BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Noreen Evans, Chair 2013-2014 Regular Session AB 1336 (Frazier) As Amended June 24, 2013 Hearing Date: July 2, 2013 Fiscal: Yes Urgency: No TMW SUBJECT Prevailing Wages: Payroll Records DESCRIPTION This bill would extend the deadline from 180 days to 18 months, as specified, for the Labor Commissioner to serve a civil wage and penalty assessment against a public work contractor or subcontractor, or both. This bill would also extend the deadline from 180 days to 18 months, as specified, for a joint labor-management committee to bring an action against an employer that fails to pay the prevailing wage to its employees. This bill would revise and recast remedies that may be awarded by a court in these joint labor-management committee actions. This bill would also authorize the court to award interest, liquidated damages, and injunctive relief in these actions. BACKGROUND Existing law generally requires contractors engaged in public works to pay employees the prevailing wage, as determined by the Director of Industrial Relations. In 2000, AB 1646 (Committee on Labor and Employment, Ch. 954, Stats. 2000) established the authority of the Labor Commissioner to assess a civil wage and penalty against a contractor or subcontractor who fails to pay the prevailing wage. In 2001, SB 588 (Burton, Ch. 804, Stats. 2001) authorized joint labor-management committees to bring actions against employers who fail to pay prevailing wages. A joint labor-management committee is a committee organized by employers and labor organizations representing employees in that plant, area, or industry that are established for the purpose of improving labor management relationships, job security, (more) AB 1336 (Frazier) Page 2 of ? organizational effectiveness, enhancing economic development or involving workers in decisions affecting their jobs, including improving communication with respect to subjects of mutual interest and concern. (29 U.S.C 175a.) Under existing law, a joint labor-management committee may bring an action against an employer who fails to pay prevailing wages no later than 180 days after the filing of a valid notice of completion or 180 days after acceptance of the public work, whichever occurs last. In 2005, AB 581 (Klehs, 2005) sought to extend the statute of limitations on these actions to four years from the date of the violation and would have allowed the joint labor-management committee to recover reasonable attorney's fees, costs, and expenses, as well as restitution to employees for unpaid wages. AB 581 passed out of this Committee on a vote of 5-2 and was held on suspense in the Senate Committee on Appropriations. Similarly, in 2007, SB 569 (Steinberg, 2007), among other things, would have extended the statute of limitations on these actions to four years from the date of the violation. SB 569 passed out of this Committee on a vote of 3-2, but was held on suspense in the Assembly Committee on Appropriations. This bill would extend the deadlines from 180 days to 18 months for the Labor Commissioner to serve a civil wage and penalty assessment and a joint labor-management committee to bring an action against an employer who fails to pay the prevailing wage. This bill would also authorize a court to award interest, liquidated damages, and injunctive relief in these actions. This bill was heard by the Senate Labor and Industrial Relations Committee on June 12, 2013, and passed out on a vote of 4-1. CHANGES TO EXISTING LAW 1. Existing law generally defines a "public work" as construction, alteration demolition, installation, or repair work that is done under contract and that is paid for, in whole, or in part out of public funds. (Lab. Code Sec. 1720.) Existing law requires contractors engaged in public works to pay employees the prevailing wage, as determined by the Director of the Department of Industrial Relations. (Lab. Code Secs. 1770, 1771, 1774.) AB 1336 (Frazier) Page 3 of ? Existing law requires the Labor Commissioner to issue a civil wage and penalty assessment against a contractor or subcontractor, or both, if the Labor Commissioner determines, after investigation, that the contractor or subcontractor violated the laws regulating public works contracts. The assessment must be served no later than 180 days after the filing of a valid notice of completion in the office of the county recorder in each county in which the public work or some part thereof was performed, or no later than 180 days after acceptance of the public work, whichever occurs last. (Lab. Code Sec. 1741.) This bill would extend the statute of limitations from 180 days to 18 months for the Labor Commissioner to serve the civil wage and penalty assessment. 2. Existing law authorizes a joint labor-management committee to bring an action against any employer who fails to pay the prevailing wage to its employees, not later than 180 days after the filing of a valid notice of completion in the county recorder's office in each county in which the public work was performed, or not later than 180 days after the acceptance of the public work, whichever is later. (Lab. Code Sec. 1771.2.) Existing law authorizes a court to 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. (Lab. Code Sec. 1776(e).) This bill would extend the statute of limitations from 180 days to 18 months for a joint labor-management committee to bring an action against the employer. This bill would repeal the above provision regarding restitution and attorney's fees and costs and recast it to require the court, in an action brought by the joint labor-management committee against the employer, to award restitution to an employee for unpaid wages, plus interest from the date that the wages became due and payable, and reasonable attorney's fees and costs incurred by the joint labor-management committee in maintaining the action, including expert witness fees. This bill would also require the court to award liquidated damages equal to the amount of unpaid wages owed, and AB 1336 (Frazier) Page 4 of ? authorize the court to impose civil penalties, only against an employer that failed to pay the prevailing wage to its employees, injunctive relief, or any other appropriate form of equitable relief. This bill would prohibit these remedies in an action based on the employer's misclassification of the craft of a worker in its certified payroll records. This bill would provide that liquidated damages may be awarded only if the complaint alleges with specificity the wages due and unpaid to the individual workers, including how that amount was calculated, and the defendant fails to pay the wages, deposit that amount with the court to be held in escrow, or provide proof to the court of an adequate surety bond to cover the wages, within 60 days of service of the complaint. This bill would also specify that liquidated damages may be awarded only on the wages found to be due and unpaid, and, if the defendant demonstrates to the satisfaction of the court that the defendant had substantial grounds for contesting that a portion of the allegedly unpaid wages were owed, the court may exercise its discretion to waive the payment of the liquidated damages with respect to that portion of the unpaid wages. 3. Existing law requires each contractor and subcontractor on a public works project to 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. (Lab. Code Sec. 1776.) Existing law requires 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) to be marked or obliterated only to prevent disclosure of an individual's name and social security number. (Lab. Code Sec. 1776(e).) This bill would only require the individual's social security number to be marked or obliterated in any copy 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. AB 1336 (Frazier) Page 5 of ? 175a). This bill would also require any copy of records made available for inspection by, or furnished to, a multiemployer Taft-Hartley trust fund (29 U.S.C. Sec. 186(c)(5)) that requests the records for the purposes of allocating contributions to participants to 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. COMMENT 1. Stated need for the bill The author writes: AB 1336 provides oversight of public works projects to ensure that applicable prevailing wage laws are being followed. Misclassification of workers on public works projects is unfair to the employees and to the taxpayers funding the projects. If workers are performing skilled crafts that they are not properly trained and qualified to do, the quality and safety of the project, as well as the safety of other employees on the job site, may be jeopardized. . . . AB 1336 extends the deadline for bringing a civil action to recover lost wages from 180 days to 18 months, extends the deadline for the Labor Commissioner to issue a citation for a violation of prevailing wage laws from 180 days to 18 months, provides that the court may impose civil penalties and damages and award attorney's fees to a joint labor-management committee bringing an action, and allows employee names to be included in the records provided to a joint labor-management committee, to ensure that underpaid workers can be properly compensated. . . . Recent amendment also clarify that the bill does not expose contractors to a new liability for unpaid wages of workers that were not their employees. 2. Extending statute of limitations This bill would extend the statute of limitations from 180 days to 18 months, as specified, for the Labor Commissioner to serve a civil wage and penalty assessment against a public work contractor or subcontractor, or both. This bill would also extend the statute of limitations from 180 days to 18 months, as AB 1336 (Frazier) Page 6 of ? specified, for a joint labor-management committee to bring an action against an employer that fails to pay the prevailing wage to its employees. The State Building and Construction Trades Council (SBCTC), sponsor, states that extending the statute of limitations for these actions "will allow for adequate time for a legal remedy for workers cheated out of wages they are owed since victims of wage theft are often underpaid for years on multiple projects and only come forward when their employment with the contractor ends." In support, the California State Council of Laborers asserts that "[t]he Laborers have long been committed to helping crack down on underground economy activity and helping state officials and others reign in unscrupulous contractors who fail to pay prevailing wages, jeopardize the safety of workers on the job-site and game the system to gain an unfair competitive advantage over legitimate, law-abiding businesses. AB 1336 adds to the enforcement tool box a mechanism to ensure prevailing wages are being paid and provides adequate time for enforcement agencies and legal remedies to evaluate and make a determination and enforce prevailing wage law on behalf of workers who have been cheated out of wages they are owed. This added time is crucial as many victims of wage theft are underpaid for years on multiple projects and only come forward when their employment with the contractor has ended." Although the author has taken several amendments to address the opponents' concerns, they insist that the 18-month deadline to notice an employer of a violation is too long and unsubstantiated. The Associated General Contractors of California (AGC), opposed, writes: Requiring that the action be commenced not later than 18 months from the time of the acceptance or completion of the public work creates an imbalance with other enforcement provisions in the prevailing wage statutes that require the Division of Labor Standards Enforcement to issue a civil wage and penalty assessment within 180 days of the events described above. The division 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. Further, to extend the time frame to one and a half years for joint-labor management committees to commence civil actions would thwart the underlying purposes for the existing time periods, namely that wage claimants with good causes of actions should pursue them AB 1336 (Frazier) Page 7 of ? with reasonable diligence, that defendant employers might not have access to witnesses or other evidence to disprove a stale claim, and that dormant claims have more of cruelty than justice in them. For example, on projects of long duration (High Speed Rail and the Bay Bridge come to mind), a wage claim could be filed many years after a violation had occurred. It is very difficult, sometimes impossible, to track down first and second tier subcontractors and pertinent documents after completion of a project - especially when a subcontractor has committed a violation unknown to the general contractor and has been paid their retention and other payments. The general contractor needs to know of a wage violation before a project is completed and as soon after a violation has occurred so swift action can be taken to make a worker's pay whole. Extending the time frame for a wage claim will likely result in just the opposite effect. In addition, if the general contractor is not able to discover wage violations in a timely manner, it is highly likely that the "guilty" subcontractor will continue to commit wage violations to the maximum time allowed or until caught - which ever [sic] is longer - and further add to the injury of the worker. In response to these concerns, the sponsor argues that a worker would not be required to wait 18 months to file a claim. Rather, this bill would protect a worker who was not being paid properly but had waited to file a claim until he or she was no longer working on the project out of fear of being fired for filing the claim. Staff notes that all parties agree that paying the worker timely, fair wages is of great importance to the general contractors and labor, and other protections need to be established to address this concern, that are outside the scope of this bill. As for this bill, extending the statute of limitations so that the Labor Commissioner has adequate time to investigate wage claims and issue appropriate civil wage and penalty assessments is arguably appropriate to provide workers with wages they have earned. Notably, the statute of limitations extension to 18 months provided in this bill for joint labor-management committees is less than the four years statute of limitations extension previously approved by this Committee in AB 581 (Klehs, 2005) and SB 569 (Steinberg, 2007) (see Background). AB 1336 (Frazier) Page 8 of ? 3. Revising restitution and attorney's fees and providing additional remedies This bill would revise and recast provisions for restitution and attorney's fees and costs that may be awarded by a court in these joint labor-management committee actions. This bill would also authorize the court to award interest, liquidated damages, and injunctive relief in these actions. The sponsor argues this bill will enhance the state's enforcement efforts to combat the underground economy and protect the public's investment in infrastructure and workers from wage theft. Notably, existing law authorizes the Labor Commissioner to recover interest on unpaid wages and liquidated damages in connection with the civil wage and penalty assessments issued to the violating contractor or subcontractor. (Lab. Code Secs. 1741, 1741.2.) Additionally, this bill provides for a limitation on liquidated damages in joint labor-management committee actions, similar to that provided in Labor Commissioner assessments. Liquidated damages would not be awarded if the defendant contractor deposits the wages or provides proof of a surety bond to cover the wages. Furthermore, this bill would provide judicial discretion to award liquidated damages if the defendant demonstrates that it had substantial grounds for contesting that a portion of the allegedly unpaid wages were owed. 4. Revisions regarding information redacted from payroll records Existing law requires each contractor and subcontractor on a public works project to 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. Any copies of those records that are made available for inspection by, or furnished to, a joint labor-management committee must have the employee's name and social security number redacted. (Lab. Code Sec. 1776(e).) This bill, instead, would only require the individual's social security number to be redacted. This bill would also require any copy of records made available for inspection by, or furnished to, a multiemployer Taft-Hartley trust fund that requests the records for the purposes of allocating contributions to participants to be redacted to exclude the AB 1336 (Frazier) Page 9 of ? individual's full social security number, but shall provide the last four digits of the social security number. SBCTC argues that "under current law, [a labor management cooperation committee (LMCC)] that requests certified payroll records receives them with only 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 employee will allow the LMCC to properly follow up and determine if the payroll records are fraudulent." SBCTC also asserts that providing Taft-Hartley trust funds with the last four digits of social security numbers would enable "the correct allocation of health benefit and pension contributions to workers for which the contributions were made. The redaction of this information severely hinders this process and oftentimes lawsuits are required to obtain the information." As noted above, SBCTC states wage theft regularly involves incomplete payroll records 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 benefits contributions." This bill seeks to provide additional information, the worker's names and last four digits of the worker's social security number, to joint labor-management committees and Taft-Hartley trust funds in order to assist in fraudulent payroll records investigations and proper benefits contributions allocations. Support : California Labor Federation, AFL-CIO; California Professional Firefighters; California State Association of Electrical Workers; California State Council of Laborers Opposition : Air Conditioning Trade Association; Associated Builders and Contractors of California; Associated General Contractors of California; California Chapter of the American Fence Association; California Concrete Contractors Association, Inc.; California Fence Contractors' Association; Construction Employers Association; Engineering Contractors' Association; Flasher Barricade Association; Marin Builders Association; Plumbing-Heating-Cooling Contractors Association of California; Southern California Contractors; United Contractors; Western Electrical Contractors Association AB 1336 (Frazier) Page 10 of ? HISTORY Source : State Building and Construction Trades Council of California Related Pending Legislation : AB 972 (Calderon) would require public construction projects that require the use of an electrician to provide the electrician's state certification number on the payroll records. AB 972 is currently in the Senate Committee on Labor and Industrial Relations. SB 377 (Lieu) would toll the period for service of assessments regarding a public work project, as specified, and toll the period for commencing an action during the period of time in which a request to determine whether a project is a public work, including the period of a timely administrative appeal, is pending before the director, as specified. SB 377 would also toll the period for the period of time that a contractor or subcontractor fails to provide certified payroll records pursuant to a request from the Labor Commissioner, a joint labor-management committee, or an approved labor compliance program. SB 377 is currently in the Assembly Committee on Labor and Employment. Prior Legislation : SB 569 (Steinberg, 2007) See Background; Comment 2. AB 581 (Klehs, 2005) See Background; Comment 2. SB 588 (Burton, Ch. 804, Stats. 2001) See Background. AB 1646 (Committee on Labor and Employment, Ch. 954, Stats. 2000) See Background. Prior Vote : Senate Committee on Labor and Industrial Relations (Ayes 4, Noes 1) Assembly Floor (Ayes 49, Noes 21) Assembly Committee on Appropriations (Ayes 12, Noes 5) AB 1336 (Frazier) Page 11 of ? Assembly Committee on Judiciary (Ayes 7, Noes 3) Assembly Committee on Labor and Employment (Ayes 5, Noes 2) **************