BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 436|
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THIRD READING
Bill No: AB 436
Author: Solorio (D), et al.
Amended: 8/30/11 in Senate
Vote: 21
PRIOR VOTES NOT RELEVANT
SENATE LABOR & IND. REL. COMM. : 4-1, 9/1/11 pursuant to
29.10
AYES: Lieu, DeSaulnier, Leno, Yee
NOES: Runner
NO VOTE RECORDED: Wyland, Padilla
SUBJECT : Public works: labor compliance
SOURCE : State Building and Construction Trades Council
of
California, AFL-CIO
DIGEST : This bill makes changes to existing law related
to the prevailing wage enforcement mechanism within the
Department of Industrial Relations in order to address
potential legal questions about the funding method of that
process.
Senate Floor Amendments of 8/30/11 delete the prior version
of the bill which dealt with the definition of 'public
works; and instead (1) provides that the Department of
Industrial Relations (DIR) shall monitor and enforce
compliance with applicable prevailing wage requirements,
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through the Labor Compliance Monitoring Unit, for any
public works project paid for in whole or part out of
public funds that are derived from bonds issued by the
state, and shall charge each awarding body for the
reasonable and directly-related costs of monitoring and
enforcing compliance with the prevailing wage requirements
on each such project; (2) clarifies the method by which DIR
may charge and be reimbursed for monitoring and enforcing
compliance with the prevailing wage requirements for public
works projects paid for out of public funds derived from
state-issued bonds; (3) states that monitoring and
enforcing of prevailing wage compliance on public works
projects paid for out of public funds that are derived from
state-issued bonds is a necessary and prudent oversight
activity and constitutes an inherent cost of construction,
payable from state bond proceeds allocated to such
construction; (4) provides that the awarding body may elect
not to receive or expend amounts from bond proceeds to pay
such costs of the project, however such election does not
relieve the awarding body from reimbursing DIR for
monitoring and enforcing prevailing wage requirements on
the project; (5) specifies that the enforcement fee
requirements do not apply to state bond funded projects and
specified design-build projects if the awarding body has
entered into a collective bargaining agreement that binds
all of the contractors performing work on the contract and
that includes a mechanism for resolving disputes about the
payment of wages; (6) authorizes, upon order of the
Director of the Department of Finance, a loan in the amount
of not more than $4.3 million to be provided from the
Uninsured Employers Benefit Trust Fund to the State Public
Works Enforcement Fund, to meet the start-up needs of the
Labor Compliance Monitoring Unit.; (7) relates and
conforming changes to existing law; and (8) adds Senator
Alex Padilla as a co-author of the bill.
ANALYSIS : Existing law authorizes the awarding body for
a public works project to not require the payment of the
general prevailing rate of per diem wages on public works
projects of specified sizes and types of work, if the
awarding body elects to initiate and enforce a labor
compliance program containing specified requirements for
every public works project under the authority of the
awarding body or the awarding body elects to meet certain
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requirements with regard to any public works project under
its authority, including payment of a fee to DIR for the
enforcement of prevailing wage obligations, as specified,
which may be waived under specified circumstances,
determined by the department and deposited in the State
Public Works Enforcement Fund.
Existing law also requires DIR, with the approval of the
Director of Finance, to assess a fee on any awarding body
using funds derived from any bonds issued by the state to
fund public works projects, as specified, which are
deposited in the State Public Works Enforcement Fund, a
continuously appropriated fund. Existing law also requires
an awarding body that chooses to use funds derived from
either the Kindergarten-University Public Education
Facilities Bond Act of 2002 or the Kindergarten-University
Public Education Facilities Bond Act of 2004, or the body
awarding any contract for a public works project financed
in any part with funds made available by the Water
Security, Clean Drinking Water, Coastal and Beach
Protection Act of 2002 or the Safe, Reliable High-Speed
Passenger Train Bond Act for the 21st Century, to pay a fee
to the department sufficient to support the department's
costs in ensuring compliance with and enforcing prevailing
wage requirements on the project and labor compliance
enforcement, as specified, to be deposited in the State
Public Works Enforcement Fund. Existing law authorizes DIR
to waive the fee where specified criteria are met.
Existing law gives specified authority for certain school
district governing boards, governing boards of community
college districts and community college facility
construction projects, cities, counties, qualified entities
that operate a wastewater facility, solid waste management
facility, or water recycling facility, transit operators,
and unified school districts to enter into design-build
contracts for specified projects if certain requirements
are met, including the establishment and enforcement of a
labor compliance program or the contracting with a
third-party to operate a labor compliance program.
Existing law gives specified authority for the San Diego
Model School Development Agency to award construction
contracts, as specified, and requires it to establish and
enforce a labor compliance program or to contract with a
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third-party to operate a labor compliance program.
Existing law requires entities contracting under the above
provisions to pay a fee to DIR, established by DIR as
specified, sufficient to support the DIR's costs in
ensuring compliance with and enforcing prevailing wage
requirements on the project and labor compliance. Existing
law requires all fees collected pursuant to these
provisions to be deposited in the State Public Works
Enforcement Fund and to be used only for enforcement of
prevailing wage requirements on those projects and
authorizes the department to waive the fee if specified
criteria are met.
This bill:
1. Makes revisions regarding the method by which DIR sets
reimbursement rates for its costs of performing
prevailing wage monitoring and enforcement on the
specified public works projects described above, when
the reimbursement to DIR may be waived:
2. Exempts from the above-described requirements those
public works projects financed in any part by the Water
Security, Clean Drinking Water, Coastal and Beach
Protection Act of 2002.
3. Provides that, upon an order of the Director of Finance,
a loan in an amount not to exceed $4,300,000 shall be
made from the Uninsured Employers Benefit Trust Fund to
the State Public Works Enforcement Fund, thereby
depositing additional moneys into a continuously
appropriated fund.
Comments
This bill makes changes to the method by which SBX2-9
funded DIR to perform these prevailing wage monitoring
services. Instead of paying a fee, awarding bodies would
now be charged by DIR for their enforcement activities and
the entity would have to reimburse DIR for those costs.
The changes in the manner in which awarding bodies pay for
the DIR service were required as a result of concerns by
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the Attorney General's Office that the previous method of
reimbursement could be challenged as inconsistent with
constitutional bond law. As a consequence, the Attorney
General's Office will be unable to issue an "unqualified
bond opinion" for state bond sales, thereby preventing the
state from issuing bonds.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 9/1/11)
State Building and Construction Trades Council of
California
The Solice Group
ARGUMENTS IN SUPPORT : The State Building and
Construction Trades Council of California strongly supports
this bill and writes, "There exists an urgent need to
provide enforcement resources which enable the DIR to hold
contractors and sub-contractors accountable for prevailing
wage violations. Currently, the DIR employs less than two
dozen staff to cover the tens of thousands of public works
projects statewide. Taxpayers, law-abiding contractors and
construction workers are the primary victims when publicly
funded projects go unprotected against fraud and abuse by
unscrupulous contractors seeking to profit at the public's
expense. Non-compliance is often a sign of other
violations such as failure to carry workers' compensation
coverage and unemployment insurance and participation in
the underground economy.
PQ:do 9/1/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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