In Plumbers and Steamfitters Local 290 v. Duncan, (– Cal.Rptr.3d —, 2007 WL 4303802, Cal.App. 1 Dist., Dec. 11, 2007), a California Court of Appeal considered whether renovations to the shell of a building in which a county leases 63 percent of the assignable space constitute a public project and are, therefore, subject to the prevailing wage law. The Court of Appeal held that the renovation project is a public project that is subject to the prevailing wage law.
Facts
Kramer Properties, Inc. (“Kramer”) purchased a professional building in Eureka, California. Kramer then leased to Humboldt County (“County”) 63 percent of the square footage in the building. County agreed to pay Kramer $1.79 per square foot with 30 cents of that amount being earmarked for compliance with the prevailing wage law. The lease provides that Kramer agrees that all work to be performed on the building at County’s request must be performed in accordance with the prevailing wage law. The improvement agreement between Kramer and County requires Kramer to construct, at its cost, improvements required to the utility services to the building. The improvement agreement further requires that Kramer make certain improvements to County occupied space within the building such as installing general plumbing, drains and water coolers.
Kramer entered into two separate agreements with Cruz Plumbing Inc. (“Cruz”) to perform plumbing work. One contract, referred to as the “tenant improvement contract,” was for plumbing work within the office space occupied by County. The other contract, referred to as the “shell improvement contract,” was for plumbing work for the improvements to the building. Cruz paid prevailing wages for the work performed under the tenant improvement contract but did not pay prevailing wages under the shell improvement contract.
Plumbers and Steamfitters, Local 290 (“Local 290”) requested that the California Department of Industrial Relations (“Department”) issue a public works coverage determination. Department initially found that Cruz was required to pay prevailing wages for work done under the shell improvement contract. This decision, however, was reversed on administrative appeal. Local 290 filed a lawsuit against Department seeking to reverse its decision. The trial court did in fact reverse Department’s decision and awarded attorney fees to Local 290. Department appealed the trial court’s decision.
Decision
The Court of Appeal held that the shell improvement contract was subject to the prevailing wage law. The prevailing wage law, found at Labor Code section 1720 et seq., requires that workers who are employed on public works contracts must be paid an amount “not less than the general prevailing rate of per diem wages for work of a similar character in the locality in which the public work is performed.” The law’s purpose is “to protect and benefit employees on public works projects.” The definition of “public works” under Labor Code section 1720.2, includes construction work done under private contract if: (1) The “contract is between private persons,” (2) the property is privately owned, but after the projected is completed, “more than 50 percent of the assignable square feet” will be leased to a political subdivision, and (3) either the lease agreement was entered into prior to the construction contract, or the work is being done according to plans supplied by the state or political subdivision and the lease is entered into during or upon completion of the construction work.
Department argued that the plumbing work performed under the shell construction contract was not a public work within the meaning of section 1720.2 because that section only applies to new construction and not to renovation of an existing building. The court rejected this argument finding no basis to differentiate between a newly constructed building which was built to be leased to a public entity and a building which is renovated for the same purpose. The court also rejected Department’s argument that the language in section 1720.2 which refers to “any construction work” should be limited to that work done in the areas actually leased by County. The plumbing work under the shell construction contract is essential to the operation of the internal plumbing, including the plumbing in the areas leased by County. The court affirmed the trial court’s order in which it compelled the Department to vacate its decision that the shell construction contract is not a new public work within the meaning of section 1720.2.
Additionally, the court upheld the trial court’s order awarding attorney fees to Local 290 under Code of Civil Procedure section 1021.5. Department was a losing party, it was responsible for initiating and maintaining the policy decision at issue here, and it issued a policy determination that was set aside. The court found that Local 290 was enforcing an important right affecting the public interest and the financial burden of the litigation was disproportionately placed on Local 290. Therefore, the attorney fee award was proper.