BILL ANALYSIS Ó
AB 251
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ASSEMBLY THIRD READING
AB
251 (Levine)
As Introduced February 9, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+--------------------+--------------------|
|Labor |5-2 |Roger Hernández, |Harper, Patterson |
| | |Chu, Low, McCarty, | |
| | |Thurmond | |
| | | | |
| | | | |
|----------------+------+--------------------+--------------------|
|Appropriations |12-4 |Gomez, Bonilla, |Bigelow, Chang, |
| | |Bonta, Calderon, |Gallagher, Wagner |
| | |Daly, | |
| | |Eduardo Garcia, | |
| | |Eggman, Holden, | |
| | |Quirk, Rendon, | |
| | |Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Provides a statutory definition for a "de minimis"
public subsidy that does not trigger the requirements of
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prevailing wage law. Specifically, this bill:
1)Defines "de minimis" to mean a public subsidy that is both less
than $25,000 and less that 1% of the total project cost.
2)Specifies that this bill does not apply to a contract that was
advertised for bid, or a contract that was awarded, before
January 1, 2016.
EXISTING LAW:
1)Requires the prevailing wage rate to be paid to all workers on
"public works" projects over $1,000.
2)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.
3)Establishes a definition for "paid for in whole or in part out
of public funds," as specified.
4)Provides that if the state or a political subdivision reimburses
a private developer for costs that would normally be borne by
the public, or provides directly or indirectly a public subsidy
to a private development project that is "de minimis" in the
context of the project, an otherwise private development project
shall not thereby become subject to the requirement to pay
prevailing wages.
FISCAL EFFECT: According to the Assembly Appropriations
Committee, this bill will result in minor, absorbable costs to the
Department of Industrial Relations (DIR).
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COMMENTS: According to the author, this bill will clearly define
when a public subsidy is "de minimis" for the purpose of
determining when prevailing wage law applies to certain projects.
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. SB 975
also provided that if the state or a political subdivision
reimburses a private developer for costs that would normally be
borne by the public, or provides directly or indirectly a public
subsidy to a private development project that is "de minimis" in
the context of the project, an otherwise private development
project shall not thereby become subject to the requirement to pay
prevailing wages. However, SB 975 did not provide a definition
for the term "de minimis."
Therefore, since the enactment of SB 975, DIR has issued several
coverage determinations attempting to define the term "de
minimis."
This bill is sponsored by the State Building and Construction
Trades Council of California. They argue that the legal
definition of "de minimis" is "trifling, minimal...so
insignificant that a court may overlook it." Unfortunately, in
recent years, DIR has strayed from this legal definition of "de
minimis," and lacking a definition in statute, has loosely
interpreted the definition to apply to subsidies ranging from
thousands to millions of dollars. As a result, the sponsor argues
that there has been uncertainty over the definition of "de
minimis" over the last decade. DIR has made determinations of "de
minimis" on projects that have had public subsidies given to
developers that have ranged from $65,710 to $4.5 million.
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The sponsor concludes that a public subsidy as much or more than
the definition used in this bill is a notable amount of taxpayer
investment in a project and arguably is not "de minimis," so it is
reasonable to require payment of prevailing wages if the developer
wants a public subsidy over that amount.
Opponents argue that when SB 975 was enacted in 2001, there was
extensive debate regarding the "de minimis" exception. Although
never codified, opponents contend that there was general agreement
among the stakeholders that the trigger for the exception was 2%
of the total project cost. This was a level the stakeholders
generally agreed was reasonable to ensure that there is a true and
substantial public investment in the project before other state
mandates come into play.
This bill is identical to AB 302 (Chau) of 2013. That measure was
vetoed by Governor Brown.
Analysis Prepared by: Ben Ebbink / L. & E. /
(916) 319-2091 FN: 0000078
AB 251
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