BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 2677
                                                                  Page  1

          Date of Hearing:   May 2, 2012

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                   AB 2677 (Swanson) - As Amended:  March 29, 2012 

          Policy Committee:                              Labor and 
          Employment   Vote:                            5-1

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              No

           SUMMARY  

          This bill codifies existing Department of Industrial Relations 
          (DIR) prevailing wage rulings regarding the receipt of fringe 
          benefit contributions.  Specifically, this bill:  

          Prohibits an increased fringe benefit contribution that results 
          in a lower hourly straight time or overtime wage from being a 
          violation of the applicable prevailing wage determination as 
          long as all of the following conditions are met: 

          1)The increased fringe benefit is made pursuant to criteria 
            established in a collective bargaining agreement.
          2)The increased fringe benefit and hourly straight time and 
            overtime wage combined are no less than the general prevailing 
            wage of per diem wages. 
          3)The fringe benefit contribution is irrevocable unless made in 
            error. 

           FISCAL EFFECT  

          Minor, absorbable costs to DIR to implement this measure.  

           COMMENTS  

           1)Background  .  According to 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 








                                                                  AB 2677
                                                                  Page  2

            number of workers is prevailing. DIR further notes that the 
            prevailing wage is determined by the director of DIR in 
            written determinations issued annually on February 22 and 
            August 22. Existing law establishes penalties for 
            contractors/subcontractors who fail to pay the prevailing wage 
            to workers, as specified. 

            There are three components to the prevailing wage: the basic 
            hourly rate, fringe benefit payments, and a contribution to 
            the California Apprenticeship Council or an approved 
            apprenticeship training fund.  Existing law defines fringe 
            benefit payments or per diem wages to include employer 
            payments for the following: health and welfare, pension, 
            vacation, travel, subsistence, apprenticeship or other 
            training programs, worker protection/assistance programs, and 
            industry advancement and collective bargaining agreements, as 
            specified.  

           2)Purpose  .  According to the author, "Many collective bargaining 
            agreements allow members to elect to have a percentage or a 
            set amount deducted from their paycheck and deposited in a 
            supplemental pension account or a health care reserve at their 
            discretion. DIR has issued several opinion letters finding 
            that this  does not  constitute a violation of the prevailing 
            wage as long as the total hourly package equals the correct 
            prevailing wage rule.  Nonetheless, several local and state 
            agencies have misinterpreted the law and begun enforcement 
            proceedings. AB 2677 seeks to codify the DIR opinion letters 
            in order to avoid future misapplication of the statutes."


            
           Analysis Prepared by  :    Kimberly Rodriguez / APPR. / (916) 
          319-2081