BILL ANALYSIS Ó
AB 219
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hernández, Chair
AB 219
(Daly) - As Amended April 14, 2015
SUBJECT: Public works: concrete delivery
SUMMARY: Expands the definition of "public works" to include
the hauling and delivery of ready-mixed concrete or asphaltic
concrete, as specified. Specifically, this bill:
1)Expands the definition of "public works" to include the
hauling and delivery of ready-mixed concrete or asphaltic
concrete to a public works site, with respect to contracts
involving any state agency or any political subdivision of the
state.
2)Provides that the "hauling and delivery of ready-mixed
concrete or asphaltic concrete to a public works site" means
the job duties for a ready mixer driver that are used by the
Department of Industrial Relations under existing law.
3)Provides that a person or entity may be a "contractor" or
"subcontractor" for purposes of specified existing law
regardless of whether the person or entity is subject to the
licensing requirements of the Contractors State Licensing
Board.
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4)Provides that for purposes of this bill, an agreement with a
contractor or subcontractor to perform any public work is a
"contract" or "subcontract."
5)Provides that the expanded definition of "public works" does
not apply to contracts advertised for bid or awarded prior to
the effective date of this bill.
EXISTING LAW:
1) Requires the prevailing wage rate to be paid to all workers
on "public works" projects over $1,000.
2) Provides that workers employed by a contractors or
subcontractors in the execution of any contract for public
work are deemed to be employed upon public work.
3) Defines "public works" 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.
4) Defines "public works" to include the hauling of refuse from
a public works site to an outside disposal location, as
specified.
FISCAL EFFECT: Unknown
COMMENTS: This bill is co-sponsored by the California Public
Affairs Council and the State Building and Construction Trades
Council, and would define "public works" for purposes of state
prevailing wage law to include the delivery of ready-mix
concrete or asphaltic concrete.
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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 actually predates federal prevailing
wage law. Many of these state laws were enacted as part of
general 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 enacted the first
prevailing wage law in 1891.
Eighteen additional states 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 when
government had become the major purchaser of construction, would
operate to reduce the wages paid to workers on those projects to
a level that would disrupt the local economy.
California's prevailing was law was enacted in 1931.
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. Thus, 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.
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Most public construction projects contracted for or by the
federal government or the District of Columbia are covered by
the federal prevailing wage law, the Davis-Bacon Act (Act),
while 33 states have prevailing wage laws, often referred to as
"little Davis-Bacon Acts," that encompass projects financed by
states and their political subdivisions.
The federal Davis-Bacon Act was enacted by Congress in 1931.
The Act requires workers employed under public construction
contracts of the federal government in excess of $2,000 to be
paid a minimum wage that the United States Department of Labor
determines to be prevailing for corresponding classes of
workers. In addition, sixty separate federal laws currently
specify the payment of Davis- Bacon wages for work prescribed.
The federal government also has two additional prevailing wage
laws - the Walsh-Healy Public Contracts Act of 1935 (which
covers federal contractors in manufacturing and supply
industries), and the O'Hara-McNamara Services Act of 1965 (which
covers service contracts).
The United States Supreme Court has stated the public policy
underlying the Davis-Bacon Act as one of:
"protecting local wage standards by preventing contractors
from basing their bids on wages lower than those prevailing
in the area . . . [and] giving local labor and the local
contractor a fair opportunity to participate in this
building program." Universities Research Ass'n. v. Coutu
(1981) 450 U.S. 754, 773-774).
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General Background on "Public Works" Under California Law
In general, "public works" is defined to include construction,
alteration, demolition, installation or repair work done under
contract and "paid for in whole or in part out of public funds."
Over a decade ago, there was much administrative and legislative
action over what constituted the term "paid for in whole or in
part out of public funds." This action culminated in the
enactment of SB 975 (Alarcón), Chapter # 938, Statutes of 2001,
which codified a definition of "paid for in whole or in part out
of public funds" that included certain payments, transfers,
credits, reductions, waivers and performances of work. At the
time, supporters of SB 975 stated that it established a
definition that conformed to several precedential coverage
decisions made by the Department of Industrial Relations (DIR).
These coverage decisions defined payment by land, reimbursement
plans, installation, grants, waiver of fees, and other types of
public subsidy as public funds for purposes of prevailing wage
law. According to the sponsors, SB 975 was intended to remove
ambiguity regarding the definition of public subsidy of
development projects.
SB 975 also exempted certain affordable housing, residential and
private development projects that met certain criteria.
Follow-up legislation, SB 972 (Costa), Chapter # 1048, Statutes
of 2002, was intended to clarify the application of SB 975 and
was the result of extensive discussions between the State
Building and Construction Trades Council (sponsor of SB 975),
affordable housing advocates, and the Davis Administration.
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Supporters of SB 972 contended that the original legislation had
unintended consequences for self-help housing and housing
rehabilitation projects. As a result of that compromise, SB 972
exempted from public works requirements the construction or
rehabilitation of privately-owned residential projects that met
certain criteria.
Why It Matters: "Prevailing Wage"
The determination of whether a project is deemed to constitute a
"public work" is important because the Labor Code requires
(except for projects of $1,000 or less) that the "prevailing
wage" to be paid to all workers employed on public works
projects.
Delivery of Ready Mix Concrete and Other Cases
A 1999 decision of the Department of Industrial Relations (DIR)
addressed the issue of whether the state's prevailing wage laws
applied to the delivery of ready-mix concrete to public works
job sites. Alameda Corridor Project: A&A Ready Mix Concrete and
Robertson's Ready Mix Concrete (Public Works Case No. 99-037).
DIR began by noting that longstanding precedent requires that
employees of subcontractors who haul material to public work
sites by paid prevailing wage. However, excluded from
prevailing wage requirements are employees of bona fide material
suppliers.
DIR relied on a California Court of Appeals decision to set
forth the general test for determining whether the work was
subject to the payment of prevailing wages. O.G. Sansome v.
California Department of Transportation, (1976) 55 Cal. App. 3d
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434. DIR noted that the Court in Sansome applied the following
test:
"The Court set forth three principal criteria for the
determination of material supplier. First, a material
supplier must be in the business of selling supplies to the
general public. Second, the plant from which the material is
obtained must not be established specially for the particular
contract. Third, the plant may not be located at the site of
the work."
Applying these three criteria to the case at hand, DIR
determined that the concrete entities involved were material
supplier and not subcontractors.
In addition to the three criteria mentioned above, DIR noted
that the Sansome court also considered another factor with
respect to materials that are not stockpiled: "If the materials
hauled are immediately utilized with no rehandling out of the
flow of construction, their delivery is an integrated aspect of
and functionally related to the construction." Again applying
this factor to the case at hand, DIR concluded:
"Notwithstanding the fact that all work performed in relation
to a construction project is important to the success of that
project, the delivery of the mix by A&A/Robertson's drivers on
this project is not, as a matter of law, an integrated aspect
of and functionally related to the construction work on the
project. Accordingly, the application of the fourth criterion
does not change the result that A&A/Robertson's are material
suppliers to the project and not subject to prevailing wage
requirements."
A subsequent decision by DIR addressed whether truck drivers
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employed by an independent trucking company (not a manufacturer)
who delivered base material and asphalt to a public works
project were entitled to the payment of prevailing wages.
Triple E Trucking (Public Works Case No. 04-0180 2008). DIR
again relied on the court decision in Sansome, as well as
another court decision in Williams v. SnSands Corporation,
(2007) 156 Cal. App. 4th 742 in noting:
"Thus, the 'delivery exemption' for drivers employed by
independent trucking companies has two requirements: the truck
driver is hauling materials from a bona fide materials
supplier and 'does not himself immediately and directly
incorporate the hauled material into the ongoing public works
project.'"
DIR concluded that the driver has to do more than drive onto the
job site and deliver material as directed by the construction
supervisor to be part of the "immediate and direct
incorporation" of the material. Rather, the "driver himself"
must actually leave their truck and do more than just deliver
materials. DIR concluded that, because the drivers employed by
Triple E Trucking did not leave their trucks, they are not
entitled to the payment of prevailing wages.
In another 2008 decision by DIR, it was determined that the
off-hauling of demolition debris and materials whether performed
by the on-site demolition contractor's employees or by an
independent trucking company is subject to prevailing wage
requirements. In addition, DIR determined that the on-hauling
of material for backfill performed by the on-site demolition
contractor's employees is also subject to prevailing wage
requirements. Friendly Inn Senior Center (City of Morgan Hill),
(Public Works Case No. 2008-027). DIR, again looking at prior
case law, stated that Sansone, as interpreted by Williams,
recognized a "delivery exemption" from prevailing wages for bona
fide material suppliers. (Williams v. SnSands Corporation,
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supra, 156 Cal.App.4th at p. 752.) Under Williams, employees of
on-site construction contractors who are carrying out and
completing the provisions of the public works contract, however,
are entitled to payment of prevailing wages under section
existing law. Such work is deemed performed "in the execution
of' the contract."
A more recent decision by DIR involved the on-hauling of
embankment fill material and aggregate base to a levee
rehabilitation project. Venice Island Levee Rehabilitation
(Jerico Products, Inc.), (Public Works Case No. 2012-038 2013).
DIR again quoted the Williams court in noting:
"What is important in determining the application of the
prevailing wage law is not whether the truck driver carries
materials to or from the public works project site. What is
determinative is the role the transport of the materials plays
in the performance or "execution" of the public works
contract." (Williams, supra, 156 Cal.App.4th at p. 762.)
However, here DIR found that the materials unloaded by the
workers at issue onto the levee were immediately incorporated
into the project. Therefore, DIR concluded that the unloading
of fill material by employees of Jerico from a barge to the
levee project was performed in the execution of the public works
contract and, therefore, subject to prevailing wage
requirements.
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ARGUMENTS IN SUPPORT
This bill is co-sponsored by the State Building and Construction
Trades Council of California, the California Teamsters Public
Affairs Council, and the California Labor Federation, AFL-CIO.
They state that this bill will expand the prevailing wage to
drivers delivering ready-mix concrete and asphaltic concrete to
public works projects, regardless of whether the delivery
drivers are employed by material suppliers or project
contractors.
The sponsors argue that ready-mix concrete is a precise mixture
or set recipe that is customized for construction sites and
which is transported from a dedicated batch location or from a
manufacturing facility. They contend that under current law, the
delivery of ready-mixed or asphaltic concrete for a public works
project is covered under the prevailing wage if either of the
following occurs: 1) The product is delivered by a driver hired
by the on-site general contractor or a subcontractor; or 2) the
product is manufactured at a "dedicated" plant (i.e. one that is
established solely for the public works project).
The sponsors state that under the current material supplier
exemption to the prevailing wage law, delivery drivers hired by
a material supplier are exempted from the prevailing wage.
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However, there is no physical distinction between the work
performed by ready-mix drivers employed by contractors and
ready-mix drivers employed by manufacturers, as the product and
work is identical. By expanding the prevailing wage to all
ready-mix drivers serving public works, this bill would create a
more fair application of the Labor Code that does not depend on
who owns the truck delivering the ready-mix or whether the
driver is employed by an onsite contractor or a cement
manufacturer.
They conclude that this bill is about uniformity and a fair
application of the prevailing wage law to deliveries of
ready-mix and asphaltic concrete and not about expanding
prevailing wage to all material drivers.
ARGUMENTS IN OPPOSITION
Opponents raise three general arguments against this bill.
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First, opponents contend that it ignored longstanding
distinctions in labor law between a driver and a construction
worker. They argue that ready-mix concrete is delivered to
construction sites by drivers, whose training and duties pertain
to driving. The spreading, vibrating, testing and finishing of
the concrete is done by trained construction workers. Drivers
do not participate in on-site construction work, nor do they
work alongside the construction workers. Opponents also state
that, by removing these distinctions, this bill also threatens
to bring confusion to other areas of employment law, such as the
coverage of manufacturing and construction employees under
separate Wage Orders of the Industrial Welfare Commission.
Second, opponents argue that this bill is inconsistent with the
contract between a supplier and a contractor. They note that
ready mix concrete is a finished product, delivered to the site
in an unfinished state pursuant to a purchase order. Ready mix
concrete delivered to the jobsite is essentially the same as
material delivered to the site such as paint, lumber or steel.
Opponents contend that, under the Uniform Commercial Code, as
adopted by California, the delivery of materials is treated
differently than construction. Material suppliers are only
responsible for delivery of material to a project site. Once
the product is delivered, it becomes the responsibility of the
contractor, a separate legal entity.
Finally, opponents argue that this bill contravenes longstanding
and well-established legal precedent that material suppliers are
not subject to prevailing wage law. They note that DIR has
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specifically addressed the question of whether the prevailing
wage applies in such cases. They argue that the bill also
potentially sets off a "chain reaction" by targeting a single
delivered product. If delivered concrete is subject to
prevailing wage law, what is the legal footing and rationale for
excluding the delivery of lumber, steel, paint, welding
materials, fuel and other supplies?
In addition, the Associated General Contractors (AGC) argues
that this bill imposes significant new liability and
administrative burdens on prime contractors since, under
California law, prime contractors are jointly and severally
liable for the payment of prevailing wages by all subcontractors
on a public work project. This bill would expand that liability
to include the payment of prevailing wages by a material
supplier providing ready-mixed concrete to a public works
construction jobsite. Prime contractors cannot practically
monitor prevailing wage compliance by material suppliers as they
can with jobsite contractors because ready-mixed concrete
drivers spend the overwhelming majority of their time off the
jobsite on public roads or at the permanent plant to be loaded
with the ready-mixed concrete, often in service to other
projects. Moreover, AGC argues that this bill presents
considerable challenges in maintaining and monitoring certified
payroll reports. This exponentially and unfairly increases a
prime contractor's exposure to debarment or registration
violations under California's strict prevailing wage and
registration requirements.
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REGISTERED SUPPORT / OPPOSITION:
Support
American Federation of State, County and Municipal Employees
California Labor Federation, AFL-CIO (co sponsor)
California Professional Firefighters
California State Council of Laborers
California Teamsters Public Affairs Council (co sponsor)
State Building and Construction Trades Council (co sponsor)
Opposition
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7/11 Materials Inc
American Alliance Authority & Compliance
American Alliance DT
Associated Builders and Contractors of California
Associated General Contractors of America, San Diego Chapter
Associated General Contractors of California
Associated Ready Mixed Concrete, Inc.
Bender Ready Mix, Inc.
BoDean Company
California Asphalt Pavement Association
California Concrete Contractor Association's
California Concrete Pumpers Alliance
California Construction and Industrial Materials Association
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California Construction Trucking Association
California Precast Concrete Association
California Professional Association of Specialty Contractors
Central Supply Co, Inc. dba Harbor Ready-mix
Coalition of American-Latino Truckers
Desert Water Agency
Don Chapin Company, Inc.
George Reed, Inc.
Hansen Bros. Enterprises
Hazard Construction Company
Heavy-Haul Conference
Howard Jarvis Taxpayers Association
Knife River Construction
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Mathews Readymix
National Ready Mixed Concrete Company
Northgate Ready Mix
Numerous Individuals
Plumbing-Heating-Cooling Contractors Association of CA
Puente Ready Mix, Inc.
Robertson's Ready Mix
Southern California Contractors Association
Spragues' Ready Mix
Vulcan Materials Company
Western Aggregates
Western Electrical Contractors Association
Western Trucking Alliance
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Analysis Prepared by:Benjamin Ebbink / L. & E. / (916) 319-2091