California imposes a prevailing wage law on employers who contract to provide services or construction work for public entities on public works projects of more than $1,000 (Labor Code sec. 1771). According to the California Department of Industrial Relations (DIR), the purpose of prevailing wage laws is to make sure that getting a public works contract is not based on paying lower wage rates than a competitor.
The DIR establishes the prevailing wage rate, which is derived from the hourly rate paid on public works projects to the majority of a particular craft’s workforce who are located within the locality or nearest labor market area. It is a combination of an hourly pay rate plus fringe benefits and is generally significantly higher than the minimum wage.
However, the California Supreme Court ruled that a charter city does not need to comply with state prevailing wage obligations (State Building and Construction Trades Council of California, AFL-CIO v. City of Vista, (7/2/12) ___ Cal.4th ___).
Vista, a charter city located in San Diego County, entered into contracts for the construction of public buildings. A federation of labor unions asserted that the city must comply with state prevailing wage law, despite local ordinances that stated the contractors on public works did not need to comply. The court agreed with the city that the projects constituted municipal affairs that could be governed by local ordinance.
The California Constitution provides that ordinances of charter cities supersede state law with respect to municipal affairs, but that state law prevails with respect to matters of statewide concern. The court held that 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 (that is, subject to state legislative control).”
Author: HR Watchdog, HRCalifornia’s Employment Law Blog, © California Chamber of Commerce