BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 377|
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THIRD READING
Bill No: SB 377
Author: Lieu (D)
Amended: 5/9/13
Vote: 21
SENATE LABOR & INDUSTRIAL RELATIONS COMMITTEE : 3-1, 4/24/13
AYES: Lieu, Leno, Yee
NOES: Wyland
NO VOTE RECORDED: Padilla
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/13
AYES: De León, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
SUBJECT : Public works: project determinations: wage and
penalty
assessments
SOURCE : International Union of Operating Engineers
DIGEST : This bill requires the Director (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, as specified.
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.
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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.
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. 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 is tasked with the
responsibility of determining the general prevailing rate of per
diem wages in accordance with specified standards.
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:
1. The awarding body previously affirmatively represented to
the contractor in writing, in the call for bids, or
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otherwise, that the work to be covered by the bid or contract
was not a "public work" as defined.
2. 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," as defined, and failed to disclose that
information to the contractor before the bid opening or
awarding of the contract.
Existing law states that if the Labor Commissioner
(Commissioner) or his/her designee determines after an
investigation that there has been a public works violation, the
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.
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.
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.
This bill:
1.Requires an awarding body to notify the Director, the
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.
2.Requires the awarding body 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
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project is not estimated to exceed six months.
3.Requires the Commissioner to serve a civil wage and penalty
assessment no later than 180 days of the date of the
determination of a violation.
4.Tolls (delays) the period for commencing a civil action by the
joint labor-management committee to the period of time
required by the Director to determine whether a project is a
public work, including a determination on administrative
appeal.
5.Requires the Director to determine, within 60 days of receipt
of a determination request, whether a project is a public
work.
6.Requires an administrative appeal of that determination to be
made within 30 days after receipt.
7.Requires the Director to issue a determination of an appeal
with 30 days of its receipt.
8.Makes the authority of the Director 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
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 prevailing wage laws that required
payment of specified hourly wages on government construction
projects, the State of Kansas being the first in 1891.
18 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
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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.
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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, 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 this 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 this bill. Additionally, this bill will 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.
SUPPORT : (Verified 5/23/13)
International Union of Operating Engineers (source)
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California Labor Federation, AFL-CIO
Construction Employees' Association
State Building & Construction Trades Council of California
OPPOSITION : (Verified 5/23/13)
Associated Builders and Contractors of California
Department of Finance
ARGUMENTS IN SUPPORT : Proponents argue that existing 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 this bill'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 existing law fails to provide a
set deadline for the 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.
ARGUMENTS IN OPPOSITION : According to the Associated Builders
and Contractors of California, this bill sets out a revised
process where a public entity has a new duty to self-report
public works projects they deem to not be a works. This bill
also extends the date that the Commissioner can assess
non-payment of prevailing wage penalties.
Opponents believe this bill unreasonably extends contractor
exposure to legal challenges and liability for new fines and
penalties because the date actions can commence is based on when
the Division of Labor Standards Enforcement makes a
determination of whether or not a project is a public works.
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The construction industry is just beginning to recover.
California also has some of the most stringent labor laws and
penalties for violating those requirements. Opponents do not
see a reason to increase contractor liability at this time.
PQ:nk 5/23/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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