Buying the Materials Can Trigger Prevailing Wages for an Entire Project: What a New Attorney General Opinion Means for Public Agencies

10.16.2026

A new opinion from the California Attorney General (“AG”) may give public agencies pause before they help pay for a construction project by covering the cost of materials. In Opinion No. 26-201, issued on October 13, 2026, the AG concluded that when a public agency’s money is used to buy materials for a construction project, the project becomes a “public work” — and prevailing wages must be paid to the workers on that project, even if those workers are paid entirely with private funds.

The opinion grew out of a straightforward question posed by the San Joaquin County Counsel. Imagine a county gives a private nonprofit public money to purchase flooring for a building project. The nonprofit then hires its own workers to install that flooring and pays them out of its own, non-public funds. Because the public money was earmarked only for materials and not for the labor itself, the County inquired whether the project was subject to prevailing wage laws. As a general rule, the AG’s answer was yes.

California’s prevailing wage law requires that workers on “public works” be paid the local prevailing wage. (Cal. Lab. Code § 1771.) A project counts as a public work when construction, installation, or similar work is done under contract and paid for, in whole or in part, out of public funds. (Cal. Lab. Code § 1720, subd. (a)(1).) The AG reasoned that paying for materials is, in practical terms, paying for part of the work. Workers cannot install flooring until the flooring is purchased, so public money spent on the materials is money that helps pay for the installation. Because the law requires only that the work be paid for “in part” with public funds, that connection is enough to bring the entire project within the law’s reach.

The opinion also leaned on a 2001 clarification by the Legislature defining what it means for work to be “paid for in whole or in part out of public funds.” (Cal. Lab. Code § 1720, subd. (b).) That definition sweeps in both direct and indirect public support — including handing over something of value for less than its fair market price, or paying costs that would normally be part of carrying out the project. Buying or donating a project’s materials fits squarely within that language. In the AG’s view, a public agency cannot sidestep the prevailing wage law simply by labeling its contribution as a payment for materials rather than for labor. (Cal. Atty. Gen. Op. No. 26-201 (Oct. 13, 2026).)

That concern — preventing agencies and developers from defeating the law through careful labeling, or what the opinion calls “creative earmarking” — runs throughout the analysis. The AG emphasized that the prevailing wage law is meant to protect workers and is read broadly to serve that purpose. Allowing a public agency to assign all of its funding to materials and none to labor would invite exactly the kind of gamesmanship the law is designed to prevent. (See Lusardi Constr. Co. v. Aubry (1992) 1 Cal.4th 976, 985, 987–988; City of Long Beach v. Dep't of Indus. Relations (2004) 34 Cal.4th 942, 950.)

The opinion recognized one narrow exception. A public contribution to an otherwise private development can be disregarded if it is both less than $600,000 and less than two percent of the total project cost. (Cal. Lab. Code § 1720, subd. (c)(3)(B)(i).) But the AG noted that the cost of materials routinely exceeds two percent of a project’s total cost, so earmarking money for materials will rarely fit within this limited exception — and certainly cannot be used to get around it.

While an opinion of the AG is not binding law, California courts do, however, give AG opinions great weight and treat the opinions as persuasive authority. (California Assn. of Psychology Providers v. Rank (1990) 51 Cal.3d 1, 16–17.) For California’s public agencies, the practical message is significant. Paying for or donating materials is not a workaround; neither are grants, reimbursements, in-kind contributions, or below-market transfers of property. And once a project qualifies as a “public work,” the prevailing wage requirement applies to the entire project — not just the slice funded with public dollars.

Agencies that are considering contributing to construction projects built by nonprofits, developers, or other private partners should take a careful look at how those arrangements are structured. It is worth reviewing existing and planned funding agreements, grants, and cost-sharing arrangements for prevailing wage exposure, and building prevailing wage compliance — including contractor registration, monitoring, and certified payroll — into project budgets and contracts from the outset. Where the law’s application to a particular project is unclear, a public agency can request a project-specific coverage determination from the Department of Industrial Relations before committing any funds.