The state Court of Appeals has held that the method Washington uses to determine prevailing wages for public works projects is unconstitutional.

As defined in state law, the prevailing wage is “the rate of hourly wage, usual benefits, and overtime paid in the locality . . . to the majority of workers, laborers, or mechanics, in the same trade or occupation.” Locality is defined as “the largest city in the county wherein the physical work is being performed.” As we noted in a 2012 policy brief, the prevailing wage typically increases the minimum wage for public works projects so that it is in line with the going union wage rate.

Before 2018, prevailing wages were determined by the Department of Labor and Industries (L&I) by conducting wage and hour surveys. In 2018, the Legislature passed SSB 5493, which required L&I to adopt the wages paid under CBAs for the geographic area. If an area has more than one CBA, the higher rate prevails. (Even if the CBA does not apply to the majority of workers in the trade.)

According to the Court of Appeals, the 2018 change is unconstitutional because it violates the non-delegation doctrine. The Legislature may not delegate legislative functions unless the Legislature provides “standards and guidelines which indicate in general terms what is to be done and the administrative body which is to do it” and “adequate procedural safeguards.”

The Court found that SSB 5493 fails the first test because it requires the prevailing wage to be set based on wages in future CBAs—the Legislature can’t delegate if the proposed standard doesn’t yet exist. SSB 5493 fails the second test because it “does not contain any procedural requirements that specify requirements for a CBA to be valid or applicable to a particular locality or geographical area.”

If this ruling stands, it could positively affect state and local budgets. The fiscal note for SSB 5493 said it would have indeterminate expenditure impacts for local governments, but “any changes in prevailing wage would likely increase local government costs for labor work on projects, as well as for any ongoing or intermittent labor that may be contracted out for specific needs such as grounds maintenance or specialized skills.”

After passage of SSB 5493, the Association of Washington Cities (AWC) noted that the change “resulted in dramatic increases” in at least some prevailing wage rates, pointing to landscaping costs in particular. The Court of Appeals opinion includes another example:

 Under SSB 5493, the highest wage rate prevails for an occupation in any given county, even if that particular wage rate only covers 100 feet of a total county. For example, a local agreement made by Seattle operators reaches part of Grant County. Prior to SSB 5493, the Seattle rates never prevailed in Grant County because the vast majority of the work was covered under a different CBA with much lower rates. Now, Seattle rates will prevail in Grant County as the prevailing wage rate because the Seattle rates are higher.

On the other hand, conducting wage surveys is presumably more costly than taking wage information from CBAs, so the ruling could increase some costs for the state.