BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1598|
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THIRD READING
Bill No: AB 1598
Author: Buchanan (D), et al.
Amended: 4/26/12 in Assembly
Vote: 21
SENATE LABOR & INDUST. RELATIONS COMM. : 5-1, 6/13/12
AYES: Lieu, DeSaulnier, Leno, Padilla, Yee
NOES: Wyland
NO VOTE RECORDED: Runner
SENATE APPROPRIATIONS COMMITTEE : 5-2, 8/16/12
AYES: Kehoe, Alquist, Lieu, Price, Steinberg
NOES: Walters, Dutton
ASSEMBLY FLOOR : 48-24, 4/30/12 - See last page for vote
SUBJECT : Public contracts: public works: installation
SOURCE : Northern California Carpenters Regional Council
DIGEST : This bill modifies the definition of
installation to include the assembly and disassembly of
freestanding and affixed modular office systems.
ANALYSIS : Existing law requires that not less than the
general prevailing wage rate of per diem wages, as
determined by the Department of Industrial Relations (DIR),
be paid to all workers employed on a public works project.
The prevailing wage rate is the hourly rate paid on a
public works project to a majority of workers engaged in a
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particular craft, classification or type of work within the
locality and in the nearest labor market area.
Existing law defines public works as construction,
alteration, demolition, installation, or repair work done
under contract and paid for in whole or in part out of
public funds. At issue with this bill is work that may or
may not be "installation." There have been administrative
decisions concerning the assembly of modular office systems
and whether such work constitutes a public work under state
prevailing wage law. SB 975 (Alarcon), Chapter 938,
Statutes of 2001, amended Labor Code Section 1720 to add
"installation," in part, to clarify that such work would be
covered by prevailing wage law. Despite the addition of
"installation," DIR maintained a distinction between
freestanding and affixed modular office systems when
determining whether such installation was covered by
prevailing wage law.
Modular office system assembly is generally done as part of
new construction for the purpose of creating work stations
and disassembly and assembly is generally done as part of
renovation when carpet is replaced or painting is done.
Often, modular office system assembly or disassembly is
obtained by purchase contract with office furniture
equipment suppliers, not under a public works construction
contract.
This bill modifies the definition of installation to
include the assembly and disassembly of freestanding and
affixed modular office systems.
Comments
Existing law requires that not less than the general
prevailing wage rate of per diem wages, as determined by
the director of the DIR, be paid to all workers employed on
a "public works" projects. The prevailing wage rate is the
basic hourly rate paid on public works projects to a
majority of workers engaged in a particular craft,
classification or type of work within the locality and in
the nearest labor market area. The determination of
whether a project is deemed to constitute a "public work"
is important because the Labor Code requires (except for
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projects of $1,000 or less) that the "prevailing wage" to
be paid to all workers employed on public works projects.
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." These debates culminated in the enactment
of SB 975 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 the bill
stated that it established a definition that conformed to
several precedential coverage decisions made by the DIR.
The bill also exempted certain affordable housing,
residential and private development projects that met
certain criteria.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee, unknown,
potentially significant to major costs to the General Fund
or special funds in any year for the assembly and
disassembly of freestanding modular office systems at
prevailing wages.
Minor, absorbable costs to the Labor Enforcement and
Compliance Fund for oversight and enforcement.
Potentially General Fund costs beginning July 1, 2013
when authorization for the Labor Enforcement and
Compliance Fund sunsets.
SUPPORT : (Verified 8/16/12)
Northern California Carpenters Regional Council (source)
Advanced Installation Services
California Conference of Carpenters
California Labor Federation
California Teamsters Public Affairs Council
Construction Employers' Association
Galindo Installation and Moving Services
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Modular Installers Association
Northern California District Council of Laborers
Operating Engineers Local Union 3
Quality Systems Installation
Service West
Southwest Regional Council of Carpenters
State Building and Construction Trades Council
OPPOSITION : (Verified 8/16/12)
Associated Builders and Contractors of California
ARGUMENTS IN SUPPORT : According to proponents, confusion
and questions on whether certain kinds of installation
projects are considered public works and subject to
prevailing wage coverage have been raised due to the fact
that there is currently no definition of "installation"
(for public works projects) in law. Proponents argue that
before 2001, when the definition of "public works" was
limited to "construction, alteration, demolition or
repair," the Director of DIR issued three precedential
public works determinations finding that installation of
modular office systems only met the definition of "public
works" if it was bolted, secured, or mounted to walls.
According to proponents, this finding causes certain kinds
of installations to be excluded from prevailing wage
coverage.
Proponents argue that SB 975, sought to clarify the types
of public funds and public subsidies that trigger
prevailing wage, as well as redefine "public works" to
include "installation." Proponents argue that the purpose
of including "installation" as covered work was to ensure
that the assembly and disassembly of modular office systems
would be covered by prevailing wages whether the office
systems installed were affixed or freestanding. In support
of the bill, some proponents state that 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 those used in
the construction of interior office walls. Unfortunately,
they argue, no definition was provided for the term
"installation," and as a result, the Director has continued
to rely on the precedential decisions referred to above
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that were made before the term "installation" was added to
the definition of covered work. This bill eliminates any
confusion by specifying that "installation" includes the
assembly and disassembly of freestanding modular office
systems.
ARGUMENTS IN OPPOSITION : Opponents of this bill argue
that nearly all analyses of the impact of prevailing wage
requirements clearly show that prevailing wage mandates
result in higher costs due to a variety of factors.
According to opponents, this bill continues the unwarranted
expansion of state mandated construction wage rates to
projects that are not, in reality, construction.
Additionally, they argue that 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.
ASSEMBLY FLOOR : 48-24, 4/30/12
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Bonilla, Bradford, Buchanan, Butler, Charles Calderon,
Campos, Carter, Chesbro, Dickinson, Eng, Feuer, Fong,
Fuentes, Galgiani, Gatto, Gordon, Hall, Hayashi, Roger
Hernández, Hill, Huber, Hueso, Huffman, Lara, Bonnie
Lowenthal, Ma, Mendoza, Mitchell, Monning, Nestande, Pan,
Perea, V. Manuel Pérez, Portantino, Skinner, Solorio,
Swanson, Torres, Wieckowski, Williams, Yamada, John A.
Pérez
NOES: Achadjian, Bill Berryhill, Conway, Donnelly,
Fletcher, Beth Gaines, Garrick, Gorell, Grove, Hagman,
Halderman, Harkey, Jeffries, Jones, Knight, Mansoor,
Miller, Morrell, Nielsen, Norby, Olsen, Silva, Valadao,
Wagner
NO VOTE RECORDED: Blumenfield, Brownley, Cedillo, Cook,
Davis, Furutani, Logue, Smyth
PQ:k 8/20/12 Senate Floor Analyses
kUPPORT/OPPOSITION: SEE ABOVE
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