BILL ANALYSIS Ó
SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
Senator Tony Mendoza, Chair
2015 - 2016 Regular
Bill No: AB 219 Hearing Date: June 24,
2015
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|Author: |Daly |
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|Version: |June 1, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Deanna Ping |
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Subject: Public works: concrete delivery.
KEY ISSUE
Should the Legislature expand the definition of public works to
include the hauling and delivery of ready-mixed concrete to
carry out a public works contract?
ANALYSIS
Existing law requires that workers employed on public works
projects in California be paid the applicable prevailing wage,
as determined by the Department of Industrial Relations. Among
other things, existing law:
Requires that not less than the general prevailing
wage rate be paid to all workers employed on a "public
works" project costing over $1,000 dollars and imposes
misdemeanor penalties for a violation of this
requirement. (Labor Code §1771)
Defines "paid for in whole or in part out of public
funds" as, among other things, "Fees, costs, rents,
insurance or bond premiums, loans, interest rates, or
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other obligations normally required in the execution of a
contract that are paid, reduced, charged at less than
fair market value, waived or forgiven." (Labor Code
§1720)
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. (Labor Code §1720)
Also defines "public works," as the hauling of refuse
from a public works site to an outside disposal location,
with respect to contracts involving any state agency.
(Labor Code §1720.3)
Provides that "hauling of refuse" includes, but is
not limited to hauling soil, sand, gravel, rocks,
concrete, asphalt, excavation materials, and construction
debris.
(Labor Code §1720.3)
Provides that the contractor to whom the contract is
awarded, and any subcontractor under him, shall pay not
less than the prevailing wage to wall workers employed in
the execution of the contract. (Labor Code §1774)
This Bill expands the definition of "public works" to include
the hauling and delivery of ready-mixed concrete, as specified.
Specifically, this bill:
1)Expands the definition of "public works" to include the
hauling and delivery of ready-mixed concrete to carry out a
public works contract, with respect to contracts involving any
state agency or any political subdivision of the state.
2)Provides that "ready-mixed concrete" means concrete that is
manufactured in a factory or batching plant, according to a
set recipe, and then delivered in a liquefied state by mixer
truck for immediate incorporation into a project.
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3)Provides that the "hauling and delivery of ready-mixed
concrete to carry out a public works contract" means the job
duties for a ready mix driver that are used by the Department
of Industrial Relations (DIR) under existing law, and includes
receiving the concrete at the factory or batching plant and
the return trip to the factory or batching plant.
4)Provides that the applicable prevailing wage rate shall be the
current prevailing wage rate as determined for the geographic
area in which the factory or batching plant is located.
5)Provides that the entity hauling or delivering ready-mixed
concrete to carry out a public works contract shall enter into
a written subcontract agreement with the party that engaged
the entity to supply the ready-mixed concrete. The written
agreement shall require compliance with specified requirements
of existing law.
6)Requires the entity hauling or delivering ready-mixed concrete
to carry out a public works contract to submit a certified
copy of the payroll records to the party that engaged the
entity and to the general contractor within three working days
after the employee has been paid, accompanied by a written
time record certified by each driver.
7)Provides that this bill does not apply to contracts advertised
for bid or awarded prior to the effective date of this bill.
COMMENTS
1. Background on "Public Works":
Existing law requires that not less than the general
prevailing wage rate of per diem wages, as determined by the
director of the Department of Industrial Relations (DIR), be
paid to all workers employed on a "public works" projects.
The prevailing wage rate is the basic hourly rate paid on
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public works projects to a majority of workers engaged in a
particular craft, classification or type of work within the
locality and in the nearest labor market area. 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.
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." These debates
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). SB 975 also exempted certain
affordable housing, residential and private development
projects that met certain criteria.
2. Delivery of Ready Mix Concrete and Other Cases
Under current law and longstanding legal and Department of
Industrial Relations precedent, the employees of
subcontractors who haul material to public work sites must be
paid prevailing wage. Employees of bona fide material
suppliers are excluded from prevailing wage requirements. 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 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 434. DIR noted that the Court in Sansome applied the
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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
suppliers and not subcontractors. The opinion also stated that
the Legislature failed to pass a version of AB 302 that
designated concrete mix on-hauling a public work however, it
also noted "that such action does not reflect a legislative
intent to preclude the payment of prevailing wages to concrete
mix delivery drivers."
In a 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).
3. Need for this bill?
California recognizes the work of ready-mix drivers as skilled
construction work and has published prevailing wage
determinations which contractors are required to use in two
cases. Currently, the delivery of ready-mixed concrete for
incorporation into a public works construction project is
'covered work' under prevailing wage when the product is
delivered by a driver hired by the contractor to deliver the
product or when the product is manufactured at a 'dedicated'
plant (one that is established solely for that particular
public workers project). The author notes that exempted from
prevailing wage are deliveries by 'material men,' who are
essentially drivers that are employed directly by the
manufacturer, operating trucks owned by that manufacturer. The
author argues that there is no physical distinction between
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the work performed by ready-mix drivers employed by
contractors and drivers employed by manufacturers.
AB 219 provides that the delivery of ready-mixed concrete is
covered work in all public works circumstances. The work would
be covered regardless of who owns the truck delivering the
product, and regardless of whether the driver is operated by
an independent trucking company or by the manufacturer of the
concrete. According to the author, AB 219 closes a loophole in
current law by requiring the application of prevailing wage to
deliveries of all ready-mix concrete to public works projects.
4. Proponent Arguments :
Proponents state that this bill will expand the prevailing
wage to drivers delivering ready-mix concrete to public works
projects, regardless of whether the delivery drivers are
employed by material suppliers or project contractors.
Proponents 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 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).
Proponents 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.
However, they argue that 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. They contend that
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 argue that
this bill is about uniformity and a fair application of the
prevailing wage law to deliveries of ready-mix and not about
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expanding prevailing wage to all material drivers.
Lastly, proponents outline the various amendments taken to
address the concerns of opposition including: limiting the
bill to ready-mix only to remove concern about expansion to
other materials, adding a subcontract requirement that general
contractors need to allow access to certified payroll records
to ensure the ready-mix companies are liable for noncompliance
and protect general contractors from penalties, providing
certainty on the prevailing wage rate that applies (the
location of the plant site), defining the scope of work as
defined by DIR, applying the provisions to future projects
only, and specifying that the bill only applies to a public
works contract - addressing concerns regarding public/private
developments.
5. Opponent Arguments :
Opponents argue that AB 621 unfairly targets ready-mix
concrete and express three general arguments against this
bill.
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. They contend that the spreading,
vibrating, testing and finishing of the concrete is done by
trained construction workers and drivers do not participate in
on-site construction work, nor do they work alongside the
construction workers.
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.
They contend that 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
as material suppliers are only responsible for delivery of
material to a project site. They argue that once the product
is delivered, it becomes the responsibility of the contractor,
a separate legal entity.
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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 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. Opponents ask 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, opponents argue 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. Opponents
assert that 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, opponents argue that this bill presents considerable
challenges in maintaining and monitoring certified payroll
reports. Opponents also argue that AB 219 will cause the
state to incur significant enforcement costs for the DLSE and
lastly, will impose significant new material supply costs on
public construction and could negatively impact new
construction jobs.
6. Prior Legislation :
AB 302 (Floyd), Chapter 220, Statutes of 1999, added local
governmental agencies within the requirement to pay prevailing
wages on public works projects for the removal of refuse from
the construction site.
SB 975 (Alarcón), Chapter 938, Statutes of 2001, declared
legislative intent that projects financed through Industrial
Development Bonds issued by the California Infrastructure and
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Economic Development Bank must comply with existing laws
pertaining to prevailing wages. Additionally, the bill
established a definition for "public funds" and included
"installation" in the existing definition of "public works."
AB 1598 (Buchanan), Chapter 810, Statutes of 2012, defined
"installation," for the purpose of public works projects, to
include the assembly and disassembly of freestanding and
affixed modular office systems
SUPPORT
State Building and Construction Trades Council (Co-Sponsor)
Alameda Building Trades Council
American Federation of State, County and Municipal Employees,
AFL-CIO
California Labor Federation, AFL-CIO
California Professional Firefighters
California State Council of Laborers
California Teamsters Public Affairs Council
Contra Costa Building Trades Council
Fresno, Madera, Tulare & Kings Building Trades Council
Humboldt/Del Norte Building Trades Council
Imperial Building Trades Council
Kern, Inyo & Mono Building Trades Council
Los Angeles/Orange Building Trades Council
Marin Building Trades Council
Mid Valley Building Trades Council
Monterey/Santa Cruz Building Trades Council
Napa/Solano Building Trades Council
Northeastern, Shasta, Trinity, Lassen & Tehama Building Trades
Council
Sacramento/Sierra Building Trades Council
San Bernardino/Riverside Building Trades Council
San Diego Building Trades Council
San Francisco Building Trades Council
San Joaquin, Calaveras & Alpine Building Trades Council
San Mateo Building Trades Council
Santa Clara/San Benito Building Trades Council
Sonoma, Mendocino & Lake Building Trades Council
Stanislaus, Merced & Mariposa Building Trades Council
Tri-Counties Building Trades Council
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OPPOSITION
711 Materials Inc.
Associated Builders and Contractors of California
Associated General Contractors of California
Associated Ready Mixed Concrete
Assured Aggregates Company Inc
Bender Ready Mix
BoDean Company
Calaveras Materials
California Asphalt Pavement Association
California Chamber of Commerce
California Concrete Contractor Association's
California Construction and Industrial Materials Association
California Trucking Association
CalPortland Company
Casraic Brick
CEMEX
Desert Water Agency
Don Chappin Company
El Dorado Irrigation District
GCU Trucking
George Reed Inc
Granite Construction Co.
Granitrock
Hansen Brothers Enterprises
Hanson
Hanson HEIDELBERG cement Group
Hazard Construction
Holliday Rock Co.
Howard Jarvis Taxpayers Association
Knife River Construction
Livingston's Concrete Service Inc.
Mathews Readymix LLC
National Ready Mixed Concrete Company
Northgate Ready Mix
P.W. Gillibrand Co.
Plumbing-Heating-Cooling Contractors Association of California
Puente Ready Mix Inc.
Remedy Concrete, Asphalt & Aggregate
Southwest Concrete Pavement Association
Spragues' Ready Mix
Superior Ready Mix Concrete
Syar Concrete LLC
Teichert Materials
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United Contractors
United States Pumice Company
Vulcan Materials Co.
Western Electrical Contractors Association
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