ASSOCIATED BUILDERS AND CONTRACTORS V DIRECTOR CONSUMER & INDUSTR
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STATE OF MICHIGAN
COURT OF APPEALS
ASSOCIATED BUILDERS AND CONTRACTORS,
SAGINAW VALLEY AREA CHAPTER,
FOR PUBLICATION
July 19, 2005
9:00 a.m.
Plaintiff-Appellee/Cross-Appellant,
v
DIRECTOR, DEPARTMENT OF CONSUMER &
INDUSTRY SERVICES, and MIDLAND COUNTY
PROSECUTING ATTORNEY,
No. 234037
Midland Circuit Court
LC No. 00-002512-CL
ON REMAND
Defendants/Cross-Appellees,
and
NATIONAL ELECTRICAL CONTRACTORS
ASSOCIATION, MICHIGAN CHAPTER,
Defendant/Intervenor-Appellant/
Cross-Appellee,
Official Reported Version
and
MICHIGAN MECHANICAL CONTRACTORS
ASSOCIATION, MICHIGAN CHAPTER OF
SHEET METAL & AIR CONDITIONING
CONTRACTORS, and MICHIGAN STATE
BUILDING & CONSTRUCTION TRADES
COUNCIL,
Defendants/Intervenors-Appellants/
Cross-Appellees,
and
SAGINAW COUNTY PROSECUTOR,
Intervenor.
Before: Whitbeck, C.J., and White and Donofrio, JJ.
WHITBECK, C.J. (concurring).
-1-
I concur with the majority in this matter. I write separately to emphasize, briefly, several
points that I consider to be of some importance.
I. Overview
At issue here is the constitutionality of the prevailing wage act,1 sometimes referred to as
the "Little Davis-Bacon Act" because the Legislature patterned it after the federal Davis-Bacon
Act of 1931.2
The central provision of the prevailing wage act is § 2,3 which 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 not be
paid less than the wage and fringe benefit rates prevailing in the locality in which
the work is to be performed. . . .
Section 44 of the prevailing wage act implements § 2 by providing a method for
establishing the "prevailing wages and fringe benefits" based on collective bargaining
agreements in the locality:
The commissioner[5] shall establish prevailing wages and fringe benefits at
the same rate that prevails on projects of a similar character in the locality under
collective agreements or understandings between bona fide organizations of
construction mechanics and their employers. . . .
1
MCL 408.551 et seq.
2
40 USC 276a et seq. (now 40 USC 3141 et seq.).
3
MCL 408.552.
4
MCL 408.554.
5
The prevailing wage act defines the "commissioner" as "the [D]epartment of [L]abor." MCL
408.551(d). Under Executive Reorganization Order No. 1996-2, the Department of Labor
became the Department of Consumer & Industry Services, MCL 445.2001, of which defendant
Kathleen Wilbur was the Director. Under Executive Reorganization Order No. 2003-18, MCL
445.2011, the Department of Consumer & Industry Services became the Department of Labor
and Economic Growth. I will use the abbreviation "CIS" in this concurrence to delineate the
responsible department.
-2-
As the Attorney General points out, plaintiff Associated Builders and Contractors,
Saginaw Valley Area Chapter (the Saginaw ABC) does not here contend that the Legislature
lacks the authority to enact a prevailing wage act, nor does the Saginaw ABC contend that the
Legislature lacks the authority to establish a method for the periodic adjustment of those rates
without direct legislative action. Although the Saginaw ABC advances a number of contentions
in this matter, there are two with which I am particularly concerned. The first is that, in practice,
there is a "two-tier" rate system that allows unions and unionized contractors to establish one set
of high rates applicable to public works projects but does not constrain them from negotiating
another set of lower rates for use in privately funded projects. The second is that the rates
negotiated for use on prevailing wage act projects—a phrase that the Saginaw ABC appears to
use interchangeably with public works projects, presumably meaning those projects that are
covered by the prevailing wage act—are "artificially high." I will deal with these two
contentions in order below.
II. The "Two-Tier" System
The Saginaw ABC contends that the prevailing wage act is an unconstitutional delegation
of legislative authority. In support of this contention, the Saginaw ABC asserts that the CIS is "a
mere paper shuffler in the process of determining prevailing wages" and that "the regulation of
wages and benefits on state-funded construction projects in Michigan is passed to unions and
unionized contractors." The Saginaw ABC further asserts that, "working together in collusion,"
such unions and unionized contractors can set inflated wage and fringe benefit rates in collective
bargaining agreements and, at the same time, "make side agreements to adhere to lower rate
scales which enable unionized contractors to compete in the everyday, 'dog-eat-dog' private
marketplace."
The Saginaw ABC identifies two types of such "side agreements": market recovery
programs and job targeting programs. As I understand it, under a market recovery program a
union may sacrifice wages in order to ensure that a unionized contractor can compete for the
award of a contract for a given project. Such market recovery programs allow the modification
of wages, fringe benefits, and work rules on a job-by-job basis. Thus, for example, the union
may agree that operating engineers, who under the collective bargaining agreement with the
unionized contractor are entitled to $25 an hour, will receive $23 an hour. As the defendantsintervenors frankly concede, unions institute such market recovery programs in the face of
nonunion competition that pays a lower wage scale. Theoretically at least, the cumulative effect
of the lower wages that the unionized contractor will pay allows that contractor to be competitive
in bidding for projects and therefore "recover" the market that the contractor would otherwise
have lost.
As I understand it, a job targeting program is a device for equalizing the pay of union
members whose unionized contractor employer has successfully won a contract under a market
recovery program. Using again the example of operating engineers who will make $23 an hour
on a project pursuant to a market recovery program, the union will "target" that lower salary and
will make up the difference between what the operating engineers would otherwise earn under
the collective bargaining agreement, $25 an hour, with a subsidy from a job targeting fund that
the union collects from the entire bargaining unit through additional dues.
-3-
The Saginaw ABC labels these programs a "recent form of obnoxious collusion" and
asserts that, by effectively establishing a two-tier rate system, they "taint" the collective
bargaining process in relation to the prevailing wage act. I would first note that this argument
would have considerably more traction had the Saginaw ABC actually challenged the market
recovery and job targeting programs at the trial court level. However, counsel for the Saginaw
ABC made it clear that it was making no such challenge:
Mr. Masud: Judge, ABC, and I will make very clear on this, because
there's some other counter-claims that ABC needs to be concerned about.
We are not challenging the lawfulness of market recovery. . . .
We don't need to show that that process is illegal. In fact, we state in our
brief that it is not—job targeting is not illegal. . . .
* * *
I will make it very clear for this record that ABC is not in any way, shape,
or form challenging employers and Union's right to do these things.
Secondly, I note that the record is barren of any suggestion that the Saginaw ABC
engaged in any effort through administrative proceedings to have the CIS consider these "side
agreements" in establishing prevailing wages. As the defendants-intervenors point out, the
doctrine of exhaustion of administrative remedies is well-settled in Michigan and requires a
party to exhaust whatever administrative remedies are available before challenging an agency
action in court.6 There are a number of very good reasons for the doctrine.
(1) [A]n untimely resort to the courts may result in delay and disruption of
an otherwise cohesive administrative scheme; (2) judicial review is best made
upon a full factual record developed before the agency; (3) resolution of the
issues may require the accumulated technical competence of the agency or may
have been entrusted by the Legislature to the agency's discretion; and (4) a
successful agency settlement of the dispute may render a judicial resolution
unnecessary.[7]
It is certainly possible, as the Saginaw ABC asserts, that unions and unionized
contractors are colluding to conceal the existence of their market recovery and job targeting
programs from the CIS. It is certainly possible that this collusion taints the collective bargaining
process. It is certainly possible that this taint results in higher wage rates for projects covered by
the prevailing wage act. But there is not a scintilla of evidence in this record that this is so. And
6
Judges of the 74th Dist v Bay Co, 385 Mich 710, 728; 190 NW2d 219 (1971).
7
Int'l Business Machines Corp v Dep't of Treasury, 75 Mich App 604, 610; 255 NW2d 702
(1977).
-4-
the reason that no such evidence exists in the record is that the Saginaw ABC made no attempt,
by complaint, petition, or otherwise, to engage the accumulated technical competence of the CIS
to determine whether any of these possibilities might be confirmed.
In summary, it is one thing to label an administrative agency, which might be able to
settle such issues conclusively, as a mere paper shuffler; rhetoric is often its own reward. It is
quite another to seek untimely judicial intervention that has the effect, intended or not, of
disrupting an otherwise cohesive administrative scheme. And it is extraordinarily inefficient to
then seek judicial review without the benefit of a full factual record developed before the agency.
As a matter of law, therefore, the Saginaw ABC has failed here to exhaust its administrative
remedies. The trial court thus erred when it denied summary disposition regarding the Saginaw
ABC's unlawful delegation claim on the basis that there were material issues of fact about which
discovery could proceed.
III. "Artificially High" Wage Rates
In support of its contention that the prevailing wage act is unconstitutionally vague, the
Saginaw ABC asserts:
[T]o say that the [prevailing wage a]ct requires the payment of
"prevailing" wages in the locality is a misnomer. Union construction workers
perform far less construction work in Michigan than do non-union construction
workers. The wages paid to this minority of workers under collective bargaining
agreements are well above [the] industry average. Since those high rates found in
collective bargaining agreements are used exclusively to set the rates established
by the CIS on prevailing wage projects, the "prevailing" wages under the Act are
always far above the average for the industry. Thus, it cannot be said that they
are truly "prevailing."
Since trade unions are effectively able to force their exorbitant wage and
fringe benefits rates on all publicly-funded construction projects in Michigan
through the application of the [prevailing wage act], the overall impact of the
[prevailing wage a]ct is to increase the cost to the government for public works
construction projects over what they would cost in the open market.[8]
In a footnote, the Saginaw ABC goes further:
The resultant unnecessary increased cost is not the only affront to
Michigan taxpayers. The [prevailing wage a]ct's original purpose has a checkered
past as well. According to the Michigan Supreme Court, the Act is patterned after
the federal Davis-Bacon Act, 40 U.S.C. 276a, and has its same goals and
purposes. Western Michigan University v. State of Michigan, 455 Mich 531, 535-
8
Footnotes omitted.
-5-
536 (1977). The federal statute was enacted in 1931 in large part as a means by
which to protect the higher wages of white construction workers in northern cities
such as New York, Philadelphia and Detroit from being diluted through "cheap
colored labor" from the southern states. Thiebolt, Prevailing Wage Legislation,
Wharton School of the University of Pennsylvania, (1986), p. 30. There is very
strong evidence that the Michigan [prevailing wage a]ct has reduced employment
opportunities in particular for blacks. Richard Vetter, supra, referencing Robert
P. Hunter, Union Racial Discrimination is Alive and Well, Mackinac Center for
Public Policy, September 1977.
Now, it may well be that the Congress passed the Davis-Bacon Act in order to insulate
white construction workers from competition by "cheaper" African-American workers from the
south. It may well be that the Michigan prevailing wage act has reduced employment
opportunities for African-Americans in this state. It may well be that the prevailing wage act's
reliance on collective bargaining agreements as determinative of prevailing wages in a locality is
misplaced. It may well be that the overall effect of the prevailing wage act is to increase the cost
to the government for public works construction projects over what they would cost in the open
market. It may well be that each of these factors is an "affront" to Michigan citizens and
taxpayers.
Unquestionably, however, these are public policy questions.9 Equally unquestionably,
there is nothing in our judicial commission that empowers us, as compared to the Michigan
Legislature, to address them. Our legal training makes us no more qualified to resolve these
public policy issues than teachers or truck drivers, no more able to sense and act upon the public
will than funeral directors or fire fighters, no wiser in charting a course for sound labor policy in
the state than plumbers or physicians. If the prevailing wage act should be reconstituted or even
repealed, then it is the Michigan Legislature—popularly elected by teachers and truck drivers,
funeral directors and fire fighters, plumbers and physicians, and the rest of our diverse society to
address precisely these types of public policy questions—that must undertake this task.
Thus, my personal opinion on the fairness or the soundness of the prevailing wage act—
and, quite frankly, the opinion of the Saginaw ABC on the same public policy issues—has
absolutely nothing to do with whether the act is unconstitutional by reason of unlawful
delegation or vagueness. The Legislature is free to adopt bad policy; it is free to act unfairly; it
is free to pursue ostensibly counterproductive or even downright foolish objectives, all without
the judicial branch acting as a super-legislature and substituting its own version of what
constitutes sound public policy. While this freedom is not unlimited—it is for this reason,
9
Of course, if the Legislature intended such public policy decisions to have a racially
discriminatory effect, they would be subject to strict scrutiny by the courts. See, for example,
Washington v Davis, 426 US 229, 241-242; 96 S Ct 2040; 48 L Ed 2d 597 (1976). But the
Saginaw ABC has not brought an equal protection or due process claim asserting that the
prevailing wage act is racially discriminatory on its face or as applied.
-6-
among others, that we the people enact constitutions—our scope of review is extremely limited
and we must exercise it with the greatest restraint. As this Court has said:
That a statute may appear undesirable, unfair, unjust, or inhumane does
not itself render the statute unconstitutional and empower a court to override the
Legislature. Doe v Dep't of Social Services, 439 Mich 650, 681; 487 NW2d 166
(1992). Arguments that a statute is unwise or results in bad policy should be
addressed to the Legislature. People v Kirby, 440 Mich 485, 493-494; 487 NW2d
404 (1992).[10]
If arguments that a statute needs change, or even repeal, should be addressed to the
Legislature, then it most certainly follows that the courts should not step in to do what the
Legislature has not done. And, as the attached chart shows, since 1972 there have been thirteen
proposed amendments to exempt certain projects from the prevailing wage act. During the same
period there have been ten attempts to repeal the act. However, no proposed amendment, or
repeal, of the act has passed. In essence, the Saginaw ABC invites us to do what the Legislature
has refused to do: repeal the prevailing wage act. As is clear from the majority opinion, today
we have declined that invitation.
/s/ William C. Whitbeck
10
Proctor v White Lake Twp Police Dep't, 248 Mich App 457, 462; 639 NW2d 332 (2001).
-7-
Michigan Prevailing Wage Act
History of Proposed Amendments
Year
Title
2005
HB
4351
Primary
Sponsor
Rep.
Hildenbrand
2005
HB
4531
Rep.
Hildenbrand
2003
HB
4161
Rep. Sheen
2001
SB 82
Sen. Steil
2001
SB 84
Sen. Steil
2001
HB
4383
Rep.
Gosselin
2001
HB
4474
Rep. Kuipers
2000
SB
1353
Sen. Steil
1999
HB
4193
Rep. Kuipers
1999
HB
4271
Rep. Kukuk
Repeal the Michigan prevailing wage act. To repeal
MCL 408.551 through 408.558.
1999
SB
122
Sen. Steil
Eliminate requirement to pay prevailing wage on
public school projects. To amend MCL 408.551.
1999
SB
207
Sen. Steil
Repeal the Michigan prevailing wage act. To repeal
MCL 408.551 through 408.558.
1998
HB
5506
Rep.
Voorhees
Exempt bond projects approved by the state
treasurer from the Michigan prevailing wage act.
To amend MCL 408.558.
1997
SB
0131
Sen. Steil
Repeal the Michigan prevailing wage act. To repeal
MCL 408.551 through 408.558.
Description
Eliminate requirement to pay prevailing wage on
public school construction projects. To amend
MCL 408.551.
Eliminate requirement to pay the prevailing wage on
public school projects. To amend MCL 408.551.
Eliminate requirement to pay prevailing wage on
public school construction projects. To amend
MCL 408.551.
Eliminate requirement to pay prevailing wage on
public school academy projects. To amend MCL
408.551.
Eliminate requirement to pay prevailing wage on
public school projects. To amend MCL 408.551.
Eliminate requirement to pay prevailing wage on
public school, bridge, highway and road projects.
To amend MCL 408.551.
Exempt projects building bridges used only for
snowmobiling from the Michigan prevailing wage
act. To amend MCL 408.551.
Eliminate requirement to pay prevailing wage on
public school academy projects.
To amend
408.551.
Repeal the Michigan prevailing wage act. To repeal
MCL 408.551 through 408.558.
-8-
Status
Referred to Committee on
Employment Relations,
Training & Safety
Referred to Committee on
Employment Relations,
Training & Safety
Referred to Committee on
Employment Relations,
Training & Safety
Referred to Committee on
Education
Referred to Committee on
Education
2nd Reading in Committee on
Employment Relations,
Training & Safety
Referred to Committee on
Conservation and Outdoor
Recreation
Referred to Committee on
Education
Referred to Committee on
Employment Relations,
Training & Safety
Referred to Committee on
Employment Relations,
Training & Safety
Referred to Committee on
Human Resources, Labor,
Sr. Citizens & Vet. Affairs
Referred to Committee on
Human Resources, Labor,
Sr. Citizens & Vet. Affairs
Referred to Committee on
Education. Reported w/
recommendation to
Committee on Labor &
Occupational Safety
Referred to Committee on
Human Resources, Labor,
Sr. Citizens & Vet. Affairs
1997
SB
0805
Sen. Steil
1995
HB
4327
SB
0095
Rep.
DeLange
Sen. Steil
1995
SB
0106
Sen. Shugars
(& Steil)
1995
SB
0149
Sen.
Honigman
1993
HB
4812
Rep. Profit
1993
SB 92
19911992
19911992
19911992
HB
4157
SB
318
SB
403
Sen.
Honigman
Rep.
DeLange
Sen.
Honigman
Sen. Emmons
19891990
HB
4706
Rep. Owen
19891990
SB
588
Sen. Cherry
19871988
19851986
19831984
19811982
19791980
19771978
19751976
19731974
1972
None
N/A
Exempt certain projects subject to the Michigan Referred to Committee on
prevailing wage act. To amend MCL 408.558.
Labor & Occupational
Safety
Repeal the Michigan prevailing wage act. To repeal Referred to Committee on
MCL 408.551 through 408.558.
Human Resources & Labor
Repeal the Michigan prevailing wage act. To repeal Referred to Committee on
MCL 408.551 through 408.558.
Human Resources, Labor &
Veterans Affairs
Exempt institutions of higher education from the Referred to Committee on
Michigan prevailing wage act. To amend MCL Human Resources, Labor &
408.551.
Veterans Affairs
Repeal the Michigan prevailing wage act. To repeal Referred to Committee on
MCL 408.551 through 408.558.
Human Resources, Labor &
Veterans Affairs
Require the Department of Labor to file complaints Referred to Committee on
when it knows of violations of the Michigan Labor
prevailing wage act.
Repeal the Michigan prevailing wage act.
Referred to Committee on
Labor
Establish prevailing wages and fringe benefits on Referred to Committee on
state projects pursuant to federal Davis-Bacon Act.
Labor
Repeal the Michigan prevailing wage act
Referred to Committee on
Labor
Exempt construction of or work on state mental Referred to Committee on
health projects from the prevailing wage Labor
requirements.
Assign penalties for violations of the prevailing Referred to Committee on
wage act and prevent bidding on state contracts by Labor
violators.
Assign penalties for violations of the Michigan Referred to Committee on
prevailing wage act and provide for the payment of Human Resources and Sr.
wage differentials
Citizens
N/A
N/A
HB
4131
HB
4364
None
Rep.
DeLange
Rep.
O'Connor
N/A
Enact a prevailing wage act pursuant to the federal
act.
Repeal requirement to pay prevailing wage for state
projects.
N/A
HB
5464
HB
4233
None
Rep. Conroy
N/A
Require EDC's to pay prevailing wage and fringe Passed
benefits
Include school district in the definition of locality.
Passed and Approved by
Governor—MCL 408.551
N/A
N/A
None
N/A
N/A
N/A
None
N/A
N/A
N/A
1995
Rep. Elliott
-9-
Referred to Committee on
Labor
Referred to Committee on
Labor
N/A
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