Western Michigan University Bd. of Control v. State, AFL-CIO

• Decision Date: 29 July 1997
• Docket Number: 104341,AFL-CIO,Docket Nos. 104340
• Parties: , 134 Lab.Cas. P 58,298, 119 Ed. Law Rep. 1122, 4 Wage & Hour Cas.2d (BNA) 114 WESTERN MICHIGAN UNIVERSITY BOARD OF CONTROL, a constitutional body politic and corporate, Plaintiff-Appellee, Associated Builders & Contractors, Inc., Western Michigan Chapter, a Michigan Corporation, Intervenor Plaintiff-Appellee, v. STATE of Michigan, Defendant-Appellant, and Michigan State Building Trades and Construction Council,, a voluntary unincorporated association, Intervenor Defendant-Appellant.
• Court: Michigan Supreme Court

Page 828

565 N.W.2d 828

455 Mich. 531, 134 Lab.Cas. P 58,298,

119 Ed. Law Rep. 1122,

4 Wage & Hour Cas.2d (BNA) 114

WESTERN MICHIGAN UNIVERSITY BOARD OF CONTROL, a constitutional body politic and corporate Plaintiff-Appellee Associated Builders & Contractors, Inc., Western Michigan Chapter, a Michigan Corporation, Intervenor Plaintiff-Appellee, v. STATE of Michigan, Defendant-Appellant and Michigan State Building Trades and Construction Council AFL-CIO, a voluntary unincorporated association, Intervenor Defendant-Appellant.

Docket Nos. 104340, 104341.

Supreme Court of Michigan.

Argued April 10, 1997.

Decided July 29, 1997.

Miller, Canfield, Paddock & Stone, P.L.C. by Don M. Schmidt and Charles E. Ritter, Kalamazoo, for Plaintiff-Appellee.

Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, and Kelly Keenan, Assistant Deputy Attorney General, Lansing, for Defendant-Appellant State of Michigan.

Klimist, McKnight, Sale, McClow & Canzano, P.C. by John R. Canzano, Southfield, for Defendant-Appellant Intervenor Michigan State Building and Construction Trades Council.

Miller, Johnson, Snell & Cummiskey, P.L.C. by Peter J. Kok and Timothy J. Ryan, Grand Rapids, amicus curiae, for Associated Builders & Contractors, Inc.

Opinion

MALLETT, Chief Justice.

Michigan's prevailing wage act, M.C.L. § 408.551 et seq.; M.S.A. § 17.256(1) et seq., requires that certain contracts for state projects contain a provision obligating the contractor to pay workers on the project the wage rate and fringe benefits prevailing in the locality where the construction is to occur. We granted leave in this case to determine whether Western Michigan University's student recreational facility project is subject to the act. The trial court and Court of Appeals determined that because state appropriations did not directly finance or guaranty financing for the project, the project was not "sponsored or financed in whole or in part by the state" ¹ within the meaning of the act and that, consequently, the project was not subject to it. We disagree. Because Western Michigan University is essentially an arm of state government, its project was sponsored and financed by the state within the plain meaning of the act.

I Facts

Western Michigan University began planning renovation of its student recreational facilities in the mid-1980s. It entered into various contracts for the planning and work on the project during the 1980s and early 1990s. Before the Board of Control of the university finalized the financing of the project, bills relating to the various contracts were paid out of the university's general fund, which contained commingled state appropriations. In the spring of 1991, the board adopted an enrollment fee increase to fund the project. In December of 1992, after realizing that funds generated from the enrollment fee would not completely cover the cost, the university issued approximately $60 million in revenue bonds. The bonds were to be primarily repaid with revenues from student activity fees. The university additionally pledged certain general fund revenues. These revenues included tuition fees, deposits, charges and receipts, income from students, gross revenues from housing, dining and auxiliary facilities, and grants, gifts, donations, and pledges, as well as investment income.

The university sent an inquiry to the Department of Labor regarding whether it must pay construction workers on the project at the prevailing wage act rate. The parties dispute whether the department informed the university that the act did not apply. The university claims that the department indicated that the act did not apply to the project because it was not funded by direct state appropriations. The state claims that correspondence from the department related to other projects, and not to the recreational facility project at issue here.

In light of controversy surrounding the applicability of the prevailing wage act to the project, state representative Mary Brown requested a formal opinion from the Attorney General on the issue. The Attorney General determined that the act does apply generally to construction projects undertaken by state universities, and specifically applies to the student recreational facilities projects. OAG, 1991-1992, No. 6,723, pp. 156-160 (June 23, 1992).

Immediately following release of the Attorney General opinion, the university commenced this declaratory judgment action. The trial court granted summary disposition for the university and the intervenor plaintiff, Associated Builders & Contractors, Inc., holding that because the project had not been "sponsored or financed" by the state, it was not subject to the act. The state, and the intervenor defendant Michigan State Building Trades and Construction Council, AFL-CIO, appealed. The Court of Appeals affirmed. 212 Mich.App. 22, 536 N.W.2d 609 (1995). The defendant and the intervenor defendant sought leave to appeal in this Court and now we reverse.

II Prevailing Wage Act

Michigan's prevailing wage act is generally patterned after the federal prevailing wage act, also known as the Davis-Bacon Act. 40 U.S.C. § 276a et seq. Both the federal and Michigan acts serve to protect employees of government contractors from substandard wages. Federal courts have explained the public policy underlying the federal act as

"protect[ing] local wage standards by preventing contractors from basing their bids on wages lower than those prevailing in the area" ... [and] "giv[ing] local labor and the local contractor a fair opportunity to participate in this building program." [Universities Research Ass'n, Inc. v. Coutu, 450 U.S. 754, 773-774, 101 S.Ct. 1451, 1463, 67 L.Ed.2d 662 (1981).]

The purposes of the Davis-Bacon Act are to protect the employees of Government contractors from substandard wages and to promote the hiring of local labor rather than cheap labor from distant sources. [North Georgia Building & Construction Trades Council v. Goldschmidt, 621 F.2d 697, 702 (C.A.5, 1980).]

The Michigan prevailing wage act reflects these same public policy concerns. Through its exercise of the sovereign police power to regulate the terms and conditions of employment for the welfare of Michigan workers, ² the Michigan Legislature has required that certain contracts for state projects must contain a provision requiring the contractor to pay the prevailing wages and fringe benefits to workers on qualifying projects.

Whether a particular project comes within the ambit of the act is governed by the language of the act itself. In this regard, the act provides:

Every contract executed between a contracting agent and a successful bidder as contractor and entered into pursuant to advertisement and invitation to bid for a state project which requires or involves the employment of construction mechanics, other than those subject to the jurisdiction of the state civil service commission, and which is sponsored or financed in whole or in part by the state shall contain an express term that the rates of wages and fringe benefits to be paid to each class of mechanics by the bidder and all of his subcontractors, shall be not less than the wage and fringe benefit rates prevailing in the locality in which the work is to be performed. [M.C.L. § 408.552; M.S.A. § 17.256(2) (emphasis added).]

In summary, to come within the act, a project must: (1) be with a "contracting agent," a term expressly defined in the act; (2) be entered into after advertisement or invitation to bid; (3) be a state project, a term also defined in the act; (4) require the employment of construction mechanics; and (5) be sponsored or financed in whole or in part by the state.

The parties do not dispute that the contracts at issue were entered into pursuant to an invitation to bid or that the project required the employment of construction mechanics. Consequently, we will not further discuss these two threshold requirements.

The requirement that the project be with a "contracting agent" is explained in the act's definition of the term "contracting agent":

"Contracting agent" means any officer, school board, board or commission of the state, or a state institution supported in whole or in part by state funds, authorized to enter into a contract for a state project or to perform a state project by the direct employment of labor. [M.C.L. § 408.551(c); M.S.A. § 17.256(1)(c).]

The university is clearly a contracting agent within the plain meaning of the act. The constitutional provisions relating to state universities deems the university an "institution" and establishes state support:

The legislature shall appropriate moneys to maintain ... Western Michigan University ... by whatever names such institutions may hereafter be known, and other institutions of higher education established by law. [Const 1963, art 8, § 4.]

Further, the regional universities act, M.C.L. § 390.551; M.S.A. § 15.1120(1), refers to the university as a "state institution":

The established state institutions known as Central Michigan university, Eastern Michigan university, Northern Michigan university and Western Michigan university are continued under these names. Each institution shall be governed by a separate 8-member board of control.

Having determined that the university is a "contracting agent," we next turn to whether the student recreational facilities project it undertook is a "state project." The act also expressly defines this term:

"State project" means new construction, alteration, repair, installation, painting, decorating, completion, demolition, conditioning, reconditioning, or improvement of public buildings, schools, works, bridges, highways, or roads authorized by a contracting agent. [M.C.L. § 408.551(b); M.S.A. § 17.256(1)(b).]

The parties do not dispute that the project undertaken by the contracting agent, Western Michigan University, involved renovations and an addition to the existing student recreation...