Do contractors on Texas public works have to pay the prevailing wage, and what happens if they underpay or misclassify workers?

TX AG Opinion DM-0469: Do Texas contractors have to pay the prevailing wage on public works?

Plain-English summary

State Representative Rene Oliveira, chair of the House Committee on Economic Development, asked the Attorney General five questions about Government Code chapter 2258, the law that requires the prevailing wage to be paid on public-works projects. The questions came out of a real dispute: the International Brotherhood of Electrical Workers alleged that A-Bar Electric, Inc., a subcontractor remodeling the Bolin Science Hall at Midwestern State University, was paying electricians less than the local prevailing rate, was paying the same worker different rates for different work, and had used workers in classifications the contract did not list. The university and the subcontractor disputed those allegations. The Attorney General noted that his office is not a fact-finding body and answered the legal questions while assuming the union's factual allegations were true.

On the merits, the Attorney General concluded the following. First, a contractor on the project had to pay no less than the local prevailing wage rate to workers on the public work, unless the work was limited to maintenance, which chapter 2258 excepts. Second, paying one worker two different wage rates is not a violation of chapter 2258 as a matter of law, because the prevailing rate attaches to the job that is performed; a worker who does stonemason work one day and carpenter work the next is owed the stonemason rate for the first and the carpenter rate for the second. Whether a particular worker was a journeyman or an apprentice is a question of fact and contract, not a question of statutory interpretation. Third, a contractor may hire a craft or type of worker the original contract did not list, but only where the public body has a system to review and approve the new hire in advance and to set the prevailing wage rate for that classification before the work is done; a contractor cannot bring in an unlisted craft the public body has not approved and rated.

Fourth, the $60 penalty in section 2258.023(b) for paying below the contract's stipulated wage is mandatory, not optional, and it is owed for each worker for each calendar day (or part of a day) the worker is underpaid. The penalty applies even when the underpaid worker agreed to accept a wage below the listed prevailing rate, because the statute fixes the floor and a worker cannot waive it. Fifth, an underpaid worker's remedy runs mostly through the public body and arbitration, not the courts. The worker files a complaint with the public body that awarded the contract; the public body decides whether it has good cause to believe a violation occurred, withholds money owed to the contractor, and uses it to reimburse the worker. A court remedy is available in only one situation: where the public body found the allegations substantiated but withheld too little from the contractor to make the worker whole, in which case the worker may sue the contractor and its surety. In every other situation the worker and the contractor must try to settle or submit the unresolved issues to binding arbitration.

Currency note

This opinion was issued in 1998. 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.

Government Code chapter 2258 has been amended several times since 1998, including changes to the penalty, complaint, and arbitration provisions. The opinion itself notes that section 2258.021 was amended in 1997. Confirm the current text of chapter 2258 before relying on any specific dollar figure, deadline, or procedure described here.

Who this opinion affected (as of 1998)

Contractors and subcontractors on public works: The opinion told them they owed at least the local prevailing wage on covered projects, that the $60-per-day penalty for underpaying was mandatory and could not be escaped by a worker's agreement to take less, and that they could not bring in an unlisted craft or type of worker without the public body's advance approval and rate-setting.

Public bodies awarding public-work contracts (state agencies, universities, political subdivisions): The opinion described their duties to specify prevailing rates in the call for bids and contract, to review and rate any new worker classification before it is used, and to run the complaint-and-withholding process when a worker alleged underpayment.

Construction workers on public projects: The opinion explained that a worker who performed more than one craft was entitled to each craft's prevailing rate, that no agreement to accept a sub-prevailing wage was binding, and that their path to recover underpaid wages generally ran through a complaint to the public body and binding arbitration rather than the courts.

Common questions

Did a Texas contractor have to pay the prevailing wage on a public job in 1998?
Yes, under this opinion. A contractor on a public work for the state or a political subdivision had to pay no less than the general prevailing rate of wages for similar work in the locality, unless the work was limited to maintenance.

Could a contractor pay the same worker two different wage rates?
The opinion concluded that doing so was not a violation of chapter 2258 as a matter of law. The prevailing rate attaches to the job performed, so a worker who did two different kinds of work was owed the prevailing rate for each. Whether a worker was correctly classified for the work done was treated as a question of fact.

Could a contractor use a worker in a craft the contract did not list?
Only with the public body's advance approval. The opinion concluded a contractor did not violate chapter 2258 by hiring an unlisted craft or type of worker if the public body had a system to approve the hire and set that classification's prevailing rate before the work was done. A contractor could not use an unlisted craft the public body had not approved and rated.

Was the $60 penalty optional, and could a worker waive it by agreeing to less?
The opinion concluded the penalty was mandatory, not optional, and was owed for each worker for each day of underpayment. It also concluded the penalty applied even where the underpaid worker had agreed to accept a wage below the listed prevailing rate.

How did an underpaid worker get the money back?
The opinion described a complaint process: the worker complained to the public body that awarded the contract, the public body decided whether it had good cause to believe a violation occurred and withheld payments owed to the contractor to reimburse the worker. A lawsuit against the contractor and its surety was available only where the public body withheld too little to make the worker whole; otherwise the worker and contractor had to settle or go to binding arbitration.

Background and statutory framework

Government Code chapter 2258 carries forward the substance of former V.T.C.S. article 5159a, the prevailing-wage statute the Legislature repealed in 1995 and recodified into chapter 2258 as part of a nonsubstantive revision. Section 2258.021 entitles a worker employed on a public work by or on behalf of the state or a political subdivision to be paid not less than the general prevailing rate of per diem wages for work of a similar character in the locality where the work is performed; the subsection does not apply to maintenance work. The public body must specify the prevailing wage rate for each craft or type of worker in its call for bids and in the contract.

Section 2258.022 addresses the public body's role when a craft or type of worker is needed that was not foreseen at bid time. The opinion read that section to let a public body approve, in advance, a classification of worker whose need was discovered after the project started, and to set the prevailing rate for that classification, so a contractor who works through that advance-approval system does not violate the chapter. Section 2258.023(a) requires the contractor to pay no less than the rates stipulated in the contract, and section 2258.023(b) provides that a contractor who violates the section "shall pay" the public body $60 for each worker for each calendar day or part of a day the worker is paid less than the stipulated rates; the opinion read "shall pay" as making the penalty mandatory. Penalty money the public body collects does not go to the underpaid workers; the public body retains it to offset the costs of administering chapter 2258.

The complaint and remedy mechanism appears in sections 2258.051 through 2258.056 and section 2258.053. A worker files a complaint with the public body that awarded the contract; the public body makes an initial determination of good cause to believe the contractor violated the chapter, withholds payments due the contractor, and uses that money to reimburse the worker. If the public body did not withhold enough to fully reimburse the worker, the worker may sue the contractor and its surety for the remaining money. The opinion traced the legislative history of the arbitration provision added in 1993, noting that the bill as introduced provided for judicial review by trial de novo, that the Senate committee substitute deleted trial de novo and provided instead that unresolved issues go to binding arbitration, and that a worker may seek a judicial remedy only in the single circumstance where the public body substantiated the complaint but withheld too little to make the worker whole.

The opinion drew on standard tools of statutory construction and on the prevailing-wage statute's purpose, which Texas courts have described as ensuring that workers on public projects are paid what the public body has determined to be the prevailing wage in the locality. The Attorney General assumed, on the requestor's representation, that the Bolin Science Hall remodeling was a public work subject to chapter 2258, and observed that a remodeling project, as that term is commonly understood, ordinarily involves more than maintenance.

Citations

Statutes:

• Tex. Gov't Code ch. 2258, §§ 2258.021, 2258.022, 2258.023, 2258.051, 2258.052, 2258.053, 2258.056
• V.T.C.S. art. 5159a (repealed 1995; recodified as Gov't Code ch. 2258)

Cases:

• Southern Prison Co. v. Rennels, 110 S.W.2d 606 (Tex. Civ. App.-Amarillo 1937, writ dism'd)
• Texas Highway Commission v. El Paso Building & Construction Trades Council, 234 S.W.2d 857 (Tex. 1950)
• Sharifi v. Young Bros., Inc., 835 S.W.2d 221 (Tex. App.-Waco 1992)
• Cullipher v. Weatherby-Godbe Construction Co., 570 S.W.2d 161 (Tex. Civ. App.-Texarkana 1978)

Related opinions:

• Tex. Att'y Gen. Op. O-1216 (1939); M-187 (1968); H-56 (1973); M-329 (1985); JM-48 (1986); DM-98 (1992)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0469
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1998/dm0469.pdf

Original opinion text

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

Office of the Attorney General, State of Texas

DAN MORALES, ATTORNEY GENERAL

March 12, 1998

The Honorable Rene O. Oliveira
Chair, Committee on Economic Development
Texas House of Representatives
P.O. Box 2910
Austin, Texas 78768-2910

Opinion No. DM-469

Re: Whether Government Code section 2258.021 requires Midwestern State University to pay the prevailing wage rate to electricians performing work on a public works project, and related questions

Dear Representative Oliveira:

You ask five questions about Government Code chapter 2258. First, you ask whether a contractor violates chapter 2258 by paying one worker two different rates of pay. We conclude it is not a violation as a matter of law, although it may be a violation as a matter of fact. Second, you ask whether it is a violation of chapter 2258 to employ a craft or type of worker not listed in the original public work contract. We conclude that a contractor may hire a craft or type of worker not listed in the contract's wage determination so long as the public entity approves, in advance, the hiring and determines the prevailing wage rate to which the worker is entitled. Third, you ask whether the sixty-dollar penalty section 2258.023(b) levies on a contractor who fails to pay the prevailing wage is mandatory or optional. We conclude payment of the penalty is mandatory. Fourth, you ask whether the sixty-dollar penalty is required even though the worker has agreed to accept wages below the prevailing wage. We conclude that it is. Fifth and finally, you ask how a worker misclassified as an apprentice, and who therefore received a reduced wage, may collect the difference between the wages the worker should have received and the wages he or she actually received. Assuming Midwestern State University has determined that the contractor here has not violated chapter 2258, we believe the worker and the contractor must arbitrate the issue.

We understand that you raise these issues because the International Brotherhood of Electrical Workers alleges that A-Bar Electric, Inc., which we understand to be a subcontractor on the remodeling of the Bolin Science Hall, is paying less than the local prevailing wage rate to electricians. The union alleges in part that at least one worker employed by A-Bar Electric was working in different crafts or types of work, receiving a different wage rate for each craft or type. Additionally, it is alleged that workers were classified in some crafts or types of work that Midwestern State University had not listed in the contract. Moreover, material you submit with your request contends that A-Bar Electric has, in several instances, misclassified electricians as apprentices, thereby reducing the wages paid those electricians below the prevailing wage level for journeymen. We understand that Midwestern State University and A-Bar Electric contest these allegations. This office is not a fact-finding body, and we assume for purposes of this opinion that the allegations are true.

You state in your letter to this office that the Bolin Science Hall project is subject to Government Code chapter 2258, and we accept your statement without examining it. In any event, we must rely on your statement because we have not been given a description of the project beyond an indication that it is a remodeling project. Accordingly, we will discuss next the pertinent provisions of chapter 2258.

Government Code section 2258.021 entitles a worker employed on a public work to wages equal to or greater than the prevailing wage rate in the locality in which the work is being performed:

RIGHT TO BE PAID PREVAILING WAGE RATES. (a) A worker employed on a public work by or on behalf of the state or a political subdivision of the state shall be paid:

(1) not less than the general prevailing rate of per diem wages for work of a similar character in the locality in which the work is performed; . . . .

(b) Subsection (a) does not apply to maintenance work.

(c) A worker is employed on a public work for the purposes of this section if the worker is employed by a contractor or subcontractor in the execution of a contract for the public work with the state, a political subdivision of the state, or any officer or public body of the state or a political subdivision of the state.

The public body must specify in the call for bids and the contract the prevailing wage rate for each craft or type of work necessary to execute the contract. Similarly, a contractor who is hired to perform the public work may not pay workers employed in the execution of the contract less than the prevailing wage rates specified in the contract. A contractor who violates the prevailing wage rate requirement must pay a penalty:

A contractor . . . who violates this section shall pay to the state or a political subdivision of the state on whose behalf the contract is made, $60 for each worker employed for each calendar day or part of the day that the worker is paid less than the wage rates stipulated in the contract.

With this summary of chapter 2258, we turn to the issues you raise. We conclude, in answer to your third question, that a contractor hired to work on the Bolin Science Hall project must pay no less than the prevailing wage rate to electricians working on the project unless the work is limited to maintenance. Government Code section 2258.021(a) entitles a worker employed on a public work project on behalf of the state or a political subdivision to no less than the prevailing wage rate. Additionally, section 2258.023(a) requires the contractor on a public-work project to pay workers on the project no less than the prevailing wage rate. Maintenance is, however, excepted from the prevailing wage rate requirement. As this office previously has assigned, "maintenance" refers to ordinary upkeep and repair necessary to preserve a thing in good condition. Whether the Bolin Science Hall project is maintenance is a question of fact that is not amenable to the opinion process. If the project is a remodeling project, as alleged and as that term is commonly understood, we surmise the project involves more than maintenance.

In answer to your first specific question, we conclude that a contractor does not violate chapter 2258 as a matter of law by paying a single worker two different wage rates. In our opinion, the prevailing wage rate attaches to the job performed. If an individual performs different jobs, he or she is entitled to be compensated at the prevailing wage rate for each job. So, for example, if one worker works on Monday as a stonemason and on Tuesday as a carpenter, he or she is entitled to receive stonemason's wages for Monday and carpenter's wages for Tuesday.

From the exemplary situations the union has detailed, we gather that, among other things, the union is concerned that individual workers have been classed as journeymen for some of the work they performed and as apprentices for other work. We do not believe chapter 2258 is violated if an individual worker who is a journeyman in one craft and an apprentice in another is paid accordingly; for instance, in the example we just used, a worker may be a journeyman stonemason but an apprentice carpenter. Nevertheless, we assume the union is concerned that one worker, a journeyman, receives journeyman's wages for some, but not all, of the electrical work the worker performs. For the remainder of the electrical work, the worker receives apprentice's wages.

Whether a worker is a journeyman or an apprentice is not a question requiring a legal interpretation of chapter 2258, which does not distinguish between the two. Rather, it may be a question of contract interpretation, a task this office is not equipped to perform. It is also a question of fact.

In answer to your second specific question, a public body has the opportunity to approve the hiring and to determine the prevailing wage rate to which the new classification of worker is entitled. We note, of course, that section 2258.022 requires a public body to specify in its call for bids and the contract the general prevailing rate for each craft or type of worker needed to execute the contract. But we cannot say that the legislature intended by this to restrict a public body or its contractor from hiring classifications of worker, the need for which was not originally foreseen, to respond to a situation discovered after the public-work project has started. For example, in the course of a remodeling project, parties to the contract may discover, as the plaster comes down, that damage that cannot be properly repaired by only the crafts or types of worker listed in the contract. In our view, the legislature intended by the language of section 2258.022 to require the public body to approve in advance every classification of worker that the contractor hires and, most importantly, to set the prevailing wage rate to which each classification of worker is entitled. So long as the public body has in place a system whereby, prior to the hiring, it reviews a contractor's request to hire a craft or type of worker not specified in the contract and determines the local prevailing minimum wage rate, we do not believe a contractor who complies with that system violates Government Code chapter 2258. A contractor may not, however, hire a craft or type of worker if the public body has not approved the hiring and determined the prevailing wage rate in advance.

We conclude, in response to your third specific question, that a contractor must, not may, pay a sixty-dollar penalty if the contractor has violated section 2258.023. Section 2258.023(b) describes the penalty as a mandatory, not an optional, punishment: "A contractor . . . who violates this section shall pay . . . $60 for each worker employed for each calendar day or part of the day that the worker is paid less than the wage rates stipulated in the contract." The sixty-dollar penalty section 2258.023 prescribes does not apply to violations of other sections of chapter 2258, however.

Similarly, we conclude that a contractor who violates section 2258.023 must pay the sixty-dollar penalty even if the underpaid workers agreed to accept a wage rate below the listed, prevailing wage rate. Section 2258.023(a) requires the contractor to pay no less than the listed, prevailing wage rate. Moreover, chapter 2258 establishes the prevailing wage rate requirement as a statutory entitlement. Section 2258.021, as amended by the legislature in 1997, is entitled "Right to be Paid Prevailing Wage Rates" and mandates that a worker employed on a public work be paid no less than the prevailing wage rate. Chapter 2258 excuses the contractor from paying the prevailing wage rate only in two circumstances: first, if the work is limited to maintenance; or second, if the public body failed to list in the contract the prevailing wage rates.

Finally, in response to your last question, we conclude that a worker who believes he or she has been underpaid, but whom the public body has determined was not underpaid under chapter 2258, must submit the issue to binding arbitration unless the worker and the contractor can settle the issue. Chapter 2258 sets up a somewhat confusing enforcement mechanism, though, and we feel it merits explanation. To start enforcement, an aggrieved worker must file a complaint with the public body that awarded the contract. The public body must make an "initial determination" as to whether it has good cause to believe that the contractor has in fact violated chapter 2258. If the public body determines it has good cause, it must withhold payments due the contractor, and it may use that money to reimburse the worker. If the public body has not withheld enough from the contractor to fully reimburse the worker, the worker may sue the contractor and the contractor's surety for the remaining money he or she is owed. In addition, section 2258.053(a) provides that a contractor and aggrieved worker must submit to an arbitrator any unresolved issues relating to an alleged underpayment unless the worker and the contractor settle the issue in a timely manner.

In our opinion, chapter 2258 permits a worker to seek a judicial remedy only in one circumstance: where the public body, having received the worker's complaint and adjudging the allegations substantiated, withholds an insufficient amount of money to make the underpaid worker whole. In any other situation, we believe an aggrieved worker and the contractor must try to settle or submit to binding arbitration. We believe this construction is consistent with the legislative history of the arbitration provision, which was added in 1993. The arbitration provision was not in the 1993 bill as it was introduced. Rather, the bill as introduced provided that a contractor or worker aggrieved by a public body's decision on a complaint is entitled to judicial review by trial de novo in a court of competent jurisdiction. The Senate Committee on Intergovernmental Relations deleted the trial de novo provision but provided that unresolved issues should be submitted to binding arbitration. Senator Barrientos, explaining the Senate committee substitute, indicated that under the substitute the only matter that can be appealed to the courts is if the city has not retained enough money in the payments to the contractor to satisfy the award of the arbitrator.

We cannot advise you as to what remedies are available to the allegedly underpaid workers.

SUMMARY

Assuming that the Bolin Science Hall remodeling project is subject to Government Code chapter 2258, Midwestern State University must require the contractor and subcontractors to pay no less than the local, prevailing wage rate to electricians working on the project unless the work is limited to maintenance.

Government Code chapter 2258 does not as a matter of law prohibit a contractor from paying one worker two different wage rates.

So long as a public body has in place a system whereby, prior to the hiring, it reviews a contractor's request to hire a craft or type of worker not specified in the contract and determines the local prevailing wage rate, we do not believe a contractor who complies with that system violates Government Code chapter 2258. A contractor may not, however, hire a craft or type of worker that the public body has not approved and determined the prevailing wage rate in advance.

A contractor who pays workers less than the prevailing wage rate set out in the contract must, not may, pay a sixty-dollar penalty to the public body. It is not a defense that the underpaid worker agreed to accept a wage rate below the listed, prevailing wage rate.

Chapter 2258 permits a worker to seek a judicial remedy only in one circumstance: where the public body, having received the worker's complaint and adjudging the allegations substantiated, withholds an insufficient amount of money to make the underpaid worker whole. In any other situation, chapter 2258 requires an aggrieved worker and the contractor to try to settle the issue or submit to binding arbitration.

DAN MORALES
Attorney General of Texas

JORGE VEGA
First Assistant Attorney General

SARAH J. SHIRLEY
Chair, Opinion Committee

Prepared by Kymberly K. Oltrogge
Assistant Attorney General