BILL ANALYSIS Ó
AB 251
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Date of Hearing: March 25, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
251 (Levine) - As Introduced February 9, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill provides a statutory definition for a "de minimis"
public subsidy that does not trigger the requirements of
prevailing wage law.
AB 251
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Specifically, this bill: Defines "de minimis" to mean a public
subsidy that is both less than $25,000 and less than 1% of the
total project cost, and will not apply to a project that was
advertised for bid, or a contract that was awarded, before
January 1, 2016.
FISCAL EFFECT:
Minor, absorbable costs to the Department of Industrial
Relations (DIR). To the extent the definition of "de minimis"
leads to the payment of a prevailing wage, private project costs
will likely increase.
COMMENTS:
1)Background. 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. Existing law requires prevailing wage to be paid to
all workers on public works projects (except for projects of
$1,000 or less). 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."
Statute further specifies if the state or a political
subdivision reimburses a private developer for costs that
would normally be borne by the public, or provides a public
subsidy to a private development project that is "de minimis"
in the context of the project, the private development project
is not subject to public works requirements, including paying
a prevailing wage. The term "de minimis", however, is not
AB 251
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currently defined in statute and as such, has been left to
DIR's interpretation.
2)Purpose. The State Building Construction and Trades Council
of California (Council), sponsor of this measure, note the
legal definition of de minimis is "trifling, minimal . . . so
insignificant that a court may overlook it." The Council
contends that DIR's past interpretations of de minimis - 1.64%
of total project costs in the tens of millions - is not
trifling.
3)Comments. In 2005, under Public Works Case No. 2004-024 (New
Mitsubishi Auto Dealership), DIR articulated a standard for
"de minimis" to mean "the public funding was proportionally
small enough, in relation to the overall cost of the project,
that the availability of those funds did not significantly
affect the economic viability of the project". Specifically,
DIR found that public reimbursement of $65,710 to a project
with a total cost of $4,010,010 represented only 1.64 percent
of the total project cost, and therefore could reasonably be
considered "de minimis." Since 2005, DIR has applied this test
and has used 2% as a general rule for threshold determination.
4)Prior Legislation. This bill is identical to AB 302 (Chau)
from 2013. That measure was vetoed by Governor Brown, who
stated the following in his veto message:
"This measure seeks to codify a definition of the term
'de minimus' for purposes of what level of public subsidy
triggers prevailing wage requirements on an otherwise
private project.
Longstanding practice has been to view the subsidy in
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context of the project and use 2% as a general threshold
for determinations. By codifying a standard that
establishes 'de minimus' as less than 1% and less than
$25,000 few, if any, projects receiving public subsidies
will be found to be exempt from prevailing wage
requirements.
While I remain a staunch supporter of prevailing wages
and the associated quality work and good paying jobs, I
am concerned that this measure is too restrictive.
Finally, there has been no showing that the current
practice is unreasonable."
Analysis Prepared by:Misty Feusahrens / APPR. / (916)
319-2081