Don’t mess with the California Labor Commissioner.
Julie Su, California’s Labor Commissioner, has been making headlines recently as California’s Division of Labor Standards Enforcement (“DLSE”) has cracked down on prevailing wage violations. In a report issued this past month, the DLSE reports that it assessed over $25 million in back wages and civil penalties on public works projects in 2012, the highest recovered since 2002.
And 2013 may be another record breaking year.
This past month the Labor Commissioner assessed over $1.8 million in prevailing wage violations against three subcontractors on public works projects in Southern California (Pow!), in early June she assessed nearly $750,000 against four general contractors on public works projects in Central and Southern California (Bam!), and just over a week later assessed over $8 million against another general contractor on a hotel project which had received rent credits from a public entity (Kaboom!).
Prevailing wages, like state and federal minimum wages, set a minimum wage rate that employers must pay to workers. However, unlike minimum wages, prevailing wages do not apply to all employers, but only to employers who work on public works projects (or, under certain federal contracts), and the prevailing wage that must be paid by an employer depends on the classification or type of work performed by each worker.
California’s Prevailing Wage Law, like the federal prevailing wage law, the Davis-Bacon Act, dates back to 1931. Enacted during the Great Depression, California’s Prevailing Wage Law and the federal Davis-Bacon Act, require that employers working on public works contracts pay their workers wage rates “prevailing” in the local area, the idea being that it would limit the incentive for employers to recruit lower-wage workers from outside the area.
The Davis-Bacon Act
The federal Davis-Bacon Act, codified at 40 U.S.C. §§3141 et seq., provides that contractors and subcontractors performing work on federally-funded or -assisted contracts in excess of $2,000 for the construction, alteration or repair of public buildings or public works pay their workers no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area as set by the U.S. Department of Labor (“DOL”).
Contractors and subcontractors are required to pay covered workers weekly and submit weekly certified payroll records to the contracting agency. In addition, contractors and subcontractors are required to post Davis-Bacon Act wage determinations and a Davis-Bacon Act poster on the job site.
Failure to pay prevailing wages may be grounds for withholding contract payments, contract termination, and liability for costs to the government and debarment from future contracts for up to three years.
Further information on the Davis-Bacon Act and the DOL’s prevailing wage determinations can be found at the DOL’s website.
California’s Prevailing Wage Law
California’s Prevailing Wage Law, codified at California Labor Code sections 1720 et seq., provides that contractors and subcontractors performing work on state, municipal or local public works projects with a value of over $1,000 pay their workers not less than the general prevailing rate of per diem wages for work of a similar character in the locality in which the public work is performed as set by the California Department of Industrial Relations (“DIR”).
However, charter cities may exempt a public works project within the city limits from prevailing wage requirements if 100% of the funding comes from local city funding sources. In addition, for small public works projects, if an entity has an approved labor compliance program, prevailing wages are not required to be paid on public works projects of $25,000 or less involving new construction, or public works projects of $15,000 or less involving alteration, demolition, repair or maintenance.
Failure to pay prevailing wages may be grounds for assessment of back wages and civil penalties.
Further information on the Prevailing Wage Law and DIR’s wage determinations can be found at the DIR’s website.
A Warning to Contractors
In a press release issued by the DIR earlier this month, Labor Commissioner Su warned contractors, “Failure to pay the proper prevailing wage is a form of wage theft. We will crack down on not only the subcontractors who steal workers’ wages and fail to pay apprenticeship training contributions, but also on the general contractors so we put proper incentives on them to deal only with honest, law-abiding businesses in California.”
You’ve been warned.