By Roland Murphy for AZBEX
Construction trade groups and the Goldwater Institute issued celebratory statements after Maricopa County Superior Court Judge Bradley Astrowsky ruled that a prevailing wage and a minimum wage are not the same thing, no matter how much some state and local authorities might wish it so.
In a June 21 ruling, Astrowsky found the prevailing wage ordinances passed by Phoenix and Tucson in January violate an Arizona state law specifically prohibiting such actions. The ruling also held the cities’ legal foundation for taking their actions to be fundamentally flawed.
The Goldwater Institute represented the Arizona Chapter of the Associated General Contractors, the Arizona Builders Alliance, and the Associated Minority Contractors of Arizona in a lawsuit against Phoenix and Tucson to strike down the ordinances. Last Friday’s ruling rejected a motion to dismiss by the cities and granted summary judgment to the plaintiffs.
Terms and Background
In legalistic and government contracting language, the definition of prevailing wage can be dense and cumbersome. For the purposes of this article, and understanding the issue in general, the Wikipedia definition will suffice: “In United States government contracting, a prevailing wage is defined as the hourly wage, usual benefits and overtime, paid to the majority of workers, laborers, and mechanics within a particular area. This is usually the union wage.”
The Davis-Bacon Act of 1931 mandated prevailing wage for most federally funded projects. Various amendments and administrative rules have ensured their implementation, and 32 states have their own versions of the Davis-Bacon requirements.
In broadly general terms, prevailing wage rules tend to be favored by unionized contractors and Democratic administrations because they improve union contractors’ ability to compete for project awards. Conversely, they tend to be opposed by non-union and smaller contractors, and by Republican administrations, because they are cumbersome to administer, increase compliance and operational costs, and generally reduce non-union contractors’ competitiveness.
Both sides agree prevailing wage rules add to project costs. A 2016 estimate from the Congressional Budget Office found the Davis-Bacon Act prevailing wage requirement increased the cost of federal construction projects by $1.4B per year on average. Phoenix City Manager Jeff Barton had estimated implementing the rule would add $17M/year to City projects and require another $1.4M to create 12 new positions to administer and enforce the rules. Tempe estimated a prevailing wage rule there would add $7.3M to City project costs.
In an October 2023 survey, 98% of Associated Builders and Contractors member respondents expressed opposition to prevailing wage and apprenticeship requirements mandated under the Biden Administration’s Inflation Reduction Act, saying the rules would negatively impact their ability to compete and would make them less likely to bid on clean energy projects.
The Inflation Reduction Act, Infrastructure Investment and Jobs Act and other pandemic stimulus packages and programs implemented by the Biden Administration increased momentum for prevailing wage rules in states and municipalities, including many major cities in Arizona.
Arizona, however, has had a state law on the books since 1984 that expressly forbids municipalities, counties and agencies from implementing prevailing wage rules or ordinances. Democratic Attorney General Kris Mayes issued an opinion in June of last year that attempted to give prevailing wage supporters a workaround.
In 2006, Arizona voters approved a law that allowed municipalities to set their own minimum wage requirements. Mayes’ opinion held prevailing wage is a type of minimum wage and, consequently, the 2006 law superseded the 1984 statute.
Prior to Mayes issuing her opinion, the City of Phoenix had passed a prevailing wage law last March. The Goldwater Institute threatened to sue under the 1984 law, and Phoenix repealed the ordinance a month later. After Mayes’ opinion came out, both Phoenix and Tucson felt they were on more solid legal ground and passed their ordinances. Tempe followed their example and passed its own ordinance in May.
Phoenix and Tucson Struck Down
Judge Astrowsky’s decision found both Mayes’ reasoning and the ordinances in Phoenix and Tucson were incorrect and invalid. In a seven-page statement, the Court held that the minimum wage and the prevailing wage are two different things. “The Minimum Wage Law allows cities to ‘regulate minimum wages,’ …i.e., to set across-the-board wage floors for private and public employees and employers generally. The prevailing wage prohibition, on the other hand, bans cities from requiring contractors on public works projects to follow detailed wage requirements based on locality, occupation, and market conditions, as a requirement for contracting with the city, and the minimum wage and the prevailing wage are not necessarily the same.”
It went on to say, “On some occasions, the prevailing wage for a particular worker may be the minimum wage, but on other occasions, it may be higher. Certainly, the laws, when read together, mean that the prevailing wage cannot be less than the minimum wage, and as they can be harmonized, they both can coexist. While the prevailing wage can be said, and was so said by Defendants, to be the ‘minimum wage’ an employer must pay when involved in a city contract, this does not mean that the prevailing wage is the minimum wage as established by A.R.S. § 23-363. The two are not calculated in the same method, thus, to equate the same is not logical.”
Astrowsky also dismissed the argument that the voter-approved initiative superseded the previous state law. He found that since the 2006 law did not specifically repeal the 1984 statute, and since the Legislature did not act to impede the voter initiative, the 2006 minimum wage law has no effect on the 1984 law.
Aftermath and Next Steps
Following the ruling’s publication this week, both the Goldwater Institute and the AZAGC issued statements praising the decision. AZAGC President David Martin said, “We are thrilled with the court’s decision, which upholds the principles of a free market and removes unnecessary burdens from contractors. We encourage the City of Phoenix and the City of Tucson to accept this ruling and avoid further wasting taxpayer money on appeals.”
Goldwater said, “Today’s decision is a victory for Arizona taxpayers—who deserve to have public works projects run as closely as possible to true market conditions, instead of having their costs decreed by politicians in order to benefit their political friends. It’s also a win for workers themselves, who deserve to do work in a competitive environment where wages are based on merit, instead of political dictate.”
The Arizona Republic quoted Phoenix Mayor Kate Gallego as saying, “Today’s decision is disappointing, and we are exploring potential next steps. Those building the future of our city deserve to be paid fairly and I plan to exhaust every legal avenue to ensure workers earn the wages they deserve.”
The same article quoted Tucson Mayor Regina Romero who said, “I’m disappointed in today’s ruling. Prevailing wages have been a tool to uplift our communities, improve our local economy and protect workers from being underpaid and taken advantage of. The City of Tucson will continue to find ways to create a better quality of life for workers and their families, as we’ve done previously.”
Both cities are reported to be considering their options to appeal.
The article also speculated on the degree to which local officials will rely on opinions from Mayes in the future, particularly since Gallego said Phoenix had explicitly relied on the Attorney General’s opinion when the City passed its ordinance.
For its part, Tempe was specifically aware of the risks when it passed its ordinance. AZBEX reached out to both Goldwater and Tempe Mayor Corey Woods by email for comments on what steps, if any, the City will take next.
Goldwater Institute’s Senior Communications Manager Joe Setyon responded by saying, “In light of yesterday’s court decision striking down Phoenix and Tucson’s prevailing wage mandates, we urge the City of Tempe to repeal its own prevailing wage mandate, which is similarly illegal under state law.”
Neither Mayor Woods nor any other Tempe representative responded by press time.