Who's Entitled to the Prevailing Wage? Not the People Doing the Work...

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.

Another Reason Minnesota Is Better Than Wisconsin

I can think of a number of reasons why Minnesota is better than Wisconsin.  Professional hockey, a more vibrant cultural scene, a lower unemployment rate, not being referred to as a "cheesehead" or other similar state-based derogatory nickname, and according to this report, Wisconsin has the highest rate of binge drinking and heavy drinking in the country.  (See p. 51 of the report)  Some may place that last statistic in the plus column for Wisconsin, but I digress.

The Wisconsin Assembly has given those of us in Minnesota another reason to cheer, while at the same time providing me an additional reason to trash on Wisconsin.  Specifically, the Wisconsin legislature has passed two pieces of legislation that severely restrict the rights of employees to sue and receive compensation for workplace discrimination.

First, the Wisconsin Assemby passed a bill that repeals an employee's right to recover compensatory and punitive damages when they have proven in court that they were the victims of workplace discrimination or harassment.  While the bill has not been signed by Governor Scott Walker, I have no doubt he intends to sign it. 

But what does that mean to everyday employees in Wisconsin?  In these cases, compensatory damages often take the form of monetary compensation for the emotional distress they experienced when they were illegally discriminated against / terminated by their employer.  And let's not forget, they recover these damages AFTER they have proven in court that they were the victims of discrimination.  So these damages are only available to those employees who have proven that their boss was a biggot, sexist, etc. 

The fact that someone may experience emotional distress when they are fired for their race, age, disability, gender, etc. is not a tough concept for folks to grasp.  As one article states, the emotional toll the loss of a job creates is compounded when the job loss occurred for a discriminatory reason.  Moreover, most of us intuitively understand how being sexually harassed in the workplace may cause, in some instances, severe emotional distress. 

Punitive damages are those damages that are awarded against employer only when an employee makes an additional showing that the employer knowingly violated the anti-discrimination law at issue.  In other words, these damages are only available when an employee can prove that the employer knew discriminating against the employee was illegal but consciously decides to do it anyway.  I can tell you that obtaining punitive damages in discrimination cases can be, as a practical matter, difficult.   

Wisconsin has passed this law presumably as part of some "pro-jobs" political agenda.  However, one has to question how denying victims of discrimination full compensation for the workplace discrimination they experienced creates jobs.  I guess the employer could use that extra cash to hire a younger, male, non-disabled person, but I doubt that argument is one anyone is willing to legitimately make.  Moreover, the victims of discrimination are often terminated, resulting in less jobs, not more.  Removing some of the teeth from these anti-discrimination laws could lead to an increase in discriminatory terminations because employers know the cost of engaging in discrimination is significantly less.  Conversely, the realization that it may be liable for compensatory and punitive damages may deter an employer from engaging in a discriminatory termination, thus keeping a job.  But I'm not a statistician, I'm a lawyer.

The other bill that passed the Wisconsin Assembly and is presumably sitting on Governor Walker's desk is even more bizarre.   The Assembly has voted to repeal the state's Equal Pay Act (EPA), which guarantees women the same pay as men for doing the same work.  I never would have guessed that there are people who would have the guts to publicly admit they have no problem paying women less than men, but I've been proven wrong again.  And the irony of course, according to this representative, is that pay disparity between men and women has significantly dropped in Wisconsin since the passage of Wisconsin's EPA in 2009, which most of us would assume to be a good thing. 

Assuming the argument for repealing the EPA is again some "pro-jobs" agenda, one may try to challenge the premise that engaging in overt sexism leads to job creation.  Reasonable minds (and most women) may not see the nexus between the two.  So I'm here to explain it.  See, if you pay women half of what men make, you can hire two women for the price of one.  We just created a job!  Get it?  And you wonder why those Wisconsinites have a such a problem with alcohol....