Opinion ID: 6329622
Heading Depth: 3
Heading Rank: 1

Heading: Factor 1 (nature of the contract)

Text: The ALJ observed that no government agency was a party to the construction contract between Juneau I and Alborn but that a government agency, the Department of Administration, was a party to the lease. Because the Act requires a contract “for the [S]tate,” not with the State,38 the ALJ concluded that the State did not need to be a party but simply needed to benefit from the construction contract.39 The ALJ noted that the Act’s coverage requires a “contracting agency” that “has entered into 35 909 P.2d at 333-34. 36 Id. at 334. 37 See In re N. Star 1300, LLC, OAH No. 19-1092-CON at  (Dec. 18, 2020) (explaining summary adjudication in administrative hearing and summary judgment in court are analogous); Schikora v. State, Dep’t of Revenue, 7 P.3d 938, 941-42, 946 (Alaska 2000) (treating summary adjudication and summary judgment interchangeably); cf. Progressive Cas. Ins. Co. v. Skin, 211 P.3d 1093, 1098 (Alaska 2009) (explaining that at summary judgment phase all factual inferences must be drawn in favor of non-moving party). 38 AS 36.95.010(3) (emphasis added). 39 See Western Alaska, 909 P.2d at 334 (determining State agency was “contracting agency” for Act’s purposes even though “not a party to the [construction] contract” because agency was part of larger business arrangement that included contract). -14- 7589 a public construction contract with a contractor.”40 The ALJ concluded that, as Alborn conceded, there would be no construction contract without the lease; the Department of Administration thus was a contracting agency because it was a party to the lease.41 The ALJ then concluded the two agreements established a tenant improvement project undertaken with the State’s specific needs in mind, even accepting Alborn’s contention that the project’s momentum came from Juneau I. The ALJ’s conclusion is well-supported by the State’s lease extension being contingent on the improvements. The ALJ reasonably concluded on the undisputed facts that Factor 1 weighed in favor of a “public construction” finding. b. Factor 2 (public purpose) and Factor 3 (State control post-construction) The ALJ concluded that renovating a building leased exclusively by the State “serves a public purpose.” The ALJ pointed out that the building would be identified as a State building, unlike in Western Alaska,42 and that it had been used exclusively by the State for 30 years. Alborn does not sufficiently contest this conclusion. Although acknowledging that a tenant improvement project could serve the private purpose of helping a landlord retain a commercially viable building, the ALJ reasonably concluded on the undisputed facts that there was enough of a “public purpose” that Factor 2 weighed in favor of a “public construction” finding. 40 AS 36.05.900. 41 See City of Sitka, 644 P.2d 227, 232-34 (Alaska 1982) (determining timber clearing contract was “instrumental to” public dam construction contract and analyzing two contracts together). 42 See 909 P.2d at 331-32 (explaining State agency in question had investment in commercial hotel). -15- 7589 The ALJ acknowledged that Juneau I, as landlord, maintained a high level of project control but concluded that State control was significant enough for finding material State involvement. Alborn contests this conclusion, focusing on project control during construction, in contradiction to Western Alaska’s focus on State control after construction.43 Alborn argues first that the Department of Administration, not the ALJ, has the “authority” and “agency expertise” to define the State’s level of control over a contract, including application of wage and hour laws. Alborn contends that the Department of Administration “furnishes whatever degree of oversight that a State agency may provide both during construction and throughout the lease term” and that the Department of Administration “acknowledged that no State control was involved . . . on this project.” The Department of Labor responds that the State required upgrades as a condition for extending its lease and that Juneau I asked Alborn to meet the State’s specifications. The Department of Labor notes that the renovation included ADA compliance necessary only for public entities and that “[t]he State had the right to approve” upgraded flooring, “final color selections for flooring and carpeting,” window placement, and more. Finally, the Department of Labor correctly points out that only it has statutory authority to assess the Act’s coverage.44 We agree that the Department of Administration’s opinion is irrelevant to Western Alaska’s test.45 And we agree that, on the undisputed facts, the State’s post­ 43 Id. at 336. 44 See AS 36.05.030 (delineating Department of Labor’s authority); AS 36.30.080 (delineating Department of Administration’s authority). 45 Alborn attempts to recast this argument elsewhere as a claim that the ALJ did not have “jurisdiction” to determine the scope of the Act’s coverage because as the (continued...) -16- 7589 amendment lease control is substantial and material. The ALJ’s conclusions that Factors 2 and 3 weigh in favor of a “public construction” finding were reasonable. c. Factor 4 (State funding after construction) and Factor 5 (financing provided by State) The ALJ concluded — and the Department of Labor concedes — that Factor 5 weighed against a “public construction” finding. Accepting as true Alborn’s contentions about project financing, the ALJ found that Juneau I and its majority owner provided the vast majority of the funding. The ALJ also accepted that the State provided no initial financing because the rent increase started only after project completion. Weighing Factor 5 in Alborn’s favor therefore was reasonable. But the ALJ concluded that Factor 4, which is forward-looking,46 weighed in favor of the Act’s coverage because over a ten-year period the rent increase would materially defray construction costs. The ALJ distinguished Western Alaska and Alaska Federation because in those cases there was “no regular income stream” from the State 45 (...continued) State’s contracting agency the Department of Administration has the authority to determine the State’s contracting obligations and because an ALJ cannot “invalidate” a contract. We stress that although the Department of Administration may contract on the State’s behalf, the Department of Labor determines whether a contract is covered by the Act. AS 36.05.030 (delineating Department of Labor’s authority); AS 36.30.080 (delineating Department of Administration’s authority). There is no conflict between these two mandates. As we already have explained, limited contractual analysis for purposes of determining the Act’s coverage is well within the Department of Labor’s — and therefore the ALJ’s — purview. 46 See Western Alaska, 909 P.2d at 336; Alaska State Fed’n of Lab. v. State, Dep’t of Lab., 713 P.2d 1208, 1211 (Alaska 1986) (discussing funding issues from which Western Alaska five-factor test was derived). -17- 7589 to the building owner;47 in contrast, the State will be Juneau I’s exclusive tenant for at least ten years. Alborn contends that the rental income stream is not guaranteed because it is subject to annual legislative appropriation. But if Juneau I took this possibility seriously, it likely would not have contracted for the renovations. It thus was reasonable for the ALJ to conclude, on the undisputed facts, that Factor 4 weighed in favor of the Act’s coverage. 3. The Department of Labor reasonably concluded that a State contract covered the entire “public construction” project and that the Act therefore applied. a. The conclusion that Amendment 55 was a sham After concluding that the Act covered the entire renovation project, the ALJ then asked which lease version controlled: Amendment 54 or Amendment 55? The ALJ correctly considered the broad policies set out in City of Sitka and Western Alaska. In City of Sitka we cautioned against “unduly exalt[ing] form over substance” when we held that a timber clearing contract severed from a larger, State-sponsored dam building contract was still subject to the Act.48 In Western Alaska we similarly disapproved of “attempts to disguise State involvement in the building contract” and cautioned that contracting “arrangements that could be designed to circumvent the Act’s application” could violate the Act.49 With these cases in mind, the ALJ analyzed whether Amendment 55 was a “bargained-for agreement” or a “sham . . . intended only to affect the rights of the workers on the project.” Quoting the Restatement (Second) of Contracts, the ALJ 47 See Western Alaska, 909 P.2d at 331-32; Alaska State Fed’n of Lab. 713 P.2d at 1209. 48 644 P.2d 227, 232-33 (Alaska 1982). 49 909 P.2d at 334. -18- 7589 observed that a sham contract exists when the “purported consideration was not in fact bargained for but was a mere formality or pretense.”50 Applying the law to the undisputed facts, the ALJ concluded that, for purposes of Act coverage, Amendment 55 was a sham. The ALJ noted Alborn’s concession that “the parties removed certain projects from Amendment 54, and Juneau I then promised to do the removed projects for free, in order to avoid the [Act].” Alborn points out minor differences between Amendment 54 and Amendment 55 combined with the Companion Letter — for example, a different deadline and a few additional projects — as evidence that Amendment 55 was not a sham. But Alborn also suggests that not seeking a new Act coverage determination after executing Amendment 55 was justified partly because other than the omission of Actcovered items listed in the Bifurcation Letter, there were no major differences. The ALJ explained why minor differences did not affect the Act coverage analysis: If two parties agree to a sale, and then later purport to change their agreement to a mutual exchange of ‘gifts’ without actually changing the bargain, it does not matter if they also add additional items to their exchange at the time of the sham gift giving. Here, the important undisputed facts are that (1) the seven [S]tate-specific items listed in Amendment 54 and purportedly removed by Amendment 55 were, in fact, never removed from the bargain because they were promised by Juneau I in the [Companion Letter]; and (2) the rent did not change between Amendment 54 and Amendment 55 even though Amendment 55 purportedly offered a less useful building. This analysis is further supported by City of Sitka and broader Act policies. Even though the parties in City of Sitka had severed the timber clearing contract from the 50 RESTATEMENT (SECOND) OF CONTRACTS. § 79 (AM. L. INST. 1981). -19- 7589 original construction contract, we examined the original contract — and therefore the project as a whole — when evaluating the Act’s coverage.51 We have explained that the Act “is to the benefit of the employees, not the contracting principals”52 and was intended to be “liberally construed to effectuate its beneficent purpose.”53 The Department of Administration clearly never intended to accept the building lease without the State-specified renovations. Amendment 55 may be an enforceable contract between Juneau I and the State, but under any standard of review we agree with the ALJ that Amendment 55 was an attempt to circumvent the Act. C. The Department Of Labor Correctly Denied Alborn’s Estoppel Defense. Equitable estoppel has three general elements: “(1) assertion of a position by conduct or word, (2) reasonable reliance thereon, and (3) resulting prejudice.”54 Courts also may consider “[a] fourth element, . . . [which] is that the estoppel will be enforced only to the extent that justice so requires.”55 Thus, “even where reliance has been foreseeable, reasonable, and substantial, the interest of justice may not be served by the application of estoppel [against the government] because the public interest would be significantly prejudiced.”56 51 644 P.2d at 232-33. 52 Id. at 232. 53 Western Alaska, 909 P.2d at 333 (quoting Drivers, Salesmen, Warehousemen, Milk Processors, Cannery, Dairy Emps. & Helpers, Loc. Union No. 695 v. NLRB, 361 F.2d 547, 553 n.23 (D.C. Cir. 1966)). 54 Municipality of Anchorage v. Schneider, 685 P.2d 94, 97 (Alaska 1984). 55 Id.; see Beecher v. City of Cordova, 408 P.3d 1208, 1214 (Alaska 2018). 56 See Schneider, 685 P.2d at 97 (explaining that fourth element is especially (continued...) -20- 7589 Alborn seeks to estop the Department of Labor’s enforcement action. Because the estoppel defense does not fall under the agency’s area of expertise,57 we apply the substitution of judgment standard of review.58 This standard “permits a . . . court to substitute its own judgment for that of the agency even if the agency’s decision had a reasonable basis in law.”59 Alborn appears to raise two estoppel arguments. We address them in turn and conclude both were correctly rejected.
Alborn first points out that it “relied upon assurances” from the Department of Administration that Act-covered items listed in the Bifurcation Letter “had been omitted from Amendment 55, . . . eliminat[ing] the [Act’s] coverage issues.” Quoting Thorsheim v. State, Alborn argues that the Department of Administration and the Department of Labor should be considered “a single entity.”60 Alborn notes that 56 (...continued) relevant “when considering estoppel against a municipality”); Beecher, 408 P.3d at 1214 (same). 57 Cf. AS 23.05.010 (explaining Department of Labor’s purpose); AS 36.05.030 (authorizing Department of Labor to set prevailing wage, determine Act coverage and violations, and refer infractions to attorney general for enforcement). 58 See North Slope Borough v. State, Dep’t of Educ. & Early Dev., 484 P.3d 106, 113 (Alaska 2021) (explaining when substitution of judgment standard applies). 59 Tesoro Alaska Petrol. Co. v. Kenai Pipe Line Co., 746 P.2d 896, 903 (Alaska 1987). 60 469 P.2d 383, 389 (Alaska 1970) (“[T]he Department of Administration and the Department of Fish and Game were both integral parts of a single entity, the State of Alaska.”). -21- 7589 statutory law lists both as part of the “[S]tate government”61 and that the Act defines “contracting agency” as “the [S]tate.”62 Alborn then sets out a seemingly absurd result: It was the State of Alaska that assured Juneau I that [the Act’s] wage coverage was inapplicable to the project . . . . Conversely, it thereafter was the State of Alaska which sought to label the project as “[Act-covered] public construction,” even though the State of Alaska, wearing a different hat, had indicated it was not. And presently, it also is the State of Alaska which is seeking to recoup the increased wages. (Emphasis in original; citation omitted.) Alborn contends this supports an estoppel defense based on the Department of Administration’s assurances. But Thorsheim, a case about whether the State could be considered a “contractor” in a workers’ compensation proceeding, is inapposite.63 The Department of Administration had negotiated a contract on a state agency’s behalf; we held that under the workers’ compensation statute the State could not be considered a contractor with respect to its public duties no matter which agency was involved.64 That narrow decision does not stand for the proposition that separate State agencies cannot have different stances on a particular issue or that State agencies should be considered a single entity in all contexts.65 61 See AS 44.17.005 (listing government offices and departments). 62 See AS 36.05.900 (defining “contracting agency”). 63 469 P.2d at 385. 64 Id. at 389-90. 65 Such a conclusion would logically contradict state and federal precedent allowing different government branches and agencies to bring lawsuits and administrative enforcement actions against one another; a single party cannot sue itself. (continued...) -22- 7589 Alborn also misstates the definition of “contracting agency” under the Act as “the [S]tate.” The Act defines “contracting agency” as “the [S]tate or a political subdivision of the [S]tate that has entered into a public construction contract with a contractor,”66 and “political subdivision” includes “any [S]tate department [or] [S]tate agency.”67 The Act thus clearly envisions the possibility that one arm of the State could enter into an Act-covered construction contract, taking the position that the Act does not apply, and that the Department of Labor, vested with the exclusive authority to determine Act coverage,68 could bring an enforcement action. In that context, the Department of Labor and the offending “political subdivision” necessarily would have taken opposite positions regarding the Act’s coverage, just as happened in this case. 65 (...continued) See, e.g., Beegan v. State, Dep’t of Transp. & Pub. Facilities, 195 P.3d 134 (Alaska 2008) (involving investigation and potential Alaska State Commission for Human Rights (ASCHR) administrative action against DOT&PF); State, Dep’t of Fish & Game, Sport Fish Div. v. Meyer, 906 P.2d 1365 (Alaska 1995) (involving investigation and potential ASCHR administrative action against Department of Fish and Game), superseded on other grounds by statute, ch. 63, § 4, SLA 2006, as recognized in Huit v. Ashwater Burns, Inc., 372 P.3d 904, 914 n.52 (Alaska 2016); see generally Michael Herz, United States v. United States: When Can the Federal Government Sue Itself?, 32 WM. & MARY L. REV. 893 (1991), https://scholarship.law.wm.edu/wmlr/vol32/iss4/4; SEC v. Fed. Lab. Rels. Auth., 568 F.3d 990, 997-98 (D.C. Cir. 2009) (Kavanaugh, J., concurring) (collecting cases and explaining why government should not always be treated as single entity for litigation purposes). 66 AS 36.05.900 (emphasis added). 67 AS 36.95.010(6). 68 AS 36.05.030 (“The Department of Labor . . . has the authority to determine . . . [if] this chapter is being violated.”). -23- 7589 Alborn’s “single entity” estoppel theory additionally can be rejected on public interest grounds.69 Even assuming Alborn met the required elements of reasonable and detrimental reliance on a prior position taken by the unitary “State,” application of estoppel would frustrate enforcement of the Act, which was enacted to help construction workers earn better wages.70 Precluding enforcement cuts against the public interest and the Act’s broad policy mandate.
Alborn alternatively appears to argue that the Department of Labor took inconsistent positions with respect to the Act’s coverage and that enforcement therefore should be estopped. Specifically, Alborn complains that the Department of Labor characterized Wage and Hour’s Bifurcation Letter as its “final” determination; that the Bifurcation Letter clearly indicated only some work items would be covered by the Act; and that the Department of Labor changed its position by deciding that all of the work items were covered. a. Assertion of a position by conduct or word The ALJ concluded that Wage and Hour “asserted a position” in its Bifurcation Letter.71 Wage and Hour “maintain[ed that] the overall construction project as contemplated could be covered” by the Act, but it parsed individual items that would not be covered under a compromise proposal. Less than two weeks later, Wage and Hour characterized the Bifurcation Letter as its “final answer.” With respect to the 69 See Municipality of Anchorage v. Schneider, 685 P.2d 94, 97 (Alaska 1984) (explaining courts should consider public interest when evaluating estoppel arguments made against government). 70 See Western Alaska, 909 P.2d 330, 332-33 (Alaska 1996) (explaining Act’s public interest purpose). 71 See Schneider, 685 P.2d at 97 (asserting position is element of estoppel). -24- 7589 construction project as governed by Amendment 54, the Department of Labor thus took a stance.