Opinion ID: 1365643
Heading Depth: 3
Heading Rank: 1

Heading: Prevailing Wage Statutes

Text: Like its federal counterpart, [15] the prevailing wage provisions found in West Virginia Code §§ 21-5A-1 to -11 (Repl. Vol. 1996 & Supp. 2001) (hereinafter referred to as the wage act) were enacted for the purpose of protecting laborers engaged in construction of public improvements from substandard wages by ensuring the payment, as a minimum, of the prevailing level of wages. Section two of our wage act announces the unmistakable policy of this State to secure the payment of the prevailing wage rate for construction performed on public improvements by or on behalf of any public authority. W.Va.Code § 21-5A-2. In resolving the case below, the circuit court based much of its decision on the absence of any contract having been signed by WVU. While there is no reference to a contract in section two of the wage act, [16] the lower court read in the need for a contract to invoke the protections of the wage act by virtue of the references to contract letting or authority to enter into a contract contained in the definitions of both public improvement and public authority. See W.Va.Code § 21-5A-1(1), (4). Before addressing the issue of the lack of a contract having been signed by a public authority, however, we wish to first address the related issues of whether the Center is a public improvement and whether the Center was constructed on behalf of a public authority. Id. We note at the outset of this discussion that the procurement of financing for the construction of buildings associated with the educational missions of a public institution often entails the use of creative financing and further, that the employment of certain financial mechanisms necessary to effectuate the construction of such improvements may require the involvement of third parties. Given this recognition of the realities of modern-day financing, we find it incumbent to look behind the surface of the facts relied upon by the circuit court. We are certainly not the first court to analyze whether the provisions of its respective wage act or competitive bidding laws are being circumvented, [17] either through the use of a lease/purchase agreement rather than an outright purchase of a building, or through the use of third-party construction combined with creative financing. In Mechanical Contractors Association v. University of Cincinnati, 141 Ohio App.3d 333, 750 N.E.2d 1217 (2001), the court examined whether competitive bidding statutes were applicable despite the use of a leasing arrangement to acquire a conference center for the university. While the university argued that the bidding laws which imposed certain requirements on the property owner did not apply based on its lack of ownership, the appellate court refused to ignor[e] the realities of the situation. Id. at 1222. In determining the pivotal issue of ownership, the Ohio Court rejected the university's position that it was merely a lessee under the lease agreement. Instead, the court found significant the fact that the university had purchased the property with the intention of improving it with the conference center; the conference center was constructed on public property; ownership of the property automatically reverted to the university for a sum certain on a date certain; and the fact that the rent payments calculated by the actual cost of the project until such time as the university has essentially paid for the project itself were used as the sum certain cost for such reversion of ownership. Id. at 1223. Based on these facts, the court found the actual owner of the property to be the university, and thus the bidding statutes were determined to apply. Id. Given the absence of a corresponding ownership focus within our prevailing wage and competitive bidding statutes, we are more intrigued with the appellate court's agreement with the lower court that the bidding laws applied notwithstanding the method used to finance the conference center, `as a consequence of [the university's] intended use of the buildings[.]' Id. Based on the university's intended use of the conference center, the court had no difficulty affirming the lower court's conclusion that the project was for a public improvement within the meaning of Ohio's laws. Of perhaps even more importance for our analytical purposes, however, was the Ohio Court's rejection of the university's argument that certain statutory obligations do not apply based solely upon the fact that a private entity directly contracts for the project. Id. at 1224. Another decision from which we draw guidance is the City of Camdenton, a case in which the Missouri Court of Appeals ruled that the prevailing wage rate was applicable where the municipality sold property to a third party under an arrangement requiring such third party to oversee the construction of a firehouse/police station on the property and then grant the city a lease with an option to purchase the improved property. 779 S.W.2d at 312. Given that the construction project was clearly for public use or benefit, there was no question that the firehouse/police station constituted a public works within the Missouri statute. Id. at 316. The municipality advanced the same argument that the Foundation advances here: The prevailing wage rate does not apply since the construction workers are not employed pursuant to a contractual arrangement between a public body and a general contractor. Id. In addition, the city cited its option to terminate the lease/purchase agreement after one year. Id. at 317. In concluding that the prevailing wage act is not limited to a project on which the workmen are employed directly by a public body, the Missouri court stated: To hold that this carefully constructed legal facade insulates the construction of the firehouse/police station from the Prevailing Wage Act would be to place form over substance. The building was to be built according to the plans and specifications of Camdenton. Camdenton retained the right to change those plans and specifications. Camdenton was also granted the power to supervise the construction.... Inherent in the design of the building and its location is a compelling inference that it is to be used by Camdenton. 779 S.W.2d at 316 (emphasis supplied). Describing the arrangement employed by the municipality as `a financing device,' the Missouri court concluded that the workmen on the project are in reality employed on behalf of Camdenton. [18] Id. at 316-17. Observing that [a] city may not do indirectly that which it cannot do directly, the appellate court reasoned that were it [t]o hold otherwise [it] would [be] lend[ing] judicial approval to an easy method of nullifying the Act. Id. at 317. In the recent decision of Division of Labor Standards v. Friends of the Zoo, 38 S.W.3d 421 (Mo.2001), the Missouri Supreme Court agreed with the position adopted by the intermediate appellate court in Camdenton that [a] public body constructing public works may not circumvent the prevailing wage law by a `carefully constructed legal facade.' 38 S.W.3d at 423. At issue in the Friends case was whether workers employed by the not-for-profit Friends of the Zoo charitable organization to construct a reptile house for the zoo were in fact workers ... employed on behalf of a public body engaged in the construction of public works. Id. at 422. Reversing the lower court's grant of summary judgment to the Friends, the Missouri Supreme Court rejected the argument advanced by the Friends that the prevailing wage laws could only apply if the private entity in charge of the construction is an agent of the public body. Id. at 423. Viewing this interpretation as too narrow, the appellate court concluded: Where, by all the facts and circumstances, a private entity and a public body create a facade behind which the public body engages in public works, the workers are employed on behalf of the city. Id. at 424. Several additional decisions suggest factors that are relevant to resolving the underlying issue of whether, despite the identity of the contracting parties or the nature of the contract itself, the construction work is nonetheless subject to the respective state's prevailing wage laws based on the realities of the situation. In Hunter v. City of Bozeman, 216 Mont. 251, 700 P.2d 184 (1985), the court looked beyond the lease agreement governing a municipality's use of a vehicle storage building, which was built pursuant to a separate construction contract to which the city was not a party. Affirming the lower court's decision that the lease was in fact a sale of the building to the City and that this was in effect a public works project, the court found determinative the fact that the City obtained absolute ownership of the `leased' building for $10 and retain[ed] ownership of the land as well as the inclusion of a liquidated damages clause in the event the City failed to renew periodic five-year renewal options during the twenty-year lease period. Id. at 187. In a case which examined as a matter of first instance whether the Oregon prevailing wage laws applied to a build-to-suit lease, the court determined that the critical factor was who exercised the most control over the project. Columbia-Pacific Bldg. & Const. Trades Council v. Oregon Comm'n on Pub. Broad., 102 Or.App. 212, 794 P.2d 438, 442 (1990). Thus, in deciding whether a state agency `carried on' construction, the appellate court looked to the fact that the lessor retained control over financing and construction decisions; the lease was for fair rental value with the option to purchase at full market value; an escape clause left the lessor with all of the risk; and the lower court's conclusion that the contract was not a subterfuge to avoid paying the prevailing wage. Id. at 440. In rejecting the applicability of the Oregon prevailing wage act, the court also found significant the fact that the lessor already owned the land on which the building was constructed; the lessee was not given a reduced purchase price or any other rights in the building under the lease; and the lease agreement allowed Grayco [lessor] to build what was primarily an easily-rented office building on its own land. Id. at 442. After carefully and thoroughly considering the cases cited by the parties, we reach the conclusion that the question of whether our wage act applies in any given situation is not resolved simply with reference to the signing parties on a particular contract. This is because the real parties in interest may not be signatories to the contracts governing the construction project. As discussed above, the practicalities of modern-day financing may require certain third-party arrangements which tend to shield, in some instances, the full extent of the involvement of the actual party in interest. This necessitates that the examining court must look behind the mere paperwork to examine a host of factors in determining the applicability of the wage act in any given case. As a fundamental matter, we recognize that under West Virginia Code § 21-5A-2, the provisions concerning prevailing wages can only be invoked when a construction project that constitutes a public improvement and which involves workers employed by or on behalf of a public authority is involved. In deciding below that a public improvement was not involved based upon the use of the terms let to contract contained in the definition of public improvement, we believe the circuit court focused too narrowly on that part of the definition meant to reference in an all-encompassing fashion all other structures upon which construction may be let to contract. W.Va.Code § 21-5A-1(4). The key to defining a public improvement, as recognized by an opinion of this state's attorney general and numerous courts, is the interwoven concepts of public use and public benefit. See W.Va. Att'y Gen. Op., No. 10 (Feb. 21, 1989); Camdenton, 779 S.W.2d at 316. The determination of whether the construction at issue involves public use, and therefore constitutes a public improvement, requires application of numerous factors. One such set of factors previously identified by counsel for the U.S. Attorney General [19] in analyzing the applicability of the federal prevailing wage act to a lease includes the following considerations: We believe that, in general, the determination whether a lease-construction contract calls for construction of a public building or public work likely will depend on the details of the particular arrangement. These may include such factors as the length of the lease, the extent of government involvement in the construction project, the extent to which the construction will be used for private rather than public purposes, the extent to which the costs of construction will be fully paid for by the lease payments, and whether the contract is written as a lease solely to evade the requirements of the Davis-Bacon act [federal prevailing wage act].... [T]he fact that a novel financing mechanism is employed should not in itself defeat the reading of such a contract as being a contract for construction of a public building or public work. This list of factors, with several modifications, can aid a lower court in its determination of whether a public improvement is involved notwithstanding the outward appearances of the contracts or leases at issue. Accordingly, we hold that the issue of whether a public improvement is involved within the meaning of this state's prevailing wage act must be determined by examining: (1) whether a public entity initiated the construction project; (2) the extent of control retained by the public entity during the development and construction phases; (3) the extent to which the project will be used for a public purpose; (4) whether public funds are used either directly for the costs of construction or indirectly by means of a lease arrangement which contemplates payments essentially covering the amount of the construction; (5) whether the contract is written as a lease solely to evade the requirements of the prevailing wage act; and (6) all other relevant factors bearing on the ultimate issue of whether the project is indeed a public project notwithstanding novel financing mechanisms. While, for reasons stated below, we do not set aside the circuit court's findings and conclusions, we wish to comment briefly on the application of these factors to the case sub judice for future guidance purposes only. Although several documents submitted as attachments to ACT's petition suggest that WVU was intimately involved in the planning stages of the Center, we have no evidentiary finding relative to this issue. Because no evidence was adduced below [20] with regard to the actual control assumed by WVU during the construction phase we cannot determine the extent of control maintained by WVU throughout the construction phase of the process. ACT produced documentation indicating that 89.5% of the Center was to be occupied by WVU and the remainder by the Foundation. In this Court's opinion, the relatively minor use of the Center by a private entity would not foreclose a determination that the use of the Center was primarily public in nature. Although the Foundation stresses the legal right, as required by West Virginia Code § 5A-3-40 (1994) (Repl. Vol. 2000), of WVU to cancel the lease with thirty days notice, we do not find the mere inclusion of such a cancellation clause to be conclusive on the issue of whether a project can be viewed a public improvement within the meaning of this state's wage laws. Similarly, we do not find determinative on this issue the fact that the document ultimately executed was only a lease and not a lease-purchase agreement. It is conceivable to this Court that there is still an understanding between the Foundation and WVU governing the use of the building at the conclusion of the lease period. [21] See Lycoming County Nursing Home Ass'n, Inc., v. Commonwealth of Penn., 156 Pa.Cmwlth. 280, 627 A.2d 238, 243 (1993) (reasoning that fact of construction commencement pre-signing of lease agreement indicated Commissioners knew outcome of negotiations would be favorable). In disregarding the applicability of the Dial decision, the circuit court overlooked the fact that this Court acknowledged in that decision that a lease-purchase agreement undertaken to provide space for government offices clearly served a public purpose. See 198 W.Va. at 199, 479 S.E.2d at 709. In the same fashion, we believe that the leasing device undertaken in this case could be viewed as a creative mechanism of serving the needs of a public entity, WVU, with regard to procuring necessary office space. In this Court's opinion, it would be imprudent to overlook the fact that WVU, rather than the Foundation, was the party who initiated efforts related to the Center's planning and construction. WVU was clearly engaged in a long-term process of obtaining office space to be used primarily by its employees. In foreclosing application of the wage act based upon the fact that WVU did not sign any of the documents under consideration, the lower court has overlooked the insertion of statutory language in West Virginia Code § 21-5A-2 that extends protection of the act when the workers at issue are employed ... on behalf of any public authority. Id. Following the rationale employed by the court in Camdenton, we determine that the absence of a public authority as signatory to a document examined in connection with the issue of the applicability of this state's prevailing wage act does not in itself defeat application of the act. Where sufficient facts are submitted to demonstrate that the workers are involved in construction on behalf of any public authority, the act may still apply. In determining the factual issue of whether the construction is on behalf of the public authority, the trial court should consider whether a public entity initiated the underlying project and all other relevant factors including whether public funding is involved and whether the intended use is for a public purpose. To find otherwise, as the Court observed in Camdenton, would amount to sanctioning a relatively easy way to avoid invoking the provisions of the wage act. See 779 S.W.2d at 317. Implicit in our holding regarding the factors to consider in evaluating whether a public improvement exists for prevailing wage purposes is a recognition that the term public authority, like the term public improvement, cannot be used as a shield to prevent the wage act from operating when the public entity for whom the construction is being performed is not a party to a contract. It only stands to reason that if the wage act was intended to extend to those workers who are doing work on behalf of a public authority, then the mere lack of a signature by that public authority to a contract should not be permitted to operate in such a fashion to circumvent the intent of this state to fairly compensate those laborers. We acknowledge that the wage act, as currently written, clearly hinges its operation on the existence of a contract having been signed by a public authority. See W.Va.Code § 21-5A-6. Barring statutory amendment to section six to include language indicating that an entity acting on behalf of a public authority can sign a contract which invokes the protections of the wage act, we feel compelled to read in such language in the interest of upholding the laudatory policy advanced by the wage act of establishing a floor for the workers engaged in construction for the public's benefit. See W.Va.Code § 21-5A-2; see also Banker v. Banker, 196 W.Va. 535, 543-44, 474 S.E.2d 465, 473-74 (1996) (noting that in interpreting the terms of our ... statutes specifically, we, in the past, have taken care not to undermine the statutes' fundamental goals and that we consistently have turned back neat legal maneuvers attempted by litigants that were not in keeping with overarching duties, responsibilities, and rights that the West Virginia Legislature intended); State v. Elder, 152 W.Va. 571, 575, 165 S.E.2d 108, 111 (1968) (`This and other courts will always endeavor to give effect to what they consider the Legislative intent; but, we do not change plain and simple language employed in framing a statute unless there is an impelling reason for so doing.') (quoting Baird-Gatzmer Corp. v. Henry Clay Coal Mining, 131 W.Va. 793, [805,] 50 S.E.2d 673[, 680 (1948)]). Accordingly, we conclude that in those instances where it is exceedingly clear that a public entity who qualifies as a public authority under West Virginia Code § 21-5A-1(1) is intimately involved with the construction at issue, a trial court may be permitted to reach a conclusion that the wage act should apply notwithstanding the absence of a public authority's actual signature on a subject contract where it can be demonstrated that a contracting party is acting on behalf of the public authority. The concepts previously discussed with regard to determining the existence of a public improvement, such as identifying who initiated the project; examining the degree of control exercised by the public entity in the planning and development stages; and looking to the nature of the use to which the project will be put, will similarly be useful in deciding whether a third party is acting on behalf of a public authority in entering into contracts involving public improvement-type projects. We find no compelling reason not to extend the protections of the wage act in such instances where a public authority is operating behind the scenes to accomplish purposes that qualify as public in nature. Moreover, we feel constrained to interpret the wage act in this fashion to prohibit the clear intent of the statute from being violated.