in New York.

As the economy recovers, developers have started hiring more non-union workers to cut costs, a step they insist is necessary to balance the concerns of cautious lenders, construction quality and job-site safety. The tactic has forced organized labor, including the electricians’ Local 3 and the ironworkers’ Local 580, to agree to cutbacks on wages, benefits and job rules. Earlier this year, for example, Zeckendorf Development announced that union concessions would allow it to save 20 percent in employee costs for its 44-story condo at 50 United Nations Plaza. Other high-profile developers who have negotiated similar packages include Steve Witkoff for 150 Charles Street in the West Village and Harry Macklowe for his 432 Park Avenue on the Upper East Side.

Developers contend that these concessions have played a part in the industry’s return to health, and that more are needed for a full recovery.

“The employers would say they’ve gotten some benefit [from the concessions] but not enough, and the unions would say they’ve given up more than what’s reasonably expected of them,” said Allen Ross, a veteran construction lawyer who is a partner at Duane Morris.

Local 14, however, has stood alone in opposing many of these projects’ labor agreements, refusing to bend when other unionized trades caved.

“They are just much more difficult and obstinate [than other unions],” said the president of a major New York–based development firm, who asked not to be identified to prevent biasing future labor discussions.

To labor activists, Local 14 is the firewall in the fight for worker rights.

“Too many people forget it was the training and union wages and benefits that built the middle class,” Christian said. “No matter how grand or how high the building, if the workers aren’t provided fair wages and benefits, buildings may rise, but the middle class will disappear.”

But to developers, the union is blocking what could be a full-fledged building boom, which they consider a plus for everyone — crane operators included.

“Anything that’s going to make the cost and the price of building in today’s modern era cheaper is something to be applauded, no matter where it comes from,” said Manhattan-based construction attorney Barry LePatner, author of “Broken Buildings, Busted Budgets.”

Checkered past
Founded in 1896, the International Association of Operating Engineers has more than 400,000 members and 123 chapters in the U.S. and Canada. In New York, Local 14 members have been involved in almost every major real estate and public works project, including the Barclays Center in downtown Brooklyn, Hunter’s Point South in Long Island City, the Freedom Tower in Lower Manhattan and the Second Avenue Subway.

Relative to other construction trades, industry insiders explained, the operating engineers bring a critical amount of leverage to the table because their field is so specialized and highly skilled — they can literally speed up or shut down a project by themselves.

Over the years, Local 14 hasn’t hesitated to use its power.
In July 2006, the crane operators in New York led a weeklong construction strike after negotiations broke down over productivity rules. Some union members had been accused of being paid as much as $82.65 an hour for doing little or no work.

Labor 14 threatened to walk off the job again in 2011, when developers pushed for a reduction in overtime pay for on-site elevator operators and for the elimination of “master mechanics.”

The union required master mechanics to be present at any construction site with at least five pieces of heavy equipment or three tower cranes; developers argued that the master mechanics did virtually no work yet received sometimes as much as $400,000 a year, including overtime.

Eventually, the two sides reached a compromise, agreeing to eliminate master mechanics on projects of less than $50 million. On overtime pay, the developers scored a victory — from double time to time and a half for elevator operators working outside, and $10 less an hour for inside operators.

Still, developers contend they need to cut labor costs even more and are finding other ways to get union concessions.

The Related Companies, for example, hired California-based Tutor Perini Corp. to manage construction on a 47-story tower at 30th Street and 10th Avenue in its massive Hudson Yards project, which allows it to get around local work rules and salary requirements.

That move, which some predicted could lead to the hire of non-union crane operators, succeeded in bringing Local 14 to the bargaining table. Christian said the two sides have since worked out a deal for Local 14 to work on the Hudson Yards project under Tutor Perini. “We have been able to negotiate an agreement which will generate significant savings for this project,” he said, but declined to give further details.

Both Related and Tutor Perini declined to comment.

Whether Local 14 will compromise with less formidable developers on lesser projects remains to be seen; Christian, however, said his members are open to talks.

“We are always prepared and willing to negotiate,” Christian told TRD.

Tensions within the industry have paralleled the strife inside Local 14. A three-year federal investigation of the union’s ties to the Columbo and Genovese organized crime families culminated in 2008 with convictions of more than 45 top union officials and family members. The officials were found to have received kickbacks for no-show jobs and bribes from contractors.

To ensure the union stayed clean, a federal district court judge appointed George Stamboulidis, managing partner of the New York office of the law firm BakerHostetler, as Local 14’s ethical practices attorney.

“It’s not a great thing when you’ve got a union responsible for running important equipment at a job site that’s run or influenced by the Mob,” a law enforcement official with detailed knowledge of the investigation told TRD, adding there has been no direct link between organized crime and any crane accidents since the probe.

Just a few months ago, in February, Local 14 was on the winning side in court. A federal district judge threw out a 2011 lawsuit by Thomas Vario, who claimed the union denied him membership because he is the great nephew of reputed mobster Paul Vario. Thomas Vario, a 46-year-old construction worker who lives in Queens, argued he has no connections with the mob and does not even communicate with his uncle. Nonetheless, Judge Sterling Johnson threw out the case on a technical matter, noting that Stamboulidis was acting properly in his union oversight role.

In April, Local 14 put up a slate of candidates for its first election of officers in more than a decade, after years of being prohibited from doing so by investigators. Christian hopes the election will herald a new era.
“That chapter is now behind us,” Christian said of the corruption scandal, “and we will be vigilant moving forward to ensure it doesn’t happen again.”

Safety first
In the wake of a string of serious accidents, most notably the 2008 crane collapse at 303 East 51st Street that killed seven and injured 24, the Department of Buildings has instituted more than two dozen regulations to improve construction-site safety.

The real estate industry supports the requirements, said Steven Spinola, president of the Real Estate Board of New York, which counts many developers among its members.

“A safer work environment, which the city’s new work environment will produce over time, will lead to the production of more housing, commercial space and jobs,” Spinola said.

Official word of the new crane-operator requirements came in April 2012, though the proposal had been in the works for months. By July 1, all crane operators must complete 40 hours of training on New York City’s safety and construction regulations, pass a criminal background check, meet physical fitness requirements and comply with a substance abuse policy. Also part of the new licensing requirements is certification by the National Commission for the Certification of Crane Operators or another accredited organization.

“A better exam means a better crane operator on the job site,” DOB Commissioner Robert LiMandri said when he announced the changes. “Veterans of any profession can suffer from complacency, but in the world of high-risk crane operations, it can lead to catastrophe.”

Local 14 and other unions have made it clear that they endorse making the workplace safer, but question whether the new laws are simply a back-end way to undercut the gains of organized labor.

Local 14’s Christian pushed back against any suggestion that safety isn’t of the utmost importance to crane operators.
“Our members need no reminders of the dangers of our work,” he said. “When you are sitting in a cab 60, 70, 80 stories above the street, hoisting thousands of pounds of steel or swinging tons of cement, you are holding the lives of hundreds of construction workers, passing cars, pedestrians in your hands. That doesn’t even take into account the possibility of causing millions of dollars of damage to nearby property, and shutting down the entire project.”

He said that every major accident in the last five years occurred because of a lack of proper inspection or equipment failure.

In LePatner’s view, the construction industry is still in dire need of reform, in terms of safety, cost and transparency.

“We’ve got to break some of the bonds that hold back the entire construction industry and really have them shooting themselves in the foot,” he said.