By Kerry Shapiro
Last week, the California Supreme Court handed down an important decision on prevailing wage law favorable to industry. On August 16, 2021, the California Supreme Court issued its decision in Mendoza v. Fonseca McElroy Grinding Co., Inc. S253574, answering the question whether prevailing wage must be paid for mobilization work, which involved transporting heavy machinery to and from a public works site under Labor Code section 1772. The Court held that section 1772 does not expand the categories of public work that trigger obligation to pay at least the prevailing wage and that under this theory, prevailing wage did not need to be paid for mobilization work. In so far as there may be some other statutory basis for compensating mobilization and travel time at the prevailing rate, those issues were beyond the scope of the Court’s decision. The Court’s decision is consistent with the positions argued in the case by Fonseca, and by JMBM client California Construction and Industrial Materials Association (“CalCIMA”), which had filed an Amicus Brief in support of Fonseca.
The Court reached its decision contrary to several decisions over the past 15 years in lower courts and the Department of Industrial Relations (“DIR”), and represents a major victory for industry by rejecting an attempt to balloon the coverage of prevailing wage law under Labor Code section 1772.
To read more about the Supreme Court’s ruling, a copy of the Decision is available here. CalCIMA’s Amicus Brief, prepared by JMBM in support of defendant Fonseca is available here.
California’s Labor Code requires that certain kinds of jobs performed on a public works project be compensated at a per diem rate no less than the prevailing wage paid in the area where the work is done. (Labor Code section 1771). The Labor Code delineates with specificity the kinds of “public work” covered by the prevailing wage statutes. (See Labor Code sections 1720-1720.9).
After a thorough analysis of the statute and legislative history, the California Supreme Court found nothing in the language of section 1772 indicates it was intended to expand the categories of public work covered by prevailing wage law. Instead it was meant to define the types of workers entitled to the law’s protection when employed by contractors, not the types of work which were defined elsewhere in the statute. Thus, unless mobilization qualifies as a public work itself, the employer has no obligation to pay prevailing wage to those who perform it.
A number of lower courts had previously concluded that section 1772 applies to tasks that are “an integrated aspect of the ‘flow’ process of construction.” These conclusions were made without true analysis of the legislative history or statutory language. As a result, controversy arose as to just what it meant for labor to be integrated into the ‘flow’ process of construction and so to qualify as part of the “execution of a contract for public work.” The Court concluded that to the extent coverage is premised upon whether an activity is integrated into the flow process of construction, the approach ignores the carefully crafted definitions of public work contained in prevailing wage law. Moreover it is not entirely clear what it means for an activity to be “integrated” into construction or other defined public work.
Notably, the Court was careful to limit the scope of the decision. First, the plaintiff did not contend that mobilization qualified as defined “public work.” As a result, the Court did not consider this argument as to whether mobilization might be considered public work under another theory. The Court also cautioned that it had no view as to whether many of the prior decisions addressing whether an employer is a subcontractor as opposed to bona fide material supplier within the meaning of the prevailing wage law were still valid.
Although the Supreme Court’s holding is narrow and certainly leaves some important questions unanswered, public works employers should celebrate the Court’s rejection of attempts to expand public works beyond those activities defined in the statute.
Kerry Shapiro chairs the Natural Resources & Mining Practice Group at Jeffer Mangels Butler & Mitchell LLP. He has represented the mining, construction and building materials industries on mineral extraction and land development projects for more than 25 years. Kerry also serves as General Counsel to the California Construction and Industrial Materials Association (CalCIMA). Contact Kerry at KShapiro@jmbm.com.
JMBM’s Natural Resources & Mining Law Group
Jeffer Mangels Butler & Mitchell LLP has one of California’s leading natural resources and mining law practice groups. The group is comprised of lawyers with over 25 years of practice in law firms, government, and consulting, and provides companies and trade associations with unparalleled counseling, compliance, and litigation services in nearly every area of federal and California natural resources and mining law.