BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        AB 326|
          |Office of Senate Floor Analyses   |                              |
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                                   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: 










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          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  







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            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







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          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,  







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            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


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