BILL ANALYSIS �
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Date of Hearing: April 2, 2014
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hern�ndez, Chair
AB 2272 (Gray) - As Introduced: February 21, 2014
SUBJECT : Public works: prevailing wage.
SUMMARY : Specifies that "public work" for purposes of
prevailing wage law also means projects funded by the California
Advanced Services Fund pursuant to existing law.
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, except work done directly by any public
utility company pursuant to order of the Public Utilities
Commission or other public authority.
3) Establishes a definition for "paid for in whole or in part
out of public funds," as specified.
4) Establishes the California Advanced Services Fund and
requires the Public Utilities Commission to administer a
program using moneys in the fund to encourage deployment of
high-quality advanced communication services to all
Californians by providing funding for infrastructure projects
to provide broadband access to households that are unserved
or underserved, as specified.
FISCAL EFFECT : Unknown
COMMENTS :
A Brief History of State and Federal Prevailing Wage Law
State prevailing wage laws vary from state to state, but do
share a common history that actually predates federal prevailing
wage law. Many of these state laws were enacted as part of
general reform efforts to improve working conditions at the end
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of the 19th and the beginning of the 20th centuries. Between
1891 and 1923, seven states adopted prevailing wage laws that
required payment of specified hourly wages on government
construction projects. The State of Kansas enacted the first
prevailing wage law in 1891.
Eighteen additional states and the federal government adopted
prevailing wage laws during the Great Depression of the 1930s
amidst concern that acceptance of the low bid, a common
requirement of government contracting for public projects when
government had become the major purchaser of construction, would
operate to reduce the wages paid to workers on those projects to
a level that would disrupt the local economy.
California's prevailing was law was enacted in 1931.
In general, the proponents of prevailing wage legislation wanted
to prevent the government from using its purchasing power to
undermine the wages of its citizens. It was believed that the
government should set an example, by paying the wages prevailing
in a locality for each occupation hired by government
contractors to build public projects. Thus, prevailing wage
laws are generally meant to ensure that wages commonly paid to
construction workers in a particular region will determine the
minimum wage paid to the same type of workers employed on
publicly funded construction projects.
Most public construction projects contracted for or by the
federal government or the District of Columbia are covered by
the federal prevailing wage law, the Davis-Bacon Act (Act),
while 33 states have prevailing wage laws, often referred to as
"little Davis-Bacon Acts," that encompass projects financed by
states and their political subdivisions.
The federal Davis-Bacon Act was enacted by Congress in 1931.
The Act requires workers employed under public construction
contracts of the federal government in excess of $2,000 to be
paid a minimum wage that the United States Department of Labor
determines to be prevailing for corresponding classes of
workers. In addition, sixty separate federal laws currently
specify the payment of Davis- Bacon wages for work prescribed.
The federal government also has two additional prevailing wage
laws - the Walsh-Healy Public Contracts Act of 1935 (which
covers federal contractors in manufacturing and supply
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industries), and the O'Hara-McNamara Services Act of 1965 (which
covers service contracts).
The United States Supreme Court has stated the public policy
underlying the Davis-
Bacon Act as one of:
"protecting local wage standards by preventing contractors
from basing their bids on wages lower than those prevailing
in the area . . . [and] giving local labor and the local
contractor a fair opportunity to participate in this
building program." Universities Research Ass'n. v. Coutu
(1981) 450 U.S. 754, 773-774).
General Background on "Public Works" Under California Law
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
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
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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.
Why It Matters: "Prevailing Wage"
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.
Background on the California Advanced Services Fund
The California Advanced Services Fund program was established to
encourage deployment of high-quality advanced communications
services to all Californians that will promote economic growth,
job creation, and the substantial social benefits of advanced
information and communications technologies. Existing law
establishes the goal of the program as, by no later than
December 31, 2015, to approve funding for infrastructure
projects that will provide broadband access to no less than 98
percent of California households.
The Public Utilities Commission (PUC) authorized the California
Advanced Services Fund (CASF) on December 20, 2007. The CASF
provides grants to "telephone corporations" as defined under the
Public Utilities Code to bridge the "digital divide" in unserved
and underserved areas in the state.
The Legislature reaffirmed the PUC's creation of the CASF
program in Senate Bill 1193, which Governor Schwarzenegger
signed on September 27, 2008, and codified the program as Public
Utilities Code section 281. On September 25, 2010, Governor
Schwarzenegger signed Senate Bill 1040, which extended the CASF
indefinitely and expanded it to include three accounts: (1) the
Infrastructure Grant Account, (2) the Consortia Grant Account,
and (3) the Revolving Loan Account.
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The CASF is funded by a surcharge rate on revenues collected by
telecommunications carriers from end-users for intrastate
telecommunications services. On January 1, 2008, the PUC
adopted a surcharge rate of 0.25% to fund the program. On
December 17, 2009, the PUC reduced the CASF surcharge from 0.25%
to 0.00% effective January 1, 2010. On September 22, 2011, the
PUC revised the surcharge from 0.0% to 0.14% effective November
1, 2011. The Commission increased the surcharge rate from 0.14%
to 0.164% effective April 1, 2013.
Recent Prevailing Wage Determination Regarding Central Valley
Next Generation Broadband Infrastructure Project
The Central Valley Next Generation Broadband Infrastructure
Project (CVNGBIP) is a 1,371 mile fiber-optic infrastructure
project through 18 counties that will reportedly serve a
population of 4 million people when completed. The goal of the
project is to provide direct fiber connectivity to 63 anchor
institutions, access by another 40 anchor sites, and access to
hundreds of thousands of other businesses and residences. The
$66.6 million project is funded through federal, state and local
funds, with about 10 percent of its total funding coming from
the CASF discussed above.
On November 22, 2013 DIR Director Christine Baker issued a
determination letter which found that the project, because it is
partially funded with state funds, is a public work subject to
California's prevailing wage requirements:
"In this case the funds in question are ordered collected
by the CPUC, a state public entity, and forwarded to the
State Treasurer. The State Treasurer in turn holds the
funds until directed to make payments to private entities
developing and constructing the new telecommunications
service. The funds are held in public coffers subject to
disbursement by the Treasurer on behalf of a California
public entity. The CPUC funds the Project with funds
levied as a surcharge on intrastate telecommunications
services. The funds it collects are public funds when
received and disbursed by order of the Commission to the
State Treasurer as the CPUC's agent?
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?For the foregoing reasons, the Project is a public work
within the meaning of Section 1720. Therefore, the Project
is subject to prevailing wage requirements."<1>
ARGUMENTS IN SUPPORT :
This bill is sponsored by the California-Nevada Conference of
Operating Engineers, who argues that is simply codifies the
recent DIR determination in statute to avoid confusion and legal
questions in the future. They believe this will give clarity to
contractors who are bidding on CASF-funded projects, and to
labor standards officers who are responsible for enforcing labor
laws on the projects.
REGISTERED SUPPORT / OPPOSITION :
Support
California-Nevada Conference of Operating Engineers (sponsor)
California State Council of Laborers
Opposition
None on file.
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091
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<1> Public Works Case No. 2013-015. Central Valley Next
Generation Broadband Infrastructure Project/Central Valley
Infrastructure Network (November 22, 2013).