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 SB 377 (Lieu) Page 1 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 SB 377 (Lieu) Page 2 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.