Bidding on California Public Projects Not a “Fundamental Vested Right”: The Case of the $915 Debarment


California contractors who violate prevailing wage laws do so at their peril. A recent case, Ogundare v. Department of Industrial Relations (2013) 214 Cal.App.4th 822, held that a one year debarment from bidding on public projects did not implicate a “fundamental vested right.” Consequently, trial court review of a Division of Labor Standards Enforcement decision imposing debarment should have been more deferential to the DLSE decision, evaluating whether substantial evidence supported the decision rather than exercising its independent judgment on the evidence.

In a hearing before the DLSE, a laborer presented his paystub showing that he had worked 61 hours for a contractor in a particular week for $915, or $15/hour. The certified payroll submitted by the contractor to the public owner for that week showed that the laborer had worked 25 hours at the prevailing wage of $36.10/hour. On the basis of this and additional evidence that two other workers had not been paid overtime, the DLSE ordered a one-year debarment of the contractor for commiting willful violations of California’s prevailing wage law with intent to defraud.

When the contractor sought mandamus to set aside the debarment order, the trial court assumed that the right to bid on public projects was a “fundamental vested right.” It then applied its independent judgment to the facts and found no “credible evidence . . . of an intent to defraud” and that willfulness alone was insufficient to support debarment under the relevant statute.

On appeal by the DLSE, the court found that the right to bid on public projects was not a “fundamental vested right”–the contractor was not prohibited from working on all projects, only public ones, and therefore the interest involved was instead “purely economic.” This distinction is critical–administrative adjudications affecting only “purely economic” interests are reviewed under the much more deferential substantial evidence test (phrased in one case as “unless the finding . . . is so lacking in evidentiary support as to render it unreasonable, it may not be set aside.”). The court then applied the substantial evidence standard, and despite the contractor’s pleas of clerical error and lack of intent to defraud, remanded to the trial court to affirm the debarment.