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Supreme Court Exposes Special Districts to Prevailing Wages for All Contracted Work - Kaanaana v Barrett Business Services, Inc.

By Vanessa Gonzales posted 05-24-2021 11:35 AM

  

contruction.jpgBy Deborah Wilder, President, Contractor Compliance and Monitoring Inc.

 

The California Supreme Court recently ruled (March 29, 2021) that prevailing wages are not limited to just construction related projects when it comes to public utility, reclamation and other special districts. The Court essentially ruled that any contracts Special Districts entered into must be paid at prevailing wages.

This case involved the Los Angeles County Sanitation District No. 2 and their contract with Barrett Business Services to sort recycling and have other staff operate the Downey Area Recycling and Transfer Station and the Puente Hills Material Recovery Facility. None of the work performed by Barrett was construed as construction, maintenance or repair.

For the last 90 years, prevailing wage or public works projects have been limited to construction or construction related projects, including construction, repair, remodeling, alteration, maintenance, service work, emergency work and warranty work. Even though the California Department of Industrial Relations (DIR) has continued to define the work performed under Labor Code Section 1720 et seq as restricted to construction related work, the court ruled, Section 1720(a)(2) provides that prevailing wage includes “work done for irrigation, utility, reclamation, and improvement districts, and other districts of this type.” The court reasoned that the language in Labor Code Section 1720(a)(2) specifically referencing special districts was different than the language relating to other agencies engaged in “public works.” The court stated because this particular section of the code did not specifically call out construction and related work, that the Legislature had meant it to have a more expansive interpretation for special districts to include ALL work awarded by a public agency and paid for in whole or in part from public funds.

What this means is that all contracts between a special district and any contractor would be open to prevailing wages. This could mean financial services, computer maintenance, engineering consultants, janitorial work and more. Because there are not prevailing wage classifications published for non-construction work, special districts are in quite a quandary.

So, what is the solution? ACWA, CASA and CSDA are working toward a legislative correction. The DIR seems to be “studying the issue” and it is highly unlikely that a legislative fix will occur this year (or even next year).

In the meantime, there is a provision in the Labor Code and related regulations that allow an Awarding Agency to request a wage classification and wage rates from the Director of the DIR. The provision requires providing the DIR with 45 days’ notice before the Bid Date to issue a new prevailing wage classification and wage rate. While this may seem like a time-consuming process, the alternative is having the contractors classify their workers into one of the many construction trades in excess of $50 an hour. For example, most likely the workers sorting the recycling will be classified into the closest prevailing wage classification, likely Laborers with wages upwards of $55 an hour. A computer programmer may well be classified under the Electrician Inside Wireman trade in excess of $80 an hour. The only way to prevent that is to request a classification from the Director of the DIR of, for example, “computer service technician” and suggest a “scope of work” and “prevailing wage rate” commensurate with market rates. With no legislative solution in sight, special districts will have to choose between standing in line to get prevailing wage rates for all of their non-construction contracts or risking that the workers will be classified into one of the many construction classifications which already exist.

If you need more information on this topic or want our help in preparing a prevailing wage request to the DIR, please contact CCMI.

 

Deborah is a licensed attorney in Oregon and California and is the president of Contractor Compliance and Monitoring Inc., a prevailing wage consulting firm. Deborah is also the author or three books on the topic of California and federal prevailing wages. She can be contacted at dwilder@ccmilcp.com.

 


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