BILL ANALYSIS
SB 569
Page 1
Date of Hearing: June 11, 2008
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Sandre Swanson, Chair
SB 569 (Steinberg) - As Amended: June 4, 2007
SENATE VOTE : 24-13
SUBJECT : Public works: prevailing wage payments: payroll
records.
SUMMARY : Revises various provisions of law related to
enforcement of the payment of prevailing wages on public works
projects. Specifically, this bill :
1 Requires a party awarding a public works contract, for which
the overall construction cost is over $100,000, to report to
the Contractors' State License Board (CSLB) the name and
license number of each contractor and subcontractor performing
work, and the name, location, and identification number of the
public works project for which the contract is afforded.
2)Specifies that a contractor and subcontractor shall be jointly
and severally liable for all amounts due pursuant to a final
order or judgment on that final order in any action to enforce
the requirements of existing law, regardless of the party
bringing the action.
3)Specifies that a contractor shall not be liable for penalties
incurred as a result of a subcontractor's failure to pay
prevailing wages, except as specified.
4)Extends the statute of limitations for a joint
labor-management committee to bring an action against a
contractor or subcontractor who fails to pay prevailing wages
from not later than 180 days after the filing of a valid
notice of completion to not later than four years after the
violation occurs.
5)Requires a court to enjoin violations, award unpaid wages for
distribution to employees, and award the joint
labor-management committee reasonable attorney's fees, costs,
and expenses incurred in maintaining the action.
6)Clarifies that a contractor is not liable for the violations
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of a subcontractor in an action filed more than 180 days after
the filing of a valid notice of completion, as specified, or
not later than 180 days after acceptance of the public work,
whichever occurs later.
7)Authorizes a member of the public to request copies of
certified payroll records directly from the contractor or
subcontractor, but provides that a contractor or subcontractor
shall not be required to provide members of the general public
access to the records maintained at the principal office.
8)Specifies that copies of records provided to joint
labor-management committees shall be marked only to obliterate
social security numbers, but not names.
FISCAL EFFECT : According to the Senate Committee on
Appropriations, this bill will result in costs related to
information reporting/Website maintenance ranging to $200,000 in
2008-09. In addition, there are unknown, likely significant
costs to respond to contract or wage inquiries.
COMMENTS : This bill, sponsored by the California State Pipe
Trades Council, makes a number of changes to provisions of
existing law related to the enforcement of state prevailing wage
laws. These changes may be classified into four main
categories: (1) CSLB oversight; (2) contractor and subcontractor
joint and several liability; (3) joint labor-management
committee actions; and (4) access to certified payroll records.
Each of these issues will be discussed in turn below:
Contractors' State Licensing Board
The Contractors State License Board (CSLB) was established in
1929 as the Contractors License Bureau under the Department of
Professional and Vocational Standards. Today it is part of the
Department of Consumer Affairs. The CSLB licenses and regulates
contractors in 43 classifications that constitute the
construction industry. Currently there are approximately 280,000
licensed contractors in the state. The CSLB also registers home
improvement salespersons.
The CSLB has established a Statewide Investigative Fraud Team
(SWIFT) that focuses on the underground economy and on
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unlicensed contractors. These units conduct stings and sweeps to
help curtail illegal contracting by citing those who are not
licensed.
This bill requires a party awarding a public works contract, for
which the overall construction cost is over $100,000, to report
to the CSLB the name and license number of each contractor and
subcontractor performing work, and the name, location, and
identification number of the public works project for which the
contract is afforded. The bill requires this information to be
submitted not later than 30 days after the information becomes
available to the awarding body. Finally, this bill requires
CSLB to include such information related to individual licensed
contractors on CSLB's website.
CSLB states that it supports the concept of this bill, but has
concerns about the implementation of the public works database.
First, CSLB states that the additional resources necessary to
develop and manage the database should be allocated to CSLB.
Second, CSLB states that the implementation date for the
database should be no earlier than July 1, 2010 to allow for
development of the website. Finally, CSLB states that public
agencies must be responsible for inputting their own project
information in order for the system to operate efficiently at
minimal costs to CSLB.
Joint and Several Liability
Current law provides that a contractor and subcontractor are
jointly and severally liable for all amounts due pursuant to a
final order or a judgment on that final order. However, current
law requires the Labor Commissioner to first exhaust all efforts
to collect the amount due from the subcontractor before pursuing
the claim against the contractor.
In a recent case before the California Fourth District Court of
Appeal, the court held that a subcontractor's employee on a
public works project cannot sue the prime or general contractor
on theories of statutory or contractual liability for the
nonpayment of prevailing wages by the subcontractor, the
employee's direct employer. Violante v. Communities Southwest
Development & Construction Co., 138 Cal. App. 4th 972 (2006).
The court noted that it is the Labor Commissioner that
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determines whether there has been any violation of the
prevailing wage law and then issues wage and penalty assessment.
As discussed above, current law assesses joint and several
liability against the contractor and subcontractor for those
assessments. However, the court held that "it is the Labor
Commissioner, not an employee, who pursues such claims." Id. at
979.
This bill specifies that the contractor and subcontractor are
jointly and severally liable for all amounts due pursuant to a
final order or a judgment in any action to enforce the laws
relating to public works, "regardless of the party bringing the
action in which the judgment is rendered" (Emphasis provided).
This provision of the bill appears to be a direct response to
the Violante decision discussed above.
In addition, the bill specifies that a contractor shall not be
liable for penalties incurred as a result of a subcontractor's
failure to pay prevailing wages, except as provided for under
specified current law. Current Labor Code Section 1775(b)
provides that a prime contractor is not liable for monetary
penalties unless they had knowledge of the failure of the
subcontractor to pay prevailing wages or failed to comply with
certain monitoring requirements.
Statute of Limitations in Actions By Joint Labor-Management
Committees
Existing law provides that 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.
This bill extends the statute of limitations to not later than
four years after the violation occurs. However, the bill
provides that that a contractor is not liable for the violations
of a subcontractor in an action filed more than 180 days after
the filing of a valid notice of completion, as specified, or not
later than 180 days after acceptance of the public work,
whichever occurs later.
This bill also requires a court in such actions to enjoin
violations, award unpaid wages for distribution to employees,
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and award the joint labor-management committee reasonable
attorney's fees, costs, and expenses incurred in maintaining the
action.
Existing law allows the joint labor-management committee to
bring an action against an employer that "fails to pay the
prevailing wage to its employees." This bill would provide that
the committee may bring an action "against a contractor or
subcontractor" who fails to comply with any of the requirements
of the entire chapter of the Labor Code dealing with public
works.
Access to Certified Payroll Records
Current law requires contractor and subcontractors on public
works projects to keep accurate payroll records showing the
name, address social security number, work classification, hours
worked and wages paid to employees. The payroll records are
required to be certified as true and correct by the contractor
or subcontractor.
Certified payroll records shall be made available for inspection
upon request of the employee, the awarding body, the Division of
Labor Standards Enforcement, or the Division of Apprenticeship
Standards.
In addition, under current law a certified copy of payroll
records shall be made available for inspection by a member of
the public. However, a request by the public shall be made
through either through the awarding body, the Division of Labor
Standards Enforcement, or the Division of Apprenticeship
Standards.
This bill would authorize a member of the public to request
copies of certified payroll records directly from the contractor
or subcontractor, but provides that a contractor or
subcontractor shall not be required to provide members of the
general public access to the records maintained at the principal
office.
Current law provides that copies of records made available to
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the public shall be marked or obliterated to prevent disclosure
of an individual's name, address and social security number.
Existing law also provides that copies provided to joint
labor-management committees shall be marked only to prevent
disclosure of an individual's name and social security number.
This bill provides that copies of records provided to joint
labor-management committees shall be marked only to obliterate
social security numbers, but not names.
ARGUMENTS IN SUPPORT :
According to the sponsor, the California State Pipe Trades
Council, current law requires contractors on public works
construction projects to pay their employees prevailing wages.
However, existing enforcement resources, public and private, are
inadequate to monitor and enforce prevailing-wage requirements.
As a result, unscrupulous contractors can underpay their
employees and get an unfair advantage in bidding against honest
contractors.
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 sponsor argues that this bill strengthens prevailing-wage
enforcement by creating a database of licensed contractors'
public works projects, by improving the information currently
provided to joint labor-management committees ("JLMs") that
monitor prevailing-wage compliance, and by requiring injunctive
relief when a JLM proves a contractor's violation in court.
The sponsor argues that this bill provides easy and efficient
E-government access to public information. It requires awarding
bodies to report prime contractors and subcontractors performing
their public works projects to the Contractors State License
Board. It will use the already-existing CSLB web site, adding
public works projects to the many types of information now
posted there. The CSLB database will identify the public
projects performed by each licensed contractor and
subcontractor.
This bill also reduces the current workload of public agencies
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in processing requests for certified payroll records by allowing
joint labor-management committees and members of the public to
request those records directly from contractors. It also
promotes contractor compliance by requiring employee names to be
included in the payroll records provided to joint
labor-management committees.
Where JLMs prove violations in court, this bill requires the
court to enjoin future violations in addition to awarding back
pay and attorneys' fees. This bill also establishes a four-year
statue of limitations for joint labor-management committees to
file actions to enforce the prevailing wage law, eliminating a
difficult-to-measure 180-day limitation period. The sponsor
states that this four-year limitations period is consistent with
the one for unpaid wages under the unfair competition law.
Finally, the sponsor contends that this bill corrects a recent
judicial error. Even though existing law provides that
contractors are jointly and severally liable with their
subcontractors for the subcontractors' prevailing-wage
underpayments, a 2006 court decision misconstrued the rule as
applying only in Labor Commissioner proceedings. This bill
reaffirms the long-established rule of joint-and-several
liability for prevailing-wage underpayments, regardless of the
forum.
ARGUMENTS IN OPPOSITION :
Opponents argue that this bill will increase employment-related
lawsuits by establishing an unprecedented database of contractor
information and expanding opportunities for private rights of
action levied by joint labor-management committees. They
contend that this bill will place significant new burdens on
contractors and awarding agencies that are unnecessary.
Specifically, 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 general contractor
are not aware of every subcontractor who may perform on a
project. Opponents believe this would present a tremendous
burden to the already under-staffed, under-funded CSLB and would
be of little value.
While opponents appreciate recent amendments concerning joint
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liability, they argue that general contractors' liability for
the "sins" of the subcontractors creates uncertainty and
unpredictability for California contractors.
In addition, opponents argue that expanding the ability for a
joint labor-management committee to file private rights of
action against not only general contractors but also
subcontractors and expanding the statute of limitations is bad
public policy because current law provides predictable
guidelines on when enforcement of public works violations may
occur and sets out the ground rules.
Finally, opponents argue that this bill would create an
unnecessary administrative burden for contractors by allowing
the public to request payroll records directly from contractors.
Existing law already allows the awarding body to provide
payroll records to members of the public with necessary
safeguards.
PRIOR RELATED LEGISLATION :
AB 581 (Klehs) from 2005 contained language similar to many of
the provisions of this bill. That measure was held in the
Senate Committee on Appropriations.
COMMITTEE STAFF COMMENTS :
This bill is double-referred to the Assembly Committee on
Judiciary.
REGISTERED SUPPORT / OPPOSITION :
Support
California Labor Federation, AFL-CIO
California State Association of Electrical Workers
California State Pipe Trades Council (sponsor)
Contractors State License Board (conditional support)
State Building and Construction Trades Council
Western States Council of Sheet Metal Workers
Opposition
Associated Builder and Contractors of California
Associated General Contractors of California
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Associated General Contractors of San Diego
California Business Properties Association
California Chamber of Commerce
California Chapter of the American Fence Contractors'
Association
California Fence Contractors' Association
Consulting Engineers and Land Surveyors of California
Department of Consumer Affairs
Department of Industrial Relations
Engineering Contractors' Association
Flasher/Barricade Association
Marin Builders' Exchange
Southern California Contractors Association
Western Electrical Contractors Association, Inc.
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091