Arizona Court of Appeals Holds that Government Contractors Do Not Have to Abide By Cities’ Prevailing Wage Rules

Anyone who has attempted to secure a government contract understands that they must follow a series of rules and procedures that do not apply to agreements between private parties. In some situations, it seems like one law contradicts another, forcing businesses to assess exactly what must be done to get the job they seek. Recently, the Arizona Court of Appeals considered whether the state’s law barring prevailing wage mandates in government contracts was superseded by the statute enabling cities to establish their own minimum wage. 

In Associated Minority Contractors et al. v. City of Phoenix et al., the dispute arose out of the city’s rule linking wages on construction projects to information generated from market surveys within the industry. Prevailing wage requirements date back approximately a century, most prominently in the federal Davis-Bacon Act. Arizona adopted its own version of the Davis-Bacon Act in 1933, but then reversed it in a 1984 statewide ballot initiative. 

Another ballot initiative, this one in 2006, changed existing state law and gave municipalities the power to increase the state-mandated minimum wage for employees within its city limits. In 2023, Phoenix and Tucson, drawing on guidance from the Arizona Attorney General, enacted ordinances requiring contractors to use federal Department of Labor data to pay prevailing wages on government construction projects of a certain value. The Tucson rule applied to contracts of at least $2 million, and the Phoenix prevailing wage provision took effect when a job cost $4 million or more. 

Construction industry groups objected to the effect these ordinances had on their labor costs and sued, alleging violation of the 1984 law barring prevailing wage mandates. The Court of Appeals agreed, drawing a distinction between “minimum wages” and “prevailing wages.” According to the court’s reasoning, a minimum wage is a jurisdiction-wide floor applicable to covered employers and employees. A prevailing wage is a variable, occupation- and locality-specific rate typically derived from surveys and applied as a condition of public contracting. Because the two concepts are legally and functionally distinct, the later grant of authority to set local minimum wages did not authorize cities to impose prevailing wage requirements on their own public works.

The court also emphasized that implied repeals are disfavored and that the more specific statute (the public contracting prohibition) controls over the more general statute (local minimum wage authority) absent clear conflict. If you have questions about the rules controlling a government contract your business is seeking, or any other agreement, it is wise to speak with a qualified attorney before you invest significant resources into landing the project. 

Located in Phoenix, the Law Offices of Donald W. Hudspeth, P.C. assists Arizona companies with a full range of contract matters. To schedule a consultation, please call us at 866-696-2033 or contact us online.