AB 219
Page 1
Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hernández, Chair
ABPCA Bill Id:AB 219
Author:(Daly) – As Amended Ver:April 14, 2015
SUBJECT: Public works: concrete delivery
SUMMARY: Expands the definition of "public works" to include the hauling and delivery of ready-mixed concrete or asphaltic concrete, as specified. Specifically, this bill:
1) Expands the definition of "public works" to include the hauling and delivery of ready-mixed concrete or asphaltic concrete to a public works site, with respect to contracts involving any state agency or any political subdivision of the state.
2) Provides that the "hauling and delivery of ready-mixed concrete or asphaltic concrete to a public works site" means the job duties for a ready mixer driver that are used by the Department of Industrial Relations under existing law.
3) Provides that a person or entity may be a "contractor" or "subcontractor" for purposes of specified existing law regardless of whether the person or entity is subject to the licensing requirements of the Contractors State Licensing Board.
4) Provides that for purposes of this bill, an agreement with a contractor or subcontractor to perform any public work is a "contract" or "subcontract."
5) Provides that the expanded definition of "public works" does not apply to contracts advertised for bid or awarded prior to the effective date of this bill.
EXISTING LAW:
1) Requires the prevailing wage rate to be paid to all workers on "public works" projects over $1,000.
2) Provides that workers employed by a contractors or subcontractors in the execution of any contract for public work are deemed to be employed upon public work.
3) Defines "public works" to include, among other things, construction, alteration, demolition, installation or repair work done under contract and paid for in whole or in part out of public funds.
4) Defines "public works" to include the hauling of refuse from a public works site to an outside disposal location, as specified.
FISCAL EFFECT: Unknown
COMMENTS: This bill is co-sponsored by the California Public Affairs Council and the State Building and Construction Trades Council, and would define "public works" for purposes of state prevailing wage law to include the delivery of ready-mix concrete or asphaltic concrete.
A Brief History of State and Federal Prevailing Wage Law
State prevailing wage laws vary from state to state, but do share a common history that actually predates federal prevailing wage law. Many of these state laws were enacted as part of general reform efforts to improve working conditions at the end of the 19th and the beginning of the 20th centuries. Between 1891 and 1923, seven states adopted prevailing wage laws that required payment of specified hourly wages on government construction projects. The State of Kansas enacted the first prevailing wage law in 1891.
Eighteen additional states and the federal government adopted prevailing wage laws during the Great Depression of the 1930s amidst concern that acceptance of the low bid, a common requirement of government contracting for public projects when government had become the major purchaser of construction, would operate to reduce the wages paid to workers on those projects to a level that would disrupt the local economy.
California's prevailing was law was enacted in 1931.
In general, the proponents of prevailing wage legislation wanted to prevent the government from using its purchasing power to undermine the wages of its citizens. It was believed that the government should set an example, by paying the wages prevailing in a locality for each occupation hired by government contractors to build public projects. Thus, prevailing wage laws are generally meant to ensure that wages commonly paid to construction workers in a particular region will determine the minimum wage paid to the same type of workers employed on publicly funded construction projects.
Most public construction projects contracted for or by the federal government or the District of Columbia are covered by the federal prevailing wage law, the Davis-Bacon Act (Act), while 33 states have prevailing wage laws, often referred to as “little Davis-Bacon Acts,” that encompass projects financed by states and their political subdivisions.
The federal Davis-Bacon Act was enacted by Congress in 1931. The Act requires workers employed under public construction contracts of the federal government in excess of $2,000 to be paid a minimum wage that the United States Department of Labor determines to be prevailing for corresponding classes of workers. In addition, sixty separate federal laws currently specify the payment of Davis- Bacon wages for work prescribed.
The federal government also has two additional prevailing wage laws – the Walsh-Healy Public Contracts Act of 1935 (which covers federal contractors in manufacturing and supply industries), and the O'Hara-McNamara Services Act of 1965 (which covers service contracts).
The United States Supreme Court has stated the public policy underlying the Davis-Bacon Act as one of:
“protecting local wage standards by preventing contractors from basing their bids on wages lower than those prevailing in the area . . . [and] giving local labor and the local contractor a fair opportunity to participate in this building program.” Universities Research Ass'n. v. Coutu (1981) 450 U.S. 754, 773-774).
General Background on "Public Works" Under California Law
In general, "public works" is defined to include construction, alteration, demolition, installation or repair work done under contract and "paid for in whole or in part out of public funds."
Over a decade ago, there was much administrative and legislative action over what constituted the term "paid for in whole or in part out of public funds." This action culminated in the enactment of SB 975 (Alarcón), Chapter # 938, Statutes of 2001, which codified a definition of "paid for in whole or in part out of public funds" that included certain payments, transfers, credits, reductions, waivers and performances of work. At the time, supporters of SB 975 stated that it established a definition that conformed to several precedential coverage decisions made by the Department of Industrial Relations (DIR).
These coverage decisions defined payment by land, reimbursement plans, installation, grants, waiver of fees, and other types of public subsidy as public funds for purposes of prevailing wage law. According to the sponsors, SB 975 was intended to remove ambiguity regarding the definition of public subsidy of development projects.
SB 975 also exempted certain affordable housing, residential and private development projects that met certain criteria.
Follow-up legislation, SB 972 (Costa), Chapter # 1048, Statutes of 2002, was intended to clarify the application of SB 975 and was the result of extensive discussions between the State Building and Construction Trades Council (sponsor of SB 975), affordable housing advocates, and the Davis Administration. Supporters of SB 972 contended that the original legislation had unintended consequences for self-help housing and housing rehabilitation projects. As a result of that compromise, SB 972 exempted from public works requirements the construction or rehabilitation of privately-owned residential projects that met certain criteria.
Why It Matters: "Prevailing Wage"
The determination of whether a project is deemed to constitute a "public work" is important because the Labor Code requires (except for projects of $1,000 or less) that the "prevailing wage" to be paid to all workers employed on public works projects.
Delivery of Ready Mix Concrete and Other Cases
A 1999 decision of the Department of Industrial Relations (DIR) addressed the issue of whether the state's prevailing wage laws applied to the delivery of ready-mix concrete to public works job sites. Alameda Corridor Project: A&A Ready Mix Concrete and Robertson's Ready Mix Concrete (Public Works Case No. 99-037).
DIR began by noting that longstanding precedent requires that employees of subcontractors who haul material to public work sites by paid prevailing wage. However, excluded from prevailing wage requirements are employees of bona fide material suppliers.
DIR relied on a California Court of Appeals decision to set forth the general test for determining whether the work was subject to the payment of prevailing wages. O.G. Sansome v. California Department of Transportation, (1976) 55 Cal. App. 3d 434. DIR noted that the Court in Sansome applied the following test:
"The Court set forth three principal criteria for the determination of material supplier. First, a material supplier must be in the business of selling supplies to the general public. Second, the plant from which the material is obtained must not be established specially for the particular contract. Third, the plant may not be located at the site of the work."
Applying these three criteria to the case at hand, DIR determined that the concrete entities involved were material supplier and not subcontractors.
In addition to the three criteria mentioned above, DIR noted that the Sansome court also considered another factor with respect to materials that are not stockpiled: "If the materials hauled are immediately utilized with no rehandling out of the flow of construction, their delivery is an integrated aspect of and functionally related to the construction." Again applying this factor to the case at hand, DIR concluded:
"Notwithstanding the fact that all work performed in relation to a construction project is important to the success of that project, the delivery of the mix by A&A/Robertson's drivers on this project is not, as a matter of law, an integrated aspect of and functionally related to the construction work on the project. Accordingly, the application of the fourth criterion does not change the result that A&A/Robertson's are material suppliers to the project and not subject to prevailing wage requirements."
A subsequent decision by DIR addressed whether truck drivers employed by an independent trucking company (not a manufacturer) who delivered base material and asphalt to a public works project were entitled to the payment of prevailing wages. Triple E Trucking (Public Works Case No. 04-0180 2008). DIR again relied on the court decision in Sansome, as well as another court decision in Williams v. SnSands Corporation, (2007) 156 Cal. App. 4th 742 in noting:
"Thus, the 'delivery exemption' for drivers employed by independent trucking companies has two requirements: the truck driver is hauling materials from a bona fide materials supplier and 'does not himself immediately and directly incorporate the hauled material into the ongoing public works project.'"
DIR concluded that the driver has to do more than drive onto the job site and deliver material as directed by the construction supervisor to be part of the "immediate and direct incorporation" of the material. Rather, the "driver himself" must actually leave their truck and do more than just deliver materials. DIR concluded that, because the drivers employed by Triple E Trucking did not leave their trucks, they are not entitled to the payment of prevailing wages.
In another 2008 decision by DIR, it was determined that the off-hauling of demolition debris and materials whether performed by the on-site demolition contractor's employees or by an independent trucking company is subject to prevailing wage requirements. In addition, DIR determined that the on-hauling of material for backfill performed by the on-site demolition contractor's employees is also subject to prevailing wage requirements. Friendly Inn Senior Center (City of Morgan Hill), (Public Works Case No. 2008-027). DIR, again looking at prior case law, stated that Sansone, as interpreted by Williams, recognized a "delivery exemption" from prevailing wages for bona fide material suppliers. (Williams v. SnSands Corporation, supra, 156 Cal.App.4th at p. 752.) Under Williams, employees of on-site construction contractors who are carrying out and completing the provisions of the public works contract, however, are entitled to payment of prevailing wages under section existing law. Such work is deemed performed "in the execution of' the contract."
A more recent decision by DIR involved the on-hauling of embankment fill material and aggregate base to a levee rehabilitation project. Venice Island Levee Rehabilitation (Jerico Products, Inc.), (Public Works Case No. 2012-038 2013). DIR again quoted the Williams court in noting:
"What is important in determining the application of the prevailing wage law is not whether the truck driver carries materials to or from the public works project site. What is determinative is the role the transport of the materials plays in the performance or "execution" of the public works contract." (Williams, supra, 156 Cal.App.4th at p. 762.)
However, here DIR found that the materials unloaded by the workers at issue onto the levee were immediately incorporated into the project. Therefore, DIR concluded that the unloading of fill material by employees of Jerico from a barge to the levee project was performed in the execution of the public works contract and, therefore, subject to prevailing wage requirements.
ARGUMENTS IN SUPPORT
This bill is co-sponsored by the State Building and Construction Trades Council of California, the California Teamsters Public Affairs Council, and the California Labor Federation, AFL-CIO. They state that this bill will expand the prevailing wage to drivers delivering ready-mix concrete and asphaltic concrete to public works projects, regardless of whether the delivery drivers are employed by material suppliers or project contractors.
The sponsors argue that ready-mix concrete is a precise mixture or set recipe that is customized for construction sites and which is transported from a dedicated batch location or from a manufacturing facility. They contend that under current law, the delivery of ready-mixed or asphaltic concrete for a public works project is covered under the prevailing wage if either of the following occurs: 1) The product is delivered by a driver hired by the on-site general contractor or a subcontractor; or 2) the product is manufactured at a "dedicated" plant (i.e. one that is established solely for the public works project).
The sponsors state that under the current material supplier exemption to the prevailing wage law, delivery drivers hired by a material supplier are exempted from the prevailing wage. However, there is no physical distinction between the work performed by ready-mix drivers employed by contractors and ready-mix drivers employed by manufacturers, as the product and work is identical. By expanding the prevailing wage to all ready-mix drivers serving public works, this bill would create a more fair application of the Labor Code that does not depend on who owns the truck delivering the ready-mix or whether the driver is employed by an onsite contractor or a cement manufacturer.