White Paper: SB Implementation

Transcription

1 White Paper: SB Implementation California Senate Bill 854 was passed in June 2014 and changed the implementation and enforcement of public works projects for public agencies, grant recipients and the contracting community. This paper will set forth the changes in the law, the staggered implementation schedule from June 20, 2014 through January 1, 2016, some of the challenges with the implementation and recommended best practices moving forward into The overall purpose of SB 854 was to implement a system where all public works projects were registered with the California Department of Industrial Relations (DIR), all certified payrolls were submitted by contractors to the DIR and where all contractors performing public works would also be registered specifically to perform public works. In doing so, the legislation and DIR established certain systems and protocols to accomplish this purpose. Registering Public Works Projects PWC-100 The first requirement under SB 854 is for public agencies to register all public works projects over $1,000 (starting June 20, 2014). Prior to SB 854, projects were registered by using a PWC-100 form, but only for projects over $30,000 or for any project containing Proposition 84 funding (The Safe Drinking Water, Water Quality and Supply, Floor Control, River and Coastal Protection Bond Act of 2006). Commencing on June 14, 2014 all public agencies were required to register all public works projects over $1,000. Many public agencies had never filed a PWC-100 form prior to June 2014, in part because of a lack of education on the obligation to do so and in part because the DIR did not spend resources to actively monitor and review if PWC-100 forms were filed. There were no penalties or consequences if such a form was not filed (other than admonishment to fill it out in the future). With the passage of SB 854, that changed (to be discussed later). The PWC-100 form includes basic information about the project. A sample of the form can be found at: It includes basic information such a project location, prime contractor information, duration of the project, types of crafts to be employed, etc. The PWC-100 is to be filed electronically with the DIR not later than five (5) days after the award of the contract. Some agencies have queried the definition of award of contract. In the formal bidding processes, it would be when the agency s governing board approves the award of the contract. On other types of work such as purchase order, task order or emergency work, the award should be consider the date the contract is signed, the date the Notice to Proceed is issued or the first day work is performed on the project, whichever occurs first. While there are no financial penalties imposed upon an agency who files the form a few days late; there are consequences to the job. Contractors are required to file electronic certified payrolls on each of these projects and cannot do so until the project is set up in the DIR s database. Having the Awarding Agency file a PWC-100 creates that project file so that the contractor can then file the payroll reports. 1

2 Further, Awarding Agencies should be aware that the intentional disregard of filing PWC-100 forms can result in a misdemeanor criminal prosecution under California Labor Code Section 1777, which states: Any officer, agent, or representative of the State or of any political subdivision who willfully violates any provision of this article, and any contractor, or subcontractor, or agent or representative thereof, doing public work who neglects to comply with any provision of section 1776 is guilty of a misdemeanor. To date DIR has not pursued any such actions criminal actions against public agencies or individuals employed by public agencies. However, Eric Rood, Assistant Labor Commissioner, has stated the DIR will pursue such action if public agencies continue to intentionally disregard the requirements to file PWC-100 forms. It should also be noted that non-public agencies which received public funds or some type of public assistance triggering prevailing wage will be required to submit a PWC-100 form. This typically applies to certain nonprofit groups or developers receiving grants or other public assistance. Public agencies which provide grant funds or other types of public assistance to entities for construction which will trigger prevailing wage obligations should inform these entities of their prevailing wage obligations. There are limited exceptions to the PWC-100 filing requirement. The exception applies to DIR legacy Labor Compliance Program (only four (4)) and any project which requires the implementation of a Project Labor Agreement. Mandated Contract Clauses Effective January 1, 2015, all public agencies are required to include the following information in all contracts and solicitations for bid: No contractor or subcontractor may be listed on a bid proposal for a public works project (submitted on or after March 1, 2015) unless registered with the Department of Industrial Relations pursuant to Labor Code section [with limited exceptions from this requirement for bid purposes only under Labor Code section (a)]. No contractor or subcontractor may be awarded a contract for public work on a public works project (awarded on or after April 1, 2015) unless registered with the Department of Industrial Relations pursuant to Labor Code section This project is subject to compliance monitoring and enforcement by the Department of Industrial Relations. The Awarding Agency will need to include this new language in any renewal or extension of an existing contract and to be sure to include it in any new specifications or contracts. There is no requirement to amend or issue an addenda to any contract which was awarded prior to January 1,

3 Contractor Registration All entities (corporations, partnership, owner operators) that perform covered public works must be registered with the DIR as a public works contractor. This requirement became effective for all contracts bid after March 1, 2015 and awarded after April 1, This requires these contractors to complete a registration form online with the DIR and pay an annual fee of $300 each fiscal year (July 1- June 30). A contractor who is not registered at the time of bid may not perform work on a public works project. If a contractor is not registered at the time of a bid, the agency is allowed to contact the contractor and provide a 24 hour window whereby the contractor can register on the DIR s website and pay an additional penalty of $2,000. (See Labor Code Sections and ). If there is no formal bid date then: 1) the date the contractor submits a price; 2) enters into a contract; 3) is issued a Notice to Proceed; or performs work on the project, whichever is first shall be considered as the bid date for the purposes of registration. This applies to all contractors and subcontractors who will perform work on the project. It is important to note that this registration requirement applies to all work covered by prevailing wage and not just those entities licensed by the California Contractors State License Board (CSLB). For example: trucking, surveying and construction inspections are just a few classifications of work which are covered by prevailing wage, but which are not regulated by the California CSLB. These companies must also register as public works contractors with DIR. Finally entities which can be considered joint employers must also be registered with the DIR as public works contractors. This includes labor referral services and temp agencies as well a truck brokers. Contracts awarded prior to April 1, 2015 are not subject to this registration requirement. While DIR has not yet opined on the issue of contract/option renewals, it is the opinion of the author that any renewal or extension of an existing contract would likely be subject to the contractor registration requirement. Submission of Electronic Certified Payrolls For all projects awarded after April 1, 2015, contractors must submit certified payroll electronically to DIR through the ecpr system. The ecpr system was actually launched in June 2015 and continues to be revised and updated on a regular basis. As of December 2015, the ecpr is only collecting certified payroll information and has no way to capture other forms and information mandated by the DIR: fringe benefit information (PW-26), training contributions (CAC-2) or apprenticeship compliance (DAS-140 and DAS-142). Future versions of the ecpr program may address these issues. DIR has made clear that the department is not reviewing the payroll information submitted. DIR is still complaint driven and will only review the electronic information submitted if and when a complaint is submitted to DIR relating to one of these projects. 3

4 Agency s Ongoing Obligation to Monitor Prevailing Wage Having contractors submit certified payrolls through DIR s ecpr system does not relieve an Awarding Agency of its obligation to monitor prevailing wage compliance. Labor Code Section 1726 requires: (a) The body awarding the contract for public work shall take cognizance of violations of this chapter committed in the course of the execution of the contract, and shall promptly report any suspected violations to the Labor Commissioner. (b) If the awarding body determines as a result of its own investigation that there has been a violation of this chapter and withholds contract payments, the procedures in Section shall be followed Thus, an Awarding Agency may either report prevailing wage violations directly to DIR for enforcement (and allow DIR up to 18 months after the Notice of Completion to complete its investigation) or be proactive in prevailing wage enforcement during the course of the project, requiring corrective action by the contractor and imposing necessary penalties. Many agencies have taken the position that they would rather be proactive and close out their projects by engaging in prevailing wage monitoring rather than allow DIR to take up to 18 months after project close to conclude its investigation and finding. The DIR specifically issued a Precautionary Legal Notice to Public Agencies reminding agencies this obligation: All awarding bodies continue to share responsibility to monitor and enforce compliance on public works and should review the Labor Commissioner's precautionary notice. A complete copy of the precautionary notice can be found at: DIR has also taken this opportunity to remind public agencies that maintenance work is covered by the definition of public works and so prevailing wage must also be paid for items such as landscape maintenance, roofing repairs, painting touch up, annual service work and warranty work. It is especially important to include prevailing wage language is these contracts or purchase orders. 1 Notice of Completion SB 854 also requires that an Awarding Agency file a Notice of Completion for each public works project. The filing of a Notice of Completion has the legal effect of triggering the DIR s statute of limitations when investigating a project. The DIR must complete its investigation and issue its findings (Civil Wage and Penalty Assessment) within 18 months of the filing of the Notice of Completion. Filing such a Notice assists in the final close out of the project. From a practical stand point, some agencies have taken the position that a Notice of Completion will not be filed for relatively small projects because of the time and expense in completing such a notice for every small contract. 1 Routine janitorial services are not considered a public works and are not covered by prevailing wages. 4

5 This is an internal policy decision which each agency should make for itself. The recommended practice is to comply with SB 854 and file a Notice of Completion for all public works projects. For construction projects, a Notice of Completion may be filed when there is substantial completion of the work. For maintenance and service work, a Notice of Completion should be filed at the end or conclusion of the initial set term of the contract. For example: A three-year contract for roofing maintenance with 4 one year extensions for a set price. A NOC would be filed at the end of the three (3) years and then at the end of each Annual Renewal period. 2 An agency can chose to file a Notice of Completion at the conclusion of work under any single purchase order or task order (if they so choose). However, from a practical point of view, this could result in filing multiple Notice of Completions in a short period of time, creating a burdensome and costly compliance component. This is why it is recommended and an accepted practice to file a single Notice of Completion at the conclusion of term of the service/maintenance contact. Failure to file a Notice of Completion will impact the contractor far more than the Awarding Agency as it continues to expose the contractor to liability Update Effective January 1, 2016 all public works projects over $1,000 must have electronic certified payrolls submitted to DIR through the ecpr on an ongoing, prospective basis. This new requirement impacts both contractors and public agencies. For 2015, only those projects awarded after April 1, 2015 had to submit certified payroll through the ecpr system. Starting in January 2016, all ongoing projects (even those awarded prior to April 1, 2015) are required to submit certified payroll through the ecpr program. No retroactive payrolls are required. While this issue impacts contractors the most, the contractor will not be allowed to submit the ecprs unless and until the public agency has filed a PWC-100. This means public agencies will need to file PWC-100 forms for any ongoing project which was awarded prior to April 1, When the public agency files the PWC-100 for these older projects, the agency should reference the original date of the contract award and the original start date of the contract. All public agencies should review all public works projects to ensure that a PWC-100 has been filed for all projects ongoing in Contractors will not be allowed to file their ecprs for these projects until the public agency has filed its PWC In the unlikely event of an open-ended contract for services, there should be a set time when rates can be renegotiated and then that point in time could be used to file a Notice of Completion 5

6 Best Practices Summary Public agencies would be well advised to review their internal practices to ensure that each of the following items and protocols are met: Review bid specifications, general specifications, contract and purchase order to ensure that mandatory contract language relating to contractor registration is included. Review general specifications, contracts and purchase orders to ensure that all prevailing wage information is updated and current. The Legislature makes changes nearly every year to prevailing wage requirements and a review by competent legal counsel will continue to protect the agency. Review agency s internal protocols relating to the filing of PWC-100 forms. Some agencies are small and all PWC-100s are filed by a single person or department. Other larger agencies have PWC-100 forms filed by multiple departments. i.e. public works, capital improvements, maintenance or operations. Determine agency protocol for the review of all existing public works projects to determine which have not been registered with the DIR by filing a PWC-100 form and who will be responsible for registering the rest of these projects as soon as possible in January Review agency protocols for prevailing wage compliance. What is the governing board or general manager s commitment to prevailing wage enforcement and how is that implemented. Review should include: o Contract clauses o Collection of certified payroll o What level of review of certified payroll is undertaken? o What is the agency s procedure if prevailing wage violations are reported? Does the agency investigate? Is investigation turned over to the DIR? Are funds withheld pending outcome of investigation? o What is the agency s procedure for filing a Notice of Completion on its public works projects? Finally an awarding agency should designate a point person whose responsibility it is each year to stay updated on prevailing wage requirements either through consultation with legal counsel or attending educational seminars. December 18, 2015 Prepared by Deborah E.G. Wilder, Esq. dwa@wilderlawfirm.com 6