The Minnesota Supreme Court recently engaged in some mental gymnastics to deprive some employees doing work for the City of Minneapolis the right to have a jury decide whether they were paid the prevailing wage for their work. The opinion in the case of Caldas v. Affordable Granite & Stone, Inc. (AGS) can be found here.
The City had hired the plaintiffs' employer, AGS, to repair some flooring in the Minneapolis Convention Center. Per the City's requirements, the contract between AGS and the City expressly stated that AGS's employees would be paid the "prevailing wage" for the work they were doing on behalf of the city. The 13 plaintiffs in this case argued that they were engaged in putting in the new floor, which entitled them to approximately $44 per hour which was the prevailing wage for the work. AGS argued that the plaintiffs were engaged in janitorial work. Two audits by the City into complaints by the plaintiffs found that they had been properly characterized as performing janitorial work.
The plaintiffs sued claiming breach of contract, among other things. Because the plaintiffs were not parties to the contract between the City and AGS that contained the prevailing wage requirement, they had to argue that they were intended third party beneficiaries to that contract. AGS, naturally, argued the plaintiffs were not intended beneficiaries so it could avoid paying these folks the prevailing wage. The court's decision turned on whether these plaintiffs were intended third party beneficiaries or not.
The test that is commonly used in Minnesota to determine if someone is a third party beneficiary states:
Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and ... the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
So what does that legalese mean? Essentially, when a beneficiary of a contract is not expressly named in the contract, the court can look at the circumstances surrounding the contractual provision at issue to determine who, if anyone, may have been an intended beneficiary of the contract. If you are not an intended beneficiary, you cannot sue to enforce the contract.
So at this point you have to be asking yourself this question: If a prevailing wage provision was not meant to benefit the employees of AGS who were going to do the work , who the heck was it intended to benefit?
And that would be a great question. And logic would dictate that your instincts were correct. And you would be in good company in reaching that conclusion because the City of Minneapolis itself argued to the court that the plaintiffs were intended third party beneficiaries of the prevailing wage agreement.
But if you were a member of the Minnesota Supreme Court, you would have ended up on the losing end of this argument. The court held that AGS's promise to pay the prevailing wage was a "general promise to comply with the law, which does not confer upon AGS employees the right to enforce the law." The court went on to state that the City, not the employees, had a right to enforce that provision by conducting audits or investigations into whether AGS was complying with the prevailing wage provision of the contract. The City conducted those audits, concluded the plaintiffs were paid properly, and that was the end of it.
My feeling is that it was easy for the court to dismiss this case because the City itself had already concluded that these plaintiffs were properly classified and properly paid. As such, they did not present a compelling case that they had suffered some type of horrendous injustice. When the facts of a particular case do not engender some level of sympathy, it is often difficult to persuade the court that your side should win. But the problem here was that the only issue before the court was whether these folks were intended beneficiaries. It was a jury's job to first determine whether the provision had been breached.
Two of the six justices who decided the case dissented. In addressing the question of whether these plaintiffs were intended beneficiaries of the contract, they asked this question: “If Affordable Granite & Stone’s promise to pay its employees the prevailing wage for their work on the Convention Center was not meant to benefit these appellants, for whose benefit was it intended?”
For those of us who do this for a living, we think that is a really good question.
