California Supreme Court Sides with Charter Cities on Prevailing Wage; Decision Could Impact Local PLA Neutrality Laws

1 July 26, 2012  State & Local Construction

In a landmark decision, the California Supreme Court on July 2 upheld the right of California’s 121 charter cities to establish their own policies governing when to apply the state’s prevailing wage law to city construction projects. In this case, the city of Vista asserted that by becoming a charter city, it had the ability to opt out of the state’s prevailing wage law, which requires the payment of super-minimum wages based on union rates, when building city projects.

Some of you may ask what makes a charter city different from other California cities.

The answer is in Article XI of the California Constitution, which allows cities to operate under their own constitutions (charters) under a concept called the League of California Cities, sometimes described as Home Rule.

But now the ability of charter cities to exercise this power is clashing with California’s state legislature. The legislature, dominated by union-backed elected officials from a few large coastal cities, including Los Angeles and San Francisco and their immediate inner suburbs, has imposed costly state mandates. As a result, local governments are seeking ways to provide services to their citizens at a competitive, reasonable price by circumventing these mandates.

But the state is pushing back and finding answers to these questions is becoming increasingly critical:

  1. To what extent can the state government nullify the policies of local governments?
  2. To what extent can the state government coerce local governments by cutting off funding to those that fail to conform to its legislative will?

In a July 9 column in the Sacramento Bee (and published in many other California newspapers), veteran political commentator Dan Walters succinctly describes this growing conflict between the state government and charter cities as a battle over project labor agreements (PLAs), government-mandated construction wage rates (“prevailing wage”), and public employee pension reform: Dan Walters: City-State Relations Take a Turn.

While the California Supreme Court’s decision in the Vista case is a huge win for charter cities trying to assert their independence from Sacramento, it is also important to note that PLA requirements are also entangled in this decision.

Perhaps anticipating a future court case over Senate Bill 922 and Senate Bill 829, the dissent in this 5-2 decision includes a footnote specifically addressing the legislative intent of the two new laws nullifying or undermining local Fair and Open Competition ordinances.

8 The Legislature recently acted to specify that if a charter city’s ordinance prohibits consideration of a project labor agreement (defined by Pub. Contract Code, § 2500, subd. (b)(1) as a “prehire collective bargaining agreement that establishes terms and conditions of employment,” including wages) for a public works project, “state funding or financial assistance shall not be used to support that project” (Pub. Contract Code, § 2502). (Both provisions added by Stats. 2011, ch. 431, § 2, enacting Sen. Bill No. 922 (2011-2012 Reg. Sess.).) The history of this legislation notes that the law was deemed necessary because “[s]everal counties (Stanislaus, Orange, and San Diego) and Charter Cities (Chula Vista and Oceanside) have banned [project labor agreements].” (Assem. Com. on Business, Professions and Consumer Protection, Rep. on Sen. Bill No. 922 (2011-2012 Reg. Sess.) as amended Sept. 2, 2011, p. 3.)

Just this year, the Legislature returned to the subject and highlighted its commitment to give localities the option of using project labor agreements. Section 2503, added to the Public Contract Code, provides that if a charter city’s ordinance “prohibits, limits, or constrains in any way the governing board’s authority or discretion to adopt, require, or utilize a project labor agreement, . . . then state funding or financial assistance shall not be used to support any construction projects awarded by the city.” (Stats. 2012, ch. 11, § 1.) Both new laws are not effective until January 15, 2015, to allow cities to repeal ordinances that establish blanket bans on project labor agreements.

The footnote suggests that the two new state laws nullifying local bans on government-mandated PLAs and cutting off funding to charter cities with these types of bans are a benevolent gift from the state meant to give local governments more freedom. According to this thinking, the state has the right to undermine a local government’s contracting practices and force on it the “option” to require contractors to sign union agreements as a condition of work. This is incredibly perverse thinking, but it reflects the signing message from Gov. Brown claiming that Senate Bill 922 “seems fair to me – even democratic.”

Ultimately, the most important question is this: how will the California State Legislature and the administration of Gov. Jerry Brown react to this rebellion of charter cities against their exercise of power on behalf of the State Building and Construction Trades Council of California and the California Labor Federation?

Here at, we hope the state government will recognize the spirit of the Vista decision and let charter cities make their own determinations when it comes to public procurement.

Kevin Dayton is President and CEO of Labor Issues Solutions, LLC in California. See the Dayton Public Policy Institute web site at


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One Response to California Supreme Court Sides with Charter Cities on Prevailing Wage; Decision Could Impact Local PLA Neutrality Laws

Michael Anon August 1, 2012 at 3:15 pm

What is the point of laws that can be ignored? California wants to have their cake and eat it too. California is the catalyst to many of the problems that the entire nation faces.

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