BILL ANALYSIS Ó AB 1598 Page 1 ASSEMBLY THIRD READING AB 1598 (Buchanan) As Amended April 26, 2012 Majority vote LABOR & EMPLOYMENT 5-1 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Swanson, Alejo, Allen, |Ayes:|Fuentes, Blumenfield, | | |Furutani, Yamada | |Bradford, Charles | | | | |Calderon, Campos, Davis, | | | | |Gatto, Hall, Hill, Lara, | | | | |Mitchell, Solorio | | | | | | | | | | | | | | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Morrell |Nays:|Harkey, Donnelly, | | | | |Nielsen, Norby, Wagner | | | | | | | | | | | | | | | | | | | | | ----------------------------------------------------------------- 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 : According to the Assembly Appropriations Committee, this bill will result in potential increased staff costs to the Department of Industrial Relations (DIR), likely less than $125,000, due to increased workload regarding AB 1598 Page 2 enforcement. However, increased fine revenue may offset any increased staff costs. 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. 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 (Alarcón), Chapter 938, Statutes of 2001, 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). 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 freestanding 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." AB 1598 Page 3 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. 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." 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." Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091 FN: 0003350