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Nov
2013
26

IL Supreme Court Escapes Legal Tangle, Rules E.R.H. Utilities is Contractor, Must Pay Prevailing Wages

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The Illinois Supreme Court has ruled unanimously against an E.R.H. Utilities claim that the company was exempt from paying prevailing wages for utility work it did for the village of Bement. E.R.H.’s argument that it was a public utility as defined by the Utilities Act was based on its upkeep of the village’s potable water systems.   After a series of appeals brought differing results, the Department of Labor took the appeal to the Supreme Court which ruled that legislature never officially defined public utility under the Prevailing Wage Act and that E.R.H. was a contractor, not a public utility.

Legal website Municipal Minute provides a brief review of the decision:

The Illinois Supreme Court first reviewed the language of the Prevailing Wage Act, finding that the legislature did not include a definition of “public utility” nor any rationale for exemption public utilities from the prevailing wage requirement. People of State of Illinois v. E.R.H. Enterprises, 2013 IL 115106 (Nov. 21, 2013).  The Court then reviewed the definition of “public utility” under the Utilities Act as applied by the appellate court, and determined that the appellate court failed to acknowledge a specific exemption in the Utilities Act definition for utilities that are owned by a “municipal corporation.”  Based on this language, the Court found that E.R.H. was a contractor, not a public utility company and that the Village was the operator of the water facility, not E.R.H.  Consequently, E.R.H was not exempt from the Prevailing Wage Act and was required to pay its employees prevailing wages for work performed on the Village’s water facility and improvements.  

Appellate Strategist explains how the confusing nature of the case forced the Supreme Court to turn to a legal dictionary in hopes of settling the situation:

In an opinion by Justice Lloyd A. Karmeier, the Supreme Court reversed the Appellate Court. The Court began by noting a curious point: that there was no good evidence as to exactly why “public utilities” had been exempted from the Prevailing Wage Act in the first place. The Court noted that since the Act offers no definition of a public utility, the Appellate Court had imported the definition found in the Utilities Act. But the broad definition in that statute had a very specific purpose – to designate “a wide range of persons and entities” that would be subject to the regulatory jurisdiction of the Illinois Commerce Commission. Since it wasn’t clear why the exemption from the Prevailing Wage Act had been enacted, it was equally unclear whether it was appropriate to borrow the definition in the Utilities Act in construing its breadth.

Instead, the Court turned to Black’s Law Dictionary. The Court found Black’s definition of a “public utility” significant for two reasons: first, it specified that “most” utilities are subject to government regulation, and second, the Dictionary states that typically, the “utility” owns the facilities providing the public service. Neither of these conditions applied to the defendant, the Court found.

The Court noted that whatever the reason, public utilities had been exempt from the Prevailing Wage Act ever since it was enacted. In the original version of the Act, the exemption applied to work “done directly by any public utility company pursuant to order of the commerce commission or other public authority.” The italicized language had been removed in 1961, and the Court speculated that perhaps the legislature had concluded that any work done by a public utility, whether pursuant to a direct order by the commerce commission, would eventually be scrutinized by regulators as a result of a rate case.

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