Recent Legislation Ensures Further Expansion And Enforcement Of California’s Prevailing Wage Law

Author(s): Dwayne McKenzie, John S. (Rocky) Miller, Jr.

Source: CCN Client Alert

11/21/2013

Effective January 1, 2014, several bills signed by Governor Brown increase the risks to private developers and contractors that projects previously believed to be private works or non-prevailing wage may be declared to be “public works” subject to California’s Prevailing Wage Law (Labor Code §1720, et seq.). The new legislation also strengthens enforcement provisions, facilitating efforts by the Labor Commissioner and private parties to recover for prevailing wage violations.

Senate Bill 377 establishes deadlines for issuing coverage determinations and imposes reporting requirements on public agencies and project owners. Under the Prevailing Wage Law, the Director of the Department of Industrial Relations (DIR) issues interpretative “coverage determinations” upon request, advising whether particular works of construction are “public works.” SB 377 requires the Director to issue a requested determination for projects undertaken by a public agency within 60 days (subject to an additional 60 day extension in complex cases) following receipt of the last notice of support or opposition from an interested party. For private projects that may receive “public funds” as broadly defined in the Prevailing Wage Law, the Director must issue a determination within 120 days of receipt of the last notice of support or opposition. Administrative appeals must be made within 30 days of the Director’s determination, and the Director’s decision on appeal must be issued within 120 days (subject to an additional 60 day extension at the Director’s discretion). Notably, SB 377 declares that the Director’s coverage determinations are quasi-legislative, thereby narrowing the scope of subsequent judicial review.

SB 377 also extends the time for the Labor Commissioner and private joint labor-management committees (established pursuant to the federal Labor Management Cooperation Act of 1978) to sue to recover unpaid prevailing wages and penalties. SB 377 adds a requirement that parties filing a notice of completion and public agencies accepting completion of public works report the notice or acceptance to the Labor Commissioner. If they do not, the time for the Labor Commissioner to issue a civil wage and penalty assessment is tolled unless and until proper notice is given. The time for a joint labor-management committee to file an action for unpaid prevailing wages is tolled similarly. SB 377 also tolls these time periods (i) for any time required for the Director to issue a coverage determination and (ii) for any time that a contractor or subcontractor fails to properly provide certified payroll records in response to a request from the Labor Commissioner, a joint labor-management committee, or a DIR-approved labor compliance program.

Assembly Bill 1336 facilitates collection efforts for prevailing wage violations by extending the time for the Labor Commissioner to issue a civil wage and penalty assessment for unpaid wages, penalties and liquidated damages against a contractor and subcontractor from 180 days to 18 months following the filing of a notice of completion or acceptance of the work. AB 1336 similarly extends from 180 days to 18 months the time for a joint labor-management committee to bring an action against an employer for prevailing wage violations and authorizes in such actions an award against the employer of interest, liquidated damages, civil penalties, and injunctive and equitable relief in addition to unpaid wages.

Together, SB 377 and AB 1336 can be expected to result in greater enforcement efforts as public works are monitored by the DIR and Labor Commissioner, coverage determinations and civil wage and penalty assessments are issued, and civil actions are pursued by aggrieved workers and labor-management cooperation committees. In particular, the extension for assessments to 18 months poses additional risks for general contractors and owners because the Labor Commissioner may seek wages, liquidated damages and penalties after project completion and after all retention payments have been made to contractors and subcontractors.

Senate Bill 7 seeks to encourage charter cities to impose prevailing wage requirements on local construction. SB 7 was introduced in response to the 2012 California Supreme Court decision in State Building & Construction Trades Council of California, AFL-CIO v. City of Vista, et al., which held that the “home rule” doctrine of the California Constitution (which ensures charter city autonomy over municipal affairs) applies to wages paid workers on locally funded projects. Vista essentially confirmed that local charter city projects are not subject to the Prevailing Wage Law. Beginning with projects awarded on or after January 1, 2015, SB 7 prevents a charter city from receiving or using state funding for city construction projects if the city has a charter provision or ordinance that allows the charter city to take advantage of this “home rule” exemption or if the city has awarded, within the prior two years, a public works contract without requiring the contractor to comply with the Prevailing Wage Law. Faced with the choice to forego state funding for local construction, SB 7 imposes substantial financial pressure on charter cities to require prevailing wages on charter city projects.

Senate Bill 54 is the first legislation that applies the prevailing wage rates established under the Prevailing Wage Law to private industry. Enacted for the purported purpose of protecting public health and safety, SB 54 extends training and prevailing wage obligations to construction, alteration, demolition, installation, repair, or maintenance work at certain chemical manufacturing and processing facilities, including refineries, regardless of whether the construction is subsidized by public funds. Although SB 54 specifically states that construction under SB 54 is not a “public works” under the Prevailing Wage Law (and therefore not subject to all of its associated requirements, such as record-keeping), it may nevertheless presage future legislative efforts to impose prevailing wage obligations on privately funded construction.

This year’s Prevailing Wage Law legislation comes on the heels of several California appellate court decisions and Department of Industrial Relations coverage determinations which expanded the reach of the Prevailing Wage Law while limiting the exceptions contained within the statute that exempt traditional private projects from its application. Developers and contractors should closely monitor their public works projects and evaluate any potential subsidies in private development projects to identify Prevailing Wage Law exposure.

 

If you have questions regarding any prevailing wage issues, please contact the following attorneys:

Dwayne McKenzie at 310.284.2279 or dmckenzie@coxcastle.com
Rocky
Miller at 310.284.2235 or rmiller@coxcastle.com

If you have questions on prevailing wage issues as they relate to affordable housing development, you may also contact:

Steve Ryan at 415.262.5150 or sryan@coxcastle.com
Ofer
Elitzur at 415.262.5165 or oelitzur@coxcastle.com

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