BILL ANALYSIS Ó
AB 1598
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Date of Hearing: March 28, 2012
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Sandre Swanson, Chair
AB 1598 (Buchanan) - As Introduced: February 6, 2012
SUBJECT : Public contracts: public works: installation.
SUMMARY : Defines "installation" (for purposes of the law
applicable to the payment of prevailing wages on public works
projects) to include the assembly and disassembly of
freestanding and affixed modular office systems.
EXISTING LAW :
1) Requires the prevailing wage rate to be paid to all workers
on "public works" projects over $1,000.
2) Defines "public work" to include, among other things,
construction, alteration, demolition, installation or repair
work done under contract and paid for in whole or in part out
of public funds.
FISCAL EFFECT : Unknown
COMMENTS : According to the author, this bill seeks to clarify
the meaning of "installation" within the state public works law
to include the assembly and disassembly of freestanding and
affixed modular office systems.
General Background on "Public Works" Under California Law
In general, "public works" is defined to include construction,
alteration, demolition, installation or repair work done under
contract and "paid for in whole or in part out of public funds."
Over a decade ago, there was much administrative and legislative
action over what constituted the term "paid for in whole or in
part out of public funds." This action culminated in the
enactment of SB 975 (Alarcón), Chapter # 938, Statutes of 2001,
which codified a definition of "paid for in whole or in part out
of public funds" that included certain payments, transfers,
credits, reductions, waivers and performances of work. At the
time, supporters of SB 975 stated that it established a
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definition that conformed to several precedential coverage
decisions made by the Department of Industrial Relations (DIR).
These coverage decisions defined payment by land, reimbursement
plans, installation, grants, waiver of fees, and other types of
public subsidy as public funds for purposes of prevailing wage
law. According to the sponsors, SB 975 was intended to remove
ambiguity regarding the definition of public subsidy of
development projects.
SB 975 also exempted certain affordable housing, residential and
private development projects that met certain criteria.
Follow-up legislation, SB 972 (Costa), Chapter # 1048, Statutes
of 2002, was intended to clarify the application of SB 975 and
was the result of extensive discussions between the State
Building and Construction Trades Council (sponsor of SB 975),
affordable housing advocates, and the Davis Administration.
Supporters of SB 972 contended that the original legislation had
unintended consequences for self-help housing and housing
rehabilitation projects. As a result of that compromise, SB 972
exempted from public works requirements the construction or
rehabilitation of privately-owned residential projects that met
certain criteria.
Why It Matters: "Prevailing Wage"
The determination of whether a project is deemed to constitute a
"public work" is important because the Labor Code requires
(except for projects of $1,000 or less) that the "prevailing
wage" to be paid to all workers employed on public works
projects.
Background on Modular Office Systems
There have been many administrative decisions over the years
concerning the assembly of modular office systems and whether
such work constitutes a public work under state prevailing wage
law. For example, prior to the passage of SB 975, several DIR
public works determinations held that the assembly of such
systems only constituted a "public work" if the system was
bolted, secured or mounted to the realty (walls and/or floors).
See, for example. Valley View Elementary School, PW 99-034
(September 1999), and Metal Workers and Metal Storage Shelving,
PW 99-060 (November 1999).
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The sponsor of the current legislation (the Northern California
Carpenters Regional Council) argues that SB 975 added the term
"installation," in part, to clarify that such work would be
covered by prevailing wage law.
However, even after the passage of SB 975, DIR continued to
apply the affixed/freestanding dichotomy in determining whether
such work was covered by prevailing wage law. For example, in
Western Contract Services, PW 2005-017 (December 2005), DIR
found that the mere assembly and/or disassembly of free-standing
modular furniture was not subject to prevailing wage
requirements. That case distinguished an earlier coverage
determination as involving modular furniture that was bolted
down, secured or mounted to the realty.
In a subsequent decision, DIR stated that the determination of
whether such work was included as a public work was not affected
by SB 975's codification of "installation." Modular Furniture,
County of Sacramento, PW 2008-035 (November 2009). In that
decision, DIR stated that, "The relevant distinction between the
pre-SB 975 and post-SB 975 versions of the Labor Code are
immaterial. Whether the work is installation rising to the
level of construction under the pre-SB 975 version or
'installation' under the post-SB 975 version produces the same
result. The pre-SB 975 and the post-SB 975 coverage
determinations have in common the bolting, securing or mounting
of items to the realty as fixtures."
ARGUMENTS IN SUPPORT :
The Northern California Carpenters Regional Council argues that
this bill is necessary because DIR's continued insistence in
recent years on the affixed/freestanding dichotomy means that
the intent of SB 975's addition of the term "installation" has
not been completely effectuated. They state the following:
"The tools, processes and materials used to build and
install 'free standing' office modular systems are, in the
vast majority of cases, either analogous or identical to
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those used in the construction of interior office walls.
Layout is determined by the reading of plans, including
cross referencing partition layout plans with electrical,
data and HVAC plans, often requiring coordination with the
applicable subcontractors and/or working at the direction
of the general contractor. The layout is then performed by
measuring off the same reference points and lines used by
every other construction sub-craft. Partitions are then
constructed/assembled using electric drills, screw guns,
saws, wrenches and various other construction tools.
Partitions ate constructed/assembled with the
manufacturer's own proprietary hardware systems, bolts and
screws, just as are metal stud framed interior walls. They
are aligned with lasers and/or builders levels in the same
manner as metal framed office walls as well as contains
electrical and data cabling.
Free standing and affixed office modular system
installations must comply with and pass inspection for the
Americans with Disabilities Act and local fire and building
codes. Contractors performing office modular system
installation are required to have an active California
State Contractors License."
The California State Conference of Carpenters writes that a
"tortured interpretation of the existing statute under the
previous administration resulted in a reversal of this well
established practice. This simple statutory clarification will
bring a necessary measure of certainty to the public works
contracting process that reflects legislative and regulatory
intent as well as standard industry practice."
ARGUMENTS IN OPPOSITION :
Writing in opposition to this bill, the Associated Builders and
Contractors of California (ABC California) argues that it
"proposes to expand state prevailing wage mandates to the set up
and take down of office cubicles. ABC California believes Ýthis
bill] continues the unwarranted expansion of state mandated
construction wage rates to projects that are not, in reality,
construction. It is important to note that modular systems set
up and take down is something that is normally obtained by
purchase contract with office furniture equipment suppliers, not
under a public works construction contract."
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REGISTERED SUPPORT / OPPOSITION :
Support
Advanced Installation Services
California Conference of Carpenters
California Labor Federation, AFL-CIO
California-Nevada Conference of Operating Engineers
Construction Employers' Association
Galindo Installation & Moving Services
Modular Installers Association
Northern California Carpenters Regional Council
Northern California District Council of Laborers
Operating Engineers Local Union No. 3
Quality Systems Installations, Ltd.
Service West
State Building and Construction Trades Council of California
Opposition
Associated Builders and Contractors of California
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091