Supreme Court Holds That Prevailing Wage Statute is Constitutional

The Supreme Court recently held[1] that Senate Bill 5493 (“SSB 5493”), which alters the method for how the Washington State Department of Labor and Industries’ industrial statistician sets the prevailing wages for employees on public works projects, is constitutional. 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 would be required to adopt the prevailing wage rate for a county solely based on collective bargaining agreements (CBAs) for that trade.  If a trade has more than one CBA in a county, the highest wage rate will prevail.

SSB 5493 has negative impacts on employers because it creates the potential for wage rates to be set based on CBAs that represent the minority of hours worked in a county. The International Union of Operating Engineers, Local 302, provides an example of this. 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 a side agreement. 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 agreement were higher, those wage rates became the prevailing wage in 16 counties even though they represented a minority of the hours worked.

The Supreme Court reversed the Court of Appeals,[2] which held that SSB 5493 was unconstitutional because it violated the non-delegation doctrine. The non-delegation doctrine stands for the principle that the legislature cannot delegate legislative duties to private parties. The Supreme Court held that SSB 5493 is constitutional because it does not improperly delegate authority to a private party, and there are procedural safeguards in place to ensure adequate protection. The case is being remanded to the Court of Appeals to decide two remaining issues: whether RCW 39.12.015(3)(a) violates article II, section 37 of the Washington Constitution, and whether RCW 39.12.015(3)(a) violates due process and equal protection.

Commentary: SSB 5493 requires 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 exists. This results 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. Prevailing wage rates may no longer accurately represent the majority of hours worked in each county.

[1] Associated General Contractors of Washington v. State of Washington, et al., slip op. 1002581 (Oct. 13, 2022).

[2] Court of Appeals Reverses Prevailing Wage Rate Statute for Public Works Projects – ACS Lawyers

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