BILL ANALYSIS
SB 45
Page 1
Date of Hearing: June 24, 2009
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
William W. Monning, Chair
SB 45 (Padilla) - As Amended: June 3, 2009
SENATE VOTE : 21-11
SUBJECT : Public works: payment of prevailing wage: violations.
SUMMARY : Establishes a permanent debarment for contractors in
repeated violation of specified public works laws.
Specifically, this bill:
1 Provides that whenever a contractor or subcontractor is found
by the Labor Commissioner to be in violation of public works
laws with an intent to defraud for a second and subsequent
violation, the entity is ineligible from bidding on or be
awarded a public works contract, or performing work as a
subcontractor on a public works contract.
2)Provides that whenever a contractor or subcontractor is found
by the Labor Commissioner to be in willful violation of public
works laws for a second and subsequent violation, the entity
is ineligible from bidding on or be awarded a public works
contract, or performing work as a subcontractor on a public
works contract.
EXISTING LAW :
1 Provides that whenever a contractor or subcontractor has been
found by the Labor Commissioner to be in violation of public
works laws with an intent to defraud, the entity shall be
ineligible for a period of one to three years from bidding on
or being awarded a public works contract, or performing work
as a subcontractor on a public works contract.
2)Provides that whenever a contractor or a subcontractor has
been found by the Labor Commissioner to be in willful
violation of public works laws, the entity shall be ineligible
for a period of up to three years for each second and
subsequent violation occurring within three years of a
separate and previous willful violation from bidding on or
being awarded a public works contract, or performing work as a
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subcontractor on a public works contract.
3)Specifies that a "willful" violation occurs when a contractor
or subcontractor "knew or reasonably should have known of his
or her obligations under the public works law and deliberately
fails or refuses to comply with its provisions."
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : Under existing law, a contractor who has been found
to be in violation of specified provisions of law by the Labor
Commissioner is ineligible for a period of up to three years
from bidding for, being awarded, or performing work on a public
works contract.
According to the most recent annual report of the Bureau of
Field Enforcement within the Department of Industrial Relations,
in 2008 the Labor Commissioner signed orders of debarment for
seven contractors. Each of these orders imposed the maximum
statutory debarment period of three years, rendering each of the
individuals and entities ineligible to bid on or be awarded a
contract for a public works project, or to perform work as a
subcontractor on those projects. In addition, the Labor
Commissioner initiated debarment actions against three
additional contractors and their principles for failure to pay
for all hours worked, falsified certified payroll records,
misclassification of workers, and failure to pay correct
prevailing wage rates.
The author and sponsors of this measure state cite to a specific
violation of labor law and public works law that it is intended
to address - the intentional misclassification of employees as
independent contractors. They state that this bill would
provide that a contractor working on public works that is found
to be in repeated violation of purposely misclassifying
employees with "intent to defraud" or to have "willfully
violated the law" will no longer be able to contract for public
works.
The sponsors contend that employee misclassification creates
severe challenges for workers, employers and insurers, as well
as for policy enforcement. Misclassified workers lose access to
unemployment insurance in the cases where they find themselves
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in unemployed situations, as is the case in the construction
industry by nature of the business. These employees find
themselves with inadequate workers' compensation coverage, as
well as being personally liable for Social Security taxes. They
also contend that costs to the state for misclassification in
the construction industry alone could stretch into the hundreds
of millions of dollars annually alone in uncollected income
taxes.
The sponsors also argue that this bill is more on line with
federal rules that authorize a debarring official to debar a
contractor for "willful failure to perform in accordance with
the terms of one or more contracts."
The Western Electrical Contractors Association (WECA-IEC)
opposes this bill, stating that while the recent amendments
would authorize the debarment only after a second violation,
they are troubled that the focus in on punishment. They suggest
that one alternative would be to subject a contractor found to
have willfully violated the law to be subject to mandatory
supervision for a period of time by the state, with the
contractor obligated to pay an administrative fine to cover the
costs of supervision.
In addition, the Department of Industrial Relations (DIR)
opposes this measure and argues that provisions of current law
are adequate to preclude unscrupulous contractors from bidding
on public works jobs. DIR states that there is no information
suggesting that the present three-year debarment for willful
violators is insufficient.
PRIOR LEGISLATION :
The author has introduced two bills over the last few years
dealing with independent contractor misclassification. Senate
Bill 622 (Padilla) of 2007 would have increased monetary
penalties for intentional misclassification of employees as
independent contractors. That measure was approved by the
Legislature but vetoed by the Governor. Senate Bill 1490
(Padilla) of 2008 would have required employers to notify
individuals classified as independent contractors of that
classification and provide these persons with information
regarding their rights under current law. That bill was held in
the Senate Committee on Appropriations.
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REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
California Labor Federation, AFL-CIO
California State Building and Construction Trades Council,
AFL-CIO
California State Council of Laborers
California Teamsters Public Affairs Council
Opposition
Construction Employers' Association
Department of Industrial Relations
Western Electrical Contractors Association
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091