BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 776|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 776
Author: Corbett (D)
Amended: 4/15/13
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 : Senate Rule 28.8
SUBJECT : Public works: prevailing wage rates: employer
payment credits
SOURCE : State Building and Construction Trades Council
DIGEST : This bill establishes an additional restriction on
credit granted for employer payments made to monitor and enforce
public works laws. This bill (1) prohibits credit from being
granted for employer payments made to monitor and enforce laws
related to public works if those payments are not made to a
program or committee established under the federal Labor
Management Cooperation Act of 1978 (Act), and (2) provides that
an employer may take credit for those specified employer
payments, even if those payments are not made (or costs are not
paid) during the same pay period for which credit is taken, if
the employer regularly makes those payments on no less than a
quarterly basis.
CONTINUED
SB 776
Page
2
ANALYSIS : Existing law requires that workers employed on
public works projects in California be paid the applicable
prevailing wage, as determined by the Director of the Department
of Industrial Relations, and that the body awarding a contract
assure compliance with this requirement.
Among other things, existing law regarding "public works"
projects:
1. Requires that not less than the general prevailing rate of
per diem wages be paid to all workers employed on a "public
works" project costing over $1,000 and imposes misdemeanor
penalties for violation of this requirement.
2. Defines "public work" to include, among other things,
construction, alteration, demolition, installation or repair
work done under contract and paid for in whole or in part out
of public funds.
3. Defines "paid for in whole or in part out of public funds"
to include, among other things, fees, costs, rents, insurance
or bond premiums, loans, interest rates, or other obligations
normally required in the execution of a contract that are
paid, reduced, charged at less than fair market value, waived
or forgiven by the state or political subdivision.
Existing law also stipulates that per diem wages include
employer payments for the following and provides that these
payments are a credit against the obligation to pay the general
prevailing rate of per diem:
1. Health and welfare.
2. Pension.
3. Vacation.
4. Travel.
5. Subsistence.
6. Apprenticeship or other training programs, as specified.
7. Worker protection and assistance programs or committees
CONTINUED
SB 776
Page
3
established under the Act (United States Code Section 175a of
Title 29), to the extent that their activities are directed
to the monitoring and enforcement of laws related to public
works.
8. Industry advancement and collective bargaining agreements
administrative fees, provided that they are required under a
collective bargaining as specified.
9. Other purposes similar to those specified in the above (1)
to (8), inclusive.
Existing law, however, also provides that these credits for
employer payments do not reduce the employer's obligation to pay
the hourly straight time or overtime wages found to be
prevailing.
Existing law specifies that no credit shall be granted for
benefits required to be provided by other state and federal law.
This bill establishes an additional restriction on credit
granted for employer payments made to monitor and enforce public
works laws. Specifically, this bill:
1. Prohibits credit from being granted for employer payments
made to monitor and enforce laws related to public works if
those payments are not made to a program or committee
established under the Act.
2. Provides that an employer may take credit for those
specified employer payments, even if those payments are not
made (or costs are not paid) during the same pay period for
which credit is taken, if the employer regularly makes those
payments on no less than a quarterly basis.
Prior legislation . AB 2677 (Swanson, Chapter 827, Statutes of
2012) provided that an increased employer payment contribution
that results in a lower hourly straight time or overtime wage is
not considered to be a violation of the applicable prevailing
wage determination so long as specified conditions are met.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
CONTINUED
SB 776
Page
4
SUPPORT : (Verified 5/3/13)
State Building and Construction Trades Council (source)
California Labor Federation, AFL-CIO
California State Association Of Electrical Workers
California State Pipe Trades Council
Western States Council of Sheet Metal Workers
OPPOSITION : (Verified 5/3/13)
Air Conditioning Trade Association
Associated Builders and Contractors of California
California Construction Compliance Group
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
ARGUMENTS IN SUPPORT : According to the author's office, this
bill protects the wages and fringe benefits of workers on public
works projects by clarifying the requirements for bona fide
fringe benefits. The author's office argues that, increasingly,
contractors selected for a prevailing wage project that do not
typically provide employee benefits equal to the level required
by prevailing wage laws are claiming credit against their
obligation to pay prevailing wages for payments to an
employer-sponsored "contract compliance committee," asserting
that these payments are for "other" purposes within Labor Code
Section 1773.1.
The author's office argues that such payments are problematic
for four reasons, (1) there is nothing joint about these
employer committees as only management participates; (2) workers
do not choose to have a portion of their prevailing wages sent
to the employer committee; (3) the primary purpose of the
employer committee is to minimize payroll taxes, not to help
workers, who did not create the committee or choose to fund it;
and (4) the employer committees appear to be more focused on
trying to repeal prevailing wage laws, instead of prevailing
wage law compliance.
Proponents argue that this bill closes loopholes in prevailing
wage law by clarifying that contractor payments for monitoring
and enforcing laws related to public works cannot count as a
credit towards a contractor's obligation to pay prevailing
CONTINUED
SB 776
Page
5
wages, if those payments are not made to a joint program or
committee established under the Act. According to proponents,
the Act requires labor and management to cooperatively set up
these committees and run them ensuring that workers and
management have a say in how they operate. Additionally,
proponents argue that when a contractor claims credits that they
then do not pay to their workers who actually earned the
benefits, they can underbid good contractors who not only abide
by the law but believe that construction workers should get the
pay and benefit packages they have earned.
ARGUMENTS IN OPPOSITION : According to opponents, this bill
prohibits credit from being granted for employer payments made
to monitor and enforce labor and apprenticeship laws related to
public works, if those payments are not required by a collective
bargaining agreement. They argue that the underground economy
is not a union versus non-union issue and neither is violation
of the laws on public works projects. According to opponents,
union contractors are required to make these payments by their
agreements, and they can be found in the published prevailing
wages under the "other" column. Non-union contractors, they
argue, receive the same credit when they voluntarily pay these
same moneys to support independent programs that monitor and
enforce public works labor law compliance.
Opponents assert that this bill is a direct effort to eliminate
independent compliance enforcement by defunding it and otherwise
seeking to limit the operation of such programs. They argue
that independent compliance efforts deserve credit in the exact
same way as the union contractor for the monies that collective
bargaining agreements collect. Additionally, opponents argue
that in many cases, the violations have not been reported by a
joint program supposedly in charge of such monitoring, but
discovered by - and subsequently reported to the Labor
Commissioner's office - an independent compliance programs for
action. Opponents further argue that public works compliance is
made more effective by having as wide a universe as possible to
audit and subsequently report violations.
Lastly, opponents argue that the real policy goal is to end
underground economy activity and it makes no sense to terminate
independent efforts to find and report labor law violations.
CONTINUED
SB 776
Page
6
PQ:k 5/6/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED