In 2018, the Washington Legislature amended its prevailing wages statute adopting S.S.B 5493 and codified as RCW 39.12.015(3). RCW 39.12.015(3) changed how the Washington State Department of Labor and Industries’ industrial statistician set the prevailing wages for employees on public works projects, from a county-by-county basis to a “geographic jurisdiction” basis established in collective bargaining agreements (“CBA”) or if multiple CBAs, the CBA with the higher wage would prevail. This change proved problematic for contractors since it allowed a minority of employees to determine the prevailing wage through side agreements and limited meaningful wage negotiations by industry trade groups. Contrary to the previous rule wherein wages were set by the average or majority wage rate in a certain county (which was normally the collectively bargained wage) and provided some flexibility to the industrial statistician in determining the prevailing wage, now, RCW 39.12.015(3)(a) directs the industrial statistician to “establish the prevailing rate of wage by adopting the hourly wage … paid for the geographic jurisdiction established in [CBAs],” removing flexibility, and requiring the inclusion of CBA (which could encompass multiple counties) wage rates as a part of the prevailing wage formula.
In the same year as the bill was passed, a local union of operating engineers went on strike after negotiations of a labor agreement with the Associated General Contractors (“AGC”) broke down. The result was that during the strike, the operating engineers’ union entered into side agreements with smaller employers, but after the strike ended, AGC and the union came to an agreement with lower set wages than the side agreements, yet the side agreements became the prevailing wage under RCW 39.12.015(3). Considering the complexity of certain CBAs, for example, if an agreement was made by parties in King County but the agreement also covered operations in distant Adams County, the higher wage would prevail allowing King County rates (which on average are higher than Adams County) to control wage rates in Adams County. This reasonably frustrated AGC, builders, and other contractors who sought legal remedies.
Three years later, the Washington State Court of Appeals Division Two (“Division Two”) held that RCW 39.12.015(3) was unconstitutional because it violated the nondelegation doctrine and improperly delegated legislative duties to private parties (setting public employee prevailing wages through privately negotiated CBAs). However, the following year, the Washington State Supreme Court reversed Division Two and held in Associated General Contractors et al v. State et al., No.100258-1 (October 2022) that RCW 39.12.015(3) was constitutional and did not violate the nondelegation doctrine. Subsequently, the case was remanded back to Division Two to consider whether RCW 39.12.015(3) violated article II, section 37 of the Washington Constitution.
In its recent second bite at the apple, Division Two held that “[b]ecause RCW 39.12.015 renders a straightforward determination of the scope of rights or duties under RCW 39.12.026(1) erroneous, RCW 39.12.015(3) violates article II, section 37 of the Washington Constitution,” which forbids revision of a statute by mere reference. Associated General Contractors et al v. State et al., No. 54465-2-II (Unpublished) (April 2023). RCW 39.12.026(1) limits the sources of wages and benefits used by the industrial statistician to set the prevailing wage to only sources “in the county for which the work was performed.” RCW 39.12.026(1). As the above analysis noted, this is contrary to RCW 39.12.015(3), which requires the industrial statistician to include wage rates determined by CBAs regardless of whether a CBA was a single county or multicounty agreement. Therefore, if the industrial statistician used a multicounty CBA, compliance with both RCW 39.12.015(3) and 39.12.026(1) would be impossible and change the straightforward meaning of RCW 39.12.026(1), in violation of article II, section 37. Although Division Two did not hang its hat on any of the more provocative claims raised by AGC et al., AGC, other builders, and contractors nevertheless scored a win for meaningful negotiations and limit wage expenses on public works projects.
Comment: The Division II Court of Appeals decision is a win for contractors, for now. The State has appealed the most recent decision by the Court of Appeals to the Washington State Supreme Court. ACS will continue to follow this decision and update this blog if the Court of Appeals decision is reversed.