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The Fight to Keep Prevailing Wages

HOW YEARS OF STRUGGLE AGAINST ANTI-UNION FORCES
LED TO VICTORY ON PREVAILING WAGE BILL

Undated

     Governor Gray Davis made history on June 1, 1999, when he signed a bill that requires the Department of Industrial Relations to use the modal rate method to determine prevailing wage rates on public works jobs in California.

     The signing of the prevailing wage bill, SB 16, marked the end of a political struggle that has flared off and on for many years. In one of the lowest blows aimed squarely at organized labor and the working men and women in the building and construction trades, Pete Wilson set out to destroy prevailing wages in the mid-1990s.

     He was well aware that five times between 1983 and 1990, the Department of Industrial Relations (DIR) had considered using a wage averaging system of determining prevailing wages on public works jobs. He was also aware that in each case, DIR backed off after considering testimony from unions, employers and the public.

     In 1988, Ron Rinaldi, DIR director under Gov. George Deukmejian, even issued a memo stating that the modal rate method "appears to be the most equitable and adequate measure of existing rates." So the Deukmejian administration opted to continue enforcing a regulation, adopted in 1956, that said that the prevailing rate "shall be the single rate paid the greatest number of workers in a particular craft in a locality." That single rate is called the modal rate.

     Then in 1993 after Wilson became Governor, several members of the Assembly and Senate introduced bills that would have either cut back or drastically curtailed prevailing wages. Those bills were defeated. Again in 1995, 10 bills to gut prevailing wages were introduced. All were killed in committee. But this time, we knew Wilson wasn't going to stop. The State Building and Construction Trades Council (SBCTC) began to gather information from economists at various universities to determine how prevailing wages affected the construction industry and state and local economies. We also produced a video that spelled out how the payment of prevailing wages strengthened the California economy.

     All the while, through the summer of 1995, we also negotiated with the Wilson administration's DIR director and members of the Assembly, seeking a legislative solution to our differences on prevailing wages. By the end of the summer, just when we thought we had negotiated a solution, the Wilson administration reneged. Then in October 1995, Wilson's DIR director published a notice that he planned to issue new regulations that would repeal the ones in place since the mid-1950s and replace them with a so-called "weighted average" system.

     At public hearings to consider the "weighted average" regulations, Wilson administration officials testified that those regulations were expected to save $200 million annually in public works costs in California.

     Translation: $200 million was going to come out of the paychecks of California's construction workers the first year those regulations were in effect.

     Additional translation: Nonunion contractors would gain an advantage over those who used union workers. Pay rates would drop. Health and welfare benefits would cease to exist. Construction pay no longer would support a middle class family. Training through joint union/employer apprenticeship programs would die on the vine.

     On Nov. 7, 1995, the SBCTC Executive Board voted to hire the law firm of Altshuler, Berzon, Nussbaum, Berzon & Rubin to assist in the prevailing wage fight. We filed a lawsuit, and on Nov. 28, a Superior Court in San Francisco issued a temporary restraining order that stopped the DIR hearings. On Dec. 27, 1995, the restraining order was replaced with an injunction. The Court agreed with us that DIR had failed to make assessments of the economic impacts the proposed regulations would have on workers, contractors, businesses, and state and local governments.

     DIR was forced to go back to square one.

     While DIR was licking its wounds, the SBCTC Executive Board voted to hold prevailing wage rallies in Sacramento on Valentine's Day, Feb. 14, 1996, and in Los Angeles on Feb. 26.

     The rallies were a rousing success. More than 15,000 construction workers from all over California jammed the Capitol grounds on Feb. 14 in the biggest Capitol rally since the '60s. And on Feb. 26, more than 25,000 construction workers turned out in downtown Los Angeles. Traffic came to a standstill. The national media took notice, and Pete Wilson knew he had a fight on his hands.

     Despite the massive rallies and strong support from worker-friendly legislators, Wilson plowed ahead with his efforts to scrap the modal rate system that had been in place more than 40 years.

     At the same time, Wilson's legislative allies and Department of Industrial Relations Director Lloyd "Chip" Aubry were sending signals that they might be open to a legislative compromise. A coalition of construction unions and employer associations worked through the summer of 1996 to reach agreement with legislators who supported Wilson and Aubry on a bill that would end the conflict.

     There were ominous signs, however, that Wilson and Aubry were playing a double game. While his friends in the Legislature were negotiating with the unions and employer associations, Aubry quietly re-issued the proposed regulations that would put into place a wage-cutting "weighted averaging" system to replace the modal rate method of determining prevailing wages. But before those new regulations could take effect, months of public hearings and administrative steps had to take place.

     In the meantime, at the request of the State Building and Construction Trades Council (SBCTC), the Legislature had removed from the 1996-97 state budget the DIR's request for $1.3 million to conduct wage surveys needed to put its new bogus "prevailing wage" rules into effect.

     The summer ended with DIR moving ahead with its wage-slashing regulations and no agreement on a legislative solution. In November, the SBCTC learned that DIR planned to put its new regulations into effect in January 1997.

     The new rules said, basically, that if fewer than a 50 percent plus one majority of workers in a particular craft or trade in any given locality in California were paid at the same rate, that instead of basing the prevailing wage rate on the most frequently occurring rate in collectively bargained agreements, a weighted average of all wage rates - union and nonunion - would be used. That would drop wages on public works jobs by about 20 percent, Wilson's officials said.

     In addition, the regulations would prevent any collectively bargained pay raises from taking place during the life of a public works project. Thus, workers on large, multi-year projects would be denied pay increases. Under the regulations that had been in place for many years, the authority to grant pay raises while a project was under way appeared under two asterisks (**), and this authority was known as "double asterisk."

     Benefits, primarily health insurance and retirement plans, also would be largely wiped out under the new regulations. The new regs said that if there is less than a majority of workers being paid at a collectively bargained rate, collectively bargained holidays would not be recognized. Instead, the holidays would be the legal holidays established by federal and state law.

     In another disturbing move that signaled DIR's intent to put the new regulations into effect, the department had begun in the fall of 1996 to make wage surveys of the pipe trades, sheet metal workers, glaziers and roofers. They would be the first to suffer wage cuts when the anti-union regulations took effect. On Nov. 27, 1996, at the request of the SBCTC, a lawsuit was filed in San Francisco Superior Court to force DIR to halt its wage surveys. Altshuler, Berzon, Nussbaum, Berzon and Rubin of San Francisco again was selected as the lead law firm.

     The lawsuit argued that the wage surveys violate the law by spending DIR funds to conduct the surveys in spite of the fact that the Legislature denied funding for such surveys in the 1996-97 fiscal year state budget. California law forbids state agencies from using other funds for activities which were denied funding by the Legislature.

     Before the new "wage averaging" regulations took effect on Jan. 27, 1997, the SBCTC enlisted the support of Assembly Speaker Cruz Bustamante, Assembly Member Denise Ducheny, chair of the Assembly Budget Committee, Senate President Pro Tem Bill Lockyer and Sen. Mike Thompson, chair of the Senate Budget Committee. Those members filed a brief supporting the Building Trades' position.

     And after the San Francisco Superior Court issued a decision which allowed DIR to continue its prevailing wage surveys, the legislative leaders pushed through a resolution, ACR 17, which condemned DIR for adopting a regulation that contradicted the law it was supposed to carry out.

     On March 13, 1997, the SBCTC, nine large contractor associations and the Teamsters filed another lawsuit in Sacramento County Superior Court asking the Court to strike down the new prevailing wage regulations because they violated the intent of the prevailing wage law that had been in effect for decades.

     Less than two months later after clearing the Assembly, ACR 17 won final adoption in the Senate. A copy of the resolution was immediately sent to Sacramento Superior Court Judge Cecily Bond to support the Building Trades' case against Wilson's prevailing wage regulations.

     May 9, 1997, was a red-letter day for the Building Trades. The First District Court of Appeal in San Francisco issued a unanimous three-justice decision saying that DIR Director Aubry had exceeded his authority by spending funds that had been specifically denied by the Legislature, and forbidding him from proceeding with any more wage surveys without a legislative appropriation.

     And in Sacramento, Superior Court Judge Cecily Bond issued a restraining order on the second lawsuit to stop the state from imposing its new prevailing wage regulations on public works projects. Judge Bond's ruling said the new regulations could cause "irreparable injury" and "chaos in the bidding process."

     That same afternoon, shortly after the Appeal Court and Superior Court issued their decisions, Aubry resigned as DIR director.

     Three weeks later, Bond issued her final ruling that said the long-established modal rate method of determining prevailing wages could not be changed without the Legislature's approval. Bond also ruled that DIR had no authority to scrap the double asterisk rule.

     Although the DIR appealed the decisions in both lawsuits, the new administration of Gov. Gray Davis withdrew the lawsuits before the higher courts had ruled. Moreover, in 1999, with the support of a worker-friendly Legislature and Governor, the SBCTC won passage of SB 16, a bill that places into the Labor Code for the first time a requirement that DIR use the modal rate method to determine prevailing wages. The bill was co-authored by Senate President Pro Tem John Burton and Assembly Speaker Antonio Villaraigosa. It cleared the Senate 21-12 on March 22, 1999, and the Assembly 54-17 on May 13, 1999. In the Assembly, it won bipartisan support with 46 Democrats and 7 Republicans voting "yes."

     On June 1, 1999, the long war over prevailing wages ended when Gov. Gray Davis signed SB 16 into law, and issued a proclamation honoring all construction workers by declaring June 1 "Building and Construction Trades Day" in California. The proclamation sends a clear message to those who would destroy construction workers' pay. That message is "back off."

     With the signing of SB 16, anyone who wants to do away with the modal rate method of determining prevailing wages must win the approval of the Legislature and get the signature of the Governor.

     It was a war that was fought in the Courts, in the Legislature and in the agencies of state government. It lasted more than five years. It was worth all the time and effort that went into it because in the end, it was construction workers who won.