BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 377|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 377
Author: Lieu (D)
Amended: 9/3/13
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
SENATE FLOOR : 28-10, 5/28/13
AYES: Beall, Block, Calderon, Cannella, Corbett, Correa, De
León, DeSaulnier, Evans, Galgiani, Hancock, Hernandez, Hill,
Hueso, Jackson, Lara, Leno, Lieu, Liu, Monning, Padilla,
Pavley, Price, Roth, Steinberg, Torres, Wright, Yee
NOES: Anderson, Berryhill, Emmerson, Fuller, Gaines, Huff,
Knight, Nielsen, Walters, Wyland
NO VOTE RECORDED: Wolk, Vacancy
ASSEMBLY FLOOR : 53-25, 9/9/13 - See last page for vote
SUBJECT : Public works: project determinations: wage and
penalty
assessments
SOURCE : International Union of Operating Engineers
CONTINUED
SB 377
Page
2
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.
Assembly Amendments (1) delete a notice provision related to a
political subdivision that believes that a project in which it
is interested, is not a public work, (2) make changes to the
director's project determination timelines, and make specified
determinations exempt from the Administrative Procedure Act, (3)
require the person filing a notice of completion to also provide
notice to the Labor Commissioner, as specified, and require the
awarding body or political subdivision accepting a public work
to provide to the Labor Commissioner notice of that acceptance,
as specified, and (4) toll the period for service of assessments
and for commencing an action brought by a joint labor-management
committee for the length of time notice is not provided to the
Labor Commissioner.
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.
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.
CONTINUED
SB 377
Page
3
Existing law:
1.Defines "awarding body" or "body awarding the contract" as the
department, board, authority, officer or agent awarding a
contract for public work.
2.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.
3.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.
4.Requires the Labor Commissioner to issue a civil wage and
penalty assessment to a contractor or subcontractor, or both,
if, after an investigation, the commissioner determines there
has been a violation of the laws regulating public works
projects, including the payment of prevailing wages. The
assessment is required to be served within 180 days after the
filing of a valid notice of completion in the county where the
public work was performed or within 180 days after the
acceptance of the public work, except as specified.
5.Authorizes a joint labor-management committee, established
pursuant to a specified provision of federal law, to bring an
action against any employer who fails to pay prevailing wages
as required by state law.
6.Requires each contractor and subcontractor to keep accurate
payroll records, as prescribed, that are certified and
available for inspection, as specified.
This bill:
1. Provides that the period of service for assessments for
prevailing wage violations shall be tolled for the period of
time required by DIR to determine whether a project is a
CONTINUED
SB 377
Page
4
public work.
2. Provides that the period of service for assessments shall
also be tolled for the period of time that a contractor or
subcontractor fails to provide certified payroll records in a
timely manner, as specified.
3. Provides that these tolling provisions shall also apply to
the period of time for commencing an action brought by a
joint labor-management committee.
4. Provides that when a request is made to DIR for a
determination of whether a specific project or type of work
is a public work, DIR shall make that determination within 60
days of receipt of the last notice of support or opposition
from any interested party.
5. Specifies that if DIR deems that the complexity of the
request requires additional time, DIR may have up to an
additional 60 days, as specified.
6. Provides that for projects or types of work that are
otherwise private development projects receiving public funds
as specified, DIR shall make the determination within 120
days of receipt of the last notice of support or opposition
from any interested party.
7. Provides that if the requestor of a determination is not a
political subdivision, the requester shall, within 15 days,
serve a copy of the request upon the political subdivision.
In such a case the awarding body shall advise DIR of its
position regarding the request within 30 days of receipt of
the request.
8. Provides for an administrative appeal process, as specified.
9. Provides that DIR shall have quasi-legislative authority to
determine coverage of projects or other types of work under
existing prevailing wage laws and a final determination on
any appeal is subject to judicial review, as specified.
10.Provides that these determinations, and any determinations
relating to the general prevailing wage rate, as specified,
CONTINUED
SB 377
Page
5
will be exempt from the Administrative Procedure Act.
11.Makes related findings and declarations.
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
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
CONTINUED
SB 377
Page
6
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 : (per Assembly Labor and Employment Committee analysis
of 8/14/13 - unable to reverify at time of writing)
International Union of Operating Engineers (source)
California Labor Federation, AFL-CIO
Construction Employer's Association
State Building & Construction Trades Council of California
OPPOSITION : (per Assembly Labor and Employment Committee
analysis of 8/14/13 - unable to reverify at time of writing)
Associated Builders and Contractors of California
California Special Districts Association
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.
CONTINUED
SB 377
Page
7
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.
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.
ASSEMBLY FLOOR : 53-25, 9/9/13
AYES: Alejo, Ammiano, Atkins, Bloom, Bocanegra, Bonilla, Bonta,
Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,
Chesbro, Cooley, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Hall, Roger
Hernández, Holden, Jones-Sawyer, Levine, Lowenthal, Medina,
Mitchell, Mullin, Muratsuchi, Nazarian, Pan, Perea, V. Manuel
Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone,
Ting, Weber, Wieckowski, Williams, Yamada, John A. Pérez
NOES: Achadjian, Allen, Bigelow, Chávez, Conway, Dahle,
Donnelly, Beth Gaines, Gorell, Grove, Hagman, Harkey, Jones,
Linder, Logue, Maienschein, Mansoor, Melendez, Morrell,
Nestande, Olsen, Patterson, Wagner, Waldron, Wilk
NO VOTE RECORDED: Vacancy, Vacancy
CONTINUED
SB 377
Page
8
PQ:AL:nl:k 9/9/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED