Updates to our Terms of Use

We are updating our Terms of Use. Please carefully review the updated Terms before proceeding to our website.

Monday, April 22, 2024 | Back issues
Courthouse News Service Courthouse News Service

Firehouse Builders Won’t Get Prevailing Wage

ALBANY, N.Y. (CN) - A volunteer fire department is not a public entity that must pay prevailing wages on a building project, New York's highest court ruled.

The Bath Volunteer Fire Department Inc., a nonprofit contractor, provided fire-fighting and rescue services out of a station owned by the village of Bath, located about an hour northwest of Elmira, N.Y.

An expanding vehicle fleet made for cramped quarters about 10 years ago, but the village declined to build a bigger firehouse. Estimating that a new facility would cost $2.7 million, the department secured a site, arranged financing and hired a general contractor for the project in 2006.

A short time later, the state Department of Labor began an investigation into whether state law required R-J Taylor General Contractors Inc. and more than a dozen subcontractors on the project to pay their workers "prevailing wages" - the hourly wage and fringe benefits common to a particular job title in a particular community.

A hearing officer subsequently found that to be the case, calling the Bath Volunteer Fire Department the "functional equivalent" of a municipal entity. Because the new firehouse would benefit the community, it constituted a public work, the officer said.

Sidelining the subsequent Article 78 petition from the construction companies, the Appellate Division's Third Judicial Department agreed that prevailing wages applied.

It said the volunteer fire company "essentially functioned as a village department" because of its close relationship with village government. The village handled the bidding process for new equipment, owned the fire trucks and furnished the fuel to run them, according to the ruling.

The "lion's share" of fire department operating expenses, moreover, rely on funding it gets from the village contract.

On further appeal, New York's highest court reversed last week.

"We hold that because no public agency, as contemplated by the statute, is a party to the contract, the prevailing-wage law does not apply," Judge Eugene Pigott wrote for a four-member majority of the Court of Appeals.

The fire company does not qualify as a "public agency" because it is not one of the four specific entities outlined in the prevailing-wage statute: the state, a public benefit corporation, a municipal corporation or a commission, according to the ruling.

It similarly does not represent the "functional equivalent" of a municipal corporation, the court said, likening the case to precedent involving charter schools.

"We rejected that argument because while charter schools, like volunteer fire corporations, may be 'quasi-public' in nature, they are not a specified public entity and thus, do not fit within the ambit of the statute," Pigott wrote.

"Had the Legislature intended to include volunteer fire corporations under the statute, it could easily have done so," he added, pointing to a 2007 amendment that expanded the statute to include contracts involving other entities.

"Indeed, certain volunteer fire department contracts may fall under the prevailing-wage law based on the amendment language," he wrote. "At the time of this contract, however, the 2007 amendment of the prevailing-wage law did not exist."

Judges Victoria Graffeo, Susan Read and Robert Smith concurred, while the court's newest addition, Judge Jenny Rivera, took no part.

Chief Judge Jonathan Lippman partly dissented.

The state constitution makes no mention of public agencies when it states that no worker on a public works project will "be paid less than the rate of wages prevailing in the same trade or occupation in the locality within the state where such public work is to be situated, erected or used," Lippman wrote.

It was the Legislature that put the phrase "public agency" into the legislation, and that subsequently "was judicially read as limiting the prevailing-wage requirement to work contracted for by a public agency," according to the dissent.

Lippman said the 2007 amendment aims to address the "loophole" of the public agency requirement by extending the prevailing-wage law to "third parties contracting for a public work on a public entity's behalf."

Had the Bath firehouse contract come after the amendment, "it is clear that it would have qualified as a prevailing-wage trigger, since it was plainly a contract for a public work - a firehouse having as its purpose the provision of a quintessentially governmental service under municipal control," he wrote.

Bath may have let the fire company arrange for the construction of the new station expressly to avoid the prevailing-wage requirement, Lippman added.

The chief of the fire company had even "acknowledged at the administrative hearing that 'the reason we were owning the station [was] because we could significantly lower the labor rates,'" a footnote to the dissent notes.

Lippman also highlighted how Bath had agreed to pay an additional $150,000 a year for its fire-protection contract coming out of the new firehouse, calling it "an uncommonly large ongoing commitment for a small municipality."

The higher fee came "for the clearly understood purpose of amortizing the debt to be assumed by the [fire company] in connection with its financing of the construction of the Bath firehouse," Lippman wrote.

"While it is the majority's view that the subject services contract was for services only, and it is true that the contract did not expressly provide that the additional funding was to be applied to pay for the firehouse, the factual record made at the administrative hearing leaves not the slightest doubt that the contract did contemplate in a most concrete way the construction of the new village firehouse."

A report from the hearing sent to then-Labor Commissioner Colleen Gardner says the village intended to have the firehouse benefit from $150,000 that had been budgeted annually to repay nearly paid off municipal garage construction bonds. The fire company, which also had fire-protection contracts with two other nearby communities, anticipated annual loan payments of $158,658 for the project, according to the report.

"When public entities enter into agreements involving, even remotely, public payment for construction, the threshold for public entity contracting within the description of Labor Law Section 220 (2) has been deemed to have been crossed," Lippman wrote.

"I would affirm the well-considered decision and order of the Appellate Division confirming the [labor] commissioner's determination and dismissing the petition."

Rochester-based attorney Anthony Adams Jr., of Gates & Adams, argued for the construction companies. The state was represented by Assistant Attorney General Zainab Chaudhry.

Amicus briefs were submitted by the Associated General Contractors of New York State, the Empire State Chapter of the Associated Builders and Contractors, the Firemen's Association of the State of New York, and chapters of the New York State Council of the National Electrical Contractors Association.

Categories / Uncategorized

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.