Could a Maryland school board avoid the state's prevailing wage law by turning down some of the state construction funding it was eligible for?

Plain-English summary

The Executive Director of Maryland's Public School Construction Program asked whether a local board of education could avoid the State Prevailing Wage Law, which requires paying prevailing local wage rates on qualifying public works, by voluntarily declining a portion of the state aid it was eligible to receive for a school construction project. The Prevailing Wage Law applied to a school project only if state funds covered 75% or more of construction costs. The opinion concluded that a board could indeed sidestep the law simply by financing more than 25% of the project with local funds, since the statute set a precise, purely objective funding-percentage test rather than one that examined a board's motives for limiting state aid. The opinion traced the history of a 1972 opinion that had urged scrutiny of "token" local contributions meant only to dodge the law, and concluded that later court decisions and statutory amendments had eliminated any need for such motive-based inquiry: courts had rejected a "de minimis" exception, and the current statute's clean percentage threshold left no room to second-guess why a board chose to fund a project the way it did. The opinion also addressed a related question, concluding that architects' fees should not be counted as "costs of construction" for measuring a board's local contribution, expressly overruling a 1972 opinion that had reached the opposite conclusion on that point.

Currency note

This opinion was issued in 1984. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Could a Maryland school board avoid the state's prevailing wage law by turning down some of the state construction funding it was eligible for?
According to this 1984 opinion, yes. The Attorney General concluded that a local board of education could remove a school construction project from the Prevailing Wage Law's coverage simply by funding more than 25% of the project's cost with local funds instead of requesting the full state aid available.

Did the board's motive for limiting state funding matter?
The opinion concluded it did not. It explained that the current statute set a purely objective percentage-of-funding test, and that Maryland courts had rejected a "de minimis" or motive-based inquiry into why a local contribution was made, meaning the Interagency Committee could not examine the means or purpose behind a board's decision to hold state funding below the 75% threshold.

Did architects' fees count toward a school board's local funding contribution?
The opinion concluded they did not. It explained that architects' fees are not part of the general contractor's construction contract and that the Prevailing Wage Law was designed to protect construction laborers and mechanics, not architects, so architectural plans and services should not be treated as "costs of construction," expressly overruling a 1972 opinion that had said otherwise.

Background and statutory framework

The State Prevailing Wage Law, Title 8, Subtitle 5 of Article 21 of the Maryland Code, required prevailing wage rates on public works contracts of $500,000 or more performed by a "public body." Under Article 21, §8-501(d)(3), a local board of education's school construction project was treated as a "public body" project, and thus subject to the law, only when state funds covered 75% or more of construction costs. The opinion traced the statute's history from its 1969 enactment, which exempted county and municipal agencies entirely, through 1971 and 1983 amendments narrowing the exemption, and applied Court of Appeals decisions in Demory Brothers, Inc. v. Board of Public Works and Associated Builders and Contractors of Maryland, Inc. v. Commissioner of Labor and Industry, both of which read the funding-percentage threshold literally rather than inquiring into the purpose or relative size of a local contribution.

Citations

Statutes:

• Article 21, §8-504(a) of the Maryland Code (Commissioner of Labor and Industry sets prevailing wage rates)
• Article 21, §8-504(b) of the Maryland Code (contractors must pay at least the prevailing rate)
• Article 21, §8-501(d)(1) of the Maryland Code (general definition of "public body")
• Article 21, §8-501(d)(2) of the Maryland Code (political subdivision election to be covered)
• Article 21, §8-501(d)(3) of the Maryland Code (75% state-funding threshold for school construction)
• Article 21, §8-501(c) of the Maryland Code (definition of "public works")
• Article 21, §8-501(b) of the Maryland Code (definition of "construction")
• Article 21, §§8-501(f) and 8-502(a) of the Maryland Code (Prevailing Wage Law protects laborers, workmen, and mechanics)
• Education Article, §5-301(a) of the Maryland Code (Board of Public Works defines approved school construction costs)
• Education Article, §5-301(b) of the Maryland Code (State pays costs of approved school construction projects)
• Chapter 558, Laws of Maryland 1969 (original enactment of the Prevailing Wage Law)
• Chapter 220, Laws of Maryland 1971 (extended coverage to local agencies funded solely by the state)
• Chapter 70, Laws of Maryland 1983 (added the 75% school-construction threshold)
• 40 U.S.C. §276a(a) (federal Davis-Bacon Act, on which Maryland's law was patterned)

Cases:

• Barnes v. Commissioner of Labor and Industry, 45 Md. App. 396, 404 (1980), aff'd, 290 Md. 9 (1981) (Prevailing Wage Law's rationale is wage stabilization)
• Ansell v. Howard Co. Council, 264 Md. 629, 636 (1972) (the state has not preempted the field of public school construction)
• Demory Brothers, Inc. v. Board of Public Works, 273 Md. 320 (1974) (rejected the "de minimis" doctrine; "only" means "only" under the 1971 amendment)
• Associated Builders and Contractors of Maryland, Inc. v. Commissioner of Labor and Industry, 31 Md. App. 171 (1974), aff'd per curiam, 278 Md. 464 (1976) (size and purpose of a local contribution are immaterial under the funding-percentage test)
• Baltimore Building and Constr. Trades Council v. J. Gordon Barnes, Inc., 290 Md. 9, 15 (1981) (courts construe statutory language in its natural and ordinary signification)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1984/Volume69_1984.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

PREVAILING WAGE LAW

School Construction Program-"Costs Of Construction"-Waiver Of State Funding-Boards Of Education May Waive State Aid And Thereby Avoid Application Of Prevailing Wage Law-Architects' Fees Not "Costs Of Construction" For Purposes Of Prevailing Wage Law.

October 5, 1984

Dr. Yale Stenzler, Executive Director
Public School Construction Program

On behalf of the Interagency Committee on School Construction ("Interagency Committee"), you have requested our opinion on whether a local board of education may, by voluntarily waiving a portion of the State aid for which a school construction project is eligible, avoid the application of the State Prevailing Wage Law.

For the reasons stated below, we have concluded that (i) if a local board of education so chooses, it is free to finance all or any part of the cost of a school construction project with local funds, rather than with the State aid for which it might be eligible, and (ii) if, in doing so, it finances more than 25% of that cost with local funds, the Prevailing Wage Law is inapplicable to the project.1

I
Introduction

The State Prevailing Wage Law, Title 8, Subtitle 5 of Article 21 of the Maryland Code, governs the circumstances under which state or local authorities must specify, in the call for bids for a public works project, that "prevailing wage" rates be paid to workers and apprentices on the project.2 If a project is subject to the statute, the Commissioner of Labor and Industry is required to determine the wage rates prevailing in the project's locality for work of the same class or type as that called for by the project. Article 21, §8-504(a). The contractor and subcontractors must pay at least those rates for work on the project. Article 21, §8-504(b).

The Prevailing Wage Law applies only to the actions of a "public body", which includes all State agencies. Article 21, §8-501(d)(1). Under the present program of State aid for school construction, contracts for school construction are made, not by a State agency, but by local boards of education. Nonetheless, for purposes of the Prevailing Wage Law, a local board of education is considered to be a "public body" if "State funds are used to provide 75 percent or more of the funds for the construction of the public elementary or secondary school". Article 21, §8-501(d)(3).3

The question, then, is whether a local board of education may, by voluntarily undertaking to pay more than 25% of the total cost of a school construction project, take itself out of the statute's definition of a "public body" and thereby avoid the application of the Prevailing Wage Law to the project.4

II
History of the Prevailing Wage Law

The requirement that workers on State construction projects generally be paid prevailing wage rates has been a part of Maryland law since 1969. Chapter 558, Laws of Maryland 1969.5 Like similar laws in other states, Maryland's Prevailing Wage Law is apparently designed to prevent public works contractors from undercutting wage rates in the local construction industry. "The common rationale of [prevailing wage] statutes, including that of Maryland, seems to be one of wage stabilization, to assure that wage rates generally prevailing in the construction industry in particular areas are not adversely affected by major public works projects undertaken in those areas." Barnes v. Commissioner of Labor and Industry, 45 Md. App. 396, 404 (1980), aff'd, 290 Md. 9 (1981).

As originally enacted, the Maryland Prevailing Wage Law applied only to the State and those State departments, officers, boards, commissions, and agencies not "funded primarily from sources other than the State". Former Article 100, §96(d), as enacted by Chapter 558, Laws of Maryland 1969. Counties, municipal corporations, and their boards, commissions, and other agencies were excluded from the statutory definition of "public body" and, consequently, were entirely exempt from the Prevailing Wage Law. Id.

In 1971, however, the definition of "public body" was revised to bring county and municipal agencies within the statute's purview, but only "when state public funds are the only funds used for the construction of a particular public works". Former Article 100, §96(d)(1), as amended by Chapter 220, Laws of Maryland 1971.6 The definition expressly excluded "any county or municipal corporation, or any department, officer, board, commission, or agency thereof, when funds other than state funds are used either in whole or in part for the construction of public works". Id.

In 1983, the definition of "public body" was again revised, this time to add a special definition relating to public school construction:

"In the case of a public work which is a public elementary or secondary school, 'public body' means an agency, political subdivision, corporation, person, or entity of whatever nature when State public funds are used to provide 75 percent or more of the funds for the construction of the public elementary or secondary school, but... 'public body' does not include any county or municipal corporation, or any department, officer, board, commission, or agency thereof, when less than 75 percent of the funds used for the construction of a public elementary or secondary school are State funds." Article 21, §8-501(d)(3) (enacted by Chapter 70, Laws of Maryland 1983).7

The trend of the General Assembly's actions on the Prevailing Wage Law has clearly been in the direction of expanding the law's applicability to local agencies' projects. But, just as clearly, the General Assembly has consistently chosen to make the law inapplicable when a local agency contributes in some substantial form to a public works project.

III
Analysis

A. School Construction Program

Under Maryland's program of State aid for school construction, "[t]he State shall pay the costs in excess of available federal funds of all public school construction projects and public school capital improvements", as approved by the Board of Public Works. Education Article, §5-301(b). And, with respect to "the administration of the public school construction program, the power of the Board of Public Works is plenary and supreme". 64 Opinions of the Attorney General 118, 121 (1979).

Nonetheless, the State has not preempted the field of public school construction. Ansell v. Howard Co. Council, 264 Md. 629, 636 (1972). And the plenary power of the Board of Public Works to administer a State aid program does not impair the residual power of local authorities to expend local funds rather than request State aid. See 264 Md. at 636-37.

Nothing in the school construction program precludes a local board of education from expending local funds on a school construction project in preference to the State funds the local board could request. Put another way, §5-301(b) of the Education Article obligates the State to offer, but does not obligate the local board of education to accept, State aid for school construction.

B. Prevailing Wage Law

Article 21, §8-501(d)(3) exempts school construction projects from the Prevailing Wage Law whenever "less than 75 percent of the funds used for the construction ... are State funds". Thus, the General Assembly has established a wholly objective test for the law's applicability to a particular project. In our view, such a test does not give the Interagency Committee occasion to examine how the level of State funding was determined or to inquire into the reasons for a local board's decision to request less State aid than it might.

In 1972, this Office suggested that a local board's "token contribution" to the cost of a school project, made for the purpose of removing the project from the Prevailing Wage Law's ambit, would be ineffective for that purpose. 57 Opinions of the Attorney General 178, 183 (1972) (construing then Article 100, §96(d)(1)). The Attorney General considered that "such a subterfuge would not be condoned by the courts", although the law's terms then exempted local agencies' projects unless they were funded wholly by the State. Id. The Attorney General therefore recommended that, to assure compliance with the law, the Commissioner of Labor and Industry "ascertain the existence of a bona fide purpose for the county board's contribution", in part by considering whether the contribution is "more than just de minimis". Given subsequent events, however, we do not believe that this earlier concern for the purpose or relative insubstantiality of a local board's contribution is still viable.

In 1974, the Court of Appeals questioned the use of a "de minimis rule" in analyzing the effect of a local school board's actions. Demory Brothers, Inc. v. Board of Public Works, 273 Md. 320 (1974). In Demory Brothers, the Court of Appeals affirmed a Court of Special Appeals holding that the local board's payment of building permit fees for a construction project did not exempt the project from the Prevailing Wage Law. At the same time, however, the Court said that it was "troubled by [the lower court's] having reached that decision by the application of the doctrine of de minimis non curat lex". 273 Md. at 331.8 Noting that the 1971 amendment to the Prevailing Wage Law "specifically provided that the law should be applicable 'when state public funds are the only funds used for the construction of a particular public works'", the Court of Appeals stated: "We assume, without deciding, that when the Legislature said 'only' it meant 'only.'" 273 Md. at 332. Accordingly, although the Court of Appeals arrived at the same conclusion as the Court of Special Appeals, it did so on an entirely different basis: on the fact that payment of the fees was not an actual expenditure of any county funds, but "merely a transfer of county monies from one county pocket to another". 273 Md. at 331.

Subsequently, the Court of Special Appeals ruled that two school construction projects were exempt from the Prevailing Wage Law, under the 1971 amendment, because some county funds were used on the projects. Associated Builders and Contractors of Maryland, Inc. v. Commissioner of Labor and Industry, 31 Md. App. 171 (1974), aff'd per curiam, 278 Md. 464 (1976). That court found both the relatively small size of the county's contribution, in one case, and the purpose for which county funds were used, in the other, to be immaterial to a determination of the Prevailing Wage Law's applicability. 31 Md. App. at 179-80.9 The court did note, however, albeit in dicta, that the counties' contributions were "not... made for the purpose of avoiding" the Prevailing Wage Law. 31 Md. App. at 180.

Although these cases are not altogether clear on the matter, they do suggest that the Maryland courts would not apply the de minimis doctrine to local funding of a school construction project. That is, local funding of even slightly more than the statutory threshold would apparently be sufficient to remove a project from the Prevailing Wage Law's purview.

Moreover, whatever might have been the de minimis doctrine's appropriateness in 1972, the statute has since been significantly modified. We believe that the current statute's clear and unambiguous language now establishes a purely objective, percentage-of-contributions test for determining whether a local contribution is sufficiently "substantial" to exempt a project from the Prevailing Wage Law. By its own terms, the law does not apply, and, consequently, the project contracts need not include prevailing wage rates, "when less than 75 percent of the funds used for the construction of a public elementary or secondary school are State funds". Article 21, §8-501(d)(3). Thus, the statute itself now sets a precise standard of "substantiality": any local contribution of more than 25%.

In our view, such a precise standard affords no occasion for inquiry into the means or motive whereby the level of State funding might be held below the designated cut-off line, nor for considering whether a project is eligible for more State funds than are actually used. See Baltimore Building and Constr. Trades Council v. J. Gordon Barnes, Inc., 290 Md. 9, 15 (1981) (to carry out the legislative intent, a court will consider statutory language in its "natural and ordinary signification").

For these reasons, we believe that the Prevailing Wage Law in its present form allows a local board of education, if it so chooses, to remove a project from the law's ambit by paying more than 25% of the construction costs with local funds.

IV
Related Issues

There are two related points to which we wish to draw your attention.

A. Assurances of Compliance

First, when a local board plans to contribute more than 25% of the funds for a project and, on that basis, requests Interagency Committee approval of a contract that has not been bid with prevailing wage rates, the Committee can and should condition its approval on the local board's actually making the expected contribution.

Because we conclude that §8-501(d)(3) means neither more nor less than what it states, we believe the Prevailing Wage Law applies whenever State funds are actually used for 75% of a school construction project's final cost, including any change orders. Thus, if a change order would increase the anticipated cost of a project that was bid with less than prevailing wage rates, the change should be funded in a manner that will not raise total State funding to 75% of the project's final cost.

We therefore suggest that, if the Committee approves a proposed contract that does not include prevailing wage rates, the approval resolution provide that State funding must be limited to less than 75% of the project's total cost, including any change orders.10 This advice applies equally (i) to school construction projects approved for immediate funding and (ii) to "forward funded" projects, which are initially funded by a local board of education but "recognized" by the Interagency Committee with the understanding that the Committee will consider reimbursement of eligible costs in some future fiscal year.

B. Differing Statutory Standards

Second, we note that whether an item is "an approved public school construction or capital improvement cost" eligible for State funding under the school construction program does not determine whether it is a "cost of construction" for purposes of the Prevailing Wage Law.

Under the school construction program, "the Board of Public Works shall define by regulation what constitutes an approved public school construction or capital improvement cost". Education Article, §5-301(a). In contrast, the Prevailing Wage Law defines "construction", by statute, as "all construction, reconstruction, painting and decorating, alteration, maintenance or repair". Article 21, §8-501(b). Thus, the two terms have no direct bearing on each other and should not be confused.

Hence, for example, a school construction cost not eligible for State funding under the school construction program might still have to be included, for purposes of determining Prevailing Wage Law applicability, in calculating the size of the local board's contribution to the project. See Associated Builders and Contractors of Maryland, Inc. v. Commissioner of Labor and Industry, 31 Md. App. 171 (1974), aff'd per curiam, 278 Md. 464 (1976).11

On the other hand, if a school construction cost is eligible for State funding, but a local board chooses to contribute its own funds instead, that contribution also may be considered in determining the proportion of the project's costs that are funded from non-State sources. The costs contributed by a local board need only meet the Prevailing Wage Law's definition of "construction" costs to be included in calculating the percentage of costs paid by the local board.12

V
Conclusion

In summary, it is our opinion that a local board of education may voluntarily waive a portion of the State aid for which a school construction project is eligible and thereby remove the project from the Prevailing Wage Law's purview. Under Article 21, §8-501(d)(3), the law applies to a school construction contract only if 75% or more of the funds actually used are State funds. Thus, the Interagency Committee may approve a proposed construction contract that does not provide for prevailing wage rates if the local authority commits itself to funding more than 25% of the total cost of construction.

Stephen H. Sachs, Attorney General

Susan J. Mathias
Assistant Attorney General

Avery Aisenstark
Chief Counsel,
Opinions and Advice

Editor's Note: Since the issuance of this Opinion, the State Prevailing Wage Law has been recodified twice, without substantive change. The provisions of Article 21 cited in the text are now to be found, with identical section numbering, at Title 18, Subtitle 5 of the State Finance and Procurement Article. Effective July 1, 1987, the Prevailing Wage Law will be Title 12, Subtitle 3 of that Article.

1 We previously advised you of this conclusion orally. This Opinion explains the reasons underlying our conclusion.

2 The term "public works" is broadly defined to include "all buildings, bridges, roads, streets, alleys, ditches, sewage disposal plants, waterworks and all other structures or works, constructed for public use or benefit or paid for wholly or in part out of public funds". Article 21, §8-501(c).

However, this statutory definition excludes public works contracts of less than $500,000. The scope of this Opinion, therefore, is limited to school construction contracts of $500,000 or more.

3 Pursuant to Article 21, §8-501(d)(2), any political subdivision of the State may elect to be covered by the Prevailing Wage Law. Our Opinion does not address that situation: If a political subdivision has made such an election, there would be no question that the Prevailing Wage Law would apply to all public works projects in the political subdivision, because the subdivision itself would then be deemed a "public body" for purposes of the statute. Id.

4 The Interagency Committee, as agent for the Board of Public Works, must approve all proposed awards of school construction contracts to be funded with State aid. Rules, Regulations and Procedures for the Administration of the School Construction Program, §9(b) (June 10, 1981). If a school construction project is subject to the Prevailing Wage Law, the Interagency Committee may not properly approve a contract permitting the payment of wages below prevailing wage rates. See 57 Opinions of the Attorney General 178, 184 (1972).

5 Before the 1969 enactment, Maryland's prevailing wage law applied only to road construction in Allegany, Garrett, and Washington Counties. Former Article 89B, §25 (repealed by Chapter 558, Laws of Maryland 1969).

6 That amendment also broadened the statute's coverage of State agencies to include all those not "funded wholly from sources other than the State", that is, to include all State agencies that received some State funds, even if their primary source of funding was not the State. Former Article 100, §96(d)(1), as amended by Chapter 220, Laws of Maryland 1971.

7 The 1983 revision also amended the statute's existing definition of "public body" to include all State agencies, regardless of the source of their funding, and to include "any other . . . entity of whatever nature when State public funds are used to provide 50 percent or more of the funds for the construction of a particular public works". Article 21, §8-501(d)(1).

8 The phrase "de minimis non curat lex" means "the law does not... take notice of very small or trifling matters". Black's Law Dictionary 388 (5th ed. 1979).

9 The Wicomico County Board of Education undertook to pay for specific improvements amounting to approximately 1% of the project's total cost. Talbot County's more substantial contribution, approximately 10% of the total project cost, was undertaken to make a new school auditorium usable as a community cultural center. The Commissioner of Labor and Industry had ruled that the local contribution to the Wicomico County project made the Prevailing Wage Law inapplicable to it; this ruling was sustained by the Court of Special Appeals. However, because the Commissioner found that the noneducational purpose of Talbot County's contribution was "not a bona fide purpose within the meaning of" the Prevailing Wage Law, he ruled that the law did apply to that project; this ruling was overturned by the Court of Special Appeals.

10 Again, our discussion here is limited to school construction contracts of $500,000 or more. See note 2 above.

11 In this regard, a special note is warranted regarding the role that architects' fees play in the equation. In 57 Opinions of the Attorney General 178, 183 (1972), the Attorney General advised that architectural plans and architectural services "should properly be considered as part of the 'construction of a particular public works'" for purposes of the Prevailing Wage Law.

However, architectural services are not performed by the general contractor or their subcontractors, and architects' fees are not included in the contract for the construction of a school. In Associated Builders, for example, the Court of Special Appeals determined that the counties involved had contributed to "costs of construction", thereby avoiding Prevailing Wage Law application, solely on the basis of costs they had paid under their general contracts. See note 9 above and accompanying text. We also note that the payment of architects' fees does not affect the applicability of the federal prevailing wage statute, the Davis-Bacon Act, which applies to contracts of $2,000 or more involving the employment of "laborers and/or mechanics". 40 U.S.C. §276a(a). Similarly, Maryland's Prevailing Wage Law, patterned after the Davis-Bacon Act, was not designed to protect architects and their employees but "laborer[s], workm[e]n, and mechanic[s]" and their apprentices. See Article 21, §§8-501(f) and 8-502(a).

We believe, therefore, that architectural plans and services should not be considered "costs of construction" for purposes of the Prevailing Wage Law. Thus, we specifically overrule 57 Opinions of the Attorney General 178 (1972) to the extent that the Opinion advised that architectural plans and services should be considered "costs of construction" under the Prevailing Wage Law.

12 Of course, a local board may not include in a "school project" some other county construction project, not a part of that particular elementary or secondary school, and then count the county funds contributed for that other construction project as local funds contributed for the construction of the school.

See also the discussion in note 11 above regarding architects' fees.