BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 219


                                                                    Page  1





          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.








                                                                     AB 219


                                                                    Page  2







          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.









                                                                     AB 219


                                                                    Page  3






          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. 










                                                                     AB 219


                                                                    Page  4





          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).


          










                                                                     AB 219


                                                                    Page  5





          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.   








                                                                     AB 219


                                                                    Page  6





          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  








                                                                     AB 219


                                                                    Page  7





          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  








                                                                     AB 219


                                                                    Page  8





          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,  








                                                                     AB 219


                                                                    Page  9





          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.


          








                                                                     AB 219


                                                                    Page  10







          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.  








                                                                     AB 219


                                                                    Page  11





          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.











                                                                     AB 219


                                                                    Page  12







          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  








                                                                     AB 219


                                                                    Page  13





          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.


          












                                                                     AB 219


                                                                    Page  14















          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








                                                                     AB 219


                                                                    Page  15







          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








                                                                     AB 219


                                                                    Page  16







          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








                                                                     AB 219


                                                                    Page  17







          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








                                                                     AB 219


                                                                    Page  18












          Analysis Prepared by:Benjamin Ebbink / L. & E. / (916) 319-2091