Contractor Has to Shell Out $8 Million After Unions Win Argument That Hilton San Diego Bayfront Hotel Was a “Public Works” Project

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Are you one of the 2000+ construction trade workers who built the Hilton San Diego Bayfront Hotel? The California Division of Labor Standards Enforcement (Labor Commissioner’s office) gave me the following information about what to do:

Send your contact information to this California Division of Labor Standards Enforcement district office address (presumably via a letter or postcard) explaining that you were a trades worker on the Hilton San Diego Bayfront Hotel:

California Division of Labor Standards Enforcement
7575 Metropolitan Drive, Room 210
San Diego, CA 92108

According to a representative in the DIR Legal Division, payments to former workers (in the form of checks) are supposed to be available 60-90 days after the June 17, 2013 official announcement. A third-party administrator is handling the processing of the payments.

The phone number for this San Diego district office is (619) 220-5451.


This morning (June 17, 2013) the California Department of Industrial Relations (DIR) issued a press release declaring that the Labor Commissioner Collects Over $8 Million in Wages for Public Works Job at Hilton Hotel in San Diego. Surely unions will portray this settlement as a victory for exploited workers against greedy capitalists. Actually, it is a symptom of absurd, ambiguous, union-backed definitions of public works in state law.

Right off the bat, you notice something odd: the headline of the press release includes the clarification that the hotel was a “public works job.” How did a Hilton hotel become a public works job? You thought “public works jobs” were government projects such as schools, courthouses, libraries, and post offices.

You thought wrong. In 2001, Governor Gray Davis signed the union-backed Senate Bill 975 into law. It expanded the definition of a “public works” project to include just about any assistance of any financial value from a government:

For purposes of this section, “paid for in whole or in part out of public funds” means the payment of money or the equivalent of money by a state or political subdivision directly to or on behalf of the public works contractor, subcontractor, or developer, performance of construction work by the state or political subdivision in execution of the project, transfer of an asset of value for less than fair market price; fees, costs, rents, insurance or bond premiums, loans, interest rates, or other obligations that would normally be required in the execution of the contract, which are paid, reduced, charged at less than fair market value, waived or forgiven; money to be repaid on a contingent basis; or credits applied against repayment obligations.

In 2012, the Assembly Labor and Employment Committee rejected (on a party-line vote – Democrats opposed and Republicans in support) Assembly Bill 987, sponsored by Associated Builders and Contractors of California and introduced by Assemblywoman Shannon Grove (R-Bakersfield). This bill would have simplified a section of California Labor Code 1720 defining “public works” that two court decisions have described as “As statutes go, Section 1720 is hardly a triumph of the drafter’s art.” Unions like the law as written, and their triumph described below shows why they oppose any reasonable amendments to the law.

The United Port of San Diego owns property on the San Diego waterfront next to the San Diego Convention Center. In 2002, the Port issued a Request for Proposals for an entity to lease the land and build a hotel on the site. After choosing Hilton San Diego Convention Center, LLC to lease the land and build the hotel, the Port negotiated a lease that included a rent credit equal to 60 percent of the rent due each month for 11 years, not to exceed a total of $46.5 million. Subsequently the Port provided a “rent credit acceleration” for the hotel developer.

Hilton San Diego Convention Center, LLC chose Hensel Phelps, an investor in the project, as the general contractor. In April 2004, Hensel Phelps asked the Port if the hotel project was a public works job subject to the payment of state-mandated construction wage rates (so-called “prevailing wages”) to trade workers. In a memorandum dated May 12, 2004, the Port considered the available information and concluded that “the Hilton Hotel development is not considered a public works project subject to the payment of prevailing wages.” See that memo here: May 12, 2004 – Port Says Hilton San Diego Not Public Works.

After construction began in 2006, the Carpenters Contractors Cooperation Committee (CCCC) and Southern California Labor/Management Operating Engineers Contract Compliance Committee, two union-affiliated labor-management cooperation committees, referenced the rent credit and asked the California Department of Industrial Relations (DIR) to determine whether or not the Hilton Hotel was a public works project subject to state-mandated prevailing wage laws. The DIR began its own analysis of the project. See September 14, 2006 DIR Request to Port of San Diego for Hilton San Diego Documents.

In a response to the DIR dated October 2, 2007, Port of San Diego staff stated that it “believes that given the specific conditions of the RFP; challenges caused by extensive site remediation; the extent of public improvements; location; and size of the site, the transaction that was negotiated with Hilton represents the market for this particular site,” thus denying that the rent credit exceeded fair market value. The Port also warned that if the state decided to declare the hotel a public works project, it would discourage additional development of the area:

Port staff has received inquiries from other tenants, who are in the process of developing leaseholds, regarding this matter. We are concerned that attempts to treat private leaseholds as public projects will set off a chain reaction and have a chilling effect on redevelopment and reduce rental revenue to the Port, which will in turn negatively impact the Port’s ability to further its own capital projects.

Associated Builders and Contractors (ABC) of California (my former employer) and Associated General Contractors (AGC) of California submitted letters to the DIR arguing that the Hilton hotel was not a public works project. The Southern California Labor/Management Operating Engineers Contract Compliance Committee submitted a rebuttal to the ABC and AGC arguments.

November 30, 2007 San Diego Hilton Not a Public Works – ABC of CA Comment

December 7, 2007 San Diego Hilton Not a Public Works – AGC of CA Comment

December 19, 2007 San Diego Hilton is a Public Works – Operating Engineers Union Response

On April 1, 2008, the Director of the California Department of Industrial Relations determined that “the construction of the Hilton San Diego Convention Center Hotel and related development” is “a public work subject to prevailing wage requirements.” See April 1, 2008 DIR Director’s Decision – San Diego Hilton – Public Works.

Hensel Phelps filed an administrative appeal of the decision, and the DIR sought additional comments. See April 25, 2008 DIR Notice of Appeal – San Diego Hilton. Among the commenters were Associated Builders and Contractors of California: see May 8, 2008 San Diego Hilton Not a Public Works – Comments on Appeal – ABC of California.

On June 23, 2008, the DIR Director denied the appeal and affirmed his original decision that the Hilton San Diego Convention Center Hotel was a public work subject to prevailing wage requirements. Four days later, Hensel Phelps filed a lawsuit (Hensel Phelps Construction Company vs. California Department of Industrial Relations) in San Diego County Superior Court to overturn the DIR Director’s decision.

On February 25, 2010, a San Diego County Superior Court judge ruled that the Hilton San Diego Convention Center Hotel and related construction was not a “public work” subject to prevailing wage requirements. On April 23, 2010, the Director rescinded his earlier decision and ruled that the Hilton San Diego Convention was not a public works project. See April 23, 2010 DIR Rescinds Coverage Determination for San Diego Hilton.

But the Carpenters Contractors Cooperation Committee appealed the judgment to the Court of Appeal, Fourth Appellate District. On July 26, 2011, the court reversed the Superior Court decision and ruled that the rent credit was a payment of public funds, regardless of whether or not the rent reduction had a realizable monetary worth. See July 26, 2011 Hensel Phelps v San Diego Port District Appeals Court Decision – Prevailing Wage on Hilton San Diego Bayfront Hotel.

The State Building and Construction Trades Council of California had filed an amicus brief in the case. In its July 21, 2011 bulletin Court of Appeal Rules Prevailing Wage is Required on San Diego Hilton Project, it expressed outrage that “the Schwarzenegger Administration refused to file an appeal to defend the Department of Industrial Relations’ coverage decision” and that “the Port District and the Developer should be ashamed of themselves.”

The DIR press release explains what happened next:

Hensel Phelps Construction Company and the Labor Commissioner then negotiated the amount of wages due to the workers. All 2,051 workers will receive the full prevailing wages they earned on this project. They performed every aspect of construction, from foundation drilling to concrete pouring to steel erection to landscaping.

Hensel Phelps Construction Company will pay a third party administrator to process payments to the workers. The prime contractor will also pay an additional $400,000.00 to the Labor Commissioner as reimbursement for investigative costs.

Now we know that state-mandated construction wage rates cost an extra $8 million for a specific $350 million hotel project built in downtown San Diego in the mid-2000s. You can imagine the cost of prevailing wage for a project in a rural area during the recent economic downturn.

Is it surprising that the developers of the proposed Turtle Bay Sheraton Hotel in Redding suspended their plans earlier this year to build the hotel when unions managed (on their second try) to get the DIR to determine that hotel would be a “public works” project? See my February 15, 2013 post Unions Rise to Defense of “Prevailing Wage” Rates Jeopardizing Hotel Project in Redding and my January 31, 2013 post Redding Needs a Charter to End Nonsense Definition of Private Hotel as a “Public Works” Project.

20 comments

  1. Xxxx Xxxxx says:

    I was a union glazier apprentice and worked on the Hilton bayfront hotel. How does a worker receive his share of the lawsuit. I am not currently employed as a glazier. Do I need to contact my union office to update my address. Also, how much each worker receives and how long will it take to receive it. Is there a phone number I can call to see if I qualify to receive a part of the settlement?

    • Kevin Dayton says:

      I just left a message with the California Department of Industrial Relations to find out what you need to do to get your money from the Hilton Bayfront Hotel. I’ll let you know as soon as I get the information, and I’ll post it on my web site with the article, since I’m guessing some of the other 2,051 workers will find my article.

      If you are entitled to any benefits from the Glaziers Union (for example, if you spent enough years in the union to be vested in the pension, etc.), you’ll want them to know your current address.

      Kevin Dayton

  2. Xxxx Xxxxxxxx says:

    I worked on this job for three months through a temp service (55 hrs a week ) before being hired directly by hensel -phelps for two weeks then wrongfully terminated I`ve been out of work over 5 years as a form setter when can we get are money I contacted my former employer and they told me there was nothing they could do ,there`s a lot of people out there who don`t even know about this,we all need answers after all its “are” money and they have had it for years!

  3. […] of California determining that the Hilton San Diego Bayfront Hotel was a public works project (Contractor Has to Shell Out $8 Million After Unions Win Argument That Hilton San Diego Bayfront Hote…), I’m receiving communications from some of the 2000+ workers on that project who want to […]

  4. Xxxxx Xxxxxx says:

    Does anyone have a idea what the pay rate will be example ;carpenters this rate,iron workers this rate and so on ?

    • Kevin Dayton says:

      I do not, but the California Division of Labor Standards Enforcement (Labor Commissioner’s office) gave me the following information about what to do if you are one of those 2000+ workers:

      Send your contact information to this California Division of Labor Standards Enforcement district office address (presumably via a letter or postcard) explaining that you were a trades worker on the Hilton San Diego Bayfront Hotel:

      California Division of Labor Standards Enforcement
      7575 Metropolitan Drive, Room 210
      San Diego, CA 92108

      According to a representative in the DIR Legal Division, payments to former workers (in the form of checks) are supposed to be available 60-90 days after the June 17, 2013 official announcement. A third-party administrator is handling the processing of the payments.

      The phone number for this San Diego district office is (619) 220-5451.

  5. Xxxxxx Xxxxxxxx says:

    Thank You for all your help always happy to see someone these days do there job right or helping others out when they need it.

  6. william jones says:

    I have contacted you in the past I was a concrete form setter on the Hilton job for 14 weeks( 56 hrs. per)I have gone as far as sending in the paper work they sent me to fill out and I sent it back(regest.mail) the return slip said they received it 10-3-13 and I should receive a check in 7-10 days it is now past 10 working days and still no word ,has anyone heard of 1 of the 2,051 men on this job receiving a check as of 10-18 13 ?

  7. william jones says:

    Still have not received payment as of 10-23-13 I am pretty sure someone has to be collecting interest on the 8 million dollars so I won’t hold my breath anymore this whole thing is a joke

  8. william jones says:

    I have called the office I sent my info to in Los Angeles but on one returns my calls after taking my info so I guess its time to call Turko at KUSI NEWS !

    • Shawn says:

      I also was one of the workers on this job. I also have sent my paperwork back via certified mail back in September and to this day have not received any form of payment. I also have called and have had no luck. If anyone has had some response from them please let me know.

  9. shawn says:

    I just spoke to the claims administrator in LA Office , the ones that are supposedly handling the case..He was no help . According to him he has no idea when the checks will be mailed. The only thing he said is that its goint to still take a while! This is ridiculous!!

  10. Shawn says:

    Just spoke with “Ray” who is supposedly the contact that is dealing directly with Marcello Amster (the division that is holding the checks) According to Ray, he just spoke to that office and once again there is no information. The only thing that Marcello Amster office told him is to tell the workers to be patient, the checks will be issued out, maybe sometime next year!!! WTH!! Are they serious!

  11. Shawn says:

    still waiting! has anyone gotten paid on this yet?? Ray just told me that now it will possibly be by end of February, and if not then he will follow up with them but not until then!! Ridiculous!!

    • Daryl says:

      we all need to keep on them about this. In my experience the “squeaky wheel” will get greased when the problem becomes an actual issue. Please post the information needed to contact “RAY” or any others involved and we will resolve this with the masses.

  12. Daryl says:

    Call Ray @ (562) 983-1832 and leave a message. He most likely will not pick up. Lets see if anyone gets a response.

  13. william jones says:

    Yes this is a bunch of b.s. someone is collecting interest on 8.2 million dollars and its not us the workers I have been round and round with these people about getting paid even had to send them proof of my ss # notorized sent in December do we need to file a class action law suit to get our money or what

  14. Adam says:

    Checked are beginning to be received. My supervisor received theirs last week.

  15. Larry castro says:

    So the checks will be mailed out in 4 to 6 months after paperwork is approved, according to ray…. Anybody received their check yet??