California Supreme Court Narrows Coverage of Prevailing Wage Law

08.31.2021

The Supreme Court clarified that the statutory definition of "public work" generally is limited to work on fixed structures and land, and not rolling stock. Separately, the Supreme Court held “public work” must be expressly defined under the Labor Code.

On August 16, 2021, the California Supreme Court decided a pair of cases addressing California's prevailing wage law—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. The cases are important to the construction industry companies engaged in public works, and construction unions.

In Mendoza, the Court addressed whether prevailing wages must be paid for mobilization (e.g., work transporting heavy machinery to and from a public works site). The plaintiff employees in Mendoza did not contend that their work was a "public work" under Labor Code 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 rejected that reading, concluding that section 1772 did not enlarge coverage beyond that delineated by the coverage sections of the Labor Code including section 1720 (“. . . construction, alteration, demolition, installation, or repair…”) but simply confirms that the law extends to employees employed by contractors or subcontractors. In reaching that conclusion, the Court abrogated prior judicial 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 sections 1720 through 1743. We can now expect more litigation and “new “interpretations by Department of Industrial Relations (DIR) as to the meaning of terms such as “preconstruction,” “repair” and “maintenance.”

For example, while the Mendoza Court made clear that section 1772 does not itself make mobilization a public work for which prevailing wages must be paid, it expressly did not address whether certain types of mobilization efforts might fall within the scope of the categories of "public works" as defined in section 1720 (e.g., "preconstruction," "[s]treet improvement work," etc.). This issue will undoubtedly be addressed legislatively or in subsequent court decisions. It does reverse years of precedent by the DIR to cover certain types of work including travel time and yard time.

In Busker, the Court addressed whether publicly funded work performed on rolling stock, such as a train, is a covered "public work." Wabtec, an equipment and services company, hired the plaintiff to perform work on rail cars as part of a broader project to prevent train collisions. The plaintiff was not paid prevailing wages. Other workers, not employed by Wabtec, were used for installing equipment in the railyard itself and were paid prevailing wages.

On a certified question from the Ninth Circuit, the California Supreme Court held that the plaintiff's work was not on a public work and therefore the prevailing wage law did not apply to the plaintiff. Defined in Labor Code section 1720(a), "public work" includes "construction" and "installation." Examining the statutory context, and dictionary definitions, the Court concluded that those terms referred to work performed on fixed structures (like buildings, roads, and dams) but not work on rolling stock. The statute's coverage provisions have been amended many times, the Court observed, but never to embrace work on rolling stock. The Court also noted that the DIR has consistently excluded rolling stock from coverage.

The Court also rejected the plaintiff's reliance on section 1772, which, as the Court explained in Mendoza, does not expand the definition of "public works."

Earlier this year, the Court held in Kaanaana v. Barrett Business Services, Inc., 11 Cal. 5th 158, 165 (2021), that the law applies to work done for special government districts, even if not traditional construction work on fixed structures. These latest decisions rejecting the plaintiffs' effort to expand coverage show that Kaanaana was a narrow ruling based on a specific statutory provision. Beyond such special situations, the Court has now reaffirmed that the traditional definition of a "public work" is the governing definition that triggers the obligation to pay prevailing wages.