STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6723

June 23, 1992

COLLEGES AND UNIVERSITIES:

Application of prevailing wage act

PREVAILING WAGE ACT:

Application to state colleges and universities

The prevailing wage act does apply generally to construction projects undertaken by state universities, regardless of the source of funding for the projects.

The prevailing wage act does apply specifically to the renovation and addition to the student recreational facility to be built by Western Michigan University.

Honorable Mary Brown

State Representative

The Capitol

Lansing, Michigan

You have requested my opinion on two questions, both of which concern the prevailing wage act, 1965 PA 166, MCL 408.551 et seq.; MSA 17.256(1) et seq. Your questions may be stated as follows:

1. Does the prevailing wage act apply generally to construction projects undertaken by state universities?

2. Does the prevailing wage act apply specifically to the renovation and addition to the student recreational facility to be built by Western Michigan University?

Western Michigan University is a constitutional body corporate established by Const1963, art 8, Sec. 6. The Board of Trustees of the University has announced plans to renovate and to construct an addition to the University's existing Gary Student Recreation Center and Read Field House. I am advised that the existing facility was constructed on property donated to the University by the City of Kalamazoo and was financed entirely by bonds issued by the University and secured by student fees; no portion of the existing facility was financed with funds appropriated to the University by the Michigan Legislature. The University intends to finance the renovations and additions to this facility entirely out of the proceeds from a special student activity fee which it has begun imposing upon all students. The funds raised by this fee will be segregated in a separate account and will not be commingled with any other funds received by the University.

STATUTORY ANALYSIS

The prevailing wage act requires that certain contracts for state projects must contain a provision obligating the contractor to pay wages and fringe benefits to construction employees at a rate which is not less than the rate prevailing in the locality where the construction is to occur. MCL 408.552; MSA 17.256(2). The applicable prevailing wage and fringe benefit rates are determined by the Michigan Department of Labor based upon an examination of local collective bargaining agreements and other "understandings" or contracts between local contractors and their construction employees. MCL 408.554; MSA 17.256(4).

The fundamental mandate of the prevailing wage act is set forth in section 2 of the act, MCL 408.552; MSA 17.256(2), which provides, insofar as it is pertinent here, that:

A contractor's failure to comply with this requirement is punishable as a misdemeanor. MCL 408.557; MSA 17.256(7).

The application of the prevailing wage act to the University, and to this particular project, therefore, turns upon whether the project is a "state project" and whether it is "sponsored or financed in whole or in part by the state," within the meaning of section 2, supra.

Section 1(b) of the act, MCL 408.551(b); MSA 17.256(1)(b), provides the following definition of the term "state project" as it is used in the act:

The term "contracting agent," in turn, is defined by section 1(c), MCL 408.551(c); MSA 17.256(1)(c), as follows:

As the Legislature has not defined the term "state institution" in the prevailing wage act, the term is to be given its plain and ordinary meaning. Shelby Twp v Dep't of Social Services, 143 MichApp 294, 300; 372 NW2d 533 (1985); lv den 424 Mich 859 (1985).

Each of the constitutional provisions relating to the state universities (Const1963, art 8, Secs. 4, 5 and 6) expressly refers to these entities as "institutions" or "institutions of higher education." Further, the Legislature has implemented these constitutional provisions with regard to Central, Eastern, Northern and Western Michigan Universities in 1963 (2nd ExSess) PA 48, MCL 390.551 et seq; MSA 15.1120(1) et seq. In section 1 of that act, the four universities are described as "the established state institutions" known by those names. Finally, the Legislature is required to appropriate funds to maintain the state universities by Const1963, art 8, Sec. 4, and does so on an annual basis. See, e.g., 1991 PA 123. Clearly, a state university is a "state institution supported in whole or in part by state funds" within the plain and ordinary meaning of MCL 408.551(c); MSA 17.256(1)(c), supra, and therefore may constitute a "contracting agent" for purposes of the prevailing wage act.

This office has been advised that the University of Michigan and Michigan State University pay the prevailing wage on their state construction projects. This office has also been advised that the Department of Labor has long taken the position that the prevailing wage act applies to the state universities.

Bd of Education of Oakland Schools v Superintendent of Public Instruction, 401 Mich 37, 41; 257 NW2d 73 (1977). [ Citing United States v Moore, 95 US 760, 763; 24 LEd2d 588 (1877).]

Thus, a construction project undertaken by a state university is a "state project" and is subject to the prevailing wage act if the project is "sponsored or financed in whole or in part by the state." MCL 408.552; MSA 17.256(2).

If the Legislature directly appropriates funds for a university construction project, the project would clearly qualify as a "state project" which is "sponsored or financed ... by the state." ⁽¹⁾ Direct legislative appropriation of funds is not, however, the only means by which a project can be sponsored or financed by the state. In West Ottawa Public Schools v Director Dep't of Labor, 107 MichApp 237; 309 NW2d 220 (1981), lv den, 413 Mich 917 (1982), for example, the state did not directly appropriate any funds for the project in question but did act as a surety for the payment of bonds issued to finance the project. The Court held that this was sufficient to constitute "sponsorship" within the meaning of the prevailing wage act. In reaching this conclusion, the Court defined "sponsor" as "one who assumes responsibility for some other person or thing." 107 MichApp at 247-248.

The board of control of a state university assumes responsibility for any construction project undertaken by the university and the university, thus, is the "sponsor" of the project. State universities are clearly a part of state government in Michigan. Regents of the University of Michigan v Employment Relations Comm, 389 Mich 96, 108; 204 NW2d 218 (1973); Branum v Bd of Regents of University of Michigan, 5 MichApp 134, 138-139; 145 NW2d 860 (1966). ⁽²⁾ Thus, a construction project undertaken by a state university and financed with the university's funds is a "state project" and is "sponsored or financed in whole or in part by the state" within the plain meaning of the prevailing wage act.

CONSTITUTIONAL ANALYSIS

This does not end our inquiry, however. It remains necessary to address the impact, if any, of Const1963, art 8, Secs. 5 and 6 upon your questions. These two provisions of the Michigan constitution expressly grant to the governing board of each state university the "general supervision of the institution and the control and direction of all expenditures from the institution's funds." In light of this grant of authority, "[t]he powers and prerogatives of Michigan universities have been jealously guarded not only by the boards of those universities but by [the Michigan Supreme] Court in a series of opinions running as far back as 1856." Bd of Control of Eastern Michigan University v Labor Mediation Bd, 384 Mich 561, 565; 184 NW2d 921 (1971). Thus, in Weinberg v Regents of the University of Michigan, 97 Mich 246, 255; 56 NW 605 (1893), the Court reviewed a state statute which purported to require all Michigan public bodies, when contracting for the construction of a public building, to require their contractors and subcontractors to post bonds sufficient to assure payment of all labor and material costs. Citing the constitutional autonomy of the University Regents, the Court concluded that the statute could not constitutionally be applied to the University. Accord, William C Reichenbach Co v Michigan, 94 MichApp 323; 288 NW2d 622 (1979). See also, OAG, 1989-1990, No 6602, p 226 (October 4, 1989).

More recently, however, the Michigan Supreme Court has recognized that the constitutional independence of the state universities is not absolute. In Regents of the University of Michigan v Employment Relations Comm, supra, for example, the Court was confronted with the question of whether the Michigan Public Employees Relations Act (PERA), MCL 423.201 et seq; MSA 17.455(1) et seq, applied to the University of Michigan. Addressing the constitutional provisions assuring the independence of the University's Board of Regents, the Court stated, 389 Mich at 107:

The Court went on to state, Id at 108:

PERA, the Court noted, was adopted pursuant to the Legislature's authority over public employee labor relations, an authority expressly recognized by article 4, Sec. 48 of the 1963 Constitution. In light of this newly adopted constitutional provision, PERA represented the clearly established public policy of the state and was, therefore, applicable to the University. Id, at 107. This conclusion, the Court indicated, did not interfere with the constitutional autonomy of the Regents since that autonomy lies primarily within the educational sphere. Id, at 109-110. See also, Bd of Control of Eastern Michigan University, supra, 384 Mich at p 566.

This analysis applies with equal force to the provisions of the prevailing wage act. Const1963, art 4, Sec. 49, provides:

The term "conditions of employment" has been found to include matters relating to wages and fringe benefits. Fort Stewart Schools v Federal Labor Relations Authority, 495 US 641, 650; 110 SCt 2043; 109 LEd2d 659 (1990). Thus, pursuant to Const1963, art 4, Sec. 49, the determination of public policy in the area of hours and conditions of employment, including wages, is expressly vested in the Legislature. The prevailing wage act is plainly an exercise of that legislative authority. That this act represents the clear public policy of the state was explicitly recognized by the Court of Appeals in West Ottawa, supra, 107 MichApp, at 245, where the Court stated that:

The prevailing wage act applies generally to all construction projects in which the state is involved through sponsorship or funding. Because that act is a legislative exercise of the police power expressing the clearly established public policy of the state, it may be applied to state universities without violating their constitutional autonomy.

CONCLUSION

It is my opinion, therefore, in answer to your first question, that the prevailing wage act does apply generally to construction projects undertaken by state universities, regardless of the source of funding for the projects. It is also my opinion, in answer to your second question, that the prevailing wage act does apply specifically to the renovation and addition to the student recreational facility to be built by Western Michigan University.

Frank J. Kelley

Attorney General