BILL ANALYSIS �
AB 436
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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)
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|COMMITTEE VOTE: |5-2 |(September 8, 2011) |RECOMMENDATION: |concur |
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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.
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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 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
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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 "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 7, Statutes of the 2009-2010
Second Extraordinary Session in 2009. 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
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Compliance Monitoring Unit (CMU), payroll record review and other
CMU monitoring and investigative activities, complaints, and the
withholding of 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: 0002870