Court of Appeal Holds Prevailing Wage Law Does Not Apply to
Locally Funded Projects of Charter Cities

The California Court of Appeal recently held that on projects wholly financed by local funds, charter cities need not comply with California's Prevailing Wage Law.

In the case, State Building and Construction Trades Council of California, AFL-CIO v. City of Vista, the State Building and Construction Trades Council of California (AFL-CIO) sued the City of Vista in an attempt to secure a court order that the City was required to comply with California's prevailing wage law in the construction of several new capital improvements, including a new civic center, two fire stations, a sports park and a theater.

The court concluded that the prevailing wage law does not address matters of statewide concern and therefore the City of Vista, as a charter city, is not required to comply with the prevailing wage law on public works contracts that are financed solely from City revenues. Such contracts are municipal affairs over which the City has paramount power under article XI, section 5, subdivision (a) of the California Constitution.

In general, the prevailing wage law imposes several requirements on cities in public construction projects. For example, as an awarding body of a project, a city must obtain from the Director of the Department of Industrial Relations (DIR) the prevailing wage in its location for each craft, classification or type of worker needed to carry out a project (Labor Code section 1773). This information must be included in the call for bids, bid specifications and contract, or be available from the city's offices (Labor Code section 1773.2). Additionally, a city is required to take note of violations in the execution of a project (Labor Code section 1726) and is expected to assist the DIR's Department of Labor Standards Enforcement in actions to recover unpaid wages and penalties (Labor Code section 1775). Finally, before making payments to the contractor of money due under a contract, a city must withhold the amount required to satisfy a wage and penalty assessment issued by the Commissioner of the California Department of Labor (Labor Code section 1727).

However, under the State Building and Construction Trades Council of California, AFL-CIO decision, if a charter city is contracting to construct a public improvement project that is wholly financed by local funds, it need not comply with the prevailing wage law or any of these requirements. This is likely to result in substantial financial savings to charter cities on locally funded projects.