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A Better Partnership
May 19, 2016

MSC holds that cities can regulate wages in municipal contractor agreements that affect or involve city property

In Associated Builders and Contractors v City of Lansing, No. 149622, the Michigan Supreme Court upheld a Lansing ordinance requiring contractors and subcontractors that perform construction on behalf of the city to pay their laborers at least the prevailing wage.
 
The city of Lansing enacted an ordinance which states that no contract for construction on behalf of the city will be approved unless the contractor has agreed that its laborers will receive the prevailing wage established by the U.S. Department of Labor.  The ordinance applies only to mechanics and laborers, including truck drivers, employed directly on the work site.  Associated Builders and Contractors brought an action challenging the Lansing ordinance and claiming that municipalities do not have the authority to adopt laws regulating the wages paid by third parties.  The circuit court, relying on  the 1923 case of Attorney General ex rel Lennane v City of Detroit, 225 Mich 631; 196 NW 391 (1923), agreed with Associated Builders and held that the city of Lansing exceeded its power in passing the wage law.  The Michigan Court of Appeals reversed the circuit court’s decision, holding that changes in the Michigan Constitution and other legal developments made Lennane obsolete and inapplicable.
 
The Michigan Supreme Court agreed with the Court of Appeals and upheld the Lansing prevailing wage law.  Article 7, § 22 of the 1963 Constitution states that each “city and village shall have the power to adopt resolutions and ordinances relating to its municipal concerns, property and government, subject to the constitution and the law.”  The Court interpreted the section to give cities and villages broad power to regulate their own affairs.  The Court held that the wages paid by municipal contractors to their workers have a “self-evident relationship” to municipal concerns and property.  As a result, cities have the power to set terms for contracts they enters into with third parties—including the wages the third party pays to its employees.
 
The Court further noted that its holding does not imply that cities are sovereign entities with the ability to negate legislative action.  Justice Zahra further expounded upon this point in his concurrence.  He agreed with the majority that the Lansing ordinance was valid and that Lennane should be overruled, but he wrote separately to clarify that municipalities do not have any inherent authority, and derive their power only from the state.
 
Finally, the Court noted that the Court of Appeals did not have the authority to overrule Lennane, which was a Michigan Supreme Court case.  The Court therefore vacated the decision of the Court of Appeals, but affirmed the result.

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