BILL ANALYSIS Ó AB 1336 Page 1 Date of Hearing: April 24, 2013 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair AB 1336 (Frazier) - As Amended: April 17, 2013 SUBJECT : Prevailing wages: payroll records. SUMMARY : Enacts various provisions of law related to enforcement of prevailing wage law by specified joint-labor management committees. Specifically, this bill : 1)Extends the statute of limitations for civil actions for failure to pay prevailing wage brought by specified joint labor-management committees from 180 days to 24 months after the wages were due. 2)Provides that in such civil actions, the court shall award restitution to an employee for unpaid wages plus interest, liquidated damages equal to the amount of unpaid wages owed, and may impose specified civil penalties, injunctive relief, or any other appropriate form of equitable relief. 3)Provides that the court shall award a prevailing joint labor-management committee its reasonable attorney's fees and costs incurred in maintaining the action, including expert witness fees. 4)Specifies that such a civil action shall not be based on the employer's misclassification of the craft of a worker in its certified payroll records. 5)Specifies that these provisions do not limit any other available remedies for a violation of the law. 6)Provides that a copy certified payroll records provided to a joint labor-management committee shall be marked or obliterated on to prevent disclosure of an individual's social security number (but not their name). 7)Provides that a copy of certified payroll records provided to a multiemployer Taft-Hartley trust fund that requests the records for the purpose of allocating contributions to participants shall be marked or obliterated only to prevent disclosure of an individual's full social security number, but AB 1336 Page 2 shall provide the last four digits of the social security number. FISCAL EFFECT : Unknown COMMENTS : This bill proposes a number of changes related to enforcement of prevailing wage law by joint labor-management committees. Joint labor-management committees are authorized and established pursuant to the federal Labor Management Cooperation Act of 1978. The changes proposed by this bill may be classified into two main categories: (1) civil actions filed by joint-labor management committees; and (2) requirements regarding certified payroll records. Both of these issues will be discussed in turn below. Civil Actions Filed by Joint Labor-Management Committees Existing law authorizes joint labor-management committees to bring a civil action against an employer that fails to pay the prevailing wage to its employees. Current law provides that such a civil action shall be commenced not later than 180 days after the filing of a valid notice of completion or not later than 180 days after the acceptance of the public work, whichever occurs last. This bill would instead provide that such civil actions shall be commenced not later than 24 months after the wages were due. In addition, this bill specifies some of the remedies available in such action. Existing law (at Labor Code Section 1776(e)) already provides that a joint labor management committee may maintain an action in a court of competent jurisdiction against an employer who fails to comply with the requirement to pay prevailing wages. Current law provides that the court may award restitution to an employee for unpaid wages and may award the joint labor management committee reasonable attorney's fees and costs incurred in maintaining the action. Current law also specifies that such an action may not be based on the employer's misclassification of the craft of a worker on its certified payroll record and specifies that these provisions do not limit any other available remedies for a violation of the law. Existing law (Labor Code Section 1775) also imposes specified civil penalties against a contractor or subcontractor that fails AB 1336 Page 3 to pay prevailing wages. However, current law specifies that the prime contractor is not liable for such penalties unless it had knowledge of the failure of the subcontractor to pay prevailing wages or unless the prime contractor failed to comply with specified requirements. This bill replicates these provisions in Labor Code Section 1771.2(c) and adds some additional provisions. Specifically, this bill provides that in such civil actions, the court shall award restitution to an employee for unpaid wages plus interest, liquidated damages equal to the amount of unpaid wages owed, and may impose specified civil penalties (in accordance with Labor Code Section 1775, discussed above), injunctive relief, or any other appropriate form of equitable relief (emphasis provided). The bill also provides that the court shall award a prevailing joint labor-management committee its reasonable attorney's fees and costs incurred in maintaining the action, including expert witness fees (emphasis provided). The bill also provides, consistent with existing law, that these provisions do not limit any other available remedies for a violation of the law. Finally, the bill specifies, consistent with existing law, that such a civil action shall not be based merely on the employer's misclassification of the craft of a worker in its certified payroll records. Prior Legislation - SB 569 (Steinberg) of 2007 would have, among other things, extended the statute of limitations for such civil actions to four years after the violation occurs. SB 569 was held under submission in the Assembly Appropriations Committee. Similarly, AB 581 (Klehs) of 2005 would have extended the statute of limitations to four years. AB 581 was held under submission in the Senate Appropriations Committee. Access to Certified Payroll Records Current law requires contractor and subcontractors on public works projects to keep accurate payroll records showing the name, address social security number, work classification, hours worked and wages paid to employees. The payroll records are required to be certified as true and correct by the contractor or subcontractor. AB 1336 Page 4 Certified payroll records shall be made available for inspection upon request of the employee, the awarding body, the Division of Labor Standards Enforcement, or the Division of Apprenticeship Standards. In addition, under current law a certified copy of payroll records shall be made available for inspection by a member of the public. However, a request by the public shall be made through either through the awarding body, the Division of Labor Standards Enforcement, or the Division of Apprenticeship Standards. Current law provides that copies of records made available to the public shall be marked or obliterated to prevent disclosure of an individual's name, address and social security number. Existing law also provides that copies provided to joint labor-management committees shall be marked only to prevent disclosure of an individual's name and social security number. This bill provides that copies of records provided to joint labor-management committees shall be marked only to obliterate social security numbers, but not names. This bill also provides that a copy of certified payroll records provided to a multiemployer Taft-Hartley trust fund (generally a pension or health and welfare fund) that requests the records for the purpose of allocating contributions to participants shall be marked or obliterated only to prevent disclosure of an individual's full social security number, but shall provide the last four digits of the social security number. Prior Legislation - SB 569 (Steinberg) of 2007 would have, among other things, provided that copies of records provided to joint labor-management committees shall be marked only to obliterate social security numbers, but not names. SB 569 was held under submission in the Assembly Appropriations Committee. ARGUMENTS IN SUPPORT : This bill is sponsored by the State Building and Construction Trades Council of California, who argues that it will enhance the state's enforcement efforts to combat the underground economy, protect the public's investment in infrastructure and protect workers from wage theft. The sponsor states that the change in the statute of limitations AB 1336 Page 5 for claims will allow for adequate time for a legal remedy for workers cheated out of wages they are owed since victims of wage theft are underpaid for years on multiple projects and only come forward when their employment with the contractor ends. In addition, the sponsor states that under current law, a joint labor-management committee that requests certified payroll records receives them only with the workers' addresses and not the workers' names. However, many instances of wage theft involve payroll records that do not report all the hours an employee is actually working. Providing the names of the employees will allow the committee to properly follow-up and determine if the payroll records are fraudulent. Finally, the sponsor states that this bill will provide Taft-Hartley trust funds with the last four digits of social security numbers, enabling the correct allocation of health benefits and pension contributions to workers for which the contributions were made. The sponsor states that the redaction of this information severely hinders this process and often lawsuits are required to obtain this information. Many instances of wage theft involve payroll records that do not report all the hours the employee is actually working and there are occasions when the employer has gone out of business or refuses to cooperate in an audit, so the certified payroll records are the only practicable means for allocating benefit contributions. Similarly, other supporters argue that the extension of the statute of limitations will ensure that any and all violations result in full compensation for the employee and further discourage an employer from attempting to go unnoticed. They argue that this bill will help to prevent the misclassification of workers and ensure that work is done by appropriately qualified skilled workers. ARGUMENTS IN OPPOSITION : The Associated General Contractors of California (AGC) opposes this bill unless amended. Primarily, AGC argues deleting the requirement that the civil action be commenced not later than 180 days after acceptance of the public work, or the filing of a valid notice of completion, whichever is later, is unnecessary and would create an imbalance with other enforcement provisions in the prevailing wage statutes that require the Division of AB 1336 Page 6 Labor Standards Enforcement (DLSE) to issue a civil wage and penalty assessment within 180 days of the events described above. AGC argues that DLSE regularly and routinely issues such assessments within the proscribed 180 day period, and there is no legitimate basis for creating a different period of time for joint labor-management committees. AGC also argues that the certified payroll record provisions of this bill threaten the privacy rights of California workers by changing the law to allow joint labor-management committees to obtain the names of workers and the last four digits of their social security numbers. AGC contends that such committees are already entitled to obtain the addresses of these workers, and this additional information will most certainly enable joint labor-management committee representatives and employees to not only mail information and questionnaires to such workers but to also visit their homes and speak with them and their families directly. In certain circumstances, workers may likely find such visits intrusive and unwelcome. The Construction Employers' Association (CEA) also opposes this measure, raising particular concern with the provisions of the bill specifying the civil remedies that may be pursued by joint labor-management committees. CEA states that courts have long held that plaintiffs may only file suit against the actual employer for wage claims. Conversely, Labor Code Section 1775 imposes "joint and several liability" between a contractor and subcontractor for wage claims. Because this bill directs courts to adhere to Section 1775, CEA contends that the bill is imposing "joint and several liability" where it did not previously exist. Furthermore, pursuant to 1775 (b) the Labor Commissioner may waive penalties related to a subcontractor's violation. However, CEA expresses concern that the courts do not have the same level of expertise as the Labor Commissioner when it comes to certified payroll enforcement and could potentially impose penalties that are not otherwise due pursuant to 1775 (b). CEA states that if the goal of this measure is to penalize those entities who violate wage law, the bill should be amended to speak only to those entities. The California Surety Federation opposes this measure and argues that, from a surety perspective, creating a "tail of liability" that extends out two years creates various challenges. First, the ability to prove a claim two years after the fact becomes a significant challenge due to the inevitable loss of evidence AB 1336 Page 7 over time. Furthermore, a surety must have an expectation of closure to properly price and author a bond. If there is a concern that a significant liability may retain outstanding for up to two years, it is possible that some sureties might not be willing to take the risk, thereby driving up the cost of bonding and a limited supply of sureties willing to write such business. REGISTERED SUPPORT / OPPOSITION : Support California Labor Federation, AFL-CIO California State Association of Electrical Workers California State Pipe Trades Council State Building and Construction Trades Council of California (sponsor) Western States Council of Sheet Metal Workers Opposition Air Conditioning Trade Association Associated Builders and Contractors of California Associated General Contractors of California (oppose unless amended) California Association of Sanitation Agencies California Chapter of the American Fence Association California Fence Contractors' Association California Surety Federation Construction Employers' Association Engineering Contractors' Association Flasher Barricade Association Marin Builders Association Plumbing-Heating-Cooling Contractors Association of California Western Electrical Contractors Association Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091