BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 377 (Lieu) - Public Works: Project Determinations: Wage and  
          Penalty Assessments
          
          Amended: May 9, 2013            Policy Vote: L&IR 3-1
          Urgency: No                     Mandate: No
          Hearing Date: May 20, 2013      Consultant: Robert Ingenito
          
          This bill meets the criteria for referral to the Suspense File.


          Bill Summary: SB 377 would require the Director of the  
          Department of Industrial Relations (DIR) to establish a new  
          process to determine whether a project is a public work, upon  
          the request of any party. 

          Fiscal Impact: DIR estimates that it would incur staffing costs  
          of $580,000 (special funds) for additional staff and related  
          equipment expenses to implement the provisions of the bill, for  
          (1) developing forms, (2) adopting regulations, (3) monitoring  
          reports by awarding bodies about projects not believed to be  
          subject to the requirements of the California prevailing wage  
          law, and (4) making coverage determinations and decisions on  
          appeal within the time prescribed by the bill. Additionally, the  
          bill would result in database costs to DIR to capture the  
          interested political subdivision, the parties and any person  
          that has asked for that notice the reason and all the pertinent  
          dates and timeframes pursuant to the decision process for the  
          determinations.  The estimated cost for this on-line  
          notification system is $230,000 in the first year of  
          implementation plus $50,000 ongoing for operation and  
          maintenance.

          Background: DIR enforces prevailing wage law in the State.  
          Toward that end, DIR's Director makes public works coverage  
          determinations on request, issuing letter decisions stating  
          whether a given project or type of work is subject to prevailing  
          wages and often defends those decisions in court. 

          The Division of Labor Standards Enforcement (DLSE) enforces the  
          prevailing wage laws and imposes penalties for violations. Using  
          research by Office of Policy, Research and Legislation, the  
          Director publishes general prevailing wage determinations in the  








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          58 counties for a variety of job classifications engaged in  
          public works. Included in these determinations are employer  
          payments for a variety of benefits including Health & Welfare,  
          Pension, Travel and Subsistence, Apprenticeship, and sums for  
          Industry Advancement and Enforcement.

          DLSE reviews certified payroll records and verifies that  
          employer payments are properly irrevocably made to a third party  
          plan, fund or program.  DLSE also assures that the proper  
          classifications were used and the appropriate wage rates were  
          paid.

          Currently, a city can put out a project for bid without  
          determining its eligibility as a public works project.

          Current law does not mandate when DIR must respond to a public  
          works determination request. However, current law does require  
          wage claims to be filed within 180 days upon completion of the  
          project. To the extent that DIR issues its determination after  
          the 180 days has expired, workers would be unable to recover  
          back pay or hold the contractors and awarding agencies liable  
          for wage violations.
          
          Proposed Law: This bill would, among other things, do the  
          following:

                 Require a political subdivision to notify the Labor  
               Commissioner, Director of Industrial Relations, and any  
               person who has asked for that notice if a project in which  
               it is interested in is not a public works.

                 Require the notification 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.

                 Require the Director of DIR to determine, within 60 days  
               of receipt of a determination request, whether a project is  
               a public works.

                 Require an administrative appeal of that determination  
               to be made within 30 days after receipt. 

                 Require the Director to issue a determination of an  








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               appeal with 30 days of its receipt.

                 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 is pending before the director.

          Staff Comments: To the extent that this bill leads to the  
          reclassification of contracts as public works projects after  
          they have been awarded, construction costs on these projects  
          would be higher than initially planned.