Private – Public Construction Project

4 months ago

My company is a private company and we are working with a local school district to take some under utilized land at a local elementary and convert it into a covered sports facility that my organization will use for our youth soccer events. The plan is for us to lease the land from the school district and cover all of the associated construction costs.

If the land is leased to our organization and there is no public money being used for the project does the project still come under the prevailing wage law?

Thank You!

Senior Legal Associate Levelset

Prevailing wage requirements can be confusing – particularly when there’s some combination of public and private funds/land. But as you may know, failing to pay prevailing wages, when required, is a dangerous proposition. Levelset discusses that idea here: Understanding the California Prevailing Wage Requirements.

Generally, when determining whether a California construction project would be subject to prevailing wage rules, there are two key things to look at: (1) Is the project a “public work?”; and (2) Were public funds used?

While the funding question may be easy to answer, section 1720 of the CA prevailing wage regulations goes into great detail on what’s considered a “public work.”

Generally, projects are considered a public work when there’s some level of public investment or other involvement. Importantly, the public investment need not be direct – things that look like in-kind payments may be enough to have a project be deemed a “public work” for the purposes of prevailing wage requirements. Really, anything of benefit that’s conveyed – like a loan, a beneficial lease rate, or any asset that’s given at less than the fair market price from the public entity to the private one could give rise to the need for prevailing wages.

But, where a public entity is making no investment and giving no benefit to its lessee and charging market price rent for the land it is leasing, there’s a reasonable chance that the project would not be subject to prevailing wage requirements.

For the most clarity, it might be helpful to contact the California Department of Industrial Relations’ Prevailing Wage Unit. Alternatively, consulting with a local prevailing wage expert might be helpful since they’d be able to review the circumstances surrounding the lease and construction agreement in better detail.

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