This guest post was authored by Randy Parent

State law requires payment of the general prevailing rate of wages to construction workers employed by contractors performing public works projects under contract with all public entities.  However, the California Supreme Court recently held that charter cities are exempt from this requirement.  (State Building and Construction Trades Council of California, AFL-CIO v. City of Vista (2012) 2012 WL 2508036.)

Prevailing wages are determined by the state on a regional basis for construction trade crafts.  They are defined as the wage rate paid to the largest number of workers in a particular classification.  This rate is usually negotiated by unions and union signatory contractors.  Prevailing wage law requires both union and non-union contractors to pay the same rate of wages to workers on public projects.

The voters of the general law City of Vista (“City”) approved a local tax to fund construction of several public buildings.  Following approval of the tax, the City Attorney recommended taking steps to become a charter city.  He asserted that a charter city would have the option not to pay prevailing wages, which could result in millions of dollars of savings.  Voters approved a ballot measure changing Vista to a charter city.

The City awarded contracts to design and build two fire stations.  The contracts did not require compliance with the state’s prevailing wage law.  A labor federation (“Union”) representing 300,000 California construction workers petitioned for a writ of mandate to direct the City to comply with the state’s prevailing wage law.

Under the California Constitution, ordinances of charter cities supersede state law with respect to “municipal affairs,” but state law is supreme on matters of “statewide concern.”  The court articulated a four-part test, with its holding resting on two of the factors:  (1) whether the City ordinance regulates a “municipal affair; and (2) whether the state law addressed a matter of “statewide concern.”

Under the first prong, the court concluded that the construction of a municipal facility financed with the city’s own funds involved a “municipal affair.”  The court’s ultimate determination rested on its analysis of the second prong.  The court accepted the Union’s arguments that prevailing wage law supports the promotion of regional labor standards and the proper training of construction apprentices, which the court found to constitute statewide concerns in the abstract.  The court reasoned that the State could expend State funds to support these purposes.  However, the court ruled that the State could not require a charter city to exercise its purchasing power in the construction market to support these State concerns while increasing the charter city’s costs.