BILL ANALYSIS Ó AB 2677 Page 1 Date of Hearing: May 2, 2012 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 2677 (Swanson) - As Amended: March 29, 2012 Policy Committee: Labor and Employment Vote: 5-1 Urgency: No State Mandated Local Program: No Reimbursable: No SUMMARY This bill codifies existing Department of Industrial Relations (DIR) prevailing wage rulings regarding the receipt of fringe benefit contributions. Specifically, this bill: Prohibits an increased fringe benefit contribution that results in a lower hourly straight time or overtime wage from being a violation of the applicable prevailing wage determination as long as all of the following conditions are met: 1)The increased fringe benefit is made pursuant to criteria established in a collective bargaining agreement. 2)The increased fringe benefit and hourly straight time and overtime wage combined are no less than the general prevailing wage of per diem wages. 3)The fringe benefit contribution is irrevocable unless made in error. FISCAL EFFECT Minor, absorbable costs to DIR to implement this measure. COMMENTS 1)Background . According to DIR, California's 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 a majority of such workers are paid at a single rate). If there is no single rate paid to a majority, the single or modal rate being paid to the greater AB 2677 Page 2 number of workers is prevailing. DIR further notes that the prevailing wage is determined by the director of DIR in written determinations issued annually on February 22 and August 22. Existing law establishes penalties for contractors/subcontractors who fail to pay the prevailing wage to workers, as specified. There are three components to the prevailing wage: the basic hourly rate, fringe benefit payments, and a contribution to the California Apprenticeship Council or an approved apprenticeship training fund. Existing law defines fringe benefit payments or per diem wages to include employer payments for the following: health and welfare, pension, vacation, travel, subsistence, apprenticeship or other training programs, worker protection/assistance programs, and industry advancement and collective bargaining agreements, as specified. 2)Purpose . According to the author, "Many collective bargaining agreements allow members to elect to have a percentage or a set amount deducted from their paycheck and deposited in a supplemental pension account or a health care reserve at their discretion. DIR has issued several opinion letters finding that this does not constitute a violation of the prevailing wage as long as the total hourly package equals the correct prevailing wage rule. Nonetheless, several local and state agencies have misinterpreted the law and begun enforcement proceedings. AB 2677 seeks to codify the DIR opinion letters in order to avoid future misapplication of the statutes." Analysis Prepared by : Kimberly Rodriguez / APPR. / (916) 319-2081