Planes, Trains and Prevailing Wages. Ok, No Planes, But Trains and Prevailing Wages Yes

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The California Supreme Court doesn’t often delve into construction-related issues, but this year we’ve got two cases, both related to the payment of prevailing wages on California public works projects.

The first, Mendoza v. Fonseca McElroy Grinding Co., Inc. (2021) 11 Cal.5th 1118 which we discussed in our last blog post, concerned whether mobilization work qualifies as a “public work” and in turn requires the payment of prevailing wages. On the same day that the Supreme Court issued its decision in Mendoza, it issued a decision in Busker v. Wabtec Corporation, et al. , Case No. S251135 (August 16, 2021). This is the equivalent of being struck by lightning twice.

In Busker, the California Supreme Court considered whether on a public transportation project “field work” (e.g., building and outfitting radio towers on land adjacent to train tracks) and “onboard work” (e.g., installing electronic components on train cars and locomotives”) requires the payment of prevailing wage.

The Busker Case

In 2010, the Southern California Regional Rail Authority entered into a contract with Parsons Transportation Group, Inc. to design, furnish and install a communication network known as a Positive Train Control to prevent collisions and other dangerous train movement. The project was publicly funded and cost over $216 million.

The project included the installation of wayside signals, back office servers, a communications network, a centralized dispatching system, and software development and installation. The project also required the integration of various components on trains, at wayside sites along tracks, and at centralized control centers. This included “field work” (e.g., building and outfitting radio towers on land adjacent to train tracks) and “onboard work” (e.g., installing electronic components on train cars and locomotives”).

Parsons subcontracted the onboard work to Wabtec Corporation. John Busker was one of over 100 Wabtec workers on the project and he worked on the project for approximately two years performing electrical onboard installation work. He was not paid prevailing wages for this work although Wabtec’s subcontract with Parsons included a provision requiring Wabtec to comply with applicable prevailing wage laws.

Busker later filed a prevailing wage complaint against Wabtec with the Division of Labor Standards Enforcement (DLSE). In 2015, DLSE issued a civil wage and penalty assessment in the whopping amount of $6,468,564 against Wabtec for failing to pay prevailing wages. Wabtec requested review by the Labor Commissioner arguing that California’s prevailing wage law did not cover rolling stock such as locomotives and buses. Upon review, the DLSE vacated the assessment after a DLSE officer testified that his officer had directed him to vacate the assessment because historically work performed on rolling stock was not covered by the prevailing wage law.

While the matter was being reviewed by the Labor Commissioner, Busker filed a complaint in state court against Wabtec alleging that Wabtec failed to pay prevailing wages. Wabtec filed a motion to transfer the case to federal court, and after the case was removed to federal court, filed a motion for summary judgment on the ground that onboard work was not a covered activity under the prevailing wage law. The district court granted Wabtec’s motion and Busker appealed.

On appeal to the 9th Circuit Court of Appeal, the Court of Appeal requested that the California Supreme Court address whether, pursuant to Labor Code section 1720, onboard work qualifies as: (1) ‘construction’ or ‘installation’ under the section, or (2) was integral to other work performed on the project, a standard set forth in Oxbow Carbon & Minerals, LLC v. Department of Industrial Relations (2011) 194 Cal.App.4th 538 (Oxbow) and Cinema West, LLC v. Baker (2017) 13 Cal.App.5th 194 (Cinema West).

The California Supreme Court Decision

Before the California Supreme Court, Busker argued that the terms “construction” and “installation” as used in Labor Code section 1720 were intended to be construed liberally and included work performed on rolling stock such as trains.

The Supreme Court disagreed, noting that historically the terms “construction” and “installation” have been viewed as categories of “public works,” and that “public works” has been uniformly defined as work fixed on real property. The Court further noted that nothing in the legislative history of Labor Code section 1720 suggested that the Legislature intended the terms “construction” and “installation” to be interpreted broadly. Rather, held the Court, if the Legislature intended a broad interpretation of those terms it would have explicitly done so.

Busker further argued that, even if onboard work did not qualify as “public works” under Labor Code section 1720, prevailing wages were still required because onboard work was “integrally related” to the towers on the trackside (i.e., work fixed on real property) under Oxbow Carbon, supra, and Cinema West, supra.

Again, the Supreme Court disagreed, explaining that the issue in Oxbow Carbon and Cinema West was whether the projects were “publicly funded” not whether they were “public works.” In Oxbow Carbon, the project involved a petroleum coke facility in which conveyors were installed with public funds while the roof over the conveyors privately funded. Similarly, in Cinema West, the project involved a development which included the construction of a movie theater complex in exchange for a publicly-funded parking lot adjacent to the movie theater. “[T]hose cases, explained the Court, “focus on the public funding question, not the nature of the work itself . . . [and] [a]ccordingly, they do not support an expanded meaning of ‘public work.'”

And, here, explained the Supreme Court:

It is true that the components installed on trains partner with the field work, in the sense that they ultimately function together as part of an overall communication system. But that interface does not make the onboard installation integral to the completion of the actual construction work. If “construction” included any activity necessary to the operation of a public work, that term would bring within its expansive sweep any activity necessary to make the public work functional, whether or not the activity is related to the construction process. That approach has no discernable limiting principle. Here, the labor of those who wrote the software used in the PTC system, as well as those who manufactured the needed computer chips, could be considered integral to the field work because the overall system would not function without it. For that matter, the towers built on the trackside would be useless without the trains, so arguably the initial building of the railcars would be covered.

Neither Oxbow nor Cinema West suggests that an activity is considered “construction” simply because it somehow makes other public work functional. In those cases, it was clear that both the publicly and privately funded contracts involved actual building or installation on land. A communication system is not like a manufacturing plant or theater/parking complex. The PTC system involves a “complete integrated object” only if viewed at an unduly high level of abstraction. The overall undertaking is much broader and more complex than building things on land. It is, instead, a multifaceted communications network. Some components of that system may indeed be structures or other fixed works, so that building them might qualify as “construction.” But work that is not otherwise defined as “construction” does not become so simply because it plays some role in making the overall communications system functional.

Conclusion

For construction employers involved in public works construction, Mendoza and Busker are, I would imagine, both a blessing and a curse. A blessing in the sense that the California Supreme Court has established some outward limits on when prevailing wages are required, but a curse in the sense that there are (and likely always will be) many unknowns in the prevailing wage landscape as to what specific work requires the payment of prevailing wages and what work does not.

And because I’m a Doris Day fan, in particular a fan of the original 1945 version of Sentimental Journey by Les Brown, here’s an oldie for your listening pleasure (be patient with the long intro, it’s worth it):

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