Hunt Ortmann is one of the foremost authorities on California construction law, contracts, dispute resolution and litigation offering additional legal services in the areas of business and commercial law, employment matters and labor law compliance, real estate, insurance and suretyship.
Three California Supreme Court rulings this year exposed the shortfalls of prevailing wage law. Current prevailing wage law, a collection of Labor Code statutes that govern employment on public works paid for in whole or in part with public funds, is in a state of disarray. In particular, Labor Code §1720 establishes what are “public works.” It lays out eight specific definitions. The most well-known definition is subsection (a)(1), which defines public works to include “construction, alteration, demolition, installation, or repair work” (specifically including inspection and land surveying, preconstruction, site assessment, post construction and cleanup work) done under contract and paid for with public funds. One other subsection includes, for example, all work done for irrigation, utility, reclamation, and improvement districts (discussed further below). For some time, the courts and Department of Industrial Relations (“DIR”) expanded those definitions to include many ancillary items. Because lawmakers chose to specifically identify what is included as a public work, the Court finds it cannot expand that definition to anything not specifically included.
The Great Depression prompted the need for laws designed to protect the fair wages of construction workers and fair competition of union and non-union companies. Since then, courts generally apply its principles liberally to achieve the desired impact. The new decisions label this overly generous interpretation as misinterpretation of prevailing wage laws. Part of this misreading by the lower courts and DIR included improperly expanding the meaning of Labor Code §1772, which states: “[w]orkers employed by contractors or subcontractors in the execution of any contract for public work are deemed to be employed upon public work.” Lower California courts since 1976 interpreted “in the execution of any contract” language of the statute to broadly include all “tasks that are an integrated aspect of the flow process of construction.” Last week’s Supreme Court rulings struck down those decades of expansion.
The California Supreme Court issued a series of rulings curbing the meaning of public works and putting the ball in the court of the Legislature to resolve apparent inconsistencies in the statutory language versus the intended purpose.
Mobilization Work is Not Covered By Prevailing Wage
In Mendoza v. Fonseca McElroy Grinding Co., Inc., union equipment operators sought payment of prevailing wage for offsite mobilization and transportation of heavy machinery to and from a public works construction site. It was undisputed that once onsite, the operator’s work entitled them to prevailing wages. The operators claimed that their offsite mobilization and transportation of equipment was performed “in execution of the public works contract” and it was therefore covered work based on Labor Code §1772 as work performed in furtherance of the public work.
The Court rejected the operators’ argument and found that §1772 was only enacted to confirm that subcontractors, and not just prime contractors, are subject to prevailing wage. Expansion beyond that, said the Supreme Court, was unwarranted. The Legislature had specifically enumerated what constituted covered work in Labor Code § 1720, and mobilization was not listed or otherwise seemingly contemplated. Whether or not it was a logical extension of prevailing wage policy was not for the Court to decide. Because mobilization is not called out as covered work by statute, it is not.
Work Performed on “Rolling Stock” Is Not Covered By Prevailing Wage
The Busker ruling, issued at the same time as Mendoza, also provides a black and white limitation on prevailing wage coverage. It is an illustration of the absurd results of implementing prevailing wage law as currently written. In this case, electricians that installed electrical components on Metrolink train cars and locomotives were found not to be entitled to prevailing wage. The project was publicly funded and done under a public contract. Construction work done on the wayside (land alongside rail tracks) was indisputably covered by prevailing wage. The rail car electricians that worked on the rail cars specifically, however, could not show that their work on rail cars, or “rolling stock,” was covered by prevailing wage. The court found evidence that, historically, all unaffixed work including work on boats, vehicles, and trains, was not considered covered work. The Court found no basis for the work to be subject to prevailing wage and denied the rail car electricians’ claims. As with Mendoza, the Busker Court could not ignore that the law specifically listed what are public works, and therefore the Court could not add to that definition without cause.
This remarkable opinion parsed the fine line of what are “public works,” noting twice that public works is a “term of art” defined specifically by Labor Code §1720. Busker also rejected the idea that “installation” of public works mentioned in Labor Code §1720 related to anything other than the installation of fixtures on land, noting that installation was defined in 2012 by the Legislature and DIR as assembly of office systems and bolting, securing, or mounting items to realty.
In both recent cases, the Supreme Court clung to the letter of the law. In Busker it disapproved of the notion that rail work was covered simply because it existed on a public works contract. In Mendoza it resisted the expansion of Labor Code §1772 beyond its express meaning, despite decades of precedent to the contrary. Two of the seven Supreme Court justices disagreed with the rulings, believing both Mendoza and Busker‘s work was covered under existing law. While the dissenting justices found the rulings did not align with the purpose of the law, the majority is still right in that these are issues for the Legislature, not the courts, to resolve.
All Work at Irrigation, Utility, Reclamation, Improvement Districts and Other Districts Of This Type Is Covered by Prevailing Wage
Mendoza and Busker are logical extensions of the California Supreme Court’s ruling earlier this year in the matter of Kaanaana v. Barrett Business Services, Inc., finding that refuse sorters at a County of Los Angeles sanitation district were entitled to prevailing wage. Again, the Court followed the Labor Code language specifically. Public works are defined to include “all [w]ork done for irrigation, utility, reclamation, and improvement districts, and other districts of this type.” Lab. Code, § 1720(a)(2). Overruling the lower courts, the Supreme Court said prevailing wage was not limited to construction projects. As written, the prevailing wage obligation for District work is completely separate and apart from construction. They are independent obligations enumerated entirely distinctly from one another in the code. The District “public work” obligation covered by Labor Code §1720 (a)(2) includes work for all districts of this type; and the kind of work is not limited in any way. “Public works” as its relates to construction is covered by Labor Code §1720 (a)(1) and defined apart from any definition of public works as it relates to work for Districts in Labor Code §1720 (a)(2).
The court understood its rulings may not comport with what the Legislature intended, but the Court cannot re-write the law when its words are clear. Understanding the problems with the statute, the Justices noted ” The Legislature can, if it sees fit, adjust the statutory definition to align with its current conception of the appropriate scope of the prevailing wage law.” But until it does so, the courts are duty-bound to address the laws as enacted.
The three 2021 Supreme Court rulings relating to prevailing wage send a clear message to the Legislature: the statutory scheme is illogical and unworkable as designed, leading to absurd results. The Court is correct in its view. Prevailing wage is a legal minefield for contractors with even the best intentions. The law’s present murkiness is not fair to either workers or contractors. All deserve to have a firm understanding of coverage before embarking upon work. Busker performed electrical work on a public works project and was not entitled to prevailing wage. The Kaanaana plaintiffs sorted garbage and were entitled to prevailing wage. Is this what the Legislature intended? Probably not. But it’s what Californians are going to get, unless and until prevailing wage legislation is fixed once and for all.
Emily Kromke is an accomplished construction litigator. For more than a decade Ms. Kromke has dedicated her practice to handling the broad needs of contractors, from navigating public bidding rules to filing mechanic’s lien claims.