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  ****