BILL ANALYSIS Ó AB 2677 Page 1 ASSEMBLY THIRD READING AB 2677 (Swanson) As Amended March 29, 2012 Majority vote LABOR & EMPLOYMENT 5-1 APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Swanson, Alejo, Bonnie |Ayes:|Fuentes, Blumenfield, | | |Lowenthal, Gorell, Yamada | |Bradford, Charles | | | | |Calderon, Campos, Davis, | | | | |Gatto, Hall, Hill, Lara, | | | | |Mitchell, Solorio | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Morrell |Nays:|Harkey, Donnelly, | | | | |Nielsen, Norby, Wagner | | | | | | ----------------------------------------------------------------- SUMMARY : Clarifies that certain fringe benefit contributions do not operate to constitute a violation of prevailing wage law. Specifically, this bill specifies that an increased fringe benefit contribution that results in a lower hourly straight time or overtime wage shall not be considered a violation of the applicable prevailing wage determination so long as all of the following conditions are met: 1)The increased fringe benefit is made pursuant to criteria set forth in a collective bargaining agreement. 2)The increased fringe benefit and hourly straight time and overtime wage combined are no less that the general prevailing wage rate. 3)The fringe benefit contribution is irrevocable unless made in error. FISCAL EFFECT : According to the Assembly Appropriations Committee, this bill will result in minor and absorbable costs to the Department of Industrial Relations (DIR) to implement this measure. COMMENTS : Current law requires that, except as specified, not less than the general prevailing rate of per diem wages be paid AB 2677 Page 2 to workers employed on public works projects. Existing law deems per diem wages to include specified employer payments and provides that employer payments are a credit against the obligation to pay the general prevailing rate of per diem wages. Existing law, however, provides that credits for employer payments do not reduce the obligation to pay the hourly straight time or overtime wages found to be prevailing. This bill would provide that an increased fringe benefit contribution that results in a lower hourly straight time or overtime wage is not considered to be a violation of the applicable prevailing wage determination so long as specified conditions are met. This bill is sponsored by the California State Association of Electrical Workers and the Western States Council of Sheet Metal Workers. The sponsors state that 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. The sponsors state that 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. This bill seeks to codify the DIR opinion letters in order to avoid future misapplication of the statutes. Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091 FN: 0003436