IR # 97-15
Tuesday, March 4,1997

Rick Rice
Louis Bonsignore
(415) 972-8835

DIR to File Formal Legal Response to Prevailing Wage Reform Litigation

SAN FRANCISCO -- The Department of Industrial Relations (DIR) is preparing to file a formal legal response to the lawsuit filed yesterday in Sacramento Superior Court by representatives of organized labor and signatory contractors, DIR Director Lloyd W. Aubry, Jr. announced today.

"This suit is another in a series of lawsuits by unions and signatory contractors to block implementation of much needed reforms,"Aubry said. "Similar regulations were adopted by the federal government in the early 1980's, and were followed by a similar legal challenge from the national building trades,"he added. Their challenge was ultimately unsuccessful, and we expect the same result in California."

"We are confident,"he said, "that the Department proceeded appropriately through the regulatory process in developing the reforms which became effective January 27, 1997, and that these new regulations are based on firm legal grounds."

The prevailing wage reforms conformed California regulations to federal rules under the Davis-Bacon Act and to those of most other states. Essentially, the regulatory changes affected two general areas of the state's prevailing wage regulations so that wages paid on public works projects more accurately reflect those actually paid in the area where the project is located.

Under the new rules, when there is no single rate paid to the majority of workers in a particular craft in a local area, prevailing wages are calculated using a weighted average. The previous regulations provided that the "most frequently occurring" wage rate would become the prevailing rate. As the unions concede in their papers, this method tended to ensure that rates based on collective bargaining agreements would become the prevailing rate. The modal method was heavily criticized for unfairly inflating wages paid on taxpayer-funded projects, particularly in comments coming from rural areas of the state, where union membership is relatively low.

A second reform repealed the "double asterisk" provision, which called for changes in prevailing wages on projects where the prevailing wage rate was based on a collective bargaining agreement that predicted changes in the rates paid in future years. There is no similar provision in federal law.

After reviewing the petitioners' initial filings, the Court set a hearing for May 9, in Sacramento.