High Court Eases Way for States to Back Wage Laws

The U.S. Supreme Court made it easier Tuesday for states to withhold payments from contractors who do not comply with prevailing-wage laws.

States do not have to give contractors a hearing to challenge a withholding of payment, the court ruled unanimously in a California case. As long as contractors can challenge a state’s action in court, their rights are adequately protected, the justices said.

A contractor’s claim for payment “is an interest . . . that can be fully protected by an ordinary breach-of-contract suit,” Chief Justice William H. Rehnquist wrote for the court.

The case involved a fire-protection company called G&G; Fire Sprinklers Inc., which served as a subcontractor on several California public works projects.

Like many states, California has a law requiring contractors on such projects to pay their workers a prevailing wage set by the state.

The state can withhold wage payments and penalties from contractors that fail to pay the prevailing-wage rate, and when a subcontractor is at fault, contractors can withhold the payment from them.

The current California law does not let companies challenge such a decision in a hearing, but allows them to sue to recover wages and penalties. Starting July 1, a new California law will allow contractors to seek a state hearing.

In 1995, the California Division of Labor Standards Enforcement determined that G&G; violated state law by failing to pay prevailing wages or keep proper payroll records on three projects in which it had been a subcontractor.

State officials directed the withholding of more than $135,000 in wages and penalties from G&G.; The company sued in federal court, saying the state violated its due-process rights under the federal Constitution by depriving it of property without holding a hearing.

A federal judge and the U.S. 9th Circuit Court of Appeals ruled for G&G.; The Supreme Court ordered the appeals court to restudy the case, and the 9th Circuit Court again ruled for G&G; last year.

On Tuesday, the Supreme Court reversed that decision.

The case is Lujan vs. G&G; Fire Sprinklers, 00-152.