California contractors were stunned in November 2008 when the Director of the Department of Industrial Relations (DIR) issued a determination that a specific contractor, Russ Will Mechanical, should have paid prevailing wages to its workers who fabricated HVAC parts in the company’s permanent off-site fabrication shop for a specific public works project. Russ Will Mechanical filed an administrative appeal of the determination.
Now, the DIR has granted the appeal and reversed the 2008 determination. Russ Will Mechanical did not have to pay prevailing wage to its workers in this specific case. This is excellent news for California contractors concerned about the cost and ambiguities of the original determination. See the decision at this link: DIR Decision on Administrative Appeal - Russ Will Mechanical .
In his May 3, 2010 decision, the DIR Director responded favorably to the argument that the DIR should interpret California prevailing wage law consistently with the federal prevailing wage law, known as the Davis-Bacon Act. According to the decision, California courts have relied on federal cases interpreting the Davis-Bacon Act when they have interpreted California prevailing wage law. As a result, interpretations of the state prevailing wage law are “in harmony” with federal prevailing wage law. When this approach is taken to the Russ Will Mechanical case, the conclusion is that the specific case of off-site fabrication at issue was not done in the execution of public works construction as defined under California law.
How Was ABC Involved in This Decision?
Throughout this three-year review process, ABC fought for an appropriate and clear interpretation of prevailing wage coverage of off-site fabrication. ABC of California submitted a letter to the DIR in June 2007 urging the Director not to require prevailing wage for the work targeted in the Russ Will Mechanical investigation. Also in June 2007, ABC of California skirmished with the DIR over an unsuccessful request for public documents that might reveal a union role in the case. In January 2009, ABC of California submitted a letter to the DIR Director asking him to withdraw his November 2008 determination and issue a stay on enforcement of certain ambiguous types of prevailing wage coverage. In April 2009, ABC of California submitted comments to DIR in opposition to the original determination. ABC of California is referenced in the May 3, 2010 decision to reverse the 2008 determination.
ABC of California was represented through its general counsel Robert Fried of Atkinson, Andelson, Loya, Ruud & Romo. ABC - California Cooperation Committee (ABC-CCC) and the ABC National Construction Legal Rights Foundation (CLRF) provided funding in the effort to clarify prevailing wage coverage for off-site fabrication.
Warning for the Future
It is possible that the Sheet Metal Workers International Union Local No. 104, which accused Russ Will Mechanical of evading prevailing wage law, will take legal action to block the reversal of the determination. ABC will keep you informed of the latest developments.
In the meantime, contractors should be aware that a new Governor who is friendly to union special interests could reinterpret the law to again require contractors to pay prevailing wage on off-site fabrication. In March 2003, Governor Gray Davis’ Acting Director of the Department of Industrial Relations (DIR) Chuck Cake (a former IBEW official) used two prevailing wage coverage determinations to expand prevailing wage coverage to off-site fabrication. After an outcry from business groups throughout California, the DIR suspended the determinations. Ultimately the recall happened and the Schwarzenegger Administration permanently withdrew the determinations in May 2004.