BILL ANALYSIS                                                                                                                                                                                                    Ó





          SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
                             Senator Tony Mendoza, Chair
                                2015 - 2016  Regular 

          Bill No:               SB 954       Hearing Date:    April 6,  
          2016
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          |Author:    |Hertzberg                                            |
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          |Version:   |February 4, 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:  per diem wages


          KEY ISSUE
          
          Should the Legislature redefine what type of employer  
          contributions to benefits count toward the requirement to pay  
          workers the prevailing wage on public works projects?

          Should the Legislature prohibit employers from taking credit for  
          paying the prevailing wage by contributing to certain employee  
          benefits, if those contributions are not required by a  
          collective bargaining agreement? 
          
          
          ANALYSIS
          
           Existing law  

                 Requires that the applicable general prevailing rate of  
               per diem wages be paid to workers employed on public works  
               projects in California. This rate is determined by the  
               Director of the Department of Industrial Relations for each  
               locality in which the public work is to be performed and  
               for each craft, classification, or type of worker needed to  
               execute the public works project (Labor Code §1773). 








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                 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). 

                 Requires that employers pay the general prevailing rate  
               of per diem wages to all workers employed on a public works  
               project costing over $1,000 (Labor Code §1771).

                 Allows employers, in addition to paying these workers  
               basic straight-time and overtime pay, to use payments to  
               the following as a credit against the obligation to pay the  
               general prevailing rate of per diem wages (Labor Code  
               §1773.1).

                  1)        Health and welfare
                  2)        Pension
                  3)        Vacation
                  4)        Travel
                  5)        Subsistence
                  6)        Apprenticeship or other training programs  
                    authorized by §3093 of the Labor Code, to the extent  
                    that the cost of training is reasonably related to the  
                    amount of contributions.
                  7)        Worker protection and assistance programs or  
                    committees established under the federal Labor  
                    Management Cooperation Act of 1978 (29 U.S.C. Sec.  
                    175a), to the extent that the activities of the  
                    programs or committees are directed to the monitoring  
                    and enforcement of laws related to public works.
                  8)        Industry advancement and collective bargaining  
                    agreements administrative fees, provided that these  
                    payments are required under a collective bargaining  
                    agreement pertaining to the particular craft,  
                    classification, or type of work within the locality or  
                    the nearest labor market area at issue.
                  9)        Other purposes similar to those specified in  
                    paragraphs (1) to (8), inclusive.
           

          This Bill  
          
                 Redefines the prevailing wage to include industry  
               advancement and collective bargaining agreements  







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               administrative fees, provided that the employer is required  
               by a collective bargaining agreement to pay them.

                 Revises the definition of the prevailing wage to exclude  
               employer payments for other purposes similar to: 

                  1)        Certain apprenticeship or other training  
                    programs.

                  2)        Worker protection and assistance programs or  
                    committees established under the federal Labor  
                    Management Cooperation Act of 1978 (29 U.S.C. Sec.  
                    175a).

                  3)        Industry advancement and collective bargaining  
                    agreements administrative fees.

                 Prevents the use of employer payments for industry  
               advancement as credit for paying the prevailing wage if  
               those payments are not required by a collective bargaining  
               agreement. 


          COMMENTS
          

          1.  Need for this bill?

            The prevailing wage is derived from the basic hourly rate paid  
            on public works projects to a majority of workers engaged in a  
            particular type of work within the locality and in the nearest  
            labor market area. This ensures, among other things, that  
            government funds do not become tangled up in competitive  
            under-bidding which can reduce worker wages. The prevailing  
            wage in both federal and California law can include two parts:  
             1) a basic hourly rate of pay and 2) employer payment of  
            various benefits for the employee such as health and life  
            insurance, pension, vacation, among others. In short, rather  
            than just money, these employers can give their employees  
            money and bona fide benefits as long as the value of both  
            components add up to the prevailing wage rate. 
            
            This bill would revise the definition of acceptable employer  
            payments toward benefits, and thus what counts as payment of  
            the prevailing wage. The author feels that the current broad  







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            definition of these employer payments allows non-union  
            employees who are not party to a collective bargaining  
            agreement to have part of their wages deducted for industry  
            advancement purposes. As such, employers can deduct and use  
            these wages without the input or consent of the employees or  
            their labor representatives.  The law's uncertainty regarding  
            benefits is compounded by the inclusion of employer payments  
            for other purposes similar to industry advancement as part of  
            the prevailing wage.  


          2.  Proponent Arguments  :
            
            Existing law permits employer credits for industry advancement  
            purposes that are "similar" to those in a collective  
            bargaining agreement (CBA) pertaining to a particular craft,  
            classification, or type of work in the nearest labor market.  
            This credit, a reduction in the amount of an employee's check,  
            is diverted into a fund that can be used for lobbying or other  
            activities that are not subject to a specific CBA. 
            
            Proponents further argue that current law is not sufficiently  
            clear that the employer must actually be a party to a CBA that  
            requires such contributions. This ambiguity has been used by  
            contractors to reduce worker's wages to fund the contractors'  
            own "industry advancement." This is done without worker  
            representation or a say as to whether employees want these  
            deductions to occur, for what purposes the money can be used,  
            and the amount of the deduction. In fact, these funds are  
            often used to support activities that are contrary to the  
            interests of workers, such as efforts to weaken health and  
            safety standards or to reduce wages on public works and  
            apprenticeship training standards.

            Finally, proponents state that the collective bargaining  
            process is essential to level the playing field between  
            management and labor, so that any payments that reduce  
            workers' wages are actually in the interests of workers. SB  
            954 protects worker wages and clarifies the list of credits an  
            employer may claim when reducing per diem wages. 

          3.  Opponent Arguments  :

            Against the total prevailing wage amount, contractors are  
            allowed credits for a range of cash wages and benefit  







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            payments. Funds deposited by both union and non-union  
            contractors into the "other payments" category, which include  
            benefits, may be used for "industry advancement." Opponents  
            claim that SB 954 is now trying to eliminate non-union  
            contractors' ability to fund industry advancement as part of  
            their permitted credits when calculating the prevailing wage  
            for their workers.

            Opponents contend that the Legislature should not be singling  
            out prevailing wage contributions based on the union or  
            non-union status of the contractor. The bill is devoid of  
            conditions that empower workers represented by a union to have  
            democratic control and proper accounting of trusts and  
            committees that receive these employer payments.  Instead,  
            opponents believe that SB 954 simply bans any payments not  
            made pursuant to a CBA. 

            Opponents claim that California can assist in building a  
            skilled-workforce through education and hands-on training  
            utilizing funds from the "other payments" category for  
            industry advancement. SB 954 takes much of that away by saying  
            only union contractors may use these funds for industry  
            advancement.

          4.  Prior Legislation  :

                 SB 776 (Corbett), Chapter 169, Statutes of 2013 -  
               prohibited credit from being granted for employer payments  
               made to monitor and enforce laws related to public works if  
               those payments are not made to a program or committee  
               established under the federal Labor Management Cooperation  
               Act of 1978 and provided that an employer may take credit  
               for those specified employer payments, even if those  
               payments are not made, or costs are not paid, during the  
               same pay period for which credit is taken, if the employer  
               regularly makes those payments on no less than a quarterly  
               basis.
          
          
          SUPPORT
          
          State Building and Construction Trades Council (sponsor)

          
          OPPOSITION







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          Air Conditioning Trade Association
          Associated Builders and Contractors of California
          Associated Builders and Contractors - San Diego Chapter
          California Construction Advancement Group
          Plumbing-Heating-Cooling Contractors Association of California
          Western Electrical Contractors Association

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