A construction project was undertaken by the New York Racing Authority (NYRA), a not-for-profit entity established in 2008. Near its inception, NYRA had received $5 million from its predecessor, without any designation or restriction on use of the funds. NYRA’s predecessor had, in turn, received $105 million from the State of New York.

NYRA had construction work performed but without requiring prevailing wages. In response to a union inquiry, the NY Dept. of Labor conducted an investigation. A DOL hearing officer then determined that the project was subject to the prevailing wage laws.

The Appellate Division has nullified the NY DOL determination, concluding: NYRA is not a public instrumentality, nor was there evidence to support the position that public funds were used for the project.

A 2013 NY Court of Appeal decision stated that a “public work” requires (1) a public agency be a party to the contract; (2) the project must involve “construction-like labor” and be paid for with public funds; and (3) the primary objective of the project must be to benefit the public.

Applying that standard, the Appellate Division noted there was no evidence that NYRA had received state funds during the period of the project, and the only evidence of possible state funds was the $5 million transfer from its predecessor, arguably a portion of a $105 million transfer from the state. NYRA had total revenue in 2008 that was 13 times the amount of the transfer, and in the following year 53 times that amount. The NY DOL could not establish, as a result, that any state funds for the project had come into NYRA. Thus, there was “no basis to conclude that the funds retained any public characteristic.” The case is W.M. Schultz Constr., Inc. v Musolino, 2017 N.Y. App. Div. LEXIS 1407 (3rd Dept., Feb. 23, 2017).