BILL ANALYSIS                                                                                                                                                                                                    






                             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,  
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          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.)

                                                                      



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             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  
                                                                      



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            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.  
                                                                      



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            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  
                                                                      



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          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  
                                                                      



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            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).
          
                                                                      



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          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  
                                                                      



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          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

                                                                      



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                                        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) 



                                                                      



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          Assembly Committee on Judiciary (Ayes 7, Noes 3)
          Assembly Committee on Labor and Employment (Ayes 5, Noes 2)

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