BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 326| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 326 Author: Frazier (D) Amended: 6/9/16 in Senate Vote: 21 SENATE LABOR & IND. REL. COMMITTEE: 4-0, 6/8/16 AYES: Mendoza, Stone, Leno, Mitchell NO VOTE RECORDED: Jackson SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 ASSEMBLY FLOOR: 70-0, 1/15/16 - See last page for vote SUBJECT: Public works: prevailing wage rates: wage and penalty assessments SOURCE: Associated General Contractors DIGEST: This bill requires 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, as specified. ANALYSIS: Existing law: AB 326 Page 2 1)Requires the Labor Commissioner to issue civil wage and penalty assessments to contractors or subcontractors who violate prevailing wage laws (Labor Code §1741). 2)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 Code §1742.1). 3)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). 4)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). 5)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 AB 326 Page 3 Commissioner, his or her designee, of a settlement or other final disposition of an assessment issued pursuant to Labor Code §1741 or from the authorized representative of the awarding body of a settlement or other final disposition of a notice issued pursuant to Labor Code §1771.6. Comments 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 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. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No SUPPORT: (Verified6/27/16) Associated General Contractors (source) Associated Builders & Contractors of California Construction Employers' Association AB 326 Page 4 California Professional Association of Specialty Contractors Southern California Contractors Association OPPOSITION: (Verified6/27/16) None received ARGUMENTS IN SUPPORT: 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 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. ASSEMBLY FLOOR: 70-0, 1/15/16 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, AB 326 Page 5 Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Gatto, Gipson, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Irwin, Jones, Kim, Lackey, Levine, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Rendon, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Williams, Wood, Atkins NO VOTE RECORDED: Bloom, Chávez, Eduardo Garcia, Gomez, Holden, Jones-Sawyer, Linder, Ridley-Thomas, Wilk Prepared by:Brandon Seto / L. & I.R. / (916) 651-1556 6/29/16 15:45:48 **** END ****