Two New Prevailing Wage Laws Aimed at Stopping "Wage Theft"

by Best Best & Krieger LLP

Public Agencies are Now Required to Provide Notice of Completion and/or Acceptance on All Public Works Projects to Labor Commissioner Within Five Days

Effective January 1st, two new California prevailing wage laws affect public works projects. Senate Bill 377 establishes new deadlines for issuing prevailing wage coverage determinations and imposes new reporting requirements on public agencies. Assembly Bill 1336 extends the statutory deadline for the Labor Commissioner to issue civil wage and penalty assessments from 180 days to 18 months, and tolls that deadline until the Labor Commissioner is provided a timely notice of the filing of a Notice of Completion and/or acceptance of a public works project. Together these new bills provide the Labor Commissioner and private joint labor-management committees greater ability to enforce compliance with the state’s prevailing wage laws.

Because these new prevailing wage laws may extend the exposure faced by contractors who have failed to pay prevailing wages (and the sureties on their payment bonds), it is important for public agencies to understand that these contractors and/or their sureties may seek to shift liability back to the awarding bodies. The practical effect of these bills on public agencies still remains to be determined. Best practice for public agencies is to annually train their staff on the rules regarding public works construction, including Notices of Completion, prompt payment rules, stop-notices, prevailing wages, and related bonding and surety matters.

The central purpose of the prevailing wage law is to protect and benefit employees on public works projects. Prevailing wage laws are intended to prevent government contractors from using itinerant, cheap, bootleg labor. State prevailing wages must be paid on all contracted public works projects over $1,000 as defined under the Labor Code. Higher thresholds may apply ($15,000 or $25,000) if the public entity has adopted a special labor compliance program. Existing law requires the Labor Commissioner to issue a civil wage and penalty assessment against a contractor or subcontractor, or both, if the Labor Commissioner determines after investigation that the contractor and/or subcontractor violated the prevailing wage laws.  

SB 377 amends Labor Code section 1773.5 to set new deadlines for the Director of Industrial Relations to issue public works coverage determinations at 60 days for public works projects or 120 days for otherwise private development projects receiving public funds, subject to certain extensions. For public agencies, these new deadlines may result in more prevailing wage coverage determinations being issued by the Director of Industrial Relations and potentially resulting in more projects being deemed public works. As a result, this is a good time for public agencies to review their public works contracts to ensure that all recommended prevailing wage provisions are incorporated. SB 377 also establishes an administrative appeal deadline of 30 days and a deadline of 120 days for the Director to make a final determination on that appeal. SB 377 also grants the Director the legal authority to make prevailing wage coverage determinations (equivalent to legislative policy-making) and provides that a final determination of an appeal is subject to judicial review.

As for public agencies, SB 377 adds a new Section 1741.1 to the Labor Code allowing the deadline for serving civil wage and penalty assessments by the Labor Commissioner to be tolled until the Labor Commissioner is provided notice of completion/acceptance of a project in a timely manner. Specifically, SB 377 requires that public agencies notify the Labor Commissioner within five days of the filing of a notice of completion with the county recorder or the acceptance of a public work by a public agency, whichever is later. No specific penalty is included in the legislation for noncompliance.

Meanwhile, AB 1336 amended Labor Code section 1741 (a) to extend the statute of limitations for a State Labor Commissioner to enforce a civil wage and penalty assessment from 180 days to 18 months after the filing of a valid notice of completion or acceptance of the public work, whichever occurs later. This period of time will be tolled until the Labor Commissioner is provided notice of completion/acceptance of a project in a timely manner by the public agency, per SB 377. AB 1336 also extended the deadline for private joint labor-management committees to enforce a deadline from 180 days to 18 months and provided these committees additional civil remedies in the form of interest on unpaid amounts, liquidated damages, and injunctive relief against the contractor and/or subcontractor. AB 1336 also requires that certified payroll records shared with these joint labor-management committees or certain trust funds be redacted only to prevent disclosure of an individual’s full social security number.

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