California's prevailing wage law generally requires that workers employed on public works projects be paid the local prevailing wage for work of a similar character. In Sheet Metal Workers' International Association, Local 104 v. Duncan (August 27, 2014, A131489) ___Cal.App.4th___, the Court of Appeal held that an employee of a subcontractor is not covered by prevailing wage law when the worker fabricates materials for a public works project at a permanent, offsite manufacturing facility that is not exclusively dedicated to the project.
In 2005, a contractor entered into a public works contract with a community college district to modernize an administration building. Russ Will Mechanical Inc., ("Russ Will") was the subcontractor responsible for the heating, ventilation, and air conditioning. The subcontract provided that the project was subject to prevailing wage requirements.
Steve Neves, an employee of Russ Will at the company's permanent offsite fabrication facility, filed a complaint with the Department of Industrial Relations ("DIR") alleging that he should have been paid prevailing wages for work related to the project. At the offsite fabrication facility, Neves fabricated ductwork and other materials for the project. Although some portion of the work was custom fabricated for the project, a great deal of the materials produced by Neves for the project was industry standard and available for sale in industry catalogues.
DIR issued a determination in which it concluded that Russ Will was required to pay prevailing wages for the offsite fabrication work associated with the project. DIR reasoned that because Russ Will did not sell supplies to the general public, it was properly characterized as a subcontractor under Labor Code section 1722 and was not except from prevailing wage law. Russ Will filed an administrative appeal.
In its decision on administrative appeal, DIR reversed its initial determination. DIR noted that California law did not squarely address the matter at hand, and thus DIR interpreted the law consistent with federal regulations interpreting federal prevailing wage law. A sheet metal union filed a petition for administrative mandate in Superior Court.
The Superior Court reversed DIR's determination on administrative appeal, holding that DIR improperly relied on federal law. Russ Will filed an appeal.
The Court of Appeal ("Court") reversed the Superior Court's decision, holding that offsite fabrication "is not covered by the prevailing wage law if it takes place at a permanent, offsite manufacturing facility and the location and existence of the facility is determined wholly without regard to the particular public works project." The Court noted that the Labor Code and case law did not squarely address this issue but that federal prevailing wage law can provide guidance to interpret analogous provisions within the Labor Code. Furthermore, the Court found that, notwithstanding DIR's initial determination in this case, DIR's determinations "establish a consistent pattern of exempting fabrication work at permanent, offsite facilities" because such facilities are more like material suppliers (which are not covered by prevailing wage law) than onsite construction workers (which are covered by prevailing wage law).
What This Means To You
This case provides clarity on a narrow, but important, issue regarding the application of California's prevailing wage law to work performed by subcontractors who fabricate project materials offsite. If you have any questions concerning this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.