By Kevin Jeffery, Graniterock VP & General Counsel
Last year we reported on California's adoption of Assembly Bill 219, which determined that ready-mix concrete delivery to a state public project was prevailing wage work.
As planned, AB 219 went into effect on July 1. In the build up to AB 219's effective date, California concrete suppliers, the contractors and public owners who work with them, and the agencies that regulate them, poured a lot of effort into preparing for compliance with the new law.
Eleven days ago, all of those parties received a jolt.
On Oct. 21, a U.S. District Court in Los Angeles issued a preliminary injunction, putting the enforcement of AB 219 on hold. If your business is in any way involved with California public works infrastructure, here are five things you'll want to know:
1. Preliminary injunction stays enforcement of AB 219. In issuing a preliminary injunction, the federal court ordered the Department of Industrial Relations (DIR) to cease its enforcement of AB 219, and prohibited the DIR from imposing any penalties or fines based on the law AB 219 put into place. The basis for the court's ruling was its finding that the ready-mix companies who had sued to permanently overturn AB 219 had demonstrated there were serious questions about whether AB 219 violated the equal protection clause of the 14th Amendment of the U.S. Constitution, and that they would suffer serious harm if the law were allowed to remain in place.
2. What does "preliminary" mean? The court's stay on enforcement is a temporary action, taken at the outset of a complex legal dispute over whether AB 219 in fact violates the U.S. Constitution or is preempted by federal law. The court did not decide this ultimate question. Instead, its preliminary injunction was a ruling that effectively put AB 219 on hold, pending the eventual outcome of the broader litigation to determine AB 219's validity.
3. The DIR's appeal. But even this temporary action is subject to appeal. The DIR immediately appealed the court's preliminary injunction to Ninth Circuit U.S. Court of Appeals. The appeal asks the Ninth Circuit to leave AB 219 fully in effect pending the outcome of the trial on the merits. The Ninth Circuit's decision on this appeal is not expected before January 2017.
4. The DIR's aggressive enforcement position. In addition, the DIR has indicated that, if it is successful in setting aside the court's injunction, it intends to enforce all prevailing wage requirements from AB 219’s original effective date of July 1 to the full extent allowed by law. In a published announcement, the DIR also said "contractors and subcontractors should be aware that if they choose not to pay prevailing wages to workers on public works projects, they may still be subject to claims for unpaid wages and penalties by parties who are not subject to the injunction."
5. Get legal advice, specific to your situation. These developments leave ready-mix suppliers, subcontractors, contractors and owners in our public works industry in an unwelcome swirl of uncertainty. At the time of this writing, the preliminary injunction staying enforcement of AB 219 is still in effect. However, the pending appeal and the DIR's stated enforcement decision present complications that should prompt industry members to monitor the course of this litigation, and consider their compliance approach carefully. If this uncertainty impacts your business, you should get independent legal advice on how best to approach issues of AB 219 enforcement.
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