BILL ANALYSIS Ó AB 551 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 551 (Campos) As Amended August 24, 2011 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |50-26|(May 19, 2011) |SENATE: |22-13|(August 30, | | | | | | |2011) | ----------------------------------------------------------------- Original Committee Reference: L. & E. SUMMARY : Increases the maximum penalty on contractors and subcontractors who fail to pay the prevailing wage from $50 to $200 a day and would increase the minimum penalty (except in certain cases of a good faith mistake) from not less than $10 to not less than $40 a day for prevailing wage violations on a public work. Specifically this bill : 1)Increases the penalty assessed from $20 to $80 to contractors and subcontractors with previous violations and from $30 to $120 for willful violations. 2)Requires the Labor Commissioner (LC) to maintain a Web site listing of contractors who are ineligible to bid on or be awarded a public works contract and at least annually notify awarding bodies of the availability of the list of disbarred contractors. 3)States that the LC notify the contractor or subcontractor that, in addition to any other penalties, the contractor shall be subject to disbarment if certified payroll records are not produced within 30 days after receipt of written notice. Failure to comply by that deadline would prohibit the contractor from bidding on or be awarded a contract for public work or performing work as a subcontractor on a public works project for three years. The Senate amendments : 1)Increase the maximum penalty to $200 a day and would increase the minimum penalty on contractors and subcontractors who fail to pay the prevailing wage, except in certain cases of a good faith mistake. AB 551 Page 2 2)Require the LC to maintain a Web site listing of contractors who are ineligible to bid on or be awarded a public works contract and at least annually notify awarding bodies of the availability of the list of disbarred contractors. 3)State the LC shall notify the contractor or subcontractor that, in addition to any other penalties, the contractor shall be subject to disbarment if certified payroll records are not produced within 30 days after receipt of the written notice. 4)Incorporate changes to prevent a chaptering out conflict with AB 766 (Monning) of 2011. AS PASSED BY THE ASSEMBLY , this bill increased the penalties on contractors and subcontractors who fail to pay the prevailing wage on public works projects and bars repeat violators from bidding or working on public works projects for three years. FISCAL EFFECT : According to the Senate Appropriations Committee, the increased workload would be handled by up to one Deputy Labor Commissioner l ($4,357-5,631; total compensation $76,966 annually) in the Bureau of Field Enforcement (BFE) and this bill may result in increased fines and penalties collection which are deposited into the General Fund. Additionally, there could be minor savings from not having to distribute the list of ineligible contractors since the LC would have the information posted on their Web site. However, the LC would also have a new requirement to notify awarding bodies of the availability of the list. COMMENTS : According to the Department of Industrial Relations (DIR), California's prevailing wage laws were enacted to ensure that contractors' abilities to get public works contracts were not based on paying their workers lower wage rates than their competitors. However, the author of this bill states that contractors are not deterred by the current penalties assessed for violating the state's prevailing wage law. The author states that the existing penalties are too low and have not been raised or amended in years. 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 AB 551 Page 3 Effectiveness of Bureau of Field Enforcement (BFE Report), 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 of Debarment for nine contractor companies and their principles; the highest known number of debarments in a single year. The 2009 BFE Report also states that the Division of Labor Standards Enforcement (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. In their letter expressing sponsorship of this bill, the State Building and Construction Trades Council of California (SBCTCC) states that the intent of this bill is to 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. The California Teamsters Public Affairs Council writes that this bill will strengthen prevailing wage laws by enhancing enforcement. Analysis Prepared by : Shannon McKinley / L. & E. / (916) 319-2091 FN: 0002136