OAH 8-1900-19710-1
Governor’s Tracking Number AR 279
STATE OF
OFFICE OF
ADMINISTRATIVE HEARINGS
FOR THE MINNESOTA DEPARTMENT
OF LABOR AND INDUSTRY
|
In the Matter of the Proposed
Amendments to the Rules of the Department of Labor and Industry, Labor
Standards Unit, Relating to Prevailing Wage Determinations, Master Job
Classifications, |
REPORT OF THE ADMINISTRATIVE
LAW JUDGE |
A hearing concerning the above rules
was held by Administrative Law Judge Eric L. Lipman at 9:30 a.m. on Friday,
July 25, 2008, in the Minnesota Room of the headquarters of the Department of
Labor and Industry (Department or Agency) at
William A. Bierman, Jr., Esq.,
Approximately 41 people
attended the hearing and signed the hearing register. The proceedings continued until all
interested persons, groups or associations had an opportunity to be heard
concerning the proposed amendments to these rules.
After the hearing
ended, the Administrative Law Judge kept the administrative record open for
another twenty calendar days – until August 14, 2008 – to permit interested
persons and the Department to submit written comments. Following the initial comment period,
pursuant to Minnesota law,[1]
the hearing record was open an additional five business days so as to permit
interested parties and the Agency an opportunity to reply to earlier-submitted
comments. The hearing record closed for
all purposes on August 21, 2008.
The public hearings and this Report are part of a larger
series of processes under the Minnesota Administrative Procedure Act. These processes must be completed before an
Agency is authorized to adopt rules.
Among the protections provided to the public under the
Minnesota Administrative Procedure Act are the requirements that the Agency
demonstrate that the proposed rules are necessary and reasonable, and that any
changes the Agency may have made to the proposed rules after they were
initially published are not substantially different than what the Agency
originally proposed.[2] The rulemaking process also provides for
public hearings, at which the public may review, discuss and critique the
proposed rules.
NOTICE
The Department must wait at least five
working days before taking any final action on the rules. During that period, this Report must be made
available to all interested persons upon request.
Pursuant to the provisions of Minnesota
Rules, part 1400.2100, and Minnesota Statutes, section 14.15, subdivisions 3
and 4, this Report has been submitted to the Chief Administrative Law Judge for
his approval. If the Chief
Administrative Law Judge approves the adverse findings of this Report, he will
advise the Commissioner of actions that will correct the defects. If the Department elects to make any changes
to the rule, it must resubmit the rule to the Chief Administrative Law Judge
for a review of those changes before adopting the rule.
However, in those instances where the
Chief Administrative Law Judge identifies defects which relate to the issues of
need or reasonableness, the Department may either follow the Chief
Administrative Law Judge's suggested actions to cure the defects or, if the Department
does not elect to follow the suggested actions, it must submit the proposed
rule to the Legislative Coordinating Commission, and the House of Representatives
and Senate Policy Committees with primary jurisdiction over state governmental
operations for the advice of the Commission and Committees.
When the rule is filed with the Secretary
of State by the Office of Administrative Hearings, the Department must give
notice to all persons who requested that they be informed of the filing.
SUMMARY
OF CONCLUSIONS
The Department has established that it has the
statutory authority to adopt the proposed rules and that the rules are
necessary and reasonable, with six exceptions as detailed in Findings 71, 99, 107,
118 and 125.
Based upon all the
testimony, exhibits, and written comments, the Administrative Law Judge makes
the following:
FINDINGS OF FACT
I. Background on the Proposed Rules
1.
In 1973,
2.
Under the
Minnesota Prevailing Wage Act, the Department establishes the labor
classifications for workers and determines the prevailing wage rate for the
classifications. The classes of labor
are listed under the Master Job Classifications at Minnesota Rules
5200.1100. Prevailing wage rates are
determined by the Department by the use of wage surveys that it compiles for
each of ten defined areas of the state.
The prevailing wage rate to be paid is the surveyed rate paid to the
largest number of workers engaged in the same class of labor within a specified
area.
3.
This rulemaking
proceeding involves a proposal by the Department to amend and revise rules
relating to the master job classifications, which the Department establishes
for making prevailing wage determinations.
The purpose of the rule amendments is to update the master job
classifications to reflect changes in construction techniques, practices, and
equipment that have developed since the classifications were last updated
approximately 10 years ago.[3] In the main,
the proposed rule amendments apply to highway and heavy construction, as well
as commercial construction. The
Department has proposed amendments clarifying when the Commissioner must
determine whether work performed by a class of labor not named in the master
job classifications is included in an existing class, adding a general class of
labor, and clarifying the minimum number of hours of work required for a worker
to be included in the wage survey process.[4] The proposed
amendments also create separate classifications for certain highway-heavy and
commercial construction duties; create new classifications or amend existing
classifications relating to landscaping and seeding, and painting and striping
of roads; and create new classifications or amend classifications relating to
warning lights, warning signs, and other traffic control devices. The proposed rule amendments also create new
classifications or amend existing classifications for survey workers, quality
testers, articulated haulers, and off-road trucks.[5]
4.
The master job
classifications were last revised and amended in 1997. At that time, the Department used the same
six groups of power equipment to cover both highway-heavy construction, and
commercial construction. However, changes
in technology and construction practices over the years, as well as the
differences between highway-heavy construction and commercial construction, have
necessitated updating the rules. In particular,
the differences between the types of power equipment used in highway-heavy
construction and those used in commercial construction, as well as the
differences in pay for equipment operators, has grown over the years.[6] According to
the Department, there is a clear need based on changes in construction
practices to create a set of classifications for commercial power equipment
operators. The equipment is more specialized
and also more technologically advanced with features such as remote control
operation and GPS controlled operation.[7]
5.
To address these
differences and provide greater clarity and precision, the proposed rules
separate power equipment operator classifications by specific construction
type. Under the proposed rules, the
Department will survey two separate sets of power equipment classifications,
one for highway-heavy equipment operators and one for commercial type
construction operators.[8]
II. Milestones in this Rulemaking Proceeding
6.
The proposed
rules were developed in cooperation with the Minnesota Department of
Transportation. Together, the
departments established an advisory committee to gather input on the proposed
rules from affected parties. The
advisory committee was made up of members of the construction industry,
including prime contractors, subcontractors, material suppliers and trucking
firms, unions, employees and other affected parties to determine the best way
to address the master job classification amendments involved in this
rulemaking. Also included were
representatives of surveyors, landscapers, traffic control companies, and
pavement marking/painting contractors.
Department staff attended all advisory committee meetings to be
available to answer questions and to listen to committee concerns.[9]
7.
In 2002, the
Advisory Committee held public hearings at which it took oral testimony from committee
members and members of the audience.
Written comments were also collected at the end of each hearing and the
committee accepted comments submitted by mail.
The Advisory Committee met on February 28, 2002, March 28, 2002, and
April 30, 2002. The Department
considered all comments and information submitted with respect to the proposed
rules.[10]
8.
A Request for
Comments was first published on the proposed rules in the State Register on September 20, 1999.[11] It was mailed
to all persons on the Department’s rulemaking mailing list. Subsequent Requests for Comments were
published in the State Register on
July 30, 2001,[12] October 25, 2004,[13] and July 24, 2006.[14] In addition
to being mailed to all persons on the Department’s rulemaking list, the
Requests for Comments were also sent to all persons who requested information
about the proposed rules from either the Agency or the Department of
Transportation, as well as contractors who sought information about the
rulemaking from the Department of Transportation’s Labor Compliance Unit. All comments received in response to the
Requests for Comments were considered by the Department in preparing the
proposed rule amendments.[15]
9.
Drafts of the
proposed rules and the Request for Comments have been posted on the
Department’s website since July 2006.[16]
II. Rulemaking Legal Standards
10.
Under Minn.
Stat. § 14.14, subd. 2, and Minn. R. 1400.2100, the Agency must establish the
need for, and reasonableness of, a proposed rule by an affirmative presentation
of facts. In support of a rule, the
Agency may rely upon materials developed for the hearing record,[17]
“legislative facts” (namely, general and well-established principles, that are
not related to the specifics of a particular case, but which guide the
development of law and policy,[18]
and the Agency’s interpretation of related statutes.[19]
11.
A proposed rule
is reasonable if the Agency can “explain on what evidence it is relying and how
the evidence connects rationally with the Agency’s choice of action to be
taken.”[20] By contrast, a proposed rule will be deemed
arbitrary and capricious where the Agency’s choice is based upon whim, devoid
of articulated reasons or “represents its will and not its judgment."
[21]
12.
An important
corollary to these standards is that when proposing new rules an Agency is
entitled to make choices between different possible regulatory approaches, so
long as the alternative that is selected by the Agency is a rational one.[22] Thus, while reasonable minds might differ as
to whether one or another particular approach represents “the best
alternative,” the Agency’s selection will be approved if it is one that a
rational person could have made.[23]
13.
Lastly, in these
proceedings the Administrative Law Judge conducts a review of the Agency’s
compliance with the procedural requirements for promulgating new rules. Among the inquiries that are made are: Whether the Agency has statutory authority to
adopt the rule; whether the rule is unconstitutional or otherwise illegal;
whether the Department has complied with the rule adoption procedures; whether
the proposed rule grants undue discretion to government officials; whether the
rule constitutes an undue delegation of authority to another entity; and
whether the proposed language meets the definition of a rule.[24]
14.
The Department prepared
a Statement of Need and Reasonableness ("SONAR") in support of the
proposed rules. At the hearing, the
Agency primarily relied upon the SONAR as its affirmative presentation of need
and reasonableness for the proposed amendments.
The SONAR was supplemented by comments made by members of the Agency’s
Panel and supporting witnesses during the public hearings.
15.
The Department has
suggested three amendments to the proposed rules in response to stakeholder
comments. Accordingly, because these
later modifications followed the publication of the proposed rules in the State
Register, Minn. Stat. § 14.05, subd. 2, further requires that the
Administrative Law Judge determine whether the new language is substantially
different from that which was originally proposed.[25]
16.
Additionally,
Minn. Stat. § 14.05, subd. 2 instructs that a later modification does not make
a proposed rule substantially different if “the differences are within the
scope of the matter announced . . . in the notice of hearing and are in
character with the issues raised in that notice,” the differences “are a logical
outgrowth of the contents of the . . . notice of hearing and the comments
submitted in response to the notice,” and the notice of hearing “provided fair
warning that the outcome of that rulemaking proceeding could be the rule in
question.” In reaching a determination
regarding whether modifications are substantially different, the Administrative
Law Judge is to consider whether “persons who will be affected by the rule
should have understood that the rulemaking proceeding . . . could
affect their interests,” whether “the subject matter of the rule or issues
determined by the rule are different from the subject matter or issues
contained in the . . . notice of hearing,” and whether “the effects of the rule
differ from the effects of the proposed rule contained in the . . . notice of
hearing.”[26]
III. Compliance with Procedural Rulemaking
Requirements
17.
On May 29, 2008,
the Agency requested the scheduling of a hearing regarding the proposed rules
and approval of the Additional Notice Plan.
The Department filed the following documents with the Chief
Administrative Law Judge at that time: A
copy of the draft Notice of Hearing proposed to be issued; a copy of the
proposed rules as certified by the Revisor of Statutes; and a draft of the
SONAR.
18.
On June 4, 2008,
the Department submitted an amended Notice of Hearing.
19.
On June 5, 2008,
Administrative Law Judge Eric L. Lipman approved the Notice of Hearing and
Additional Notice Plan, contingent upon the addition of the Chairwoman of the
Minnesota State Bar Association’s Construction Law Section to the mailing list.[27]
20.
On June 19,
2008, the Agency mailed a copy of the SONAR to the Legislative Reference
Library as required by law,[28] and mailed copies of the Notice of Hearing, proposed
rules, and SONAR to the chairs, chief authors and ranking minority members of
designated legislative committees.[29]
21.
On June 19,
2008, the Agency mailed the Notice of Hearing and a copy of the proposed rules
to all persons and associations who had registered to be on the Agency’s
rulemaking list.[30]
22.
On June 23,
2008, a copy of the proposed rules and the Notice of Hearing were published in
the State Register.[31]
23.
On the day of
the hearing,[32]
the Agency placed the following documents into the record:
(a) the Request for Comments
as published in the State Register on
July 24, 2006 (Exhibit A);
(b) the Proposed Rules as
approved by the Revisor of Statutes, dated June 2, 2008 (Ex. C);
(c) the SONAR (Ex. D);
(d) the Agency’s Certificate
of Mailing the SONAR to the Legislative Reference Library (Ex. E);
(e) the Notice of Hearing as published in the
State Register (Ex. F);
(f) the Agency’s Certificate
of Mailing the Notice of Hearing to the Rulemaking Mailing List and its
Certificate of Accuracy of the Mailing List (Ex. G);
(g) the Agency’s Certificate
of Mailing the Notice of Hearing Pursuant to the Additional Notice Plan with
attached mailing lists (Ex. H);
(h) written comment received
from the American Council of Engineering Companies dated July 24, 2008 (Ex. I);
(i)
the Agency’s
Certificate of Sending the Notice, SONAR, and Proposed Rules to Legislators
(Ex. K-1);
(j) the Agency’s Certificate
of Posting the Notice of Hearing on its Website Pursuant to the Additional
Notice Plan (Ex. K-2);
(k) a copy of the Agency’s May 23, 2008, letter to the Department of
Finance and the response from the Department of Finance dated June 13, 2008
(Ex. K-3);
(I)
a copy of Administrative
Law Judge Eric Lipman’s letter to the Agency approving its Additional Notice
Plan dated June 5, 2008 (Ex. K-4);
(m) copies of transcripts of the
Agency’s Advisory Committee meetings that took place on February 28, 2002,
March 28, 2002, and April 30, 2002 (Ex. L 1-3);
(n) a copy of the Federal
(USDOL) Prevailing Wage Determination showing “grouped” power operator
classifications (Ex. M-1);
(o) the Agency’s 2007 Highway
and Heavy Construction Prevailing Wage Determinations by 10 Regions (Ex. M-2);
(p) the Agency’s 2007
Commercial Construction Prevailing Wage Determinations
for 87 Counties (Ex. M-3);
(q) copies of written comments
the Agency received in 2006 after publishing its Request for Comments on July
24, 2006 (Ex. N); and
(r) written comments on the
proposed rules received prior to and during the hearing. (Exs. 1-4)
24.
Except as noted
in Finding 30 below, the Administrative Law Judge concludes that the Agency has
met all of the procedural requirements established by statute and rule.
IV. Statutory Authority
25.
The Department states
that it has both general and specific statutory authority to adopt rules. Minnesota Statutes § 175.171(2) grants the
Department general authority:
. . . to adopt reasonable
and proper rules relative to the exercise of its powers and duties, and proper
rules to govern its proceedings and to regulate the mode and manner of all
investigations and hearings . . .
26.
As specific
statutory authority for the proposed rules, the Department cites Minn. Stat. §
177.43, subdivision 4, which directs the Department to determine prevailing
wage rates for all trades and occupations on projects other than highway; and Minn.
Stat. § 177.44, subdivisions 3 and 4, which direct the Department to
investigate and determine the classes of labor and prevailing wage rates for
highway construction projects.
27.
The Department also
cites Minn. Stat. § 177.28, subd. 1 (2007) for general rulemaking authority to
adopt these rules. This section states
that:
[t]he commissioner
may adopt rules, including definitions of terms, to carry out the purposes of
section 177.21 to 177.44, to prevent the circumvention or evasion of those
sections, and to safeguard the minimum wage and overtime rates established by
177.24 and 177.25.[33]
28.
The
Administrative Law Judge finds that the above statutory provisions grant the Department
the authority to adopt the proposed rules.
V. Impact on Farming Operations
29.
Minn. Stat. §
14.111 imposes additional notice requirements when the proposed rules affect
farming operations. The statute requires
that an Agency provide a copy of any such changes to the Commissioner of
Agriculture at least thirty days prior to publishing the proposed rules in the
State Register.
30.
The proposed
rules do not impose restrictions or have a direct impact on fundamental aspects
of farming operations.[34] The
Administrative Law Judge finds that the proposed rule changes will not affect
farming operations in
VI. Additional Notice Requirements
31.
Minn. Stat. §
14.131 requires that an Agency include in its SONAR a description of the
efforts it made to provide notification to persons, or classes of persons, who
may be affected by the proposed rule; or alternatively, the Agency must detail
why these notification efforts were not made.
The Agency submitted an additional notice plan to the Office of
Administrative Hearings, which was approved on June 5, 2008.[35] Pursuant to
the plan, the Agency mailed the Notice of Hearing and proposed rules to four
lists in addition to its official rulemaking list: the “Prevailing Wages” list;
the “Associations” list, which also received a one page new release requesting
that the release be placed in the association’s email notification or
publication for its members; a mailing list of persons or groups who submitted
comments; and the Agency’s “Request for Comments” mailing list.[36] The combined
lists consisted of approximately 1,600 names of individuals, contractors, companies,
and groups that received notice of the proposed rule amendments form the
Agency. In addition, the Agency posted
the Notice of Hearing and proposed rules on its website.[37]
32.
The
Administrative Law Judge finds that the Agency fulfilled its additional notice
requirement.
VII. Statutory Requirements for the SONAR
A. Cost and
Alternative Assessments in the SONAR
33.
Minn. Stat. §
14.131 requires an Agency adopting rules to include in its SONAR:
a. a description of the classes of persons
who probably will be affected by the proposed rule, including classes that will
bear the costs of the proposed rule and classes that will benefit from the
proposed rule;
b. the probable costs to the Agency and to
any other Department of the implementation and enforcement of the proposed rule
and any anticipated effect on state revenues;
c. a determination of whether there are less
costly methods or less intrusive methods for achieving the purpose of the
proposed rule;
d. a description of any alternative methods
for achieving the purpose of the proposed rule that were seriously considered
by the Agency and the reasons why they were rejected in favor of the proposed
rule;
e. the probable costs of complying with the
proposed rule, including the portion of the total costs that will be borne by
identifiable categories of affected parties, such as separate classes of
governmental units, businesses or individuals;
f. the probable costs or consequences of
not adopting the proposed rule, including those costs or consequences borne by
identifiable categories of affected parties, such as separate classes of
governmental units, businesses or individuals; and
g. an assessment of any differences between
the proposed rule and existing federal regulations and a specific analysis of
the need for and reasonableness of each difference.
34.
With respect to
the first requirement, the Department identified in its SONAR the following
classes of affected persons: highway-heavy and commercial construction
contractors and subcontractors; construction workers including independent
truck owner-operators; companies with multiple trucks for hire (MTOs); truck
drivers; the owners of public works projects; and Minnesota taxpayers.[38]
35.
The Department states
that contractors and subcontractors which are not currently paying prevailing
wages, because the duties are misclassified in lower wage classifications, will
bear some costs when a new classification is added. However, the Agency points out that those
increased labor costs will most likely be passed on to the state and local
governments as part of the cost of the construction project. In addition, because the amount of work that
is not covered by existing classifications is small, the Agency asserts
potential increased labor costs will be minimal.[39]
36.
The Department states
that construction workers and truck drivers in both highway-heavy and
commercial construction will benefit from the proposed rule amendments –
presumably, because these workers will receive higher wages. In addition, contractors
and subcontractors who bid on public works projects will benefit because the proposed
rules clarify who must be paid prevailing wages making the bidding process more
uniform and equitable. Lastly, the
Agency asserts that local economies will benefit from the likely increase in spending
by construction employees. As the
Department reasons, a rise in wages will benefit communities increasing the
ability of workers to purchase goods and services and by reducing demand upon
social services programs.[40]
37.
With respect to
the second requirement, the Agency estimates that the costs it will incur in
enforcing the proposed rules will be minimal.
The Agency states that it will need to revise its computer system to
accommodate the new classifications and it will have to survey a larger number
of labor classes. The Agency believes
that the total cost of making the computer program revisions and surveying a
larger number of classes will be $5,000 per year or less. The Agency anticipates negligible cost
increases with respect to data entry, mailing or other administrative tasks as
a result of these proposed rules. The
Agency expects to achieve overall future cost savings in enforcement actions
because it anticipates the proposed rules will clarify master job
classification issues that are often the subject of contested enforcement
actions.[41]
38.
The Agency
states that Minnesota Department of Transportation will incur additional administrative
costs due to the increase in the number of classifications. However, the Agency asserts that the
Department of Transportation should achieve overall cost savings in enforcement
because the proposed rules should clarify labor classifications, which are
often at issue in costly contested enforcement actions.[42] The Agency
does not anticipate that the proposed rules will have any measureable effect on
state revenues.[43]
39.
With respect to
the third requirement, the Agency
asserts that there are no less costly or less intrusive methods for achieving
the purpose of the proposed rule amendments, which is to update the master
classifications to reflect changes in construction techniques, practices, and
equipment. The proposed rule amendments
do not impose additional burdens on contractors or companies working on
publicly-financed construction projects.
Contractors or others who participate in the prevailing wage survey will
still need to determine under which master job classification to report each
worker. Although there will be a larger
number of classifications to use, the Agency asserts that it should be clearer
which classification applies to which type or work.[44]
40.
With respect to
the fourth requirement, the Agency states that it considered case by case
enforcement as an alternative method for achieving the purpose of the proposed
rules. The Minnesota Department of
Transportation has the authority to enforce prevailing wage statutes and
existing rules on a case by case basis.
However, the Department rejected this method because, unlike adopting
rules, it does not affect all members of the industry uniformly and it is much
more costly than rulemaking. The Agency
also notes that the Department of Transportation has attempted in the past to
provide “contract guidelines” in bidding procedures as an alternative method
for updating and clarifying the classifications. However, due to the general applicability and
future effect of these guidelines,
41.
With respect to
the fifth requirement, the Agency states that the proposed rule amendments are
not expected to have a significant impact on construction costs covered by the
prevailing wage laws. The Agency
maintains that it is not expanding the scope of coverage of the prevailing wage
law so much as it is reorganizing and updating existing classifications. While the proposed rules do identify some new
job classes, the rules primarily regroup existing classes into new master job
classification groups. Some of the new
classes will receive their own prevailing wage rate, and other classes will
become part of power equipment operator job groups that will receive one group
wage rate. According to the Agency, most
of the duties covered under the new job classifications were earlier covered by
the prevailing wage rules – although under different classifications. For example, the new laborer job classes
(110-112) have been enforced for highway and heavy construction projects using
the existing prevailing wage rate for “common laborer.” Likewise,
wages for work performed under the proposed new special equipment operator
classes (201-205) have been enforced at the rate for drivers “two axle unit,”
and wages for paint truck drivers (205) has been enforced under the existing
class for “painter.” [47]
42.
The Agency
maintains that the changes to the job classifications are expected to have little
or no measureable impact on construction costs covered by the prevailing wage
laws. However, the total fiscal impact
of the proposed rules is difficult to estimate because the Department relies upon
voluntary surveys to set the prevailing wage rates. Prevailing wage rates are based on the modal
wages collected by the annual prevailing wage survey. It is not known how many survey responses
will identify the new job classes, or whether their wages will differ from the
wages of the job classifications under which they may have been covered. It is also not known whether union wage rates
are already being used for the work. The
Agency concedes, however, that the regrouping of job classifications will lead to
some job classes having higher prevailing wages than under the current system –
indeed, it points to this effect as among the benefits of the proposed rules.[48]
43.
The Minnesota Department of Finance likewise concluded after
reviewing the proposed rules that “there will eventually be a fiscal impact to
local units of government that engage in state funded construction activities
that employ affected classes of workers, but the impact is impossible to
quantify.”[49]
44.
According to the
Agency, determination of the fiscal impact of new prevailing wage rates for
certain job classes is dependent on at least three variables: (1) the
percentage of total construction costs that are labor costs; (2) the percentage
of labor costs (or hours) that involve the new job classes; (3) the percentage
increase in labor costs for the work done in the new job classes. Ranges for each of these variable percentages
were used to calculate percentage cost increases in construction costs. The impact of the wage changes is calculated
as: (cost of construction) x (1) x (2) x (3).[50]
45.
Based upon the
2002 Economic Census, the Office of the Legislative Auditor estimated that,
nationwide, labor costs represent approximately 25 percent of total
construction costs.[51]
46.
The record does
not include data as to the number of hours of work that will be performed under
the new classifications or the share of the total labor costs that the new job
classes will represent.[52] Indeed, these
figures are likely to vary considerably between projects. In its SONAR, the Department provided
estimated impacts of the new labor classes, if one were to assume that the new
classes represented one, five or 10 percent of labor costs.[53]
47.
The Department
conducted a “worst-case scenario” analysis of the 2007 prevailing wage survey
results for common laborers and it showed that if all the reported laborers who
received wages lower than the mode were to be paid at the modal rate, there
would be a 22 percent increase in wage costs for laborers. This would amount to an increase from $30 per
hour to $36 per hour. Similarly, a 30
percent increase would raise labor costs from $30 per hour to $39 per hour, and
a 40 percent increase would raise labor costs from $30 per hour to $42 per
hour.[54]
48.
According to the
Department’s analysis: If labor costs accounted for 30 percent of the total
construction cost, and 5 percent of the labor costs was for work performed by
new labor classes, and these new job class wages increased an average of 30
percent due to the prevailing wage, a $1 million construction project would now
cost $1,004,500.[55]
49.
In 2006, highway
and heavy construction projects administered by MnDOT were estimated at $2
billion and state-financed commercial construction contracts were estimated at
$0.8 billion.[56] With this
total amount of contracting activity, the potential effects of higher wage
rates could be quite large. According to
the Agency’s analysis, the effect of the rule changes upon $2 billion of
highway and heavy construction could range between $800,000 and $32 million in
added costs. The effect upon $0.8
billion of commercial construction could range between $300,000 and $12.8
million in new costs.[57]
50.
With respect to
the sixth requirement, the Agency states that the probable costs of failing to
adopt the proposed rules is that more workers will not be paid the correct
prevailing wage rate on publicly-financed projects. The Agency points out that the Minnesota
Department of Transportation has been collecting underpaid or unpaid prevailing
wages on behalf of workers of approximately $1,000,000 per year in recent
years. Another probable consequence of
not adopting the rules will be a continuation of some confusion as to the
proper classification and pay rates for workers, particularly with respect to
power equipment operators and those workers in the new classifications proposed
by the rules.[58] Lastly, the
Agency asserts that a probable consequence of failing to adopt the proposed
rules will be increased costs to the state for case-by-case enforcement actions.[59]
51.
With respect to
the seventh requirement, the Agency identifies in its SONAR several differences
between
B. Performance-Based Regulation
52.
Minn. Stat. §
14.131 requires that an Agency include in its SONAR a description of how it
“considered and implemented the legislative policy supporting performance-based
regulatory systems set forth in section 14.002.” Minn. Stat. § 14.002 states further that
“whenever feasible, state agencies must develop rules and regulatory programs that
emphasize superior achievement in meeting the Agency’s regulatory objectives
and maximum flexibility for the regulated party and the Agency in meeting those
goals.”[61]
53.
The Department
asserts in its SONAR that the goal of the proposed rules is to provide guidance
to contractors as to which activities are covered by the prevailing wage rates
and, in so doing, “level the playing field” between union and non-union
contractors in bidding for public works projects. The Department states that in order to
achieve maximum flexibility for the regulated parties, it worked with an
Advisory Committee made up of construction industry members, including:
contractors, subcontractors, material suppliers, trucking firms, unions,
employees and other affected parties. Together
Agency staff and Advisory Committee members discussed the best ways to address
master job classifications.[62]
54.
The Agency
states that, in comparison to case by case enforcement, the proposed rules
promote superior achievement in meeting the prevailing wage law’s regulatory
objective of paying prevailing wages.[63]
55.
The
Administrative Law Judge concludes that the Department has sufficiently
assessed the performance impact of the proposed rules and has satisfied the
requirements of Minn. Stat. § 14.131.
C.
Consultation with Commissioner of Finance
56.
Under Minn. Stat. § 14.131, the Agency is also required to
“consult with the commissioner of finance to help evaluate the fiscal impact
and fiscal benefits of the proposed rule on units of local government.”
57.
The Department consulted with the Department of Finance, and
in a response dated June 13, 2008, the Department of Finance concluded that “there
will eventually be a fiscal impact to local units of government that engage in
state funded construction activities that employ affected classes of workers,
but the impact is impossible to quantify.”[64]
58.
The
Administrative Law Judge concludes that the Agency has met the requirements
(set forth in Minn. Stat. § 14.131) for consultation with the Commissioner of
Finance regarding the fiscal impact and benefits of the proposed rules.
D. Compliance Costs to Small Businesses and
Cities
59.
Under Minn.
Stat. § 14.127, subd. 1, agencies must “determine if the cost of complying with
a proposed rule in the first year after the rule takes effect will exceed
$25,000 for: (1) any one business that
has less than 50 full-time employees; or (2) any one statutory or home rule
charter city that has less than ten full-time employees.”[65] Although this determination is not required
to be included in the SONAR, the statute states that the Agency “must make
[this] determination . . . before the close of the hearing record” and the
Administrative Law Judge must review the determination and approve or
disapprove it.[66]
60.
In the SONAR,
the Department states that it has considered whether the cost of complying with
the proposed rules in the first year after the rule takes effect will exceed
$25,000 for any small business or small city and has determined that it will
not. The Department’s determination is
based upon its assessment in the SONAR of the probable costs of complying with
the proposed rules.[67] The Department asserts that the proposed rule
is simply a clarification of the current rules and not an expansion of
coverage. According to the Department,
small businesses will simply use the new clarified classification rules to
determine their labor costs when developing a bid for a project subject to the
prevailing wage statute. The Department further
states that small cities with less than 10 full-time employees are not
generally part of state-aid highway programs and only in rare cases would bear
a portion of the state-funded construction project costs. In these rare cases, concludes the
Department, any incremental costs would be below the $25,000 threshold.[68]
61.
The
Administrative Law Judge concludes that the Agency has met the requirements set
forth in Minn. Stat. § 14.127 for determining whether the cost of complying
with the proposed rules in the first year after the rules take effect, will
exceed $25,000 for any small business or small city.
VIII. Analysis
of the Proposed Rules
62.
This Report is
limited to the discussion of the portions of the proposed rules where
commentators prompted a genuine dispute as to the reasonableness of the
Agency’s proposed alternative or otherwise required close examination. Several sections of the proposed rules were
not opposed by any member of the public and were adequately supported by the
SONAR. Accordingly, this Report will not
necessarily address each comment or rule part.
63.
The
Administrative Law Judge finds that the Agency has demonstrated by an
affirmative presentation of facts the need for and reasonableness of all rule
provisions that are not specifically addressed in this Report. Further, the Administrative Law Judge finds
that all provisions that are not specifically addressed in this Report are
authorized by statute and that there are no other defects that would bar the
adoption of those rules.
IX. Rule by
Rule Analysis
64.
The Department
proposed to modify
If work is performed
by a class of labor not defined by set forth in part 5200.1100,
Master Job Classifications, the contracting agency shall assign a wage rate and
the commissioner of labor and industry shall review and certify the assigned
wage rate based on the most similar trade or occupation from the area wage
determination. Within 90 days, the Commissioner of Labor and Industry must determine
that the work is included in an existing Major Job Classification or initiate
the rulemaking procedure so that the classification will be defined set
forth in the Master Job Classifications in part 5200.1100.[69]
65.
Commentator
Michael L. McCain, of the law firm of Seaton, Beck & Peters, asserted that
the proposed revisions to these rules were unreasonable because contrary to its
duty under the Prevailing Wage Act, the agency purported only to “name,” rather
than “define” various classes of labor.[70]
In the SONAR, the Department asserts the proposed
amendments clarify:
that the Commissioner of Labor and Industry, has an
option of determining that work being performed by a class of labor, which
somebody claims is not covered by an existing classification, is included in an
existing classification. This is an alternative to initiating a rulemaking
procedure and is clearly indicated as an option and a duty in the statute
in Minn. Stat. § 177.43, subd. 1 with respect state projects generally and
Minn. Stat. § 177.44, subd. 1 with respect to highway projects.[71]
66.
In the view of the Administrative Law Judge, the Commissioner of Labor
and Industry has not been delegated the authority to simply announce that
certain work “being performed by a class
of labor … is included in an existing classification” and for this announcement
to have a binding effect. The statute
relied upon by the Department, Minn. Stat. § 177.43, subd. 1, states in
relevant part: “a laborer or mechanic may
not be paid a lesser rate of wages than the prevailing wage rate in the same or
most similar trade or occupation in the area.”
Similarly, Stat. § 177.44, subd. 1, provides: “The laborer or mechanic must be paid at least the
prevailing wage rate in the same or most similar trade or occupation in the
area.” Neither of these statutes authorizes
the “alternative to initiating a rulemaking procedure” for defining the
length and breadth of Major Job Classifications, claimed by the Department in
its SONAR.
67.
Indeed, the
Department acknowledges that when state agencies have, in the past, issued
“contact guidelines … as an alternative method for updating and clarifying the
classifications … Minnesota courts have consistently ruled that these
guidelines are unpromulgated rules and unenforceable.”[72] Relabeling classification
“guidelines” as classification “determinations” would not change the character
of these pronouncements or suddenly render them enforceable.
68.
Without such a
rulemaking alternative appearing in law, in order for a new classification
opinion of the Commissioner to have binding effect it must be promulgated as an
interpretive rule. The Minnesota
Administrative Procedure Act (MAPA) defines a “rule” as:
every agency statement of general applicability and
future effect, including amendments, suspensions, and repeals of rules, adopted
to implement or make specific the law enforced or administered by that agency
or to govern its organization or procedure.[73]
Interpretations
of existing rules which “make specific the law enforced or administered by the
agency,” and are not either long-standing positions of the agency or within the
plain meaning of the regulation, are deemed to be “interpretative rules.”[74] Like substantive rules, an agency’s
interpretative rules are valid only if they are promulgated in accordance with
MAPA.[75]
69.
Significantly,
the Court of Appeals’ decision in AAA
Striping Service Co. v. Minnesota Dep’t of Transportation,[76]
supports this conclusion. In AAA Striping Service, the Court
addressed the minimum processes that a state contractor might demand as to
DOLI’s development of prevailing wage classifications. The panel noted:
To determine whether and to whom DOLI is accountable for decisions not
to follow through with rulemaking, we note the importance of classification and
the context in which such decisions are made.
Workers, labor unions, contractors, subcontractors (including AAA), and
perhaps even local units of government, have a substantial interest in the
classification process. Fair wages,
workers’ livelihoods, the financial feasibility of projects, and
entrepreneurial opportunities for contractors may be affected by these
decisions. The statutes mandate
investigation and hearings necessary to define worker classifications. This is strong legislative directive to
observe the basics of procedural due process in making classification
decisions. We conclude that at a
minimum, DOLI should engage in rulemaking as specified in its own regulation,
or, in the alternative, make available a reconsideration process with a
contested case proceeding when requested by an aggrieved party. . . . To
say that the decision to include striper and striper tenders in an existing
classification is entirely within the discretion of DOLI, that it can exercise
this discretion without a record or a hearing, and that there is no review
available is inconsistent with DOLI’s own rules, the statutes, and with the
principles of procedural due process.[77]
In that case, the Court of Appeals considered and
rejected the claim that the Commissioner of Labor and Industry could, by mere
announcement alone, place certain work within a given job classification.
70.
Under the terms
of the prevailing wage statute, the Commissioner may: (a) define
classifications and wage rates before bidding on state contracts occurs; (b)
seek to enforce the plain meaning of existing regulations through contested
case procedures and (c) undertake rulemaking to establish new major job
classifications.
71.
What the Department
may not do is codify in its regulations a power that the Legislature has not
conferred upon it and which the state courts declare to be at odds with the
“principles of procedural due process.”
The proposed revisions to Minn.
R. 5200.1030 and Minn. R. 5200.1035 are not approved.
72.
At a minimum,
the Department will need to remove references to an alternative process for
modifying job classifications, short of rulemaking, in any later revisions of Minn. R. 5200.1030 and Minn. R. 5200.1035.
73.
Mr. McCain, as
well as Philip Raines, of the Associated Builders and Contractors of Minnesota,
make a broad-based challenge to the proposed revisions to the Master Job
Classifications – namely, that the new classifications are so fatally
unspecific that none of the revisions can be considered reasonable.[78] In the view of the Administrative Law Judge,
that attack is too broad and outdistances the record in this rulemaking
proceeding.
74.
As to whether a
rule is impermissibly vague, the Minnesota Supreme Court has instructed that a
rule “should be upheld unless the terms are so uncertain and indefinite that
after exhausting all rules of construction it is impossible to ascertain
legislative intent.”[79] Stated another way, a regulation is not impermissibly
vague merely because its terms could have been drafted with greater precision.[80]
75.
On this record
we have the Department’s claims that the work encompassed by the existing and
proposed job classifications is “obvious” from the name of the classification
and industry custom and usage,[81] and the concurrence of at least one stakeholder
76.
By contrast, the challenge of Messrs. McCain and Raines to all of the
proposed classifications, does not, with two exceptions discussed below, detail
the infirmities of Major Job Classifications proposed for modification in this
rulemaking proceeding. For example, Mr.
McCain submitted into the record detailed evidence as to the lack of definition
for the Job Classification “Carpenter.”[83] In this rulemaking, however, the Department
only proposes to revise the number associated with the Carpenter classification,
from 404 to 704; and does not undertake any substantive change to the scope or
depth of this classification.[84]
77.
Additionally, it
may well be that Classification 306 (“Grader or motor patrol”), for example, is
fatally unspecific and vague – as McCain
and Raines argue in their broadside against all of the new classifications
– but that proposition does not follow from cited evidence that the classification
for “Carpenter” lacks the required precision.
In such a circumstance, the broad,
but largely unspecific challenge does not overcome the record evidence that the
scope of at least some of the classifications is obvious from their bare titles.[85] For that reason, a finding that all of the
proposed classifications are defective is not warranted on this record.
78.
Raising a different claim, Dale Zoerb, President of Building Restoration
Corporation, urged the Department to develop two new classifications for
“Tuckpointing” and “Caulkers” – classifications which do not now appear among
the Special Crafts Master Job Classifications.
In reply, the Department stated that it is now undertaking a parallel
rulemaking proceeding, under which a broader set of revisions to the Special
Crafts classifications will be made, and that the addition of new
classifications is better directed to those proceedings. The reply of the agency in this regard is
reasonable.
79.
The Department proposes to add as Classification 110 the following new
Major Job Classification:
Survey field technician (operate total station, GPS
receiver, level, rod or range poles, steel tape measurement; mark and drive
stakes; hand or power digging for and identification of markers or monuments;
perform and check calculations; review and understand construction plans and
land survey materials).[86]
While there were a number
of commentators submitting comments on this proposed rule, the stakeholder
comment can be grouped into two principal critiques: First, the stakeholders assert that the rule
does not make clear that professional surveyors working at the construction
site are beyond the reach of the proposed rule;[87] and second, the rule will
have distorting effects upon future wage surveys because it combines into a
single job classification tasks that are commonly distributed among employees
of very different experience levels and pay rates.[88]
80.
To these critiques, the agency’s reply is two-fold. First, it specifically disclaims that the
duties included in the classification are those that are performed by
registered land surveyors (or the surveyors’ supervisory personnel) and asserts
that this disclaimer is included in the Department’s Statement of Need and
Reasonableness underlying the proposed rule.[89] While the latter point is certainly true,
because any final rule is certainly to be in wider circulation than copies of
the June 19, 2008 SONAR, in the view of the Administrative Law Judge the
Department should consider adding terms such as “non-licensed,”
“non-registered,” or “non-supervisory” to the regulatory text so as to make its
stated intentions clear. Such a revision
would not be beyond the scope of the regulation as originally proposed.
81.
Second, while acknowledging that there may be differences in levels of
experience (and corresponding pay) among workers performing survey functions,
the Department asserts that because these workers use similar equipment, and
perform similar tasks, “[t]hese nuances are hard to detect in the field in an
enforcement setting.”[90] The Department apparently does not quarrel
with the view that a single classification may have a distorting effect on the
modal rate that is later mandated for this work – arguing that a single classification
is reasonable because the Department’s survey and audit techniques cannot
discern the differences that the stakeholders now describe. While the Department’s claim creates some
tension with the direction from the Legislature that it ascertain prevailing wage rates for “all
trades and occupations” before the state asks for bids on covered projects,[91] the fact that the Department
cannot detect differences among surveyors of different experience levels provides
some rationale for its regulatory choice.
82.
A revision to this rule part that the Department may wish to consider is
segmenting the overall class of surveyors based upon a specified number of
years of experience. Such a segmenting
could respond to the comments made by affected stakeholders and would not later be beyond
the scope of the regulation as originally proposed.
83.
The classification proposed by the Department, however, is needed and
reasonable.
84.
The Department
proposes a new master job classification to include workers who install
temporary traffic control systems such as cones, barriers and flashing lights
during covered construction projects.[92]
85.
The Department
proposed to establish the following new Classification, as Number 111: “Traffic control person (temporary
signage).”
86.
As it was with the classification of survey field technicians, above,
stakeholders commenting upon the proposed addition broke along various lines –
with some opposing the addition of a new category;[93] others asserting that it
was not sufficiently segmented so as to account for different levels of job
experience;[94] and still
others favoring the proposed change.[95]
87.
While the comments from both contractor and labor groups suggest that
there may be later confusion as to the proper classification of workers
performing these tasks, the classification responds to recent changes in
contracting practice[96] and is needed and
reasonable.
88.
The Department
proposes a new master job classification to include workers who “perform
quality tests in the field or covered offsite facilities on construction
materials.”[97] By way of a later amendment, the Department proposes
to limit the reach of such classification to those projects in which MnDOT has
retained the quality assurance professionals to review quality control services
by the contractor.[98]
89.
As amended,
Classification 112 would read:
“Quality control
tester (field and covered off-site facilities; testing of aggregate, asphalt
and concrete materials; limited to MnDOT Highway and Heavy construction
projects where MnDOT has retained Quality Assurance professionals to review and
interpret the results of quality control testers services provided by the
contractor.”
90.
This narrowing
of the rule would presumably address the objection raised by the Associated
General Contractors of
91.
As revised, the
proposed classification is needed and reasonable and is not beyond the scope of the regulation as originally proposed.
92.
The Department
proposes a new master job classification to include workers who use various
types of power equipment and machinery to landscape surfaces during
construction projects.[99]
93.
The new
Classification 203 would read:
“Landscaping
equipment, includes hydro seeder or mulcher, sod roller, farm tractor with
attachment, specifically seeding, sodding or plant, and two-framed forklift
(excluding front, posi-track, and skid steet loaders), no earthwork or grading
for elevations.”
94.
The Laborers Council opposed the development of this new classification
on the grounds that it would later cause confusion as to whether workers should
be assigned to existing Classification 103 (Laborer, Landscaping) or the
newly-developed Classification 203.[100] While it does not appear that the Department
addressed this point either in its SONAR, or in its later post-hearing
comments, because the agency references the worker’s operation of certain specialized
equipment in Classification 203, it cannot be said that it is impermissibly
vague or irrational. The proposed classification is needed and reasonable.
95.
The Department
proposes a new master job classification to include workers who are part of a
one or two person operation that uses a truck for pavement marking or removal.
96.
The new
Classification 205 would read: “Truck
for pavement marking or removal (one or two person operators).”
97.
Various
stakeholders, representing both labor and industry groups, complained that the
proposed rule was too imprecise and could lead to difficult classification
disputes with the revised Classification 715, relating to painters.[101] The Department’s reply, in its post-hearing
submissions, is apparently that the use of a truck in pavement painting makes
this labor sufficiently different from painting without the use of a truck, such
that a separate job classification is warranted. As noted above, because the agency references the worker’s operation of certain equipment
in proposed Classification 205 (namely, a truck), and this distinction is in
accord with the applicable collective bargaining agreements, it cannot be said
that the distinction between Classifications 205 and 715 is not perceptible or
rational.[102]
98.
More problematic for the Department is that, as pointed out by the
International Brotherhood of Teamsters Locals 160 and 346, neither the proposed
rules nor the accompanying materials explain why a truck driver operating pavement
truck should be classified separately from other types of truck driving. While the Department clearly intends to
include such drivers in the proposed Classification,[103] the affirmative
presentation of facts from the agency simply does not address this point. Moreover,
the text of the classification itself contains so few descriptive words, that a
basis for distinguishing Classification 205 from the separate, general class of
truck driving,[104] if there is such a
distinction, cannot be inferred.
99.
The Department has not established that the proposed classification is
needed and reasonable.
100.
At a minimum,
the Department will need to resolve the apparent conflict with
101.
The Department
proposes a new master job classification to include workers who operate large
capacity cranes that perform “the specialized work of pile driving, sheeting,
caisson work, and rotary drilling and boring.”[105]
102. The new Classification 301 would read: “All truck and crawler cranes 50 tons and
over and doing pile driving, sheeting, caisson work, rotary drilling, and
boring.”
103. Joseph Ryan, testifying on behalf of the International Union of Operating Engineers Local 49 (and
later, Paul W. Iversen, submitting comments on behalf of Local 49), asserted that
a better dividing line for the scope of this classification would be equipment with
a lifting capacity in excess of 40 tons, instead of the 50-ton standard
referenced in the proposed rule. Specifically,
Mr. Iversen argued that a classification that extended to equipment with a
lifting capacity of 40 tons and greater would be better aligned to the
applicable collective bargaining agreements than the proposed standards.[106]
104. The rationale expressed by
the Department in the SONAR asserts:
The change is necessary
because these modern very large cranes doing these specialized tasks require
high levels of skills and experience. The change is reasonable because the pay
for operators of these particular cranes doing these tasks is higher and the
operators require “certification” under Laws of Minnesota, [2005], Chapter 87,
§1 (Minn. Stat. § 182.6525 (2007).[107]
105. Regrettably, however, the requirements of Minn. Stat.
§ 182.6525 do not provide a rationale for limiting the classification to
equipment with a lifting capacity of 50
tons or greater. The certification requirements
in the referenced statute apply to individuals operating cranes with a lifting
capacity of five tons or more – presumably, obliging valid certificates for
operators of both 40-ton cranes and 50-ton cranes alike.
106. Because the affirmative
presentation of facts from the agency does not address why its line of demarcation
was chosen, and the text of the classification itself contains so few
descriptive words, a basis for the 50-ton limitation on the classification
cannot be inferred.
107.
The Department has not established that the proposed classification is
needed and reasonable.
108.
At a minimum,
the Department will need make an affirmative
presentation of facts in support of whatever lifting capacity limitation may be
chosen, in any later revisions of Minn. R. 5200.1100 - Classification 301.
109.
The Department
initially proposed a new master job classification to include workers who operate
power equipment that is commonly used in pile driving or sheeting operations.[108] By way of a
later amendment, the Department proposes to add the classification text as an
example of the type of duties undertaken by workers under newly-renumbered
Classification 716 – “Piledriver.”[109]
110.
As amended,
Classification 386 would read:
“Piledriver, including vibratory driver or extractor for piling and
sheeting operations.”
111.
Because the record establishes that the work undertaken within this
Classification has been undertaken by workers denominated as Piledrivers in the
past, and such a classification is in accord with applicable collective
bargaining agreements, the proposed revisions are needed and reasonable. Moreover, the proposed revisions to newly-renumbered Classification 716 are not beyond the scope of the regulation as
originally proposed.
112.
The Department
proposes to revise the Classification for Terrazo workers by adding two words
“marble setters.”[110]
113. The renumbered and expanded Classification 723 would
read: “Terrazo workers / marble
setters.”
114.
Commentator
Michael L. McCain, of the law firm of Seaton, Beck & Peters, asserts that
the two word addition urged by the Department is not sufficiently specific to
describe what marble work is included in the newly renumbered and expanded job
classification.[111]
115.
By way of reply,
the Department contends that the comments made by Mr. McCain “do not relate to
any particular new class or amendment to an existing class proposed in these
rules.”[112]
116. Because the affirmative
presentation of facts from the agency does not detail the scope of work in the classification performed by
marble setters,[113] and the proposed
two-word addition to the classification contains so few descriptive words, that
after exhausting all rules of construction it is not possible to ascertain the
intent of the regulation.
117. In a circumstance in which a proposed rule fails to
provide a reasonable notice of what standards will be applied, the proposed
rule is defective.[114]
118.
The Department has not established that the proposed classification is
needed and reasonable.
119.
At a minimum, in
any later revisions of Minn. R.
5200.1100 - Classification 723, the Department will need to include
enough description of the work duties of “marble setters” so that regulated
parties will have fair notice of what standards will be applied under the
Prevailing Wage Act.
120.
The Department
proposes a new master job classification “Tile finishers” so as to distinguish
these workers from the broader duties of “tile setter.”[115]
121. The new Classification 725 would read: “Tile finishers.”
122.
As with
Classification 723, discussed above, Mr. McCain, of the law firm of Seaton,
Beck & Peters, asserts that the proposed two word classification title is
not sufficiently specific to describe what work is included in the new
classification.[116]
123.
Likewise, as noted
above, the Department contends that the comments made by Mr. McCain “do not
relate to any particular new class or amendment to an existing class proposed
in these rules.”[117]
124.
In the SONAR
however, the Department does make a meaningful set of distinctions. It declares:
The scope of work of a tile finisher is not as broad as tile setter. Tile
finisher work includes mixing grout, grouting and surfacing all types of tile,
cutting tile, and sealing surfaces. Tile setters set the tile, repair and patch
tile, layout the work, install substrates; install showers, countertops,
floors, and steps; lay quarry tile; install ceilings, mantels, hearths,
swimming pools, domes, columns, and arches; and other work not performed by
tile finishers.[118]
Regrettably, however,
because the Department’s SONAR is not promulgated as a rule, and will never be
binding as a regulation, it does not operate to either define or limit the tile
finisher classification.
125. Accordingly, because the
proposed two-word addition to the classification contains so few descriptive
words, after exhausting all rules of
construction it is not possible to ascertain the intent of the regulation, the
revision proposed by the agency is not reasonable.
126. With that said, a regulatory cure appears to be
within easy reach. By modifying the
classification with the limiting terms that are now set forth in SONAR, it
could provide the missing detail. Such a
modification would be in line with the other modifications it has made in this
proceeding (compare generally,
Classifications 110 and 203 and 328) and would not be beyond the scope of the regulation as originally proposed.
1. The
Department of Labor and Industry gave proper notice of the hearing in this
matter.
2. The
Department has fulfilled the procedural requirements of Minn. Stat. § 14.14 and
all other procedural requirements of law or rule, with the exception noted in
Finding 30, which was found to be a harmless error.
3. The
Department has demonstrated its statutory authority to adopt the proposed rules
and has fulfilled all other substantive requirements of law or rule within the
meaning of Minn. Stat. §§ 14.05, subd. 1, 14.15, subd. 3, and 14.50 (i) and
(ii), except as noted in Findings 71, 99, 107, 118 and 125.
4. The
Department has demonstrated the need for and reasonableness of the other
portions of the proposed rules by an affirmative presentation of facts in the
record within the meaning of Minn. Stat. §§ 14.14, subd. 4 and 14.50 (iii),
except as noted in Findings 71, 99, 107, 118 and 125.
5. The
modifications to the proposed rules that were offered by the Department after
publication in the State Register do
not make the rules substantially different from the proposed rule within the
meaning of Minn. Stat. §§ 14.05, subd. 2, and 14.15, subd. 3.
6. Any Findings
that are more properly characterized as Conclusions are hereby adopted as such
and incorporated by reference. Any
Conclusions that are more properly characterized as Findings are hereby adopted
as such and incorporated by reference.
7. A
finding or conclusion of need and reasonableness in regard to any particular
rule subsection does not preclude, and should not discourage, the Department
from further modification of the proposed rules based upon an examination of
the public comments; provided that the rule finally adopted is based upon the
facts appearing in this rule hearing record.
Based upon the foregoing Conclusions, the
Administrative Law Judge makes the following:
IT IS HEREBY RECOMMENDED that the proposed amended
rules be adopted, except as otherwise noted.
Dated: September 22, 2008.
|
_/s/
Eric L. Lipman |
|
ERIC L. LIPMAN |
|
Administrative Law Judge |
It bears noting that, at different times over the
past decade, both the Legislative Auditor and the Minnesota Court of Appeals
have urged the Department to undertake rulemaking in order to close gaps in the
Prevailing Wage Act regulations.[119]
For
its part, the Department has responded in this proceeding, and in others, that
it is willing to undertake such rulemaking and that it does so to both provide
guidance to workers, contractors and audit personnel, and to avoid the burden
of later enforcement litigation.[120] Indeed, as noted above, the Department
projects that its revisions to the prevailing wage rules will result in lower
enforcement-related costs.
On
this record, however, it appears that a key stumbling block to realization of
the agency’s stated goals is the Department’s claim that the work that is
encompassed by the existing and proposed job classifications is “obvious” from
the name of the classification and industry custom and usage.[121] While this
view is not demonstrably irrational – the legal standard that is applicable in rulemaking
proceedings – it is certainly a minority viewpoint; with representatives of
labor, industry and sister government agencies frequently disagreeing with the
Department on this score.[122] Moreover, as our collective experience has
shown, the claim that the prevailing wage provisions are clear on their face is
not one that has been sustained by tribunals when other, more stringent legal
standards apply.[123]
Accordingly,
as the Department considers possible cures to the rulemaking defects that have
been identified in this proceeding, and methods by which it can meet the needs
of the stakeholders who will rely upon any later rules, one conclusion is clear: Additional detail on the boundaries between
and among Major Job Classifications would benefit all concerned.[124]
E. L. L.
[1] Minn. Stat. § 14.15, subd. 1.
[2]
[3] SONAR at 8.
[4] SONAR at 2.
[5] SONAR at 4.
[6] SONAR at 3-4.
[7] SONAR at 9.
[8] SONAR at 3-4.
[9] SONAR at 14.
[10] SONAR at 14-15.
[11] 24 S.R. 396.
[12] 26 S.R. 107.
[13] 29 S.R. 454.
[14] 31 S.R. 91.
[15] SONAR at 15.
[16] SONAR at 16.
[17] See, Manufactured
Housing Institute v. Pettersen, 347
N.W.2d 238, 240 (
[18] Compare generally, United States v. Gould, 536 F.2d 216, 220 (8th Cir. 1976).
[19] See, Mammenga
v. Board of Human Services, 442
N.W.2d 786, 789-92 (
[20] Manufactured Hous. Inst., 347 N.W.2d at 244.
[21] Compare,
Mammenga, 442 N.W.2d at 789;
[22] Peterson
v.
[23]
[24] See,
[25] See Minn. Stat. §§ 14.15, subd. 3, and 14.05, subd. 2 (2006).
[26] Minn. Stat. § 14.05, subd. 2 (2006).
[27] Ex. K-4.
[28] Ex. E.
[29] The Agency sent materials to the leadership of
the Economic Development Budget Division, Business Industry & Jobs
Committee, Higher Education and Workforce Development Policy and Finance
Division, and Commerce and Labor Committee.
See, Ex. K-1.
[30] Ex. G.
[31] 32 S.R. 2253.
[32] See, July 25, 2008 Hearing Transcript at 12.
[33] See,
[34] See also, n the Matter of the Proposed
Amendments to Rules Governing Prevailing Wage Determinations,
[35] Ex. K-4.
[36] SONAR at 15-16. See,
Ex. H.
[37] Ex. H and Ex. K-2.
[38] SONAR at 6.
[39] SONAR at 5 and 8.
[40] SONAR at 6.
[41] SONAR at 6-7.
[42] SONAR at 7.
[43]
[44] SONAR at 8.
[45] SONAR at 9.
[46]
[47] SONAR at 10.
[48] SONAR at 6, 9, 10 and 13.
[49] Ex. K-3.
[50] SONAR at 11.
[51] “Prevailing
Wages,”
[52] SONAR at 11.
[53] SONAR at 10.
[54] SONAR at 11.
[55]
[56] The estimated highway and heavy project costs
were supplied by MnDOT and the estimated commercial construction contracts were
based on the 2006 Capital Budget Bill and a cost breakdown provided by the
Minnesota Department of Finance. SONAR
at 12.
[57] SONAR at 12.
[58] SONAR at 13.
[59]
[60] SONAR at 13-14.
[61]
[62] SONAR at 14.
[63] SONAR at 15.
[64] Ex. K-3.
[65]
[66]
[67] See, SONAR at 9-11.
[68] SONAR at 17.
[69] While an
earlier version of the Department’s rulemaking proposed use of the term “name”
in place of the word “define” – in its first round of comments the Department
further modified its position to urge use of the words “set forth in” the Major
Job Classifications. Compare, Proposed Permanent Rules Relating to Prevailing Wages, Revisor No.
RD3697 at 1-2 with the Department’s
Initial Comments, at 8-9 (August 14, 2008).
[70] Compare, e.g., Minn. Stat. § 177.4,
subd. 3 (2006) (“The Department of Labor and
Industry shall conduct investigations and hold public hearings necessary to
define classes of laborers and mechanics and to determine the hours of labor
and wage rates prevailing in all areas of the state for all classes of labor
and mechanics commonly employed in highway construction work, so as to
determine prevailing hours of labor, prevailing wage rates, and hourly basic
rates of pay”).
[71] SONAR at 18
(emphasis added).
[72] SONAR at 9; see also, SONAR at 14 ("The federal
process also allows for the creation of new prevailing wage classifications
outside of the federal rulemaking process. Our prevailing statute and Chapter 14
of Minnesota Statutes do not").
[73] Minn. Stat. §
14.02, subd. 4.
[74] See, e.g.,
Cable Communications Bd. v. Nor-West Cable Communications P’ship, 356
N.W.2d 658, 667 (Minn. 1984) (“Generally, if the agency’s interpretation of a
rule corresponds with its plain meaning, or if the rule is ambiguous and the
agency interpretation is a long-standing one, the agency is not deemed to have
promulgated a new rule”).
[75] See, In re Application of Q Petroleum, 498 N.W.2d 772, 780 (Minn. App.), review denied (
[76] 681 N.W.2d
706 (
[77]
AAA Striping Service Co., 681
N.W.2d at 717 (emphasis added and citations and footnote omitted).
[78] See, Initial
Comments of Michael L. McCain, at 3-7 (August 14, 2008); Initial Comments of Philip Raines, at
1-2 (August 13, 2008).
[79] In re N.P., 361 N.W.2d 386, 394 (
[80] Compare generally, State v. Normandale
Properties, Inc., 420 N.W.2d 259, 262 (Minn. App.), review denied (
[81] SONAR at 18 (“The definitions of the various job
classifications for power equipment operators and truck drivers are obvious …
from the name and well known from custom and usage in the construction industry
and labor agreements”).
[82] See, Rebuttal
Comments of Paul W. Iversen, at 3 (August 21, 2008).
[83] See, Initial Comments of Michael L. McCain,
at 4-5.
[84] Proposed Permanent Rules Relating to
Prevailing Wages, Revisor No. RD3697 at 13.
Similarly, other commentators attacked the underlying substance of Major
Job Classifications which the Department only proposed to renumber in this
proceeding. Those challenges are
likewise not well placed.
[85] See, SONAR at 18; Rebuttal Comments of Paul W. Iversen, at 3.
[86] Proposed Permanent Rules Relating to
Prevailing Wages, Revisor No. RD3697 at 4.
[87] See, e.g., Initial Comments of the
Associated Gen. Contractors of Minn., at 1 (August 11, 2008); Initial Comments of Minnesota Soc’y of
Professional Eng’rs, at 1-2 (August 14, 2008); Initial Comments of Diane S. Halverson, at 1 (August 8, 2008).
[88] See, e.g., Initial Comments of
[89] SONAR at 20; Department’s Initial Comments, at 6 (August
14, 2008); Department’s Rebuttal Comments,
at 5 (August 21, 2008).
[90] Department’s Initial Comments, at 6.
[91] Compare, e.g., Minn. Stat. § 174.43,
subd. 4 (2006).
[92] SONAR at
20-21.
[93] See, Initial
Comments of Laborers Dist. Council of
[94] See, Initial
Comments of Tim Lewis, at 4 (August 14, 2008); Rebuttal Comments of Tim Lewis, at 2 (August 21, 2008).
[95] See, Initial
Comments of the Associated Gen. Contractors of Minn., at 1; Rebuttal Comments of MnDOT’s Office of
Construction and Innovative Contracting, at 7 (August 21, 2008).
[96] SONAR at 21.
[97]
[98] Department’s Initial Comments, at 2.
[99] SONAR at 21.
[100] See, Initial
Comments of Laborers Dist. Council of
[101] See, e.g., Initial Comments of Tim Lewis, at 4; Initial Comments of the International Union of Painters & Allied
Trades, Dist. Council 82, at 3; Rebuttal
Comments of AAA Striping Service Co., at 2-3 (August 21, 2008).
[102] SONAR at 21.
[103]
[104] Compare,
[105] SONAR at 26.
[106] See, Initial
Comments of Paul W. Iversen, at 1 (August 14, 2008).
[107] SONAR at 26.
[108] SONAR at 33.
[109] Department’s Rebuttal Comments, at 7-8; Compare also, Initial Comments of Dennis
Perrier and Burt Johnson, at 1-2 (August 12, 2008); Proposed Permanent Rules Relating to Prevailing Wages, Revisor No.
RD3697 at 13.
[110] Proposed Permanent Rules Relating to
Prevailing Wages, Revisor No. RD3697 at 14.
[111] See, Initial
Comments of Michael L. McCain, at 8-10.
[112] Department’s Rebuttal Comments, at 8.
[113] Compare, SONAR at 50 (“The new language
is necessary to clarify that the scope of work in the classification includes
the work performed by marble setters. The change is necessary for enforcement
purposes to assure prevailing wage coverage for marble setters. The change to
the classification is reasonable because the marble setters perform work
similar to Terrazzo workers and the work requires similar skill and experience
to perform”).
[114] See, In
the Matter of Proposed Amendments to Rules Governing Apprenticeship Wages, OAH
Docket No. 7-1900-17022-1, slip op. at 36 (2006) (http://www.oah.state.mn.us/aljBase/190017022.rr.htm).
[115] See, SONAR at 50-51; Proposed Permanent Rules Relating to
Prevailing Wages, Revisor No. RD3697 at 14.
[116] See, Initial
Comments of Michael L. McCain, at 8-10.
[117] Department’s Rebuttal Comments, at 8.
[118] See, SONAR at 50-51.
[119] See, e.g., Prevailing Wages – Evaluation
Report, at 63 (Office of the Legislative Auditor, 2007) (“The source of the problem is that the rules promulgated by
the Department of Labor and Industry do not define the job responsibilities of
the various job classes for either commercial or highway/heavy construction. In
particular, there is no definition of the responsibilities of common or skilled
laborers in comparison to those of skilled tradesmen…. The Department of Labor
and Industry should promulgate rules that define the job responsibilities of
workers in the various construction job classes listed in the department’s
rules”) (http://www.auditor.leg.state.mn.us/ped/pedrep/prevailingwages.pdf);
L&D Trucking v.
[120] See, SONAR at 7, 9, 13 and 14; accord, Proposed Amendments to Rules Governing
Prevailing Wages: Trucking,
[121] See, SONAR at 18 (“The definitions of the various job
classifications for power equipment operators and truck drivers are obvious …
from the name and well known from custom and usage in the construction industry
and labor agreements”); compare also,
In the Matter of the MnDOT Detroit Lakes
Regional Headquarters, Construction Project Number 00TZ1791B, OAH Docket
No. 8-3001-17706-2 (2008) (http://www.oah.state.mn.us/aljBase/300117706-finrpt.htm)
("MnDOT argues that the correct labor classifications for particular tasks
were known to Comstock on the date that the underlying contract was signed
because Comstock had a listing of the Major Job Classifications, a copy of the
contract Statement of Work and – presumably – was a knowledgeable
contractor").
[122] See, e.g., SONAR at 9; Initial Comments of Tim Lewis, at 4; Initial Comments of the International Union
of Painters & Allied Trades, Dist. Council 82, at 3; Initial Comments of Laborers Dist. Council
of
[123] See, e.g., Sa-Ag, Inc. v. Minnesota Dep't of
Transp., 447 N.W.2d 1, 5 (Minn. App. 1989) (the court disagreed with the
Department of Transportation that for purposes of the prevailing wage statute,
the statutory term, “substantially in place,” was susceptible to only one
meaning; and held that the Department of Transportation "engaged in
rulemaking by issuing the addendum which interprets the term"); In the Matter of the MnDOT Detroit Lakes
Regional Headquarters, supra ("Because the prevailing wage
classification rules do not include sufficient language for readers to
determine its intended scope, they may not form the basis for a monetary claim
by MnDOT against Comstock").
[124] Compare generally, Proposed Amendments to
Rules Governing Prevailing Wages: Trucking,