BILL ANALYSIS �
AB 302
Page 1
ASSEMBLY THIRD READING
AB 302 (Chau)
As Introduced February 12, 2013
Majority vote
LABOR & EMPLOYMENT 5-2
APPROPRIATIONS 12-5
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|Ayes:|Roger Hern�ndez, Alejo, |Ayes:|Gatto, Bocanegra, |
| |Chau, Gomez, Holden | |Bradford, |
| | | |Ian Calderon, Campos, |
| | | |Eggman, Gomez, Hall, |
| | | |Holden, Pan, Quirk, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Morrell, Gorell |Nays:|Harkey, Bigelow, |
| | | |Donnelly, Linder, Wagner |
| | | | |
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SUMMARY : Provides a statutory definition for a "de minimis"
public subsidy that does not trigger the requirements of
prevailing wage law. Specifically, this bill defines "de
minimis" to mean a public subsidy that is both less than $10,000
and less that 1% of the total project cost.
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.
3)Establishes a definition for "paid for in whole or in part out
of public funds," as specified.
4)Provides that if the state or a political subdivision
reimburses a private developer for costs that would normally
be borne by the public, or provides directly or indirectly a
public subsidy to a private development project that is "de
minimis" in the context of the project, an otherwise private
AB 302
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development project shall not thereby become subject to the
requirement to pay prevailing wages.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, this bill will result in no direct fiscal impact to
the Department of Industrial Relations (DIR).
COMMENTS : According to the author, this bill will clearly
define when a public subsidy is "de minimis" for the purpose of
determining when prevailing wage law applies to certain
projects.
SB 975 (Alarc�n), Chapter 938, Statutes of 2001, codified a
statutory definition of "paid for in whole or in part out of
public funds" for purposes of prevailing wage law. SB 975 also
provided that if the state or a political subdivision reimburses
a private developer for costs that would normally be borne by
the public, or provides directly or indirectly a public subsidy
to a private development project that is "de minimis" in the
context of the project, an otherwise private development project
shall not thereby become subject to the requirement to pay
prevailing wages. However, SB 975 did not provide a definition
for the term "de minimis."
Therefore, since the enactment of SB 975, DIR has issued several
coverage determinations attempting to define the term "de
minimis."
In 2005, DIR first articulated a standard for "de minimis" in
Public Works Case No. 2004-024 (New Mitsubishi Auto Dealership)
(March 18, 2005). In that case, DIR noted that nothing in the
prevailing wage law or the applicable legislative history of SB
975 provided guidance as to the appropriate measure of what
should be considered "de minimis." Therefore, DIR looked to
other statutory or regulatory schemes for other state agencies
(including Franchise Tax Board and the California Coastal
Commission) and articulated a standard for "de minimis" 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" (emphasis provided). In that specific case, DIR
found that public reimbursement of $65,710 to a project with a
total cost of $4,010,010 represented only 1.64% of the total
project cost, and therefore could reasonably be considered "de
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minimis."
This bill is sponsored by the State Building and Construction
Trades Council of California, who argues that since the initial
articulation of the standard in 2005 DIR has treated any public
subsidy - no matter how large - as de minimis if the subsidy is
less than 1.64% of total project costs. They contend that this
bill would restore the original intent of SB 975 that the "de
minimis" exception be limited to situations in which the public
subsidy is "trifling" such that it should not have legal
significance. This bill would provide that "a subsidy is de
minimis if it is both less than ten thousand dollars ($10,000)
and less than one percent of the total project cost." According
to the sponsor, the prevailing wage law itself is triggered for
public projects of $1,000 or more, so treating subsidies of up
to $10,000 as de minimis is generous to developers. They argue
that a public subsidy of more than $10,000 is not just a
"trifle" so it is reasonable to require payment of prevailing
wages if the developer wants the public subsidy. Nothing
prevents a private developer from declining to accept public
subsidies if it does not wish to pay prevailing wages.
Writing in opposition to this bill, the Western Electrical
Contractors Association (WECA) states, "When Labor Code�1720 was
amended in 2001 the de minimis exception was widely debated and
although never codified, was generally agreed to be 2% of the
project. While some question that wisdom, this 'agreement' and
subsequent DIR determinations have held that it requires a
substantial public subsidy to trigger California's Public Works
Law."
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
FN: 0000124