BILL ANALYSIS Ó
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: April 24, 2013 2013-2014 Regular
Session
Consultant: Deanna D. Ping Fiscal:Yes
Urgency: No
Bill No: SB 377
Author: Lieu
As Amended: April 1, 2013
SUBJECT
Public works: project determinations: wage and penalty
assessments
KEY ISSUES
Should the legislature require an awarding body to notify
specified interested parties, when they believe a project is not
a "public work" and, therefore, not subject to prevailing wage
requirements?
Should the legislature require the Director of Industrial
Relations to issue a determination of whether a project is
deemed to be a "public work" within 60 days?
Should the legislature require the Labor Commissioner to serve a
civil wage and penalty assessment for violations of public works
provisions within 180 days of the violation being determined?
ANALYSIS
Existing law defines "public works" to include, among other
jobs, construction, alteration, demolition, installation, or
repair work done under contract and paid for in whole or in part
out of public funds. (Labor Code §1720)
Under existing law , "paid for in whole or in part out of public
funds" means, among other things, the following:
1. The payment of money or the equivalent of money by the
state or political subdivision directly to or on behalf of
the public works contractor, subcontractor, or developer.
2. The performance of construction work by the state or
political subdivision in execution of the project.
3. Fees, costs, rents, insurance or bond premiums, loans,
interest rates, or other obligations that would normally be
required in the execution of the contract, that are paid,
reduced, charged at less than fair market value, waived, or
forgiven by the state or political subdivision.
4. Money loaned by the state or political subdivision that
is to be repaid on a contingent basis.
Existing law defines "awarding body" or "body awarding the
contract" as the department, board, authority, officer or agent
awarding a contract for public work (Labor Code §1722)
Existing law requires all employees who work on public works
projects costing $1,000 or more to be paid the general
prevailing rate of per diem wages and the general prevailing
rate for holiday and overtime work for the specific location
where the public work is to be performed (Labor Code §1771) This
requirement is applicable to work performed under contract and
it does not apply to work carried out by a public agency with
its own forces. Existing law provides certain exemptions to the
payment of prevailing wage that includes, among others, private
residential projects. The Director of the Department of
Industrial Relations (DIR) is tasked with the responsibility of
determining the general prevailing rate of per diem wages in
accordance with specified standards. (Labor Code §1773)
Existing law allows a contractor to bring an action in court 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 (per prevailing wage provisions) if it meets the
following requirements:
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" as defined.
The awarding body received actual written notice
from the Department of Industrial Relations that the work
to be covered by the bid or contract is a "public work,"
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Senate Committee on Labor and Industrial Relations
as defined, and failed to disclose that information to
the contractor before the bid opening or awarding of the
contract. (Labor Code §1726)
Existing law states that if the Labor Commissioner or his or her
designee determines after an investigation that there has been a
public works violation, the Labor Commissioner shall with
reasonable promptness issue a civil wage and penalty assessment
to the contractor or subcontractor or both. The assessment shall
be in writing and shall describe the nature of the violation and
the amount of wages, penalties, and forfeitures due. (Labor Code
§1741)
Existing law states that the assessment should 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
not later than 180 days after acceptance of the public work,
whichever occurs last. (Labor Code §1741)
Existing law states that a joint labor-management committee may
bring an action in any court of competent jurisdiction against
an employer that fails to pay the prevailing wage to its
employees. This action shall be commenced not later than 180
days after the filing of a valid notice of completion in the
office of the county recorded in each county in which the public
work or some part thereof was performed or not later than 180
days after acceptance of the public work, whoever last occurs.
(Labor Code §1771.2)
This Bill would:
Require an awarding body to notify the Director of
Industrial Relations, the Labor Commissioner, and any
person who has asked for that notice, if a project in which
it has a legal interest is not a public work.
o The awarding body is required to notify these
entities within 30 days of the commencement of any
work estimated to last six months or more, and before
the commencement of any work if a project is not
estimated to exceed six months.
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Require the Labor Commissioner to serve a civil wage and
penalty assessment within 180 days of the date of the
determination of a violation.
o The period of service of assessments shall be
delayed to meet the period of time required by the
Director of Industrial Relations to make the public
works determination.
Toll (delay) the period for commencing a civil action by
the joint labor-management committee to the period of time
required by the Director of Industrial Relations to
determine whether a project is a public work, including a
determination on administrative appeal.
Allow any party to request from the Director of
Industrial Relations a determination of whether a project
is a public work within 60 days of receipt of that request.
o Allows a party to make an administrative
appeal of the director's determination within 30 days.
o If the director deems that the complexity of
the request or appeal requires additional time, the
director may have an additional 60 days if he or she
certifies in writing the reasons for the extension.
Make the authority of the Director of Industrial
Relations to determine coverage of projects under the
prevailing wage laws quasi-legislative, and a final
determination on any appeal would be subject to judicial
review.
COMMENTS
1. A Brief History of State and Federal Prevailing Wage Law:
State prevailing wage laws vary from state to state, but do
share a common history that predates federal prevailing wage
law. Many of these state laws were enacted as part of
Progressive Era reform efforts to improve working conditions
at the end of the 19th and the beginning of the 20th
centuries. Between 1891 and 1923, seven states adopted
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prevailing wage laws that required payment of specified hourly
wages on government construction projects, the State of Kansas
being the first in 1891.
Eighteen additional states (including California in 1931) and
the federal government adopted prevailing wage laws during the
Great Depression of the 1930s amidst concern that acceptance
of the low bid, a common requirement of government contracting
for public projects, would reduce local wages and disrupt the
local economies. This was particularly in the depths of the
Great Depression, where, for some local economies, the
government had become the primary purchaser of construction
products and a significant employer.
In general, the proponents of prevailing wage legislation
wanted to prevent the government from using its purchasing
power to undermine the wages of its citizens. It was believed
that the government should set an example, by paying the wages
prevailing in a locality for each occupation hired by
government contractors to build public projects. Even today,
prevailing wage laws are generally meant to ensure that wages
commonly paid to construction workers in a particular region
will determine the minimum wage paid to the same type of
workers employed on publicly funded construction projects.
2. Need for this bill?
Under current law there is no notification requirement for an
awarding body to inform interested individuals when a project
it has a legal interest in is not a public work. Currently, a
city can put a project for bid without determining the
project's status as a public works project first. This lack of
a determination allows the contractor with the winning bid to
pay its workers below the legally mandated prevailing wage if
in fact the project is a public work and required the payment
of prevailing wage from inception. SB 377 would require an
awarding body to notify the Director of Industrial Relations
and Labor Commissioner, as well as any person who has
requested said notice, if a project is not a public works.
This notification requirement would help clear up any
ambiguity as to a project's public work status.
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Current law also does not provide a set deadline for the
Director of Industrial Relations to issue a determination of a
project's public work status and the Labor Commissioner to
serve a civil wage and penalty assessment when a determination
is made. According to the author's office, there have been
cases where it has taken over two or three years to receive
these determinations and reach a resolution. The issue with
this long wait time is that the statute of limitations to
bring a civil action runs out - preventing workers from being
able to collect their owed wages. SB 377 seeks to impose time
limits on the process for the determination of a project's
public work status and the civil wage and penalty assessment.
This would alleviate the long wait time many workers have
experienced and SB 377's tolling (or delaying) of the 180 day
statute to after the receipt of the public works determination
provides sufficient time for workers to pursue civil action
for the owed wages.
3. Proponent Arguments :
Proponents argue that current law lacks a sufficient
notification requirement for public works projects to inform
the public about whether a project is determined to be a
public works. They contend that this allows an awarding body
to put out a project for bid without a determination -
resulting in the contractor to pay below the prevailing wage,
depriving workers of their lawful wages. Proponents argue that
SB 377's notification requirement will ensure that the
contractor with a winning bid of a public works project will
pay the lawfully mandated prevailing wage.
Proponents further argue that current law fails to provide a
set deadline for the Labor Commissioner to serve a civil wage
and penalty assessment to determine a violation. They maintain
that this lack of a streamlined appellate process causes
workers to have to suffer through a long waiting period before
learning if there was in fact a wage violation. Proponents
contend when a decision is finally granted, the long wait time
often leaves workers without any options because the statute
of limitations for legal action has run out - eliminating the
worker's opportunity to collected the owed wages.
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4. Opponent Arguments :
None on file.
5. Prior Legislation :
SB 966 (Alarcon), Chapter 804, Statutes of 2003 - permitted a
contractor to recover increased costs from an awarding body of
public works, if the work had been determined to be subject to
prevailing wages after the job had begun.
SUPPORT
International Union of Operating Engineers (Sponsor)
California Labor Federation, AFL-CIO
State Building & Construction Trades Council of California
OPPOSITION
None received.
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