Attorney General's Opinion

Attorney General, Richard Blumenthal

January 15, 2008

Honorable Anne Gnazzo

Department of Administrative Services

165 Capitol Avenue

Hartford, CT  06106

Dear Commissioner Gnazzo:

Your department has asked whether the state is responsible for paying increases to the minimum wage when state contracts are silent as to which party will absorb the cost associated with such increases.  We conclude that the state has an obligation to reimburse contractors for increases in the minimum wage that may occur during the term of a contract when the contract is silent on that issue.  Additionally, this office recommends that all state contracts specifically provide for state responsibility for payment of increases in the minimum wage during a contract term. 

You informed this office that the Department of Administrative Services (“DAS”) delegated authority to the Department of Public Works (“DPW”) to enter into two janitorial service contracts (the “Contracts”).  Subsequently, DPW awarded the Contracts to Connecticut Community Providers Association (“CCPA”) in October 2003.  The term of each Contract originally expired on February 28, 2007.  Prior to this expiration date, DAS informed DPW that the Contracts were subject to a new law, Conn. Gen. Stat. § 4a-82(o), which, according to DAS’s interpretation of that law, extended the termination dates of janitorial service contracts through the end of a 4-year pilot program covering those types of contracts, ending in November 2010.  This pilot program exists in accordance with Conn. Gen. Stat § 4a-82(b) and is intended “to create janitorial work job opportunities for persons with a disability and persons with a disadvantage.”  You also informed me that CCPA is willing to perform under the Contracts until November 2010 but it is seeking reimbursement for minimum wage increases that became effective in January 2006 and January 2007. 

The Contracts are silent on whether the State has an obligation to reimburse CCPA for any expenses that it incurs as a result of increases in minimum wages.  Specifically you ask:

Pursuant to 4a-82(o) ¹ contracts in effect on or after October 1, 2006 shall remain in effect through the term of the pilot program.  The statute does not contemplate increases in wages.  The contract does not allow for increases in wages except prevailing wage increases.  In the two cases we are dealing with right now, the contractor has asked for in [sic] increase equal to that of what [the] minimum wage has increased since the inception of the contract.  At the time the contractor bid these services they did not know that their contract could be extended by four years. So to the question, can we allow for a price increase where CCPA and its vendor have documented the increase and explained that it is for the amount that the state minimum wage has increased (by legislation) since the date of contract award?

My opinion is that the State should reimburse contractors for increased costs resulting from increases in the minimum wage during the term of a contract.  Fundamental fairness, legislative intent, statutory language, as well as the public policy reasons for the minimum wage rate, all argue persuasively that the state has an obligation to pay for these increases.

This office has issued two opinions concerning the duty of the State to reimburse contractors for standard wage increases: 013 Conn. Op. Atty. Gen. (2003) issued to Department of Labor Commissioner Shaun B. Cashman and 026 Conn. Op. Atty. Gen. (2006) issued to Department of Labor then-Acting Commissioner Raeanne Curtis (attached).  Each opinion concludes that contractors are entitled to reimbursement for the increase in standard wages.  The question in the 2003 Opinion was whether applicable labor statutes required employers to raise standard wage rates during the life of the contract.  In that opinion, this office analyzed the applicable statutes and found that the General Assembly’s use of the present tense in the statute indicated an intent for employees to receive wage rates in effect at the time they are paid, as otherwise the General Assembly would have articulated a limitation.  Further, the opinion stressed that the primary purpose of the labor statute is to ensure fair wages to employees and quoted the proponent of the bill, Representative Chris Donovan, as follows:

[T]his bill deals with the inequities and wages for janitorial [and] food service employees who are contracted by the state. When, as many people know, when our state contracts out for janitorial [and] food services, we become the lowest payer employer for this service in the state. Our bidding process forces contractors to pay the lowest wages, with little or no benefits. We pay poverty wages for working men and women. . . . This bill . . . creates a fair system to compensate our janitors.

The question in the 2006 opinion was whether the contractor or the state had to absorb the cost of the standard wage increases.  In that opinion, the Attorney General relied in part on a Department of Labor conclusion that forcing employers to absorb the cost of increases in standard wages instead of reimbursing them for those costs would thwart the legislative goal of paying fair wages.  The Department of Labor reasoned that if employers must absorb those costs, they are at a competitive disadvantage, which in turn tends to adversely affect the security of the employees’ jobs and defeats the labor statute’s purpose.  Since none of the contracts reviewed for the 2006 opinion specified which party was responsible for paying the increase in wage rates, and since the State drafted the contracts, the opinion concluded that the State was responsible for reimbursing contractors for the cost of the increases in standard wage rates. 

In regard to the present issue, the Department of Labor's Wage and Hour Section has informed my office that it believes the State should reimburse CCPA for increases in the minimum wage.  There is no question that CCPA's workers are entitled to be paid at least the minimum wage.  Conn. Gen. Stat. § 31-58 et seq.  The legislative and policy goals relating to standard wages that underlie the 2003 and 2006 opinions are equally applicable in the context of minimum wages.  We concur with the Department of Labor that it is unfair to require employers to hold their prices for four additional years despite rising mandatory wages, particularly when those employers had no indication that the State would extend their contract for four years, not by means of a bargained-for contract provision that presumably would have included a provision for rising wages, but by force of statute.

State payment of minimum wage increases during a contract's term is required by the clear, powerful public policy considerations underlying the minimum wage laws themselves. The Department of Labor has reasonably reached this conclusion and we agree. Both the standard wage and the minimum wage further the same public interest of preserving Connecticut jobs that pay a fair wage.  Fundamental fairness, legislative intent, statutory language, as well as the public policy reasons for the minimum wage rate, all argue persuasively that the state has an obligation to pay for these increases.

As with the standard wage, the present contracts are silent on who is ultimately responsible for paying the increase in minimum wage rates, the contractor or the state.  Consistent with our 2006 opinion on standard wage increases, the state should be responsible for reimbursing employers for increases in the minimum wage that occur during the term of a contract. 

I recommend that DAS in the future include appropriate provisions in its contracts consistent with this opinion.

Very truly yours,

RICHARD BLUMENTHAL
ATTORNEY GENERAL

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