In State Building and Construction Trades Council of California, AFL-CIO v. City of Vista, (— Cal.Rptr.3d —, Cal.App. 4 Dist., April 28, 2009), a California Court of Appeal considered the issue of whether a charter city is required to comply with the prevailing wage law in the construction of public works projects. The Court of Appeal held that a charter city does not have to comply with the prevailing wage law for public works contracts financed solely with city revenues because “such contracts are municipal affairs over which [the charter city] has paramount power under article XI, section 5, subdivision (a) of the California Constitution.”
The City of Vista ("Vista") became a charter city after its voters approved a ballot measure in June 2007 to adopt a city charter. At the time the measure was adopted, Vista was planning to construct a new civic center, two fire stations, a sports park, and a stage house. Prior to the vote on the measure, Vista's city attorney had advised the city council that the cost of construction for these projects would be approximately $100 million, but payment of prevailing wages would add millions of dollars to the construction costs. The attorney had informed the city council that the cost of prevailing wages would not be incurred if Vista would choose to become a charter city. The city council advocated a vote in favor of the ballot measure by informing the public if voters passed the ballot measure and Vista became a charter city, it would be able to choose "when and if it pays 'prevailing wages'" on public works construction contracts. The ballot measure was approved by voters and Vista became a charter city.
Vista passed an ordinance which provides that no city contract shall require the city to pay prevailing wages unless such payment is legally required pursuant to federal or state law; the project is considered by "City Council not to be a municipal affair," or the payment is authorized by a City Council resolution. Vista proceeded with its planned projects.
State Building and Construction Trades Council of California, AFL-CIO, ("Trades Council") filed suit against Vista asking the trial court to issue an order directing Vista to comply with the prevailing wage law for the contemplated projects and to issue a declaration that Vista is "obligated to comply with California's prevailing wage law notwithstanding . . . Vista's recent adoption of a charter." Trades Council further sought an order that Vista's ordinance addressing the prevailing wage law is invalid. The trial court found that Vista was not required to comply with the prevailing wage law and denied Trades Council's the relief it requested by its complaint.
The Court of Appeal affirmed the trial court’s ruling and held that the prevailing wage law “does not address matters of statewide concern and therefore Vista, as a charter city, is not required to comply [with the prevailing wage law] with respect to public works contracts which are financed solely from city revenues.” The court concluded that contracts financed solely from city revenues “are municipal affairs over which Vista has paramount power under article XI, section 5, subdivision (a) of the California Constitution.”
Article XI, section 5 of the California Constitution provides, in part, that “[c]ity charters adopted pursuant to this Constitution shall supersede any existing charter, and with respect to municipal affairs shall supersede all laws inconsistent therewith.” The powers established by section 5 are often referred to as the “home rule” powers.
When a charter city’s local laws conflict with state law, a court is to consider “whether the state law qualifies as a matter of ‘statewide concern,’” thus potentially overriding the local charter city law. If the state law is not one of statewide concern, “the conflicting city measure is a ‘municipal affair’ and ‘beyond the reach of [state] legislative enactment.’” If the state law is a matter of statewide concern, the court must then “consider whether it is both reasonably related to the resolution of that concern, and . . . narrowly tailored to limit incursion into legitimate municipal interests.” If a court does in fact invalidate a charter city measure in favor of the conflicting state statute, it does not necessarily mean that the subject matter of the measure is not appropriate for the city to regulate. Instead, it means “that under the historical circumstance presented, the state has a more substantial interest in the subject than the charter city.”
The court considered the history of the prevailing wage law and concluded that the purpose of the prevailing wage law “is to ensure that contractors who enter into collective bargaining agreements can compete for public works contracts.” The law was not enacted to protect all state workers, but to protect “local craftsmen who were losing work to contractors who recruited labor from distant cheap-labor areas.” Private construction contracts that do not involve the expenditure of public funds are not subject to the prevailing wage law. The protection provided by the prevailing wage law “is plainly not so vital a part of the state’s overall goal of protecting the state’s workers that it applies generally to all construction contracts.”
The court also looked to previous California case law, which held that the prevailing wage law is not a matter of statewide concern and that a charter city was not subject to the prevailing wage law. The court found that a review of the case law shows that the prevailing wage law “does not touch upon matters of statewide concern sufficient to outweigh the power of charter cities over their municipal affairs.”
The court noted that Vista’s attempt to avoid application of the prevailing wage law is in direct conflict with the prevailing wage law. However, it found that the limitations and exceptions in the prevailing wage law persuade the court “that municipal works projects do not have such an extramural dimension as would warrant legislative intervention in an otherwise strictly municipal affair.” The court concluded that in light of the “home rule” powers under article XI, section 5, subdivision (a), and in light of the manner in which the prevailing wage law operates, “charter cities, not the Legislature, retain the power to determine whether the statute’s provisions will govern their public works contracts.”
While the case arose in the context of projects which are traditional city public works projects, such as a civic center financed solely with city funds, the case has broader implications for local financial assistance of projects by charter cities. Under the decision, it would seem that a charter city would more comfortably be able to provide financial subsidies or assistance to many otherwise private projects without triggering prevailing wage laws, as long as the subsidies come solely from city funds, and not other sources such as state or local funding. This is so because purely private projects are not subject to the prevailing wage law, and, under the rationale of the decision, financial assistance solely from charter city revenues should not transform an otherwise private project into a project requiring the payment of prevailing wages.
A cautionary note is in order. The prevailing wage law remains a very fluid and ever-changing area, and subtle differences in facts between projects can result in significantly different conclusions. Therefore, we recommend that you always consult your legal counsel as to any particular project or circumstance. Additionally, the Vista decision is from the Court of Appeal, an intermediate appellate court, and we expect that the parties will seek review of the decision by the California Supreme Court. The Supreme Court has discretion to accept or decline a request to review the case. Should the case be accepted for review by the Supreme Court, the Court of Appeal decision would be superseded pending the Supreme Court’s decision.
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