BILL ANALYSIS �
AB 302
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Date of Hearing: April 10, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 302 (Chau) - As Introduced: February 12, 2013
Policy Committee: Labor and
Employment Vote: 5-2
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill defines "de minimis," for the purpose of determining a
public subsidy with regard to paying a prevailing wage on a
public works project, as meeting both of the following:
1)It is less than $10,000.
2)It is less than one percent of the total project cost.
FISCAL EFFECT
No direct fiscal impact to the Department of Industrial
Relations (DIR). To the extent the definition of "de minimis"
leads to the payment of a prevailing wage, private project costs
will likely increase.
COMMENTS
1)Background . Existing law defines "public works" as
construction, alteration, demolition, installation, or repair
work done under contract and paid for in whole or in part out
of public funds, except work done directly by any public
utility company, as specified. "Paid for in whole or in part
out of public funds" means all of the following:
a) The payment of money or the equivalent of money by the
state or political subdivision directly to or on behalf of
the public works contractor, subcontractor, or developer.
b) Performance of construction work by the state or
political subdivision in execution of the project.
c) Transfer by the state or political subdivision of an
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asset of value for less than fair market price.
d) Fees, costs, rents, insurance or bond premiums, loans,
interest rates, or other obligations that would normally be
required in the execution of the contract, that are paid,
reduced, charged at less than fair market value, as
specified.
e) Money loaned by the state or political subdivision that
is to be repaid on a contingent basis.
f) Credits that are applied by the state or political
subdivision against repayment obligations to the state or
political subdivision.
Statute also specifies if the state or a political subdivision
reimburses a private developer for costs that would normally
be borne by the public, or provides a public subsidy to a
private development project that is "de minimis" in the
context of the project, the private development project is not
subject to public works requirements, including paying a
prevailing wage.
Current law does not define "de minimis" and as such, DIR has
interpreted the definition of this term. In 2005, DIR defined
this term in the Public Works Case No. 2004-024 (New
Mitsubishi Auto Dealership) (March 2005) to mean "the public
funding was proportionally small enough, in relation to the
overall cost of the Project, that the availability of those
funds did not significantly affect the economic viability of
the Project." Specifically, DIR determined the public
reimbursement of $65,710 for the project cost of $4 million
represented roughly 1.64% of the total project cost and
therefore, was considered "de minimis." Since 2005, DIR has
made defined "de minimis" in a similar manner for other
projects - roughly 1.64% of the total project cost.
2)Purpose . The State Building Construction and Trades Council
of California (Council), sponsor of this measure, argue the
legal definition of "de minimis" is shorthand for the Latin
phrase - "de minimis non curat lex" - the law does not concern
itself with trifles. As such, a "de minimis" public subsidy
should be defined as those that are trifling. The Council
contends that DIR's past interpretations of "de minimis" -
1.64% of total project costs in the tens of millions - is not
trifling.
3)Prevailing wage . According to DIR, California's prevailing
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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 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.
Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081