J.D. Donovan, Inc. v. Minnesota Department of Transportation

STATE OF MINNESOTA
IN SUPREME COURT
A14-0863
A14-1021
Court of Appeals Gildea, C.J.
Dissenting, Lillehaug and Stras, JJ.
J.D. Donovan, Inc., et al., Took no part, Hudson and Chutich, JJ.
Appellants,
vs.
Filed: April 20, 2016
Minnesota Department of Office of Appellate Courts
Transportation, et al.,
Respondents.
________________________
Thomas Revnew, Tara Craft Adams, Seaton, Peters & Revnew, P.A., Minneapolis,
Minnesota, for appellants.
Lori Swanson, Attorney General, Mathew Ferche, Assistant Attorney General, Saint
Paul, Minnesota, for respondents.
Brendan D. Cummins, Justin D. Cummins, Cummins & Cummins, LLP, Minneapolis,
Minnesota, for amicus curiae Minnesota State Building and Construction Trades Council.
________________________
SYLLABUS
The transport of asphalt cement from a commercial oil refinery to a contractor’s
facility is not subject to the Prevailing Wage Act because the scope of hauling activities
considered to be “work under the contract” under Minn. R. 5200.1106 (2015) is limited
to hauling activities to, from, or on the site of a public works project.
Reversed.
1
OPINION
GILDEA, Chief Justice.
This consolidated appeal involves the scope of the Minnesota Prevailing Wage
Act, Minn. Stat. §§ 177.41–.44 (2014), as applied to hauling activities for state highway
projects. The question presented is whether truck drivers hauling asphalt cement from a
commercial oil refinery to a contractor’s facility are performing “work under a contract”
within the meaning of Minn. Stat. § 177.44, subd. 1, and therefore must be paid
prevailing wages. Relying on an administrative rule that addresses the meaning of “work
under a contract,” Minn. R. 5200.1106 (2015), the courts below answered this question in
the affirmative. Because we hold that hauling activities must be to, from, or on the site of
a public works project to qualify as “work under a contract,” we reverse.
Respondent Minnesota Department of Transportation (MnDOT) awarded
contracts to OMG Midwest, Inc., d/b/a Southern Minnesota Construction (SMC), and
appellant Hardrives, Inc. (Hardrives) for highway projects. In 2012, the State contracted
with SMC for work on Trunk Highway 30 in Blue Earth County. In 2009, the State
contracted with Hardrives for work on Trunk Highways 10 and 23 in Benton County.
As the prime contractors for the highway projects, SMC and Hardrives furnished
all services and materials needed to complete the work specified in the contracts. As
relevant here, SMC and Hardrives agreed to incorporate a particular grade of asphalt
cement into the asphalt concrete mixture furnished to pave the highway surfaces. SMC
and Hardrives further agreed to obtain the asphalt cement from a MnDOT-certified oil
2
refinery. Appellants J.D. Donovan, Inc. (Donovan) and Wayne Transports, Inc. (Wayne)
assisted in the acquisition and transport of asphalt cement for the projects.
Donovan provided services for both the SMC project and the Hardrives project.
Specifically, Donovan purchased asphalt cement from the oil refineries, resold the asphalt
cement to SMC and Hardrives, and dispatched truck drivers to haul the asphalt cement
from the refineries to SMC’s and Hardrives’s permanent asphalt mixing facilities. At
these facilities, the asphalt cement was pumped into storage tanks for later use in creating
asphalt concrete for the projects. Donovan did not make any deliveries to either of the
project work sites and did not provide any hauling services at the work sites.
Wayne, a common carrier with for-hire trucking services, provided services for the
Hardrives project. During the relevant period, Wayne transported 1,129 loads of asphalt
cement from an oil refinery to Hardrives’s permanent asphalt mixing facility. Seven of
these loads were used for the Hardrives project, although Wayne was not informed that
these loads would be used for the project. Wayne did not make any deliveries to the
project work site and did not provide any hauling services at the work site.
In addition to awarding contracts for state highway projects, MnDOT is charged
with enforcing section 177.44 of the Prevailing Wage Act, which addresses the prevailing
wage requirements for state highway projects. Minn. Stat. § 177.44, subd. 7. Following
an investigation, the Labor Compliance Unit of MnDOT determined that Hardrives had
violated the project contract by failing to ensure that drivers employed by Donovan were
paid prevailing wages. In February 2013, MnDOT notified Hardrives by letter that hiring
subcontractors to haul “contract-specific oil” directly to its asphalt plant “in order to
3
produce a contract-specific product” constituted “work under the contract” under Minn.
R. 5200.1106, which required the payment of prevailing wage rates. Shortly thereafter,
MnDOT sent a similar letter to SMC. MnDOT gave Hardrives and SMC 20 days to
submit certified payroll records demonstrating compliance with the prevailing wage
requirements. See Minn. Stat. § 177.44, subd. 7.
In response to the notices, appellants commenced two separate actions in district
court against MnDOT, seeking declaratory and injunctive relief. Donovan instituted one
action against MnDOT involving the SMC project. Donovan, Wayne, and Hardrives
collectively instituted another action against MnDOT involving the Hardrives project. In
both cases, appellants argued that the hauling activities of Donovan and Wayne did not
constitute “work under a contract” under Minn. Stat. § 177.44, subd. 1. They claimed
that MnDOT was taking a new position on the application of the Prevailing Wage Act to
trucking firms. Donovan asserted that it had been providing trucking services on dozens
of state highway projects over the previous several years, and MnDOT had never before
claimed that hauling asphalt cement from a refinery to a fixed commercial plant location
was subject to the prevailing wage requirements. Alternatively, appellants argued that
the hauling activities were exempt from the prevailing wage requirements under the
“commercial establishment exception” in the Act. See Minn. Stat. § 177.44, subd. 2.1
1
Because we conclude that the hauling activities are not “work under the contract”
for purposes of the Act, it is not necessary for us to resolve the commercial establishment
issue appellants raise. See Minn. Stat. § 177.44, subd. 2.
4
The district courts in both cases granted summary judgment to MnDOT. The
court of appeals consolidated the cases for appeal and affirmed. J.D. Donovan, Inc. v.
Minn. Dep’t of Transp., Nos. A14-0863, A14-1021, 2015 WL 404666, at *6 (Minn. App.
Feb. 2, 2015). The court of appeals concluded that the hauling activities of Donovan and
Wayne qualified as “work under a contract” under Minn. R. 5200.1106, subp. 3(B)(5).
J.D. Donovan, 2015 WL 404666, at *5. In addition, the court of appeals summarily
rejected appellants’ arguments concerning the application of the commercial
establishment exception. Id. at *5-6. We granted appellants’ petition for review.
I.
At issue here is the meaning of “work under a contract” for state highway projects
under the Prevailing Wage Act. Minn. Stat. § 177.44, subd. 1. Under section 177.44, a
laborer who is
employed by a contractor, subcontractor, agent, or other person doing or
contracting to do all or part of the work under a contract . . . to which the
state is a party, for the construction or maintenance of a highway . . . must
be paid at least the prevailing wage rate in the same or most similar trade
or occupation in the area.
Minn. Stat. § 177.44, subd. 1 (emphasis added); see Minn. Stat. § 177.42, subd. 6
(defining the term “[p]revailing wage rate”). The Minnesota Department of Labor and
Industry has promulgated administrative rules that apply to prevailing wage
determinations. Minn. R. 5200.1000–.1120 (2015); see Minn. Stat. § 177.44, subd. 3
(calling for the Department of Labor and Industry to define classes of laborers and to
determine prevailing wage rates for all classes of labor commonly employed in
highway construction work). MnDOT is responsible for ensuring adherence to the
5
prevailing wage requirements. Minn. Stat. § 177.44, subd. 7. The Act provides fines
and penalties for violations of section 177.44, including criminal penalties. See id.,subd. 6 (“A contractor, subcontractor, or agent who violates this section is guilty of a
misdemeanor and may be fined not more than $300 or imprisoned not more than 90
days or both.”) In addition, businesses that violate the Act may be barred from
working on state projects for a 3-year period. See Minn. Stat. § 16C.285, subd. 3
(2014) (defining a “[r]esponsible contractor” as a contractor that, among other
requirements, has not violated the prevailing wage statutes).
The dispute here centers on whether “work under a contract” with respect to the
hauling activities of truck drivers is limited to hauling activities to, from, or on the site of
the state highway project. Appellants argue that the hauling activities of Donovan and
Wayne do not qualify as “work under a contract” because they were not making
deliveries to or from a project work site. MnDOT responds that the hauling activities do
not have to take place at a project work site in order to qualify as “work under a
contract,” stressing that the transport of contract-specific asphalt cement to the prime
contactors’ facilities was an integral part of the highway projects.
II.
We begin our analysis by examining the meaning of “work under a contract” in
Minn. Stat. § 177.44, subd. 1. Statutory interpretation is a question of law that we review
de novo. Krummenacher v. City of Minnetonka, 783 N.W.2d 721, 726 (Minn. 2010).
Although the Prevailing Wage Act does not define the term “work under a
contract,” section 177.44 provides two examples that help delineate the scope of the Act
6
with respect to the delivery of project materials. The Act does not apply to “the delivery
of materials or products by or for commercial establishments which have a fixed place of
business from which they regularly supply the processed or manufactured materials or
products,” which is the “commercial establishment exception.” Minn. Stat. § 177.44,
subd. 2. But the Act does apply to “laborers or mechanics who deliver mineral aggregate
such as sand, gravel, or stone which is incorporated into the work under the contract by
depositing the material substantially in place, directly or through spreaders, from the
transporting vehicle.” Id. This statutory context does not constitute a definition of “work
under a contract,” but it does confirm that the Legislature did not intend that all types of
hauling activity would be subject to the Act.2
Because the statute does not specifically define the phrase “work under a
contract,” the parties agree that we should look principally to the definition of “work
under the contract” in Minn. R. 5200.1106 to determine whether the delivery of asphalt
cement from an oil refinery to a prime contactor’s asphalt mixing facility is subject to the
prevailing wage requirements. See Minn. R. 5200.1106, subp. 2(A) (defining “work
under the contract” and indicating that “[t]he term ‘work under a contract’ has the same
meaning”). The interpretation of an administrative regulation presents a question of law
2
In concluding that the Act covers all types of hauling activity connected in any
way to a state highway project, the dissent ignores this statutory context. The dissent’s
simplistic reading of the phrase “work under the contract” would also mean that the
Department of Transportation has been in violation of the Act for decades. This is so
because the Legislature directed the Department of Transportation to “require adherence
to” the statute. Minn. Stat. § 177.44, subd. 7. But, as we know from the record here, the
Department has never, before this case, required truckers engaged in the type of hauling
at issue here to “adhere[] to” the Act.
7
that we review de novo. In re Alexandria Lake Area Sanitary Dist. NPDES/SDS Permit
No. MN0040738 (Alexandria), 763 N.W.2d 303, 310 (Minn. 2009); see Citizens
Advocating Responsible Dev. v. Kandiyohi Cty. Bd. of Comm’rs, 713 N.W.2d 817, 828
n.9 (Minn. 2006) (noting that administrative regulations are governed by the same rules
of construction that apply to statutes).
Our first task is to determine whether the language of the rule is ambiguous.
Johnson v. Paynesville Farmers Union Coop. Oil Co., 817 N.W.2d 693, 707 (Minn.
2012). A rule is ambiguous “if it is unclear or reasonably susceptible to more than one
reasonable interpretation.” In re Cities of Annandale & Maple Lake NPDES/SDS Permit
Issuance (Annandale), 731 N.W.2d 502, 517 (Minn. 2007). Our assessment of whether
the rule is ambiguous does not depend on a reading of words or phrases in isolation, “but
relies on the meaning assigned to the words or phrases in accordance with the apparent
purpose of the regulation as a whole.” Id.; see also Troyer v. Vertlu Mgmt. Co./Kok &
Lundberg Funeral Homes, 806 N.W.2d 17, 24 (Minn. 2011) (explaining that we
“construe rules ‘as a whole’ and ‘words and sentences are understood . . . in the light of
their context’ ” (quoting State v. Gaiovnik, 794 N.W.2d 643, 647 (Minn. 2011))). If the
rule is not ambiguous, “we construe the rule according to the common and approved
usage of its words and phrases and do not disregard the rule’s plain meaning to pursue its
spirit.” Troyer, 806 N.W.2d at 24.
8
Turning to the text of the rule, “work under the contract” generally means:
all construction activities associated with the public works project,
including any required hauling activities on the site of or to or from a
public works project and work conducted pursuant to a contract . . .
regardless of whether the construction activity or work is performed by the
prime contractor, subcontractor, trucking broker, trucking firms,
independent contractor, or employee or agent of any of the foregoing
entities, and regardless of which entity or person hires or contracts with
another.
Minn. R. 5200.1106, subp. 2(A) (emphasis added); see also id., subp. 4 (specifying
certain types of work that are “not considered to be work under a contract,” which relate
to the commercial establishment exception). MnDOT argues that the hauling activities of
Donovan and Wayne fall within the plain meaning of “work under the contract” because
the phrase “construction activities associated with the public works project” specifically
encompasses “hauling activities” and work performed by “trucking firms.” Id.,subp. 2(A). According to MnDOT, “truck drivers delivering materials to a prime
contractor are as much a part of a highway project as any other class of labor.” In
addition, MnDOT points out that Rule 5200.1106 references “construction or
construction service-related activities” as “including trucking activities.” Id., subp. 2(D)
(defining “contractor”).3 Therefore, MnDOT contends that “[t]rucking activities are
3
The parties dispute whether Donovan and Wayne are “contractors” within the
meaning of Minn. R. 5200.1106, subp. 2(D). Appellants contend that the provision of
asphalt cement and related hauling activities makes Donovan and Wayne “more akin to a
material supplier than a contractor.” Because we conclude that the hauling activities of
Donovan and Wayne do not constitute “work under the contract” under Minn. R.
5200.1106, subp. 2(A), we need not reach this issue.
9
plainly recognized as an important function” that is covered by the prevailing wage
requirements.
Appellants respond that the definition of “work under the contract” is explicitly
limited with respect to hauling activities and includes only “hauling activities on the site
of or to or from a public works project.” Minn. R. 5200.1106, subp. 2(A). Although
MnDOT contends that the reference to “hauling activities on the site of or to or from a
public works project” is simply a nonexclusive example of a type of covered construction
activity, appellants assert that interpreting “work under the contract” to encompass all
hauling activities associated with a public works project would render the reference to
“on the site of or to or from a public works project” superfluous and insignificant. See
Troyer, 806 N.W.2d at 24 (“When possible, ‘no word, phrase, or sentence should be
deemed superfluous, void, or insignificant.’ ” (quoting Krueger v. Zeman Constr. Co.,
781 N.W.2d 858, 861 (Minn. 2010))).
MnDOT also relies on Minn. R. 5200.1106, subp. 3(B), which provides six
specific examples of hauling activities that are considered “work under the contract” for
purposes of prevailing wage requirements. Five of the six examples—(1) through (4) and
(6)—specifically reference hauling activities to, from, or on the site of a project work
site:
(1) the hauling of any or all stockpiled or excavated materials on the
project work site to other locations on the same project even if the trucks
leave the work site at some point;
(2) the delivery of materials from any facility that does not meet the
requirements of a commercial establishment to the project and the return
haul to the starting location either empty or loaded;
10
(3) the delivery of materials from another construction project site to
the public works project and the return haul empty or loaded is considered
work under the contract. Construction projects are not considered a
commercial establishment;
(4) the hauling required to remove any materials from the public works
project to a location off the project site and the return haul if empty or if
loaded from other than a commercial establishment;
(5) the delivery of materials or products by trucks hired by a contractor,
subcontractor, or agent thereof, from a commercial establishment; and
(6) delivery of sand, gravel, or rock, by or for a commercial
establishment, which is deposited “substantially in place,” either directly
or through spreaders from the transporting vehicles is work under the
contract. In addition, the return haul to the off-site facility empty or loaded
is also considered work under the contract.
Minn. R. 5200.1106, subp. 3(B) (emphasis added). MnDOT’s argument that the hauling
activities here are covered construction activities focuses on the fifth example: “the
delivery of materials or products by trucks hired by a contractor, subcontractor, or agent
thereof, from a commercial establishment.” Id., subp. 3(B)(5). According to MnDOT,
the plain language of this provision specifically covers the hauling activities here because
Donovan and Wayne were hired by project contractors to deliver asphalt cement from oil
refineries, which MnDOT contends are “commercial establishments” under the rule. See
id., subp. 5(F) (defining “commercial establishment”).4
4
If, as the dissent concludes, the Act covers all hauling activity connected to a state
highway project, it is difficult to understand why the rule drafters would have gone to the
trouble to write these detailed and lengthy examples. Indeed, the dissent’s interpretation
of the statute renders large portions of the rule superfluous, because, if as the dissent
asserts, all hauling activity connected in any way with a state highway project is covered,
there is no purpose for all of the specific, detailed examples in the rule of the types of
hauling activities that are covered. We are not empowered to render all of these
(Footnote continued on next page.)
11
For their part, appellants contend that the fifth example, when read in context,
applies only to deliveries “from a commercial establishment” to a project work site. Id.,subp. 3(B)(5). Appellants stress that the overarching definition of “work under the
contract” as applied to “hauling activities” means “hauling activities on the site of or to or
from a public works project.” Id., subp. 2(A). It makes no sense, appellants argue, for
the specific examples in subpart 3(B) to be read more broadly than the overarching
definition in subpart 2(A), noting that all of the other examples are specifically limited to
hauling activities to, from, or on the project work site.5
The broad definition of the phrase “work under the contract” as encompassing “all
construction activities associated with the public works project” provides a basis for more
than one reasonable interpretation of the phrase as applied to hauling activities. Id.,subp. 2(A). Read broadly, “all construction activities associated with the public works
project” could reasonably be construed to include deliveries of asphalt cement to the
prime contractors’ facilities because Donovan and Wayne were delivering construction
(Footnote continued from previous page.)
examples null. Our obligation, instead, is to interpret the rule in a way that gives effect to
all of the rule’s provisions. Troyer, 806 N.W.2d at 24.
5
Appellants also argue that there is a fact dispute over whether the oil refineries that
supplied the asphalt cement here are “commercial establishment[s].” See Minn. R.
5200.1106, subp. 5(F) (stating that “[t]he determination of whether a facility is a
‘commercial establishment’ is made on a location-by-location basis and on a product-by-
product basis”). Because we conclude that the hauling activities are not “work under the
contract” for purposes of the prevailing wage requirements, it is not necessary for us to
interpret or apply the commercial establishment exception. But see infra n.8 (discussing
the rationale behind the example in Minn. R. 5200.1106, subp. 3(B)(5) as expressed in
the Statement of Need and Reasonableness).
12
materials needed for the highway projects. But when we read the rule in its entirety, it is
not unreasonable to conclude that the phrase “work under the contract,” as applied to
hauling activities, is limited to hauling activities to, from, or on the project work site. In
fact, the principal definition of “work under the contract” in Minn. R. 5200.1106,
subp. 2(A), specifically references hauling activities “on the site of or to or from a public
works project,” making it reasonable to interpret the limitation as specifying the scope of
covered hauling activities. Moreover, the repeated references to the project work site in
the examples of hauling activities that are considered to be “work under the contract” in
Minn. R. 5200.1106, subp. 3(B), could reasonably be construed as confirmation that
hauling activities that are not to, from, or on the project work site fall outside the scope of
the prevailing wage requirements. Cf. McBoyle v. United States, 283 U.S. 25, 27 (1931)
(declining “to read words that so carefully enumerate the different forms of motor
vehicles” that are subject to the National Motor Vehicle Theft Act as including airplanes
where the statute contains “no reference of any kind to aircraft”). Therefore, because
there is more than one reasonable interpretation of Minn. R. 5200.1106, we conclude that
the phrase “work under the contract” is ambiguous with respect to deliveries of
construction materials that are not to or from a project work site.6
6
The dissent proclaims that the words “work under a contract” in Minn. Stat.
§ 177.44, subd. 1, are clear and free from ambiguity and that applying the statute “to the
facts in this case is not a difficult task.” But, in the rulemaking proceeding for Rule
5200.1106, the administrative law judge (ALJ) found that there had been “very different
and divergent understandings” of the meaning of “work under a contract” in connection
with the work of truck drivers; in fact, as of 2001—almost 30 years after its enactment—
the Prevailing Wage Act had “not been implemented for many truck drivers making
(Footnote continued on next page.)
13
III.
Having concluded that the meaning of “work under the contract” is ambiguous
with respect to hauling activities that are not to, from, or on the project work site, “we
apply canons of construction to determine the intent of the rule makers,” Troyer v. Vertlu
Mgmt. Co./Kok & Lundberg Funeral Homes, 806 N.W.2d 17, 25 (Minn. 2011), including
consideration of the “rulemaking record,” Citizens Advocating Responsible Dev. v.
Kandiyohi Cty. Bd. of Comm’rs, 713 N.W.2d 817, 828 (Minn. 2006). See generally
Minn. Stat. § 645.16 (2014) (listing factors that may be considered “[w]hen the words of
a law are not explicit”). In addition, we strictly construe “provisions that provide for a
(Footnote continued from previous page.)
deliveries to state-funded projects because of disputes” about the prevailing wage
requirements. Minn. Office of Admin. Hrgs., Proposed Amendments to Rules Governing
Prevailing Wages: Trucking, Minnesota Rules, Chapter 5200, Report of the
Administrative Law Judge, OAH 12-1900-13145-1, 2001 WL 702292, at *6, *11
(Jan. 30, 2001) (ALJ Report). Consequently, the definition and examples in
Rule 5200.1106 were intended to clarify that deliveries to project sites constitute “work
under a contract.” See infra § III. It is not “that simple,” as the dissent claims, to classify
deliveries of asphalt cement from a commercial oil refinery to a contractor’s facility. To
begin with, these deliveries are not obvious “construction activities” under Minn. R.
5200.1106, subp. 2(A). See ALJ Report at *11 (stating that the delivery of “mineral
aggregates to an asphalt or ready mix production facility” does not constitute a
“construction activity”); cf. 26 C.F.R. § 1.199-3 (2015) (specifying that “[a]ctivities
constituting construction” for purposes of determining domestic production gross receipts
under the Internal Revenue Code generally “do not include tangential services such as . . .
delivering materials, even if the tangential services are essential for construction”).
Moreover, because the contractor’s facilities serve the general public in addition to public
works projects, it may not always be clear to aggregate suppliers or to the truckers which
deliveries contain construction materials that will be used for state highway projects. For
example, according to Wayne, the bills of lading for the deliveries of asphalt cement here
were issued by the refinery, and Wayne did not know at the time that any of the deliveries
were related to a state highway project.
14
penalty.” Brekke v. THM Biomedical, Inc., 683 N.W.2d 771, 774 (Minn. 2004); see also
Chatfield v. Henderson, 252 Minn. 404, 410, 90 N.W.2d 227, 232 (1958).7
In previous cases involving the interpretation of an ambiguous administrative rule,
we have relied on statements of need and reasonableness (SONARs) “as evidence of the
extrinsic factors listed in Minn. Stat. § 645.16.” Troyer, 806 N.W.2d at 27; see Minn.
Stat. § 14.131 (2014) (stating that “the agency must prepare . . . a statement of the need
for and reasonableness of the rule,” including “a description of the classes of persons who
probably will be affected” and the “probable costs of complying with the proposed rule”).
For example, in Citizens Advocating, we examined “the rulemaking record,” including
SONARs, “to determine what the rulemakers intended.” 713 N.W.2d at 830. We
proceed to do the same here.
Since the enactment of the Prevailing Wage Act in 1973, the Department of Labor
and Industry (DLI) has worked with MnDOT, often “closely,” in promulgating the
administrative rules that interpret the Prevailing Wage Act. 1994 SONAR 2. Pursuant to
7
Generally, we defer to an agency’s reasonable, longstanding interpretation of an
ambiguous rule. Annandale, 731 N.W.2d at 513-14, 516. On the other hand, when an
agency’s interpretation of an ambiguous rule is recent or has not been consistent but is
instead tantamount to a litigation position, deference is not appropriate. Id. at 521. We
have explained that an agency’s consistent and longstanding interpretation “may have
encouraged reliance by the public” and may signal the delegating authority’s view “either
that the interpretation is correct or that the authority has willingly acquiesced to the
agency’s interpretation”; but, when the agency interpretation is more recent, “any
reliance interest is diminished, and changed or new interpretations may be the product of
political opportunism rather than good-faith efforts at interpretation.” Id. at 528.
Because the broad interpretation of “work under the contract” now advanced by MnDOT
is not a longstanding interpretation of Minn. R. 5200.1106, the broad interpretation does
not warrant deference. Indeed, MnDOT does not even argue that we must defer to its
interpretation of the rule.
15
Minn. Stat. § 177.44, subd. 3, DLI has identified five general “classes of labor” for state
highway projects that are subject to the prevailing wage requirements: laborers, power
equipment operators, truck drivers, special equipment, and special crafts. Minn. R.
5200.1040. For each general class, the rules provide specific codes and classifications
that contractors are required to use in “documenting classes of labor.” Minn. R.
5200.1100, subp. 1(A); see id., subp. 4 (addressing truck drivers). Significantly, in 1995,
DLI described the subpart addressing truck drivers as identifying “the individual trucks
which may be used to haul material to, from, or about a construction project.” 1995
SONAR 23 (emphasis added). In other words, DLI did not consider hauling materials
between two off-project sites, in preparation for construction, to be subject to the
prevailing wage requirements. Rather, DLI expressed its understanding that only truck
drivers hauling materials to, from, or about a construction project were performing work
subject to the prevailing wage requirements.
In 2001, DLI promulgated Minn. R. 5200.1106 to further clarify the application of
the prevailing wage requirements to truck drivers. 2000 SONAR 3, 8, 23-26, 33-34.
According to DLI, the promulgation of Rule 5200.1106 was meant to ensure that the
Prevailing Wage Act covered “labor costs associated with the hauling of asphalt,
concrete, aggregate, and borrow to highway construction sites.” 2000 SONAR 8. With
respect to the hauling activities that are listed in Minn. R. 5200.1106, subp. 3(B), as
examples of “work under the contract,” DLI explained that the examples were “intended
to ensure that drivers [were] paid prevailing wages for hauling both to and from the
construction site.” 2000 SONAR 35 (emphasis added). In particular, the example in
16
Minn. R. 5200.1106, subp. 3(B)(5), on which MnDOT now relies—“the delivery of
materials or products by trucks hired by a contractor, subcontractor, or agent thereof,
from a commercial establishment”—was intended to clarify that the payment of
prevailing wages for hauling materials to the project site was required, “even when
[trucks hired by the contractor were] delivering from a commercial establishment.” 2000
SONAR 36.8 Thus, according to the 2000 SONAR, the language “on the site of or to or
from a public works project,” which is part of the definition of “work under the contract”
in Minn. R. 5200.1106, subp. 2(A), was intended to apply to all six examples of hauling
activities in Minn. R. 5200.1106, subp. 3(B), even example (5), which does not
specifically reference the project work site.
In sum, the rulemaking history of Minn. R. 5200.1106 makes it clear that DLI
considered only those truck drivers who are hauling materials “on the site of or to or from
a public works project” to be engaging in “construction activities” that constitute “work
under a contract” under the Prevailing Wage Act. Indeed, at oral argument, MnDOT
admitted that it had never previously attempted to apply the Act to the types of hauling
activities at issue here: deliveries of asphalt concrete from oil refineries to the facilities
8
This clarification was necessary, DLI believed, to distinguish these types of
hauling activities from the hauling activities that fall within the scope of the commercial
establishment exception. 2000 SONAR 36; see Minn. Stat. § 177.44, subd. 2 (providing
that drivers hauling materials “by or for commercial establishments” fall within the scope
of the commercial establishment exception (emphasis added)). DLI sought to clarify that
drivers hauling materials on behalf of the contractor, albeit departing from a commercial
establishment, are covered by the prevailing wage requirements, as made clear by the
example in Minn. R. 5200.1106, subp. 3(B)(5). 2000 SONAR 36. Thus, the example in
subpart 3(B)(5) was intended to distinguish hauling activities from a commercial
establishment to the project site from exempt hauling activities.
17
of prime contractors. MnDOT submitted, however, that this was evidence not of its
interpretation of the Act, but was merely a matter of “non-enforcement.” But, as the
Supreme Court has recognized, although agency enforcement power cannot simply
“evaporate through lack of administrative exercise,” it is also true that “the want of
assertion of power by those who presumably would be alert to exercise it, is equally
significant in determining whether such power was actually conferred.” Fed. Trade
Comm’n v. Bunte Bros., Inc., 312 U.S. 349, 351-52 (1941) (concluding that the Federal
Trade Commission’s 25-year-long failure to assert the power it was then claiming was a
“powerful indication” of the scope of the act at issue). In even clearer terms, in
Bankamerica Corp. v. United States, the Court underscored the significance of an
agency’s inconsistent enforcement history, noting that the Federal Trade Commission had
“made no attempt” in 60 years to enforce an act with respect to activities it was claiming
were covered, despite those activities being “widespread and a matter of public record
throughout the period.” 462 U.S. 122, 130 (1983). The Court found it “difficult to
believe” that the FTC, the Department of Justice, and Congress all would have
“overlooked or ignored the pervasive and open practice [at issue] had it been thought
contrary to the law.” Id. at 130-31. We likewise find it difficult to believe that DLI,
MnDOT, and the Legislature all happened to overlook or ignore open and pervasive
hauling activities—hauling activities that are customary in the construction industry—for
more than two decades had they understood that those hauling activities required the
payment of prevailing wages.
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Interpreting “work under the contract” narrowly also is consistent with our rules of
construction pertaining to the interpretation of statutes that impose penalties. See, e.g.,
Brekke, 683 N.W.2d at 774. In light of the focus on “hauling activities on the site of or to
or from a public works project” in Minn. R. 5200.1106, subp. 2(A), we decline to
interpret “work under the contract” broadly to cover hauling activities that are not to,
from, or on the project work site—activities MnDOT has never previously treated as
construction activities subject to the Prevailing Wage Act. And although MnDOT cites
the criminal penalty provision in Minn. Stat. § 177.44, subd. 6, as evidence of “the
important purpose” the Act serves, “it is reasonable that a fair warning should be given”
when a statute imposes criminal penalties, and “so far as possible the line should be
clear.” McBoyle, 283 U.S. at 27; see also State v. Rick, 835 N.W.2d 478, 486 (Minn.
2013) (articulating the rule that “ ‘no citizen should be held accountable for a violation of
a statute whose commands are uncertain’ ” (quoting United States v. Santos, 553 U.S.
507, 514 (2008))). In this case, the line between covered and non-covered hauling
activities was not clear with respect to deliveries of construction materials that are not to
or from a project work site.
In accordance with DLI’s longstanding interpretation of the phrase “work under
the contract,” as expressed through the rulemaking history, as well as our rule of narrow
construction that applies when a statute imposes penalties, we hold that Minn. R.
5200.1106 requires that hauling activities be to, from, or at the site of a public works
project in order to constitute “work under a contract” within the meaning of the
Prevailing Wage Act. Because the hauling activities of Donovan and Wayne were not to,
19
from, or on the project work sites, the hauling activities do not constitute “work under the
contract” subject to the prevailing wage requirements. Therefore, we reverse the decision
of the court of appeals, which affirmed summary judgment in favor of MnDOT.
Reversed.
HUDSON, J., not having been a member of this court at the time of submission,
took no part in the consideration or decision of this case.
CHUTICH, J., took no part in the consideration or decision of this case.
20
DISSENT
LILLEHAUG, Justice (dissenting).
The requirements in the Minnesota Prevailing Wage Act (MPWA) for state
highway projects are straightforward. So is the administrative rule that implements them.
A laborer working for a contractor or subcontractor that has agreed “to do all or part of
the work under a contract” is entitled to be paid at the prevailing wage rate. In these
cases, prime contractors entered into contracts with the Minnesota Department of
Transportation (MnDOT) to do state highway work. Each prime contractor entered into
contracts with subcontractors to do some of the work. To do their work, the
subcontractors employed laborers to haul asphalt cement. It follows that, under the
MPWA, the laborers, who were performing “work under a contract,” were entitled to be
paid at the prevailing wage rate.
Rather than apply this logic, the court generates a fog of ambiguity. The purported
ambiguity allows the court to carve out an exception to the MPWA: prevailing wages
need not be paid for hauling activities that are not “to, from, or on the site” of the project.
This judicially created exception violates the plain language of the statute and the
implementing rule. Therefore, I respectfully dissent.
I.
The dispute in this case centers on the interpretation of Minn. Stat. § 177.44(2014), which is part of the MPWA, Minn. Stat. §§ 177.41–.44 (2014). Section 177.44
covers wages and hours for work performed under state highway contracts. Interpreting a
statute presents a question of law that we review de novo. Gerber v. Gerber, 714 N.W.2d
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702, 704 (Minn. 2006). If the statute is unambiguous, we apply the statute’s plain
meaning. Brayton v. Pawlenty, 781 N.W.2d 357, 363 (Minn. 2010).
The statute provides:
A laborer or mechanic employed by a contractor, subcontractor,
agent, or other person doing or contracting to do all or part of the work
under a contract based on bids as provided in Minnesota Statutes 1971,
section 161.32, to which the state is a party, for the construction or
maintenance of a highway . . . must be paid at least the prevailing wage rate
in the same or most similar trade or occupation in the area.
Minn. Stat. § 177.44, subd. 1. The words “work under a contract” are not unclear. At a
minimum, they include the work performed on the state highway project by a prime
contractor and by the prime contractor’s subcontractors. The opinion of the court
presents no argument to the contrary.
Applying the unambiguous statute to the facts in this case is not a difficult task.
As the court describes, MnDOT contracted for two state highway projects with prime
contractors SMC and Hardrives. SMC and Hardrives each subcontracted with Donovan
to furnish and deliver asphalt cement for the projects. Hardrives also subcontracted with
Wayne to deliver asphalt cement. Thus, Donovan and Wayne, both subcontractors, were
“contracting to do . . . part of the work under a contract” with MnDOT. Their laborers,
who were truck drivers, were entitled to be paid at the prevailing wage rate. It is just that
simple.
II.
Instead of reading the statute as it is written, the court essentially amends it by
misinterpreting the administrative rule that implements the statute, Minn. R. 5200.1106
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(2015). The court carves out an exception for hauling activities that are not “to, from, or
on the site of” the highway project. But there is absolutely nothing in the statute that
even hints at such an exception.
The judicially created exception conflicts with our foundational rule of statutory
interpretation that we do not, and cannot, add to a statute words intentionally or
inadvertently omitted by the Legislature. See Rohmiller v. Hart, 811 N.W.2d 585, 590
(Minn. 2012); Genin v. 1996 Mercury Marquis, 622 N.W.2d 114, 117 (Minn. 2001). If a
carve-out to the MPWA excluding its application to off-site hauling activities is desirable
as a matter of policy, that job is for the Legislature. See Axelberg v. Comm’r of Pub.
Safety, 848 N.W.2d 206, 212 (Minn. 2014) (“[W]e must read this state’s laws as they are,
not as some argue they should be.”) The statute plainly covers the work of, and benefits
the laborers of, subcontractors on state highway projects.
If the rule contained the exception the court carves out today, it would violate the
statute. Administrative agencies may adopt regulations to implement or make specific
the language of a statute, but they may not adopt conflicting rules. See Billion v. Comm’r
of Revenue, 827 N.W.2d 773, 781 (Minn. 2013); Special Sch. Dist. No. 1 v. Dunham,
498 N.W.2d 441, 445 (Minn. 1993) (stating that “[i]t is elemental that when an
administrative rule conflicts with the plain meaning of a statute, the statute controls”).
An administrative rule “cannot subvert the primary purpose behind the legislation,”
Weber v. City of Inver Grove Heights, 461 N.W.2d 918, 922 (Minn. 1990), which in the
case of the MPWA includes extending the prevailing-wage requirement to all work
performed under state highway contracts, see Minn. Stat. § 177.41 (“It is therefore the
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policy of this state that wages of laborers, workers, and mechanics on projects financed in
whole or part by state funds should be comparable to wages paid for similar work in the
community as a whole.”). The court’s interpretation of the rule violates the statute.
Properly read, the rule is consistent with the statute. Each of the first three
subparts of the rule shows that the hauling work covered by the statute and the rule need
not be to, from, or at the site to trigger the requirement that the subcontractor pay its
laborers at the prevailing wage rate.
Subpart 1 of the rule makes clear that, on state highway projects, “the prevailing
wage rate . . . must be paid for work under the contract.” Minn. R. 5200.1106, subp. 1.
There is no exception for off-site hauling. Subpart 2(A) defines “work under the
contract” broadly as “all construction activities associated with the public works project.”
Id., subp. 2(A). And subpart 2(B) defines “contract” broadly as including “project
proposals, plans, and specifications, and all requirements for labor, equipment, and
materials found in such proposals, plans, and specifications.” Id., subp. 2(B). Again,
there is no exception for off-site hauling; “all” means all.
Subpart 2(A) elaborates on the meaning of “under the contract”: the phrase
includes not only “any required hauling activities on the site or to or from a public works
project” but also (using the word “and”) “work conducted pursuant to a contract . . .
regardless of whether the construction activity or work is performed by the prime
contractor, subcontractor, trucking broker, trucking firms, independent contractor, or
employee or agent of any of the foregoing entities, and regardless of which entity or
person hires or contracts with another.” Id., subp. 2(A). The word “and” is one of
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inclusion, not exclusion. Lennartson v. Anoka–Hennepin Indep. Sch. Dist. No. 11,
662 N.W.2d 125, 130 (Minn. 2003) (noting that the term “and” “is the type of language
that is typically associated with a conjunctive rule”).
Plainly, subparts 1, 2(A), and 2(B) of the rule apply to all activities under the
contract. There is no exception in these subparts for off-site hauling.
Subpart 3(B) of the rule reinforces this reading. The subpart provides six
examples of hauling activities “included in hours worked and considered work under the
contract.” Minn. R. 5200.1106, subp. 3(B). Examples (1) through (4) and example (6)
reference hauling to, from, or at the construction site and thus do not apply here. But
example (5) is exactly on point: “the delivery of materials or products by trucks hired by
a contractor, subcontractor, or agent thereof, from a commercial establishment.” Id.,subp. 3(B)(5). Subcontractors Donovan and Wayne were delivering materials or
products by trucks from commercial establishments—in this case, asphalt cement from
refineries. Their hauling fits squarely within example (5). By reading example (5) out of
the rule, the court ignores the Legislature’s command that “[e]very law shall be
construed, if possible, to give effect to all its provisions.” Minn. Stat. § 645.16 (2014).
To create ambiguity, the court points to the references in subparts 2(A) and 3(B) to
hauling to, from, or on the construction site. But these references do not generate a
reasonable alternative interpretation. All of the words on which the court relies are words
of inclusion—on-site hauling work is “included and considered work under the
contract”—and are not words excluding off-site hauling. Minn. R. 5200.1106,
subp. 3(B). The court seems to be adopting a new principle of interpretation, which
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could be phrased as: inclusions expressed shall be construed to exclude all others. This
is a mutation of the doctrine of expressio unius est exclusio alterius, the canon of
construction (to be applied only after ambiguity is found) that “[e]xceptions expressed in
a law shall be construed to exclude all others,” Minn. Stat. § 645.19 (2014). Indeed, the
rule anticipates and answers the court’s misunderstanding. Subpart 3 provides that the
examples of “work under the contract” apply “[w]ithout limiting the application of [the
rule] to other situations.” Minn. R. 5200.1106, subp. 3. Plainly, the rule is not limited to
hauling to, from, or on the site.
III.
Although not relevant to my plain-meaning textual analysis, I cannot help but
observe that the court’s new rule of law that off-site hauling is not “work under the
contract” produces two ironies. First, it allows Donovan to escape the prevailing-wage
requirement on the very same projects for which Donovan and its prime contractors
received Disadvantaged Business Enterprise (DBE) credit for the same labor and material
Donovan furnished—under the contract. See 49 C.F.R. § 26 (2015) (allowing contractors
to receive credit for employing DBEs).
The second irony is that, had the subcontractors not been paid for their work, they
could have made claim on, and been paid through, the prime contractors’ payment bonds.
Such bonds, generally required on state construction projects, are for the benefit of
subcontractors “engaged under, or to perform the contract . . . .” Minn. Stat. § 574.26,
subd. 2 (2014).
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In other words, by the court’s new rule of law, the subcontractors get the statutory
benefits of working under a state contract, but the laborers performing the work for them
do not. Such asymmetry is unwarranted.1
IV.
Because I would affirm the court of appeals’ decision that, in these cases, the
subcontractor hauling services were “work under the contract,” I would reach the second
issue: whether the prime contractors were “commercial establishments” under the
MPWA and the rule. They were not.
Although the MPWA does not contain an exception for all off-site hauling, it does
expressly exempt one form of hauling. The prevailing wage rate need not be paid for
“the delivery of materials or products by or for commercial establishments which have a
fixed place of business from which they regularly supply the processed or manufactured
materials or products.” Minn. Stat. § 177.44, subd. 2 (emphasis added).
I agree with the district courts and with the court of appeals that, in this case, SMC
and Hardrives were contractors, not “commercial establishments.” In these cases, the
commercial establishments were the refineries from which the subcontractors were
delivering asphalt cement to the prime contractors. Donovan’s and Wayne’s deliveries
were from the refineries, not by or for the refineries. Thus, the exception is inapplicable.
1
Today’s decision appears to be influenced by the fact that the executive branch has
not consistently enforced the statute and the rule. But variations in executive
enforcement policy from one administration to another do not and cannot alter our
judicial function.
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Accordingly, the court should have affirmed the court of appeals in all respects.
STRAS, Justice (dissenting).
I join in the dissent of Justice Lillehaug.
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