BILL ANALYSIS �
AB 2107
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Date of Hearing: March 28, 2012
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Sandre Swanson, Chair
AB 2107 (Valadao) - As Introduced: February 23, 2012
SUBJECT : Public works: prevailing wages: school districts.
SUMMARY : Establishes a 50 percent "public funds" requirement
for the triggering of prevailing wage law on school
constructions projects. Specifically, this bill :
1)Provides that a school district is not required to comply with
prevailing wage requirements with regard to the construction,
reconstruction or rehabilitation of school facilities where
the state or a political subdivision contributes less than 50
percent of the total payment under the contract (except where
required by federal law).
2)Specifies that this provision will not apply where a change
order or contract amendment increases or decreases the public
funds beyond the 50 percent threshold, as specified.
EXISTING LAW :
1) Requires the prevailing wage rate to be paid to all workers
on "public works" projects over $1,000.
2) Defines "public work" to include, among other things,
construction, alteration, demolition, installation or repair
work done under contract and paid for in whole or in part out
of public funds.
FISCAL EFFECT : Unknown
COMMENTS : In general, "public works" is defined to include
construction, alteration, demolition, installation or repair
work done under contract and "paid for in whole or in part out
of public funds."
Over a decade ago, there was much administrative and legislative
action over what constituted the term "paid for in whole or in
part out of public funds." This action culminated in the
enactment of SB 975 (Alarc�n), Chapter # 938, Statutes of 2001,
which codified a definition of "paid for in whole or in part out
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of public funds" that included certain payments, transfers,
credits, reductions, waivers and performances of work. At the
time, supporters of SB 975 stated that it established a
definition that conformed to several precedential coverage
decisions made by the Department of Industrial Relations (DIR).
These coverage decisions defined payment by land, reimbursement
plans, installation, grants, waiver of fees, and other types of
public subsidy as public funds for purposes of prevailing wage
law. According to the sponsors, SB 975 was intended to remove
ambiguity regarding the definition of public subsidy of
development projects.
SB 975 also exempted certain affordable housing, residential and
private development projects that met certain criteria.
Follow-up legislation, SB 972 (Costa), Chapter # 1048, Statutes
of 2002, was intended to clarify the application of SB 975 and
was the result of extensive discussions between the State
Building and Construction Trades Council (sponsor of SB 975),
affordable housing advocates, and the Davis Administration.
Supporters of SB 972 contended that the original legislation had
unintended consequences for self-help housing and housing
rehabilitation projects. As a result of that compromise, SB 972
exempted from public works requirements the construction or
rehabilitation of privately-owned residential projects that met
certain criteria.
The determination of whether a project is deemed to constitute a
"public work" is important because the Labor Code requires
(except for projects of $1,000 or less) that the "prevailing
wage" to be paid to all workers employed on public works
projects.
As stated above, under current law, "public works" are defined
as construction, alteration, demolition, installation or repair
work paid for in whole or in part out of public funds. A
significant portion of public works construction work consists
of school construction and modernization work.
This bill provides that the governing board of a school district
is not required to comply with prevailing wage requirements with
regard to the construction, reconstruction or rehabilitation of
school facilities where the state or a political subdivision
contributes less than 50 percent of the payment under the
contract, except to the extent required by federal law.
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ARGUMENTS IN SUPPORT :
The author states the following in support of this bill:
"Private organizations seeking to donate large sums of
money for school construction and/or restoration projects
are currently faced with prevailing wage requirements that
significantly drive up the cost of public works projects.
Currently, the Labor and Education codes make no
distinction between private project funding (that accounts
for the majority percentage of the contractor cost
estimates) versus projects paid for by state or local
governments?
? Adding an exemption for school district governing boards
that have obtained significant private funding to pay for a
project, would create leeway for schools to complete
improvements and additions to their campuses in a timely
and cost effective manner; allowing for a better-quality
educational environment to directly benefit students."
ARGUMENTS IN OPPOSITION :
Writing in opposition to this bill, the Construction Employers'
Association writes that "�this measure] would undermine
prevailing wage laws. These laws help ensure that employees
earn fair wages and benefits and that they can make a career in
the construction industry, versus having a job. This wage
stability is crucial from an employer perspective because it
encourages a more professionalized workforce which results in
higher quality products and lower accident rates. Conversely,
lowering the wage rate as proposed by �this measure] will
invariably result in more on-site incidents and lower quality
products?"
Similarly, the California Labor Federation, AFL-CIO writes:
"Given the budget constraints faced by school governing
boards, it makes no sense to exempt them from a useful tool
to save money. Prevailing wage delivers high quality
school construction while at the same time saving money
through increased productivity. The exemptions in this
bill would only hurt school construction projects.
Prevailing wage guarantees projects come in on time and on
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budget. Countless studies and reams of evidence confirm
that weakened prevailing wage standards result in
inadequate training programs, longer foreman hours,
shoddier work that requires more maintenance and,
inevitably, cost overruns. These overruns and late
completions end up costing tax payers more in the
long-run."
PRIOR RELATED LEGISLATION :
AB 987 (Grove) of 2012, among other things, would have exempted
from prevailing wage requirements any school district
construction, reconstruction or rehabilitation projects except
as required by federal law. In addition, the bill would have
provided that prevailing wage requirements do not apply to any
project for which the state pays less than 50 percent of the
total payment under the contract. AB 987 failed passage in the
Assembly Committee on Labor and Employment.
AB 1018 (Nakanishi) of 2003 would have exempted school facility
new construction or modernization projects from any requirement
to pay prevailing wages. AB 1018 failed passage in the Assembly
Committee on Labor and Employment.
REGISTERED SUPPORT / OPPOSITION :
Support
Associated Builders and Contractors of California
Opposition
California Association of Electrical Workers
California Labor Federation, AFL-CIO
California State Pipe Trades Council
Coalition of California Utility Employees
Construction Employers' Association
International Union of Elevator Constructors
State Building and Construction Trades Council of California
Western States Council of Sheet Metal Workers
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
AB 2107
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