Prevailing wage has its champions and its benefits. It is also expensive. For this reasons, private developers generally try to avoid paying prevailing wages on projects. [Note: I don’t have the evidence for that last statement; what percentage of construction work these days is “prevailing wage”?] Sometimes, public entities try to get in on the act.
Oxbow Carbon & Minerals, LLC owned a long term lease for a warehouse on Pier G at Long Beach Harbor, previously used as a holding pen for petroleum coke. To accommodate top loading of the coke, the warehouse previously had no roof. But the coke operation was shut down by air quality regulations in 2001. In 2005 the City of Long Beach and Oxbow amended the lease. The amendment allowed for $2.258 million in rent reimbursements to permit Oxbow to construct a new conveyor to move the coke. Upon completion of the conveyor, title vested in the City. Oxbow executed a separate contract for construction of a new roof with a contractor using non-union labor.
The roofing contract was challenged by the local iron workers union. Long Beach and Oxbow presented a unified front arguing that the roof was a separate contract, entirely paid by private funds, and thus not subject to prevailing wage laws. This argument was rejected by the DIR. Although there was no dispute that the roof was paid entirely with private funds, the DIR determined the roof contract was a public work because the conveyor and roof were part of one organic project partly paid for with public funds (the conveyor). Therefore the entire project, including the roof, was subject to prevailing wage laws. Oxbow appealed to the Superior Court, and then the Court of Appeals . . . and came away 0-3. Moral of the story, don’t play games with the DIR and prevailing wages.
Oxbow Carbon & Minerals, LLC v. Department of Industrial Relations 194 Cal. App. 4th 538 (certified for publication 4/19/11)
