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