On March 17, 2017, the Department of Industrial Relations (DIR) submitted Budget Trailer Bill 502. Budget Trailer Bill 502 would provide changes to the existing contractor registration requirements, as well as changes to the requirement for agencies to provide the DIR with notice of pending public works projects, as initially required by SB 854. SB 854 established the requirement that all public works contractors register with the DIR, and also established a prevailing wage monitoring and enforcement mechanisms. See our previous article on the changes here.

Budget Trailer bill 502 proposes to increase the registration dollar thresholds that were set in SB 854. Contractor registration would be required for new construction that is $25,000, previously $1,000, and $15,000 for maintenance projects. The Budget Trailer bill would also create new civil penalties that would be imposed by the State Labor Commissioner. Any contractors or subcontractors that do not register with the DIR will be fined $100 per day, with a limit of $8,000. Additional fines of $100 per day, up to $10,000, would apply to any contractors who employ unregistered subcontractors. This could also result in the loss of registration for the current fiscal year and disqualification from registering in the following year. Moreover, a first time violation would not result in the loss of registration if it was unintentional.
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On June 20, 2014, the California legislature adopted SB 854, a “budget bill” that was heavily negotiated and tied to the approval of the state budget. Included among a variety of unrelated provisions in the lengthy bill were a number of additions and changes to the California Labor Code which will revamp the monitoring of public works projects throughout California through the Department of Industrial Relations (“DIR”).

SB 854 creates a new public works monitoring scheme for the DIR. While the DIR has been charged with establishing and enforcing prevailing wage requirements for number of years, the new scheme will place more responsibility on the DIR. This alert will summarize the new requirements for both public agencies and contractors.
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The California legislature has enacted a number of laws that impact prevailing wage requirements, including provisions that affect charter cities, requirements to inform the Labor Commissioner of the completion of public works projects, exposure to liquidated damages for prevailing wage violations, and applying prevailing wage requirements to refinery construction projects. These laws went into effect on January 1, 2014, and are summarized below.


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The legislature is considering adopting a statute that would require workers on private projects to be paid prevailing wage if public subsidies exceed the lesser of $10,000 or 1% of the project cost.  This would effectively eliminate the de minimis exception and likely change the landscape for public subsidies on private projects.


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An appellate court case decided in April of 2009 held that public works projects awarded by charter cities, and financed solely from city revenues, were not subject to California prevailing wage requirements under the Prevailing Wage Law. (See State Building and Construction Trades Council of California v. City of Vista (2009) 173 Cal.App.4th 567.)  On August 19, 2009, the California Supreme Court granted a petition to review the case, and de-published the opinion of the appellate court.  According to the Supreme Court website the case has been “fully briefed,” although oral argument has not yet occurred.  Presumably, the Supreme Court will issue its opinion by the end of the year.


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The California Department of Industrial Relations recently published an opinion which solidifies the “de minimis” exception to prevailing wage laws for private developers which receive small amounts of public financial support for their projects. In Public Works Case No. 2008-37, the DIR responded to a request for a prevailing wage coverage determination initiated by the developer of a senior care facility in Elk Grove. As an incentive to build the facility, the city offered financial incentives in the form of reduced sewer impact fees (sewer credits) which totaled over $200,000. The DIR concluded that pursuant to Labor Code section 1720(c)(3), this amount was “de minimis” in relation to the overall project cost.


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A recent California appellate court decision held that an employee of a subcontractor on a public works project has no right to recover a prevailing wage underpayment from the prime contractor. (See Violante v. Communities Southwest Development and Construction Company, (April 17, 2006, E037333) ___ Cal.App.4th ___ [06 C.D.O.S. 3209].) In Violante, the plaintiffs were employed by a subcontractor on a master planned community development with 2000 residences and many public improvements. Plaintiffs’ alleged that they were not paid prevailing wages for their work by their direct employer, the subcontractor, and brought suit against the general contractor.
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