California Legislature—2013–14 Regular Session

Assembly Bill No. 2744

Introduced by Committee on Labor and Employment (Assembly Members Roger Hernández (Chair), Alejo, Chau, and Holden)

February 27, 2014

An act to amend Section 1777.1 of, and to repeal and add Section 1777.7 of, the Labor Code, relating to public works.

LEGISLATIVE COUNSEL’S DIGEST

AB 2744, as introduced, Committee on Labor and Employment. Public works: apprenticeship program.

Existing law provides that when a contractor or subcontractor performing a public works project is found by the Labor Commissioner to be in violation of the requirements relating to public works contracts, except with regard to the employment of apprentices, with intent to defraud, or within a 3-year period of having committed 2 or more separate willful violations of these provisions, the contractor or subcontractor or a firm, corporation, partnership, or association in which the contractor or subcontractor has any interest is ineligible to bid on, be awarded, or perform work as a subcontractor on a public works contract for specified periods of time.

This bill would make these provisions applicable to violations of provisions related to the employment of apprentices.

Existing law, among other things, imposes a civil penalty on contractors or subcontractors who are determined to have knowingly violated specified provisions regulating the employment of apprentices on public works projects, provides that a contractor or subcontractor who is determined to have knowingly committed a serious violation of the apprentice employment provisions may additionally be denied the right to bid on or be awarded or perform work as a subcontractor on any public works contract for a specified period of time, provides for a review of the civil penalty or debarment by the Labor Commissioner, and provides for a process to collect the civil penalty.

This bill would revise and recast these provisions by, among other things, making the civil penalty applicable to the contractor and any subcontractor responsible for the violation, requiring the Labor Commissioner or his or her designee to issue a civil wage and penalty assessment in accordance with a specified provision, and providing for notice by the Division of Labor Standards Enforcement to the contractor within 15 days of receipt of a complaint that their subcontractor knowingly violated the apprentice employment provisions.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 1777.1 of the Labor Code is amended to
read:

1777.1.  

(a) Whenever a contractor or subcontractor performing
a public works project pursuant to this chapter is found by the
Labor Commissioner to be in violation of this chapter with intent
to defraud, begin delete except Section 1777.5, end delete the contractor or subcontractor
or a firm, corporation, partnership, or association in which the
contractor or subcontractor has any interest is ineligible for a period
of not less than one year or more than three years to do either of
the following:

(1) Bid on or be awarded a contract for a public works project.

(2) Perform work as a subcontractor on a public works project.

(b) Whenever a contractor or subcontractor performing a public
works project pursuant to this chapter is found by the Labor
Commissioner to have committed two or more separate willful
violations of this chapter begin delete , except Section 1777.5, end delete within a
three-year period, the contractor or subcontractor or a firm,
corporation, partnership, or association in which the contractor or
subcontractor has any interest is ineligible for a period up to three
years to do either of the following:

(1) Bid on or be awarded a contract for a public works project.

(2) Perform work as a subcontractor on a public works project.

(c) Whenever a contractor or subcontractor performing a public
works project has failed to provide a timely response to a request
by the Division of Labor Standards Enforcement, the Division of
Apprenticeship Standards, or the awarding body to produce
certified payroll records pursuant to Section 1776, the Labor
Commissioner shall notify the contractor or subcontractor that, in
addition to any other penalties provided by law, the contractor or
subcontractor will be subject to debarment under this section if
the certified payroll records are not produced within 30 days after
receipt of the written notice. If the commissioner finds that the
contractor or subcontractor has failed to comply with Section 1776
by that deadline, unless the commissioner finds that the failure to
comply was due to circumstances outside the contractor’s or
subcontractor’s control, the contractor or subcontractor or a firm,
corporation, partnership, or association in which the contractor or
subcontractor has any interest is ineligible for a period of not less
than one year and not more than three years to do either of the
following:

(1) Bid on or be awarded a contract for a public works project.

(2) Perform work as a subcontractor on a public works project.

(d) A willful violation occurs when the contractor or
subcontractor knew or reasonably should have known of his or
her obligations under the public works law and deliberately fails
or refuses to comply with its provisions.

(e) The Labor Commissioner shall publish on the
commissioner’s Internet Web site a list of contractors who are
ineligible to bid on or be awarded a public works contract, or to
perform work as a subcontractor on a public works project pursuant
to this chapter. The list shall contain the name of the contractor,
the Contractors’ State License Board license number of the
contractor, and the effective period of debarment of the contractor.
Contractors shall be added to the list upon issuance of a debarment
order and the commissioner shall also notify the Contractors’ State
License Board when the list is updated. At least annually, the
commissioner shall notify awarding bodies of the availability of
the list of debarred contractors. The commissioner shall also place
advertisements in construction industry publications targeted to
the contractors and subcontractors, chosen by the commissioner,
that state the effective period of the debarment and the reason for
debarment. The advertisements shall appear one time for each
debarment of a contractor in each publication chosen by the
commissioner. The debarred contractor or subcontractor shall be
liable to the commissioner for the reasonable cost of the
advertisements, not to exceed five thousand dollars ($5,000). The
amount paid to the commissioner for the advertisements shall be
credited against the contractor’s or subcontractor’s obligation to
pay civil fines or penalties for the same willful violation of this
chapter.

(f) For purposes of this section, “contractor or subcontractor”
means a firm, corporation, partnership, or association and its
responsible managing officer, as well as any supervisors, managers,
and officers found by the Labor Commissioner to be personally
and substantially responsible for the willful violation of this
chapter.

(g) For the purposes of this section, the term “any interest”
means an interest in the entity bidding or performing work on the
public works project, whether as an owner, partner, officer,
manager, employee, agent, consultant, or representative. “Any
interest” includes, but is not limited to, all instances where the
debarred contractor or subcontractor receives payments, whether
cash or any other form of compensation, from any entity bidding
or performing work on the public works project, or enters into any
contracts or agreements with the entity bidding or performing work
on the public works project for services performed or to be
performed for contracts that have been or will be assigned or sublet,
or for vehicles, tools, equipment, or supplies that have been or will
be sold, rented, or leased during the period from the initiation of
the debarment proceedings until the end of the term of the
debarment period. “Any interest” does not include shares held in
a publicly traded corporation if the shares were not received as
compensation after the initiation of debarment from an entity
bidding or performing work on a public works project.

(h) For the purposes of this section, the term “entity” is defined
as a company, limited liability company, association, partnership,
sole proprietorship, limited liability partnership, corporation,
business trust, or organization.

(i) The Labor Commissioner shall adopt rules and regulations
for the administration and enforcement of this section.

SEC. 2.  

Section 1777.7 of the Labor Code is repealed.

begin delete

1777.7.  

(a) (1) A contractor or subcontractor that is determined
by the Labor Commissioner to have knowingly violated Section
1777.5 shall forfeit as a civil penalty an amount not exceeding one
hundred dollars ($100) for each full calendar day of
noncompliance. The amount of this penalty may be reduced by
the Labor Commissioner if the amount of the penalty would be
disproportionate to the severity of the violation. A contractor or
subcontractor that knowingly commits a second or subsequent
violation of Section 1777.5 within a three-year period, where the
noncompliance results in apprenticeship training not being provided
as required by this chapter, shall forfeit as a civil penalty the sum
of not more than three hundred dollars ($300) for each full calendar
day of noncompliance. Notwithstanding Section 1727, upon receipt
of a determination that a civil penalty has been imposed by the
Labor Commissioner, the awarding body shall withhold the amount
of the civil penalty from contract progress payments then due or
to become due.

(2) In lieu of the penalty provided for in this subdivision, the
Labor Commissioner may, for a first-time violation and with the
concurrence of an apprenticeship program described in subdivision
(d), order the contractor or subcontractor to provide apprentice
employment equivalent to the work hours that would have been
provided for apprentices during the period of noncompliance.

(b) In the event a contractor or subcontractor is determined by
the Labor Commissioner to have knowingly committed a serious
violation of any provision of Section 1777.5, the Labor
Commissioner may also deny to the contractor or subcontractor,
and to its responsible officers, the right to bid on or be awarded
or perform work as a subcontractor on any public works contract
for a period of up to one year for the first violation and for a period
of up to three years for a second or subsequent violation. Each
period of debarment shall run from the date the determination of
noncompliance by the Labor Commissioner becomes a final order.

(c) (1) An affected contractor, subcontractor, or responsible
officer may obtain a review of the determination of the Labor
Commissioner imposing the debarment or civil penalty by
transmitting a written request to the office of the Labor
Commissioner that appears on the determination within 60 days
after service of the determination of debarment or civil penalty. If
no hearing is requested within 60 days after service of the
determination, the determination shall become final.

(2) The provisions of Section 1742 shall apply to the review of
any determination issued pursuant to subdivision (a) or (b), subject
to the following:

(A) The provisions of Section 1742 and any regulations
implementing that section shall apply to a responsible officer who
requests review of a determination under this section to the same
extent as any affected contractor or subcontractor who requests
review.

(B) In the review of a determination under this section, the
affected contractor, subcontractor, or responsible officer shall have
the burden of providing evidence of compliance with Section
1777.5.

(3) For purposes of this section, a determination issued pursuant
to subdivision (a) or (b) includes a determination that has been
approved by the Labor Commissioner and issued by an awarding
body that has been authorized to assist the director in the
enforcement of Section 1777.5 pursuant to subdivision (p) of that
section. The Labor Commissioner shall have the right to intervene
in any proceeding for review of a determination issued by an
awarding body. If the involvement of the Labor Commissioner in
a labor compliance program enforcement action is limited to a
review of the determination and the matter is resolved without
litigation by or against the Labor Commissioner or the department,
the awarding body shall enforce any applicable penalties, as
specified in this section, and shall deposit any penalties and
forfeitures collected in the General Fund.

(4) The Labor Commissioner may certify a copy of the final
order of the Director of Industrial Relations and file it with the
clerk of the superior court in any county in which the affected
contractor or subcontractor has property or has or had a place of
business. The clerk, immediately upon the filing, shall enter
judgment for the state against the person assessed in the amount
shown on the certified order. A judgment entered pursuant to this
section shall bear the same rate of interest and shall have the same
effect as other judgments and be given the same preference allowed
by the law on other judgments rendered for claims for taxes. The
clerk shall not charge for the service performed by him or her
pursuant to this section. An awarding body that has withheld funds
in response to a determination imposing a penalty under this section
shall, upon receipt of a certified copy of a final order that is no
longer subject to judicial review, promptly transmit the withheld
funds, up to the amount of the certified order, to the Labor
Commissioner.

(d) If a subcontractor is found to have violated Section 1777.5,
the prime contractor of the project is not liable for any penalties
under subdivision (a), unless the prime contractor had knowledge
of the subcontractor’s failure to comply with the provisions of
Section 1777.5 or unless the prime contractor fails to comply with
any of the following requirements:

(1) The contract executed between the contractor and the
subcontractor or the performance of work on the public works
project shall include a copy of the provisions of Sections 1771,
1775, 1776, 1777.5, 1813, and 1815.

(2) The contractor shall continually monitor a subcontractor’s
use of apprentices required to be employed on the public works
project pursuant to subdivision (d) of Section 1777.5, including,
but not limited to, periodic review of the certified payroll of the
subcontractor.

(3) Upon becoming aware of a failure of the subcontractor to
employ the required number of apprentices, the contractor shall
take corrective action, including, but not limited to, retaining funds
due the subcontractor for work performed on the public works
project until the failure is corrected.

(4) Prior to making the final payment to the subcontractor for
work performed on the public works project, the contractor shall
obtain a declaration signed under penalty of perjury from the
subcontractor that the subcontractor has employed the required
number of apprentices on the public works project.

(e) Any funds withheld by the awarding body pursuant to this
section shall be deposited in the General Fund if the awarding
body is a state entity, or in the equivalent fund of an awarding
body if the awarding body is an entity other than the state.

(f) (1) The Labor Commissioner shall consider, in setting the
amount of a monetary penalty, in determining whether a violation
is serious, and in determining whether and for how long a party
should be debarred for violating this section, all of the following
circumstances:

(A) Whether the violation was intentional.

(B) Whether the party has committed other violations of Section
1777.5.

(C) Whether, upon notice of the violation, the party took steps
to voluntarily remedy the violation.

(D) Whether, and to what extent, the violation resulted in lost
training opportunities for apprentices.

(E) Whether, and to what extent, the violation otherwise harmed
apprentices or apprenticeship programs.

(2) If a party seeks review of a decision by the Labor
Commissioner to impose a monetary penalty or period of
debarment, the Director of Industrial Relations shall decide de
novo the appropriate penalty, by considering the same factors set
forth above.

(g) The interpretation of Section 1777.5 and the substantive
requirements of this section, including the limitations period for
issuing a determination under subdivision (a) or (b), shall be in
accordance with the regulations of the California Apprenticeship
Council. The Director of Industrial Relations may adopt regulations
to establish guidelines for the imposition of monetary penalties
and periods of debarment and may designate precedential decisions
under Section 11425.60 of the Government Code.

end delete

SEC. 3.  

Section 1777.7 is added to the Labor Code, to read:

1777.7.  

(a) (1) If the Labor Commissioner or his or her
designee determines after an investigation that a contractor or
subcontractor knowingly violated Section 1777.5, the contractor
and any subcontractor responsible for the violation shall forfeit,
as a civil penalty to the state or political subdivision on whose
behalf the contract is made or awarded, not more than one hundred
dollars ($100) for each full calendar day of noncompliance. The
amount of this penalty may be reduced by the Labor Commissioner
if the amount of the penalty would be disproportionate to the
severity of the violation. A contractor or subcontractor that
knowingly commits a second or subsequent violation within a
three-year period, if the noncompliance results in apprenticeship
training not being provided as required by this chapter, shall forfeit
as a civil penalty the sum of not more than three hundred dollars
($300) for each full calendar day of noncompliance.

(2) In lieu of the penalty provided for in this subdivision, the
Labor Commissioner may, for a first-time violation and with the
concurrence of an apprenticeship program described in subdivision
(d) of Section 1777.5, order the contractor or subcontractor to
provide apprentice employment equivalent to the work hours that
would have been provided for apprentices during the period of
noncompliance.

(b) The Labor Commissioner shall consider, in setting the
amount of a monetary penalty, all of the following circumstances:

(1) Whether the violation was intentional.

(2) Whether the party has committed other violations of Section
1777.5.

(3) Whether, upon notice of the violation, the party took steps
to voluntarily remedy the violation.

(4) Whether, and to what extent, the violation resulted in lost
training opportunities for apprentices.

(5) Whether, and to what extent, the violation otherwise harmed
apprentices or apprenticeship programs.

(c) (1) The Labor Commissioner or his or her designee shall
issue a civil wage and penalty assessment, in accordance with the
provisions of Section 1741, upon determination of penalties
assessed under subdivisions (a) and (b). Review of a civil wage
and penalty assessment issued under this subdivision may be
requested in accordance with the provisions of Section 1742. The
regulations of the Director of Industrial Relations, which govern
proceedings for review of civil wage and penalty assessments and
the withholding of contract payments under Article 1 (commencing
with Section 1720) and Article 2 (commencing with Section 1770),
shall apply.

(2) For purposes of this section, a determination issued pursuant
to subdivision (a) or (b) includes a determination that has been
approved by the Labor Commissioner and issued by an awarding
body that has been authorized to assist the director in the
enforcement of Section 1777.5 pursuant to subdivision (p) of that
section. The Labor Commissioner may intervene in any proceeding
for review of a determination issued by an awarding body. If the
involvement of the Labor Commissioner in a labor compliance
program enforcement action is limited to a review of the
determination and the matter is resolved without litigation by or
against the Labor Commissioner or the department, the awarding
body shall enforce any applicable penalties, as specified in this
section, and shall deposit any penalties and forfeitures collected
in the General Fund.

(d) The determination of the Labor Commissioner as to the
amount of the penalty imposed under subdivisions (a) and (b) shall
be reviewable only for an abuse of discretion.

(e) If a subcontractor is found to have violated Section 1777.5,
the prime contractor of the project is not liable for any penalties
under subdivision (a) unless the prime contractor had knowledge
of the subcontractor's failure to comply with the provisions of
Section 1777.5 or unless the prime contractor fails to comply with
any of the following requirements:

(1) The contract executed between the contractor and the
subcontractor for the performance of work on the public works
project shall include a copy of the provisions of Sections 1771,
1775, 1776, 1777.5, 1813, and 1815.

(2) The contractor shall continually monitor a subcontractor’s
use of apprentices required to be employed on the public works
project pursuant to subdivision (d) of Section 1777.5, including,
but not limited to, periodic review of the certified payroll of the
subcontractor.

(3) Upon becoming aware of a failure of the subcontractor to
employ the required number of apprentices, the contractor shall
take corrective action, including, but not limited to, retaining funds
due to the subcontractor for work performed on the public works
project until the failure is corrected.

(4) Prior to making the final payment to the subcontractor for
work performed on the public works project, the contractor shall
obtain a declaration signed under penalty of perjury from the
subcontractor that the subcontractor has employed the required
number of apprentices on the public works project.

(f) The Division of Labor Standards Enforcement shall notify
the contractor on a public works project within 15 days of the
receipt by the division of a complaint that a subcontractor on that
public works project knowingly violated Section 1777.5.

(g) (1) The interpretation of Section 1777.5 and the substantive
requirements of this section applicable to contractors or
subcontractors shall be in accordance with the regulations of the
California Apprenticeship Council.

(2) A contractor knowingly violates Section 1777.5 if the
contractor knew or should have known of the requirements of that
section and fails to comply, unless the failure to comply was due
to circumstances beyond the contractor’s control.

(3) There is an irrebuttable presumption that a contractor knew
or should have known of the requirements of Section 1777.5 if the
contractor had previously been found to have violated that section,
the contract or bid documents, or both, notified the contractor of
the obligation to comply with this code’s provisions applicable to
public works projects, or the contractor had previously employed
apprentices on a public works project.

(h) The Director of Industrial Relations may adopt regulations
to establish guidelines for the imposition of monetary penalties.