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Supreme Court Rules that Charter Cities may not have to pay Prevailing Wages

On Monday, July 2, 2012, the California Supreme Court clarified that Charter Cities may exempt themselves from paying prevailing wages on public works projects where the projects are funded with local dollars.  The long anticipated case, State Building and Constructions Trades Council of California, AFL-CIO v. City of Vista, held that the ordinances of charter cities supersede state law with respect to “municipal affairs.”  The majority opined that the construction of a city-operated facility for the benefit of a city’s inhabitants is “quintessentially a municipal affair, as is the control over the expenditure of a city’s own funds.”

The City of Vista, a Charter City, adopted an ordinance to prohibit any city contract from requiring payment of prevailing wages unless (a) such payment is compelled by the terms of a state or a federal grant, (b) the contract does not involve a municipal affair, or (c) payment of the prevailing wage is separately authorized by the city council.  The State Building and Construction Trades Council of California, AFL-CIO, a federation composed of 131 local unions, 16 district labor councils, and 22 local building trades’ councils, challenged the application of the ordinance through a writ of mandate, asserting that prevailing wage laws are a statewide concern; especially given the regional nature of the construction industry.  The trial court and the Court of Appeals upheld Vista’s ordinance.  In a 5-2 decision, the Supreme Court reaffirmed that the wage levels of contract workers constructing locally funded public works are a municipal affair that is exempt from state regulation and that these wage levels are not a statewide concern subject to state legislative control

The Court’s ruling is profound and may affect the public contract and construction practices of the 120 California Charter Cities.  Interestingly, State law still requires state agencies and the other 300 general law cities to pay prevailing wages in contracts paid for with local funds.  The California Department of Industrial Relations generally sets those rates based on a survey of union agreements throughout the state.