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Victory! Goldwater Defeats Illegal ‘Prevailing Wage’ Laws in Phoenix & Tucson

June 24, 2024

In a victory for hardworking Arizonans, a state trial judge ruled this morning that the cities of Phoenix and Tucson violated state law by adopting “prevailing wage” ordinances that force businesses competing for taxpayer-funded public-works projects to pay employees above-market wages.

The ruling, which comes after the Goldwater Institute sued Phoenix and Tucson on behalf of dozens of area businesses, means Arizonans will be free to work on public projects in the state’s two largest cities without being stifled by ill-conceived regulations and bureaucratic red tape.

The issue in the case turned on the difference between “prevailing wage” and “minimum wage” laws. “Minimum wage” laws are rules that set the basic amount that any worker in the state must be paid, and last year, voters approved a ballot initiative (Prop 202) that raised a new minimum wage level. “Prevailing wage” laws are different: they typically apply only to businesses that contract with the government, and they establish a formula that calculates the wages these companies received based on a sort of average of the wages typically paid in the area.

Prevailing wages are typically higher than minimum wages, and they’re a favorite tool of unions—to raise the cost of labor and charge taxpayers more. That’s just why a provision of Arizona law called Section 321(B) forbids cities from adopting such laws. It prohibits cities from adopting any “regulation, ordinance or … any other [rule]” that “require[s] public works contracts to contain a provision requiring the wages paid by the contractor or any subcontractor to be not less than the prevailing rate of wages for work of a similar nature in the [area]….”  Section 321(B) couldn’t be clearer.

Nevertheless, Tucson and Phoenix lawmakers decided to ignore the law, and adopted prevailing wage ordinances that require public-works contracts to contain a provision requiring the wages paid by the contractor to be not less than the prevailing wages for works of a similar nature in the area. They argued that these ordinances were legal because Prop 202 had somehow repealed Section 321(B). The argument went like this: Prop 202 included a sentence that said cities could “regulate minimum wages”—and a prevailing wage is a kind of minimum wage. Therefore, Prop. 202 gave them the power to establish prevailing wages, and therefore must have repealed Section 321(B). That’s the kind of argument only a government lawyer could love.

Representing the Arizona Minority Contractors of Arizona, the Arizona Builders Alliance, and the Arizona Chapter of the Associated General Contractors of America, we went to court to challenge that idea. Prevailing wages are not a kind of minimum wage; they’re an entirely different type of law, and nothing in Prop 202 gives cities the power that Section 321(B) forbids. That’s a good thing, too, because prevailing wage laws raise costs to taxpayers, hurt immigrant laborers, and are tools of cronyism.

As Associated Minority Contractors of Arizona President Ricardo Carlo explained: “This decision is a win for minority contractors, ensuring they have fair opportunities for growth. We call on the city of Phoenix and the city of Tucson to cease further legal actions and focus on supporting all contractors in Arizona.”

David Martin, President of the Arizona Chapter of the Associated General Contractors of America, added, “We are thrilled with the court’s decision, which upholds the principles of a free market and removes unnecessary burdens from contractors.”

In today’s brief, but well-reasoned ruling, the court rejected the city’s sophistical arguments. “A prevailing wage ordinance is not a minimum wage law,” declared the judge, “and the Minimum Wage Law did not impliedly repeal the prevailing wage prohibition.” Since “the prevailing wage prohibition and [Prop. 202] … do not address the same substantive issue,” there was no basis for arguing that the initiative repealed Section 321(B)—and that meant that Section 321(B)’s prohibition remains in effect.

Today’s decision is a victory for Arizona taxpayers—who deserve to have public works projects run as closely as possible to true market conditions, instead of having their costs decreed by politicians in order to benefit their political friends. It’s also a win for workers themselves, who deserve to do work in a competitive environment where wages are based on merit, instead of political dictate.

You can read the decision here and learn more about the case here.

Timothy Sandefur is the Vice President for Legal Affairs at the Goldwater Institute.

 

 

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