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 ----------------------------------------------------------------- |Author: |Hertzberg | |-----------+-----------------------------------------------------| |Version: |February 4, 2016 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Brandon Seto | | | | ----------------------------------------------------------------- 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). SB 954 (Hertzberg) Page 2 of ? 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 SB 954 (Hertzberg) Page 3 of ? 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 SB 954 (Hertzberg) Page 4 of ? 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 SB 954 (Hertzberg) Page 5 of ? 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 SB 954 (Hertzberg) Page 6 of ? 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 -- END --