BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 551
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 551 (Campos)
          As Amended  August 24, 2011
          Majority vote
           
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          |ASSEMBLY:  |50-26|(May 19, 2011)  |SENATE: |22-13|(August 30,    |
          |           |     |                |        |     |2011)          |
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           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.









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          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
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          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 


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