The Honorable Jackie W. St. Clair

Commissioner Opinion No. **H-** 358 Texas Dept. of Labor 81Standards Box 12157, Capitol Station Austin, Texas 78711 Re: Whether it is permissibl,e under the prevailing Wage **Statute,** Art. 5159a,, toinclude fringe benefits. Dear Commissioner **St.** Clair:

**Your** request for an opinion ontheabove rubject **matter poses**  the question ofwhether a public body, awarding any contract for public work onbehalf of the State, or onbehalf ofany county, city or other political subdivision under Art. 5159a may include the **comt**of employee fringe benefits, such as group life insurance, group hospitalization, disability benefits, medical care and pensions in determining the general prevailing rate or per diem **wager?** .Article 5159a,Section 2,V. T. C.S., provides: The public bodyawarding any contract for public work onbehalf of the State, or onbehalf of any county, city and county, city, town, district or other political sub-division thereof, or otherwise undertaking any public work, shall ascertain the general prevailing **rate** of per diem wages in the locality inwhich the work is to be performed for each craft or type ofworkman or mechanic needed to execute the contract and shall specify in the call for bids for said contract, and in the **contract** itself, what **the** general prevailing rate of **per** diem wages in the said locality is for each craft or type ofworkman needed **to** execute
p. 1628The Honorable Jackie W. St. Clair page 2 **(H-350)**

**.** the contract, also the prevailing rate for legal holiday and overtime work, and it shall be mandatory uponthe contractor towhom the **contract** is awarded, and uponany subcontractor under him, to pay no less than the said specified rates to all laborers, workmen, and mechanics employed by them in the execution ofthe contract. Section 4 defines three terms, one ofwhich is “general prevailing rate of per diem wages. ” The term ‘general prevailing rate crfper diem wages’ shall be the rate determined uponas such rate by the public body awarding the contract, or authorizing the **work,** whose decision in the matter shall be final
. . . . Nothing in this Act, however, shall be construed to prohibit the payment toany laborer, workman or mechanic employed onany public work as aforesaid **or** more **than** the said general prevailing rate or **wages.** The Supreme Court of Texas has held thatthe decision ofa public bodyfixing the prevailing wage rate for a locality is final and may not be revi.ewed judicially. Texas Highway Commission V. El Paso Building & Construction Trades Council, 234 S.W. 2d 857 (Tex. 1950).

The primary purposes of the statute **are:**

. . . [T]o inform the bi&der the **wage** rate to be paid his employees and especially to protect workmen, laborers and mechanics from being required, if they accept employment to**work** for less thanthe prevailing wages paid in the countyfor the same class and character @M&Texas Highway Commission v. El Paso Building and Construction Trades Council, supra. at p. 861.
p. 1629The Honorable Jackie W. St. Clair page 3 (H-350)

In 1933, whenArticle 5159a was enacted, fringe benefits were essentially unknown. That fact alone does not, in **our** opinion, foreclose the discretionary right ofa public body to determine that “fringe benefits” have become animportant factor in determining the prevailing wage. As found by the United States Senate, “Fringe benefits such as group life insurance, group hospitalization, disability benefits, medical care, and pensions, were not important wage factors until World War II.
. . [since then] welfare and pension plans have experienced a phenomenal growth, ” andin 1964 almost 110million persona were relying onbenefits from such plans. Senate Report No. 963, 2 U.S. Code Cong. andAdm. News, (88th Cong. 2d sess.) p. 2339 (1964) at p. 2341. The same Senate Report found thatin many areas of the country the great majority of **contractors** compensate their employees in twoforms; cash, andfringe benefits andthat the

“fringe benefits clearly constitute a form ofwages. ”

Therefore, the Congress specifically provided in the Davis-Bacon Act thatthe Secretary of **Labor** in **making** prevailing wage determinations shall include, “The rate of contribution”t&~~a welfare and pension plans. 40 U.S. C.A. Sec. 2760. An amendment to the Davis-Bacon Act was necessary in order to accomplish inclurion of such fringe benefits ,because~of theAct’s requirement thatwages be paid “unconditionally. ” See Senate Report 963, supra. at pp. 2341-2342. The Texas Statute does not require that “wages ” be paid Qnconditionally, ” andhence a statutory amendment is not, in **our** opinion, essential **to** the establishment of,$he discretionary right of a public body to determine thatfringe benefits can be considered as properly includable within the term “wages” in Article 5159a. Therefore, a public body may properly consider “fringe benefits” in determining a prevailing wage rate for a particul8r locale.

The statutory definition of “prevailing wage rate” certainly does **not per**  **se** impose restraint onthejudgment ofthe public bodyin,this matter.

p. 1630. . ,

The Honorable Jackie W. St. Clair page 4 **(H-350)**

**.** Indeed there **are many**  examples of the term “wages” being construed - to include employer contributions to group employee pension andwelfare plans. Thus, in Inland Steel v. N. L. R. B., 170F. 2d 247 (7th Cir. 1948), aff’d., 339 U.S. 382 (1950), the Court held that contributions to retirement and pension plans were included within the term “wages” within the meaning ofSec. 9of the National Labor Relations Act. 29 U.S. CA., Sec. 159. Ina similar fashion, Article 8309, V. T. C.S., a part of the Texas workmen’s compensation laws, defines “average weekly wages” to include an “advantage which can be estimated in money which the employee receives from the employer as a part ofhis remuneration.”

An early Texas case, Byrd v. Citv of Dallas, 6 S.W. 2d 738 (Tex. 1928) held: The right to participate in such a fund [pension]

is therefore not a gratuity or donation in any sense. Itis **as** much a part ofthe agreed compensation as is the mmtliystipend. (6S.W. 2d at 741). Two fairly recent California Supreme Court decisions, Dunlar,v. Tremavne. 398 P. 2d 774 (Cal. 1965) ahd Tracy v. Contractor’s State License Board, 407 P. 2d 865 (Cal. 1965) reach a similwconclusion.

See also, People v. Vetri, 131N.E. 2d 568 (N.Y. 1955);~Educational Fund of Electrical Industry v. U.S., 305 F. Supp. 317 (S.D.N. Y. 1969); United Brick & Clay Werkers ofAmerica. AFL-CIO v. International Union ofDiat. 50 UMW ofA, 439 F. 2d 311(8th Cir. 1971). SUMMARY Article 5159a, V. T. C.S., gives the public body involved inletting a **contrrct** for public works the responsibility fsr determining the “prevailing wage rate” in its locale for a particular class and character

p. 1631,. .

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. ’ The Honorable Jackie W. St. Clair page 5 (H-350)

. of

### work.. Inits discretion the **wage** set may include thevalue of “fringe benefits”’ available to employees ofthe area engaged in similar kinds oflibor. Very truly **yours,**



# u Attorney General of Texas

DAVID M. KENDALL, Chairman Opinion Committee

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