Court Opinion

ID: 5486245
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:14:01.992703+00
Date Added: 2024-06-11T08:33:41.262024
License: Public Domain

OPINION OF THE COURT
Pigott, J.
Our State Constitution provides that laborers, workers and mechanics engaged in “any public work” cannot “be paid less *407than the rate of wages prevailing in the same trade or occupation in the locality within the state where such public work is to be situated, erected or used” (NY Const, art I, § 17). Labor Law § 220 implements this constitutional requirement, providing in pertinent part:
“Each contract to which the state or a public benefit corporation or a municipal corporation or a commission appointed pursuant to law is a party, and any contract for public work entered into by a third party acting in place of, on behalf of and for the benefit of such public entity pursuant to any lease, permit or other agreement between such third party and the public entity, and which may involve the employment of laborers, workers or mechanics shall contain a stipulation that no laborer, worker or mechanic in the employ of the contractor, subcontractor or other person doing or contracting to do the whole or a part of the work contemplated by the contract shall be permitted or required to work more than eight hours in any one calendar day or more than five days in any one week except in cases of extraordinary emergency including fire, flood or danger to life or property” (Labor Law § 220 [2]).
This litigation was sparked by an opinion letter dated August 31, 2007, wherein the New York State Department of Labor declared that the prevailing wage law mandate of Labor Law § 220 applied to all charter school projects. Two weeks later, on September 11, 2007, the Commissioner notified the Charter Schools Institute and the Commissioner of the State Education Department that it would begin to enforce prevailing wage laws on all charter school projects for which the advertising of bids occurred on or after September 20, 2007.
This determination was in stark contrast to the position taken by the Department in the previous seven years. In an opinion letter dated June 29, 2000, the Department then reasoned that,
“generally speaking, a Charter School is not a public entity. Therefore, Charter Schools cannot, as a class, be deemed to be Departments of Jurisdiction as defined under Labor Law Article 8, Section 220. And, in the absence of a contract with a public entity, the requirement to pay prevailing hourly *408wages and supplements to workers, laborers, and mechanics employed on a project does not arise.”
In response to this change of opinion, petitioners, two foundations that support the creation of New York charter schools, the New York Charter School Association and three charter schools, commenced the instant proceedings, seeking a judgment declaring that the Commissioner’s new position was taken in excess of her jurisdiction, that the prevailing wage laws do not apply to charter schools and an order enjoining the Commissioner from imposing the prevailing wage laws on them.
Supreme Court denied the petitions holding that the charter agreement between the school and the chartering entity is itself a contract between a public entity and a third party that may involve the employment of laborers, workers or mechanics (Matter of Foundation for a Greater Opportunity v Smith, 20 Misc 3d 453, 464 [Sup Ct, Albany County 2008]). Therefore, the court reasoned, the construction, renovation, repair and maintenance of charter schools facilities constitute projects for public works (id. at 467).
The Appellate Division reversed, granted the petitions and declared that “petitioners are not subject to the prevailing wage laws of Labor Law article 8” (Matter of New York Charter School Assn. v Smith, 61 AD3d 1091, 1095 [3d Dept 2009]). The court found that charter schools are not public entities and, further, that charter agreements are not contracts involving the employment of laborers, workers or mechanics (id. at 1094).
This Court granted leave and we now affirm.
I.
In Matter of Erie County Indus. Dev. Agency v Roberts (94 AD2d 532 [1983], affd for reasons stated below 63 NY2d 810 [1984]), we held that two conditions must be met for the prevailing wage law to apply: “(1) the public agency must be a party to a contract involving the employment of laborers, workmen, or mechanics, and (2) the contract must concern a public works project” (id. at 537).
In order for the prevailing wage laws to apply to charter schools, both prongs of the Erie County test must be met.
The Commissioner argues that the first prong, the contract requirement, is met for three independent reasons. First, taking the position of Supreme Court, the charter agreement governing the operation of a charter school is itself a contract with a *409public entity that contemplates the employment of workers on facility projects. Second, the charter school should be regarded as a public entity for purposes of the prevailing wage law. Finally, the charter school may be regarded as a third-party intermediary when it enters into a charter school facility contract on behalf of or in place of the chartering entity (usually a school district), pursuant to the charter that created it. Taking each of these arguments in order, we hold that the projects undertaken by charter schools contemplated by this litigation do not meet the contract prong of the Erie County test.
II.
The Commissioner’s first argument is easily disposed of. Labor Law § 220 (2), by its terms, requires that the contract be particular to the “work contemplated” by the parties. In other words, construction or renovation work must be involved (see e.g. Matter of 60 Mkt. St. Assoc. v Hartnett, 153 AD2d 205 [3d Dept 1990] [lease agreement between county and limited partnership providing financing for the construction project]; Matter of National R.R. Passenger Corp. v Hartnett, 169 AD2d 127 [3d Dept 1991] [financing and implementation agreements for the construction]). A charter agreement is not such a document. It is an authorizing agreement under which an agency has determined that an applicant school is competent to be licensed as an education corporation and nothing more (see Education Law § 2852 [2]). Although the charter agreement must contain certain information, such as the location of the proposed charter school (see Education Law § 2851 [2] [j]), it is not a contract for public work involving the hiring of laborers, workers, or mechanics within the meaning of section 220.
III.
As to the Commissioner’s second argument, that charter schools are public entities within the meaning of the prevailing wage law, we disagree. Only four public entities are specifically identified under Labor Law § 220 (2): the State, a public benefit corporation, a municipal corporation or a commission appointed pursuant to law. By its terms, the statute does not expressly apply to education corporations, and that includes charter schools (see Education Law § 216-a [1] [a]; § 2853 [1]).
We recognize that charter schools possess some characteristics similar to a public entity. The Legislature created charter schools as “independent and autonomous public school[s]” and
*410granted them powers that “constitute the performance of essential public purposes and governmental purposes of this [S]tate” (Education Law § 2853 [1] [c], [d] [emphasis added]). At the same time, however, charter schools are not governed by appointees of the government, but by a self-selecting board of trustees that has “final authority for policy and operational decisions of the school” (Education Law § 2853 [1] [f]). Further, the Legislature made clear that charter schools are exempt from all other state and local laws, rules, regulations or policies governing public schools (see Education Law § 2854 [1] [b]). When the Legislature intended charter schools to be subject to particular laws governing public entities, it has said so (see e.g. Education Law § 2584 [1] [e]). Thus, the status of charter schools has often been difficult to define because they may not be easily identified as either a purely private or public entity (see e.g. Matter of New York Charter Schools Assn., Inc. v DiNapoli, 13 NY3d 120 [2009] [holding that charter schools are not political subdivisions of the State, and the task of auditing charter schools was not incidental to audits of public school districts]). While charter schools are a hybrid of sorts and operate on different models, they are significantly less “public” than the entities in those four categories, and thus, it is clear that these charter schools do not fall within any of the four categories to which the prevailing wage law applies.
IV
Finally, the Commissioner argues that based on a recent amendment to Labor Law § 220, charter schools now fall within its ambit. The argument goes that when the charter schools contract for renovation work, they are contracting in place of, on behalf of and for the benefit of the State or Board of Regents.
In 2007, Labor Law § 220 (2) was amended to close what the bill’s sponsor called a “loophole” (Senate Introducer’s Mem in Support, Bill Jacket, L 2007, ch 678, at 27, 2007 McKinney’s Session Laws of NY, at 2162) in the prevailing wage laws that led to the decision in Matter of Pyramid Co. of Onondaga v New York State Dept. of Labor (223 AD2d 285 [3d Dept 1996]). In Pyramid, a private contractor, acting under a State Department of Transportation (DOT) permit, built a public road on state land to provide access to Interstate Highway 81 (id. at 286). The court found that, although the highway project was a “public works project,” prevailing wage laws did not apply because “DOT was not a party to any contract involving the construction of the project” (id. at 287).
*411The purpose of this amendment was to enforce prevailing wage laws on jobs, like the one in Pyramid, in which private parties are carrying out public work projects on behalf of public owners. Neither the amendment nor any of the supporting legislative history suggest that the prevailing wage laws would therefore extend to charter schools.
Indeed, the Charter Schools Act itself provides to the contrary: “[n] either the local school district, the charter entity nor the state shall be liable for the debts or financial obligations of a charter school or any person or corporate entity who operates a charter school” (Education Law § 2853 [1] [g]).
A charter school must secure and maintain, on its own, the facilities where it conducts its educational mission—whether by raising private funds to build a school, renting existing facilities, arranging to have a donor provide facilities or other appropriate means. When an education corporation enters into a facilities contract for a charter school, it typically does so on its own behalf, in its own name, and at its own risk. Thus, unlike in Pyramid, where the private entity was clearly acting to benefit the State, a renovation contract by a charter school is only for the benefit of the charter school itself.
Our holding today should not be read to mean that every facilities contract in which a charter school is a party is exempt from the prevailing wage laws. There may be contracts where a charter school is acting in place of, on behalf of and for the benefit of a public entity, where the prevailing wage law may apply. We need not address the application of section 220 to those situations because the facilities contracts contemplated by this litigation involve projects in which the foundation or the charter school owns the building and all construction, renovation, repair and maintenance of the building are the responsibility of the charter school.
V
In sum, we hold that the first prong of the Erie County test, the contract requirement, has not been met in these cases. Thus, the blanket ruling of the Commissioner, based on the arguments set forth, is in error. In light of our holding, we need not consider whether charter school projects are public works under the second prong of the prevailing wage law test.
Accordingly, the order of the Appellate Division should be affirmed, with costs.