BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                       AB 1939|
          |Office of Senate Floor Analyses   |                              |
          |1020 N Street, Suite 524          |                              |
          |(916) 651-1520         Fax: (916) |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 
           
                                           
                                    THIRD READING


          Bill No:  AB 1939
          Author:   Daly (D)
          Amended:  6/25/14 in Senate
          Vote:     21

           
           SENATE JUDICIARY COMMITTEE  :  6-0, 6/10/14
          AYES:  Jackson, Anderson, Lara, Leno, Monning, Vidak
          NO VOTE RECORDED:  Corbett

           ASSEMBLY FLOOR  :  75-0, 5/5/14 - See last page for vote


           SUBJECT  :    Public works:  prevailing wages:  contractors costs

           SOURCE  :     Associated General Contractors
                      Construction Employers Association


           DIGEST  :    This bill authorizes a contractor on a private works  
          project to bring an action to recover from the hiring party that  
          the contractor directly contracts with the difference between  
          the wages actually paid to an employee and the increased wages  
          that were required to be paid to an employee, in addition to any  
          penalties or other sums required to be paid, and costs and  
          attorney's fees, because the project was subsequently deemed to  
          be a public work subject to prevailing wage requirements.

           Senate Floor Amendments  6/25/14 clarify the method of delivery  
          of the notice served by the contractor on the hiring party;  
          specify the identification information that must be provided by  
          the contractor in the notice; and make minor changes. 

                                                                CONTINUED





                                                                    AB 1939
                                                                     Page  
          2

           


          ANALYSIS  :    Existing law:

           1. Requires, for public works projects of more than $1,000, all  
             workers employed on the project to be paid not less than the  
             general prevailing rate of per diem wages for work of a  
             similar character in the locality in which the public work is  
             performed, and not less than the general prevailing rate of  
             per diem wages for holiday and overtime work fixed.

           2. Requires the Department of Industrial Relations (DIR) to  
             monitor and enforce compliance with applicable prevailing  
             wage requirements for any public works project. 

           3. Requires a public works contractor to whom the contract is  
             awarded, and any subcontractor under him, to pay not less  
             than the specified prevailing rates of wages to all workmen  
             employed in the execution of the contract.

           4. Requires the contractor and any subcontractor under the  
             contractor to, as a penalty to the state or political  
             subdivision on whose behalf the contract is made or awarded,  
             forfeit not more than $200 for each calendar day, or portion  
             thereof, for each worker paid less than the prevailing wage  
             rates as determined by the director for the work or craft in  
             which the worker is employed for any public work done under  
             the contract by the contractor or by any subcontractor under  
             the contractor. 

           5. Requires the difference between the prevailing wage rates  
             and the amount paid to each worker for each calendar day or  
             portion thereof for which each worker was paid less than the  
             prevailing wage rate to be paid to each worker by the  
             contractor or subcontractor.

           6. Provides that if a worker employed by a subcontractor on a  
             public works project is not paid the general prevailing rate  
             of per diem wages by the subcontractor, the prime contractor  
             of the project is not liable for any penalties unless the  
             prime contractor had knowledge of that failure of the  
             subcontractor to pay the specified prevailing rate of wages  
             to those workers or unless the prime contractor fails to  

                                                                CONTINUED





                                                                    AB 1939
                                                                     Page  
          3

             comply specified requirements.

           7. Authorizes a contractor to bring an action in a court of  
             competent jurisdiction to recover from the body awarding a  
             contract for a public work or otherwise undertaking any  
             public work any increased costs incurred by the contractor as  
             a result of any decision by the body, the DIR, or a court  
             that classifies, after the time at which the body accepts the  
             contractor's bid or awards the contractor a contract in  
             circumstances where no bid is solicited, the work covered by  
             the bid or contract as a public work, if that body, before  
             the bid opening or awarding of the contract, failed to  
             identify as a public work in the bid specification or in the  
             contract documents that portion of the work that the decision  
             classifies as a public work. 

           8. Limits liability of the body awarding a contract for a  
             public work for recovery of increased costs if specified  
             conditions are met.

           9. Provides that "awarding body" does not include the  
             Department of General Services, the Department of  
             Transportation, or the Department of Water Resources, and  
             "increased costs" includes, but is not limited, to labor cost  
             increases required to be paid to workers who perform or  
             performed work on the public work and penalties for which the  
             contractor is liable.

           10.Authorizes a contractor to bring an action in a court of  
             competent jurisdiction 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 to an employee, any  
             penalties required to be paid, and costs and attorney's fees  
             related to this action, if either of the following is true:

                 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; or

                 The awarding body received actual written notice from  
               the DIR that the work to be covered by the bid or contract  
               is a public work, and failed to disclose that information  
               to the contractor before the bid opening or awarding of the  

                                                                CONTINUED





                                                                    AB 1939
                                                                     Page  
          4

               contract. 

           1. Requires, before making payments to the contractor of money  
             due under a contract for public work, the awarding body to  
             withhold and retain therefrom all amounts required to satisfy  
             any civil wage and penalty assessment issued by the Labor  
             Commissioner, and amounts required to satisfy a civil wage  
             and penalty assessment shall not be disbursed by the awarding  
             body until receipt of a final order that is no longer subject  
             to judicial review.

           2. Provides that, if the awarding body has not retained  
             sufficient money under the contract to satisfy a civil wage  
             and penalty assessment based on a subcontractor's violations,  
             the contractor shall, upon the request of the Labor  
             Commissioner, withhold sufficient money due the subcontractor  
             under the contract to satisfy the assessment and transfer the  
             money to the awarding body, and these amounts shall not be  
             disbursed by the awarding body until receipt of a final order  
             that is no longer subject to judicial review.

           3. Authorizes any contractor to withhold from any subcontractor  
             under him sufficient sums to cover any penalties withheld  
             from him by the awarding body on account of the  
             subcontractor's failure to comply with the terms of this  
             chapter, and if payment has already been made to the  
             subcontractor the contractor may recover from him the amount  
             of the penalty or forfeiture in a suit at law.

           4. Provides that if the Labor Commissioner determines after an  
             investigation that there has been a violation of this  
             chapter, the Labor Commissioner shall with reasonable  
             promptness issue a civil wage and penalty assessment to the  
             contractor or subcontractor, or both, and interest will  
             accrue on all due and unpaid wages from the date the wages  
             were due and payable until the wages are paid.

           5. Provides that the contractor and subcontractor shall be  
             jointly and severally liable for all amounts due pursuant to  
             a final order or a judgment thereon, and the Labor  
             Commissioner shall first exhaust all reasonable remedies to  
             collect the amount due from the subcontractor before pursuing  
             the claim against the contractor.


                                                                CONTINUED





                                                                    AB 1939
                                                                     Page  
          5

           6. Defines "awarding body" or "body awarding the contract" to  
             mean department, board, authority, officer or agent awarding  
             a contract for public work.

           7. Defines "contractor" and "subcontractor" to include a  
             contractor, subcontractor, licensee, officer, agent, or  
             representative thereof, acting in that capacity, when working  
             on public works. 

          This bill:

           1. Authorizes a contractor to bring an action in a court of  
             competent jurisdiction to recover from the hiring party that  
             the contractor directly contracts with any increased costs,  
             including, but not limited to, the difference between the  
             wages actually paid to an employee and the wages that were  
             required to be paid to an employee, any penalties or other  
             sums required to be paid, and costs and attorney's fees for  
             the action incurred by the contractor as a result of any  
             decision by the DIR, the Labor and Workforce Development  
             Agency, or a court that classifies, after the time at which  
             the contracting party accepts the contractor's bid, awards  
             the contractor a contract under circumstances when no bid is  
             solicited, or otherwise allows construction by the contractor  
             to proceed, the work covered by the project, or any portion  
             thereof, as a public work, unless either of the following is  
             true:

                 The owner or developer or its agent expressly advised  
               the contractor that the work to be covered by the contract  
               would be a public work or is otherwise subject to the  
               payment of prevailing wages; or

                 The hiring party expressly advised the contractor that  
               the work subject to the contract would be a public work or  
               is otherwise subject to the payment of prevailing wages.

           1. Requires, in order to be entitled to recovery of increased  
             costs, the contractor to notify the hiring party and the  
             owner or developer within 30 days after receipt of the notice  
             of a decision by the DIR or the Labor and Workforce  
             Development Agency, or the initiation of any action in a  
             court alleging, that the work covered by the project, or any  
             portion thereof, is a public work.

                                                                CONTINUED





                                                                    AB 1939
                                                                     Page  
          6


           2. Specifies that the above notice will contain the legal name,  
             address, and telephone number of the contractor, and the  
             name, address, and telephone number of the contractor's  
             representative, if any, and will be given by registered or  
             certified mail, express mail, or overnight delivery by an  
             express service carrier.

           3. Provides that a contractor is not required to list any  
             prevailing wage or apprenticeship standard violations on a  
             prequalification questionnaire that are the direct result of  
             the failure of the owner or developer or its agent, or a  
             contractor, hiring party to notify the contractor that the  
             project, or any portion thereof, was a public work.

           4. Does not apply to private residential projects built on  
             private property unless the project is built pursuant to an  
             agreement with a state agency, redevelopment agency, or local  
             public housing authority.

           5. Does not apply if the conduct of the contractor caused the  
             project to be a public work or if the contractor has actual  
             knowledge that the work is a public work.

           6. Defines "hiring party" to mean the party that has a direct  
             contract for services provided by the contractor who is  
             seeking recovery of a prevailing wage deficiency on a private  
             works project that was subsequently determined by the DIR or  
             the Labor and Workforce Development Agency, or the initiation  
             of any action in a court alleging, that the work covered by  
             the project, or any portion thereof, to be a public work.

           7. Allows a contractor to only seek recovery from the hiring  
             party with whom the contractor has a direct contract.

           8. Defines "contractor" to mean a person or entity licensed by  
             the Contractors' State License Board that has a direct  
             contract with the hiring party to provide services on private  
             property or for the benefit of a private owner or developer.

           Background
           
          Existing law generally requires a worker on a public works  
          project to be paid not less than the prevailing wage as  

                                                                CONTINUED





                                                                    AB 1939
                                                                     Page  
          7

          determined by the Director of DIR.  Typically, a contractor or  
          subcontractor will be notified by the DIR of the failure to  
          comply with that requirement, and the contractor or  
          subcontractor is responsible for payment of the difference  
          between the wages paid to workers and the prevailing wage rate.   
          SB 966 (Alarcon, Chapter 804, Statutes of 2003) authorized a  
          contractor to bring an action to recover from the body awarding  
          the contract for a public work any increased costs incurred by  
          the contractor, including labor cost increases and penalties, if  
          the body awarding the contract knew the project was a public  
          work but failed to disclose that information to the contractor  
          or subcontractor.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   Local:  
           No

           SUPPORT  :   (Verified  6/26/14)

          Associated General Contractors (source) 
          Construction Employers' Association (source) 
          Air Conditioning Trade Association
          American Fence Association - California Chapter
          Associated Builders and Contractors - San Diego Chapter
          California Concrete Contractors Association
          California Fence Contractors' Association
          California Professional Association of Specialty Contractors
          Flasher Barricade Association
          Marin Builders Association
          Plumbing-Heating-Cooling Contractors Association of California
          Western Electrical Contractors Association


           ARGUMENTS IN SUPPORT  :    Supporters argue that existing law  
          provides for public agency liability if it fails to include in a  
          request for proposal that a construction project is subject to  
          prevailing wages, yet existing law requires no such notice by  
          private owners or developers when public subsidies trigger a  
          prevailing wage requirement.  This bill requires the owner or  
          developer to reimburse the contractor for unpaid wages, sums  
          incurred pursuant to the Labor Code and attorney's fees  
          associated with the owner's or developer's failure to provide  
          direction to the contractor.  In this way, the supporters assert  
          that this bill would ensure timely payment of prevailing wages  
          and reduce DIR enforcement actions.  As already provided under  

                                                                CONTINUED





                                                                    AB 1939
                                                                     Page  
          8

          existing law, the party responsible for providing notice of a  
          public work and attendant prevailing wage requirements is liable  
          for prevailing wage deficiencies if the contractor does not pay  
          the prevailing wage required.  


           ASSEMBLY FLOOR  :  75-0, 05/05/14
          AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian  
            Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,  
            Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,  
            Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,  
            Gorell, Gray, Grove, Hagman, Harkey, Roger Hernández, Holden,  
            Jones, Jones-Sawyer, Levine, Linder, Lowenthal, Maienschein,  
            Medina, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan,  
            Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon,  
            Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,  
            Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A.  
            Pérez
          NO VOTE RECORDED: Hall, Logue, Mansoor, Melendez, Vacancy


          AL:nl  6/26/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

                                   ****  END  ****


















                                                                CONTINUED