BILL ANALYSIS Ó
Senate Committee on Labor and Industrial Relations
Senator Ben Hueso, Chair
Date of Hearing: June 11, 2014 2013-2014 Regular
Session
Consultant: Alma Perez-Schwab Fiscal:Yes
Urgency: No
Bill No: AB 26
Author: Bonilla
As Introduced/Amended: June 3, 2014
SUBJECT
Construction: prevailing wage
KEY ISSUES
Should the Legislature clarify that work performed during the
postconstruction phase of construction on a public works
project, including all cleanup work at the jobsite, is
considered part of the project and should be compensated at the
prevailing wage rate?
Should the Legislature clarify that any task relating to the
collecting or sorting of refuse or recyclable metals, such as
copper, steel, and aluminum, performed at a public works jobsite
is also part of the public works project and therefore subject
to the payment of the prevailing wage?
ANALYSIS
Existing law defines the term "public works" 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. "Construction" also includes work
performed during the design and preconstruction phases of
construction, including, but not limited to, inspection and land
surveying work. (Labor Code §1720)
Existing law also includes in the definition of a "public work,"
the hauling of refuse from a public works site to an outside
disposal location. However, "hauling of refuse" does not
include the hauling of recyclable metals such as copper, steel,
and aluminum that have been separated from other materials at
the jobsite prior to transportation and that are to be sold at
fair market value to a bona fide purchaser. (Labor Code §1720.3)
Under existing law , "paid for in whole or in part out of public
funds" means, among other things, the following:
1. Payment of money or the equivalent of money by the state
or political subdivision directly to or on behalf of the
public works contractor, subcontractor, or developer.
2. Performance of construction work in execution of a
project.
3. Fees, costs, rents, insurance or bond premiums, loans,
interest rates, or other obligations normally required in
the execution of the contract, that are paid, reduced,
charged at less than fair market value, waived, or forgiven
by the state/political subdivision.
4. Money loaned by the state/political subdivision that is
to be repaid on a contingent basis.
Existing law requires all employees who work on public works
projects costing $1,000 or more to be paid the general
prevailing rate of per diem wages (the hourly wage rate being
paid to a majority of the workers in a particular craft within a
given locality) and the general prevailing rate for holiday and
overtime work for the specific location where the public work is
to be performed. (L.C. §1771) The Director of the Department of
Industrial Relations (DIR) is tasked with the responsibility of
determining the general prevailing rate of per diem wages in
accordance with specified standards. (L.C. §1773)
This Bill would revise the definition of "construction," for
purposes of public works projects, to also include work
performed during the postconstruction phases of construction,
including, but not limited to, all cleanup work at the jobsite.
This Bill would also expand the definition of "public works," to
also include any task relating to the collecting or sorting, or
both, of refuse or recyclable metals, such as copper, steel, and
aluminum, performed at a public works jobsite.
Hearing Date: June 11, 2014 AB 26
Consultant: Alma Perez-Schwab Page 2
Senate Committee on Labor and Industrial Relations
COMMENTS
1. A Brief History on State and Federal Prevailing Wage Law:
State prevailing wage laws vary from state to state, many of
which were enacted as part of Progressive Era reform efforts
to improve working conditions at the end of the 19th and
beginning of the 20th centuries. Between 1891 and 1923, seven
states adopted prevailing wage laws that required payment of
specified hourly wages on government construction projects,
the State of Kansas being the first in 1891. Eighteen
additional states (including California in 1931) and the
federal government adopted prevailing wage laws during the
Great Depression of the 1930s amidst concern that acceptance
of the low bid, a common requirement of government contracting
for public projects, would reduce local wages and disrupt the
local economies. This was particularly in the depths of the
Great Depression, where, for some local economies, the
government had become the primary purchaser of construction
products and a significant employer.
In general, the proponents of prevailing wage legislation
wanted to prevent the government from using its purchasing
power to undermine the wages of its citizens. It was believed
that the government should set an example, by paying the wages
prevailing in a locality for each occupation hired by
government contractors to build public projects. Even today,
prevailing wage laws are generally meant to ensure that wages
commonly paid to construction workers in a particular region
will determine the minimum wage paid to the same type of
workers employed on publicly funded construction projects.
2. Need for this bill?
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." The determination of whether a project is deemed to
Hearing Date: June 11, 2014 AB 26
Consultant: Alma Perez-Schwab Page 3
Senate Committee on Labor and Industrial Relations
constitute a "public work" is important because the Labor Code
requires (except for projects of $1,000 or less) that the
"prevailing wage" be paid to all workers employed on public
works projects. Although the definition of "public works" is
detailed as to what work is covered as part of the project,
there appears to be some confusion regarding the post
construction work of cleaning the job site and whether or not
this work is part of the public work and therefore subject to
prevailing wage requirements.
In a 2009 decision by the director of the Department of
Industrial Relations, who is responsible for making the
prevailing wage determinations, regarding whether or not
clean-up work was part of the construction project and
therefore subject to the prevailing wage payment appears to
indicate that the department has deemed this work as part of
the project and therefore subject to prevailing wage. (Harbor
Construction Co., Inc. vs. Antelope Valley Union High School
District, Case No: 09-0095-CPR) In his decision, the director
of DIR stated that, "Contrary to Harbor's argument, the
janitorial exception to maintenance work has no applicability
where the root obligation to pay prevailing wages is found in
section 1772, and 1774. The janitorial exception only applies
to contracts let solely for maintenance work and not to
cleaning work performed as a requirement of a broader public
works contract."
Although the director's interpretation of the applicability of
prevailing wage requirements on clean-up work at a public
works project seems to address the ambiguity, there needs to
be clarity in the labor code to ensure consistency in its
applicability. This bill would clarify that, for purposes of
public works projects, "construction" work also includes work
performed during the postconstruction phases of construction,
including, but not limited to, all cleanup work at the
jobsite. Additionally, it would also clarify that "public
works" also include any task relating to the collecting or
sorting, or both, of refuse or recyclable metals, such as
copper, steel, and aluminum, performed at a public works
jobsite.
3. Proponent Arguments :
Hearing Date: June 11, 2014 AB 26
Consultant: Alma Perez-Schwab Page 4
Senate Committee on Labor and Industrial Relations
According to the author, prevailing wage laws were enacted to
ensure skilled construction workers on public works projects
are paid at least the wages and benefits that prevail in their
local communities. Unfortunately, proponents argue, this bill
is necessary to address a problem that has persisted on public
works projects that has allowed dishonest contractors to
side-step prevailing wage law when it comes to the final
clean-up work on a public works project. The author argues
that while the general prevailing wage determination includes
"all final cleanup of debris, grounds, and buildings near the
completion of the project," state law does not specify that
this work is included within the definition of "public works."
According to the author, the lack of clarity has resulted in
some public works employees performing cleanup work but not
receiving a prevailing wage for that work.
Further, the author contends that the discrepancy in pay
compromises the quality of projects and restricts workers'
ability to enter the middle-class. Additionally, proponents
argue that the lack of conformity makes it difficult for
contractors who pay prevailing wages to submit competitive
bids for public works projects. AB 26 seeks to remedy this
issue by including work performed during the postconstruction
phases of construction, including, but not limited to, all
cleanup work at a jobsite within the definition of "public
works."
4. Opponent Arguments :
According to the Associated Builders and Contractors of
California, this bill raises the question of the
appropriateness and need for prevailing wage for any task
related to sorting recyclables, post-construction. They argue
that California has one of the lowest thresholds for applying
public works prevailing wage requirements in the nation.
Additionally, they argue that prevailing wages are also far
higher when compared to local wage rates because the state
relies on the median wage rate rather than an average of local
construction wage rates. It is these requirements, they argue,
that make them concerned that the new application of
prevailing wage to post-construction work-work that is in no
Hearing Date: June 11, 2014 AB 26
Consultant: Alma Perez-Schwab Page 5
Senate Committee on Labor and Industrial Relations
way related to the construction of that project-is not
appropriate to the nature of that work and unnecessarily
increases the overall cost of project delivery.
5. Prior or Related Legislation :
AB 514 (R. Hernandez) of 2011: Chaptered
This bill clarified what was covered in the "hauling of
refuse" from a public works construction site for purposes of
the payment of prevailing wages. Specifically, the bill
clarified that "hauling of refuse" includes the hauling of
materials other than bona fide commodities sold at fair market
value from a public works site.
AB 1598 (Buchanan) of 2012: Chaptered
This bill modified the definition of "installation" under
public works projects for purposes of prevailing wage
requirements, to include the assembly and disassembly of
freestanding and affixed modular office systems.
SUPPORT
California Labor Federation, AFL-CIO
California State Council of Laborers - Sponsor
State Building and Construction Trades Council, AFL-CIO
United Contractors
OPPOSITION
Associated Builders and Contractors of California
Hearing Date: June 11, 2014 AB 26
Consultant: Alma Perez-Schwab Page 6
Senate Committee on Labor and Industrial Relations