Illinois Supreme Court to Debate Exemptions From Prevailing Wage Act

Our previews of the oral arguments on the Illinois Supreme Court’s September docket continue with People ex rel. Department of Labor v. E. R. H. Enterprises, Inc. [pdf].

E.R.H. began in 2008 when the Labor Department issued the company a subpoena for production of certain employment records. The subpoena stated that the Department was investigating whether the defendant’s repair work on certain water mains for the Village of Bement had been done in compliance with the Prevailing Wage Act. Seven months after the subpoena was served, the Department filed a complaint seeking a finding of civil contempt against the defendant for failing to comply with the subpoena. The defendant appeared and answered, arguing that it was a public utility and therefore exempt from the Prevailing Wage Act. The trial court requested that each side brief the dispute. The defendant submitted a 2004 agreement with the Village detailing the defendant’s ongoing responsibilities in connection with the Village’s potable water facility and water infrastructure.

On August 25, 2010, the trial court entered an order finding that the defendant was not a public utility, and the subpoena was therefore enforceable. Defendant moved to reconsider, and the trial court entered an amended order in February 2011, reiterating its finding. The court cited seven facts in support of its determination that the defendant was not a utility: (1) the Village owned the potable water facility and infrastructure; (2) the Village was recognized for the fluoridation of the Village’s water; (3) the Village contracted out some, but not all, of its responsibilities to the defendant; (4) the Village had the duty to serve the public and treat all persons alike; (5) defendant was simply an outside contractor assisting the Village; (6) defendant did not charge the public directly; and (7) defendant was not regulated by the Illinois Commerce Commission or any other state agency. The defendant once again sought reconsideration, which was denied, and the appeal followed.

The appeal turns on the interpretation of Section 2 of the Prevailing Wage Act, which applies to “all fixed works constructed by any public body, other than work done directly by any public utility company.” 820 ILCS 130/2. The Prevailing Wage Act does not define a “public utility.” Before the Appellate Court, the defendant argued that it is a “public utility” within the meaning of Section 3-105 of the Public Utilities Act, since it is a private corporation that operates the water and sewer systems of the Village for the public use of its citizens. The Appellate Court agreed that it was reasonable to import the definition from the Public Utilities Act in construing the Prevailing Wage Act. The Court found that its conclusion was further bolstered by the common dictionary definition of a public utility. Although the defendant neither owned the physical infrastructure, nor was it the entity directly billing the public for services, the Court found that neither was a prerequisite for the defendant to be a “public utility.” Since the defendant was a public utility in the Appellate Court’s view, the Prevailing Wage Act didn’t apply to its activities, making the subpoena unenforceable. The Court accordingly reversed.

We expect a decision in E.R.H. Enterprises within the next three to four months.

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