The California Attorney General has concluded that when a private nonprofit uses public money only to buy construction materials, the project generally becomes a “public work.” The nonprofit must then pay prevailing wages to the workers it hires, even if their wages come entirely from private funds. The conclusion appears in Opinion No. 26-201, issued October 13, 2026, and marked for publication in the official reports. Formal Attorney General opinions are advisory and do not bind the courts. California courts, however, generally treat them as entitled to considerable weight, see Freedom Newspapers, Inc. v. Orange County Employees Retirement System (1993) 6 Cal.4th 821, 829.
The request came from San Joaquin County Counsel Edward J. Kiernan, who posed a hypothetical. A county gives a nonprofit public funds to purchase flooring for a construction project. The nonprofit’s own workers install the flooring, and their wages are paid from non-public sources. The public money pays for materials only, not labor.
California’s prevailing wage law requires that all workers employed on public works be paid the prevailing rate of per diem wages (Labor Code § 1771). Labor Code § 1720, subdivision (a)(1), defines public works as construction, alteration, demolition, installation, or repair work done under contract and “paid for in whole or in part out of public funds.” The county counsel noted that the ordinary reading of “work” might not reach a purchase of materials, though materials could also be viewed as part of the cost of construction.
The question was whether a nonprofit that accepts and uses public funds to buy materials must pay prevailing wages to the workers it hires onto the project, when those workers are paid with other, non-public money. Under Busker v. Wabtec Corp. (2021) 11 Cal.5th 1147, coverage under § 1720(a)(1) requires (1) construction, (2) done under contract, (3) paid for at least in part with public funds. Only the third element was in question.
In the formal opinion of the California Attorney General, Opinion No. 26-201 (October 2026), to be published in the Opinions of the California Attorney General, the Attorney General concluded that, as a general rule, the answer is yes. The hypothetical would involve a public work, and nothing suggested it fell within an exception such as the de minimis subsidy exception. The prevailing wage law would therefore cover the workers hired by the nonprofit. Deputy Attorney General Ryan B. McCarroll prepared the opinion.
The opinion acknowledged support for the county’s narrower reading. “Work” typically means labor, and the Supreme Court in City of Long Beach v. Department of Industrial Relations (2004) 34 Cal.4th 942 held that public funds earmarked for preconstruction work did not, at the time, trigger coverage. A 1987 opinion of the U.S. Justice Department’s Office of Legal Counsel (11 Op. O.L.C. 92) had also read a federal prevailing wage provision, 42 U.S.C. § 5310, as not reaching federal money spent only on materials. The opinion noted, however, that the federal opinion construed different statutory language, and that Congress has since used broader, project-based wording in several statutes.
The opinion then reasoned that installing flooring cannot happen until the flooring is bought. Because § 1720(a)(1) requires payment only “in part” from public funds, buying the materials arguably pays for part of the installation work itself.
More decisive, in the Attorney General’s view, was the Legislature’s 2001 amendment adding § 1720(b), which defines “paid for in whole or in part out of public funds” to include direct and indirect subsidies. These include a payment of money “to or on behalf of” the contractor or developer, a transfer of an asset for less than fair market price, and the public payment of costs normally required to carry out the contract. Courts have read these provisions broadly, as in Cinema West, LLC v. Baker (2017) 13 Cal.App.5th 194 and Hensel Phelps Construction Co. v. San Diego Unified Port Dist. (2011) 197 Cal.App.4th 1020. The opinion concluded that a county payment for flooring fits comfortably within this definition. Drawing on the constitutional bar on gifts of public funds (Cal. Const., art. XVI, § 6) by way of comparison, the opinion added that the county’s payment would serve no public purpose apart from helping the nonprofit build the project.
The opinion also relied on the narrow de minimis exception in § 1720(c)(3), which, after a 2020 amendment, applies only when public funding is both under $600,000 and under 2 percent of total project cost. The $600,000 cap does not apply to projects made up entirely of single-family dwellings. Allowing agencies to earmark money for materials would let them sidestep those limits. Citing federal labor statistics, the opinion noted that materials regularly exceed 2 percent of construction costs.
The conclusion is consistent with recent positions of the Department of Industrial Relations. In its October 2024 EnergIIZE coverage determination, the DIR Director found that electric vehicle charger installations were partly publicly funded even though the state grants excluded installation costs. The opinion also cites a June 1, 2026 letter from DIR’s Chief Counsel reaching the same result on the county’s hypothetical. The opinion pointed to appellate decisions rejecting efforts to “carve up” projects into public and private pieces to avoid coverage, including Azusa Land Partners v. Department of Industrial Relations (2010) 191 Cal.App.4th 1, Oxbow Carbon & Minerals, LLC v. Department of Industrial Relations (2011) 194 Cal.App.4th 538, and Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976. Quoting Azusa, it noted that once a project is a public work, the entire project is subject to the prevailing wage law.
The opinion is limited to the hypothetical presented. It answers the question “as a general rule” and does not address other exemptions in § 1720 that could apply on different facts.