| Matter of New York Charter School Assn. v Smith |
| 2009 NY Slip Op 02519 [61 AD3d 1091] |
| April 2, 2009 |
| Appellate Division, Third Department |
| In the Matter of New York Charter School Association et al.,Appellants, v M. Patricia Smith, as Commissioner of Labor, Respondent. (ProceedingNo. 1.) In the Matter of Foundation for a Greater Opportunity et al., Appellants, v M. PatriciaSmith, as Commissioner of Labor, et al., Respondents. (Proceeding No.2.) |
—[*1] Sonnenschein, Nath & Rosenthal, L.L.P., New York City (Richard M. Zuckerman ofcounsel), for Foundation for a Greater Opportunity and others, appellants. Andrew M. Cuomo, Attorney General, Albany (Zainab A. Chaudhry of counsel), forrespondents. Gibson, Dunn & Crutcher, L.L.P., New York City (Jennifer H. Rearden of counsel), for[*2]New York City Center for Charter School Excellence, amicuscuriae.
Malone Jr., J. Appeals from two judgments of the Supreme Court (Lynch, J.), entered May30, 2008 in Albany County, which, among other things, dismissed petitioners' applications, intwo combined proceedings pursuant to CPLR article 78 and actions for declaratory judgment, toreview two determinations of respondents ruling that all charter schools are subject to theprevailing wage laws of Labor Law article 8.
In June 2000, respondent Department of Labor (hereinafter DOL) issued an opinion letterdetermining that contracts for the construction, renovation, repair and maintenance of charterschools were not subject to the prevailing wage provisions of Labor Law article 8. In August2007, however, it issued an opinion letter completely changing its position and determining thatLabor Law article 8 was, in fact, applicable to such contracts. Shortly thereafter, DOL forwardeda copy of its new opinion letter to the Charter Schools Institute and advised that it would beginto enforce prevailing wage laws on all charter school projects for which bids were advertisedafter September 20, 2007.
These combined proceedings pursuant to CPLR article 78 and actions for declaratoryjudgment were commenced by petitioners, various charter schools and related entities, againstDOL and respondent Commissioner of Labor, challenging DOL's new determinations.Petitioners in proceeding No. 1 include the New York Charter School Association, a charterschool advocacy group, Brighter Choice Foundation, Inc., a not-for-profit corporation thatprovides financial and other support to eight charter schools in Albany County, and AlbanyPreparatory Charter School, a charter school for which Brighter Choice Foundation is planningto construct and/or renovate a school facility. Petitioners in proceeding No. 2 include Foundationfor a Greater Opportunity, a not-for-profit corporation that supports the creation of charterschools and is planning to open six charter schools between 2008 and 2010, as well as Carl C.Icahn Charter School and Carl C. Icahn Charter School-Bronx North, both of which are charterschools located in the Bronx. After respondents served answers in the respectiveproceedings/actions, Supreme Court held a joint hearing. Following the hearing, Supreme Courtruled, among other things, that the prevailing wage provisions of Labor Law article 8 areapplicable to the construction, renovation, repair and maintenance of charter schools anddismissed the petitions/complaints. Petitioners now appeal.
In general, Labor Law § 220 requires that certain contracts involving the employmentof laborers, workers or mechanics on a public work project provide for the payment of theprevailing wage rate. The courts have applied a two-part test, derived from Matter of ErieCounty Indus. Dev. Agency v Roberts (94 AD2d 532, 537 [1983], affd 63 NY2d 810[1984]), to determine whether a project falls within its provisions. In order for the statute toapply, "(1) the public agency must be a party to a contract involving the employment of laborers,work[ers], or mechanics, and (2) the contract must concern a public works project" (id.;see Matter of Bridgestone/Firestone, Inc. v Hartnett, 175 AD2d 495, 496-497 [1991];Matter of National R.R. Passenger Corp. v Hartnett, 169 AD2d 127, 130 [1991]).[*3]
The statute was amended in 2007 (see L 2007, ch678, §§ 1, 2) in response to the decision in Matter of Pyramid Co. of Onondagav New York State Dept. of Labor (223 AD2d 285 [1996]), wherein this Court held that thefirst requirement of the Erie County test was not satisfied. In that case, DOT issued twowork permits to a private developer for the construction of an access ramp leading from a statehighway to a shopping mall (id. at 286). The developer contracted with a privatecontractor to perform the actual work. Because DOT was not a party to the underlying contractand the work permits did not constitute contracts for the construction of the project, this Courtheld that Labor Law § 220 was inapplicable (id. at 288).
In an effort to close what was perceived as a loophole created by the Pyramiddecision (see Senate Introducer Mem in Support, Bill Jacket, L 2007, ch 678, at 27-28),the Legislature amended the statute to apply not only to contracts in which the public entity wasa direct party, but also to "any contract for public work entered into by a third party acting inplace of, on behalf of and for the benefit of such public entity pursuant to any lease, permit orother agreement between such third party and the public entity" (Labor Law § 220 [2]; L2007, ch 678, § 5). Thus, while the statutory amendment modified the first requirement ofthe Erie County test, Erie County remains the appropriate analysis fordetermining if a project is subject to the prevailing wage provisions of Labor Law article 8.
Employing this analysis, we find that Labor Law § 220 is inapplicable to the projectsundertaken by petitioners in the case at hand. Simply stated, the charter agreements under whichthe charter schools operate do not constitute contracts between a public entity and another party,or by a third party for the benefit of a public entity, which involve the employment of laborers,workers or mechanics on a public works project, as is required under the first prong of theErie County test.
As is evident from the provisions of the New York Charter Schools Act of 1998 (seeEducation Law art 56), charter schools have unique characteristics that distinguish them from thepublic entities enumerated in the prevailing wage law (see Labor Law § 220 [2]).A charter school is established by a group of private individuals, consisting of "teachers, parents,school administrators, community residents or any combination thereof" (Education Law §2851 [1]), who submit an application to a charter entity, which may be the board of education ofcertain school districts, the board of trustees of the State University of New York or the board ofregents (see Education Law § 2851 [3]). When the application is approved by thecharter entity, the applicant and the charter entity enter into a written agreement, known as acharter, "allowing the applicant[ ] to organize and operate a charter school" (Education Law§ 2852 [5]). The charter agreement contains many provisions (see Education Law§ 2852 [5]), most of which pertain to administrative matters such as admissions, hiring,discipline, educational programming and other issues involved in the day-to-day operation of thecharter school (see Education Law § 2851 [2]). Upon issuance of the charter, thecharter school is incorporated as an educational corporation (see Education Law §2853 [1]).
Significantly, Labor Law § 220 (2) limits its application to those contracts orthird-party contracts to which "the state or a public benefit corporation or a municipalcorporation or a commission appointed pursuant to law is a party" or a beneficiary. By its terms,it does not specifically apply to educational corporations such as charter schools. Moreover, thevery fact that charter schools originate from applications submitted by private individuals, whoin many instances continue to be involved in the operation of the charter school after it isapproved, illustrates that they are much different from the four public entities expresslyreferenced in the Labor Law. [*4]Accordingly, we do not findthat charter schools are public entities as required under the first prong of the ErieCounty test.
Likewise, we do not find that the charter agreements are contracts involving the employmentof laborers, workers or mechanics, as is also required under the first prong of the ErieCounty test. As noted above, most of the provisions of the charter agreements addressadministrative matters involving the operation of the charter school (see Education Law§ 2851 [2]; § 2852 [5]). Although the law requires that the charter agreement alsocontain "[i]nformation regarding the facilities to be used by the school, including the location ofthe school, if known, and the means by which pupils will be transported to and from the school"(Education Law § 2851 [2] [j]), this does not transform it into a contract for theconstruction, renovation or repair of a public works project. Notably, a charter school "may belocated in part of an existing public school building, in space provided on a private work site, ina public building or in any other suitable location" and the space may be owned, leased or rentedby the charter school (Education Law § 2853 [3] [a]). In view of this, the facilities thatcharter schools occupy need not necessarily be under construction, renovation or repair such asto entail the employment of laborers, workers or mechanics. As is evident from a review of all ofthe provisions that must be included in the charter agreement (see Education Law§ 2851 [2]; § 2852 [5]), the facilities provision is tangential to its overall purpose.Thus, like the work permits at issue in the Pyramid decision, we do not find that thecharter agreement is a contract for the construction, renovation or repair of a public worksproject. Therefore, the prevailing wage provisions of Labor Law article 8 are inapplicable to theprojects undertaken by petitioners in the case at hand.
Our conclusion is consistent with the legislative history of the 2007 amendment to LaborLaw § 220 (2) in which there is no indication of an intent to extend the prevailing wagelaw to projects undertaken either by educational corporations or charter schools (see BillJacket, L 2007, ch 678). In fact, it appears that there have been bills introduced to accomplishthis very purpose, but that none has been enacted into law (see 2007 NY Assembly BillsA2125, A2716; 2007 NY Senate Bill S5664). We decline to take measures that the Legislaturehas expressed an unwillingness to do on its own.
Mercure, J.P., Rose, Lahtinen and Kane, JJ., concur. Ordered that the judgments arereversed, on the law, without costs, petitions granted and it is declared that petitioners are notsubject to the prevailing wage laws of Labor Law article 8.