In TECO Mechanical Contractor, Inc. v. Com., Environmental and Public Protection Cabinet, et al., a case focused on prevailing wage law, the Kentucky Supreme Court resolved two constitutional challenges to Kentucky’s prevailing wage law statutes codified at KRS 337.505 – KRS 337.555.  The Court concluded that the law does not violate procedural due process in declining to afford contractors a hearing before the Labor Cabinet assesses and demands back wages and civil penalties and the law does not improperly delegate legislative or judicial authority. 

In its analysis regarding prevailing wage law, the Court cited 64 Am. Jur. 2d Public Works and Contracts §213, “[p]revailing wage laws require contractors constructing government projects to pay their employees a wage equal to or greater than that which is typically paid to similar workers in the locality where the project is being built.” It then provided that every locality in the Commonwealth is required to establish a prevailing wage rate and enforce prevailing wage law.

A contractor, provided services on public works projects.  After the Cabinet conducted an investigation, it found that the contractor failed to pay prevailing wage rates on projects. As a result, it demanded the contractor pay hundreds of thousands of dollars in back wages to its employees. 

In response, two constitutional challenges to prevailing wage law arose: (1) that prevailing wage law violates due process by allowing the Cabinet to demand back wages and civil penalties without a hearing and (2) that prevailing wage law improperly delegates legislative or judicial authority for failing to specify how workers should be classified.

Regarding the due process claim, the Court refused to find that the Cabinet’s assessment for payment deprived the contractor of money or other business assets and, therefore, held that the contractor was not deprived of any protected property interest.  Likewise, the Court refused to find that there was deprivation a protected liberty interest. Even if a contractor’s reputation was harmed as a result of an investigation in failure to pay the prevailing wage rate, impairment of future business opportunities alone is insufficient to prove deprivation of liberty in violation of the Due Process Clause.

Concerning the delegation claim, the Court referred to prior case law authorizing the General Assembly to vest legislative or judicial powers in an administrative agency if the law delegating that authority provides protections to prevent an abuse of discretion by the agency.  The Court concluded that the Cabinet’s experience in wage law enforcement and the fact that prevailing wage law provides for judicial review of the Cabinet’s actions are sufficient measures to protect against abuse.  Also, it was noted that the functions delegated to the Cabinet were purely administrative in nature. 

As a result of these findings, prevailing wage laws set and enforced by localities are constitutional and contractors are required to abide by those laws.

TECO Mechanical Contractor, Inc. v. Com., Environmental and Public Protection Cabinet, et al. 59 Ky.L.Summ. 3 (March 31, 2012).