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California

High Court Eases Way for States to Back Wage Laws

Labor: They may, without a hearing, withhold payments from contractors who do not comply with prevailing-wage rules.

April 18, 2001|From Associated Press

The U.S. Supreme Court made it easier Tuesday for states to withhold payments from contractors who do not comply with prevailing-wage laws.

States do not have to give contractors a hearing to challenge a withholding of payment, the court ruled unanimously in a California case. As long as contractors can challenge a state's action in court, their rights are adequately protected, the justices said.

A contractor's claim for payment "is an interest . . . that can be fully protected by an ordinary breach-of-contract suit," Chief Justice William H. Rehnquist wrote for the court.

The case involved a fire-protection company called G&G Fire Sprinklers Inc., which served as a subcontractor on several California public works projects.

Like many states, California has a law requiring contractors on such projects to pay their workers a prevailing wage set by the state.

The state can withhold wage payments and penalties from contractors that fail to pay the prevailing-wage rate, and when a subcontractor is at fault, contractors can withhold the payment from them.

The current California law does not let companies challenge such a decision in a hearing, but allows them to sue to recover wages and penalties. Starting July 1, a new California law will allow contractors to seek a state hearing.

In 1995, the California Division of Labor Standards Enforcement determined that G&G violated state law by failing to pay prevailing wages or keep proper payroll records on three projects in which it had been a subcontractor.

State officials directed the withholding of more than $135,000 in wages and penalties from G&G. The company sued in federal court, saying the state violated its due-process rights under the federal Constitution by depriving it of property without holding a hearing.

A federal judge and the U.S. 9th Circuit Court of Appeals ruled for G&G. The Supreme Court ordered the appeals court to restudy the case, and the 9th Circuit Court again ruled for G&G last year.

On Tuesday, the Supreme Court reversed that decision.

The case is Lujan vs. G&G Fire Sprinklers, 00-152.

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