State Reversal on Pay Clears Way for Opening Compton Lazben Hotel

In a victory for the city, state labor officials have reversed an earlier ruling that last fall halted construction on the nearly $30-million Compton Lazben Hotel.

The state action Tuesday paved the way for the Aug. 15 opening of the hotel and convention center complex.

Last fall, the state Department of Industrial Relations ruled that the contractor, Tucon Development of Sepulveda, had to pay prevailing wages established by law because the hotel is a public works project. The city successfully appealed the ruling, convincing the state that Compton’s charter exempted the city from the prevailing wage requirement.

Originally, the 288-room hotel complex, a joint project between the city and a private developer, was to have opened in May, 1988. The date was later pushed back to December and then construction halted for five months after the state raised the wage issue. State officials said work could continue while the city appealed, but the city and the developer became embroiled in a dispute over money and construction standards that was not resolved until April.

If the city had lost the appeal, it might have had to pay about $660,000 in back wages to the workers.

Jona M. Liebrecht, president of Lazben Hotel Management Co., said he was delighted by the reversal. “We’re breathing freely now, knowing that we will open.”

About 60 people are on the hotel payroll, in addition to the construction workers finishing the interior of the building that will house three restaurants, including a jazz nightclub.

Had the city lost its appeal, the final phases of construction could have been delayed while the city and the hotel developer worked out payment schedules to workers who claimed they were owed back wages.

While city officials were congratulating themselves on winning the appeal, a employee representative expressed disappointment.

“It’s a terrible decision,” said Floyd Clay, business representative for the Los Angeles District Council of Carpenters. “I kind of expected it. There was a tremendous amount of money involved and the little people were at the bottom of the list with nothing to fight with.”

When he first filed the prevailing wage complaint last year with the Department of Industrial Relations, Clay was financial secretary of Carpenters Local 1437 of Compton, which has since been absorbed by Local 630 of Long Beach.

Clay said union attorneys would review the new ruling to determine whether there are grounds for an appeal. “We’re going to take a look at all the documents to see if we can help the little guy,” Clay said. “This is what unions were founded for. This is a classic example.”

Complicated Arrangements

The prevailing wage issue rests on a point of labor law that applies to public works projects, those paid for with public funds. The hotel project is complicated, however, because it is being financed under an arrangement in which the city owns the land but is making construction loans to the developer, who will have title to the hotel building.

Initially, the state ruled that the hotel was a public works project, meaning workers had to be paid prevailing wages--standards set under state law to ensure that workers on public, nonunion jobs get wages comparable to what union workers make in the area.

Some construction workers at the hotel made as little as $8 an hour, while the prevailing wage rate is about $25 an hour.

The city argued successfully in its appeal, however, that the project was not governed by prevailing wage standards because Compton is a charter city and chose to exempt itself in 1979 from the constraints of the public works designation. Charter cities, said Ron Rinaldi, director of the Department of Industrial Relations, have that option.

Rinaldi said that his department’s first ruling was based on “misinformation” received from the city. John M. Rea, chief counsel for the department, said that staff in the Compton city attorney’s office initially informed the state that the city never put a public works exemption in its charter.

The city also successfully argued that the project was financed and controlled by the city, not by its redevelopment agency. The redevelopment agency cannot exempt itself from the public works constraint, Rinaldi said.