Baughn v. Gorrell Riley

Clay, Commissioner Reversing. Appellants filed this suit against the Daviess Comity Board of- Education (hereinafter referred to as “Board”) and a contractor engaged in the reconstruction of a school building at West Louisville. The principal objects of the suit were to cancel the contract between the Board and the contractor, and to require the Board to comply with KRS, Chapter 337 in ascertaining and fixing prevailing rates of wages for the work to be performed. Other persons were made «parties to the suit, and by later pleadings, a declaration of rights was asked. The contractor raised the question of the constitutionality of the statute involved. The lower Court adjudged the statute unconstitutional, and declared the contract valid and binding. While a number of incidental questions were raised and decided in the Court below, the only issue we deem it necessary to decide on this appeal is the constitutional one. . Before discussing the question, it is necessary to briefly outline the situation which led to this controversy. Because of the destruction of a grade and high school building at West Louisville in Daviess County — 539 — in August 1948, the Board decided upon its reconstruction. Bids were advertised for, and on February 17, 1949, the Board awarded the basic contract to the contractor. Shortly thereafter work was begun on the new building and was continued until May 2, 1949. On that date the site was picketed by labor union representatives, and those employed by the contractor walked.off the job. Since that date construction has been suspended. The present suit was filed May 10, 1949. The controversy arose because the Board had failed to comply with KRS 337.510, which directs it to ascertain prevailing rates of wages before advertising for public construction bids, and requires it to make a part of the specifications for the work a schedule of wages based on these ascertained prevailing rates. The record indicates the contractor is paying certain classes of labor lesser rates than those prevailing for similar work in the city of Owensboro, which is located some fourteen miles from the site of the building. For this reason appellants requested that the contract be can-celled, and that the work be re-advertised for new bids based on specifications containing a schedule of prevailing wages presumably higher than those paid by the present contractor. It appears that both the Board and the contractor failed to comply with the provisions of KRS 337.510 to 337.540. The principal sections with which we are immediately concerned provide as follows (our italics): KRS 337.510. “Before advertising for bids or entering into any contract for construction of public works, every public authority shall ascertain the prevailing rates of wages of laborers, workmen, mechanics, helpers, assistants and apprentices for the class of work called for in the construction of such public works in the locality where the work is to be performed. This schedule of wages shall be attached to and made a part of the specifications for the work and shall be printed on the bidding blanks and made a part of every contract for the construction of public works.” KRS 337.520. “The wages paid for a legal day’s work to laborers, workmen, mechanics, helpers, assistants and apprentices upon public works shall not be less than the prevailing wages paid in the same trade — 540 — or occupation in the locality. The public authority shall establish prevailing wages at the same rate that prevails in the locality under collective agreements o\r understandings between bona fide organisations of labor and their employers at the date the contract for public works is made if there are such agreements or understandings in the locality applying to a sufficient 'number of employes to fugmish a reasonable basis for considering those rates fa> be the prevailing rates in the locality. * * # The issue in the case is whether not the last quoted section is an unconstitutional delegation of legislative power to private persons, associations, or corporations, contravening sections 27, 28 .and 29. At the outset it must he conceded the Legislature itself may validly fix minimum wage rates to be paid laborers on public works. Still further, it is settled the Legislature may properly grant to political subdivisions or public bodies the discretionary power, of fixing fair or prevailing wages. 11 Am. Jur., Constitutional Law, Section 223; Young v. Willis, 305 Ky. 201, 203 S. W. 2d 5; Hilton v. Board of Education, 51 Ohio App. 336, 1 N. E. 2d 166; Metropolitan Water District v. Whitsett, 215 Cal. 400, 10 P. 2d 751; State v. Anklam, 43 Ariz. 362, 31 P. 2d 888. While apparently appellees have no quarrel with the above principles, they maintain the statute goes one step further and requires the public authorities to accept, without exercising any discretion, wage rates fixed by private contracts between labor organizations and employers. They rely principally upon the cases of Wagner v. City of Milwaukee, 177 Wis. 410, 188 N. W. 487; Revne v. Trade Commission, Utah, 192 P. 2d 563, 3 A. L. R. 2d 169; Carter v. Carter Coal Company, 298 U. S. 238, 56 S. Ct. 855, 80 L. Ed. 1160; and Lowery v. City of Lexington, 116 Ky. 157, 75 S. W. 202. All of these cases recognize, and the principle is sound, that neither the Legislature nor any political subdivision possessing legislative power may delegate the exercise of such power to private persons or corporations. In the City of Milwaukee case, an ordinance provided that skilled laborers employed on city works should be paid not less than the prevailing wage, such — 541 — wage to be determined as that paid to members of any regular or recognized labor organization. The Wisconsin Supreme Court declared this ordinance invalid on the ground that the common council had no discretion in determining the prevailing wage, and it had delegated the exercise of its judgment to an independent private organization. We are not entirely committed to the soundness of the Court’s reasoning in that case, hut are convinced it is distinguishable upon two grounds: (1) at the time of the decision (1922), the wage scale paid labor union members did not constitute a generally accepted reasonable standard, and (2) the Court construed the ordinance as depriving the public authority of any exercise of discretion. In the other cases relied upon by appellees the legislating authority had clearly abdicated its function of law-making by shifting to private groups the power of fixing prices, fixing wages and passing upon bids for public works. In each case the public interest had been subordinated to what might have been adverse private interests. Turning to the statute here involved, we find that the public authority itself is required to ascertain the prevailing wage rates. In the eyes of the Legislature, wages paid under agreements between labor organizations and employers constitute a fair criteria of reasonable compensation for different types of work. It will be noted these wages are agreed upon as the result of bargaining between labor on one side and the employer on the other. As pointed out in Long Island Railway Company v. Department of Labor, 256 N. Y. 498, 177 N. E. 17, prevailing wages ordinarily are governed by the law of supply and demand, and the competitive market will tend to establish a fair wage. Other reasons for accepting as a fair standard wage rates established in similar industries are pointed out in that opinion. Under the statute involved the duty is imposed upon the public authority to ascertain and fix the prevailing wages in any particular locality. The standards set up are the collective agreements between labor organizations and employers existing at the date the public contract is made. The statute does not stop there. The — 542 — public authority is only required to accept those wage rates if such agreements apply to a sufficient number of employees “to furnish a reasonable basis for considering those rates to be the prevailing rates in the locality.” Thus the public authority is vested with the ultimate determination of what shall be the prevailing wage. This discretionary power may properly be granted to a governmental agency administering the law. See Craig v. O’Rear, 199 Ky. 553, 251 S. W. 828. The statute involved fixes the legislative policy. It establishes a standard, which we cannot say is unreasonable, to guide the public authorities. The public body is vested with a discretion in determining the reasonable prevailing wage which must be included, if any must be included, in the contract. These three factors being present, we find the Legislature has not delegated the exercise of its legislative function to private persons or interests. The wisdom of this type of legislation may be debatable, but that is not a judicial question. If this statute increases the cost of public works which the taxpayer must pay,, if it has an adverse effect upon competitive bidding, or if it aids the labor union movement, these are matters addressed to the judgment of the elected representatives of the people. Our consideration of the case must be confined to the constitutionality of the law and not its policy. Any doubt must be resolved in its favor. In our opinion the statute is not unconstitutional on the ground asserted. The lower Court apparently based its determination that the contract was valid upon its finding that the statute was unconstitutional. Since we have decided this latter conclusion was erroneous, we do not consider it necessary or proper to pass upon the contract or its status before the lower Court has had a further opportunity to reconsider it. In view of the unusual emergency circumstances presented, it is our hope the interested parties and the Court below may work out some reasonable solution which will not too greatly interfere with the public interest in having the new school building erected at an early date. Without deciding the question, it seems to — 543 — us that the contractor was not guilty of violating the statute, and the action of the Board was not wilful. For the reasons stated, the judgment is reversed for such further proceedings as may be necessary and proper consistent with this opinion.