Prevailing Wages Don’t Prevail in Charter Cities
July 2012
On July 2, 2012, the California Supreme Court issued its decision in State Building and Construction Trades Council of California, AFL-CIO v. City of Vista. The issue in the case was whether a charter city in California must follow state prevailing-wage law where the charter city is using local funds to construct buildings within the city. The Court decided that where a charter city uses local funds to perform a work of improvement, the charter city is not required to follow state law regarding prevailing wages.
To understand the Court’s decision, we must first have a working knowledge of the two types of California cities. California cities are classified as either “general law cities,” (where various “general” provisions of California law describe the procedures for governing the city) and “charter cities” (where the city is organized under a charter and is permitted to set its own municipal governance rules). The distinction is important in this case because general law cities must follow state laws relating to contracting—i.e., like the prevailing wage law. Charter Cities, however, do not necessarily have the same restriction unless they have passed an ordinance committing to follow California law.
Important for those in the construction world is that virtually all of the biggest cities in California performing the biggest municipal construction contracts are also charter cities. A list of California charter cities can be found at: http://tinyurl.com/6q6rxxx. Thus, the Supreme Court decision could have a significant impact on some of the larger municipal contracts.
Unfortunately, the analysis does not end at whether a city is charter or general law, for even charter cities may choose to follow prevailing-wage laws. In short, instead of charter cities automatically having to follow prevailing wage laws for construction projects, the California Supreme Court’s decision leaves the decision up to the charter city. So for any particular project, you will have to find out if the charter city separately requires prevailing-wage compliance.
Further, the project in question must be funded by “local funds.” In the City of Vista case, the funding came from a local sales tax to pay for two fire stations, and the court limited its decision to locally funded projects. Therefore, the decision is not applicable to projects involving State or Federal funding.
The ramifications of the decision will not be fully felt for some time. Some charter cities may hurry to pass resolutions exempting their locally funded projects from prevailing wage in an effort to save construction costs. Other charter cities may pass ordinances to make prevailing-wage the law of the charter city for political reasons. A strong political push from various interest groups, including the AFL-CIO and other unions, to encourage charter cities to pass laws adopting prevailing wage laws is likely.
© 2012 All rights reserved. Please note that the information contained herein is not intended to provide specific legal advice. You should consult with an attorney and not rely on any information contained herein regarding your specific situation.