ATTORNEY AT LAW. CHARLOTTESVILLE, VA FAX: MEMORANDUM. Background

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1 J E F F R E Y E. F O G E L ATTORNEY AT LAW 913 EAST JEFFERSON STREET CHARLOTTESVILLE, VA FAX: jeff.fogel@gmail.com MEMORANDUM TO: FROM: RE: UVA Living Wage Campaign Jeffrey E. Fogel Living Wage Campaign Contractor Wage Parity DATE: February 7, 2012 You have asked my opinion of the following questions: 1. Do the legal opinions of the attorney general of Virginia bind public bodies and state courts? 2. Are public universities legally distinct from the Virginia municipalities that have enacted living wage ordinances that remain unchallenged by the attorney general? 3. Under the Dillon Rule of strict interpretation, has the General Assembly granted the University the authority to set a floor for contractor wages that is above the state and federal minimum wage? 4. If University has been granted such power, would setting such a floor be a violation of the Virginia Public Procurement Act? Background The Living Wage Campaign at the University of Virginia (UVA) is currently pressuring the University to adopt a policy guaranteeing all direct and contracted employees are paid at a living wage that exceeds the minimum wage required by both federal and state law. 1 The University, relying on an Attorney General opinion issued to the Executive Vice President of the 1 See 29 U.S.C. 201 to 219 (2000) (Fair Labor Standards Act of 1938); VA. CODE ANN to (Virginia Minimum Wage Act).

2 University in 2006, has responded that enacting such a policy for contracted employees would violate state law and is therefore impermissible. 2 The Attorney General opinion states that the Board of Visitors of the University of Virginia is not authorized to require payment of a minimum or living wage by contractors and vendors to their employees as a term of a contract with the university. 3 Citing the Dillon Rule, the Attorney General claims that such authority can be exercised only by an explicit grant of authority from the General Assembly and that the Board of Visitor s general grant of power from the legislature is insufficient to confer it. 4 The Attorney General argued that even if the legislature had explicitly or implicitly granted the University the power to require a certain wage level from contractors, doing so would violate the Virginia Public Procurement Act (VPPA). The opinion concluded that a living wage requirement is a matter of general social or economic policy that is unrelated to the goods or services sought to be procured and therefore is not a proper consideration under the VPPA s best value contracting approach. 5 Do the Legal Opinions of the Attorney General of Virginia Bind Public Bodies and Courts? Given the University s reliance on the advisory opinion of the attorney general, the first question is whether either the University of Virginia or Virginia's courts are bound to accept the Attorney General's interpretation of the Dillon Rule and the VPPA. The answer is a clear and unequivocal no. The Virginia Supreme Court has repeatedly said that Attorney General opinions 2 See Letter from Deputy Attorney General David E. Johnson to Leonard W. Sandridge, March 21, The letter relies on a 2002 opinion of the Office of the Attorney General Va..AG LEXIS Letter from Deputy Attorney General David E. Johnson to Leonard W. Sandridge, March 21, Id. 5 Id. 2

3 are not binding but are "entitled to due consideration." 6 Indeed, even the Attorney General s office recognizes that its opinions are only advisory: Official opinions do not create new law, nor do they change existing law An official opinion reflects the attorney general s conclusion of how a court would likely rule on the issue posed While the opinions may be considered by the courts, they are not binding either on the requester or on the courts." 7 Thus, if a University-adopted policy that required contractors to pay a living wage were challenged in court, the court, while it would consider the Attorney General s opinion, would be free to decide in the University's favor. As will be discussed infra, the legal foundation of the 2006 attorney general's opinion is weak, and a challenge to such a policy would provide an archetypal example of when the courts should, after giving an opinion due consideration, disregard that opinion as not accurately reflecting the law. Has the General Assembly granted the Board of Visitors the power to include a wage term in its contracts with private parties? There are two potential locations of a statutory grant of power to the University to require the payment of a living wage by contractors: the general grant of power to the Board of Visitors and the Virginia Public Procurement Act. The University of Virginia is a public institution controlled through the Board of Visitors, which the General Assembly created for that purpose. 8 The Board of Visitors is a public 6 Twietmeyer v. City of Hampton, 255 Va. 387, 393 (1998). See also City of Virginia Beach v. Virginia Restaurant Ass'n, Inc., 231 Va. 130, 135 (1986); Albemarle County v. Marshall, Clerk, 215 Va. 756, 762 (1975); Barber v. City of Danville, 149 Va. 418, 424, (1928). 7 and Legal Resources/Opinions/index.html 8 Phillips v. Rector & Visitors of Univ. of Va., 97 Va. 472, 34 S.E. 66 (1899). 3

4 corporation, under the style of "the Rector and Visitors of the University of Virginia. 9 In its general grant of power to the Board of Visitors, the General Assembly charges the Board of Visitors with the care and preservation of all property belonging to the University. 10 It also endows the Board of Visitors with the authority to employ agents or servants and, generally, in respect to the government and management of the University, make such regulations as they may deem expedient, not being contrary to law. 11 The Attorney General opinions that conclude municipal governments and universities do not have the power to require contractor payment of a living wage rely heavily on a narrow and incorrect interpretation of the Dillon Rule. The Dillon Rule is a rule of construction regarding the statutory powers of local governments which holds that such bodies "have only those powers that are expressly granted, those necessarily or fairly implied from expressly granted powers, and those that are essential and indispensable." 12 Nonetheless, the Attorney General argues that the University may only act with an explicit grant of authority from the General Assembly. 13 The general grant language clearly allows the Board of Visitors to contract on behalf of the University. The power to contract for workers is implicit in its authority to employ agents and servants. It is also implicit in the Board of Visitor s status as a corporate entity. If the Board of Visitors is vested with the authority to contract on behalf of the University, this necessarily 9 VA. CODE ANN VA. CODE ANN VA. CODE ANN Sinclair v. New Cingular Wireless PCS, LLC, 2012 Va. LEXIS 23, 7 (Va. Jan. 13, 2012) (quoting Marble Techs., Inc v. City of Hampton., 279 Va. 409, 417 (2010) (internal quotation marks omitted)). This rule was originally articulated in 1872 by Judge Dillon of the Iowa Supreme Court in his treatise on municipal corporations Antieau on Local Government Law, Second Edition See Letter from David E. Johnson, Deputy Attorney General to Leonard W. Sandridge, March 21,

5 includes the power to determine the terms those contracts. That power would be limited only to the extent the state has prohibited certain exercises of this power. There is simply no support for the Attorney General s argument that the grant of authority to the University to stipulate contract terms must be explicit. 14 That proposition is in direct conflict with the Dillon Rule. The Attorney General also does not acknowledge that the VPPA itself is a legislative grant of power to public bodies to contract for goods and service. As discussed below, the VPPA defers to public bodies in defining the best value for its procurement needs. This alone could be considered an explicit grant of power to the University to determine the terms of its public contracts. Regardless of whether the University s power to enter into contracts and define their terms originates from the general grant or from the VPPA, the real issue is whether an exercise of this authority that stipulates a contractor wage level in excess of the state and federal minimum wage somehow violates the VPPA. The Virginia Public Procurement Act and Best Value Contracting By enacting the Virginia Public Procurement Act (VPPA), the General Assembly set down explicit statutory provisions governing procurement by public bodies. 15 Therefore, if the University is to set wage standards in its contracts, it must do so in a way that does not violate the VPPA. According to the VPPA, public bodies may consider best value concepts (and not just the lowest bid) when procuring goods and nonprofessional services. 16 The low wage workers at the University, such as housekeepers and dining services personnel, certainly qualify as 14 See Letter from David E. Johnson, Deputy Attorney General to Leonard W. Sandridge, March 21,

6 nonprofessional services. "Best value" means the overall combination of quality, price, and various elements of required services that in total are optimal relative to a public body's needs. 17 It was pursuant to best value concepts that three public bodies in Virginia have adopted living wage requirements for its contracts. Arlington County, VA., Purchasing Resolution (2010); Charlottesville, VA, Code 22-9 (2004) ( every City contract for the provision of nonprofessional services will require that the contractor pay each employee assigned to perform services a living wage equal to no less than the lowest starting salary for City employees. ); Alexandria, VA., Code (2000). 18 A Living Wage is Related to the Service Provided Among the stated intents of the General Assembly in enacting the VPPA are that competition be sought to the maximum feasible degree, that individual public bodies enjoy broad flexibility in fashioning details of such competition, [and] that specifications reflect the procurement needs of the purchasing body. 19 The Attorney General s letter-opinion defines the VPPA s intent as to provide a sure procedure under which the tax dollars of the Commonwealth are spent in an efficient and reasonable manner to obtain the highest quality of goods and services. 20 The Office of the Attorney General maintains that it is inconsistent with the policy of the VPPA to condition the award of a contract on factors that are unrelated to the goods or 15 VA. CODE ANN et. seq. 16 VA. CODE ANN VA. CODE ANN None of these enactments has been challenged. 19 VA. CODE ANN Letter from David E. Johnson, Deputy Attorney General to Leonard W. Sandridge, March 21,

7 services being procured. 21 While acknowledging that the definition of best value is broadly worded, the Attorney General asserts that it may not be read to include social and economic policies deemed important by the procuring body. 22 The Attorney General s office asserts, without citation, that a living wage requirement is a matter of general social or economic policy and that there is no link between the amount of wages paid by a private contractor to its employees and the quality of goods or services sought to be procured. 23 The Attorney General therefore found that a living wage was an improper consideration under the best value approach because it was unrelated to the public body s needs. 24 However, since the Attorney General s 2002 opinion, on which the subsequent 2006 opinion to the University heavily relied, a plethora of scholarship has been produced on the effect of living wage policies. These studies provide empirical evidence that living wage contracts produce better services and increase the number of contractors submitting bids. Municipalities have found that shifting their purchasing to living wage contractors has often improved the quality and reliability of contracted services. Studies of the effects of local living wage policies have found that higher wages have led to decreased employee turnover and increased productivity, improving the quality and reliability of contracted services. 25 A substantial 21 Id Va. AG LEXIS Letter from David E. Johnson, Deputy Attorney General to Leonard W. Sandridge, March 21, 2006., 2002 Va. AG LEXIS Letter from David E. Johnson, Deputy Attorney General to Leonard W. Sandridge, March 21, Sonn and Gebreselassie, The Road to Responsible Contracting, p. 14 (National Employment Law Project) available at (quoting Moshe Adler, Prequalification of Contractors: The Importance of Responsible Contracting on Public Works Projects (New York, NY: Fiscal Policy Institute, May 2003), p. 5, available at 7

8 body of research demonstrates that higher wages substantially reduce employee turnover, yielding a more stable workforce and reducing new employee recruitment and training costs. For example, a University of California study using statewide data found that among workers earning less than $11.00 an hour, a $1.00 increase in wages is associated with a 7 percent decrease in turnover. 26 Other studies have produced similar results. San Francisco International Airport found that annual turnover among security screeners plummeted from 94.7 percent to 18.7 percent when workers hourly wages rose from $6.45 to $10.00 an hour under a living wage policy. 27 The reduced turnover saved employers about $4,275 per employee per year in restaffing costs a savings that offset a substantial portion of the higher wages. 28 Similarly, a study of home care workers in San Francisco found that turnover fell by 57 percent following implementation of a living wage policy. 29 A study of the Los Angeles living wage law found that staff turnover rates at firms affected by the law averaged 17 percent lower than those at firms that were not and that the decrease in turnover offset 16 percent of the cost of the higher wages. 30 Research on the effects of living wage policies has also found that they generally improve worker performance, productivity, and morale. In a survey of San Francisco airport employers 26 Id. (citing Arindrajit Dube and Michael Reich, Compensation Practices, Turnover, Training and Productivity among California Businesses, Unpublished Manuscript (Berkeley, CA: Institute for Industrial Relations at the University of California at Berkeley, June 2004). 27 Id. (citing Michael Reich, Peter Hall, and Ken Jacobs, Living Wages and Economic Performance: The San Francisco Airport Model (Berkeley, CA: Institute of Industrial Relations at the University of California, Berkeley, 2003), p. 10, available at 28 Id. (citing Michael Reich, Peter Hall, and Ken Jacobs, Living Wages and Economic Performance: The San Francisco Airport Model (Berkeley, CA: Institute of Industrial Relations at the University of California, Berkeley, 2003), pp. 10 and 58, available at 29 Id. (citing Candace Howes, Living Wages and the Retention of Homecare Workers in San Francisco, Industrial Relations, Vol. 44, No. 1 pp , Jan ) 30 Id. (quoting David Fairris, David Runstein, Carolina Briones and Jessica Goodheart, Examining the Evidence: The Impact of the Los Angeles Living Wage Ordinance on Workers and Businesses (Los Angeles, CA: Los Angeles 8

9 affected by the agency s living wage policy, 35 percent reported improvements in work performance, 47 percent reported better employee morale, 44 percent reported fewer disciplinary issues, and 45 percent reported that customer service had improved. 31 In each case, only a very small percentage reported any worsening of these factors. In Boston, firms affected by the city s living wage policy also reported improved morale and increased work effort among their employees. 32 A Living Wage is Related to Competition in the Procurement Process One of the stated intents of the General Assembly in enacting the VPPA is that competition be sought to the maximum feasible degree. 33 To accomplish that end, the legislature provided that individual public bodies enjoy broad flexibility in fashioning details of such competition. 34 Maryland found that adopting the living wage requirement improved competition for state contracts by attracting more high-road vendors nearly 30 percent more bidders on average to submit bids for government work. 35 Nearly half of contracting companies Alliance for a New Economy), p. 106, 109, available at: 31 Id. (citing Michael Reich, Peter Hall, and Ken Jacobs, Living Wages and Economic Performance: The San Francisco Airport Model (Berkeley, CA: Institute of Industrial Relations at the University of California, Berkeley, 2003), p. 60, available at 32 Id. (citing Mark D. Brenner and Stephanie Luce, Living Wage Laws in Practice: The Boston, New Haven and Hartford Experiences (Amherst MA: University of Massachusetts, Political Economy Research Institute, 2005), available at 33 VA. CODE ANN Id. 35 Gebreselassie, Madland, Sonn, and Walter, Contracting that Works: A Toolkit for State and Local Government (Center for American Progress Action Fund and National Employment Law Project), available at (citing Office of Policy Analysis, Impact of the Maryland Living Wage, available at 9

10 interviewed in a report assessing the impact of Maryland s living wage law reported that the new labor standards encouraged them to bid for state contracts because it leveled the playing field. 36 Since payment of a living wage is related both to the underlying purposes of the procurement process and to the services provided, it is a reasonable component of a best value analysis and would be valid regardless of the social or political motives that may have contributed to its enactment. Conclusion The Attorney General s opinion that the Board of Visitors of the University of Virginia is not authorized to require contractors to pay a living wage to their employees is not binding on either the University or the courts. Three Virginia municipalities have enacted living wage ordinances that remain unchallenged by the Attorney General. There is no difference in the application of the Dillon Rule to these municipalities and to University. Even applying the Dillon Rule, the Board of Visitors obviously has been granted sufficient power to contract on behalf of the University and therefore implicitly to determine the terms of those contract. The critical issue then becomes whether an exercise of that power which requires contractors pay their employees a living wage as a condition of bidding violates the Virginia Public Procurement Act. The VPPA allows public bodies to consider best value factors, as defined by the public body itself, in the procurement of non-professional services. There is no binding case law or statutory authority addressing whether a living wage is a proper best value consideration. However, ample research supports a relationship between living wage requirements and the quality of the service provided 36 Id. 10

11 as well as competition in the bidding process. Therefore the payment of a living wage relates to the procurement needs of the University and is a proper consideration under the best value approach. The possibility of social and moral motivations for the policy does not undermine payment of a living wage as a proper best value consideration. 11