BILL ANALYSIS Ó
SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
Senator Tony Mendoza, Chair
2015 - 2016 Regular
Bill No: AB 326 Hearing Date: June 8,
2016
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|Author: |Frazier |
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|Version: |May 10, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Brandon Seto |
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Subject: Public works: prevailing wage rates: wage and
penalty assessments
KEY ISSUE
Should the Legislature require that funds held as collateral by
the Department of Industrial Relations (DIR) pending a
prevailing wage proceeding be released back to the contractors
who deposited them within 30 days of the conclusion of the
proceeding?
ANALYSIS
Existing law
Requires the Labor Commissioner to issue civil wage and
penalty assessments to contractors or subcontractors who
violate prevailing wage laws (Labor Code §1741)
States that after 60 days following the service of a
civil wage and penalty assessment for prevailing wage
violations, the contractors or subcontractors in question
who have not yet paid the outstanding unpaid wages, are
liable for additional penalties, called liquidated damages,
equal to the amount of the wages that remain unpaid (Labor
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Code §1742.1).
Allows contractors to appeal these decisions and obtain
an administrative or judicial review. If review is granted,
the Director of DIR may choose to waive liquidated damages
(Labor Code §1742.1).
Permits contractors or subcontractors to avoid paying
liquidated damages if, pending administrative and judicial
review, the full amount of the assessment or notice,
including penalties, has been deposited with DIR to hold in
escrow as collateral within 60 days following service of
the wage penalty assessment or notice (Labor Code §1742.1).
Requires the DIR to release these funds, plus any
interest earned, at the conclusion of all administrative
and judicial review to the persons and entities who are
found to be entitled to such funds (Labor Code §1742.1).
This Bill
Creates a time limit that requires the DIR to release
funds held in escrow for pending prevailing wage
proceedings, plus any interest earned, to the persons and
entities who are found to be entitled to such funds within
30 days following the occurrence of either:
1) The conclusion of all administrative and
judicial review.
2) Receipt by the DIR of a written notice from
the Labor Commissioner, his or her designee, or a
representative of a DIR-authorized labor compliance
program of a settlement or final resolution of the
wage and penalty assessment.
COMMENTS
1. Need for this bill?
Currently, if the DIR finds that a contractor or subcontractor
has violated prevailing wage laws they issue a penalty
assessment notice that fines these contractors. In addition to
fining these contractors and trying to recoup lost wages, the
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Labor Commissioner or the Division of Labor Standards
Enforcement may impose additional penalties, called liquidated
damages, if contractors do not pay these unpaid wages within
60 days. However, contractors can appeal these decisions, and
while they are doing so, they can avoid liquidated damages by
depositing the entire amount of the penalty assessment in cash
with the DIR to hold in escrow pending their appeal and
subsequent review.
Following resolution or settlement of these appeals, and/or
payment of wages, contractors may recoup any remaining funds
that they deposited as collateral with the DIR. However, there
is no specified time limit for when these funds must be
released by DIR. As a result, contractors in some cases must
wait for an indeterminate period of time to recover their
money. This bill creates a 30-day time limit for the release
of these funds and specifies conditions for when the 30-day
time limit commences.
2. Committee Amendments
Amendments negotiated by the author, the DIR and other
stakeholders will be taken as committee amendments should the
bill be passed by this committee. These amendments (below) are
technical clarifications to subsection (b)(2) regarding when
the 30-day time limit would commence for the return of funds
by the DIR.
(2) The department receives written notice from the Labor
Commissioner or his or her designee of a settlement or other
final disposition of an assessment issued pursuant to Section
1741 or from the authorized representative of the awarding
body of a settlement or other final disposition of a notice
issued pursuant to Section 1771.6.
3. Proponent Arguments :
Proponents contend that construction, by its nature, is a
project-by-project business model with a unique set of rules
it must follow. Employees may file a claim with the Division
of Labor Standards Enforcement regarding the payment of
prevailing wages. The contractor has a right to appeal the
claim; however, to avoid the additional penalty of liquidated
damages in addition to other penalties, the contractor must
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post a cash deposit, which includes the full amount of the
assessment notice, plus penalties.
Proponents are concerned that while statute stipulates that
the cash funds deposited by the contractor in order to avoid
liquidated damages shall be released at the conclusion of all
administrative and judicial review, there is no deadline in
the statute that states such funds shall be released in an
expedited manner. As a result, releasing such funds can take
months before a contractor is reimbursed. Unnecessarily tying
up cash can place innocent contractors in jeopardy of losing
their business or creating financial hardship. Even when a
contractor is fully exonerated, it is often difficult to
receive reimbursement from the state in a timely manner.
4. Opponent Arguments :
None received.
5. Prior Legislation :
AB 1741 (Frazier) of 2014 - proposed to amend this same code
section to allow a contractor or subcontractor in question to
deposit the full amount of the wage and penalty assessment
with the DIR in the form of a bond, instead of cash only, in
order to avoid liability for liquidated damages. AB 1741 was
held on suspense in the Assembly Appropriations Committee.
SUPPORT
Associated General Contractors (Sponsor)
Associated Builders & Contractors of California
California Professional Association of Specialty Contractors
Construction Employers' Association
Southern California Contractors Association
The Associated General Contractors
OPPOSITION
None on file.
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