Goldwater Sues Phoenix Over Yet Another Illegal ‘Prevailing Wage’ Mandate

Just months after the Goldwater Institute defeated Phoenix’s last attempt to force an illegal “prevailing wage” mandate on businesses, the city government is trying again. The city council just enacted yet another mandate that restricts qualified businesses from competing for taxpayer-funded public-works projects, hurting small businesses, minorities, younger workers, and all taxpayers.

Once again, the Goldwater Institute is stepping up to fight it, suing the city on behalf of dozens of businesses over this harmful ordinance, which violates both state law and the Arizona Constitution.

Last March, the Phoenix City Council enacted a “Prevailing Wage Ordinance for City Projects” with barely 24 hours’ notice, leaving no opportunity for the countless organizations and individuals affected to weigh in. It passed the ordinance by a 5–4 vote, over concerns by council members—and even the city attorney herself—that the ordinance violated state law. Less than a month later, after considerable public opposition led by the Goldwater Institute, the council repealed that ordinance.

But now the Phoenix City Council is trying the very same failed, illegal strategy again, passing a new prevailing wage ordinance on January 9. Similar to the old version, the new ordinance restricts qualified businesses from competing for taxpayer-funded public-works projects unless they follow a host of burdensome requirements: paying their workers based on complicated formulas produced by the federal government, keeping painstaking records, and submitting lengthy paperwork to city bureaucrats every week. Worse yet, the ordinance threatens businesses with heavy fines and other penalties, even for minor or accidental violations.

This week the Goldwater Institute, together with Robert Schaffer of Holden Willits PLC,  sued the city in Maricopa County Superior Court on behalf of the Associated Minority Contractors of Arizona, the Arizona Builders Alliance, and the Arizona Chapter of the Associated General Contractors of America. In their complaint, Goldwater and Holden Willits argue that the prevailing wage mandate violates state law, which expressly prohibits cities from imposing just these sorts of mandates on businesses. Goldwater also argues that the ordinance violates the Arizona Constitution’s guarantee of due process of law, because it gives the city engineer—an unelected bureaucrat—virtually unlimited power to investigate and punish businesses for alleged infractions.

“Phoenix’s illegal ‘prevailing wage’ mandate will make life more difficult for countless small businesses that are already struggling to stay afloat,’” said Ricardo Carlo, President of the Associated Minority Contractors of Arizona. “‘Prevailing wage’ laws drive qualified contractors out of the market and are detrimental to businesses, employees, taxpayers, and residents—disproportionately harming minorities. It’s simple: the government should never restrict who can compete for taxpayer-funded construction projects.”

“When the government imposes restrictive ‘prevailing wage’ mandates—as the federal government does, and as several other cities and states across the country have tried to do—everybody loses,” said Goldwater Institute Staff Attorney John Thorpe, lead attorney on the case. “Taxpayers have to pay more and wait longer for projects to get done; employees have a harder time finding work; and businesses, especially small businesses, suffer from higher costs and fewer opportunities.” That’s why, since 1984, Arizona law has prohibited cities from imposing burdensome and counterproductive prevailing wage mandates on contractors for public-works projects.

When private businesses compete to provide the best services at the best price, everybody wins. But when a government bureaucracy excludes qualified businesses by forcing them to jump through burdensome regulations, it hurts everybody, from entrepreneurs and workers to residents and taxpayers. But the Goldwater Institute will always stand up for economic liberty wherever government officials threaten it.

You can read about our case here.