BILL ANALYSIS
SB 45
Page 1
SENATE THIRD READING
SB 45 (Padilla)
As Amended August 27, 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, Charles |
| |Ma, Portantino | |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 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 violation, the entity is ineligible from bidding on or
being 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 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
SB 45
Page 2
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 "intent to defraud" 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
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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:
0002497