BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 251|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: AB 251
Author: Levine (D), et al.
Amended: 5/28/15 in Senate
Vote: 21
SENATE LABOR & IND. REL. COMMITTEE: 4-1, 6/10/15
AYES: Mendoza, Jackson, Leno, Mitchell
NOES: Stone
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 50-28, 4/6/15 - See last page for vote
SUBJECT: Public works: public subsidies
SOURCE: State Building and Construction Trades Council
DIGEST: This bill provides a statutory definition for a "de
minimus" public subsidy that does not trigger the requirements
of prevailing wage law. Specifically, this bill defines "de
minimus" to mean a public subsidy that is both less than $75,000
and less than one percent 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.
ANALYSIS:
Existing law:
1)Requires that workers employed on public works projects in
AB 251
Page 2
California be paid the applicable prevailing wage, as
determined by the Department of Industrial Relations.
2)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 and imposes misdemeanor penalties for a
violation of this requirement. (Labor Code §1771)
3)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 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)
4)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)
5)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, including the California
State University and the University of California, or any
political subdivision of the state. (Labor Code §1720.3)
6)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)
7)Provides that the contractor to whom the contract is awarded,
and any subcontractor under him, shall pay not less than the
prevailing wage to all workers employed in the execution of
the contract. (Labor Code §1774)
AB 251
Page 3
This bill provides a statutory definition for a "de minimus"
public subsidy that does not trigger the requirements of
prevailing wage law. Specifically, this bill defines "de
minimus" to mean a public subsidy that is both less than $75,000
and less than one percent 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.
Background
"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 DIR. According to the bill's sponsors, SB
975 was intended to remove ambiguity regarding the definition of
public subsidy of development projects.
Need for the bill. If a project is determined as a "public
work", 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. SB 975 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 minimus" in the context of the
project, the project would not be subject to the requirement to
pay prevailing wages. Currently there is no specific definition
for "de minimus" for the purpose of determining when prevailing
wage is applied to project.
According to the author, DIR has made various coverage
determinations attempting to define the term "de minimus" and
AB 251
Page 4
has interpreted "de minimus" with vastly different dollar
amounts and percentages of project costs which has led to
confusion and litigation as to what the term means. The author
notes that DIR's determinations of "de minimus" have ranged
from $65,710 to $4.5 million or from .5 percent to two percent
of a project's total cost.
According to the author, this bill restores the original
intent of SB 975 that the "de minimus" exception be limited to
situations in which the public subsidy is trivial such that it
should not have legal significance. AB 251 provides that a
subsidy is de minimus if it is both less than $75,000 and less
than one percent of the total project cost.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified6/24/15)
State Building and Construction Trades Council (source)
California Association of Sheet Metal and Air Conditioning
Contractors' National Association
California Labor Federation
California Legislative Conference of the Plumbing, Heating and
Piping Industry
California State Association of Electrical Workers
California State Pipe Trades Council
National Electrical Contractors Association
Western States Council of Sheet Metal Workers
OPPOSITION: (Verified6/24/15)
Air Conditioning Trade Association
Associated Builders and Contractors of California
Associated Builders and Contractors-San Diego Chapter
Associated General Contractors
California Building Industry Association
California Concrete Contractors Association
California Precast Concrete Association
Plumbing-Heating-Cooling Contractors Association of California
AB 251
Page 5
Western Electrical Contractors Association
ARGUMENTS IN SUPPORT: According to proponents, Labor Code
§1720(c)(3) provides that a project does not become subject to
the prevailing wage law if it receives a public subsidy "that is
de minimus in the context of the project." Proponents cite the
legal definition of "de minimus" as: "trifling, minimal?so
insignificant that a court may overlook it." Proponents contend
that DIR has strayed from this legal definition of de minimus,
and lacking a definition in statute, has loosely interpreted the
definition to apply to subsidies ranging from thousands to
millions of dollars. Proponents note that with this uncertainty
DIR has made determinations of de minimus on projects that have
had public subsidies given to developers have that ranged from
$65,710 to $1,664,804 or from .5 percent to 1.75 percent of a
project's total cost. Proponents argue that a public subsidy of
$75,000 is a large amount of taxpayer investment in a project
and arguably is not de minimus, making it reasonable to require
payment if the developer wants a public subsidy over that
amount.
ARGUMENTS IN OPPOSITION:Opponents argue that current law on what
constitutes "de minimus," a subject extensively debated as part
of the discussion surrounding SB 975, should be maintained to
ensure there is a true and substantial public investment in the
project before other state mandates come into play.
Specifically, opponents note that when Labor Code §1720 was
amended in 2001 (SB 975) the de minimus exception was discussed,
and although never codified, was generally agreed by the parties
to be 2% of the project. Opponents contend that subsequent DIR
determinations have upheld this agreement by requiring a
substantial public subsidy to trigger California's Public Works
Law. Opponents argue that this was a level stakeholders
generally agreed was reasonable to ensure there is a true and
substantial public investment in the project before other state
mandates come into play.
ASSEMBLY FLOOR: 50-28, 4/6/15
AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon,
Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd,
Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto,
Gipson, Gonzalez, Gordon, Gray, Holden, Irwin, Jones-Sawyer,
Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian,
O'Donnell, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,
AB 251
Page 6
Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams,
Wood, Atkins
NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,
Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper,
Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes,
Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner,
Waldron, Wilk
NO VOTE RECORDED: Gomez, Roger Hernández
Prepared by:Deanna Ping / L. & I.R. / (916) 651-1556
6/24/15 17:20:51
**** END ****