BILL ANALYSIS �
AB 551
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Date of Hearing: April 13, 2011
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Sandre Swanson, Chair
AB 551 (Campos) - As Introduced: February 16, 2011
SUBJECT : Public contracts: prevailing wage requirements:
violations.
SUMMARY : This bill increases the penalties on contractors and
subcontractors who fail to pay the prevailing wage on public
works projects and bars repeat violators from bidding or working
on public works projects for 3 years. Specifically, this
bill :
1)Increases the maximum penalty, from $50 to $100 per calendar
day, or portion thereof, for each worker paid less than the
prevailing wage, for contractors and subcontractors who fail
to pay the prevailing wage rate as determined by the director
for the work or craft in which the worker is employed for any
public work done as the contract by the contractor.
2)Increases the minimum penalty for contractors and
subcontractors who fail to pay the prevailing wage from $20
dollars to $40 dollars for each calendar day, or portion
thereof, for each worker paid less than the prevailing wage
rate unless the violation was a good faith mistake and if so,
the error was promptly and voluntarily corrected when brought
to the attention of the contractor or subcontractor.
3)Increases the minimum penalty, from $20 dollars to $80
dollars, for each calendar day, or portion thereof, for each
worker paid less than the prevailing wage, for contractors and
subcontractors who have been assessed penalties within the
previous three years for failing to meet its prevailing wage
obligations on a separate contract, unless those penalties
were subsequently withdrawn or overturned.
4)Increases the minimum penalty, from $30 dollars to $120
dollars, for each calendar day, or portion thereof, for each
worker paid less than the prevailing wage rate if the Labor
Commissioner determines that the violation was willful, as
defined in subdivision (c) of Section 1777.1 of the Labor
Code.
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5)Prohibits, for three years, a contractor or subcontractor from
performing a public works project when the contractor or
subcontractor has committed two or more separate willful
prevailing wage violations within a three year period.
6)Debars contractors working on public works projects when they
or their subcontractors fail to provide a timely response to a
request by the Division of Labor Standards Enforcement (DLSE),
the Division of Apprenticeship Standards or the awarding body
to produce certified payroll records.
a) Requires contractors and subcontractors to produce the
requested certified payroll records within 30 days.
b) Prohibits contractors and subcontractors who violate
this provision from bidding on, being awarded, or
performing work on a public works project for a minimum of
one year and a maximum of three years.
EXISTING FEDERAL LAW :
1)Establishes the Davis-Bacon and Related Acts (DBRA), which
requires all contractors and subcontractors performing work on
federal or District of Columbia construction contracts or
federally assisted contracts in excess of $2,000.
EXISTING STATE LAW :
1)Requires a contractors, and subcontractors under their employ,
to pay specified prevailing wage rates to all workers under
their employment when they are warded a public works
contracts.
2)Assesses specified penalties on contractors and
subcontractors who fail to pay prevailing wage rates on public
works projects as follows:
a) A maximum of $50 dollars for each calendar day, or
portion thereof, for each worker paid less than the
prevailing wage;
b) A minimum of $10 for each calendar day, or portion
thereof, for each worker paid less than the prevailing wage
rate;
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c) A minimum of $20 dollars for each calendar day, or
portion thereof, for each worker paid less than the
prevailing wage rate, if the contractor or subcontract has
been assessed penalties within the previous three years for
failing to pay prevailing wage; and,
d) A minimum of $30 dollars for each calendar day, or
portion thereof, for each worker paid less than the
prevailing wage if the Labor Commissioner finds that the
violation was willful as defined in subdivision (c) of
Section 1777.1 of the state Labor Code.
3)Defines "contractor or subcontractor" as a firm, corporation,
partnership, or association and its responsible managing
officer, as well as any supervisors, managers and officers
found by the Labor Commissioner to be personally and
substantially responsible for the willful violation Section
1777.1 of the state Labor Code.
FISCAL EFFECT : Unknown
COMMENTS :
According to the Department of Industrial Relations (DIR),
California's prevailing wage rate is the basic hourly rate paid
on public works projects to a majority of workers engaged in a
particular craft, classification or type of work within the
locality and in the nearest labor market area (if a majority of
such workers are paid at a single rate). If there is no single
rate paid to a majority, the single or modal rate being paid to
the greater number of workers is prevailing.
DIR notes that the prevailing wage is determined by the Director
of DIR in written determinations issued annually on February 22
and August 22.
DIR notes that the state's prevailing wage laws were enacted to
ensure that contractors' abilities to get public works contracts
were not based on paying their workers lower wage rates than
their competitors. DIR states that all bidders are required to
use the same wage rates when bidding on a public works project
because California law requires contractors to pay no less than
the general prevailing rate of per diem wages to all workers
employed on a public works project with a cost of $1,000 or
more. If a public agency, or "awarding body," elects to
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initiate and enforce a labor compliance program (as defined in
Labor Code Section 1771.5) that has been approved by the
Director of DIR, for every public works project under its
authority, the prevailing wage is not required to be paid for
public works projects of $25,000 or less when the project is for
construction work. Public agencies are also exempt from
prevailing wage rates for public works projects of under $15,000
when the project is for alteration, demolition, repair or
maintenance work.
According to the author, contractors are not deterred by the
current penalties assessed for violating the state's prevailing
wage law. The author states that the existing penalties are too
low and have not been raised or amended in years.
The Bureau of Field Enforcement (BFE) investigates complaints
arising from violations of the state's prevailing wage laws and
conducts payroll audits on behalf of California's workers for
back wages owed. According to the 2009 Annual Report on the
Effectiveness of Bureau of Field Enforcement (BFE Report), BFE
opened 1,352 new cases involving prevailing wage violations. In
addition, a total of $10,785,730 in back wages were found due to
workers. Of the $4,539,501 in penalties that BFE issued in 2009,
$839,123 has been collected in that year.
In addition, the 2009 BFE Report notes that the Labor
Commissioner signed Orders of Debarment for nine contractor
companies and their principles; the highest known number of
debarments in a single year. The 2009 BFE Report also state that
DSLE initiated debarment actions against three additional
contractors and their principles for several Labor Code
violations, including the failure to pay correct prevailing wage
rates.
RELATED AND PRIOR LEGISLATION :
SB 45 (Padilla) of 2009 would have increased the penalty on
contractors that willfully violated the prevailing wage law and
permanently debarred such contractors from competing with
law-abiding contractors. This bill was vetoed by the Governor.
In his veto message, the Governor wrote that the bill was
unnecessary because provisions in existing laws were adequate to
preclude unscrupulous contractors from bidding on public works
jobs.
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SB 569 (Steinberg) of 2007 would have revised various provision
of the law related to enforcement of the payment of prevailing
wages on public works projects. This bill was held in the
Assembly Appropriations Committee.
ARGUMENTS IN SUPPORT :
In their letter expressing sponsorship of this bill, the State
Building and Construction Trades Council of California (SBCTCC)
writes that the intent of this bill is to deter contractors from
simply treating the current minimal fines levied for abuses of
the prevailing wage as a cost of doing business. SBCTCC asserts
that the penalties for failing to provide certified payroll
records in a timely manner upon request from a state agency are
ineffective and hinder the ability of the state to investigate
climes of wage violations by unscrupulous employers. In
addition, SBCTCC writes that making it easier for the state to
bar unscrupulous contractors from bidding on public works
projects for three years and increasing the monetary fines for
other violations will put teeth back into the enforcement of
state law. The California Teamsters Public Affairs Council
writes that this bill will strengthen prevailing wage laws by
enhancing enforcement.
REGISTERED SUPPORT / OPPOSITION :
Support
California Labor Federation, AFL-CIO
California State Pipe Trades Council
California Teamsters Public Affairs Council
Coalition of California Utility Employees
International Brotherhood of Electrical Workers
International Union of Elevator Constructors
State Building and Construction Trades Council of California
(Sponsor)
Utility Workers Union of America
Western States Council of Sheet Metal Workers
Support If Amended
Association of California Construction Managers
Opposition
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None on file.
Analysis Prepared by : Shannon McKinley / L. & E. / (916)
319-2091