BILL ANALYSIS                                                                                                                                                                                                    ”



                                                                  AB 1336
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          Date of Hearing:   April 24, 2013

                     ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
                               Roger HernŠndez, 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  








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            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  








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          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.









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          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  








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          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  








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          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  








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          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