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