J.D. Donovan, Inc. v. Minnesota Department of TransportationJ.D. Donovan, Inc. v. Minnesota Department of Transportation
Lead Opinion
OPINION
This consolidated appeal involves the scope of the Minnesota Prevailing Wage Act,
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 vfith 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 Har-drives agreed to incorporate a particular grade of asphalt cement into the asphalt concrete. mixture furnished to pave the highway surfaces. SMC and- Hardrives
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
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 Har-drives collectively instituted another action against MnDOT involving the Hardrives project. Ih both’ cases, appellants argued that the hauling activities of Donovan and Wayne did not constitute “work under a contract” under
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At issue here is the meaning of “work under a contract” for state highway projects under the Prevailing Wage Act. Minn.Stat,
employed by a contractor, subcontractor, agent, or other person doing or cpntracting 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.
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 máking 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 contractors’ facilities was an integral part of the highway projects.
II.
We begin our analysis by examining the meaning of “work under a contract” in
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 contractor’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 that we review de novo. In re Alexandria Lake Area Sanitary Dist. NPDES/SDS Permit No. MN0040738 (Alexandria),
Our first task is to determine whether the language of the. rule is ambiguous., Johnson v. Paynesville Farmers Union Coop. Oil Co.,
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”).
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,
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 require*7 ments of a commercial establishment to the project and the return haul to the starting location either empty or loaded;
(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 cemént from oil refineries, which MnDOT contends are “commercial establishments” under the rule. See id., subp. 5(F) (defining “commercial establishment”).
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.
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,
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
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
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 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.
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 of prime contractors. MnDOT submitted, however, that this was évidence not of its interpretation of the Act, but was inerely 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.,
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,
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, 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.
Notes
. 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
. 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,
. 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.
. 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 examples null. Our obligation, instead, is to interpret the rule in a way that gives effect to all of the rule’s provisions, Troyer,
. 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).
. The dissent proclaims that the words "work under a contract” in
. Generally, we defer to an agency’s reasonable, longstanding interpretation of an ambiguous rule. Annandale,
. 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
Dissenting Opinion
(dissenting).
The requirements in the Minnesota Prevailing Wage Act (MPWA) for state high
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. . qf
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.
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 primé contractors ' SMC and Hardrives. SMC and Hardrives éach 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 (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.
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,
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 sub-part 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 inclusion, not exclusion; Lennartson v. Anoka-Hennepin Indep. Sch. Dist. No. 11,
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.”
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 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 “[exceptions expressed in a law shall be construed to exclude all others,”
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
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....”
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.
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.”
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.
Accordingly, the court should have affirmed the court of appeals in all respects.
(dissenting).
I join in the dissent of Justice Lillehaug.
. 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 poli