BILL ANALYSIS
SB 45
Page 1
SENATE THIRD READING
SB 45 (Padilla)
As Amended June 3, 2009
Majority vote
SENATE VOTE :21-11
LABOR & EMPLOYMENT 5-2 APPROPRIATIONS 12-5
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|Ayes:|Monning, Eng, Furutani, |Ayes:|De Leon, Ammiano, |
| |Ma, Portantino | |Charles Calderon, Coto, |
| | | |Davis, Fuentes, Hall, John |
| | | |A. Perez, |
| | | |Skinner, Solorio, |
| | | |Torlakson, Hill |
| | | | |
|-----+--------------------------+-----+---------------------------|
|Nays:|Bill Berryhill, Gaines |Nays:|Conway, Duvall, Harkey, |
| | | |Miller, Audra Strickland |
| | | | |
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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 (LC) to be in violation of public works
laws with 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 LC 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 LC to be in violation of public works laws with
intent to defraud, the entity shall be ineligible for a period
of one to three years from bidding on or being awarded a public
SB 45
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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 LC 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 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 Assembly Appropriations
Committee, the Department of Industrial Relations indicates that
it will experience added legal expenses (potentially in the range
of $95,000 per year) for a one-half time legal counsel.
COMMENTS : Under existing law, a contractor who has been found to
be in violation of specified provisions of law by the LC 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 LC 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 LC 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
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"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 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.
WECA-IEC states that, while it does not countenance violations of
the law, it does oppose lifetime debarment as authorized by this
bill. Finally, they argue that until reform makes prevailing wage
law easier to comply with, they are opposed to new penalty
enhancements.
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
FN: 0002233