whitebrennerllp.com
1414 K Street, 3
rd Floor
Sacramento, CA 95814
T 916.468.0950 | F 916.468.0951
{CW133787.1}
ATTORNEY - CLIENT PRIVILEGE APPLIES
CONTAINS ATTORNEY WORK PRODUCT
Memorandum
To: City of Patterson
From: Nubia I. Goldstein
Date: October 25, 2023
Re: Public Works Street Sweeping and DIR Prevailing Wage Determination
Background:
The City of Patterson entered into a five-year contract for street sweeping services in 2013, extended the contract for an additional five years in 2018, and would like to extend the contract again from 2023 to 2028. Neither the original contract nor the 2018 extension contained a prevailing wage requirement.
In 2021, the California Department of Industrial Relations (“DIR”) issued a Director’s determination indicating that street sweeping services in that case constitute public works, thereby requiring payment of prevailing wages to employees performing the work. In light of 2021 DIR decision, the City of Patterson requested advice about whether the extension for its street sweeping services contract must include a prevailing wage provision.
Issue:
Must the City of Patterson follow the 2021 DIR determination and include a prevailing wage provision in the extension for its existing street sweeping services contract?
Brief Answer:
Although the DIR determination has no precedential value beyond the entity and specific facts for which the Director made the determination, there is a risk that if DIR were to investigate the City of Patterson’s street sweeping contract, DIR would similarly determine that the City of Patterson’s street sweeping services constitute public works subject to the prevailing wage Nubia I. Goldstein
T: 916.468.0946
[email protected]
City of Patterson
October 25, 2023
{CW133787.1}
requirement. In addition, the prevailing wage requirement is statutory, and the City of Patterson therefore would not have a basis to argue that it is exempt from the prevailing wage requirement simply because no such requirement was included in prior contracts.
Discussion:
1. The DIR Director is authorized to determine what services constitute public work subject to the prevailing wage requirement.
Labor Code § 1771 specifies that all workers on public works projects over $1,000 must be paid at least prevailing wages. The statutory definition of “public works” includes maintenance work, and “maintenance” is defined at 8 CCR § 16000 to include:
(1) Routine, recurring and usual work for the preservation, protection and keeping of any publicly owned or publicly operated facility (plant, building, structure, ground facility, utility system or any real property) for its intended purposes in a safe and continually usable condition for which it has been designed, improved, constructed, altered or repaired.
Labor Code § 1773.5 gives the DIR Director authority to determine whether a project or work constitutes public work under Labor Code § 1771, though the decision is subject to judicial review once administrative procedures have been exhausted. In addition, the Director’s determinations no longer have precedential value as announced in a letter on the DIR website dated September 6, 2007.1 Rather, the DIR Director’s determination letters are advice directed to specific entities about a specific project or work. Further, where a conflict exists between a DIR letter and a statute, regulation, or court decision, the statute, regulation, or case law controls. It is worth noting that although the Director’s determinations do not have precedential value, DIR’s Public Works Manual indicates that DIR investigators typically review the Director’s determinations for guidance when evaluating whether a particular project or type of work constitutes public work subject to the prevailing wage requirement.
The DIR letter dated October 4, 2021, involved routine street sweeping services in Elk Grove on “all designated improved public street” following a set schedule. The Director determined that the services fell under the definition of “maintenance,” relying on their routine nature and the assessment that removal of debris kept the public streets in a “safe and continually usable condition.” The DIR determination concluded that the “routine street sweeping work done for the City, here is properly considered maintenance” subject to the prevailing wage requirement 1 Corrections of the Important Notice to Awarding Bodies and Interested Parties regarding the Department’s Decision to Discontinue the Use of Precedent Determinations. https://www.dir.ca.gov/oprl/09-06-2007(pwcd).pdf (last viewed October 23, 2023).
City of Patterson
October 25, 2023
{CW133787.1}
in Labor Code § 1771. Since the 2021 DIR determination was released, there have been no changes to the relevant statutes or regulations nor have there been any conflicting court decisions.
As the Director explained in the 2021 DIR letter, the determination is a departure from a 2005 DIR letter where the Director determined that street sweeping services in Santa Clarita did not constitute maintenance because, “street sweeping for aesthetic or environmental reasons does not serve to maintain the city streets in ‘good order or condition,’ does not keep the streets from ‘harm or damage,’ does not "shield from injury, danger or loss, nor does it constitute guarding or defending". In departing from the 2005 determination, the DIR Director highlighted that the 2005 determination was an outlier among the other determinations up and to the point, which all concluded that street sweeping services constitute maintenance. The Director further explained that DIR and the California Court of Appeal have continually issued guidance since 2005, indicating that other forms of debris removal and cleaning of public property constitute “maintenance.” The DIR Director ultimately determined in the 2021 letter, that the routine street sweeping services in that case constitute maintenance subject to the payment of prevailing wages.
Here, the City of Patterson entered into a five-year contract for street sweeping services in 2013 that specified as follows:
Contractor shall use and furnish at Contractor’s expense all labor, equipment, and materials necessary for the satisfactory performance of the street sweeping and parking lot sweeping work set forth herein. After sweeping, curbs and gutters shall be left in a clean condition. The sweeping shall include as many passes as necessary to leave the street in a clean condition…
The contract also established a schedule for the street sweeping services on all residential and commercial streets, city-owned paved alleys, and specified parking lots. The City of Patterson and the contractor extended the contract for an additional 5 years in 2018 and drafted an addendum to extend the contract again from 2023 to 2028. None of the contracts contain a prevailing wage provision, and an addendum to the original 2013 solicitation explicitly stated that a prevailing wage provision was not required.
In 2013 when the City of Patterson entered into the original contract, the most recent on-point Director letter was the 2005 DIR determination stating that street sweeping did not constitute public works, but now the most recent determination from 2021 indicates that street sweeping is subject to the payment of prevailing wages. In light of this shift, it is likely that DIR would determine any street sweeping contracts constitute maintenance requiring a prevailing wage provision.
The City of Patterson could contend that since the scope of work for its street sweeping services indicates that the work is to produce a “clean condition,” its contract is more in line with the City of Patterson
October 25, 2023
{CW133787.1}
2005 DIR letter that determined the street sweeping services were for aesthetic or environmental reasons and therefore did not constitute maintenance requiring the payment of prevailing wages. The City of Patterson could also add language to its contract extension further aligning its services with those in the 2005 decision. However, the 2021 DIR determination indicates an overall shift in its view of street sweeping services to that point that any street sweeping services are likely to be deemed maintenance subject to the prevailing wage requirements regardless of whether any additional language specifies that they are for an aesthetic or environmental purpose.
As already noted, the Director’s determinations do not have precedential value beyond the specific facts of each case, so the City of Patterson is not required per se to comply with the determination. However, given that DIR investigators tend to use the Director’s decisions as guidance and the Director would likely follow a similar rationale for subsequent cases; it is likely DIR would determine that the City of Patterson’s street sweeping services also constitute public works subject to the prevailing wage requirement if the City of Patterson’s street sweeping services were brought to DIR’s attention.
2. There is no exception to the prevailing wage requirement for existing contract extensions.
Labor Code § 1773.2 requires the body awarding a contract or otherwise undertaking any public work to specify in the call for bids, bid specifications, and contract that the prevailing wage provisions apply. The awarding body is also required to notify DIR of any public works contract subject to the prevailing wage requirements within 30 days of the award under Labor Code § 1773.3. In addition, a contractor is subject to sanctions for failing to comply with the requirement to pay prevailing wages on public works projects under Labor Code § 1771, though it is also possible that a contractor could seek relief from an awarding body, if the awarding body were to incorrectly indicate that a contract’s services do not constitute public works.
The Supreme Court of California held that the obligation to pay prevailing wages has an independent statutory basis separate from the contract between the awarding body and the contractor.2In Lusardi, the contract did not refer to prevailing wages, and the awarding entity told the contractor that the contracted work was not public work subject to the prevailing wage requirement. After the contractor had been working on the project for two and a half years, the DIR Director informed the awarding entity and the contractor that the work was in fact public work. The Supreme Court of California rejected the contractor’s argument that the prevailing wage law applies only when the contractor assents to it in writing and held that the obligation to pay prevailing wages for public works under Labor Code § 1771 applies to all public works employees regardless of whether prevailing wage provisions are included in the contract.3 The 2 Lusardi Construction Co. v. Aubry (1992) 1 Cal. 4th 976, 982. 3 Id. at 986.
City of Patterson
October 25, 2023
{CW133787.1}
Lusardi court further emphasized that the overall purpose of the prevailing wage law is to benefit and protect employees on public works projects; which would be defeated if contractors were exempt from complying with the law, simply because prevailing wage provisions were not included in the contract.4
Here, no prevailing wage provisions were included in the original 2013 street sweeping contract, and an addendum to the solicitation explicitly removed the prevailing wage provision, citing the provision as unnecessary. The five-year contract was renewed in 2018, again without a prevailing wage provision, and expired on June 30, 2023. The City’s draft addendum would extend the street sweeping services contract for an additional five years to 2028 under the existing conditions, once again without a prevailing wage provision. Given the Lusardi court’s finding that the obligation to pay prevailing wages has an independent statutory basis, it follows that the City of Patterson should not continue extending the street sweeping contract without a prevailing wage provision simply because it has not included one in the past. Rather, whether the City of Patterson includes a prevailing wage requirement in its contract extension should be based on whether the street sweeping services constitute public works under Labor Code § 1771. As explained above, the City of Patterson should consider the DIR Director’s 2021 determination in this analysis since DIR and its Director would likely follow the same rationale if the City of Patterson’s street sweeping services came to DIR’s attention.
Conclusion/Recommendation:
Although the 2021 DIR decision does not have precedential value that the City of Patterson must comply with per se, adding a prevailing wage provision to the City of Patterson’s street sweeping contract extension is the option with the least legal risk since DIR would likely similarly determine that the City of Patterson’s street sweeping services are subject to the prevailing wage requirements.
If the City of Patterson has concerns about adding a prevailing wage provision to its contract extension, the City of Patterson could request its own determination from the DIR Director.
Alternatively, the City of Patterson could keep the existing contract language without the prevailing wage provision, understanding there is a risk that DIR could initiate an investigation into the City of Patterson’s street sweeping services and find that the services constitute public works subject to the prevailing wage requirement.
4 Ibid.