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California Supreme Court Upholds Charter Cities’ Exemption from Prevailing Wage Requirements

Under California law, cities may be organized under either the general laws of the State or under a charter adopted by the local voters. The charter is a written document that operates as the city’s “constitution.”  Cities that adopt their own charter may adopt their own procedures for matters that are considered “municipal affairs.” Just as the California Constitution controls the actions of the State, a city’s charter operates as the constitution of the city.

While adopting a charter gives a city control over its municipal affairs, charter cities are subject to the same state laws as general law cities on matters considered to be of “statewide concern.” What constitutes a municipal affair as opposed to a matter of statewide concern is a fluid concept that the courts have grappled with on many occasions.

In the recent California Supreme Court case of State Building and Construction Trades Council of California v. City of Vista, 2012 Cal. LEXIS 6166, the Supreme Court was tasked with deciding whether the State’s prevailing wage law involves a matter of statewide concern or is instead a municipal affair.

Vista is a charter city that entered into certain contracts for the construction of public buildings. A federation of labor unions asserted that the City must comply with California’s prevailing wage law notwithstanding Vista’s local ordinances stating otherwise. The prevailing wage law requires that certain minimum wage levels be paid to contract workers constructing public works projects.

The unions filed a petition with the San Diego County Superior Court arguing that the State’s prevailing wage law is a “statewide concern” over which State law governs. The City of Vista argued that the matter is a municipal affair and therefore governed by its local ordinances. The Superior Court denied the union’s petition. Thereafter, the unions appealed to the Court of Appeal, which also ruled in favor of the City of Vista.

The California Supreme Court granted the union’s petition for review in order to resolve whether the State’s prevailing wage law applies to charter cities. On July 2, 2012, the Supreme Court ruled in favor of the City of Vista concluding that the wage levels of contract workers constructing locally funded public works are a municipal affair (that is, exempt from State regulation), and that such wage levels are not a statewide concern (that is, subject to State law). The Supreme Court held that no statewide concern was presented that would justify the State’s regulation of the wages that charter cities require their contractors to pay to workers hired to construct locally funded public works projects.

This decision by the California Supreme Court is a substantial win for charter cities. The ability of charter cities to avoid paying prevailing wages on projects funded entirely with municipal funds greatly reduces construction costs.

San Luis Obispo is the only charter city in San Luis Obispo County. Many cities, however, are considering adopting their own charters in order to have more control over their municipal affairs, including the ability to opt out of the prevailing wage requirements imposed on general law cities.

Heather Whitham
hwhitham@carnaclaw.com