An overview of Prevailing Wage Law changes commencing in 2014 affecting Contractor s. Glenn M. Gelman & Associates 12/6/2013

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1 An overview of Prevailing Wage Law changes commencing in 2014 affecting Contractor s. Glenn M. Gelman & Associates 12/6/2013

2 Overview AB1336 Extended Statue of Limitations for enforcement of Prevailing Wage Laws SB 377 Public Works Determinations SB 776 Credit for Fringe Benefit Payments Safe Harbor for Prime Contractors Liability for Penalties arising from a Subcontractors Prevailing Wage and Apprenticeship Violations Sample Declaration of Compliance Form

3 Prevailing Wages A number of bills signed this year relate to prevailing wages. Employers that provide services or construction work for the government or public entities must pay the prevailing wage, which usually is significantly higher than the minimum wage. The bills include AB 1336, SB 7, SB 54, SB 377 and SB 776. One notable bill (SB 54) expands payment of prevailing wages to privately financed refinery construction projects. AB 1336: Law provides new tools to crack down on wage and benefit theft in the underground economy Contractors who fail to pay employees correct wages on public works will be less likely to get away with it thanks to AB 1336 (Frazier) signed by Governor Brown on October 14, 2013 and effective January 1, AB 1336 amends the prevailing wage law in three keys ways: First, it gives the Labor Commissioner and joint labor/management committees (LMCCs) more time to bring back wage and benefit actions; second, it allows greater access to personal identifying information reported on certified payroll records so that LMCCs can match workers to their reported wages and benefits; and, third, it requires courts to order injunctive relief and award back wages, interest, attorneys fees, and in certain circumstances, liquidated damages when a private right of action is brought in court on behalf of underpaid workers. Current law gives the Labor Commissioner and LMCCs bringing a private right of action only 180 days to file complaints against contractors who underpay prevailing wages. After January 1, 2014, the 180-day deadline will be extended to 18 months allowing time for workers to come forward and make back wage and benefit claims when they are less vulnerable to retaliation. This extension in the statute of limitations will also allow more time for investigation by state and private entities often overwhelmed by the volume of wage theft cases. The amendments to the California Labor Code provisions governing access to certified payroll records contained in AB 1336 will assist groups working to crack down on the underground economy. There are two key provisions in the bill that will help prevailing wage compliance groups and trust funds assure that workers get the proper wages and fringe benefits. First, joint LMCCs established by unions and contractors to enforce prevailing wages will have access to names and addresses of the workers reported on certified payroll records submitted by contractors under Labor Code section Second, Taft-Hartley trust funds will have access to names addresses and the last four digits of the workers social security number so they are able to match trust payments to workers accounts to assure that each hour worked on a public works job gets credited to the worker who earned it. Currently, there are many instances of wage theft that involve payroll records that do not report all the hours an employee is actually working.

4 Continued: Providing the names of the employees will allow the LMCCs to properly follow-up and determine if the payroll records are fraudulent. Finally, AB 1336 adds remedies in a private right of action on prevailing wages including injunctive relief, or any other appropriate equitable relief, restitution to an employee for unpaid wages, plus interest, from the date the wages became payable, liquidated damages equal to the amount of unpaid wages owed, and civil penalties if the employer failed to pay the prevailing wage to its employees. The added time, information and remedies will ensure that workers on public works get paid the wages and benefits they have earned. To access the entire bill go to:

5 AB 1336 Extended Statute of Limitations for Enforcement of the Prevailing Wage Laws EFFECTIVE JANUARY 14, 2014 Assembly Bill 1336 amends Labor Code section 1741 to extend the deadline from 180 days to 18 months for the Labor Commissioner to issue a civil wage and penalty assessment against a public works contractor or subcontractor, or both, for prevailing wage violations. AB 1336 also amends Labor Code section to extend the deadline from 180 days to 18 months for a joint labor-management committee to bring a civil action against an employer that fails to pay the prevailing wages to its employees and makes other revisions to the remedies that may be awarded to these joint labormanagement committee civil actions, including allowing the court to award interest, liquidated damages, and injunctive relief. AB 1336 also amends Labor Code section 1776 to require that any certified payroll records made available to a joint labor-management committee must delete only the workers' social security numbers. The workers' names and addresses must be provided. Copies made available to a multiemployer trust fund must delete only the individual workers' full social security numbers but must provide the last four digits.of the social security number. What Contractors Should Do Monitor subcontractors closely to ensure their compliance with the prevailing wage requirements. Require verification by subcontractors of the payment of prevailing wages to affected workers. Where possible, require subcontractors to provide cancelled payroll checks and other payroll records demonstrating compliance prior to paying the subcontractors. Trust Fund payment reports, proof of dues payments. Implement procedures to ensure that the required personal information of the worker is included on the certified payroll records.

6 SB 377 Public Works Coverage Determinations EFFECTIVE JANUARY 1, 2014 Senate Bill 377 amends Labor Code section to require the Director of the Department of Industrial Relations to issue public works coverage determinations within 60 days of receipt of the last support or opposition letter relating to that project or type of work, and for projects or types of work that are otherwise private development projects receiving public funds, within 120 days of receipt. SB 377 also requires an administrative appeal of that determination to be made within 30 days of the date of the determination, and would require the Director to issue a determination on an appeal within 120 days after the receipt of the appeal. SB 377 also makes the coverage determinations quasi-legislative and provides that a final determination on any appeal is subject to judicial review. SB 377 exempts the determinations, and determinations relating to the general prevailing rate of per diem wages and for holiday, shift, and overtime work, from the Administrative Procedure Act. SB 377 also adds Labor Code section to toll the statute of limitations for the Labor Commissioner to issue a Civil Wage and Penalty Assessment or for a joint labormanagement committee to file a lawsuit for the period of time required by the Director of Industrial Relations to make a coverage determination. SB 377 also tolls those periods for the period of time that a contractor or subcontractor fails to provide certified payroll records pursuant to a request from the Labor Commissioner, a joint labor-management committee, or an approved labor compliance program. SB 377 also requires that a notice of completion must be provided to the Labor Commissioner and requires the awarding body or political subdivision accepting a public work to provide to the Labor Commissioner notice of that acceptance. SB 377 tolls the period for service of assessments and for commencing an action brought by a joint labormanagement committee for the length of time notice is not provided to the Labor Commissioner. In a signing message for SB 377, Governor Brown asked the Legislature to send him a bill in early 2014 to streamline the notice of completion process. What Contractors Should Do Require confirmation from the owner or awarding body whether the project is a public work requiring the payment of prevailing wages. Timely provide certified payroll records when requested by the Labor Commissioner, a joint labor-management committee, or labor compliance program and monitor subcontractors to ensure they timely provide certified payroll records. Monitor closely any project that is subject of a coverage determination request to the Director to determine if the project is a public works project.

7 SB 776 Credit for Fringe Benefit Payments Senate Bill 776 amends Labor Code section to allow an employer to take credit against its obligation to pay the general prevailing wage rate for specified employer payments for bona fide fringe benefits, even if those payments are not made during the same pay period for which credit is taken, so long as the employer regularly makes those payments on no less than a quarterly basis. SB 776 also prohibits credit from being granted for employer payments made to monitor and enforce laws related to public works if those payments are not required by a collective bargaining agreement. What Contractors Should Do Ensure that trust fund payments and other payments made for purposes of taking a credit against a prevailing wage obligation are done on no less than a quarterly basis. Do not take credit against the prevailing wage obligation for payments made to a third party to monitor or enforce the prevailing wage laws unless those payments are required by a collective bargaining agreement.

8 Safe Harbor For Prime Contractor's Liability For Penalties Arising From A Subcontractor's Prevailing Wage Violations Labor Code 1775 (b) If a worker employed by a subcontractor on a public works project is not paid the general prevailing rate of per diem wages by the subcontractor, the prime contractor of the project is not liable for any penalties under subdivision (a) unless the prime contractor had knowledge of that failure of the subcontractor to pay the specified prevailing rate of wages to those workers or unless the prime contractor fails to comply with all of the following requirements: (1) The contract executed between the contractor and the subcontractor for the performance of work on the public works project shall include a copy of the provisions of this section and Sections 1771, 1776, , 1813, and (2) The contractor shall monitor the payment of the specified general prevailing rate of per diem wages by the subcontractor to the employees, by periodic review of the certified payroll records of the subcontractor. (3) Upon becoming aware of the failure of the subcontractor to pay his or her workers the specified prevailing rate of wages, the contractor shall diligently take corrective action to halt or rectify the failure, including, but not limited to, retaining sufficient funds due the subcontractor for work performed on the public works project. (4) Prior to making final payment to the subcontractor for work performed on the public works project, the contractor shall obtain an affidavit signed under penalty of perjury from the subcontractor that the subcontractor has paid the specified general prevailing rate of per diem wages to his or her employees on the public works project and any amounts due pursuant to Section 1813.

9 Safe Harbor For Prime Contractor's Liability For Penalties Arising From A Subcontractor's Apprenticeship Violations Labor Code (d) If a subcontractor is found to have violated Section , the prime contractor of the project is not liable for any penalties under subdivision (a), unless the prime contractor had knowledge of the subcontractor's failure to comply with the provisions of Section or unless the prime contractor fails to comply with any of the following requirements: (1) The contract executed between the contractor and the subcontractor or the performance of work on the public works project shall include a copy of the provisions of Sections 1771, 1775, 1776, , 1813, and (2) The contractor shall continually monitor a subcontractor's use of apprentices required to be employed on the public works project pursuant to subdivision (d) of Section , including, but not limited to, periodic review of the certified payroll of the subcontractor. (3) Upon becoming aware of a failure of the subcontractor to employ the required number of apprentices, the contractor shall take corrective action, including, but not limited to, retaining funds due the subcontractor for work performed on the public works project until the failure is corrected. (4) Prior to making the final payment to the subcontractor for work performed on the public works project, the contractor shall obtain a declaration signed under penalty of perjury from the subcontractor that the subcontractor has employed the required number of apprentices on the public works project.

10 DECLARATION OF COMPLIANCE WITH CALIFORNIA PREVAILING WAGE LAW, CALIFORNIA LABOR CODE SECTIONS The undersigned declares under penalty of perjury as follows: 1. I am [print name], the [print position held] of ("Subcontractor"), a subcontractor to ("Contractor") on the job of the [project name and address] ("Project"). I am familiar with the payroll practices of Subcontractor on the Project. One of my duties and responsibilities is to ensure that Subcontractor complies with the California Prevailing Wage Law, California Labor Code sections 1720 through 1815 on the Project. I make this sworn statement pursuant to California Labor Code sections 1775, subdivision (b)(4), and , subdivision (d)(4) and have personal knowledge herein of the facts contained in this Declaration and if called to testify, could and would competently testify thereto. 2. I have reviewed the payroll practices and the payroll records for Subcontractor on the Project. Subcontractor has paid the specified prevailing rate of wages to each of its employees on the Project as required by the Prevailing Wage Law, and has paid any amounts due such employees under California Labor Code section Subcontractor has employed the required number of apprentices on the Project. 3. I have also reviewed the payroll practices of each of Subcontractor's lower-tier subcontractors on the Project. Each of Subcontractor's lower-tiered subcontractors has paid the specified prevailing rate of wages to its employees, has paid any amount due such employees under California Labor Code section 1813, has employed the required number of apprentices on the Project, and has provided Subcontractor with a declaration that complies with California Labor Code sections 1775, subdivision (b)(4), and , subdivision (d)(4).

11 4. I understand that Contractor is relying upon the truth of the contents of this sworn statement in making final payment to Subcontractor for work performed on the Project, and may suffer damages if my sworn representations were not true. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct, and that this declaration was executed on [date] in [location], California. [Name]