BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 551|
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THIRD READING
Bill No: AB 551
Author: Campos (D)
Amended: 8/24/11 in Senate
Vote: 21
SENATE LABOR & INDUST. RELATIONS COMMITTEE : 5-1, 6/22/11
AYES: Lieu, DeSaulnier, Leno, Padilla, Yee
NOES: Wyland
NO VOTE RECORDED: Runner
SENATE APPROPRIATIONS COMMITTEE : 6-2, 8/15/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Emmerson
NO VOTE RECORDED: Runner
ASSEMBLY FLOOR : 50-26, 5/19/11 - See last page for vote
SUBJECT : Public contracts: prevailing wage
requirements: violations
SOURCE : State Building and Construction Trades Council
DIGEST : This bill increases penalties for failing to pay
prevailing wages on public works projects and failing to
provide payroll records in a timely manner, as well as
creates a process for debarment for failing to follow the
laws governing public works contracts.
Senate Floor Amendments of 8/24/11 double joint this bill
to AB 766 (Monning) in order to avoid chaptering-out
CONTINUED
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issues.
ANALYSIS : Existing law requires that, on public works
projects in excess of $1,000, the relevant prevailing wage
must be paid to all workers employed on the project.
Existing law requires that body awarding any contract for
public work must obtain the general prevailing rate of per
diem wages and the general prevailing rate for holiday and
overtime work in the locality in which the public work is
to be performed for each craft, classification, or type of
worker needed to execute the contract from the Director of
Industrial Relations.
Existing law provides a hearing process in the event a
contractor or subcontractor is accused of failing to pay
appropriate wages to his/her employees. If found guilty,
the contractor or subcontractor is required to pay the
unpaid wages, plus interest, as well as liquidated damages
in the amount of the unpaid wages if the amount goes unpaid
for 60 days.
Existing law additionally requires that a contractor or
subcontractor pay the following penalties to the state or
political subdivision:
1. A minimum of $10 for each calendar day, or portion
thereof, for each worker paid less than the prevailing
wage rate, unless the failure to pay was in good faith
and, if so, the error was promptly and voluntarily
corrected when brought to the attention of the
contractor or subcontractor;
2. A minimum of $20 for each calendar day, or portion
thereof, for each worker paid less than the prevailing
wage rate, if the contractor or subcontract has been
assessed penalties within the previous three years for
failing to pay prevailing wage; and,
3. A minimum of $30 for each calendar day, or portion
thereof, for each worker paid less than the prevailing
wage if the Labor Commissioner finds that the violation
was willful.
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These penalties are capped at of $50 for each calendar day,
or portion thereof, for each worker paid less than the
prevailing wage.
Existing law also requires each contractor or subcontractor
to keep accurate payroll records which include each
employee's personal information, hours worked, and wages
paid.
Existing law provides that if the payroll records are
requested by the Division of Labor Standards Enforcement
(DLSE), the Division of Apprenticeship Standards or the
awarding body, then the contractor or subcontractor has 10
days to comply. If the contractor or subcontractor fails
to comply, then he/she must pay $25 for each calendar day,
or portion thereof, until strict compliance is effectuated.
Existing law requires that the Labor Commissioner, not less
than semiannually, publish and distribute to awarding
bodies a list of contractors who are ineligible to bid on
or be awarded a public works contract, or to perform work
as a subcontractor on a public works project.
This bill increases the penalties due to the state or
political subdivision as follows:
1. A minimum of $40 for each calendar day, or portion
thereof, for each worker paid less than the prevailing
wage rate unless the failure to pay was in good faith
and, if so, the error was promptly and voluntarily
corrected when brought to the attention of the
contractor or subcontractor;
2. A minimum of $80 for each calendar day, or portion
thereof, for each worker paid less than the prevailing
wage rate, if the contractor or subcontract has been
assessed penalties within the previous three years for
failing to pay prevailing wage; and,
3. A minimum of $120 for each calendar day, or portion
thereof, for each worker paid less than the prevailing
wage if the Labor Commissioner finds that the violation
was willful.
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These penalties are capped at of $100 for each calendar
day, or portion thereof, for each worker paid less than the
prevailing wage.
This bill also increases the penalty for failing to provide
payroll records in a timely manner to $100 for each
calendar day, or portion thereof, until strict compliance
is effectuated.
This bill also requires that if a contractor or
subcontractor fails to produce certified payroll records
within 30 days of receipt of the written notice, the
contractor or subcontractor may be prohibited from bidding
on, being awarded, or performing work on a public works
project for a minimum of one year and a maximum of three
years, unless the failure was due to events beyond the
contractor or subcontractor's control.
This bill prohibits a contractor or subcontractor from
performing a public works project for three years when the
contractor or subcontractor has committed two or more
separate willful prevailing wage violations within a three
year period.
This bill requires that the Labor Commissioner put the
names of ineligible contractors for public works projects
on the commissioner's Web site, rather than published and
distributed, and that this be done at least annually. The
Labor Commissioner must also notify the Contractors' State
License Board when the list is updated.
This bill also requires that the Labor Commissioner added
to the above-described list any contractor who is issued a
debarment order and the commissioner.
Comments
According to the author's office, contractors are not
deterred by the current penalties assessed for violating
the state's prevailing wage law. The author's office
states that the existing penalties are too low and have not
been raised or amended in years.
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The Bureau of Field Enforcement (BFE) investigates
complaints arising from violations of the state's
prevailing wage laws and conducts payroll audits on behalf
of California's workers for back wages owed. According to
the 2009 Annual Report on the Effectiveness of BFE, BFE
opened 1,352 new cases involving prevailing wage
violations. In addition, a total of $10,785,730 in back
wages were found due to workers. Of the $4,539,501 in
penalties that BFE issued in 2009, $839,123 has been
collected in that year.
In addition, the 2009 BFE Report notes that the Labor
Commissioner signed Orders Debarment for nine contractor
companies and their principles; the highest known number of
debarments in a single year. The 2009 BFE Report also
state that DSLE initiated debarment actions against three
additional contractors and their principles for several
Labor Code violations, including the failure to pay correct
prevailing wage rates.
Prior Legislation
SB 45 (Padilla), 2009-10 Session, would have increased the
penalty on contractors that willfully violate the
prevailing wage law and permanently debarred such
contractors from competing with law-abiding contractors.
The bill was vetoed by Governor Schwarzenegger, and his
veto message read:
"This bill would enact new penalties against contractors
found by the
Labor Commissioner to be in violation of the public works
law with
intent to defraud. This bill is not needed because
provisions in
existing law are already adequate to preclude
unscrupulous
contractors from bidding on public works jobs. The
standard of what
constitutes 'intent to defraud' to warrant permanent
debarment is
also not sufficiently defined. Further, recently enacted
legislation
strengthens existing law by creating an enforcement
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program to
minimize public works violations."
AB 2002 (de Leon), 2007-08 Session, would have increased
the penalties and defined the interest accrual rate, as
determined by the Labor Commissioner, when a contractor or
subcontractor violates the public works and prevailing wage
laws. The bill would have also subjected a contractor to a
penalty assessment only when a contractor had knowledge or
should have had knowledge of its subcontractor's
noncompliance. That bill was vetoed by Governor
Schwarzenegger.
SB 569 (Steinberg), 2007-08 Session, would have revised
various provisions of the law related to enforcement of the
payment of prevailing wages on public works projects. That
bill was held in the Assembly Appropriations Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Increased prevailing wage
notification requirements
- enforcement $38 $77 $77
Special*
- noticing/posting Up to $25
$10$10Special*
* Labor Enforcement and Compliance Fund
SUPPORT : (Verified 8/16/11)
State Building and Construction Trades Council (source)
California Labor Federation, AFL-CIO
California State Pipe Trades Council
California Teamsters Public Affairs Council
Coalition of California Utility Employees
International Brotherhood of Electrical Workers
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International Union of Elevator Constructors
Utility Workers Union of America
Western States Council of Sheet Metal Workers
OPPOSITION : (Verified 8/16/11)
Construction Employers' Association
Western Electrical Contractors Association
ARGUMENTS IN SUPPORT : The sponsor of this bill, State
Building and Construction Trades Council of California
(SBCTCC) argue that this bill will deter contractors from
simply treating the current minimal fines levied for abuses
of the prevailing wage as a cost of doing business. SBCTCC
asserts that the penalties for failing to provide certified
payroll records in a timely manner upon request from a
state agency are ineffective and hinder the ability of the
state to investigate claims of wage violations by
unscrupulous employers. In addition, SBCTCC writes that
making it easier for the state to bar unscrupulous
contractors from bidding on public works projects for three
years and increasing the monetary fines for other
violations will put teeth back into the enforcement of
state law.
ARGUMENTS IN OPPOSITION : The Western Electrical
Contractors Association (WECA) opposes this bill because
the organization "is strongly opposed to prevailing wage
penalties in general because almost all the prevailing wage
violations it sees are the result of inadvertent clerical
errors or good faith disputes over the law or facts." WECA
states that the DLSE "uses the potential of imposing
onerous penalties to force unreasonable settlements, and
private parties use the prospect of penalties in civil
cases and class action lawsuits to drive unwarranted
settlements." WECA argues that these penalties put many
companies in financial jeopardy, and are either unnecessary
or should be limited to violations that lack a good faith
defense, adding that the federal Davis-Bacon act is
strongly enforced without penalties of any sort.
ASSEMBLY FLOOR : 50-26, 5/19/11
AYES: Allen, Ammiano, Atkins, Beall, Block, Blumenfield,
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Bonilla, Bradford, Brownley, Buchanan, Butler, Charles
Calderon, Campos, Carter, Cedillo, Chesbro, Davis,
Dickinson, Eng, Feuer, Fong, Fuentes, Furutani, Galgiani,
Gatto, Gordon, Hall, Hayashi, Roger Hernández, Hill,
Huber, Hueso, Huffman, Lara, Bonnie Lowenthal, Mendoza,
Mitchell, Monning, Pan, Perea, V. Manuel Pérez,
Portantino, Skinner, Solorio, Swanson, Torres,
Wieckowski, Williams, Yamada, John A. Pérez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Fletcher, Beth Gaines, Garrick, Grove, Hagman, Halderman,
Harkey, Jeffries, Jones, Knight, Logue, Mansoor, Miller,
Morrell, Nielsen, Norby, Olsen, Silva, Smyth, Valadao,
Wagner
NO VOTE RECORDED: Alejo, Gorell, Ma, Nestande
PQ:kc 8/24/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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