In December, 2006, the Department of Industrial Relations adopted a new, official position which could adversely affect the real estate development and construction community. Its new position is that any type of public subsidy, waiver of permitting fees, discount or assistance from a public body to a developer does not have to be for the purpose of facilitating construction in order for the requirement to be imposed that prevailing wages (i.e., the union wage rates) be paid to the construction workers on the any project within the development. In 2005, the California Supreme Court, in interpreting California Labor Code § 1720(a)(1), ruled that in order for the prevailing wage requirement to be imposed, any public assistance or benefit under § 1720(a)(1) had to be provided to the developer for the purpose of facilitating the construction. Even though the amendments to the prevailing wage law under SB975 did not change the language in § 1720(a)(1) of the Labor Code, the DIR has chosen to take the position that the City of Long Beach decision is no longer good law and that any public benefit to a developer relative to its overall development, converts the development into a prevailing wage project. The DIR’s decision is being appealed. However, this new interpretation makes its increasingly important for developers, contractors, and others to analyze very carefully what the ramifications of any public assistance are to a real estate development.
For further information please contact Richard M. Freeman. Richard Freeman is a partner in the Real Estate, Construction & Land Use Litigation Practice Group and the Labor and Employment Practice Group in the firm’s Del Mar Heights Office.