I love it when I get to toot our own horn (pun intended)! In a huge victory for hauling companies (represented by Seaton, Peters & Revnew), the Minnesota Supreme Court reversed the Minnesota Court of Appeals on April 20, 2016, and held in J.D. Donovan, Inc. v. Minnesota Department of Transportation, that the transport of asphalt cement from a commercial oil refinery to a contractor’s facility (not the work site) is not subject to the Minnesota Prevailing Wage Act (MnPWA), as those hauling activities are not “work under the contract” as required by Minn. R. 5200.1106.
Specifically, the Supreme Court held that “work under the contract” is limited to hauling activities to, from, or on the site of a Minnesota public works project:
Minn R. 5200.1106 requires that hauling activities be to, or 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.”
The Minnesota Department of Transportation (MnDOT) argued that hauling activities do not have to take place at a project work site to be considered “work under a contract” so long as the materials were for a public works project. Of course, the MnPWA does not define the term “work under a contract” and the rules are silent.
The Facts of the Case
In this case (actually a consolidation of two), MnDOT awarded contracts to prime contractors OMG Midwest, Inc., d/b/a Southern Minnesota Construction (SMC), and Hardrives, Inc. Both of these primes furnished all services and materials needed to complete the work in the MnDOT contracts, which (important here) included incorporating a certain grade of asphalt cement in the asphalt concrete mixture that would be used to pave the highway. SMC and Hardrives agreed to obtain this asphalt cement from a MnDOT-certified oil refinery. Enter J.D. Donovan, Inc. (Donovan) and Wayne Transports, Inc. (Wayne).
Donovan purchased asphalt cement for both SMC and Hardrives’ projects from the MnDOT-certified oil refinery, and resold it to SMC and Hardrives. Accordingly, Donovan’s truck drivers hauled the asphalt cement from the refineries to SMC’s and Hardrives’ permanent asphalt mixing facilities (not the project work site). At the mixing facilities, the asphalt cement was pumped into storage tanks to use to create the asphalt concrete later for the projects. Donovan didn’t deliver directly to either project work site, nor provided any hauling services at either work site.
Wayne is a common carrier with for-hire trucking services and provided services for the Hardrives project only, transporting 1,129 loads of asphalt cement from the MnDOT-certified oil refinery to Hardrives’ permanent asphalt mixing facility. 7 of the 1,129 loads were used for the Hardrives project – though Wayne did not know that. Like Donovan, Wayne did not delivery directly to the project work site and didn’t provide hauling services at the project work site.
The Court’s Opinion
At the end of the day, MnDOT acknowledged at oral argument that it had never before attempted to apply the MnPWA to deliveries of asphalt concrete from oil refineries to the prime contractor’s facilities and that it simply did not enforce it until now. To that, the Court noted, “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.”
In other words, the Court simply did not buy into MnDOT’s recent attempt at overreaching its authority to contractors not working on a public works project, but indirectly supporting the project. This opinion is a huge victory for hauling companies and will certainly change the enforcement attempts by MnDOT moving forward.