BILL ANALYSIS Ó
AB 251
Page 1
GOVERNOR'S VETO
AB
251 (Levine)
As Enrolled July 21, 2015
2/3 vote
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|ASSEMBLY: | | (April 6, |SENATE: | | (July 13, 2015) |
| |50-28 |2015) | |24-13 | |
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|ASSEMBLY: |53-26 | (July 16, | | | |
| | |2015) | | | |
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Original Committee Reference: L. & E.
SUMMARY: Provides a statutory definition for a "de minimis"
public subsidy that does not trigger the requirements of
prevailing wage law.
The Senate amendments:
1)Specify that a public subsidy is de minimis if it is both less
than $250,000 and less than 2% of the total project cost.
AB 251
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2)Add co-authors.
EXISTING LAW:
1)Requires the prevailing wage rate to be paid to all workers on
"public works" projects over $1,000.
2)Defines "public works" 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 Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
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.
AB 251
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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, the Department of
Industrial Relations (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.
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
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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 similar to AB 302 (Chau) of 2013. That measure was
vetoed by Governor Brown.
GOVERNOR'S VETO MESSAGE:
This measure seeks to codify a definition of the term 'de
minimis' to determine what level of public subsidy triggers
prevailing wage requirements on an otherwise private project.
Longstanding practice has been to view the subsidy in context of
the project and use 2% as a general threshold for
determinations. There has been no showing that the current
practice is unreasonable.
While I remain a staunch supporter of prevailing wages I am
concerned that this measure is too restrictive and may have
unintended consequences. Two years ago, I cited the same
concerns when I returned a similar bill without my signature.
This measure does not adequately address those concerns.
AB 251
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Analysis Prepared by:
Ben Ebbink / L. & E. / (916) 319-2091 FN:
0001346