tension building at hudson yards

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NEW YORK BUSINESS®

MARCH 12 - 18, 2018 | PRICE $3.00

TENSION BUILDING AT HUDSON YARDS Related’s lawsuit looks to break a union leader’s grip on city construction PAGE 17

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REAL ESTATE

HUDSON BARBS A power struggle at the largest private development in the U.S. marks a turning point in the city’s construction industry

BUCK ENNIS

BY JOE ANUTA AND DANIEL GEIGER

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ne construction worker is accused of logging 12-hour shifts seven days a week for an entire year, an improbable schedule that earned him $600,000. And two senior tradesmen making $42 an hour to swing hammers were instead selling coffee and snacks full-time to laborers on break. These and other abuses by union workers building the massive Hudson Yards complex were alleged in a lawsuit filed last week by the megaproject’s developer, a partnership led by The Related Cos. The suit asserts the schemes inflated costs by $100 million over the past five years at the nation’s largest private development—a $20 billion, 18-millionsquare-foot undertaking. But the case is not about recouping lost money so much as it is an effort to break the grip of the most powerful labor organizer and lobbying group on the city’s unionized construction industry. Related wants to exclude the Building and Construction Trades Council of Greater New York from SQUARE FOOTAGE of labor negotiations for the Hudson Yards project second phase of Hudson Yards, which includes millions of square feet of residential and mixed-use space over the western TOTAL COST section of the rail yards as well as a soaring, 3-millionsquare-foot office tower at West 33rd Street and 10th WAGES PAID to union Avenue. Led by its imposing workers for first half of president, Gary LaBardevelopment bera, the trades council has responded with a smear campaign against Related that is nasty even by laborHOURLY WAGE of two dispute standards. LaBartradesmen accused of bera, a close ally of Gov. Anserving coffee instead drew Cuomo, has called the of working developer “greedy” and a “union buster” at union rallies and has described Hudson Yards as a “prison.” He has also pressured leaders of TRADES represented the 15 labor unions that his by the Building and umbrella group represents Construction Trades not to negotiate directly Council of Greater NY with Related—knowing the developer likely could not complete the incredibly complex project without some of the skilled union workers. At stake for unionized construction labor, which is already on the retreat in many segments of the market, is one of its last strongholds: large, lucrative projects such as Hudson Yards. “This suit may be a door into a whole new world of union construction in which work rules will be fundamentally challenged—and perhaps changed

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altogether,” said Julia Vitullo-Martin, senior fellow at the Regional Plan Association. “And there is no developer more likely to succeed on this than ­Related.”

Savings prove elusive

The roots of the dispute reach back to 2013, when the construction industry in New York was still struggling in the wake of the Great Recession. Unionized labor had been particularly pinched because of its higher wages and byzantine work rules that made it more expensive than nonunion ­competitors. To win the job to build Hudson Yards, LaBarbera negotiated a project labor agreement (see “Working Words,” page 19) in which his unions’ workers agreed to trim their compensation, liberalize work rules and lower costs. Many developers at the time said that to stick with unions, they needed PLAs to make projects financially feasible. Although the agreements were used on hundreds of projects

throughout the city, many major developers complained that ultimately they did not yield the anti­ cipated reductions. In recent years the arrangements have begun to fall out of favor. “Experience has shown PLAs have no value,” said John Banks, president of the Real Estate Board of New York, a trade and lobbying group, in a statement. “They have not resulted in the cost savings promised, and moreover, even though PLAs have contained no-strike clauses, that has not prevented certain unions from striking.” Related’s lawsuit makes clear it was not satisfied with its PLA, which covered much of the construction on the eastern half of Hudson Yards. Its suit asserts that union workers inflated their hours to boost their pay and benefits and contractors allowed no-show jobs and failed to staff the work with the agreed-upon number of apprentices, using betterpaid union members in their place. It also alleges that safety procedures were disregarded. While LaBarbera has insisted on a new PLA that

BUCK ENNIS

BUILDING TENSION 2009 WITH LOCAL construction at a near standstill, union leaders agree to negotiate project labor agreements on a job-by-job basis, allowing developers to improve efficiency, avoid strikes and cut costs. One of the first projects to utilize a PLA is Forest City Ratner’s 8 Spruce St., a 76-story tower in Lower Manhattan that had stalled during the recession.

2011 AS THE REAL ESTATE market begins to recover, residential developers in Queens and Brooklyn increasingly turn to nonunion labor to build apartment projects. Thus begins a sharp decline in market share for union labor, mainly outside Manhattan.

2013 RELATED COS. SIGNS a PLA with the Building and Construction Trades Council for the first phase of Hudson Yards, which includes two office towers, a mall, apartments, a mixed-use tower and a cultural facility. The development creates 20,000 union jobs and pays in excess of $3 billion in wages over five years, a windfall for construction unions.

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WORKING WORDS BUILDING AND CONSTRUCTION TRADES COUNCIL OF GREATER NEW YORK A union umbrella group. The council—which is often colloquially called just Building Trades—speaks for its 15 member unions and often negotiates project labor agreements on their behalf. TRADE A union dedicated to a particular type of construction work. For example, the carpenters’ union works with wood, ironworkers handle structural steel, and operating engineers man cranes. COLLECTIVE BARGAINING AGREEMENT A contract between an employer and a union that lays out provisions including wages and benefits for a specified time period. In the city’s construction industry, CBAs are made between contractors and the various union trades. The wages and benefits apply to all projects and all contractors included in the agreement. PROJECT LABOR AGREEMENT A pact between a developer or contractor and a group of workers for a specified project. Typically PLAs are seen as a way to save developers money within an existing CBA, but many builders complain that they fail to cut expenses as promised. MERIT/OPEN SHOP Construction projects that employ both union and nonunion labor. Union members often take merit-shop work because there are not enough union-only jobs to keep them busy year-round.

will keep the project exclusively union for its second phase, Related wants leeway to choose which unions it hires in order to weed out the trades it can replace with cheaper nonunion labor. The developer is using such open-shop hiring for its 55 Hudson Yards project, a tower that it said is being built with more than 90% union labor. But LaBarbera sees open-shop hiring as a way to marginalize his group and divide and conquer its constituents, destroying the negotiating power they have as a unified bloc. According to Related’s lawsuit, LaBarbera has punished union leaders for stepping out of line, banishing from his group’s meetings the executive secretary and treasurer of the New York District Council of Carpenters. The carpenters’ purported crime: an independent deal with Related to work on the foundation of 50 Hudson Yards, a tower going up at West 33rd Street and 10th Avenue. The suit also alleges that LaBarbera pressured the plumbers union to back out of a prospective contract with Related. If a judge deems that to be un-

2015 DEVELOPER Michael Stern announces he will build a 1,400-foot condo tower on Billionaires’ Row without union labor, challenging unions’ hold on skyscraper projects and unleashing the wrath of Building and Construction Trades Council President Gary LaBarbera.

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lawful interference in Related’s business, LaBarbera would lose some of the levers of power he uses to corral trade unions—which have varying goals, desires and opinions about how to maintain their market share—into a cohesive bargaining group. Proving such a case, however, is not easy. Related will have to show that LaBarbera acted maliciously. “It requires proving that the interference involved dishonesty or some other bad-faith or improper conduct, as opposed to doing something for a legitimate business advantage,” said Jyotin Hamid, a partner at Debevoise & Plimpton and the chairman of the New York City Bar Association’s Labor and Employment Law Committee. For organized labor, the stakes could not be higher. The Hudson Yards job has netted its workers $3 billion in wages so far. Without another PLA for the second half of the job, union workers might have to accept lower wages and could lose segments of the job to nonunion competition. With solidarity crucial to its effort to take on

2017 LABARBERA’S GROUP secures a wage mandate in Affordable New York, the successor to 421-a as the city’s primary program to promote affordable housing via property-tax breaks on new construction.

WORK RULES A set of stipulations dictating what union members can and cannot do on a job. For instance, rules might require a painting crew to track down a union carpenter to hammer a single nail. Developers frequently complain that onerous work rules bog down projects and balloon costs, while unions maintain they are essential to ensure quality and safety. Work rules are the two sides’ main point of contention. — J.A.

­ elated, the trades council has dubbed its campaign R #CountMeIn. LaBarbera said the unions’ success, not their misconduct, spurred Related’s legal action. “This lawsuit is clearly retaliation for a movement that has built up in this city, called #CountMeIn, where rank-and-file members oppose open-shop and nonunion construction because it undermines their wages and benefits,” he said in a statement. Even if LaBarbera prevails in court and secures another PLA for Hudson Yards, many observers think the suit marks a significant shift in the construction industry. Related is one of the largest developers in the country and has historically worked closely with union labor. “Related has thrown down the gauntlet,” the Regional Plan Association’s Vitullo-Martin said. “Now what happens?” ■

2018 RELATED, led by Chairman Stephen Ross, seeks to choose which union trades it will employ in the second phase of Hudson Yards, defying LaBarbera’s demand that his group’s 15 labor unions negotiate as a bloc. Related sues the Building Trades and LaBarbera to give it leeway to use a mix of union and nonunion labor.

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