May 11, 2009
On April 2, 2009, in New York Charter School Assoc. v. Smith and Foundation For A Greater Opportunity v. Smith, the Appellate Division of the New York State Supreme Court, Third Judicial Department, held that New York’s Labor Law Section 220—which requires the application of "prevailing wage" requirements to contracts for the construction, renovation, repair and maintenance of public works projects—does not apply to charter school projects. The Third Department’s decision overruled the 2007 opinion by the New York Department of Labor that charter schools are subject to such requirements, which had led charter schools to anticipate millions of dollars in increased costs.
The Third Department explained that Section 220, which applies to contracts to which "the state or a public benefit corporation or a municipal corporation or a commission appointed by law is a party," does not by its terms apply to educational corporations such as charter schools. As the Court observed, "charter schools have unique characteristics that distinguish them" from the public entities identified in the statute, including that they are "established by a group of private individuals, consisting of teachers, parents, school administrators, community residents or any combination thereof."
In addition, the Court determined that charter agreements are not contracts "involving the employment of laborers, workers, or mechanics," as required under longstanding precedent. Instead, "most of the provisions of . . . charter agreements address administrative matters involving the operation of the charter school." Moreover, although New York’s Education Law requires charter agreements to include "[i]nformation regarding the facilities to be used by the school, including the location of the school, if known, and the means by which pupils will be transported to and from the school," the Court held that "this does not transform" charter agreements "into a contract for the construction, renovation or repair of a public works project."
Gibson Dunn’s Jennifer H. Rearden, Michelle M. Craven, and Netra Sreeprakash briefed the appeal on behalf of amicus curiae New York City Center for Charter School Excellence. This representation arose out of Gibson Dunn’s experience with the financing and construction of charter schools in New York, New Jersey and Washington, D.C.
Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn attorney with whom you work or Andrew A. Lance (212-351-3871, firstname.lastname@example.org), Jennifer H. Rearden (212-351-4057, email@example.com), Michelle M. Craven (212-351-2480, firstname.lastname@example.org) or Netra Sreeprakash (212-351-2361, email@example.com) in the firm’s New York office.
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