BILL ANALYSIS �
AB 436
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 436 (Solorio)
As Amended August 30, 2011
Majority vote
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|ASSEMBLY: | |(June 1, 2011) |SENATE: |22-10|(September 7, |
| | | | | |2011) |
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(vote not relevant)
Original Committee Reference: L. & E.
SUMMARY : Makes changes to existing law related to a prevailing
wage enforcement mechanism in order to address potential legal
questions about the funding method of that process.
The Senate amendments delete the contents of the bill and
instead:
1)Provide that the Department of Industrial Relations (DIR)
shall monitor and enforce compliance with applicable
prevailing wage requirements 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)State that the reasonable and directly-related costs of
monitoring and enforcing compliance with the prevailing wage
requirements on a public works project incurred by DIR are
payable by the awarding body of such public works project as a
cost of construction.
3)Provide 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.
4)State legislative intent that monitoring and enforcing
compliance with the applicable prevailing wage requirements on
a public works project paid for out of public funds that are
derived from state-issued bonds, whether by use of an approved
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labor compliance program or other method, is and historically
has been a necessary and prudent oversight activity, and under
existing law, the authority to use bond proceeds for
construction of a public works project inherently includes
authority to pay reasonable costs of such oversight activities
that are directly related to such construction from state bond
proceeds allocated to such construction.
5)State that the reasonable and directly-related costs incurred
by DIR in monitoring and enforcing compliance with the
prevailing wage requirements for an awarding body on any
public works project 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 of the authorized public works project, payable
from state bond proceeds allocated to such construction.
6)Specify 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.
7)Allow the Director of the Department of Finance to authorize a
loan not to exceed $4.3 million from the Uninsured Employers
Benefit Trust Fund to the State Public Works Enforcement Fund
to meet the start-up needs of DIR's compliance monitoring
unit.
8)Make related and conforming changes to existing law.
9)Add a co-author.
AS PASSED BY THE ASSEMBLY , this bill provided that specified
work related to renewable energy generation is considered
"public works" for purposes of prevailing wage law.
FISCAL EFFECT : Unknown
COMMENTS : The laws regulating public works projects require,
among other things, that contractors and subcontractors pay
their workers not less than the general prevailing wage rates as
determined under the Labor Code. State prevailing wage
requirements are enforced both by contracting agencies, known as
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"awarding bodies," through review of certified payroll records
and taking cognizance of violations, and by the state Labor
Commissioner (also known as the Chief of the Division of Labor
Standards Enforcement), through the investigation of complaints
and issuance of civil wage and penalty assessments.
Since the adoption of Labor Code section 1771.5 in 1989, the
Director of DIR also has approved "labor compliance programs"
(LCPs) to monitor and enforce compliance with state prevailing
wage requirements on behalf of awarding bodies. The first
DIR-approved LCPs were established on a voluntary basis to
obtain higher exemptions from prevailing wage requirements under
the law. However, the Legislature later began to require
awarding bodies to use LCPs to monitor and enforce compliance on
specified projects, including school construction projects
funded by the Kindergarten-University Public Education
Facilities Bond Acts of 2002 and 2004, projects funded by the
Water Security, Clean Drinking Water, Coastal and Beach
Protection Act of 2002, and projects built under a variety of
statutes authorizing design-build procurement.
Dissatisfaction with the overall performance of LCPs led to the
adoption of SB 9 X2 (Padilla), Chapter 9, Statutes of the
2009-2010 Second Extraordinary Session. Essentially, SB 9 X2
replaced the LCP requirement in a variety of statutes with a
requirement to pay a fee for compliance monitoring and
enforcement by DIR on the same types of projects covered by
those statutes. SB 9 X2 also expanded the number of projects
that would be covered by this requirement by extending it to any
project funded in whole or in part by a state public works bond
rather than just the four bonds that previously had been subject
to an LCP requirement.
SB 9 X2 required the Director to establish the fees with the
approval of the Department of Finance for this service and to
adopt reasonable regulations setting forth the manner in which
DIR would enforce compliance on covered projects. The
legislation further provided that the new fee-based monitoring
and enforcement system would only apply to projects awarded
after the fees and regulations had been adopted. Thereafter,
the Director proposed and adopted regulations that, among other
things, addressed the new system's applicability, notices, fees,
fee waivers, the establishment of a Compliance Monitoring Unit
("CMU"), payroll record review and other CMU monitoring and
investigative activities, complaints, and the withholding of
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contract payments when payroll records are delinquent or
inadequate. These regulations were approved on June 29, 2010
and became effective on August 1, 2010, making the provisions of
SB 9 X2 effective for projects for which the contract was
awarded on or after that date.
However, subsequent to the adoption of these regulations, bond
counsel for the State Public Works Board indicated that it was
unwilling to write an unqualified opinion letter for specified
bond sales due to potential questions about the legality of
using bond funds to pay for fees in the manner prescribed in SB
9 X2 and the regulations.
As a result, DIR sought to amend and delete portions of the
regulations on a temporary emergency basis, for the purpose of
suspending and postponing the commencement of fee-based
compliance monitoring and enforcement by DIR on public works
projects until these legal issues were resolved.
According to DIR, discussions have occurred over the past
several months with bond counsel and other interested
stakeholders regarding resolving the potential legal questions
at issue with the funding mechanism. Therefore, according to
DIR this bill would make the necessary statutory changes to
address these potential issues and allow the enforcement
mechanism to move forward.
This bill was substantially amended in the Senate and the
Assembly-approved provisions of this bill were deleted.
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
FN: 0002426