BILL ANALYSIS �
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 1939|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: AB 1939
Author: Daly (D)
Amended: 6/2/14 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 6-0, 6/10/14
AYES: Jackson, Anderson, Lara, Leno, Monning, Vidak
NO VOTE RECORDED: Corbett
ASSEMBLY FLOOR : 75-0, 5/5/14 - See last page for vote
SUBJECT : Public works: prevailing wages: contractors costs
SOURCE : Associated General Contractors
Construction Employers Association
DIGEST : This bill authorizes a contractor on a private works
project to bring an action to recover from the hiring party that
the contractor directly contracts with the difference between
the wages actually paid to an employee and the increased wages
that were required to be paid to an employee, in addition to any
penalties or other sums required to be paid, and costs and
attorney's fees, because the project was subsequently deemed to
be a public work subject to prevailing wage requirements.
ANALYSIS : Existing law:
1. Requires, for public works projects of more than $1,000, all
workers employed on the project to be paid not less than the
general prevailing rate of per diem wages for work of a
CONTINUED
AB 1939
Page
2
similar character in the locality in which the public work is
performed, and not less than the general prevailing rate of
per diem wages for holiday and overtime work fixed.
2. Requires the Department of Industrial Relations (DIR) to
monitor and enforce compliance with applicable prevailing
wage requirements for any public works project.
3. Requires a public works contractor to whom the contract is
awarded, and any subcontractor under him, to pay not less
than the specified prevailing rates of wages to all workmen
employed in the execution of the contract.
4. Requires the contractor and any subcontractor under the
contractor to, as a penalty to the state or political
subdivision on whose behalf the contract is made or awarded,
forfeit not more than $200 for each calendar day, or portion
thereof, for each worker paid less than the prevailing wage
rates as determined by the director for the work or craft in
which the worker is employed for any public work done under
the contract by the contractor or by any subcontractor under
the contractor.
5. Requires the difference between the prevailing wage rates
and the amount paid to each worker for each calendar day or
portion thereof for which each worker was paid less than the
prevailing wage rate to be paid to each worker by the
contractor or subcontractor.
6. Provides that if a worker employed by a subcontractor on a
public works project is not paid the general prevailing rate
of per diem wages by the subcontractor, the prime contractor
of the project is not liable for any penalties unless the
prime contractor had knowledge of that failure of the
subcontractor to pay the specified prevailing rate of wages
to those workers or unless the prime contractor fails to
comply specified requirements.
7. Authorizes a contractor to bring an action in a court of
competent jurisdiction to recover from the body awarding a
contract for a public work or otherwise undertaking any
public work any increased costs incurred by the contractor as
a result of any decision by the body, the DIR, or a court
that classifies, after the time at which the body accepts the
CONTINUED
AB 1939
Page
3
contractor's bid or awards the contractor a contract in
circumstances where no bid is solicited, the work covered by
the bid or contract as a public work, if that body, before
the bid opening or awarding of the contract, failed to
identify as a public work in the bid specification or in the
contract documents that portion of the work that the decision
classifies as a public work.
8. Limits liability of the body awarding a contract for a
public work for recovery of increased costs if specified
conditions are met.
9. Provides that "awarding body" does not include the
Department of General Services, the Department of
Transportation, or the Department of Water Resources, and
"increased costs" includes, but is not limited, to labor cost
increases required to be paid to workers who perform or
performed work on the public work and penalties for which the
contractor is liable.
10.Authorizes a contractor to bring an action in a court of
competent jurisdiction to recover from an awarding body the
difference between the wages actually paid to an employee and
the wages that were required to be paid to an employee, any
penalties required to be paid, and costs and attorney's fees
related to this action, if either of the following is true:
The awarding body previously affirmatively represented
to the contractor in writing, in the call for bids, or
otherwise, that the work to be covered by the bid or
contract was not a public work; or
The awarding body received actual written notice from
the DIR that the work to be covered by the bid or contract
is a public work, and failed to disclose that information
to the contractor before the bid opening or awarding of the
contract.
1. Requires, before making payments to the contractor of money
due under a contract for public work, the awarding body to
withhold and retain therefrom all amounts required to satisfy
any civil wage and penalty assessment issued by the Labor
Commissioner, and amounts required to satisfy a civil wage
and penalty assessment shall not be disbursed by the awarding
CONTINUED
AB 1939
Page
4
body until receipt of a final order that is no longer subject
to judicial review.
2. Provides that, if the awarding body has not retained
sufficient money under the contract to satisfy a civil wage
and penalty assessment based on a subcontractor's violations,
the contractor shall, upon the request of the Labor
Commissioner, withhold sufficient money due the subcontractor
under the contract to satisfy the assessment and transfer the
money to the awarding body, and these amounts shall not be
disbursed by the awarding body until receipt of a final order
that is no longer subject to judicial review.
3. Authorizes any contractor to withhold from any subcontractor
under him sufficient sums to cover any penalties withheld
from him by the awarding body on account of the
subcontractor's failure to comply with the terms of this
chapter, and if payment has already been made to the
subcontractor the contractor may recover from him the amount
of the penalty or forfeiture in a suit at law.
4. Provides that if the Labor Commissioner determines after an
investigation that there has been a violation of this
chapter, the Labor Commissioner shall with reasonable
promptness issue a civil wage and penalty assessment to the
contractor or subcontractor, or both, and interest will
accrue on all due and unpaid wages from the date the wages
were due and payable until the wages are paid.
5. Provides that the contractor and subcontractor shall be
jointly and severally liable for all amounts due pursuant to
a final order or a judgment thereon, and the Labor
Commissioner shall first exhaust all reasonable remedies to
collect the amount due from the subcontractor before pursuing
the claim against the contractor.
6. Defines "awarding body" or "body awarding the contract" to
mean department, board, authority, officer or agent awarding
a contract for public work.
7. Defines "contractor" and "subcontractor" to include a
contractor, subcontractor, licensee, officer, agent, or
representative thereof, acting in that capacity, when working
on public works.
CONTINUED
AB 1939
Page
5
This bill:
1. Authorizes a contractor to bring an action in a court of
competent jurisdiction to recover from the hiring party that
the contractor directly contracts with any increased costs,
including, but not limited to, the difference between the
wages actually paid to an employee and the wages that were
required to be paid to an employee, any penalties or other
sums required to be paid, and costs and attorney's fees for
the action incurred by the contractor as a result of any
decision by the DIR, the Labor and Workforce Development
Agency, or a court that classifies, after the time at which
the contracting party accepts the contractor's bid, awards
the contractor a contract under circumstances when no bid is
solicited, or otherwise allows construction by the contractor
to proceed, the work covered by the project, or any portion
thereof, as a public work, unless either of the following is
true:
The owner or developer or its agent expressly advised
the contractor that the work to be covered by the contract
would be a public work or is otherwise subject to the
payment of prevailing wages; or
The hiring party expressly advised the contractor that
the work subject to the contract would be a public work or
is otherwise subject to the payment of prevailing wages.
1. Requires, in order to be entitled to recovery of increased
costs, the contractor to notify the hiring party and the
owner or developer within 30 days after receipt of the notice
of a decision by the DIR or the Labor and Workforce
Development Agency, or the initiation of any action in a
court alleging, that the work covered by the project, or any
portion thereof, is a public work.
2. Provides that a contractor is not required to list any
prevailing wage or apprenticeship standard violations on a
prequalification questionnaire that are the direct result of
the failure of the owner or developer or its agent, or a
contractor, hiring party to notify the contractor that the
project, or any portion thereof, was a public work.
CONTINUED
AB 1939
Page
6
3. Does not apply to private residential projects built on
private property unless the project is built pursuant to an
agreement with a state agency, redevelopment agency, or local
public housing authority.
4. Does not apply if the conduct of the contractor caused the
project to be a public work or if the contractor has actual
knowledge that the work is a public work.
5. Defines "hiring party" to mean the party that has a direct
contract for services provided by the contractor who is
seeking recovery of a prevailing wage deficiency on a private
works project that was subsequently determined by the DIR or
the Labor and Workforce Development Agency, or the initiation
of any action in a court alleging, that the work covered by
the project, or any portion thereof, to be a public work.
6. Allows a contractor to only seek recovery from the hiring
party with whom the contractor has a direct contract.
7. Defines "contractor" to mean a person or entity licensed by
the Contractors' State License Board that has a direct
contract with the hiring party to provide services on private
property or for the benefit of a private owner or developer.
Background
Existing law generally requires a worker on a public works
project to be paid not less than the prevailing wage as
determined by the Director of DIR. Typically, a contractor or
subcontractor will be notified by the DIR of the failure to
comply with that requirement, and the contractor or
subcontractor is responsible for payment of the difference
between the wages paid to workers and the prevailing wage rate.
SB 966 (Alarcon, Chapter 804, Statutes of 2003) authorized a
contractor to bring an action to recover from the body awarding
the contract for a public work any increased costs incurred by
the contractor, including labor cost increases and penalties, if
the body awarding the contract knew the project was a public
work but failed to disclose that information to the contractor
or subcontractor.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
CONTINUED
AB 1939
Page
7
SUPPORT : (Verified 6/11/14)
Associated General Contractors (source)
Construction Employers' Association (source)
Air Conditioning Trade Association
American Fence Association - California Chapter
Associated Builders and Contractors - San Diego Chapter
California Concrete Contractors Association
California Fence Contractors' Association
California Professional Association of Specialty Contractors
Flasher Barricade Association
Marin Builders Association
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
ARGUMENTS IN SUPPORT : Supporters argue that existing law
provides for public agency liability if it fails to include in a
request for proposal that a construction project is subject to
prevailing wages, yet existing law requires no such notice by
private owners or developers when public subsidies trigger a
prevailing wage requirement. This bill requires the owner or
developer to reimburse the contractor for unpaid wages, sums
incurred pursuant to the Labor Code and attorney's fees
associated with the owner's or developer's failure to provide
direction to the contractor. In this way, the supporters assert
that this bill would ensure timely payment of prevailing wages
and reduce DIR enforcement actions. As already provided under
existing law, the party responsible for providing notice of a
public work and attendant prevailing wage requirements is liable
for prevailing wage deficiencies if the contractor does not pay
the prevailing wage required.
ASSEMBLY FLOOR : 75-0, 05/05/14
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Harkey, Roger Hern�ndez, Holden,
Jones, Jones-Sawyer, Levine, Linder, Lowenthal, Maienschein,
Medina, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan,
Patterson, Perea, V. Manuel P�rez, Quirk, Quirk-Silva, Rendon,
CONTINUED
AB 1939
Page
8
Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,
Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A.
P�rez
NO VOTE RECORDED: Hall, Logue, Mansoor, Melendez, Vacancy
AL:nl 6/12/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED