BILL ANALYSIS Ó
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: June 13, 2012 20011-2012 Regular
Session
Consultant: Alma Perez Fiscal:No
Urgency: No
Bill No: AB 2675
Author: Labor and Employment
As Introduced/Amended: April 16, 2012
SUBJECT
Public works: prevailing wage rates: penalty assessment
KEY ISSUE
Should monies withheld from a contractor/subcontractors' for
violations of prevailing wage law be deemed "forfeited" by that
contractor/subcontractor once the case has been closed and the
final order granted?
PURPOSE
To clarify that once there is a final order that is no longer
subject to judicial review, the amounts withheld and necessary
to pay wages and penalties owed are deemed to be forfeited by
the contractor or subcontractor.
ANALYSIS
Existing law requires that workers employed on public works
projects in California be paid the applicable prevailing wage,
as determined by the Department of Industrial Relations. Among
other things, existing law:
Requires that not less than the general prevailing wage
rate be paid to all workers
employed on a "public works" project costing over $1,000
dollars and imposes misdemeanor penalties for a violation
of this requirement.
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. (Labor Code §1720)
Defines "paid for in whole or in part out of public
funds" as, among other things, "Fees, costs, rents,
insurance or bond premiums, loans, interest rates, or other
obligations normally required in the execution of a
contract that are paid, reduced, charged at less than fair
market value, waived or forgiven." (Labor Code §1720)
Existing law regulating public works contracts requires the
awarding body of a public works contract to withhold and retain
all amounts required to satisfy any civil wage and penalty
assessment issued by the Labor Commissioner before making
payments to the contractor of money due under contract. (Labor
Code § 1727)
Existing law provides that the amounts required to satisfy a
civil wage and penalty assessment shall not be disbursed by the
awarding body until receipt of a final order that is no longer
subject to judicial review. (Labor Code § 1727)
Existing law provides that if the awarding body has not retained
sufficient money under the contract to satisfy a civil wage and
penalty assessment based on a subcontractor's violations, the
contractor shall, upon the request of the Labor Commissioner,
withhold sufficient money due the subcontractor under the
contract to satisfy the assessment and transfer the money to the
awarding body. These amounts shall not be disbursed by the
awarding body until receipt of a final order that is no longer
subject to judicial review. (Labor Code § 1727)
This Bill would specify that upon receipt of a final order that
is no longer subject to judicial review Ýin a case regarding
monies owed for violations with pending civil wage and penalty
assessments], the retained amounts necessary to satisfy the
final order shall be deemed forfeited by the contractor or
subcontractor.
Hearing Date: June 13, 2012 AB 2675
Consultant: Alma Perez Page 2
Senate Committee on Labor and Industrial Relations
COMMENTS
1. Need for this bill?
Prevailing wage law requires that all workers on public works
projects be paid at least the "prevailing wage" for projects
"paid for in whole or in part out of public funds". 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. If the
prevailing wage requirements are not met and the contractor or
subcontractor are found to be in violation of prevailing wage
law, Labor Code §1727 requires that, before making payments to
the contractor of money due under a contract for public work,
the awarding body withhold and retain amounts sufficient to
satisfy any civil wage and penalty assessments issued by the
Labor Commissioner for these violations. These amounts are
not to be disbursed by the awarding body until the case has
been concluded and receipt of a final order Ýdirecting
disbursement to the appropriate entities] has been received
confirming it is no longer subject to judicial review.
According to the author, in order to avoid any confusion
regarding the final outcome of these retained monies, this
bill simply clarifies that once there is a final order on the
matter and the case is no longer subject to judicial review,
that the withheld amounts necessary to cover wages and
penalties owed are deemed be "forfeited" by the contractor to
make these payments.
2. Proponent Arguments :
According to the author, this bill would make a technical
change to the law relating to public works clarifying that
once there is a final order that is no longer subject to
judicial review, the amounts withheld by the awarding body,
per existing law, are deemed to be forfeited. The author
states that the technical change proposed with this bill was
Hearing Date: June 13, 2012 AB 2675
Consultant: Alma Perez Page 3
Senate Committee on Labor and Industrial Relations
brought to the committee's attention through discussions with
the Department of Industrial Relations. Further, the author
states that the courts have previously characterized these
amounts withheld or retained under as a "forfeiture". This
bill would simply conform to how courts are already
characterizing these monies.
3. Opponent Arguments :
None received.
SUPPORT
None received
OPPOSITION
None received
Hearing Date: June 13, 2012 AB 2675
Consultant: Alma Perez Page 4
Senate Committee on Labor and Industrial Relations