BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    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.

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           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  

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             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

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           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  

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          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.  
           


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          PQ:k  5/6/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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