Contractors just got a lot of company under the California prevailing wage regulations. The newbies come courtesy of the state Supreme Court, which recently ruled that anybody providing services to special districts has to pay their employees involved in that work according to the requirements of Labor Code section 1720(a)(2). 

Those of us in the construction industry have deep knowledge of the prevailing wage statutes, but we must have missed the line that the Supreme Court used to determine the rules applied to special districts. While this decision doesn’t directly hit contracting, it will spur the California legislature to review the whole issue. As the Court noted in a concurring opinion, the only way to change the decision is to change the law. 

The case that was before the Court was Kaanaana v. Barrett Business Services, Inc. The case arose from the Los Angeles Sanitation District’s operation of a recycling and transfer facility as part of its refuse disposal system. Barrett Business Services, Inc. (Barrett) contracted with the District to provide belt sorters and operate the two facilities. Refuse would be deposited onto a conveyor belt system, and Barrett’s workers would sort the materials, removing nonrecyclables, clearing obstructions, and placing materials into containers. Barrett’s workers sued, asserting various claims, including demanding payment of prevailing wage for their work. 

The Court held that “Unlike the construction and installation provisions of section 1720(a)(1), the covered district provision defines public work, not in terms of the tasks performed but in terms of the governmental district for which it is done.”.

A Big Deal 

According to the State Controller’s office, there are 4,800 special districts throughout the state providing irrigation, water, park and recreation, cemetery, fire, police protection, library, utility, harbor, healthcare, community services districts and other tasks. In the 2018-19 fiscal year, they took $75.3 billion in taxes and fees and spent $71.7 billion, the Controller said in a March 30 special report.

Each has its coterie of companies that provide services for everything any business needs beyond construction. The range is impossibly broad, from advertising copywriters to window washers, as long as such work is arguably performed by “a laborer, worker, or mechanic” within the Court’s definition of those terms in the prevailing wage statutes.

As is usual for judicial rulings, lawyers and other “professionals” are exempt from the prevailing wage requirements, but that leaves thousands of other businesses, big and small, looking at a potentially significant increase in their personnel budgets.

By Garrett Francis, ECA President Email: [email protected]