BILL ANALYSIS Ó
AB 1140
Page 1
GOVERNOR'S VETO
AB 1140 (Daly)
As Amended May 24, 2013
2/3 vote
LABOR & EMPLOYMENT 5-1 APPROPRIATIONS 12-5
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|Ayes:|Roger Hernández, Alejo, |Ayes:|Gatto, Bocanegra, |
| |Chau, Gomez, Holden | |Bradford, |
| | | |Ian Calderon, Campos, |
| | | |Eggman, Gomez, Hall, |
| | | |Ammiano, Pan, Quirk, |
| | | |Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Morrell |Nays:|Harkey, Bigelow, |
| | | |Donnelly, Linder, Wagner |
| | | | |
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ASSEMBLY: 54-24 (May 30, 2013)
SENATE: 26-13 (August 26, 2013)
SUMMARY : Provides that changes made to prevailing wage rates
apply on their effective date to any contract that is awarded or
for which notice to bidders is published on or after January 1,
2014. Specifically, this bill :
1)Provides that if during any semiannual period the Department
of Industrial Relations (DIR) determines that there has been a
change in any prevailing wage rate, the determination shall
apply on its effective date to any contract that is awarded or
for which notice to bidders is published on or after January
1, 2014.
2)Provides that specified parties may, within 20 days after
publication of a new determination, file with DIR a petition
to review the determination on the grounds that the rate has
not been determined in accordance with existing law. The
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petition shall be filed with the awarding body within two days
thereafter.
3)Provides that, upon filing of such a petition, DIR shall
initiate an investigation or hold a hearing.
4)Provides that within 20 days after the filing of such a
petition (or within a longer period agreed to by all
interested parties), DIR shall make a determination that shall
be final.
5)Specifies that determinations issued by DIR are effective 10
days after issuance and shall remain in effect until modified,
rescinded or superseded.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, this bill will result in potential unknown General
Fund costs, likely between $150,000 and $300,000, to DIR.
COMMENTS : Existing law generally requires the payment of
prevailing wages on public works projects. This bill addresses
the question of what prevailing wage rate applies when there has
been a change in the wage rate during the course of a public
works project.
This bill is sponsored by the State Building and Construction
Trades Council of California. The sponsor contends that, under
current law, the prevailing wage determination applicable to a
construction project is the determination in effect when the
project is first advertised for bid. There is sometimes a long
lag between when a project is advertised for bid and when
construction starts, and some construction projects involve work
extending for a multi-year period. The lag between when a
project is advertised for bid and when work is actually
performed leads to situations in which the prevailing wage
determination does not reflect the actual prevailing wage for
the craft and locality.
The sponsor notes that wage rates tend to increase over time to
reflect increases in the cost of living, and employer costs for
pension and health care have been increasing by a higher
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percentage. Thus, the prevailing wage determination in effect
when a project was advertised for bid in 2008 will not reflect
the true prevailing wage rate when construction is being
performed in 2013. This lag places unionized contractors at a
disadvantage in bidding for public work, because they are bound
to pay the wages and make the benefits contributions required by
the current collective bargaining agreement (CBA).
Current law tries to deal with the "lag" problem by providing
that, when a prevailing wage determination is based on a CBA
rate, and the CBA provides for future changes in wages and
benefits, the prevailing wage determination incorporates those
"predetermined changes" and makes them binding on contractors.
However, the sponsor argues that this is only a partial solution
to the "lag" problem because most CBAs last for only three
years, and prevailing wage determinations may be issued toward
the end of the CBA on which they are based.
The sponsor argues that this bill would solve the "lag" problem
by providing that the semi-annual prevailing wage determinations
issued by DIR become effective as to all public works projects.
Contractors bidding on projects can estimate future changes in
prevailing wage rates just as they estimate future changes in
the cost of materials. The sponsor states that unionized
contractors already do this because they must anticipate future
changes in CBA wage rates.
Writing in opposition to this bill, the California Association
of Sanitation Agencies argues that "this change to current law
will interrupt the pace of public works projects, especially in
localities where prevailing wages change multiple times over the
course of a project. This bill will essentially guarantee
multiple change orders on large projects and will postpone the
pace of these projects - at the cost to our ratepayers."
GOVERNOR'S VETO MESSAGE :
This measure requires contractors on public works
projects to increase workers' pay any time the state
updates its prevailing wage rates. This is intended to
address the circumstance where a non-union contractor
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is not required to adjust wages mid-project but a
union contractor is subject to such adjustments
pursuant to a collective bargaining agreement.
In most cases, projects are bid, awarded and completed
in a relatively short period of time and this measure
would have little, if any impact. Larger, long term
projects are the more likely setting for the
union/non-union wage differential this bill seeks to
address. Unfortunately, introducing such wage
adjustments as proposed by this measure is likely to
lead to uncertainty in the cost of public works
projects and increase costs ultimately borne by the
taxpayers.
Finally, many collective bargaining agreements already
address this limited circumstance by allowing wage
rates to remain at the level determined by the state
at the time of the bid, award or start of the
contract. Given this, I do not find a statutory change
warranted to address the issue raised by this measure.
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
FN: 0002923