California Supreme Court Issues Two Rulings on Prevailing Wage Cases
On August 16th, the California Supreme Court issued rulings on two potential prevailing wage cases. The Court determined that for both the work performed was not subject to California prevailing wages. Busker v. Wabtec Corporation (No. S251135) and Mendoza v. Fonseca McElroy Grinding Co., Inc. (No. S253574). The Court rejected in both cases the plaintiff employees' reading of the law that would have significantly expanded the kinds of work for which prevailing wages must be paid.
Busker involved a subcontractor (Wabtec) which was to upgrade railcars for Metrolink. In 2015, the DLSE issued a civil wage and penalty assessment of $6,468,564 against Wabtec for failure to pay prevailing wages. Wabtec requested review by the Labor Commissioner, arguing that the prevailing wage law does not apply to the onboard work because the law covers only work performed on real property, not “rolling stock” like locomotives and buses. After review, the DLSE vacated the assessment and took no further action. A number of workers then filed a class action suit against Wabtec, claiming that prevailing wages should have been paid. The California Supreme Court disagreed and found in favor of Wabtec that the “rolling stock” train cars did not fall within the definition of prevailing wage coverage, in part because the train cars were not affixed to Metrolink’s property. Work performed in Metrolink’s yard relating to signals and rail and other items affixed to the property did trigger prevailing wage and Wabtec had properly paid prevailing wages in that instance.
Mendoza involved mobilization; the offsite preparation, loading and delivery of equipment to a project as part of the mobilization on a new project site. While work on the site itself is covered by prevailing wages, the preparatory work conducted in the contractor’s yard, the loading of equipment and the delivery of that to the jobsite was not covered by prevailing wage as that work was performed “offsite” and offsite work is not subject to California prevailing wages.
The plaintiff employees in Mendoza did not contend that their work was a "public work" under section 1720; they argued only that, under section 1772, their work was covered because it was performed "in the execution" of a public works contract.
The Court concluded that section 1772 did not enlarge coverage beyond that delineated by section 1720. In reaching that conclusion, the Court abrogated lower-court decisions that had adopted a multifactor test for determining whether work ancillary to a construction project, such as hauling or off-site fabrication, falls within the statute under section 1772. Now, prevailing wages must be paid for such work only if it falls within one of the categories of covered work specified in section 1720. Please note that on site preparatory work would remain covered by prevailing wages.
Many thanks to Jones Day and Hanson Bridgett who both wrote exceptional articles on these two cases and we incorporated a few of their comments.