Decision Impacts Public Works Projects in California

The California Court of Appeal has ruled that fabrication of materials for a public works project is not subject to California’s prevailing wage law if it occurs at a “permanent, offsite manufacturing facility, the location and existence of which is determined wholly without regard to the particular public works project.” In Sheet Metal Workers’ International Assn., Local 104 v. Duncan, published Aug. 27, Russ Will Mechanical, Inc. was the heating, ventilation, and air conditioning subcontractor contracted to perform the HVAC component for a community college district project.

As part of the public works project, Russ Will fabricated sheet metal for various HVAC components at a permanent offsite facility it had operated for more than a decade. An employee of Russ Will filed a complaint with the Department of Industrial Relations claiming he should have received prevailing wages for his work fabricating sheet metal at the offsite facility. Following the DIR’s administrative review of the matter, DIR’s final coverage determination concluded that Russ Will was not required to pay prevailing wages. Local 104, which had participated in the DIR proceedings, then filed a petition for a writ of mandate in court challenging the final DIR coverage determination. Local 104’s petition was granted, and the court returned the matter to the DIR. Russ Will then appealed.

The Court of Appeal’s decision clarifies and solidifies the rule consistently set forth in past DIR coverage determinations that prevailing wage requirements do not apply when the offsite fabrication takes place at a permanent, offsite manufacturing facility, where the location and existence of the facility has no relationship to the public works project in question. While this decision could be appealed to the California Supreme Court, for now, the Sheet Metal Workers’ International decision provides certainty that the payment of prevailing wages is not required in relation to a public agency’s direct purchase of materials for a public works project from a permanent offsite manufacturing facility, so long as the facility’s existence is not reliant on, or otherwise related to, the public works project.