Partners performing work on a public works project must be paid prevailing wages

STATE OF CALIFORNIA PETE WILSON, Governor
DEPARTMENT OF INDUSTRIAL RELATIONS
DIVISION OF LABOR STANDARDS ENFORCEMENT
LEGAL SECTION
45 Fremont Street, Suite 3220
San Francisco, CA 94105
(415) 975-2060

H. THOMAS CADELL, JR., Chief Counsel

December 4, 1997

Thomas W. Kovacich, Esq.
Atkinson, Andelson, Loya, Ruud & Romo
13304 East Alondra Boulevard
Cerritos, CA 90703-2263

Re: Request for Opinion: Partners Under Prevailing Wage Law

Dear Mr. Kovacich:

Your letter of July 17, 1997, addressed to Lloyd W. Aubry,
Jr., former Director of the Department of Industrial Relations, was
referred to this office for response.

The opinion you are requesting is whether partners who
performed work on a public works project are required to be paid
prevailing wages.

Under Labor Code section 1771, all workers who perform work on
a public works project are required to be paid the prevailing wage
rates as determined by the Director. In Lusardi Construction Co. v.
Aubry (1992) 1 Cal.4th 976, 987, 4 Cal.Rptr.2d 837, the court held
that "By its express language, this statutory requirement is not
limited to those workers whose employers have contractually agreed
to pay the prevailing wage; it applies to 'all workers employed on
public works'." In interpreting Section 1771, the court emphasized
the word "all". Labor Code section 1723 states that "workman"
includes laborer, workman, or mechanic. Labor Code section 1772
provides that "Workers employed by contractors or subcontractors in
the execution of any contract for public work are deemed to be
employed upon public work."

Although there is no published California opinion which
specifically states that partners are included in Labor Code
section 1771, the Division was recently asked by the California
Department of Transportation to assist them in a case where the
issue was whether partners working on a public works project were
required to be paid the prevailing wage. In that case, entitled
Standard Traffic Services v. Department of Transportation (County
of Shasta, Case No. 132667), the court found:

Thomas W. Kovacich, Esq.
December 4, 1997
Page 2

"Labor Code §§ 1771 and 1774 are applicable to all
workers, and those sections are not limited to
"employees". The sections apply to partners who are
performing the work."

The fact that the worker may be a partner does not alter the
coverage. To exempt the partners from coverage would frustrate the
purpose of the prevailing wage law and defeat the uniform application
intended by the Legislature. Exempting the partners would
create a devise where a group of workers could form a partnership
to avoid paying themselves the statutory prevailing wages; being
exempt from the prevailing wage coverage, the partnership undoubtedly
would underbid other contractors.

The prevailing wage law is "designed to level the playing
field among bidders on public works projects . . ." (Associated
Builders and Contractors v. Curry, 797 F.Supp. 1528, 1536 (N.D.
Cal.1992). To assure that all employers are competing on equal
footing, the Legislature enacted Labor Code section 90.5 which
states that it is the policy of this state to vigorously enforce
minimum labor standards in order to protect employers who comply
with the law from those who attempt to gain competitive advantage
at the expense of their workers by failing to comply with minimum
labor standards. (see Lusardi, supra, 1 Cal.4th at 985)

The state prevailing wage law (codified in 1937) was patterned
after the Davis-Bacon Act1 (California Division of Labor Standards
Enforcement v. Dillingham Construction N.A. Inc. (1997) ___ U.S.
___ , 117 S.Ct. 832, 835; O. G. Sansone Co. v. Department of
Transportation (1976) 55 Cal.App.3d 434, 458 Fn.l, 127 Cal.Rptr.
799) and, thus, we can look to that federal law for some guidance.
The federal cases interpreting the Davis-Bacon Act reveal that the
principle requiring the payment of the prevailing wage to partners
has been applied under that Act (40 U.S.C. §276a(a). In Building
and Construction Trades Department, AFL-CIO v. Reich, 40 F.3d 1274,
1288 (D.C. Cir. 1994), the court stated that the legislative
history reveals that Congress amended the Davis-Bacon Act in 1935
to eliminate the practice where partnerships were being formed
between individual workmen to avoid paying the members of the
partnership the prevailing wage rate.

In interpreting the Davis-Bacon Act, the U.S. Attorney General
concluded that owner-operators of trucks engaged in highway

1 The provisions of Labor Code §§ 1720 et seq. are often referred to as the
"Little Davis-Bacon Act".

Thomas W. Kovacich, Esq.
December 4, 1997
Page 3

construction are employed as laborers or mechanics and subject to
the Davis-Bacon Act. (41 U.S. Op. Atty. Gen. 448, 500 (1960).) In
United States v. Landis & Young, 16 F.Supp. 832 (W.D. La. 1935),
the court held that a sole proprietor who subcontracted and
performed the work himself is subject to the Davis-Bacon Act.

Likewise, the U.S. Comptroller General, following the opinion
of the U.S. Attorney General and the case of United States v.
Landis & Young, supra, stated in the Matter of: T.W.P. Company, 59
Comp.Gen. 422, 424 (1980) that "whenever a member of a partnership
performs the work of a laborer or mechanic on a project that falls
within the scope of the Davis-Bacon Act, the prevailing wage
determination is applied."

I hope this adequately addresses the issues you raised in your
letter to former-director Lloyd W. Aubry. Please excuse the
belated response but, actually, your letter, which had been
misplaced, did not again come to my attention until recently.

Yours truly,

H. THOMAS CADELL, JR.
Chief Counsel

c.c. John Duncan, Acting Director
Jose Millan, State Labor Commissioner
Nance Steffen, Assistant Labor Commissioner
Greg Rupp, Assistant Labor Commissioner
Tom Grogan, Assistant Labor Commissioner
All Staff Attorneys
Gary J. O'Mara, Counsel, Office of Director, Legal Section