BILL ANALYSIS Ó Senate Committee on Labor and Industrial Relations William W. Monning, Chair Date of Hearing: June 12, 2013 2013-2014 Regular Session Consultant: Deanna D. Ping Fiscal:Yes Urgency: No Bill No: AB 1336 Author: Frazier As Amended: April 17, 2013 SUBJECT Prevailing wages: payroll records KEY ISSUES Should the legislature extend 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? Should the legislature change the information that must be marked or obliterated for certified payroll records provided to joint labor-management committees and multiemployer Taft-Hartley trust fund? ANALYSIS Existing law defines "public works" to include, among other jobs, construction, alteration, demolition, installation, or repair work done under contract and paid for in whole or in part out of public funds. (Labor Code §1720) 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 and the general prevailing rate for holiday and overtime work for the specific location where the public work is to be performed (Labor Code §1771) Existing law allows a contractor to bring an action in court to recover from an awarding body the difference between the wages actually paid to an employee and the wages that were required to be paid (per prevailing wage provisions) if it meets the following requirements: The awarding body previously affirmatively represented to the contractor in writing, in the call for bids, or otherwise, that the work to be covered by the bid or contract was not a "public work" as defined. The awarding body received actual written notice from the Department of Industrial Relations that the work to be covered by the bid or contract is a "public work," as defined, and failed to disclose that information to the contractor before the bid opening or awarding of the contract. (Labor Code §1726) Existing law states that a joint labor-management committee may bring an action in any court of competent jurisdiction against an employer that fails to pay the prevailing wage to its employees. This action shall be commenced not later than 180 days after the filing of a valid notice of completion in the office of the county recorded in each county in which the public work or some part thereof was performed or not later than 180 days after acceptance of the public work, whoever last occurs. (Labor Code §1771.2) Existing law states that each contractor and subcontractor shall keep accurate payroll records, showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid. (Labor Code §1776) Existing law states that any copies of records made available for inspection by, or furnished to, a joint labor-management committee established pursuant to the federal Labor Management Cooperation Act of 1978 (29 U.S.C. Sec. 175a) shall be marked or obliterated only to prevent disclosure of an individual's name and social security number . (Labor Code §1776) This bill enacts various provisions of law related to enforcement of prevailing wage law by specified joint-labor management committees. Specifically, this bill : Hearing Date: June 12, 2013 AB 1336 Consultant: Deanna D. Ping Page 2 Senate Committee on Labor and Industrial Relations 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 provide the individual's name . 7)Provides that a copy of certified payroll records provided to a multiemployer Taft-Hartley trust fund (generally a pension or welfare fund) that requests the records for the purpose of allocating contributions to participants shall provide the last four digits of the individual's social security number . COMMENTS 1. Need for this bill? In 2001, the Legislature enacted SB 588 (Burton) which authorized representatives from a labor-management committee to inspect payroll records on public works projects and to take civil action to enforce prevailing wage requirements. Currently joint labor-management committees can bring a civil action against an employer that fails to pay the prevailing wage to its employees. However, 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. Hearing Date: June 12, 2013 AB 1336 Consultant: Deanna D. Ping Page 3 Senate Committee on Labor and Industrial Relations According to the author's office, while the inspection and enforcement provided by SB 558 allows representatives from the labor-management committee to inspect payroll records for prevailing wage violations, the 180 requirement for bringing a civil action can be problematic as workers are often underpaid for years and the current statute of limitations is not sufficient to recover lost wages. Additionally, current law states that an individual's name and social security number must be redacted in payroll records. If a civil action is successful it can be difficult to locate those workers to award their owed wages as only the worker's address is available under current law. If an individual changes residences in the time frame of the civil action it could be difficult to find them and ensure that they are properly compensated. AB 1336 addresses these issues by extending the deadline for bringing a civil action to recover lost wages to two years and allowing employee names to be included in the records provided to a joint labor-management committee. 2. Double Referral: AB 1336 has been doubled referred to Senate Judiciary Committee. 3. Proponent Arguments : According to the sponsor, State Building and Construction Trades Council, the bill 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 argues that the change in the statute of limitations 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. Proponents 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 Hearing Date: June 12, 2013 AB 1336 Consultant: Deanna D. Ping Page 4 Senate Committee on Labor and Industrial Relations unnoticed. 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. They contend that many instances of wage theft involve payroll records that do not report all the hours an employee is actually working and that providing the names of the employees will allow the committee to properly follow-up and determine if the payroll records are fraudulent. The sponsor also 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. 4. Opponent Arguments : According to opponents, the deletion of the requirement that the civil action be commenced not later than 180 days is unnecessary and would create an imbalance with other enforcement provisions in the prevailing wage statutes that require the Division of Labor Standards Enforcement (DLSE) to issue a civil wage and penalty assessment within 180 days. Further, opponents argue 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. Opponents also argue that the provisions of the bill specifying the civil remedies that may be pursued by joint labor-management committees are problematic. They contend that while the courts have long held that plaintiffs may only file suit against the actual employer for wage claims, Labor Code Section 1775 imposes "joint and several liability" between a contractor and subcontractor for wage claims. Opponents argue that the bill directs courts to adhere to Section 1775 and imposes "joint and several liability" where it did not Hearing Date: June 12, 2013 AB 1336 Consultant: Deanna D. Ping Page 5 Senate Committee on Labor and Industrial Relations previously exist. Opponents express 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). Lastly, the California Surety Federation (CSF) opposes this measure and argues that, from a surety perspective, creating a "tail of liability" that extends out two years creates various challenges, such as the inevitable loss of evidence over time. CSF contends that 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. 5. 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. It also would have 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. 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. SUPPORT State Building and Construction Trades Council of California (sponsor) California Labor Federation, AFL-CIO California State Association of Electrical Workers California State Pipe Trades Council Western States Council of Sheet Metal Workers Hearing Date: June 12, 2013 AB 1336 Consultant: Deanna D. Ping Page 6 Senate Committee on Labor and Industrial Relations 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 United Contractors (oppose unless amended) Western Electrical Contractors Association Hearing Date: June 12, 2013 AB 1336 Consultant: Deanna D. Ping Page 7 Senate Committee on Labor and Industrial Relations