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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