BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 954| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 954 Author: Hertzberg (D) Amended: 6/14/16 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 SENATE FLOOR: 27-12, 4/21/16 AYES: Allen, Beall, Block, Cannella, De León, Galgiani, Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan, Pavley, Roth, Wieckowski, Wolk NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Huff, Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak NO VOTE RECORDED: Runner ASSEMBLY FLOOR: 52-22, 8/4/16 - See last page for vote 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, this bill qualifies certain prevailing wage benefit payments only if they are made by an employer obligated to do so pursuant to a collective bargaining agreement (CBA). This bill also applies this same standard to employer payments to benefits that are merely SB 954 Page 2 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. Assembly Amendments incorporate language that specifies that certain payments only qualify as part of prevailing wage requirements and as employer credits for these payments if they are made pursuant to an employer's obligation to a CBA. ANALYSIS: 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 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): SB 954 Page 3 a) Health and welfare. b) Pension. c) Vacation. d) Travel. e) Subsistence. f) Apprenticeship or other training programs authorized by Section 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 CBA 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 CBA administrative fees, provided that the employer is obligated to do so pursuant to a CBA. SB 954 Page 4 2)Revises the definition of the prevailing wage to include employer payments for other purposes similar to the following, but only if they are made pursuant to an employer's obligation to a CBA: 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 CBA administrative fees. 3)Prevents the use of employer payments for industry advancement and CBA administrative fees as credit for paying the prevailing wage unless those payments are made pursuant to an employer's obligation to 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. 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 SB 954 Page 5 definition of these employer payments allows non-union employees who are not party to a CBA 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. 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. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Assembly Appropriations Committee, this bill has no significant state fiscal impact. SUPPORT: (Verified8/4/16) State Building and Construction Trades Council (source) Air Conditioning Sheet Metal Association Air-Conditioning & Refrigeration Contractors Association California Chapters of the National Electrical Contractors Association SB 954 Page 6 California Labor Federation, AFL-CIO California Legislative Conference of the Plumbing, Heating and Piping Industry California State Council of Laborers Finishing Contractors Association of Southern California Northern California Allied Trades Southern California Contractors Association United Contractors Wall and Ceiling Alliance OPPOSITION: (Verified8/4/16) 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: Proponents state that existing law permits employer credits for industry advancement purposes that are "similar" to those in a 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 SB 954 Page 7 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. Finally, 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 and that this would not be possible under SB 954's provisions. ASSEMBLY FLOOR: 52-22, 8/4/16 AYES: Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Holden, Irwin, Jones-Sawyer, Levine, Linder, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Rendon NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Dahle, Beth Gaines, Gallagher, Grove, Harper, Jones, Kim, Lackey, Maienschein, Mathis, Melendez, Obernolte, Olsen, Patterson, Wagner, Waldron, Wilk SB 954 Page 8 NO VOTE RECORDED: Chang, Chávez, Cooley, Hadley, Roger Hernández, Mayes Prepared by:Brandon Seto / L. & I.R. / (916) 651-1556 8/5/16 11:09:18 **** END ****