BILL ANALYSIS Senate Committee on Labor and Industrial Relations Carole Migden, Chair Date of Hearing: April 11, 2007 2007-2008 Regular Session Consultant: Alma Perez Fiscal:Yes Urgency:No Bill No: SB 569 Author: Steinberg Amended Version: March 26, 2007 Subject: Public works: prevailing wage payments: payroll records. Purpose: This bill makes a number of changes and additions to current law to address public works transparency and enforcement of the state's prevailing wage law. Analysis: Existing law defines "public work" as construction, alteration, demolition, installation, or repair work that is done under contract and that is paid for, in whole or in part, out of public funds, as defined. Existing law also imposes prevailing wage obligations upon employers who provide services or construction work for public entities under contracts in excess of $1000. Each contractor and subcontractor engaged in public works is required to keep accurate payroll records. Among other things, the law states that: Payroll records must be certified and available for inspection at all reasonable hours at the employer's principal office. However, the public does not have access to records at the principal office of the contractor, but rather, through a request by the body awarding the contract, the Division of Apprenticeship Standards, or the Division of Labor Standards Enforcement. Personal information (SSN, name, address) of each individual worker is not available to the general public. Payroll information requested from an employer by the allowed entity must be provided within 10 days of written request. The Labor Commissioner may investigate and issue a civil wage and penalty assessment to a contractor or subcontractor, or both, if it is found that laws regulating public works contracts were violated. Currently, the contractor and subcontractor are jointly liable for all amounts due pursuant to a final order or a judgment on that final order, but requires the Labor Commissioner to collect amounts due from the subcontractor before pursuing the claim against the contractor. Any amounts collected from a contractor will first be applied to satisfy any outstanding wage claim before it is applied to the penalty. Currently, federally recognized joint labor-management committees may bring an action against an employer who fails to pay prevailing wages as required by state law, not later than 180 days after the filing of a valid notice of completion or acceptance of the public work, whichever occurs later. Courts may award restitution to employees and attorney's fees and costs to the committee. In addition, the Labor Commissioner is directed to publish a list of contractors and subcontractors who have committed willful violations or against whom a final compliance order has been issued. This Bill would make specific requirements of awarding bodies, the Contractors State License Board (CSLB), joint labor-management committees, contractors and subcontractors in regards to public works contracts and payroll records. Specifically, this bill: Requires each awarding body of a public works project to report specified information (name, license number, location, ID number) about the public works project, as well as, the contractor and subcontractor Hearing Date: April 11, 2007 SB 569 Consultant: Alma Perez Page 2 Senate Committee on Labor and Industrial Relations performing the work to the CSLB. The board shall include this information on their Web site. Deletes the provision requiring the Labor Commissioner to collect amounts due from the subcontractor before pursuing a claim against the contractor. Changes the statute of limitations for joint labor management committees to take enforcement actions against an employer from 180 days to not later than four years after the violation occurs. Provides that where a prevailing wage violation has been proven, the court must enjoin further violations and award unpaid wages to employees, and to award the joint labor-management committee attorney's fees, costs, and expenses. Allows for members of the public to request certified payroll records directly from the contractor or subcontractor in addition to the Division of Apprenticeship Standards, the Division of Labor Standards Enforcement. Allows only a contractor or subcontractor to be reimbursed for the costs of copying the payroll records. Deletes the existing prohibition to public access of payroll records at the principal office of the employer, and instead, allows for direct public access, but specifies access is not required to be given at the principal office of the contractor or subcontractor. Deletes the provisions authorizing the use of printouts of payroll data that is maintained as computer records. This bill specifies that provisions of this act are severable, and if any provisions or applications are held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provisions or applications. Hearing Date: April 11, 2007 SB 569 Consultant: Alma Perez Page 3 Senate Committee on Labor and Industrial Relations Comments: 1. Proponents : According to the sponsor, the California State Pipe Trades Council, prevailing wage laws were enacted to ensure that skilled construction workers employed on public works projects would be paid at least the wages and benefits that "prevail" in their local communities. The author's office states that underpaying prevailing wages reduces the tax revenue the State would otherwise receive from the employees of dishonest contractors. The taxpayers fund public projects based on prevailing-wage compliance - they should get what they pay for, both in taxes and quality construction. The sponsors believe that dishonest contractors have ample opportunity to cheat. There are thousands of public works projects in California, with tens of thousands of contractors and hundreds of thousands of workers performing them. The sponsors believe it is impossible for the Labor Commissioner - who has only a handful of prevailing wage enforcement deputies - to monitor thousands of projects, investigate the complaints they generate and pursue violations. Existing law provides no mechanism for identifying a contractor's public works projects, or for preventing repeat violations by contractors who are caught cheating. SB 569 does a number of things to improve public works transparency and enforcement of the state's prevailing wage law. 2. Opponents : According to the Associated General Contractors of California, this bill will place significant new burdens Hearing Date: April 11, 2007 SB 569 Consultant: Alma Perez Page 4 Senate Committee on Labor and Industrial Relations on contractors and awarding agencies that are unnecessary. The opponents argue that making the contractor and subcontractor jointly liable for violations would be partially overturning the Violante case decided on last year which held that a prime contractor was not liable in a civil lawsuit for a subcontractor's prevailing wage violations. The Construction Employers' Association (CEA) fails to see why a contractor should be subject to penalties when a subcontractor commits fraud. Opponents argue that requiring every awarding body in California to report the name and license number of each contractor performing on public works projects would be impractical because the awarding bodies and the general contractor are not aware of every subcontractor who may perform work on a project. CEA believes this would present a tremendous burden to the already under-staffed, under-funded CSLB and would be of little value. The opposition also believes the bill clearly encourages litigation by allowing an action to be brought four years after an alleged violation rather than the current 180 days. They believe violations need to surface quickly so that an offending subcontractor can be held accountable, and because within the 180 days the project will still be fresh in people's minds, documentation will not yet be archived, and a contractor is likely to have the same employees. The bill provides that a joint labor management committee shall be entitled to collect attorney's fees, costs and expenses if they prevail in a court action. CEA states that this bill fails to provide these same items to a contractor if the contractor prevails in a court action against a joint labor management committee. Lastly, the opposition believes this bill takes a step backward by prohibiting a contractor from using printouts Hearing Date: April 11, 2007 SB 569 Consultant: Alma Perez Page 5 Senate Committee on Labor and Industrial Relations of payroll data that are maintained as computer records and instead requiring the contractor to provide the data, at considerable additional expenses, on forms provided by the Division of Labor Standards. 3. Prior Legislation : AB 581 (Klehs) in the 2005 legislative session. The bill aimed at enabling labor-management committees to monitor and enforce compliance with prevailing wage laws. The bill died in Senate Appropriations Committee. 4. Staff Comment : According to the author, under section 4, subparagraph (e), the language was intended to read that where certified payroll records are provided to the joint labor-management committees, only the individuals' social security numbers be blocked out and have the names remain. According to the sponsors, this is necessary so that all underpaid workers can be identified and be properly paid. This provision is not included in this version of the bill; however, the author intends to amend the bill at the subsequent committee to reflect this change. This bill has been double referred to this committee and to the Judiciary committee. Support: California State Pipe Trades Council (Sponsor) California State Association of Electrical Workers State Building and Construction Trades Council, AFL-CIO Western States Council of Sheet Metal Workers Opposition: Associated Builders and Contractors of California Hearing Date: April 11, 2007 SB 569 Consultant: Alma Perez Page 6 Senate Committee on Labor and Industrial Relations Associated General Contractors of California California Chamber of Commerce Construction Employers' Association (CEA) Hearing Date: April 11, 2007 SB 569 Consultant: Alma Perez Page 7 Senate Committee on Labor and Industrial Relations