Authored Articles & Publications Jan 30, 2015

New Law Changes Landscape for Public Projects

BB&K Attorney Michael Maurer Discusses in the Daily Journal Two New Laws That Will Impact Contractors and Developers in Public Works Projects

By Michael J. Maurer

Two pieces of legislation signed into law in 2014 will have a significant effect on contractors and developers in public works projects. Senate Bill 854 establishes a new system for the Department of Industrial Relations to monitor the payment of prevailing wages on all public works projects. Assembly Bill 1939 puts the onus on developers who receive public funding to inform their contractors of the prevailing wage requirements.

It is well established in California that public works projects generally require all contractors and subcontractors to pay their workers' the prevailing rate of wages, established by the DIR director. In determining the prevailing rate, the director must consider the collectively bargained rates in the area. The prevailing rate therefore does not necessarily reflect the wages paid to most workers - which may be lower - but rather the rates established for union workers through the collective bargaining process.

The Prevailing Wage Law, at least in theory, puts union contractors on equal footing with nonunion contractors to obtain public works contracts, which generally must be awarded to the lowest qualified bidder. Of course, by raising the labor costs, the costs of public work also rise. This system may provide contractors willing to risk paying lower wages with an opportunity to undercut other bidders.

With SB 854, the DIR is attempting to create a system that will substantially increase the risk of not paying prevailing wages. The new system works in three steps: (1) all contractors and subcontractors must register with tile DIR prior to bidding on or working on any public projects; (2) public agencies must notify the DIR of all public projects and which contractors were awarded the project and (3) contractors and all subcontractors must submit certified payrolls directly to the DIR on a weekly basis.

To read the full article in the Daily Journal, which ran Jan. 30, 2015, click here (subscription required).

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