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For Builders, Trump Apprenticeship Rule Exposes a House Divided

March 12, 2020, 2:43 PM

The final rule the Labor Department released this week to launch a new apprenticeship model has exposed a rift within the construction industry that could prompt a legal challenge from the sector’s nonunion wing.

A regulation to establish Industry-Recognized Apprenticeship Programs, the Trump administration’s effort to develop an industry-focused model geared toward sectors like health care and information technology, bars construction companies from participating. That was intended to preserve longtime partnerships between builders and trade unions under the DOL’s registered apprenticeship system, a separate model that has been in place for more than eight decades.

But the rule ignored the natural fault line among builders.

“The problem or the benefit, depending on your point of view, is that those” registered apprenticeship programs managed jointly by builders and building trades unions “really are limited to the commercial and industrial construction portion of our industry,” said Randolph Ruff, an attorney who heads the construction practice group at management-side law firm Ogletree Deakins. “They typically don’t include home builders and they typically don’t exist in the nonunionized areas of the country.”

“So what this exclusion is going to do,” he added, “is it is going to basically eliminate an opportunity for the nonunionized sectors, as well as the home-building sectors, to create apprenticeship programs, to train apprentices to go into those portions of the industry.”

Building trades unions, along with specialty construction employer associations that have close relationships with organized labor, lobbied aggressively to ban the industry from the IRAP system. Unions were worried that, absent the exemption, construction companies would have had a pathway to train workers without union involvement and without the rigorous wage and safety standards in the existing apprenticeship programs. They argued that nonunion companies could then use their lower-wage apprentices to undercut union builders on contract bids, putting the labor movement’s foothold in the industry at risk.

Lawsuit Looming

The construction exemption could be grounds for a lawsuit under the Administrative Procedure Act, challenging DOL’s authority to create new opportunities that not all companies can take part in, according to multiple sources closely monitoring the IRAPs rule who were granted anonymity to discuss the matter freely. The department seems to have factored in the possibility of litigation, because the final rule includes a severability clause, stating that a court ruling to invalidate one aspect of the rule wouldn’t vacate the remainder of the regulation.

Some construction industry and workforce development sources told Bloomberg Law they think it is a distinct possibility that a legal challenge is filed to lift the exemption. Several sources, granted anonymity to speak candidly, identified the Associated Builders and Contractors, an influential nonunion trade group, as a potential plaintiff. The National Association of Home Builders, which advocates for the predominantly nonunionized residential construction sector, also came up as a possible co-plaintiff.

Representatives of both groups renounced the administration for failing to include builders, but declined to say whether they were considering a lawsuit.

“We are currently reviewing the final rule,” NAHB spokeswoman Liz Thompson said when asked about the prospect of suing the administration. ABC spokeswoman Rachel O’Grady, when asked the same question, said, “We’re going to pass on the opportunity to answer that question right now.”

ABC is represented by outside counsel Maury Baskin, of management-side law firm Littler Mendelson, who made a name for himself during the Obama administration for successfully challenging DOL regulations in court. That includes persuading judges to strike down regulations to significantly expand overtime pay requirements and require federal contractors to disclose labor and employment law violations when bidding on government work.

The Labor Department declined to comment on the possibility of litigation.

Mixed Reactions

Litigation over the apprenticeship rule could alter the politics surrounding the IRAP initiative, one of the White House’s top workplace policy priorities. Congress has not provided funding for the program, and the question of whether to include IRAPs in a potential bill to reauthorize the main law governing apprenticeships has sparked debate between Republicans and Democrats.

The IRAP regulation shifts oversight and credentialing authority to industry groups and allows employers to exert more control over identifying the skills and standards that best serve their industries.

Lawsuit or not, the exemption from IRAPs has prompted some construction industry advocates who align on other issues with the Associated Builders and Contractors to pursue their own interests.

The IRAP plan is more complicated for the Associated General Contractors, a trade group that sometimes collaborates with ABC, because it represents both unionized and nonunion companies. The group wants the White House to go back to the drawing board to design a new program specifically to address what it says are construction workforce shortages.

“Litigation won’t solve the fact that IRAPs won’t actually help, the way they’re currently structured,” said Brian Turmail, AGC’s vice president of public affairs.

Other building groups such as the National Electrical Contractors Association and the Mechanical Contractors Association of America, are happy to be carved out of the new IRAPs system.

For NECA, the message is simple: thanks for leaving us alone.

“We’re very pleased at the results of the final rule. We think the administration made the right decision in exempting the construction industry from applying for IRAPs,” said Marco Giamberardino, NECA’s vice president for government and public affairs. “We have an 80 year history of doing this and doing it very well.”

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; John Lauinger at jlauinger@bloomberglaw.com

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