Another First: CA Prevailing Wage Law Expanded to Cover Material Suppliers

by Jeffer Mangels Butler & Mitchell LLP

Jeffer Mangels Butler & Mitchell LLP

PREVAILING WAGE LAW is California's "other" minimum wage. It requires workers to be paid union wages on publicly funded construction projects. But in recent years, the law in California has EXPANDED well beyond its initial purpose. It has become a tool for workers to demand union wages on virtually any construction project in California. These claims can increase the cost of a major construction project by millions of dollars--and can be brought years after construction is complete.

AB 219 Expands Prevailing Wage To Include Deliveries of Ready-Mix Concrete

Since the 1930s, prevailing wages have applied only to construction work, not to the manufacture or delivery of construction supplies.

In California this distinction was made explicit in 1976, when the Court of Appeal held that "materialmen" and "employees of materialmen" who sell supplies to the general public are exempt from prevailing wage law; and "the delivery of standard materials" to a public work is not subject to prevailing wage. O. G. Sansone Co. v. Department of Transportation (1976) 55 Cal. App. 3d 438, 442-443.

Simply put: prevailing wage has always applied to the bricklayer, not to the bricks.

Until now. Last year, the California Legislature passed and the Governor signed AB 219, which extends prevailing wage requirements to the delivery of ready-mix concrete to public works. The bill was codified as Labor Code Section 1720.9.

This represents a sea-change in prevailing wage law: for the first time, material suppliers must comply with prevailing wage requirements!

AB 219 is likely the first step in extending California Prevailing Wage Law to cover the delivery of ALL material supplies to public works.

AB 219 is the proverbial "camel's nose under the tent." There is little doubt that the unions and the Legislature intend to extend prevailing wage requirements to other material suppliers. This concern was explicitly discussed in the Senate Labor Committee's analysis of the bill. In fact, at one point AB 219 itself included the delivery of asphalt as well as ready-mix concrete, but the language was removed to ensure passage of the bill.

If the unions succeed, the delivery of all supplies to a public works site--everything from concrete to bricks to lumber to nails--could become subject to prevailing wage.

Why is extending prevailing wage to material suppliers such a big deal?

Three reasons:

1. Cost. Requiring prevailing wage for all deliveries to public works sites will significantly increase the cost of construction in California. The California Department of Transportation (Caltrans) estimates that the passage of AB 219--which only affects the delivery of one type of material--will increase its construction costs by up to $42 million annually.

2. Massive expansion of prevailing wage. Expanding prevailing wage to suppliers would constitute a massive expansion of the program. Since inception, prevailing wage laws have applied only to contractors who work at a specified job site. The purpose of the prevailing wage law is, after all, "to benefit the construction worker on public construction projects." Sansone at 461. It is hard to see how requiring suppliers from across the globe to pay more for deliveries to prevailing wage sites will further the purpose of the statute.

3. Complexity. Suppliers are different from contractors. Contractors work at the job site. Suppliers of construction materials can be located anywhere--often out of state or out of the country. They make deliveries to both prevailing wage and non-prevailing wage sites. They often deliver to large numbers of customers world-wide, using various commercial delivery services. The logistics of paying different wages for deliveries to public works projects in California are hard to imagine (and would be even harder to enforce).

Assistance for Ready-Mix Concrete Suppliers

With regard to ready-mix, I have been advising the California Construction and Industrial Materials Association (CalCIMA) and its members on compliance with AB 219. We have prepared a "compliance checklist" for ready-mix suppliers in California. I will also be speaking on AB 219 compliance issues at CalCIMA's 2016 Education Conference, which will be held in Palm Springs on November 6-9 this year.

Hope to see you there!

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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