The Real Deal New York

The construction unions at a crossroads

The latest scraps between Related and the Building Trades’ Gary Labarbera mark a turning point in the battle over union and nonunion labor in New York
By Kathryn Brenzel | September 01, 2018 09:00AM

Gary LaBarbera at a construction union rally in Union Square

Standing in front of thousands of construction workers in Union Square, Gary LaBarbera screamed into the microphone — his voice going hoarse from condemning Related Companies.

“In my opinion, they are a bunch of fucking liars,” the New York Building and Construction Trades Council president said. “You can sue me, you can take me to court, but I will not stand down.”

He was referring to Related’s two lawsuits against him and the Building Trades and the developer’s assertion that it’s one of the biggest proponents of union labor in the city.

The tenor of the rally, held in May, reflected the rapidly escalating feud between the developer and the Building Trades over Related’s use of both union and nonunion labor at 50 Hudson Yards. The fight, which kicked off last year with protests outside the development project, has become increasingly personal and vitriolic.

“I have been through many battles, many labor disputes and many conflicts on many different levels for 25 years,” LaBarbera told The Real Deal in a recent interview. “And I have never had an adversary conduct themselves in such a despicable manner.”

LaBarbera has painted Related’s chairman, Steve Ross, and president, Bruce Beal Jr., as union busters driven by greed, while the firm’s executives describe the union leader as a bully who is causing more harm than good to the workers he claims to defend.

“Gary LaBarbera and the Building Trades’ malicious and destructive efforts, including rallying against their own trades, have cost their own members jobs,” Related’s spokesperson, Joanna Rose, said in a statement.

To have such a drama play out at Hudson Yards, the largest private project in New York’s history, marks a key turning point in the rivalry between union and nonunion labor in the city. Nonunion construction workers have gained considerable market share in the past decade or so, with many developers and construction management firms opting to hire a mixed workforce — often referred to as open shop.

But what’s really changing, sources say, is the way developers and unions are negotiating contracts.

In the case of Hudson Yards, the New York City District Council of Carpenters — the city’s largest union, with more than 20,000 members — announced a deal with Related to work on the second half of the 28-acre project. Though LaBarbera denies that such an agreement exists, the prospect of a contract shows that the city’s unions are no longer operating as a united front.

And that deal — whether or not it’s driven by the interests of the carpenters — could be the first of many, according to sources.   

“I think you are going to see more things like that happen,” said Anthony Rinaldi, head of the construction management firm Rinaldi Group and chair of the New York branch of the Associated Builders and Contractors. “That is highly unusual, and it is definitely a landmark transition.”

Open-shop town?

Three years ago, developer Michael Stern made headlines for hiring nonunion labor at 111 West 57th Street — one of the tallest planned residential skyscrapers in the city. The project wasn’t the first Manhattan high-rise to use both union and nonunion labor, but it immediately caused a stir because of its scope.

Related’s Steve Ross with designer Thomas Heatherwick in Hudson Yards

The prevailing sentiment, according to Stern, was that if a 1,428-foot condo tower billed as the thinnest in the world could rely on nonunion labor, any project could. And now some of the largest buildings under construction in the city — in addition to Hudson Yards — have gone open shop. Those include two residential towers at Tishman Speyer’s 28-07 Jackson Avenue in Queens and Amazon’s first distribution center in the boroughs at 546 Gulf Avenue in Staten Island.

“Where once we were an outlier, the entire industry has now shifted to open-shop labor,” Stern told TRD. “I think that the market has shifted, and I don’t think it’s going to shift back.”

Trying to quantify the extent of that shift can be tricky though.

While the Real Estate Board of New York — a proponent of open-shop construction — puts the share of nonunion labor for projects 10 stories or higher in the city at about 70 percent, several industry reports show a more even split.

But the New York City Department of Buildings doesn’t track whether a construction site employs union or nonunion workers, and building permits don’t show every contractor hired. In June, the DOB started to include some union information on its monthly reports of construction-related fatalities, as mandated by a City Council bill signed into law last year. But the information is limited and isn’t based on uniform definitions of union, nonunion and open shop. For instance, the majority of workers on an open-shop site can still be union members.

As a result of the lack of transparency and the lack of clarity around these designations,it’s likely that much of the available data is anecdotal at best.

So, to give a quick snapshot of the current landscape, TRD looked at the 10 largest projects under construction in the five boroughs (where new building permits have been issued by the city) and found that six were union and four were open shop. And most of the open-shop projects in the city are more than 50 percent union, according to the Building Trades.

This picture, though limited, jibes with other studies. A 2015 report by the carpenters’ union, for example, placed the overall share of union projects by square footage at 65 percent in Manhattan and 39 percent in the outer boroughs. Throughout the entire city, unions accounted for just short of 55 percent of the work, and nonunion firms did the other 45 percent.

It’s generally believed that nonunion shops have the most success on large residential projects, but they’ve started to make inroads on the commercial side as well. Developers and contractors say that this could be one reason why the battle at 50 Hudson Yards is so heated — a 58-story office building represents a massive loss to the unions at such a tenuous time.

The gradual shift away from union labor in New York is often attributed to the cost differences. Industry experts usually place the gap between union and nonunion labor costs at 10 to 15 percent, though they say it can climb higher depending on the trade. The average difference in annual wages between construction workers and those paid a prevailing union wage is 118 percent, according to a 2017 analysis released by REBNY. That figure includes benefits and also assumes a 40-hour workweek for 52 weeks, which typically isn’t the case in construction.

While nonunion labor is cheaper all around, a large chunk of the difference lies in union benefits. A union steamfitter who specializes in air conditioning and refrigeration, for example, makes an average of $55.50 an hour, plus $55.29 per hour in benefits, according to REBNY. A nonunion steamfitter earns $29.35 an hour and another $9.42 in benefits.

“I think there’s a place for both sides of the labor paradigm,” Rinaldi said. “And if the unions can start closing that price gap, I think that would make them more competitive.”

Concrete shifts

Others argue that things may be changing more permanently.

Laurie Stanziale, a partner at Tarter Krinsky & Drogin’s construction practice, said she’s seeing a growing number of developers go strictly with nonunion labor. “Just a few years back, clients would price out both,” she noted. “Now, you just make a decision early on.”

Union proponents often argue that nonunion labor is inherently less safe — pointing to the fact that more than half of the city’s construction-related deaths occur on their sites. A common response on the other side is that such stats are due to most of the development sites in the city being nonunion to begin with.

But contractors on both sides of the debate are struggling to find enough workers to take on what is still a very active construction market. In a national survey of more than 2,700 contractors conducted by the U.S. Chamber of Commerce and USG Corp. in the second quarter of 2018, 91 percent noted that they are having a hard time finding skilled workers.

Chris Mills, chief operating officer of Plaza Construction, a New York-based general contractor, said construction managers are still dealing with a “hangover” from the 2008 financial crisis, when many were forced to leave the industry due to lack of work. General contractors are now grappling with a retention issue, which stems from a lack of resources dedicated to project management, he added.

“The competition is driving the pricing down,” Mills said. “But both the union subcontractors and the nonunion subcontractors are probably not used to running their businesses at those lower margins.”

The resulting headaches, including delays and change orders, might not encourage people to stay in construction, but the industry will learn how to adapt, Mills argued. In the end though, “it is going to be in an open-shop environment,” he said.

Within the past two years, there have been other notable clashes between the union and nonunion sectors. Backed by Gov. Andrew Cuomo, the Building Trades fought for a prevailing wage as a condition of bringing back the developer tax break formerly known as 421a. The union won a variation of that.

When the program was revived as “Affordable New York” in April 2017, it mandated that construction wages for large Manhattan rental projects below 96th Street and with 300 units or more be set at a minimum average of $60 an hour. For projects on the Brooklyn and Queens waterfronts, the average wage was set at $45 an hour.

Then last September, the City Council passed its construction safety bill, which requires workers to undergo 40 hours of additional training. Some viewed the legislation as unfairly favorable to union members, many of whom were exempted from the new requirements if they underwent similar training in the past five years. 

Construction workers rallying at the NFL’s headquarters on Park Avenue

“You have a playing field that has been defined largely by the agenda of the construction trades,” said Jordan Barowitz, vice president of public affairs at the Durst Organization.

He argued that building rental housing in the outer boroughs using zero nonunion labor is “economically impossible.” In addition, Barowitz said, the unions’ “all or nothing mentality” is harmful to New York City’s affordable housing goals and drives up prices.

The Building Trades has taken on that same mentality — demanding exclusivity — in its protests at Hudson Yards, according to Related’s lawsuits.

Bad blood

LaBarbera traced the beginning of the end of good relations between him and Related to a 2016 Crain’s New York event, in which the firm’s chairman spoke on a panel just before LaBarbera took the stage. “The good news is today, New York is becoming more of an open-shop city,” Ross told the crowd.

The statement blindsided the union boss, who said Related celebrated the 2013 project labor agreement for the eastern portion of Hudson Yards with much fanfare. He noted that Ross had billed his company as a champion of union labor, but quickly changed his tune soon after the PLA was signed. 

“Bruce Beal’s mantra for the last two years within the industry is that he was going to be the person that breaks the Building Trades’ model,” LaBarbera said. “He wants that to be his legacy.”

But in one of its lawsuits filed in March, Related maintained that its goal is “to inaugurate a new era of modern and transparent labor relations.”

In that first lawsuit against LaBarbera and the Building Trades, Related alleged that the union reneged on its 2013 Hudson Yards deal and drove up costs on the site by more than $100 million. In a second lawsuit, which was filed in May, the company accused LaBarbera’s organization of interfering with concrete deliveries at 50 Hudson Yards.

Related also claims that the Building Trades’ campaign, dubbed #CountMeIn, is pressuring other unions to boycott the megadevelopment if the developer doesn’t yield and hire all-union labor for the project.

More than 20,000 union workers have been employed at Hudson Yards in the past six years, according to Related. And while the firm’s executives say they would prefer to use mostly union labor, they will not do so through a “worthless PLA” or through the Building Trades, according to the March lawsuit. Instead, Related plans to negotiate with unions on an individual basis going forward.

“The Building Trades’ ‘model’ of padded payrolls, no-show jobs and outdated work rules has long been broken,” Related’s Rose said. “We will not be bullied into entering exclusive agreements with a negotiating party which has a track record of breaking their commitments.”

A boiling point

In August, Related announced an agreement with the New York District Council of Carpenters and its parent organization, the United Brotherhood of Carpenters and Joiners of America, which the developer called “historic.”

The deal, per Related, will increase the number of trades working on 50 Hudson Yards and the rest of the project’s upcoming western portion.

Joe Geiger, the District Council’s executive secretary-treasurer, declined to comment on the agreement. But he provided a statement regarding a Building Trades rally held outside the carpenter union’s headquarters in August, protesting the group’s break from its opposition to Related.

“The reality is jobs across the city are being worked on by a variety of trades — union and nonunion alike,” he said. “With union opposition mounting locally and nationally, this is no time for union members to be attacking other union members.”

Representatives for the United Brotherhood of Carpenters did not return multiple requests for comment by phone and email.

LaBarbera contends that the agreement with Related isn’t real and is merely a publicity stunt to distract from the #CountMeIn movement. He also asserts that developers always negotiate directly with unions since each has its own leadership team.

Other contractors and developers who aren’t involved in the feud say a deal between a union and developer without the involvement of the Building Trades would be highly unusual. It was LaBarbera, after all, who signed the PLA for Hudson Yards’ eastern portion.

“One of the challenges that Gary is facing is there’s a growing consciousness that [he] is no longer the person to be talking to,” said REBNY President John Banks. “That sentiment is growing every day, and it’s going to be a challenge to his leadership.”

Banks added that many developers no longer see PLAs as an option because they don’t deliver on promised cost savings and don’t effectively prevent strikes. “They are trying to hold onto a business model that’s dying,” he said about LaBarbera’s organization and other city unions. “If the trades want to win and maintain 100 percent of the market share, then compete. Change your structure.”

For now, though, the Building Trades continues to hold rallies outside Related’s headquarters at Columbus Circle and at 50 Hudson Yards. The group has even picketed the National Football League, calling for Ross who owns the Miami Dolphins to be taken off its social and racial justice committee. Thousands of construction workers stopped traffic outside the NFL’s Park Avenue headquarters last month, resulting in the arrest of 37 people.

Meanwhile, a billboard above Seventh Avenue and 30th Street reads: “New York City is a union town! #CountMeIn.” And an inflatable pig smoking a cigar — its pockets bulging with cash — sits outside the new No. 7 train station on 34th Street as a reminder of the animosity between union workers and Related.

“To be a construction worker in New York City, the one thing you can’t be is faint of heart,” LaBarbera said. “We’re more than willing to cooperate and work collaboratively. [But] we’re not afraid to stand up and fight. This group? The wrong group to pick a fight with.”