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Greater Risks for Noncompliance with California’s Prevailing Wage Law

on Friday, 24 January 2014 in Dirt Alert: David C. Levy, Editor

Recently, California enacted several statutes to increase compliance with California’s Prevailing Wage Law (“PWL”). Generally, the PWL requires contractors and subcontractors to pay prevailing wages for local public works projects. “Prevailing wages” are the basic hourly rate paid on public works projects to a majority of workers engaged in a particular craft, classification, or type of work within the locality and in the nearest labor market area (if a majority of such workers are paid at a single rate).


The focus on compliance means greater liability exposure for those who violate the PWL. This article includes brief summaries of Assembly Bill 1336, Senate Bill 377, Senate Bill 7, and Senate Bill 4, bills that attempt to increase compliance with the PWL. Employers in the construction industry should determine if their construction contracts are subject to the PWL and if so, how to reduce the risk of violating the PWL.


Assembly Bill 1336, effective January 1, 2014, expands the remedies available to a joint labor-management committee in an action for violations of the PWL. Previously, only the Labor Commissioner could obtain liquidated damages and civil penalties for violations of the PWL. Under AB 1336, in actions brought by joint labor-management committees, a court may award restitution to an employee for unpaid wages, plus interest, liquidated damages equal to the amount of unpaid wages owed, civil penalties, injunctive relief, or any other appropriate form of equitable relief. Furthermore, a court must award a prevailing joint labor-management committee its reasonable attorneys’ fees and costs, including expert witness fees. No corresponding provision requires the award of attorneys’ fees and costs to prevailing employers.


AB 1336 also lengthens the time available to pursue enforcement actions against employers for violations of the PWL. Previously, the Labor Commissioner had 180 days to issue a civil wage and penalty assessment to a contractor, a subcontractor, or both. Specifically, the time limit on the assessment was 180 days after the filing of a valid notice of completion in the relevant county recorder’s office, or 180 days after acceptance of the public work, whichever occurred last. The deadline for a joint labor‑management committee to commence an action against an employer for violations of the PWL was identical, 180 days from the filing of a valid completion notice or from acceptance of the public work, whichever occurred last. AB 1336 lengthens the deadline for service of the assessment and commencement of an enforcement action to not later than 18 months after the filing of a valid notice of completion, or not later than 18 months after acceptance of the public work, whichever occurred last. By tripling the time period for assessments and civil lawsuits, AB 1336 increases the likelihood that employers will be subject to enforcement actions.


A related bill, Senate Bill 377 also affects the timelines for actions under the PWL. When a request is made for a determination of whether a project is a public work, SB 377 requires the Director of Industrial Relations to make that determination within 60 days of receipt of the last support or opposition letter regarding the project. The Director may have an additional 60 days if he or she deems the complexity of the request requires additional time to make a determination. If the project is a private development receiving public funds, the Director has 120 days to make a determination.


An administrative appeal of the determination must be made within 30 days of the date of the Director’s determination. The Director must then decide an appeal within 120 days after receipt of the last notice of support or opposition relating to the appeal. The Director may have up to an additional 60 days if he or she certifies in writing to the party requesting the appeal the reason for the extension.


SB 377 grants the Director quasi-legislative authority to determine which projects are subject to prevailing wage requirements. Thus, although the final determination on any administrative appeal is subject to judicial review, courts may be less likely to reverse the Director’s determination.


SB 377 also requires the person filing notice of completion of a public work to provide notice to the Labor Commissioner, and requires the awarding body or political subdivision that accepts a public work to provide notice of acceptance to the Labor Commissioner. Notably, SB 377 tolls the period for service of assessments and for commencement of an action by a joint labor-management committee for (1) the period of time required by the Director to make a determination of whether a project is a public work; (2) the period of time that a contractor or subcontractor fails to provide certified payroll records to the Labor Commissioner, a joint labor-management committee, or an approved labor compliance program; and (3) the length of time notice of completion or acceptance is not provided to the Labor Commissioner. In other words, the 18-month time periods in AB 1336 may be even longer given the tolling provisions of SB 377.


In addition to AB 1336 and SB 377, California enacted two other bills that demonstrate the legislature’s increasing focus on the payment of prevailing wages. Late last year, we published an article about Senate Bill 7. Under SB 7, a charter city cannot receive or use state funding or financial assistance for a construction project if the city authorizes a contractor to avoid paying prevailing wages on any public works contract. SB 7 also disqualifies any cities from receiving state funding for a construction project if the city has awarded a public works contract without requiring payment of prevailing wages in the last two calendar years. A charter city may receive state financial assistance, however, if it adopts a local ordinance with wage requirements equal to or greater than the state’s wage requirements.


Senate Bill 54, applicable to contracts awarded, extended, or renewed on or after January 1, 2014, requires parties working on projects involving hazardous materials, when contracting for construction, alteration, demolition, installation, repair, or maintenance work, to require that contractors and any subcontractors use a skilled and trained workforce, including skilled journeypersons. One criterion by which SB 54 defines a “skilled journeyperson” is the payment of a wage rate equal to the prevailing hourly wage rate for a journeyperson in the applicable occupation and geographic area. In other words, California has extended the PWL to certain projects that do not receive public funding at all.


These statutes all attempt to increase compliance with the PWL, via expanding the scope of available remedies, the time periods for enforcement, and the applicability of the PWL to certain projects utilizing hazardous materials. As a result, owners, developers, contractors, and subcontractors face greater liability exposure and should carefully review their construction contracts to determine if the PWL applies, and if so, to ensure compliance.

Anthony D. Todero

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