Court of Appeals Reverses Prevailing Wage Rate Statute for Public Works Projects


In a decision issued this week, Associated General Contractors of Washington, et al. v. State of Washington, the Washington State Court of Appeals examined Substitute Senate Bill 5493. Slip. Op. 54465-2-II (Aug. 31, 2021). SSB 5493 altered the method for how the Washington State Department of Labor and Industries’ industrial statistician sets the prevailing wages for employees on public works projects. Prior to the enactment of SSB 5493, the industrial statistician set prevailing wages for each trade on a county-by-county basis based on either the majority or average wage rate in that specific county. Following SSB 5493’s enactment, the industrial statistician was required to adopt the prevailing wage rate for a county solely based on collective bargaining agreements (CBAs) for that trade. If a trade had more than one CBA in a county, the highest wage rate would prevail.

SSB 5493 was a problem for public works contractors because it created the potential for wage rates to be set based on CBAs that represented the minority of hours worked in a county. The International Union of Operating Engineers, Local 302, provides an example of this. Associated General Contractors of Washington (AGC) began negotiations with an operators’ union for a master labor agreement, which would cover almost all operating engineers in 16 Washington State counties. When they could not reach an agreement, Local 302 called a strike against the employers. After one week of the strike, Local 302 approached small employers and negotiated side agreements. Some of these employers were also card-carrying members of Local 302. A few weeks later, AGC ratified a new agreement with Local 302 that included lower wages than the side agreements. Because the rates in the side agreements were higher, those wage rates became the prevailing wage in 16 counties even though they represented a minority of the hours worked.

The Court of Appeals held that SSB 5493 is unconstitutional because it violates the non-delegation doctrine. SSB 5493 required the industrial statistician to adopt the wage rate from a CBA in a county, or the highest wage rate if more than one CBA in a county existed. This resulted in the possibility of prevailing wage rates being set by CBAs not yet in existence, unsigned or expired CBAs, and pre-hire CBAs, as well as the potential for collusion with no procedural safeguards. The court reversed the superior court’s order granting summary judgment to the State and sent the case back to the superior court. This outcome is a significant win for AGC and Associated Builders and Contractors and their members because this case was brought by the organizations against the State of Washington.

Commentary: This is positive news for employers who work on public works projects throughout the State. The prevailing wage rates will once again be set based on the majority or the average wage rates for each county. This will result in the prevailing wage rates accurately representing the majority of hours worked in each county.

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