J.D. Donovan, Inc. v. Minn. Dep't of Transp., s. A14–0863

• Court: Minnesota Supreme Court
• Writing for the Court: GILDEA, Chief Justice.
• Citation: J.D. Donovan, Inc. v. Minn. Dep't of Transp., 878 N.W.2d 1 (Minn. 2016)
• Decision Date: 20 April 2016
• Docket Number: Nos. A14–0863,A14–1021.,s. A14–0863
• Parties: J.D. DONOVAN, Inc., et al., Appellants, v. MINNESOTA DEPARTMENT OF TRANSPORTATION, et al., Respondents.

878 N.W.2d 1

J.D. DONOVAN, Inc., et al., Appellants,

v.MINNESOTA DEPARTMENT OF TRANSPORTATION, et al., Respondents.

Nos. A14–0863

A14–1021.

Supreme Court of Minnesota.

April 20, 2016.

Thomas Revnew, Tara Craft Adams, Seaton, Peters & Revnew, P.A., Minneapolis, Minnesota, for appellants.

Lori Swanson, Attorney General, Mathew Ferche, Assistant Attorney General, Saint Paul, Minnesota, for respondents.

Brendan D. Cummins, Justin D. Cummins, Cummins & Cummins, LLP, Minneapolis, Minnesota, for amicus curiae Minnesota State Building and Construction Trades Council.

OPINION

GILDEA, Chief Justice.

This consolidated appeal involves the scope of the Minnesota Prevailing Wage Act, Minn.Stat. §§ 177.41–.44 (2014), as applied to hauling activities for state highway projects. The question presented is whether truck drivers hauling asphalt cement from a commercial oil refinery to a contractor's facility are performing "work under a contract" within the meaning of Minn.Stat. § 177.44, subd. 1, and therefore must be paid prevailing wages. Relying on an administrative rule that addresses the meaning of "work under a contract," Minn. R. 5200.1106 (2015), the courts below answered this question in the affirmative. Because we hold that hauling activities must be to, from, or on the site of a public works project to qualify as "work under a contract," we reverse.

Respondent Minnesota Department of Transportation (MnDOT) awarded contracts to OMG Midwest, Inc., d/b/a Southern Minnesota Construction (SMC), and appellant Hardrives, Inc. (Hardrives) for highway projects. In 2012, the State contracted with SMC for work on Trunk Highway 30 in Blue Earth County. In 2009, the State contracted with Hardrives for work on Trunk Highways 10 and 23 in Benton County.

As the prime contractors for the highway projects, SMC and Hardrives furnished all services and materials needed to complete the work specified in the contracts. As relevant here, SMC and Hardrives agreed to incorporate a particular grade of asphalt cement into the asphalt concrete mixture furnished to pave the highway surfaces. SMC and Hardrives further agreed to obtain the asphalt cement from a MnDOT-certified oil refinery. Appellants J.D. Donovan, Inc. (Donovan) and Wayne Transports, Inc. (Wayne) assisted in the acquisition and transport of asphalt cement for the projects.

Donovan provided services for both the SMC project and the Hardrives project. Specifically, Donovan purchased asphalt cement from the oil refineries, resold the asphalt cement to SMC and Hardrives, and dispatched truck drivers to haul the asphalt cement from the refineries to SMC's and Hardrives's permanent asphalt mixing facilities. At these facilities, the asphalt cement was pumped into storage tanks for later use in creating asphalt concrete for the projects. Donovan did not make any deliveries to either of the project work sites and did not provide any hauling services at the work sites.

Wayne, a common carrier with for-hire trucking services, provided services for the Hardrives project. During the relevant period, Wayne transported 1,129 loads of asphalt cement from an oil refinery to Hardrives's permanent asphalt mixing facility. Seven of these loads were used for the Hardrives project, although Wayne was not informed that these loads would be used for the project. Wayne did not make any deliveries to the project work site and did not provide any hauling services at the work site.

In addition to awarding contracts for state highway projects, MnDOT is charged with enforcing section 177.44 of the Prevailing Wage Act, which addresses the prevailing wage requirements for state highway projects. Minn.Stat. § 177.44, subd. 7. Following an investigation, the Labor Compliance Unit of MnDOT determined that Hardrives had violated the project contract by failing to ensure that drivers employed by Donovan were paid prevailing wages. In February 2013, MnDOT notified Hardrives by letter that hiring subcontractors to haul "contract-specific oil" directly to its asphalt plant "in order to produce a contract-specific product" constituted "work under the contract" under Minn. R. 5200.1106, which required the payment of prevailing wage rates. Shortly thereafter, MnDOT sent a similar letter to SMC. MnDOT gave Hardrives and SMC 20 days to submit certified payroll records demonstrating compliance with the prevailing wage requirements. See Minn.Stat. § 177.44, subd. 7.

In response to the notices, appellants commenced two separate actions in district court against MnDOT, seeking declaratory and injunctive relief. Donovan instituted one action against MnDOT involving the SMC project. Donovan, Wayne, and Hardrives collectively instituted another action against MnDOT involving the Hardrives project. In both cases, appellants argued that the hauling activities of Donovan and Wayne did not constitute "work under a contract" under Minn.Stat. § 177.44, subd. 1. They claimed that MnDOT was taking a new position on the application of the Prevailing Wage Act to trucking firms. Donovan asserted that it had been providing trucking services on dozens of state highway projects over the previous several years, and MnDOT had never before claimed that hauling asphalt cement from a refinery to a fixed commercial plant location was subject to the prevailing wage requirements. Alternatively, appellants argued that the hauling activities were exempt from the prevailing wage requirements under the "commercial establishment exception" in the Act. See Minn.Stat. § 177.44, subd. 2.¹

The district courts in both cases granted summary judgment to MnDOT. The court of appeals consolidated the cases for appeal and affirmed. J.D. Donovan, Inc. v. Minn. Dep't of Transp., Nos. A14–0863, A14–1021, 2015 WL 404666, at *6 (Minn.App. Feb. 2, 2015). The court of appeals concluded that the hauling activities of Donovan and Wayne qualified as "work under a contract" under Minn. R. 5200.1106, subp. 3(B)(5). J.D. Donovan, 2015 WL 404666, at *5. In addition, the court of appeals summarily rejected appellants' arguments concerning the application of the commercial establishment exception. Id. at *5–6. We granted appellants' petition for review.

I.

At issue here is the meaning of "work under a contract" for state highway projects under the Prevailing Wage Act. Minn.Stat. § 177.44, subd. 1. Under section 177.44, a laborer who is

employed by a contractor, subcontractor, agent, or other person doing or contracting to do all or part of the work under a contract ... to which the state is a party, for the construction or maintenance of a highway ... must be paid at least the prevailing wage rate in the same or most similar trade or occupation in the area.

Minn.Stat. § 177.44, subd. 1(emphasis added); see Minn.Stat. § 177.42, subd. 6(defining the term "[p]revailing wage rate"). The Minnesota Department of Labor and Industry has promulgated administrative rules that apply to prevailing wage determinations. Minn. R. 5200.1000–.1120 (2015); see Minn.Stat. § 177.44, subd. 3(calling for the Department of Labor and Industry to define classes of laborers and to determine prevailing wage rates for all classes of labor commonly employed in highway construction work). MnDOT is responsible for ensuring adherence to the prevailing wage requirements. Minn.Stat. § 177.44, subd. 7. The Act provides fines and penalties for violations of section 177.44, including criminal penalties. See id., subd. 6("A contractor, subcontractor, or agent who violates this section is guilty of a misdemeanor and may be fined not more than $300 or imprisoned not more than 90 days or both.") In addition, businesses that violate the Act may be barred from working on state projects for a 3–year period. See Minn.Stat. § 16C.285, subd. 3 (2014)(defining a "[r]esponsible contractor" as a contractor that, among other requirements, has not violated the prevailing wage statutes).

The dispute here centers on whether "work under a contract" with respect to the hauling activities of truck drivers is limited to hauling activities to, from, or on the site of the state highway project. Appellants argue that the hauling activities of Donovan and Wayne do not qualify as "work under a contract" because they were not making deliveries to or from a project work site. MnDOT responds that the hauling activities do not have to take place at a project work site in order to qualify as "work under a contract," stressing that the transport of contract-specific asphalt cement to the prime contractors' facilities was an integral part of the highway projects.

II.

We begin our analysis by examining the meaning of "work under a contract" in Minn.Stat. § 177.44, subd. 1. Statutory interpretation is a question of law that we review de novo. Krummenacher v. City of Minnetonka, 783 N.W.2d 721, 726 (Minn.2010).

Although the Prevailing Wage Act does not define the term "work under a contract," section 177.44provides two examples that help delineate the scope of the Act with respect to the delivery of project materials. The Act does not apply to "the delivery of materials or products by or for commercial establishments which have a fixed place of business from which they regularly supply the processed or manufactured materials or products," which is the "commercial establishment exception." Minn.Stat. § 177.44, subd. 2. But the Act does apply to "laborers or mechanics who deliver mineral aggregate such as sand, gravel, or stone which is incorporated into the work under the contract by depositing the material substantially in place, directly or through spreaders, from the transporting vehicle." Id. This statutory context does not constitute a definition of "work under a contract," but it does confirm that the Legislature did not intend that all types of hauling activity would be subject to the Act.²

Because the statute does not specifically define the phrase "work under a contract," the parties agree that we should look principally to the definition of "work under the...