Case Name: In the Matter of M.G.M. Insulation, Inc., et al., Appellants, v. Colleen C. Gardner, as Commissioner of Labor, Respondent
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 2013-02-19
Citations: 20 N.Y.3d 469
Docket Number: 
Parties: In the Matter of M.G.M. Insulation, Inc., et al., Appellants, v Colleen C. Gardner, as Commissioner of Labor, Respondent.
Judges: 
Reporter: New York Reports
Volume: 20
Pages: 469–480

Head Matter:
[985 NE2d 911, 962 NYS2d 600]
In the Matter of M.G.M. Insulation, Inc., et al., Appellants, v Colleen C. Gardner, as Commissioner of Labor, Respondent.
Argued January 2, 2013;
decided February 19, 2013
POINTS OF COUNSEL
Gates & Adams, P.C., Rochester (Anthony J. Adams, Jr., of counsel), for appellants.
I. Prevailing wage requirements apply only to those entities specified in Labor Law § 220. (Matter of Erie County Indus. Dev. Agency v Roberts, 94 AD2d 532, 63 NY2d 810; Brukhman v Giuliani, 94 NY2d 387; Varsity Tr. v Saporita, 71 AD2d 643, 48 NY2d 767; New York State Coalition for Criminal Justice v Coughlin, 64 NY2d 660; Matter of New York Charter School Assn. v Smith, 15 NY3d 403; Tri-City Elec. Co. v People, 96 AD2d 146, 63 NY2d 969; Bender v Jamaica Hosp., 40 NY2d 560; Doctors Council v New York City Employees’ Retirement Sys., 71 NY2d 669.) II. “Substantial evidence” is not the test of whether the Commissioner exceeded her statutory enforcement authority by extending it to “functional equivalents” of specified entities. (Matter of Rosenbluth v Finkelstein, 300 NY 402; Matter of National Merchandising Corp. v Public Serv. Commn., 5 NY2d 485; Matter of Raritan Dev. Corp. v Silva, 91 NY2d 98; Matter of Erie County Indus. Dev. Agency v Roberts, 94 AD2d 532; Matter of National R.R. Passenger Corp. v Hartnett, 169 AD2d 127; Matter of Stephens & Rankin v Hartnett, 160 AD2d 1201; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451; Doctors Council v New York City Employees’ Retirement Sys., 71 NY2d 669; Cattaraugus Community Action v Hartnett, 166 AD2d 891; Matter of Pyramid Co. of Onondaga v New York State Dept. of Labor, 223 AD2d 285.) III. As a matter of law the Bath Volunteer Fire Department firehouse project was not a “public work.” (Matter of Erie County Indus. Dev. Agency v Roberts, 94 AD2d 532, 63 NY2d 810; Varsity Tr. v Saporita, 71 AD2d 643; Matter of National R.R. Passenger Corp. v Hartnett, 169 AD2d 127; Matter of Vulcan Affordable Hous. Corp. v Hart- nett, 151 AD2d 84; Cattaraugus Community Action v Hartnett, 166 AD2d 891; Matter of 60 Mkt. St. Assoc. v Hartnett, 153 AD2d 205, 76 NY2d 993.)
Eric T. Schneiderman, Attorney General, Albany (Zainab A. Chaudhry, Barbara D. Underwood and Andrew D. Bing of counsel), for respondent.
I. The firehouse project satisfies the first prong of the Matter of Erie County Indus. Dev. Agency v Roberts (94 AD2d 532 [1983]) prevailing wage law test. (Harland Enters. v Commander Oil Corp., 64 NY2d 708; Matter of Westchester Rockland Newspapers v Kimball, 50 NY2d 575; Miller v Morania Oil of Long Is., O.C.P., 194 AD2d 770; Helman v County of Warren, 114 AD2d 573; Matter of New York Charter School Assn. v Smith, 15 NY3d 403; Matter of New York Charter Schools Assn., Inc. v DiNapoli, 13 NY3d 120; Janusaitis v Middlebury Volunteer Fire Dept., 607 F2d 17; Gibson v Hurleyville Fire Co. No. 1, 1 F Supp 2d 329; United States v Craft, 535 US 274; Matter of Oswald N., 87 NY2d 98.) II. The firehouse project is a public work and thus satisfies the second prong of the Matter of Erie County Indus. Dev. Agency v Roberts (94 AD2d 532 [1983]) test. (Matter of 60 Mkt. St. Assoc. v Hartnett, 153 AD2d 205, 76 NY2d 993; Harland Enters. v Commander Oil Corp., 64 NY2d 708; Matter of Long Is. Light. Co. v Industrial Commr. of N.Y. State, 40 AD2d 1003, 34 NY2d 725; Feher Rubbish Removal, Inc. v New York State Dept. of Labor, Bur. of Pub. Works, 28 AD3d 1, 6 NY3d 711; Matter of Sarkisian Bros. v Hartnett, 172 AD2d 895, 78 NY2d 859; Matter of Pyramid Co. of Onondaga v New York State Dept. of Labor, 223 AD2d 285.)
Couch White, LLP, Albany (Joel M. Howard, III, of counsel), for Associated General Contractors of New York State, LLC, amicus curiae.
I. The new standard of review promulgated by the “functional equivalent” test departs from decades of legislative and judicial determinations. (Matter of Erie County Indus. Dev. Agency v Roberts, 94 AD2d 532, 63 NY2d 810; Matter of National R.R. Passenger Corp. v Hartnett, 169 AD2d 127; Matter of Pyramid Co. of Onondaga v New York State Dept. of Labor, 223 AD2d 285; Matter of Stephens & Rankin v Hartnett, 160 AD2d 1201; Matter of New York Charter School Assn. v Smith, 15 NY3d 403.) II. The uncertainty generated by the “functional equivalent” standard will have a detrimental impact on the construction industry statewide. (Matter of Naftilos Painting & Sandblasting v Hartnett, 173 AD2d 964; Matter of Taj Airconditioning & Refrig. Co. v Goldin, 158 AD2d 350; Matter of Chesterfield Assoc. v New York State Dept. of Labor, 3 AD3d 491; Matter of City Constr. Dev. v Hartnett, 192 AD2d 651; Matter of Sierra Telcom Servs. v Hartnett, 174 AD2d 279.)
Couch White, LLP, Albany (Joel M. Howard, III, of counsel), for Empire State Chapter of the Associated Builders and Contractors, Inc., amicus curiae.
I. The Department of Labor’s “functional equivalent” test constitutes an impermissible administrative amendment to Labor Law § 220 (2). (Matter of New York Charter School Assn. v Smith, 15 NY3d 403; Weiss v City of New York, 95 NY2d 1; Finger Lakes Racing Assn. v New York State Racing & Wagering Bd., 45 NY2d 471; Saratoga County Chamber of Commerce v Pataki, 100 NY2d 801; Boreali v Axelrod, 71 NY2d 1; Packer Coll. Inst. v University of State of N.Y., 298 NY 184; Ellicott Group, LLC v State of N.Y. Exec. Dept. Off. of Gen. Servs., 85 AD3d 48; Matter of Pyramid Co. of Onondaga v New York State Dept. of Labor, 223 AD2d 285.) II. The broad discretion assumed by the Department of Labor to determine “functional equivalents” is ripe for abuse and selective enforcement. (Matter of Cayuga-Onondaga Counties Bd. of Coop. Educ. Servs. v Sweeney, 89 NY2d 395; Matter of CNP Mech., Inc. v Angello, 31 AD3d 925.)
Hurwitz Law, P.C., Rochester (Jayme Hurwitz of counsel), for Firemen’s Association of the State of New York, amicus curiae.
I. The Department of Labor may not bring fire corporations within the reach of Labor Law § 220 when the legislature has declined to do so. (Helman v County of Warren, 114 AD2d 573; Steitz v City of Beacon, 295 NY 51; Moch Co. v Rensselaer Water Co., 247 NY 160; People v Tychanski, 78 NY2d 909; Pajak v Pajak, 56 NY2d 394; Matter of Alonzo M. v New York City Dept. of Probation, 72 NY2d 662; Patrolmen’s Benevolent Assn. of City of N.Y. v City of New York, 41 NY2d 205; Matter of Town of Riverhead v New York State Bd. of Real Prop. Servs., 5 NY3d 36; Walker v Town of Hempstead, 84 NY2d 360; Matter of Roberts v Community School Bd. of Community Dist. No. 6, 66 NY2d 652.) II. Standard service agreements made between a village and a volunteer fire corporation are not agreements “which may involve the employment of laborers, workers or mechanics” under Labor Law § 220. (Matter of New York Charter School Assn. v Smith, 15 NY3d 403.)
McMahon, Kublick & Smith, P.C., Syracuse (Jan S. Kublick of counsel), for New York State Council of the National Electrical Contractors Association Chapters, amicus curiae.
I. The functional equivalence test would not result in a high level of uncertainty, and offers much needed guidance. II. A functional equivalency standard is needed in an increasingly complicated contracting environment. (Matter of Griffiss Local Dev. Corp. v State of N.Y. Auth. Budget Off., 85 AD3d 1402, 17 NY3d 714; Matter of New York Charter School Assn. v Smith, 15 NY3d 403.) III. Empire State Chapter of Associated Builders and Contractors, Inc.’s and Associated General Contractors of New York State, LLC’s claim that prevailing wage requirements significantly increase construction costs are unfounded. IV Prevailing wages support local economic development. V Empire State Chapter of Associated Builders and Contractors, Inc.’s and Associated General Contractors of New York State, LLC’s claim that prevailing wage is discriminatory is not empirically supported and is not a reason to weaken prevailing wage. VI. Acceptance of prevailing wage extends well beyond labor unions.

Opinion:
OPINION OF THE COURT
Pigott, J.
In this CPLR article 78 proceeding, we are asked to determine whether the prevailing wage requirement of Labor Law § 220 is applicable to a construction contract entered into by the Bath Volunteer Fire Department (BVFD). We hold that because no public agency, as contemplated by the statute, is a party to the contract, the prevailing wage law does not apply.
The Bath Volunteer Fire Department is a not-for-profit fire corporation under Not-For-Profit Corporation Law § 1402. Historically, it operated from a building owned by the Village of Bath. Sometime prior to 2002, it determined that the facility was inadequate for its needs. After the Village declined to build it a new firehouse, BVFD commissioned a feasibility study and obtained its own financing for the construction of one. It acquired land and invited contractors to bid for the construction work. In September 2006, it hired petitioner R-J Taylor General Contractors, Inc. (Taylor) as the general contractor. Taylor subsequently hired a number of subcontractors to construct the various portions of the firehouse.
After an investigation, the Department of Labor (DOL) issued an opinion letter, concluding that the firehouse project was a public work subject to the prevailing wage law. Once the subcontractors learned of the DOL's determination, work on the project halted. In December 2006, BVFD agreed to indemnify Taylor and its subcontractors against any liability resulting from their failure to pay the prevailing wages, and construction resumed and the project was completed.
In the meantime, an administrative hearing was held on the question of the applicability of the prevailing wage law to the firehouse project. The Hearing Officer determined that the project was subject to the prevailing wage law, concluding that the firehouse project satisfied both prongs of the so-called Erie County test for prevailing wage law applicability (see Matter of Erie County Indus. Dev. Agency v Roberts, 94 AD2d 532 [1983], affd for reasons stated below 63 NY2d 810 [1984]). Specifically, the Hearing Officer concluded that volunteer fire corporations, such as BVFD, are the "functional equivalent [s]" of municipal corporations and are therefore "covered entities" under Labor Law § 220. In the alternative, the Hearing Officer reasoned that even if a volunteer fire corporation did not generally satisfy the public entity test, the protection services agreement between BVFD and the Village of Bath satisfied the first prong of the test. Further, because the Village authorized and supported the firehouse project, and the object of the project entailed provision of fire protection services for the community, the project satisfied the "public works" requirement.
Petitioners commenced this article 78 proceeding for review of that determination. The Appellate Division confirmed the determination and dismissed the petition (86 AD3d 812 [3d Dept 2011]). This Court granted petitioners' motion for leave to appeal (18 NY3d 806 [2012]) and we now reverse.
We begin by considering whether the first prong of the Erie County test—the public agency prong—has been met. The prevailing wage law covers contracts involving each of four specific public entities: the state, a public benefit corporation, a municipal corporation or a commission appointed pursuant to law (see Labor Law § 220 [2]). It is undisputed that BVFD is a fire corporation as defined by the Not-For-Profit Corporation Law, and it is not one of the public entities named in the statute. Nevertheless, the Commissioner determined that BVFD could be deemed "the functional equivalent" of a "municipal department" within the meaning of the Labor Law. In doing so, the Commissioner considered, among other things, that volunteer fire corporations receive immunity for negligence in extinguishing fires just like district and municipal fire corporations; members of volunteer fire corporations enjoy many of the same benefits as public service employees, including immunity from liability in performance of their duties; and volunteer fire corporations are statutorily under the supervision of the municipality they service.
The "functional equivalent" test, however, was rejected by this Court in Matter of New York Charter School Assn. v Smith (15 NY3d 403 [2010]). There, the DOL deemed charter schools "public benefit corporations" because the schools serve a valuable public purpose and their existence is the result of a charter issued by a state or local municipal entity. Given those factors, the DOL determined that charter schools met the requirements established by the courts of this State for public work projects. We rejected that argument because while charter schools, like volunteer fire corporations, may be "quasi-public" in nature, they are not a specified public entity and thus, do not fit within the ambit of the statute {id. at 410).
Had the legislature intended to include volunteer fire corporations under the statute, it could easily have done so. Notably, in 2007, the legislature expanded the statute's coverage to include contracts involving other types of entities, but only when it can be shown they were acting on behalf of the public entity (Labor Law § 220 [2]; see Charter School Assn., 15 NY3d at.410). Indeed, certain volunteer fire department contracts may fall under the prevailing wage law based on the amendment language. At the time of this contract, however, the 2007 amendment of the prevailing wage law did not exist.
The Commissioner argues alternatively that the service agreements entered into with the Village trigger the prevailing wage requirement. However, these contracts are for emergency services pursuant to Village Law § 4-412 (9). That provision empowers a village to contract with the local fire corporation for the "furnishing of fire protection within the village" {id.). The service agreements do not include any provision contemplating the work involved here: the construction of a new firehouse (see Charter School Assn., 15 NY3d at 409). Thus, the service agreements are not a contract for public work within the meaning of the prevailing wage law.
Because of our determination, we need not reach the issue of whether the construction project meets the criteria of a "public work" under the second prong of the prevailing wage law test.
Accordingly, the judgment of the Appellate Division should be reversed, with costs, the petition should be granted and respondent's determination should be annulled.