BILL ANALYSIS
SB 45
Page 1
Date of Hearing: August 19, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 45 (Padilla) - As Amended: June 3, 2009
Policy Committee: Labor and
Employment Vote: 5-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill provides that a contractor or subcontractor found by
the Labor Commissioner to be in willful violation of public
works laws (or in violation of public works laws with intent to
defraud) for a second and subsequent violation will be
permanently ineligible for public works contract awards, and be
prohibited from performing work as a subcontractor on public
works contracts.
FISCAL EFFECT
DIR indicates that it will experience added legal expenses,
potentially in the range of $95,000 per year for a one-half time
legal counsel. The expenses will occur to the extent that
companies facing permanent debarment pursue a more robust
defense of their actions.
COMMENTS
1 Background . Existing law provides that whenever a contractor
or subcontractor has been found by the Labor Commissioner to
be in violation of public works laws with an intent to
defraud, the entity shall be ineligible for a period of one to
three years from bidding on or being awarded a public works
contract, or performing work as a subcontractor on a public
works contract.
It also provides that whenever a contractor or a subcontractor
has been found by the Labor Commissioner to be in willful
violation of public works laws for a second and subsequent
time within a three year period, the entity shall be
SB 45
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ineligible for an up to 3-year period from bidding on or being
awarded a public works contract, or performing work as a
subcontractor on a public works contract.
A "willful" violation occurs when a contractor or
subcontractor "knew or reasonably should have known of his or
her obligations under the public works law and deliberately
fails or refuses to comply with its provisions."
According to the most recent annual report of the Bureau of
Field Enforcement within the Department of Industrial
Relations, in 2008 the Labor Commissioner signed orders of
debarment for seven contractors. Each of these orders imposed
the maximum statutory debarment period of three years. In
addition, the Labor Commissioner initiated debarment actions
against three additional contractors and their principles for
failure to pay for all hours worked, falsified certified
payroll records, misclassification of workers, and failure to
pay correct prevailing wage rates.
2)Rationale . This bill is intended to address the problem of
employers misclassifying employees and independent
contractors. The sponsors (California State Building and
Construction Trades Council, AFL-CIO and the California State
Council of Laborers) contend that employee misclassification
creates severe challenges for workers, lawful employers and
insurers, as well as for policy enforcement. They further
contend that misclassification can also result in lost payment
of taxes to state government.
3)Opponents (the Western Electrical Contractors Association)
state that they are troubled by the focus on punishment, and
suggest that one alternative would be to subject contractors
found to have willfully violated the law to mandatory
supervision for a period of time by the state, with the
contractor obligated to pay an administrative fine to cover
the costs of supervision.
4)Prior legislation . The author has introduced two bills over
the last few years dealing with independent contractor
misclassification. Senate Bill 622 (Padilla) of 2007 would
have increased monetary penalties for intentional
misclassification of employees as independent contractors.
That measure was approved by the Legislature but vetoed.
Senate Bill 1490 (Padilla) of 2008 would have required
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employers to notify individuals classified as independent
contractors of that classification and provide these persons
with information regarding their rights under current law.
That bill was held in the Senate Committee on Appropriations.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081