BILL ANALYSIS �
SB 776
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Date of Hearing: June 12, 2013
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hern�ndez, Chair
SB 776 (Corbett) - As Amended: April 15, 2013
SENATE VOTE : 24-10
SUBJECT : Public works: prevailing wage rates: employer payment
credits.
SUMMARY : Establishes additional restrictions on credit granted
against the obligation to pay prevailing wages for employer
payments made to monitor and enforce public works laws.
Specifically, this bill :
1)Prohibits credit from being granted for employer payments made
to monitor and enforce law related to public works if those
payments are not made to a program or committee established
under the federal Labor Management Cooperation Act of 1978.
2)Provides that an employer may take credit for those specified
employer payments, even if those payments are not made (or
costs are not paid) during the same pay period for which
credit is taken, if the employer regularly makes those
payments on no less than a quarterly basis.
EXISTING LAW :
1)Requires that not less than the general prevailing rate of per
diem wages be paid to all workers employed on a "public works"
project costing over $1,000 dollars and imposes misdemeanor
penalties for violation of this requirement.
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)Defines "paid for in whole or in part out of public funds" to
include, among other things, fees, costs, rents, insurance or
bond premiums, loans, interest rates, or other obligations
normally required in the execution of a contract that are
paid, reduced, charged at less than fair market value, waived
or forgiven by the state or political subdivision.
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4)Provides that per diem wages include employer payments for the
following - and provides that these payments are a credit
against the obligation to pay the general prevailing rate of
per diem:
a) Health and welfare
b) Pension
c) Vacation
d) Travel
e) Subsistence
f) Apprenticeship or other training programs, as specified.
g) Worker protection and assistance programs or committees
established under the federal Labor Management Cooperation
Act of 1978 (Section 175a of Title 29 of the United States
Code), to the extent that their activities are directed to
the monitoring and enforcement of laws related to public
works.
h) Industry advancement and collective bargaining
agreements administrative fees, provided that they are
required under a collective bargaining as specified.
i) Other similar purposes.
5)Provides that these credits for employer payments do not
reduce the employer's obligation to pay the hourly straight
time or overtime wages found to be prevailing.
6)Specifies that no credit shall be granted for benefits
required to be provided by other state and federal law.
FISCAL EFFECT : According to the Senate Appropriations
Committee pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : Existing law requires that not less than the general
prevailing wage rate of per diem wages be paid to all workers
employed on a "public works" projects. The term "prevailing
wage" in federal and California law, includes two components - a
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basic hourly rate of pay and bona fide fringe benefits that
prevail in an area. Title 29, Part 5, Subpart B of the Code of
Federal Regulations and California Labor Code Section 1773.1
detail the types of fringe benefit contributions that meet
prevailing wage requirements. Examples of bona fide fringe
benefits include health and life insurance, pension, vacation,
apprenticeship or training programs and public works enforcement
programs or committees, among others. However, payments
required by federal, state or local law [such as social
security, unemployment compensation and workers' compensation
program] are not fringe benefit contributions.
The California Labor Commissioner may assess civil penalties for
violations of prevailing wage law. In addition, a joint labor
management committee established pursuant to the federal Labor
Management Cooperation Act of 1978 may file an action against
any employer who fails to pay prevailing wages as required by
state law.
Under existing California law, bona fide fringe benefits allowed
to count as credit against the obligation to pay prevailing
wages includes eight enumerated examples (such as health and
welfare, pension, vacation, etc.) and a ninth category described
in the code as "Other purposes similar to those specified in
paragraphs (1) to (8), inclusive." This category of "other"
allows employers to make payments against the prevailing wage
obligation for other similar purposes; however, the author
believes that this broad category has allowed some employers to
reduce an employee's wages to pay for public works compliance
without the employee's involvement in this decision.
This bill would prohibit credit from being granted for employer
payments made to monitor and enforce laws related to public
works if those payments are not made to a program or committee
established under the federal Labor Management Cooperation Act
of 1978 - ensuring both labor and management involvement in the
decision.
Title 29 of the Unites States Code, Section 175a, the federal
Labor Management Cooperation Act of 1978 establishes the
creation of labor management committees for "the purpose of
improving labor management relationships, job security,
organizational effectiveness, enhancing economic development or
involving workers in decisions affecting their jobs including
improving communication with respect to subjects of mutual
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interest and concern." By limiting the contributions that an
employer can make, for purposes of public works enforcement, to
only a program or committee established under the federal Labor
Management Cooperation Act, the author contends that this bill
would ensure that such payments are made with both labor and
employer approval and cooperation.
In addition, this bill would also conform state law to federal
law by providing that qualifying fringe benefit payments may
constitute a credit as long as the contractor transmits payments
at least on a quarterly basis. Federal law [29 CFR
5.5(a)(1)(i)] allows contractors to take a credit against their
obligation to pay prevailing wages for fringe benefit payments
even if the payments are not transmitted during the same payroll
period in which the wages are paid - as long as this is done on
at least a quarterly basis. This bill would conform California
law to this federal requirement.
ARGUMENTS IN SUPPORT :
According to the author, this bill would protect the wages and
fringe benefits of workers on public works projects by
clarifying the requirements for bona fide fringe benefits. The
author argues that, increasingly, contractors selected for a
prevailing wage project that do not typically provide employee
benefits equal to the level required by prevailing wage laws are
claiming credit against their obligation to pay prevailing wages
for payments to an employer-sponsored "contract compliance
committee," asserting that these payments are for "other"
purposes within Labor Code Section 1773.1.
The author argues that such payments are problematic for four
reasons, 1) there is nothing joint about these employer
committees as only management participates; 2) workers do not
choose to have a portion of their prevailing wages sent to the
employer committee; 3) the primary purpose of the employer
committee is to minimize payroll taxes, not to help workers, who
did not create the committee or choose to fund it; and 4) the
employer committees appear to be more focused on trying to
repeal prevailing wage laws, instead of prevailing wage law
compliance.
Supporters argue that this bill would close loopholes in
prevailing wage law by clarifying that contractor payments for
monitoring and enforcing laws related to public works cannot
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count as a credit towards a contractor's obligation to pay
prevailing wages, if those payments are not made to a joint
program or committee established under the federal Labor
Management Cooperation Act of 1978. According to supporters,
the federal Labor Management Cooperation Act of 1978 requires
labor and management to cooperatively set up these committees
and run them ensuring that workers and management have a say in
how they operate. Additionally, supporterss argue that when a
contractor claims credits that they then don't pay to their
workers who actually earned the benefits, they can underbid good
contractors who not only abide by the law but believe that
construction workers should get the pay and benefit packages
they have earned.
ARGUMENTS IN OPPOSITION :
According to opponents of the measure, this bill would prohibit
credit from being granted for employer payments made to monitor
and enforce labor and apprenticeship laws related to public
works, if those payments are not required by a collective
bargaining agreement. They argue that the underground economy
is not a union versus non-union issue and neither is violation
of the laws on public works projects. According to opponents,
union contractors are required to make these payments by their
agreements, and they can be found in the published prevailing
wages under the "other" column. Non-union contractors, they
argue, receive the same credit when they voluntarily pay these
same moneys to support independent programs that monitor and
enforce public works labor law compliance.
Opponents assert that this bill is a direct effort to eliminate
independent compliance enforcement by defunding it and otherwise
seeking to limit the operation of such programs. They argue
that independent compliance efforts deserve credit in the exact
same way as the union contractor for the monies that collective
bargaining agreements collect. Additionally, opponents argue
that in many cases, the violations have not been reported by a
joint program supposedly in charge of such monitoring, but
discovered by - and subsequently reported to the Labor
Commissioner's office - an independent compliance programs for
action. Opponents further argue that public works compliance is
made more effective by having as wide a universe as possible to
audit and subsequently report violations.
Finally, opponents argue that the real policy goal is to end
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underground economy activity and it makes no sense to terminate
independent efforts to find and report labor law violations.
REGISTERED SUPPORT / OPPOSITION :
Support
California Labor Federation, AFL-CIO
California State Association of Electrical Workers
California State Pipe Trades Council
State Building and Construction Trades Council of California
(sponsor)
Western States Council of Sheet Metal Workers
Opposition
Air Conditioning Trade Association
Associated Builders and Contractors of California
California Construction Compliance Group
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
Analysis Prepared by : Ben Ebbink / L. & E. / (916) 319-2091