Governor Brown signed into law October 10, 2015, AB 219 which expanded the California Public Works Labor Code to include hauling and delivery of ready-mix concrete to public works projects, effective July 1, 2016 as California Labor Code Section 1720.9. The amendments do not apply to public works contracts that were advertised for bid or awarded prior to July 1, 2016.

On June 30, 2016, a group of eight Ready-Mix Concrete Companies filed a lawsuit in US District Court in Los Angeles against the California Department of Industrial Relations and the Division of Labor Standards Enforcement seeking a preliminary injunction challenging that AB 219 is a violation of Equal Protection and federal law.

On October 18, 2016, the US District Court in Los Angeles granted the plaintiff’s request and issued a preliminary injunction citing that the plaintiff’s raised “serious questions as to whether including ready-mixed concrete but excluding other building materials under the prevailing wage law is rationally related to a legitimate government interest.” This temporarily restricted the DIR’s and DLSE’s enforcement of AB 219. As expected, the DIR appealed, seeking a stay of the preliminary injunction.

In the DIR’s October 28, 2016 issue of their Newsline, DIR reported:

“If the injunction is stayed, and DIR is successful on appeal, the department intends to enforce all prevailing wage requirements from AB 219’s effective date of July 1, 2016, to the full extent allowed by law. Contractors and subcontractors should also be aware that if they choose not to pay prevailing wages to workers on public works projects, they may still be subject to claims for unpaid wages and penalties by parties who are not subject to the injunction. You should consult with your attorney if you have any questions.”

On December 16, 2016 the federal Ninth Circuit Court of Appeals granted the DIR’s request for a stay of the preliminary injunction. With the stay lifted, ultimately allowing the DIR to enforce AB 219, the DIR issued a Newsline on December 23, 2016 warning contractors and subcontractors of their temporary victory:

“The order had temporarily prohibited DIR and the Labor Commissioner from enforcing new prevailing wage requirements on the delivery of ready-mix concrete to public works projects. The department will enforce all prevailing wage requirements pursuant to AB 219.”

On March 14, 2017 the U.S. District Court for the Central District of California, issued a judgment and permanent injunction overturning AB 219 as the Court’s final decision and prohibited DIR and the Labor Commissioner from enforcing AB 219. On March 29, 2017 the state appealed the permanent injunction and issued a Newsline forcefully stating their position:

“DIR asked for a stay of the injunction pending the outcome of the appeal. If the injunction is stayed, and DIR is successful on appeal, the Department intends to enforce all prevailing wage requirements from AB 219’s effective date of July 1, 2016, to the full extent allowed by law. Contractors and subcontractors should also be aware that if they choose not to pay prevailing wages to workers on public works projects, they may still be subject to claims for unpaid wages and penalties by parties who are not subject to the injunction. You should consult with your attorney if you have any questions.”

Clearly, the DIR if successful on appeal, intends to enforce the statute to the fullest extent of the law. On Wednesday, April 19, 2017 the Ninth Circuit Court of Appeals granted the DIR’s request for a stay of the permanent injunction and will be enforcing AB 219 fully.

Where does this leave contractors?

Certainly, consult with your own legal counsel. However, do note that the DIR has taken the aggressive position that they will enforce AB 219 going back to the date it took effect, July 1, 2016. With the permanent injunction stayed, the DIR can now enforce AB 219 and the appeal is likely to take through most of 2018, as oral arguments are not anticipated to begin until early 2018.