Big California Cities Exempt From Prevailing-Pay Law

California charter cities don’t have to comply with a state law mandating payment of prevailing wages on municipal construction projects, the state Supreme Court ruled.

The state’s high court rejected 5 to 2 an appeal by the Building and Construction Trades Council of California AFL-CIO, comprising 131 local unions, aimed at forcing the city of Vista, near San Diego, to pay prevailing wages on city building projects.

The city argued state law doesn’t apply to charter cities, which have greater autonomy than general-law cities, according to the court.

The state’s 120 charter cities include the largest, such as Los Angeles, San Jose, San Francisco and San Diego, according to the League of California Cities.

The unions argued the prevailing-wage law is of statewide concern, giving the state primary legislative authority.

“The city responds that the matter is a municipal affair and therefore governed by its local ordinances,” Justice Joyce Kennard wrote for the majority. “We agree with the city.”

1931 Law

California enacted the state’s prevailing wage law in 1931 to require contractors on public works projects to pay “the general prevailing rate of per diem wages for work of a similar character in the locality,” according to the opinion.

The law was intended to prevent government contractors from undercutting the local labor market by importing cheap labor from other areas, according to the court.

Vista successfully argued that the law “invades Vista’s constitutionally guaranteed autonomy as a charter city.”

Vista voters approved a sales tax of 0.5 percent in 2006 for new fire stations, a civic center, a sports park and a city amphitheater, as well as seismic retrofits on firehouses.

In 2007, the city moved to become a charter city to give it the option of not paying prevailing wages on the projects and thus saving millions of dollars, according to the court.

Passed With 67%

City voters approved the plan by 67 percent of the votes cast. Under terms of the ordinance, Vista wouldn’t be required to pay prevailing wages unless compelled by the terms of a state or a federal grant, or unless the wage was specifically authorized by the city, according to the court.

The unions sued to force the city to comply with state law.

“We conclude that no statewide concern has been presented justifying the state’s regulation of the wages that charter cities require their contractors to pay to workers hired to construct locally funded public works,” Kennard wrote

In dissent, Justice Kathryn Werdegar called the majority’s approach to the case “neither fair nor reasonable.”

“By failing to appreciate the full impact of the prevailing-wage law, the majority significantly undervalues the statewide economic concerns the law addresses,” Werdegar wrote.

A union spokesman, Sandy Harrison, said the ruling was disappointing.

“We had hoped that the court would understand that the downward pressure on wages in an entire region resulting from cities exempting themselves from the prevailing wage is very much a matter of statewide concern,” Harrison said in a statement.

A charter city may establish any form of government, including a strong-mayor system, unlike a general-law city, which must be governed by a five-member city council.

Charter cities set their own election dates and rules, establish criteria for city office and aren’t required to comply with bidding statues, provided the charter exempts it. General- law cities must seek competitive bids for public contracts of more than $5,000, according to the League of California Cities.

The case is State Building and Construction Trades Council of California, AFL-CIO, v. City of Vista, S173586, California Supreme Court (San Francisco).

To contact the reporter on this story: Pamela MacLean in San Francisco at pmaclean@pacbell.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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