BILL ANALYSIS Ó
SB 954
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Date of Hearing: June 22, 2016
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hernández, Chair
SB
954 (Hertzberg) - As Amended June 14, 2016
SENATE VOTE: 27-12
SUBJECT: Public works: prevailing wage: per diem wages
SUMMARY: Qualifies which employer payments may be included as
per diem wages for purposes of an employer's obligation to pay
prevailing wages on public works projects. Specifically, this
bill:
1)Provides that those per diem wages may include employer
payments for industry advancement and collective bargaining
agreement administrative fees only if such payments are made
pursuant to a collective bargaining agreement to which the
employer is obligated.
2)Provides that those per diem wages may include employer
payments for "other purposes similar" to certain
apprenticeship or other training programs, worker protection
and assistance programs or committees established under the
federal Labor Management Cooperation Act of 1978, and industry
advancement and collective bargaining agreements
administrative fees, only if such payments are made pursuant
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to a collective bargaining agreement to which the employer is
obligated.
3)Prevents the use of employer payments for industry advancement
and collective bargaining agreement administrative fees from
being used as a credit against the obligation to pay
prevailing wages if those payments are not made pursuant to a
collective bargaining agreement to which the employer is
obligated.
EXISTING LAW:
1)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).
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
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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, as specified,
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, 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 agreement
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.
i) Other purposes similar to those specified in paragraphs
(a) to (h), inclusive.
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FISCAL EFFECT: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS: According to the author, the current broad definition
of these "employer payments" allows non-union employees who are
not party to a collective bargaining agreement to have their per
diem wage rates include employer payments used for industry
advancement purposes. As such, employers can credit these
payments towards their prevailing wage obligation without the
input or consent of the employees or their labor
representatives. In addition, 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.
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. Proponents of prevailing wage laws contend
that 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.
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Arguments in Support
The State Building and Construction Trades Council of California
is the sponsor of this bill and writes in support:
"This bill will protect construction workers on public works
projects by ensuring they receive their rightfully owed wages.
The bill prohibits contractors/employers from, without the
consent of the worker or worker's collective bargaining
representative, deducting a portion of the worker's hourly
wages for use by contractor associations.
Contractors on public works projects are required to pay their
employees at least the prevailing wage applicable for the
craft and for the locality in which the work is performed.
The Labor Code lists the types of fringe benefit payments that
can be taken as a credit against the obligation to pay cash
wages. These include payment for healthcare, pension
contributions, vacation, and other payments that directly
benefit the employee. Additionally, Labor Code §1773.1 allows
employers to take credit for contributions to apprenticeship
training and for contributions required by a collective
bargaining agreement (CBA) for worker protection programs,
administrative fees for collective bargaining, and industry
advancement funds.
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However, while Labor Code §1773.1 allows contractors to take
credits for contributions to industry advancement funds that
are required by a CBA, current law is not sufficiently clear
that the employer must actually be a party to a CBA that
requires the contributions. This ambiguity has been utilized
by contractors to reduce workers' wages to fund their own
"industry advancement funds" without worker representation or
say on whether they 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, lower wages
on public works, and water down apprenticeship training
standards.
[This bill] will protect construction workers on public works
projects by ensuring they receive their full prevailing wages,
unless, through collective bargaining they have negotiated
with employers on deductions for industry advancement funds.
Collective bargaining allows workers to be equal partners in
the decision-making process on whether such deductions are
made and how those funds will be used in order to equally
represent the interests and well-being of both contractors and
workers.
The sanctity of the collective bargaining process is essential
to level the playing field between management and labor by
giving workers a strong voice and a seat at the negotiating
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table, so that any payments that reduce workers' wages are
actually in the interests of workers."
Arguments in Opposition
Opponents state that contractors are allowed credits toward
their prevailing wage obligation 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 this bill 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 this bill 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. This bill takes much of that
away by saying only union contractors may use these funds for
industry advancement.
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In addition, opponents argue that neither the federal government
nor the state government require expenditure reports from the
entities that receive employer payments under existing law.
Therefore, they argue that workers have no means to know of,
control or receive a proper accounting of the entities receiving
these payments designated as credits against their prevailing
wage - even those under a CBA. They suggest that this bill
should instead be amended to require the Division of Labor
Statistics and Research to annually obtain reports and to
examine expenditures of all entities that receive employer
payments before it designates those employer payments as a
credit against the prevailing wage. They believe there is a
strong need for California to exercise strong oversight and
regulation of entities that receive employer payments as a
legitimate credit against the prevailing wage paid to workers.
Finally, opponents express particular concern about the most
recent amendments to this bill that provide that per diem wages
may include employer payments for "other purposes similar" to
certain apprenticeship or other training programs only if such
payments are made pursuant to a collective bargaining agreement
to which the employer is obligated. They argue that this new
amendment essentially says that individual and non-union
contractors will no longer be able to include their
apprenticeship training contributions as part of the prevailing
wage calculations because they are not party to a collective
bargaining agreement.
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However, the language of this bill does not appear to impact the
ability of an employer under current law to include payments for
authorized apprenticeship or other training programs. The
qualification that certain payments must be made pursuant to a
collective bargaining agreement applies to payments made for
"other purposes similar" to payments for apprenticeship or other
training programs. Therefore, by definition this limitation
applies only to employer payments for something "other" than an
authorized apprenticeship or other training program. Moreover,
the sponsor of the bill has indicated that this bill is not
intended to limit credit for employer payments for authorized
apprenticeship or other training programs as provided under
existing law.
Previous Related 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.
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REGISTERED SUPPORT / OPPOSITION:
Support
Air Conditioning Sheet Metal Association
Air-conditioning & Refrigeration Contractors Association
California Chapters of the National Electrical Contractors
Association
California Labor Federation, AFL-CIO
California Legislative Conference of the Plumbing, Heating and
Piping Industry
California State Association of Electrical Workers
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California State Pipe Trades Council
Finishing Contractors Association of Southern California
International Union of Elevator Construtors
Northern California Allied Trades
Southern California Contractors Association
State Building and Construction Trades Council (sponsor)
United Contractors
Wall and Ceiling Alliance
Western States Council of Sheet Metal Workers
Opposition
Air Conditioning Trade Association
Associated Builders and Contractors of California
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Associated Builders and Contractors-San Diego Chapter
California Construction Advancement Group
California Construction Compliance Group
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
Analysis Prepared by:Taylor Jackson / L. & E. / (916)
319-2091