The Arizona Court of Appeals today sided with the Goldwater Institute in a lawsuit challenging city-wide “prevailing wage” laws in both Phoenix and Tucson—laws that are expressly forbidden by state statute. The decision is an important victory for taxpayers throughout the state, who would otherwise be forced to pay inflated prices for public works projects even though a state law approved by voters abolished “prevailing wages” over forty years ago.
Actually, the lawsuit concerns two different ballot initiatives—the 1984 law that banned “prevailing wage” contracts and a 2016 initiative that established a new statewide minimum wage and that allowed cities to impose higher minimum wage rates if they chose. The case began when Tucson and Phoenix tried to use the 2016 minimum wage law as an excuse to establish prevailing wage requirements, and even to argue that the 2016 law somehow secretly repealed the 1984 law.
But prevailing wages and minimum wages are entirely different things. A minimum wage is a requirement that all employers must pay all employees for all labor. It operates across the board, and requires, say, $15 per hour. But a prevailing wage is both more limited and more complicated. It only applies to companies that have special contracts with the government—to build a building for the government, for example—and the amount that employers are required to pay is calculated based on a complex formula that averages out what other contractors are being paid in the region. Prevailing wages are much higher than minimum wages, and they are, in essence, a special privilege enjoyed by unions that lobby the government for work.
That’s why voters abolished prevailing wages four decades ago. While cities can adopt minimum wages applicable to all workers, they’re not allowed to create prevailing wages. That couldn’t be clearer.
Nevertheless, lawyers for Phoenix and Tucson argued that a prevailing wage is a kind of minimum wage because it establishes the least amount the government can pay someone. As the Court of Appeals said today in rejecting that clever argument, the cities can’t use the colloquial meaning of “minimum” to ignore the specific, legal meaning of words in state law. “The Cities get textualism wrong,” said the court, in its unanimous ruling. “When interpreting text, the meaning of two or more combined words sometimes means something different than the sum of its parts…. We cannot simply take the literal meaning of ‘minimum,’ add it to the statutory meaning of ‘wage,’ and see what materializes. We must instead determine the full-phrasal meaning of ‘minimum wages’ as used in context.”
The real winners in today’s ruling are Arizona taxpayers—as the court itself made clear: “the Cities’ interpretation,” wrote the judges, “would grant the Cities broad power. With that power, the Cities could dictate how much any employer pays any employee anytime an employer contracts or subcontracts with the Cities. Put differently, the Cities by ordinance could dictate pay whenever an employee works under a public contract, regardless of the contract’s value or the nature of the work performed.” That, of course, would cost taxpayers more—reducing their freedom of choice and their ability to invest in their own futures—all for the benefit of politicians and politically well-connected lobbyists.
You can read today’s decision here and learn more about our work on behalf of taxpayers here.
Timothy Sandefur is the Vice President for Legal Affairs at the Goldwater Institute’s Scharf-Norton Center for Constitutional Litigation.
