Construction company executives, owners and employees who work on publicly funded construction projects should have a general understanding of prevailing wage laws, which include the Davis-Bacon Act of 1931 as well as those adopted by 26 states (often referred to as “Little Davis-Bacon” laws). States that have prevailing wage laws generally set their prevailing wage through surveys of local wages and collective bargaining agreements while some simply refer to the federal prevailing wage for their area. States vary in the threshold dollar amounts needed to implicate coverage of the prevailing wage law. In addition, some cities have enacted their own prevailing wage laws.

Critics of prevailing wage laws argue that the laws artificially raise wages, decrease competition, boost union power and negatively impact low-skill workers while proponents argue that the laws result in more local jobs, strengthen the economy and lead to better work quality. In recent years California has expanded its definition of public works to extend to additional occupations including the inclusion of ready-mix concrete delivery drivers in 2015 and tree removal work in 2017.

On Sept. 20, 2018, the 9th Circuit Court of Appeals in Allied Concrete and Supply Co. v. Baker upheld the 2015 amendment to California’s prevailing wage law that added delivery drivers of ready-mix concrete to the occupations covered by the statute.

Background

Generally, California’s prevailing wage law defines public works as “construction, alteration, demolition, installation or repair work done under contract and paid for in whole or in part out of public funds” and establishes the minimum wage that employees must receive on public works projects. The Department of Industrial Relations is tasked with determining the general prevailing rate of per diem wages in accordance with the standards set forth in the state’s labor code. In 2015, California legislators added a new labor code to its prevailing wage law. The change, effective July 1, 2016, meant ready-mix concrete delivery drivers were covered under the minimum wage requirement. Although an earlier version of the legislation included asphalt delivery drivers, the final version was limited only to ready-mix concrete drivers. The law defines ready-mixed concrete as “concrete that is manufactured in a factory or a batching plant, according to a set recipe, and then delivered in a liquefied state by mixer truck for immediate incorporation into a project.”

Amendment is Challenged

Following the amendment’s passage, a group of ready-mix concrete suppliers filed a lawsuit in U.S. District Court alleging, among other things, that the new labor code violated the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution. The district court agreed with the suppliers, finding that the law lacked a rational basis since “there were no legally relevant differences between ready-mix drivers and other delivery drivers, and the state did not have any legitimate justification for singling out the ready-mix suppliers.” This district court’s ruling was appealed to the Ninth Circuit.

The Court of Appeals Decision

The 9th Circuit reversed the district court finding the court erred by disregarding certain differences between ready-mix drivers and other drivers that the legislature could have relied on in extending the prevailing wage law.

In evaluating the constitutional challenge, the Court of Appeals discussed and applied the highly deferential rational basis standard of review that requires only “a rational relationship between the disparity of treatment and some legitimate governmental purpose.” Noting the goals of the prevailing wage laws as stated by the California Supreme Court, the Ninth Circuit reasoned that the legislature could have rationally concluded that including ready-mix drivers over other drivers furthered these goals because ready-mix drivers:

“(1) are more integrated into the construction process than other materials drivers and should be paid accordingly; (2) are more skilled than other drivers and provide a material that is more important to public works projects than other materials, such that paying the prevailing wage will attract superior drivers and improve public works; and (3) are more likely to be unionized and, therefore, vulnerable to underbidding.”

The 9th Circuit further noted that ready-mix drivers have different licensing requirements and the ability to control the cement in their trucks, which provides a rational basis for distinguishing them from other drivers. In addition, the Court of Appeals noted there is “evidence that ready-mix is used for structural support, such as walls or footings, more often than other materials” and reasoned that the legislature could have rationally concluded that ready-mix is more important to sensitive public works and that the drivers must be more skilled to ensure the integrity of the material they deliver.

The 9th Circuit considered but rejected other arguments raised by the suppliers. It concluded that the law passed the rational basis test and did not violate the Equal Protection Clause because the suppliers did not refute every conceivable justification for the labor law.

Takeaways

The Court of Appeals decision in Allied Concrete and Supply Co. illustrates the difficulty of challenging through litigation a state’s expansion of prevailing wage law or similar state law subject to the rational basis test given the deference state legislators receive from reviewing courts. This is in contrast to recent successful challenges to state prevailing wage laws via legislative efforts. For example, opponents of state prevailing wage laws were successful this year in convincing legislatures to repeal and reform prevailing wage laws in Michigan and Missouri, respectively keeping with recent trends. Currently, 24 states do not have prevailing wage laws (up from 18 in 2014): Alabama, Arizona, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Utah, Virginia, West Virginia and Wisconsin. Legislative conditions in different states vary widely; opponents of state prevailing wage laws (or their expansion) are expected to continue using any means available to repeal, roll back or hold the line on prevailing wage expansion.