BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        SB 954|
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                                   THIRD READING 


          Bill No:  SB 954
          Author:   Hertzberg (D) 
          Introduced:2/4/16  
          Vote:     21 

           SENATE LABOR & IND. REL. COMMITTEE:  3-1, 4/6/16
           AYES:  Mendoza, Leno, Mitchell
           NOES:  Stone
           NO VOTE RECORDED:  Jackson

           SENATE APPROPRIATIONS COMMITTEE:  Senate Rule 28.8

           SUBJECT:   Public works:  prevailing wage:  per diem wages


          SOURCE:    State Building and Construction Trades Council

          DIGEST:   This bill redefines what benefits employers can pay  
          into as part of their obligation to pay workers on public works  
          projects the prevailing wage. Specifically, it qualifies certain  
          prevailing wage benefit payments only if they are required by a  
          collective bargaining agreement.  This bill also eliminates  
          employer payments to benefits that are merely similar to those  
          described under existing law. Lastly, this bill does not allow  
          employers to take credit for paying workers the prevailing wage  
          if the abovementioned conditions are not met.  

          ANALYSIS:  
          
          Existing law: 

          1)Requires that the applicable general prevailing rate of per  
            diem wages be paid to workers employed on public works  








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            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). 

          2)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). 

          3)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).

          4)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):

             a)   Health and welfare

             b)   Pension

             c)   Vacation

             d)   Travel

             e)   Subsistence

             f)   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.

             g)   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.

             h)   Industry advancement and collective bargaining  







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               agreements (CBAs) administrative fees, provided that these  
               payments are required under a CBA pertaining to the  
               particular craft, classification, or type of work within  
               the locality or the nearest labor market area at issue.

             i)   Other purposes similar to those specified in paragraphs  
               (a) to (h), inclusive.
           
           This bill:

          1)Redefines the prevailing wage to include industry advancement  
            and CBAs administrative fees, provided that the employer is  
            required by a CBA to pay them.

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

             a)   Certain apprenticeship or other training programs.

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

             c)   Industry advancement and CBAs administrative fees.

          3)Prevents the use of employer payments for industry advancement  
            as credit for paying the prevailing wage if those payments are  
            not required by a CBA.

          Comments
          
          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. 







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          This bill revises 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  
          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.  


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          SUPPORT:  (Verified  4/20/16)

          State Building and Construction Trades Council (source)
          California Labor Federation, AFL-CIO
          Southern California Contractors Association

          OPPOSITION:(Verified  4/20/16)

          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


          ARGUMENTS IN SUPPORT:     The State Building and Construction  
          Trades Council states that 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  







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          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.   


          ARGUMENTS IN OPPOSITION:     Opponents state that against the  
          total prevailing wage amount, contractors are allowed credits  
          for a range of cash wages and benefit 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. This 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.  


          Prepared by:Brandon Seto / L. & I.R. / (916) 651-1556
          4/20/16 16:13:28









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