IR # 97-30
Monday, June 2, 1997

Rick Rice
Troy Swauger
(415) 972-8835

DIR To Appeal Sacramento Superior Court's Prevailing Wage Decision

SAN FRANCISCO--The Department of Industrial Relations will appeal the decision issued today by Judge Cecily Bond of Sacramento Superior Court, which nullified regulations promulgated last year that brought state prevailing wage rules into conformance with federal rules.

"We wholeheartedly disagree with the decision and tend to pursue this through the appellate court system," said John Duncan, acting Director of the Department of Industrial Relations. "Most other states and the federal government suffered legal setbacks when they first attempted to make similar changes, but were eventually successful," he said, adding "This may be the beginning of a long process, but in the interest of California taxpayers, we plan to pursue this issue vigorously."

At issue in the case (State Building and Construction Trades Council of California, et al v. Aubry) is whether the Department of Industrial Relations has the authority to change the method by which prevailing wages are calculated on public works projects. Last year, state prevailing wage regulations, which were found to inflate the cost of public works projects in California, were replaced by a new set of regulations.

"The earlier rules were adopted through the regulatory process and we believe that they can be changed through that same process as well," Duncan said.

Under the previous method, prevailing wages were determined by what is called the modal method, which requires that the most frequently occurring wage paid in any craft be determined to be the prevailing wage. The modal method tends to favor wage rates adopted under collective bargaining agreements, which are frequently the highest rates paid in many areas.

"Use of this method may have been appropriate during the 1950's and 60's, when most construction workers were members of unions and their wage rates predominated," Duncan said. "Today, however, only about 23.7 percent of California construction workers are union members, but under the modal method their wage rates have disproportionately been the basis for about 92 percent of all prevailing wage determinations."

California regulations also contained another requirement, called the "double asterisk" provision, that further inflated the wages on public works contracts. This provision applies to collective bargaining agreements containing clauses calling for a predetermined increase in wages at certain intervals. This requirement was unique to California regulations -- there is no similar federal requirement. Today's court decision reinstates the "double asterisk" provision.

"Requiring residents in the rural areas of this state to pay big city prices for much needed public works was never the intent of state or federal prevailing wage laws," Duncan said. "Reverting to that practice will not only erode public confidence in government's ability to carry out its various mandates, but will delay the construction of schools, public hospitals, libraries, roadways and other public property, so vitally needed."

"From the beginning we attempted to achieve this vitally needed reform through the legislative process," Duncan added. "Although we intend to proceed through the court system, the door is always open for further legislative discussions."

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