LABOR COMPLIANCE PROGRAM PROCEDURES MANUAL

Transcription

1 LABOR COMPLIANCE PROGRAM PROCEDURES MANUAL STATE OF CALIFORNIA REQUIREMENTS AS OF JANUARY 21,

2 TABLE OF CONTENTS Preface iii Mission Conflict of Interest Certification Statement Under Penalty & Perjury Contact Information Amended Regulations from the DIR Effective Introduction iii iv v vi x Chapter 1 Benefits of a Labor Compliance System 1 Chapter 2 Prior to Construction Procedures 3 Chapter 3 Prevailing Wage Language for Bid Documentation 4 Chapter 4 Standards of Responsibility: Prevailing Wages 5 Chapter 5 Detail of Prevailing Wage Payment Coverage 10 Chapter 6 Contractor Requirements 11 Chapter 7 Overview of Labor Code Sections 1771, 1774, and Chapter 8 Overview of Labor Code Section and (a)(1) 21 Chapter 9 Duties of the LCP Administrator 23 Chapter 10 Case Review and Document Collection 25 Chapter 11 Audit 28 Chapter 12 Penalties 30 Chapter 13 Enforcement Action 31 Chapter 14 Withholding Procedures 34 Chapter 15 Frequently Asked Questions (FAQs) 40 Chapter 16 Common Violations 44

3 Appendix A Terms and Definitions 45 Appendix B Relevant Websites 46 Appendix C DIR Determinations 47 Appendix D LCP Forms & Handouts 48 Appendix E Notice of Proposed Rulemaking - Approved January 21,

4 PREFACE MISSION STATEMENT It is the mission of The Labor Compliance Managers to actively enforce prevailing wage laws applicable in Public Works. We are implementing the labor compliance procedures described in this manual to accomplish its mission. - iii - Preface

5 CONFLICT OF INTEREST CERTIFICATION STATEMENT UNDER PENALTY & PERJURY I hereby certify that neither myself as Principal of The Labor Compliance Managers, nor any personnel, management, independent consultants, or other parties associated with our 3rd Party LCP has any affiliation with any (1) construction contractor or subcontractor within the preceding five years that has been awarded a public works contract within the geographical area in which our program operates or intends to operate, or with any public agency with which the program has contracted or intends to contract to provide labor compliance enforcement; (2) any person or entity who has been the surety of such a contract; (3) any joint labor-management committee established pursuant to the Federal Labor Management Cooperation Act of 1978 (section 175a of Title 29 of the United States Code); or (4) any person or entity who has represented workers employed in the same or similar classifications as those employed for such a contract and who has been engaged in (i) an organizational campaign under the National Labor Relations Act with contractors, professional organizations, or other parties competing for such contracts or (ii) a jurisdictional dispute with another collective bargaining representative of workers utilized for such contracts, that can be construed as a conflict of interest. The above statement is hereby certified as true and accurate, under penalty and perjury and is in compliance with (updated) requirements noted in the Title 8, California Code of Regulations which also describes how the filing of Statements of Economic Interest (FPPC Form 700) by Designated Employees and Consultants of should be completed as described below: (a) An Awarding Body that operates either its own labor compliance program or that contracts with a third party to operate all or part of its labor compliance program shall determine and designate those employees and consultants of the program who participate in making governmental decisions for the Awarding Body within the meaning of Title 2, California Code of Regulations, sections Those designated employees and consultants shall be required to file Statements of Economic Interest (FPPC Form 700) and to comply with other applicable requirements of the Political Reform Act (commencing with Section of the Government Code) in connection with work performed on behalf of the Awarding Body. (b) Designated employees and consultants who operate or are employed by a third party labor compliance program shall file their Statements of Economic Interest (FPPC Form 700) with the filing officer of each Awarding Body with which the third party program contracts, unless the Department of Industrial Relations or the Fair Political Practices Commission specifies a different or alternative filing location. Authority cited: Section , Labor Code. Reference: Sections 87100, et seq., Government Code; Section , Labor Code. Lindley Robertson, MPA Date - iv - Preface

6 CONTACT INFORMATION Questions regarding our should be addressed to: Lin Robertson Owner & Managing Director The Labor Compliance Managers 515 Blueberry Terrace San Jose, CA (408) Phone (408) Fax Questions regarding the California Labor Code, including issues that are covered in this manual can also be directed to the California State Labor Commissioner, Department of Industrial Relations, Division of Labor Standards Enforcement, 455 Golden Gate Avenue, 9th Floor, San Francisco, California v- Preface

7 AMENDED REGULATIONS WITHIN SUBCHAPTER 3, ARTICLE 6, AND SUBCHAPTER 4 OF CHAPTER 8, TITLE 8, CALIFORNIA CODE OF REGULATIONS, SECTIONS THROUGH (See Appendix E for complete summary of approved final amendments effective January 21, 2009, per the Department of Industrial Relations.) Statutory Changes: The Director has made the following substantive changes to the regulations originally proposed in the Notice of Proposed Rulemaking: Section Use of Electronic Reporting Forms. In subpart (e), the words submit or have been inserted before the word receive to indicate that the limitations expressed in that subpart apply both to the sending and receiving of electronic payroll records. Section Applicable Dates for Enforcement of. In subpart (g)(1), the language was revised to delete the reference to Appendix B and replace it with a reference to statutes that require a labor compliance program that contains or meets the requirements of Labor Code Section The new language incorporates the customary statutory designation for mandated labor compliance programs that are subject to these regulations. Section Approved Required by Statute. The new proposed Appendix B that followed this section was deleted and replaced by a new subpart (f), which specifies that a list of the statutes requiring awarding bodies to have a labor compliance program will be maintained on the Department of Industrial Relations website. This subpart effectively replaces some of the original language of subpart (a), which listed four sets of bond statutes that are subject to a labor compliance program requirement but failed to list several other statutes that also contain such a requirement. Section Approval of Awarding Body s. Subpart (c) was further revised to clarify that the Director may impose conditions on a program s approval based on the same factors used to evaluate a program s application. Also, a new subpart - vi - Preface

8 (f) was added to enable labor compliance programs with initial approval status under the existing regulations to convert to approval status without an expiration date and subject to revocation only for cause by meeting specified requirements. Specifically, the program s annual reports would have to be up-to-date and accurate; the program would have to show that it continues to employ experienced and trained personnel and has competent legal support; the program would have to update its manuals and procedures to comply with changes in the law since the program was first approved, including changes resulting from these regulatory amendments; and the program would have to be in compliance with any specific conditions placed on its approval by the Director. Section Approval of Third Party. Subpart (c) was further revised to clarify that the Director may impose conditions on a program s approval based on the same factors used to evaluate its application. Also, a new subpart (f) was added to enable labor compliance programs with initial approval status under the existing regulations to convert to unrestricted approval status without an expiration date and subject to revocation only for cause by meeting specified requirements. Specifically, the program s annual reports would have to be up-to-date and accurate; the program would have to show that it continues to employ experienced and trained personnel and has competent legal support; the program would have to update its manuals and procedures to comply with changes in the law since the program was first approved, including changes resulting from these regulatory amendments; and the program would have to be in compliance with any specific conditions placed on its approval by the Director. Section Revocation of Approval. Subpart (f) was further revised to clarify that the Director may impose restriction or conditions on a program s approval status. - vii - Preface

9 Section Annual Report. The Director selected the Option B proposal for amending this section, which will require a prescribed reporting format for all labor compliance programs, with the exception of programs with extended authority with whom the Director has agreed to accept reports in a different format. Section Investigation Methods for s Definitions and Minimum Requirements, Including Review, Confirmation and Audits of Payroll Records; On-Site Visits; and Early Resolution of Audits. The Director selected the Option B proposal for amending this section, which will do the following: (1) require all certified payroll records to be reviewed within 30 days of receipts; (2) require random confirmation of payroll records at least monthly; (3) require weekly site visits of public works projects; (4) require preparation of an audit according to prescribed standards whenever a programs determines that there has been a violation resulting in the underpayment of prevailing wages; (5) require the labor compliance program to give contractors an opportunity to submit exculpatory information before requesting the Labor Commissioner to approve the program s determination; and (6) authorize the program to resolve certain violations without seeking the Labor Commissioner s approval, subject to a further requirement to document the violation and resolution. The process of confirmation described in subpart (c) was further revised to clarify that it requires random rather than blanket confirmation of payroll records. Subpart (f) also was further revised by changing the word may to shall so that the duty to notify contractors of their right to submit exculpatory information will be mandatory rather than permissive, and the language was clarified to indicate that the contractors are entitled to a minimum of ten days within which to submit exculpatory information for consideration by the labor compliance program. Section Duties of. The Director selected the Option B proposal for amending this section, which will do the following: (1) require labor compliance programs to follow prescribed standards for processing complaints; (2) set forth the duties of labor compliance programs with respect to apprentices; (3) require programs to maintain records demonstrating reasonable and sufficient enforcement efforts for each project monitored by the program, and requiring compliance records to be retained for prescribed periods of time; and (4) authorizing the Labor Commissioner to provide, sponsor, or endorse training of prevailing wage enforcement, covering but not limited to certain prescribed subjects. Subpart (a) was further revised to include a statement on the Labor Commissioner s practice of using attorneys in enforcement cases. The language of subpart (c)(2)(d) also was revised further to clarify enforcement policies with respect to workers who are not duly registered as apprentices and to contractors who exceed the maximum ratios for use of apprentices. - viii - Preface

10 Section Determination of Amount of Forfeiture by the Labor Commissioner. The Director selected the Option B language for subpart (a)(4) to conform to the revisions in section and also added a new optional Request for Approval of Forfeiture form. - ix - Preface

11 INTRODUCTION The Labor Compliance Managers ( LCM or the Firm ) provides 3rd party Labor Compliance Program ( LCP ) consulting services to public agencies and other parties initiating or managing construction projects that are subject to State of California prevailing wage requirements. California Labor Code Section requires that all LCPs, including The Labor Compliance Managers, facilitate the following requirements on public works construction projects: 1. All bid invitations and public works contracts issued by the district shall contain appropriate language about the requirements of the public works chapter of the California Labor Code, comprised of labor code sections A pre-job conference shall be conducted with the contractor or subcontractors to discuss labor law requirements applicable to the contract. 3. Project contractors and subcontractors shall maintain and furnish to the LCP a certified copy of each weekly payroll with a statement of compliance signed under penalty of perjury. 4. The LCP shall review and, if appropriate, audit payroll records to verify compliance with the public works chapter of the labor code. 5. The LCP shall attain an approval of forfeiture the Division of Labor Standards Enforcement to assess Labor Code 1776(g) penalties when payroll records are delinquent or inadequate. 6. The LCP shall require the district to withhold contract payments equal to the amount of underpayment and applicable penalties when the LCP establishes that underpayment occurred through an investigation. 7. Legal counsel for the LCP or awarding agency shall prepare a response to a Request for Review should a contractor or subcontractor opt not to pay amounts indicated in a Notice to Withhold Contract Payment and no settlement agreement was subsequently obtained. -x- Preface

12 CHAPTER 1 Benefits of a All public works contracts as set forth in Labor Code 1720, , , and 1771 are subject to prevailing wage rates. There are a number of benefits in establishing procedures and systems to monitor compliance with prevailing wage laws. The benefits include: Competitive bidding process integrity The establishment of an effective labor compliance program ensures the following: 1. Awarding bodies receive a higher number of qualified bidders; 2. Contractors and their subcontractors are discouraged from underbidding; 3. Contractors and their subcontractors pay the required prevailing wages; thereby 4. Creating a level playing field for all contractors who bid on Public Works. Regeneration of funds to the community When the Firm actively enforces the prevailing wage laws, the process: 1. Ensures the integrity and transparency of the LCP procedures; 2. There is incentive by community contractors to bid on local Public Works projects; 3. Construction workers who are employed on the project regenerate project funds back to the local community Quality construction work Paying the prevailing wage can attract the most skilled workers and ensure the highest quality work on Public Works projects. Better labor relations Responsible working conditions promote cooperation and communication among all constituencies and offer the best long-term prospects for a sustained, positive labor management relationship. Successful contracts Enhanced scrutiny of contractors and subcontractors allows the terms of the contract to coincide with project specifications. -1- Chapter 1

13 Ability to withhold contract payment Pursuant to the requirements of the Department of Industrial Relations Division of Labor Standards Enforcement, the can initiate procedures to withhold needed portions of contract payments to cover wage restitution as well as penalty amounts as recommended in the Labor Code for compliance violations that result in the underpayment of prevailing wages. Enforce the payment of prevailing wages Construction employees, including employees, independent contractors, partners, and owneroperators, should receive the proper prevailing wages as described in the public works sections of the California Labor Code (sections 1720, , , , and 1771), and pursuant to public works determinations issued by the Department of Industrial Relations. Limited exemptions include: 1. Work carried out by a public agency with its own forces (California Labor Code Section 1771) 2. Certain janitorial services/guards (8 CCR 16000) -2- Chapter 1

14 CHAPTER 2 Prior to Construction Procedures Listed below are procedures traditionally implemented on public works projects prior to construction: Bid documentation Contract provisions for the payment of the prevailing wages should be documented prior to bid advertisement to facilitate compliance by the eventual Apparent Low Bidder that is awarded the contract by the awarding body. Advertisement for bid/construction contract The call for bids and the contract or purchase order must contain language appropriate to the requirements of prevailing wage law as contained in Labor Code sections 1771, 1775, , 1813 and The first advertisement date of the project determines the applicable prevailing wages. Pre-Bid Conference Contractors will receive information regarding the applicable prevailing wage determination and predetermined increases prior to bid. The prevailing wage rates are available on the web site of the Department of Industrial Relations Division of Labor Statistics and Research (DLSR). If needed, contractors should also be provided with a hard copy of relevant prevailing wages for each craft that would be included in the Scope of Work to ensure that bids are cognizant of the required rates of pay during the life of the project. Contractor Pre-Qualification Contractors are to certify qualifications as a responsible bidder, including in the area of prevailing wage compliance. Pre-Construction Conference This meeting is to be held before commencement of the work by contractors and subcontractors with accepted bids. The LCP representative should be prepared to discuss and answer questions about requirements and procedures, including record keeping, wage determinations, apprenticeship requirements and all labor compliance documentation that must be filed to verify compliance with the prevailing wage requirements of the Public Works project. Labor code sections and contain the instructions for hiring Apprentices and the ratios to journeymen. A sign-in sheet for participants who attended and a checklist showing which labor compliance requirements were discussed shall be completed and kept on file for each conference. -3- Chapter 2

15 CHAPTER 3 Prevailing Wage Language for Bid Documentation The following prevailing wage language for bid documentation is recommended: Attention is called to the fact that State of California prevailing wage requirements apply to this project. In accordance with provisions of Section 1773 of the Labor Code, the Director of the Department of Industrial Relations has ascertained the general prevailing rate of wages and employer payments for health and welfare, pension, vacation, and similar purposes applicable to the particular craft, classification, or type of workers employed on the work. The General Prevailing Wage Determination is available via the Internet at: All questions regarding prevailing wage requirements can also be directed to the LCP representatives assigned to the Public Works project. -4- Chapter 3

16 CHAPTER 4 Standards of Responsibility: Prevailing Wages The awarding body should require in its procurement procedures that all persons who submit bids, proposals or offers to enter into a contract with the awarding body do so truthfully and in good faith, and shall not attempt to mislead the awarding body with respect to the following including, but not limited to, records regarding the nature or quality of the work performed under the contract, payroll records, classification of employees on payroll records, and payment of prevailing wages where called for by the contract. If directed by the awarding body, contractor shall file, and cause any subcontractor to file, compliance reports with the LCP administrator. Compliance reports shall be filed as required in Labor Code section 1776 on a weekly basis. Compliance reports shall contain such information and be supported by such data or records as may be requested by the LCP administrator to determine whether general contractor or its subcontractor is in compliance with the prevailing wage requirements. General contractors shall include the awarding bodies prevailing wage requirements in each subcontract entered into in furtherance of its Public Works agreement with the awarding bodies, so that such provisions are binding upon each of its subcontractors. A. Remedies for Contractor's Breach of Prevailing Wage Requirements 1. The general contractor shall acknowledge that it shall pay workers the proper prevailing or wage ( Wage Provision ) and submit all required labor compliance documentation to the awarding body establishing its compliance with such requirement ( Document Provision ). The contractor shall acknowledge that the Wage Provision promotes each of the following (collectively Goals ): a. It protects job opportunities and stimulates the economy by reducing the incentive to recruit and pay a substandard wage to labor. b. It benefits the public through the superior efficiency of well-paid employees, whereas the payment of inadequate wages tends to negatively affect the quality of services to the awarding body by fostering high turnover and instability in the workplace. c. Paying workers a wage that enables them not to live in poverty is beneficial to the health and welfare of all citizens of the community in which the project is located. It increases the ability of such workers to attain sustenance, decreases the amount of poverty, and reduces the amount of taxpayer funded social services in the community in which the project is located. d. It increases competition by promoting a more level playing field among contractors. -5- Chapter 4

17 2. The general contractor agrees that the Documentation Provision is critical to the awarding body s ability to monitor contractor s compliance with the Wage Provision and to ultimately achieve the Goals. The contractor further agrees its breach of the Documentation Provision results in the need for additional enforcement action to achieve compliance with the prevailing wage provisions. In light of the critical importance of the Documentation Provision, the awarding body and contractor agree that the contractor s compliance with this Provision, as well as the Wage Provision, is an express condition of the awarding body s obligation to make each payment due the contractor pursuant to the Public Works contract. The awarding body shall not be obligated to make payment due the contractor until contractor has performed all of its obligations under these provisions. Any payment by the awarding body, despite the contractor s failure to fully perform its obligations under these provisions, shall not be deemed to be a waiver of any other term or condition contained in the Public Works contract or a waiver of the right to withhold payment for any subsequent breach of the Wage Provision or the Documentation Provision. B. Penalties for Breach of Prevailing Wage Requirements: The contractor agrees that its breach of the Prevailing Wage requirements would cause the awarding body damage by undermining the Goals, and the awarding body s damage would not be remedied by contractor s payment of restitution to the workers who were paid a substandard wage. The contractor further agrees that such damage could increase the greater number of employees not paid the applicable prevailing wage and the longer the amount of time over which such wages were not paid. The awarding body and contractor mutually agree that making a precise determination of the amount of awarding body s damages as a result of the contractor s breach of the Prevailing Wage requirements would be impracticable and/or extremely difficult. Therefore, the parties agree that, in the event of such a breach, the contractor shall pay to the awarding body appropriate penalties, per Section 1775, 1776 and 1813 of the Labor Code. As such, the contractor shall forfeit as a penalty to the awarding body, up to $50 for each day for each worker paid less than the stipulated prevailing rates for any public work done under contract by the contractor or by any subcontractor in violation of the provisions of the Labor Code, particularly Sections 1770 through 1780, inclusive. Liquidated Damages: Labor Code Section requires the following: (a) After 60 days following the service of a civil wage and penalty assessment under Section 1741 or a notice of withholding under subdivision (a) of Section , the affected contractor, subcontractor, and surety on a bond or bonds issued to secure the payment of -6- Chapter 4

18 wages covered by the assessment or notice shall be liable for liquidated damages in an amount equal to the wages, or portion thereof, that still remain unpaid. If the assessment or notice subsequently is overturned or modified after administrative or judicial review, liquidated damages shall be payable only on the wages found to be due and unpaid. Additionally, if the contractor or subcontractor demonstrates to the satisfaction of the director that he or she had substantial grounds for appealing the assessment or notice with respect to a portion of the unpaid wages covered by the assessment or notice, the director may exercise his or her discretion to waive payment of the liquidated damages with respect to that portion of the unpaid wages. Any liquidated damages shall be distributed to the employee along with the unpaid wages. Section shall not apply to claims for prevailing wages under this chapter. (b) Notwithstanding subdivision (a), there shall be no liability for liquidated damages if the full amount of the assessment or notice, including penalties, has been deposited with the Department of Industrial Relations, within 60 days following service of the assessment or notice, for the department to hold in escrow pending administrative and judicial review. The department shall release such funds, plus any interest earned, at the conclusion of all administrative and judicial review to the persons and entities who are found to be entitled to such funds. (c) The Labor Commissioner shall, upon receipt of a request from the affected contractor or subcontractor within 30 days following the service of a civil wage and penalty assessment under Section 1741, afford the contractor or subcontractor the opportunity to meet with the Labor Commissioner or his or her designee to attempt to settle a dispute regarding the assessment without the need for formal proceedings. The awarding body shall, upon receipt of a request from the affected contractor or subcontractor within 30 days following the service of a notice of withholding under subdivision (a) of Section , afford the contractor or subcontractor the opportunity to meet with the designee of the awarding body to attempt to settle a dispute regarding the notice without the need for formal proceedings. The settlement meeting may be held in person or by telephone and shall take place before the expiration of the 60-day period for seeking administrative review. No evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, the settlement meeting is admissible or subject to discovery in any administrative or civil proceeding. No writing prepared for the purpose of, in the course of, or pursuant to, the settlement meeting, other than a final settlement agreement, is admissible or subject to discovery in any administrative or civil proceeding. The assessment or notice shall advise the contractor or subcontractor of the opportunity to request a settlement meeting. (d) This section shall become operative on January 1, Chapter 4

19 C. Audit Rights: A copy of all payrolls shall be submitted weekly to the awarding body. Certified payroll records shall contain the full name, address, and social security number of each employee, his or her correct classification, rate of pay, daily and weekly number of hours worked, itemized deductions made, and actual wages paid. They shall also indicate apprentices and ratio of apprentices to journeymen. The employee s address and social security number need only appear on the first payroll on which his or her name appears. The payroll shall be accompanied by a Statement of Compliance signed by the employer or agent indicating that the payrolls are correct and complete and that the wage rates contained therein are not less than those required by the Department of Industrial Relations. The Statement of Compliance shall be on forms furnished by the awarding body or on any form with identical wording. Compliance will also need to be documented on a Fringe Benefit Statement, as well as any Public Works documentation required by the Division of Apprenticeship Standards. Per CCR Section (d): For each public work project subject to a s enforcement of prevailing wage requirements, a separate, written summary of labor compliance activities and relevant facts pertaining to that particular project shall be maintained. That summary shall demonstrate that reasonable and sufficient efforts have been made to enforce prevailing wage requirements consistent with the practice of the Labor Commissioner. Appendix C following this section provides a suggested format for tracking and monitoring enforcement activities. Compliance records for a project shall be retained until the later of (1) at least one year after the acceptance of the public work or five years after the cessation of all labor on a public work that has not been accepted, or (2) one year after a final decision or judgment in any litigation under Labor Code Section For purposes of this section, a written summary or report includes information maintained electronically, provided that the summary or report can be printed out in hard copy form or is in an electronic format that (1) can be transmitted by or compact disk and (2) would be acceptable for the filing of documents in a federal or state court of record within this state. If, by the 15th of the month, the contractor has not submitted satisfactory payroll records for all work performed during the monthly period ending on or before the first of that month, the awarding body can retain an amount equal to 10 percent of the estimated value of the work performed (exclusive of mobilization) during the month from the next monthly estimate, except that such retention shall not exceed $10,000 nor be less than $1,000. Retentions for failure to submit satisfactory payroll records shall be additional to all other retentions provided for in the Public Works contract. The retention for failure to submit satisfactory payrolls for any monthly period will be released for payment when the monthly estimate for partial payments next following the date that all such payrolls for which the retention was made are submitted. Appendix E documents changes that the Director to the Title 8, California Code of Regulations section listed below. The Notice of Proposed Rulemaking with the changes are effective January 21, 2009: -8- Chapter 4

20 Use of Electronic Reporting Forms. The certified payroll records required by Labor Code Section 1776 may be maintained and submitted electronically subject to all of the following conditions: (a) The reports must contain all of the information required by Labor Code Section 1776, with the information organized in a manner that is similar or identical to how the information is reported on the Department of Industrial Relations suggested Public Works Payroll Reporting Form (Form A-1131); (b) The reports shall be in a format and use software that is readily accessible and available to contractors, awarding bodies, s, and the Department of Industrial Relations; (c) Reports submitted to an awarding body, a, the Division of Labor Standards Enforcement, or other entity within the Department of Industrial Relations must be either (1) in the form of a non-modifiable image or record that bears an electronic signature or includes a copy of any original certification made on paper, or alternatively (2) printed out and submitted on paper with an original signature; (d) The requirements for redacting certain information shall be followed when certified payroll records are disclosed to the public pursuant to Labor Code Section 1776(e), whether the records are provided electronically or as hard copies; and (e) No contractor or subcontractor shall be mandated to submit or receive electronic reports when it otherwise lacks the resources or capacity to do so, nor shall any contractor or subcontractor be required to purchase or use proprietary software that is not generally available to the public. NOTE: Authority cited: Sections 54, 55, , and 1776, Labor Code. Reference: Section 1776, Labor Code. -9- Chapter 4

21 CHAPTER 5 Detail of Prevailing Wage Coverage A. Public Works and Prevailing Wages Defined The Prevailing Wage is defined as not less than the general prevailing rate of pay for work of a similar character in the County in which the project is located and as determined by the Director of the Department of Industrial Relations pursuant to the provisions of Division 2, Part 7, Chapter 1 of the California Labor Code. Prevailing wages shall be paid to all workers employed for construction, alteration, demolition, installation or repair work performed in the execution of a Public Works contract. The work of installing, assembling, repairing or reconditioning, or other work of any nature on machinery, equipment, or tools used in or upon the work, shall be considered a part of the work to be performed under a Public Works contract and any laborers, workers, or mechanics working on such machinery, equipment, or tools, shall be subject to all of the requirements relating to labor set forth in the Public Works contract. The construction, erection, and operation of material production, proportioning, or mixing plants from which material is used wholly on the contract or on contracts under the supervision of the awarding body, shall be considered a part of the work to be performed under the contract and any laborers, workers, or mechanics working on such plants shall be subject to all of the requirements relating to labor set forth in the contract. Eight hours labor constitutes a legal day s work. The Contractor shall forfeit as a penalty to the awarding body, $25 for each worker employed in the execution of the contract by the contractor or by any subcontractor for each day during which such worker is required or permitted to labor more than 8 hours in violation of Labor Code Sections 1810 to 1815, inclusive, except as provided for under Labor Code Section B. Apprentices The contractor s attention is directed to the provisions in Sections , and of the Labor Code concerning the employment of apprentices by the Contractor or any subcontractor. Section requires the contractor or subcontractor employing persons, as defined, in any apprenticeable occupation to apply to the joint apprenticeship committee which is nearest the site of the Public Works project and which administers the apprenticeship program in that trade for a certificate of approval. The certificate will also fix the ratio of apprentices to journeymen that will be used in the performance of a Public Works contract. The ratio of work performed by apprentices to journeymen in such cases shall not be less than 1 hour to 5 hours, except when the State has documented other ratio requirements Chapter 5

22 CHAPTER 6 Contractor Requirements The contractor shall certify that they are aware of the provisions of section 1773 of the Labor Code, which requires the payment of prevailing wage on Public Works projects. Also, the contractor and any subcontractors under the contractor shall comply with Section 1776, regarding wage records, and with Section , regarding the employment and training of apprentices of the Labor Code. It is the contractor s responsibility to ensure compliance by any and all subcontractors performing work under a Public Works contract. The contractor shall maintain certified payroll records and basic records (time cards, cancelled checks, cash receipts, trust fund forms, accounting ledgers, tax forms, etc) during the course of the work. These records shall be made available to the awarding body for a period of three (3 years) thereafter to be maintained at their project or office location. 1) Maintain and furnish records (labor code section 1776) a) Keep and maintain certified payroll records along with a Statement of Compliance (Public Works Payroll Reporting Form A in Appendix D). Each contractor and subcontractor is required by labor code section 1776 to keep and maintain certified payroll reports. b) All certified payroll reports are to be submitted for review during the course of the contract and furnished at times designated in the contract or within 10 days of the request by the awarding body or their LCP administrator. A certified payroll reporting form can be obtained from any office of the Department of Industrial Relations Division of Labor Standards Enforcement (DLSE). If the contractor uses his/her own form, it must contain the following information: Employee full name, address and social security number Work classification Amount paid per hour. If payments are made to any third party trust, funds or plans for health and welfare, pension or vacation trusts, as part of the employer s prevailing wage obligation, then those payments should be indicated on the payroll report. The basic wage rate paid per hour plus the amounts contributed per hour for benefits, including training fund contributions, must at least equal the total prevailing rate required for that classification. Daily regular, overtime and holiday hours and weekly totals. Gross/net wages paid for this project/all projects Chapter 6

23 Contractor s full name and address. Project name and location. Dates of the payroll. Certification statement or Statement of Compliance signed by a person with the authority to represent the company. This statement must declare under penalty of perjury that 1) the information contained in the payroll record is true and correct and 2) the employer has complied with the requirements of labor code sections 1771, 1811 and 1815 for any work performed by his or her employees on the public works project. It is important that each contractor and subcontractor write FINAL on the last submitted certified payroll record for the project. The contractor must complete a Non-Performance Report for each week in which no work is performed. All days worked on a project must be accounted for, including Saturdays, Sundays and holidays. Time cards (completed by workers), front and back copies of cancelled payroll checks, check stubs, daily logs, employee sign-in sheets, cancelled fringe benefit checks, fringe benefit statements, and/or any other record may be used by the LCP administrator or awarding body at any time to verify the accuracy of the certified payroll record and shall be provided by the contractor within 10 days following the receipt of a request for those records. 2) Electronic submittals of certified payroll records The Director of the Department of Industrial Relations has added a new section that expressly authorizes contractors and subcontractors to maintain and submit electronic payroll records, subject to the following conditions: a) The reports must contain all of the information required in Labor Code Section 1776 with the information organized in a manner that is similar or identical to how the information is reported on the Department of Industrial Relations suggested public works payroll form (Form A-1-131). b) The reports shall be in a format and use software that is readily accessible and available to contractors, awarding bodies, designated LCP administrators, and the Department of Industrial Relations Chapter 6

24 c) Reports submitted electronically must be either (1) in the form of a non-modifiable image or record that bears an electronic signature or includes a copy of any original certification made on paper, or alternatively (2) printed out and submitted on paper with an original signature. d) The requirements for redacting certain information shall be followed when certified payroll records are disclosed to the public pursuant to Labor Code Section 1776(e) whether the records are provided electronically or as hard copies; and e) No contractor or subcontractor shall be mandated to submit or receive electronic reports when it otherwise lacks the resources or capacity to do so, nor shall any contractor or subcontractor be required to purchase or use proprietary software that cannot be generally available to the public. Note: the Director has made the following substantive changes to the regulations originally proposed in the Notice of Proposed Rulemaking, effective January 21, 2009: Section (e). Use of Electronic Reporting Forms. The words submit or have been inserted before the word receive to indicate that the limitations expressed in that subpart apply both to the sending and receiving of electronic payroll records. See Appendix E. 3) Upon request, records can include supporting documents as described in the California Code of Regulations that can verify the payment of prevailing wages, including all time cards, canceled checks, cash receipts, trust fund forms, books, documents, schedules, forms, reports, receipts or other evidences which reflect job assignments, work schedules by days and hours, and the disbursement by way of cash, check, or in whatever form or manner, of funds to a person(s) by job classification and/or skill pursuant to a public works project. 4) Provide a Fringe Benefit Statement The form, also known as a Statement of Employer Payments (PW 26), must be completed by each contractor and subcontractor indicating whether they pay the employees in cash or whether payments are made to a third party trust, plan or fund for health and welfare benefits, vacation funds, or makes pension contributions. It must contain the fund or trust name, address, administrator, and amount per hour contributed and frequency of contributions for each classification of worker. Training fund contributions must be reported on this form. A copy of the form can be downloaded from: Chapter 6

25 5) Provide a copy of notices to the Division of Apprenticeship Standards (DAS Form 140) Contractors who are not already participating in an approved program, and who did not receive sufficient number of apprentices from their initial request, must request dispatch of apprentices from at least one other apprenticeship committee, if more than one exists in the area of the public works project. Using DAS Form 140, contractors must submit the contract award information in writing to each of the apprenticeship program sponsors in the area within 10 days of the prime execution of the contract or subcontract. 6) Provide a copy of request(s) for apprentices (DAS Form 142) A contractor on a public works project must employ at least one (1) hour of apprentice work for every five (5) hours performed by a journeyman. 7) Provide verification of Training Fund contributions (CAC-2 Form) Contractors who are awarded public works jobs must make training fund contributions in the amount established in the prevailing wage rate publication for journeymen and apprentices. Contractors who contribute to an apprenticeship program are entitled to a full credit in the amount of those contributions. Contractors who do not contribute to an apprenticeship program must submit their contributions to the California Apprenticeship Council, P. O. Box , San Francisco, CA Training fund contributions to the Council are due and payable on the 15th day of the month for work performed during the preceding month. The contributions should be paid by check and be submitted with a training fund contribution form (CAC -2) or a letter containing the following information: Name, address and phone number of contractor Contractor license number Name and address of Labor Compliance Managers awarding agency Jobsite location, including San Francisco County information Contract or project number Time period covered by contributions being paid Chapter 6

26 Contribution rate and total hours worked by apprenticeable craft Name of the program(s) providing apprentices, if applicable Number if apprentice hours worked, by apprenticeable craft and by program 8) Responsibility of Subcontractors The prime contractor shall be responsible for ensuring that the labor standards provisions are followed by all subcontractors. Moreover, the prime contractor may be jointly liable for the Labor Code violations of all subcontractors Chapter 6

27 CHAPTER 7 Overview of Labor Code Sections 1771, 1774, and 1813 In accordance with provisions of Section 1773 of the Labor Code, the Director of the Department of Industrial Relations has ascertained the general prevailing rate of wages and employer payments for health and welfare, pension, vacation, and similar purposes available to the particular craft, classification, or type of workers employed on the work. The General Prevailing Wage Determination is available on the web site of the Division of Labor Statistics and Research (DLSR): All questions regarding prevailing wage requirements should also be provided by the Labor Compliance Managers staff, 3rd party LCP for the awarding body. Employees must be paid unconditionally, and not less than once each week, the full amounts which are due and payable for the period covered by the particular payday. The employer must establish a fixed workweek (Sunday through Saturday, for example) and an established payday (such as every Monday or the preceding day should such payday fall on a holiday). On each and every payday, each worker must be paid all sums due as of the end of the preceding workweek and must be provided with an itemized wage statement pursuant to Labor Code Section 226. If an individual who works on the project is called a subcontractor, when in fact he/she is a journey level mechanic supplying only labor, such an individual would not be deemed a bona fide subcontractor and must be reported on the payroll of the prime contractor as a tradeworker. Any person who does not hold a valid contractor s license cannot be a subcontractor, and anyone hired by that person is the worker of the general contractor for purposes of prevailing wage requirements, certified payroll reporting and workers compensation laws. A. Prevailing wage rate determinations 1) Requirements a) The law requires that workers on a publicly-funded project must be paid the prevailing wage of the area in which the project is located. Prevailing wage rates are published twice each year as prevailing wage determinations. Some trades are issued regionally (northern or southern California) and other subtrades are issued by county in which the project is located. b) Each wage determination for each classification of worker will indicate the basic wage rate and fringe benefit amounts which equal the total required wage for each classification of worker for straight time and overtime work Chapter 7

28 c) When assistance is needed with a special or unknown classification, a written request should be submitted to the DLSR for them to make a determination. d) The contractor is obligated to pay the full prevailing rate of per diem wages. He/she, however, may take credit for amounts up to the total of fringe benefit amounts listed as prevailing in the determination. The credit may be taken only for amounts which are actual payments as defined under the Employer Payments Section CCR 16000(1)-(3). If the total of employer payments for the fringe benefits listed is less than the aggregate amount in the wage determination, the contractor must pay the difference directly to the employee. No amount of credit for payments over the aggregate amount of employer payments shall be taken as a credit towards the hourly wage required to be paid. e) The determinations indicate the amount required for straight-time work, overtime, holiday, and Saturday and Sunday work. There may be special requirements for the payment of overtime and Saturday/Sunday work, and these requirements will be indicated by footnotes. These footnotes should be examined carefully. f) There are separate determinations issued for apprentices on public works. These footnotes should also be examined carefully. g) Each wage determination will indicate when the determination will expire and whether the rate will increase during the project. A single asterisk after the expiration date indicates the rate is good for the life of the project. A double asterisk after the expiration date indicates the rate for work performed after the expiration date has been determined. If work extends past that date, the new rate must be paid and should be incorporated in contracts entered into at the time of bid. Wage determinations published by the DLSR also show any predetermined increases that may apply during the life of the project. 2) Overtime Work performed by employees on public works in excess of eight hours per day and 40 hours per week must be paid for at not less than one-and-one-half times the basic rate of pay. Each wage determination will specify the wage rate required for overtime pay and possible exceptions (e.g. Asbestos Removal Workers). Failure to pay the required prevailing wage rates would be subject to required Labor Code Section 1813 penalties and as stipulated by the Department of Industrial Relations Chapter 7

29 3) Holidays Work performed on certain holidays may require the payment of overtime or double time. A list of designated holidays for each craft or classification of labor can be found on the Division of Labor Statistics and Research (DLSR) Web site at: Each wage determination will specify the appropriate wage rate for holiday work. 4) Saturday/Sunday work Most classifications of workers require the payment of overtime or double time for work performed on Saturdays and Sundays. Each wage determination will specify the required wage rate for this work. Pay attention to any footnotes that may contain exceptions or special requirements. 5) Travel/subsistence payments Because the law requires that workers receive the general prevailing rate of per diem as part of the contractor s prevailing wage obligation, there may be a requirement to pay travel/subsistence. Many classifications require the payment of mileage or subsistence for traveling certain distances. These requirements are contained in the collective bargaining agreement on file with DLSR for each craft/classification of worker. You can download those requirements from the DLSR Web site at: 6) Owner, operator, partners The law prescribes that workers on a Public Works project receive prevailing wages. Owners, owner-operators, partners, or officers of corporations performing labor on a prevailing wage project must be paid prevailing wage rates. Owner-operators are individuals that own and operate their own machines or equipment. Owner-operators are not to be confused with Operating Engineer employees, who operate equipment owned by a company and are employees of that company. If owner operators are incorporated they must submit Certified Payroll Records. For example, J. Doe Compacting, Inc., is a corporation and its owner, Mr. John Doe is an employee of the corporation who operates a compactor; J. Doe Compacting, Inc. must report Mr. Doe as an Operating Engineer and the company must submit CPRs for employee John Doe Chapter 7

30 However, if Mr. Doe, is a sole-proprietor Owner-Operator, is not incorporated, he must be included in the CPRs of the company that contracted him as an Owner-Operator. B. Selecting the Correct Prevailing Wage Determination The Prevailing Wage Determination published bi-annually (February 22 and August 22) and are divided into Statewide, Northern and County Sections. The Statewide Prevailing Wage Determination Website is: The link for the Statewide Wage Determinations provides the prevailing wage rates for classifications such as Boiler Maker, Iron Worker, etc. These classifications are applicable to workers who work throughout the State. The Northern California Prevailing Wage Determination Website is: The link for the Northern Wage Determinations provides the prevailing wage rates for classifications such as Carpenter, Laborer, Operating Engineer, etc. These classifications are applicable to workers who work throughout the Northern California. The San Francisco County (example) Prevailing Wage Determination Website is: Selecting the above link will show the San Francisco County Wage Determinations where classifications such as Electrician, Plumber, Painter, etc can be found. These classifications are applicable to workers who work in San Francisco County, San Francisco, California. Prevailing wage rates for Apprentices has been moved to the website for the Division of Apprenticeship Standards (DAS): Selecting the above links will show the rates for apprentices that are applicable for Statewide, Northern and San Francisco County. Apprentices shall be permitted to work and be employed at the apprentice rate only when they are registered under a bona fide apprenticeship program with a State apprenticeship agency which is Chapter 7

31 recognized the State Division of Apprenticeship Standards (DAS). (Labor Code Section (c)). (See Chapter 9 for further information on Apprentice Requirements.) The appropriate Prevailing Wage Determination for use in the course of an audit is determined by the first of the two bid advertisement dates for the contract/project. Bid advertisement date from February 22 to August 21 call for the determination that is listed as yyyy-01 (yyyy stands for year, for example ). Dates from August 22 to February 1 call for the yyyy-02 ( ) Chapter 7

32 CHAPTER 8 Overview of Labor Code Sections and (a)(1) Apprentices shall be permitted to work in this capacity only when they are registered with a bona fide apprenticeship program registered with a State apprenticeship agency which is recognized by the State Division of Apprenticeship Standards (DAS). The definitions of Public Works pursuant to Labor Code Sections and (a)(1) are documented below: A. Labor Code ) California Labor Code Section requires all Public Works contractors and subcontractors to comply with the following: a) Contractors must submit the contract award information in writing to each of the apprenticeship program sponsors in the area of your Public Works project within 10 days of the prime execution of the contract or subcontract, but in no event later than the first day in which the contractor has workers employed on the public work. Contractors may use form DAS 140. This is simply a notification of award, it is not automatically a request for dispatch of a registered apprentice. b) Apprentice to Journeyman ratios requirements are at least one (1) hour of apprentice work for every five (5) hours performed by a journeyman. Ratio requirements are subject to the approved bargaining agreements that are recognized by the Department of Industrial Relations and published in the Scope of Work section of the wage determination. All contractors must request for dispatch of an apprentice from an apprenticeship program (for each apprenticeable craft or trade) by giving the program actual notice of at least 48 hours (business days only) before the date on which apprentices are required. Contractors who are not already participating in an approved program and who did not receive sufficient number of apprentices from their initial request must dispatch of apprentices from at least one other apprenticeship committee, if more than one exists in the area of the Public Works project. c) The prime contractor shall furnish to the awarding body written evidence of the registration of its and all subcontractors training programs and apprentices, with the State of California, as well as the ratios allowed (as defined in the Labor Code and by DAS) and the wage required to be paid thereunder for the area of construction. d) Pre-apprentice trainees, trainees in nonapprenticeable crafts and others who are not duly registered as apprentices will not be permitted on Public Works projects unless they are paid full prevailing wage rates as journeypersons. e) Contractors who are awarded Public Works jobs must make training fund Chapter 8

33 contributions in the amount established in the prevailing wage rate publication for journeymen and apprentices. f) Apprentices employed on Public Works projects must at all times work with or under the direct supervision of journeyperson(s). B. Labor Code (a)(1) A contractor or subcontractor that is determined by the Chief of the Division of Apprenticeship Standards to have knowingly violated Section shall forfeit as a civil penalty an amount not exceeding one hundred dollars ($100) for each full calendar day of noncompliance. The amount of this penalty may be reduced by the Chief if the amount of the penalty would be disproportionate to the severity of the violation. A contractor or subcontractor that knowingly commits a second or subsequent violation of Section within a three-year period, where the noncompliance results in apprenticeship training not being provided as required by this chapter, shall forfeit as a civil penalty the sum of not more than three hundred dollars ($300) for each full calendar day of noncompliance. Notwithstanding Section 1727, upon receipt of a determination that a civil penalty has been imposed by the Chief, the awarding body shall withhold the amount of the civil penalty from contract progress payments then due or to become due Chapter 8

34 CHAPTER 9 Duties of the As per CCR requirements: (a) A shall have a duty to the Director to enforce the requirements of Chapter 1 of Part 7 of Division 2 of the Labor Code and these regulations in a manner consistent with the practice of the Labor Commissioner. It is the practice of the Labor Commissioner to refer to the Director s ongoing advisory service of web-posted public works coverage determinations as a source of information and guidance in making enforcement decisions. It is also the practice of the Labor Commissioner to be represented by an attorney in prevailing wage hearings conducted pursuant to Labor Code Section 1742(b) and sections of Title 8 of the California Code of Regulations. (b) Upon receipt of a written complaint alleging that a contractor or subcontractor has failed to pay prevailing wages as required by the Labor Code, the shall do all of the following: (1) Within 15 days after receipt of the complaint, send a written acknowledgment to the complaining party that the complaint has been received and identifying the name, address, and telephone number of the investigator assigned to the complaint; (2) Within 15 days after receipt of the complaint, provide the affected contractor with the notice required under Labor Code section 1775(c) if the complaint is against a subcontractor; (3) Notify the complaining party in writing of the resolution of the complaint within ten days after the complaint has been resolved by the ; (4) Notify the complaining party in writing at least once every 30 days of the status of a complaint that has not been resolved by the ; and (5) Notify the complaining party in writing at least once every 90 days of the status of a complaint that has been resolved by the but remains under review or in litigation before another entity. (c) The duties of a with respect to apprenticeship standards are as follows: (1) Either the Awarding Body or the acting on its behalf shall (A) inform contractors and subcontractors bidding public works about apprenticeship requirements, (B) send copies of awards and notices of discrepancies to the Division of Apprenticeship Standards as required under Section of the Labor Code, and (C) refer complaints and promptly report suspected violations of apprenticeship requirements to the Division of Apprenticeship Standards. (2) The shall be responsible for enforcing prevailing wage pay requirements for apprentices consistent with the practice of the Labor Commissioner, including (A) that any contributions required pursuant to Labor Code Section (m) are paid to the appropriate entity, (B) that apprentices are paid no less than the prevailing apprentice rate, (C) that workers listed and paid as apprentices on the certified payroll records are duly registered as apprentices with the Division of Chapter 9

35 Apprenticeship Standards, and (D) requiring that the regular prevailing wage rate be paid (i) to any worker who is not a duly registered apprentice and (ii) for all hours in excess of the maximum ratio permitted under Labor Code Section (g), as determined at the conclusion of the employing contractor or subcontractor s work on the public works contract. (d) For each public work project subject to a s enforcement of prevailing wage requirements, a separate, written summary of labor compliance activities and relevant facts pertaining to that particular project shall be maintained. That summary shall demonstrate that reasonable and sufficient efforts have been made to enforce prevailing wage requirements consistent with the practice of the Labor Commissioner. Appendix C following this section provides a suggested format for tracking and monitoring enforcement activities. Compliance records for a project shall be retained until the later of (1) at least one year after the acceptance of the public work or five years after the cessation of all labor on a public work that has not been accepted, or (2) one year after a final decision or judgment in any litigation under Labor Code Section For purposes of this section, a written summary or report includes information maintained electronically, provided that the summary or report can be printed out in hard copy form or is in an electronic format that (1) can be transmitted by or compact disk and (2) would be acceptable for the filing of documents in a federal or state court of record within this state. (e) The Labor Commissioner may provide, sponsor, or endorse training on how to enforce prevailing wage requirements, including but not necessarily limited to the subjects of (1) ascertaining prevailing wage requirements and rates from the Division of Labor Statistics and Research, (2) monitoring and investigation under section above, (3) enforcement responsibilities under this Section and Sections below, and (4) procedural requirements and responsibilities as an enforcing agency under Labor Code Sections and and sections of Title 8 of the California Code of Regulations. NOTE: Authority cited: Section , Labor Code. Reference: Sections , , , , and through , Labor Code Chapter 9

36 CHAPTER 10 Case Review and Document Collection Below is an outline of critical steps for document collection, which should be routinely applied in every prevailing wage violation case and particularly for those cases that lead to the filing of a Notice of Withholding of Contract Payments: 1) Copy of worker complaint Notes from worker interview. Calendar of dates and hours worked. Copies of check stubs or other form of proof of underpayment. Document all attempts to authenticate the complaint. Other supporting documentation where necessary. 2) Copy of all correspondence to contractor Job-start meeting checklist. Initial notification of complaint. Invitation to review the preliminary findings. Request for additional documentation such as canceled checks, check stubs, time cards, cash receipts, ledgers, etc. Log of all calls to contractor with notes about the content of discussion. 3) Certified payroll records Job-start meeting checklist. Initial notification of complaint. Invitation to review the preliminary findings. Request for additional documentation such as canceled checks, check stubs, time cards, cash receipts, ledgers, etc. Log of all calls to contractor with notes about the content of discussion. 4) Inspector s daily log Or another detailed record of work performed by date and the numbers of workers on project. For the period of time covered in the complaint. 5) Correct prevailing wage determination and applicable increases For each classification appearing in the audit Chapter 10

37 6) Scope of work for trade classifications used From Division Labor Statistics and Research (DLSR). 7) Tabulation of bids Advertisement date(s). List of subcontractors. Contract award amounts. Description of project. 8) Notice to proceed Official project start and completion dates. Duration of project. 9) Notice of completion (if applicable) With date stamp showing when it was recorded. Any withholding or action must take place within 180 days from the date of recording. Another 180 days is granted beyond this date if funds are still available in contract. 10) Surety company information The surety is entitled to receive a copy of any action taken or Notice of Withholding of Contract Payments filed. 11) Contractor s previous record of violations (if applicable) Provide documentation regarding prior formal actions and withholdings. 12) The Notice of Withholding of Contract Payments (if applicable) Always attach a copy of the audit spreadsheet. 13) Release of Notice of Withholding of Contract Payments Returns withheld funds. Filed when a case is settled in whole or part. Filed when it is determined the violation did not occur Chapter 10

38 14) Memo to file Explains circumstances and reasons for case closure without action. Provides explanation and reasons for settlement and spells any agreements reached with contractor or other parties Chapter 10

39 CHAPTER 11 Audit In order to achieve compliance on Public Works projects, audits shall be conducted routinely by the LCP administrator and shall be conducted if requested by the: Labor Commissioner Complainants Unions Contractor(s) Workers and Member of the general public When the LCP administrator receives a complaint, a labor standards investigation file shall be opened. If after reviewing all documents and interviewing workers and other witnesses, it is revealed that a willful violation of the Labor Code has occurred, an audit shall be conducted. The audit should consist of: 1) A comparison of payroll records to the best available information as to the actual hours worked; 2) The classification of workers employed on the construction contract; 3) A review of fringe benefit payments. Examples of willful violations include some of the following: 1. Failure to Comply with Prevailing Wage Rate Requirements Failure to comply with prevailing wage rate requirements (as set forth in Labor Code and awarding body contracts) is determined a willful violation whenever less that the stipulated basic hourly rate is paid to tradeworkers, or if overtime, Holiday, rate, fringe benefits and/or employer payments are paid at a rate less than stipulated. 2. Falsification of Payroll Records, misclassification of work, and/or failure to: Falsification of Payroll Records, misclassification of work, and/or failure to accurately report hours of work is characterized by deliberate underreporting of hours of work, underreporting the head count, stating that the proper prevailing wage rate was paid when it in fact was not, misclassifying the work performed by the worker, and any other deliberate and/or willful act which results in the falsification or inaccurate reporting of payroll records Chapter 11

40 3. Failure to Submit Certified Payroll Records: Prime contractor shall be responsible for the submission of certified payroll records for itself and all subcontractors, of any tier, within ten (10) days of the week ending date of each week. The prime contractor and subcontractors have 10 days upon notification by the awarding body or their representative in which to submit basic records and/or to correct inaccuracies or omissions that have been detected by the review of records. 4. Failure to Pay Fringe Benefits: Fringe benefits are defined as the amounts stipulated for employer payments or trust fund contributions and are determined to be part of the required prevailing wage rate. Failure to pay or provide fringe benefits and/or make trust fund contributions on a timely basis is equivalent payment of less than the stipulated wage rate. Should back wages be due and there is no agreement on payment after meeting with the contractors, the LCP administrator shall report the matter to the Labor Commissioner as a willful violation, upon completion of an investigation and audit. 5. Failure to pay the Correct Apprentice Rate and/or misclassifications of workers as Apprentices: Failure to pay the correct apprentice rate as a result of: Classifying a worker as an apprentice when not properly registered Employing apprentices outside of the prescribed ratios is equivalent 6. Taking of Kickbacks: Accepting or extracting kickbacks from employee wages under Labor Code Section 1778 constitutes a felony and may be prosecuted by the appropriate enforcement agency Chapter 11

41 CHAPTER 12 Penalties Failure to pay prevailing wages to every worker on a California State regulated project may result in the contractor being prohibited from bidding on public works projects for three years by the Division of Labor Standards Enforcement. In addition, wages not paid become forfeitures and can be collected from the contractor. Fines of up to $50 per day can also be assessed. The penalties are severe and range from misdemeanors to felonies (Labor Code sections ). Although the fundamental obligation to pay prevailing wage rates rests with the contractor, ensuring payment also is important to the awarding body of Labor Compliance Managers. Failure to pay required overtime wages will result in the assessment of $25 per worker per violation, per Labor Code Section It is against the law for an employer or other person to accept any compensation from workers on a prevailing wage project. Anyone found guilty of accepting fees, bribes or any other form of compensation or kickbacks from a worker on a prevailing wage project is guilty of a felony. Any person or company that attempts to charge a fee for registration or information about public works employment is guilty of a misdemeanor. See Labor Code Section Every person, who individually or as a representative of an awarding or public body or officer, or as a contractor or subcontractor doing public work, or agent or officer thereof, who takes, receives, or conspires with another to take or receive, for his own use or the use of any other person any portion of the wages of any workman or working subcontractor, in connection with services rendered upon any Public Work is guilty of a felony Chapter 12

42 CHAPTER 13 Enforcement Action A. Duties of the LCP administrator The LCP administrator has a duty to enforce: The Labor Code public works requirements, and; The procedural regulations of the Department of Industrial Relations The above shall be enforced in a manner consistent with the practice of Title 8, California Code of Regulations, Section 16000, et seq. and in accordance with the Precedential Prevailing Wage Decisions issued by the Director, and of the Department of Industrial Relations in a manner consistent with the practiced of the Labor Commissioner. B. Withholding Contract Payments When Payroll Records are delinquent or Inadequate As per CCR 16435, please note the following: (a) "Withhold" means to cease payments by the Awarding Body, or others who pay on its behalf, or agents, to the general contractor. Where the violation is by a subcontractor, the general contractor shall be notified of the nature of the violation and reference made to its rights under Labor Code Section (b) "Contracts." Except as otherwise provided by agreement, only contracts under a single master contract, including a Design-Build contract, or contracts entered into as stages of a single project, may be the subject of withholding. (c) "Delinquent payroll records" means those not submitted on the date set in the contract. (d) "Inadequate payroll records" are any one of the following: (1) A record lacking any of the information required by Labor Code Section 1776; (2) A record which contains all of the required information but is not certified, or is certified by someone who is not an agent of the contractor or subcontractor; (3) A record remaining uncorrected for one payroll period, after the has given the contractor or subcontractor notice of inaccuracies detected by audit or record review. However, prompt correction will stop any duty to withhold if such inaccuracies do not amount to one (1) percent of the entire Certified Weekly Payroll in dollar value and do not affect more than half the persons listed as workers employed on that Certified Weekly Payroll, as defined in Labor Code Section 1776 and section of Title 8 of the California Code of Regulations. (e) The withholding of contract payments when payroll records are delinquent or inadequate is required by Labor Code Section (b)(5), and it does not require the prior approval of the Labor Commissioner. The Awarding Body shall only withhold those payments due or estimated to be due to Chapter 13

43 the contractor or subcontractor whose payroll records are delinquent or inadequate, plus any additional amount that the has reasonable cause to believe may be needed to cover a back wage and penalty assessment against the contractor or subcontractor whose payroll records are delinquent or inadequate; provided that a contractor shall be required in turn to cease all payments to a subcontractor whose payroll records are delinquent or inadequate until the provides notice that the subcontractor has cured the delinquency or deficiency. (f) When contract payments are withheld under this section, the shall provide the contractor and subcontractor, if applicable, with immediate written notice that includes all of the following: (1) a statement that payments are being withheld due to delinquent or inadequate payroll records, and that identifies what records are missing or states why records that have been submitted are deemed inadequate; (2) specifies the amount being withheld; and (3) informs the contractor or subcontractor of the right to request an expedited hearing to review the withholding of contract payments under Labor Code Section 1742, limited to the issue of whether the records are delinquent or inadequate or the has exceeded its authority under this section. (g) No contract payments shall be withheld solely on the basis of delinquent or inadequate payroll records after the required records have been produced. (h) In addition to withholding contract payments based on delinquent or inadequate payroll records, penalties shall be assessed under Labor Code Section 1776(g) for failure to timely comply with a written request for certified payroll records. The assessment of penalties under Labor Code Section 1776(g) does require the prior approval of the Labor Commissioner under section of these regulations. NOTE: Authority cited: section , Labor Code. Reference: sections 1729, , and 1776, Labor Code. C. Withholding for Violation of the Requirement to Pay Prevailing Wages CCR requires the withholding of contract payments when, after investigation, it is established that an underpayment or other violation has occurred. Please note the following: (a) "Withhold" and contracts have the same meaning set forth in Sections 16435(a) and 16435(b) of these regulations. (b) Where the violation is by a subcontractor, the general contractor shall be notified of the nature of the violation and reference made to its rights under Labor Code Section (c) "Amount equal to the underpayment" is the total of the following determined by payroll review, audit, or admission of contractor or subcontractor: (1) The difference between amounts paid workers and the correct General Prevailing Rate of Per Diem Wages, as defined in Labor Code Section 1773, and determined to be the prevailing rate due workers in Chapter 13

44 such craft, classification or trade in which they were employed and the amounts paid; (2) The difference between amounts paid on behalf of workers and the correct amounts of Employer Payments, as defined in Labor Code Section and determined to be part of the prevailing rate costs of contractors due for employment of workers in such craft, classification or trade in which they were employed and the amounts paid; (3) Estimated amounts of "illegal taking of wages"; (4) Amounts of apprenticeship training contributions paid to neither the program sponsor's training trust nor the California Apprenticeship Council; (5) Estimated penalties under Labor Code Sections 1775, 1776, and (d) The withholding of contract payments when, after investigation, it is established that underpayment or other violations have occurred requires the prior approval of the Labor Commissioner under Sections and of these regulations. NOTE: Authority cited: section , Labor Code. Reference: sections 1729, , 1773, , 1775, 1776, , 1778, 1813 and 1815, Labor Code Chapter 13

45 CHAPTER 14 Withholding Procedures The (LCP) has a duty to the Director of the Department of Industrial Relations to enforce Labor Code Sections 1720 through 1861 in a manner consistent with the practice of the Division of Labor Standards Enforcement and reflective of the new rules in the amended regulations as of January 21, 2009 within Subchapter 3, Article 6, and Subchapter 4 of Chapter 8, Title 8, California Code of Regulations, Sections through 16438: Withholding Contract Payments When Payroll Records are Delinquent or Inadequate. (a) "Withhold" means to cease payments by the Awarding Body, or others who pay on its behalf, or agents, to the general contractor. Where the violation is by a subcontractor, the general contractor shall be notified of the nature of the violation and reference made to its rights under Labor Code Section (b) "Contracts." Except as otherwise provided by agreement, only contracts under a single master contract, including a Design-Build contract, or contracts entered into as stages of a single project, may be the subject of withholding. (c) "Delinquent payroll records" means those not submitted on the date set in the contract. (d) "Inadequate payroll records" are any one of the following: (1) A record lacking any of the information required by Labor Code Section 1776; (2) A record which contains all of the required information but is not certified, or is certified by someone who is not an agent of the contractor or subcontractor; (3) A record remaining uncorrected for one payroll period, after the Labor Compliance Program has given the contractor or subcontractor notice of inaccuracies detected by audit or record review. However prompt correction will stop any duty to withhold if such inaccuracies do not amount to 1 percent of the entire Certified Weekly Payroll in dollar value and do not affect more than half the persons listed as workers employed on that Certified Weekly Payroll, as defined in Labor Code Section 1776 and section of Title 8 of the California Code of Regulations. (e) The withholding of contract payments when payroll records are delinquent or inadequate is required by Labor Code Section (b)(5), and it does not require the prior approval of the Labor Commissioner. The Awarding Body shall only withhold those payments due or estimated to be due to the contractor or subcontractor whose payroll records are delinquent or inadequate, plus any additional amount that the has reasonable cause to believe Chapter 14

46 may be needed to cover a back wage and penalty assessment against the contractor or subcontractor whose payroll records are delinquent or inadequate; provided that a contractor shall be required in turn to cease all payments to a subcontractor whose payroll records are delinquent or inadequate until the provides notice that the subcontractor has cured the delinquency or deficiency. (f) When contract payments are withheld under this section, the shall provide the contractor and subcontractor, if applicable, with immediate written notice that includes all of the following: (1) a statement that payments are being withheld due to delinquent or inadequate payroll records, and that identifies what records are missing or states why records that have been submitted are deemed inadequate; (2) specifies the amount being withheld; and (3) informs the contractor or subcontractor of the right to request an expedited hearing to review the withholding of contract payments under Labor Code Section 1742, limited to the issue of whether the records are delinquent or inadequate or the has exceeded its authority under this section. (g) No contract payments shall be withheld solely on the basis of delinquent or inadequate payroll records after the required records have been produced. (h) In addition to withholding contract payments based on delinquent or inadequate payroll records, penalties shall be assessed under Labor Code Section 1776(g) for failure to timely comply with a written request for certified payroll records. The assessment of penalties under Labor Code Section 1776(g) does require the prior approval of the Labor Commissioner under section of these regulations Withholding Contract Payments When, After Investigation, It Is Established That Underpayment or Other Violation Has Occurred. (a) "Withhold" and contracts have the same meaning set forth in Sections 16435(a) and 16435(b) of these regulations. (b) Where the violation is by a subcontractor, the general contractor shall be notified of the nature of the violation and reference made to its rights under Labor Code Section (c) "Amount equal to the underpayment" is the total of the following determined by payroll review, audit, or admission of contractor or subcontractor: (1) The difference between amounts paid workers and the correct General Prevailing Rate of Per Diem Wages, as defined in Labor Code Section 1773, and determined to be the prevailing rate due workers in such craft, classification or trade in which they were employed and the amounts paid; (2) The difference between amounts paid on behalf of workers and the correct amounts of Employer Payments, as defined in Labor Code Section and determined to be part of the prevailing rate costs of contractors due for employment of workers in such craft, classification or trade in which they Chapter 14

47 were employed and the amounts paid; (3) Estimated amounts of "illegal taking of wages"; (4) Amounts of apprenticeship training contributions paid to neither the program sponsor's training trust nor the California Apprenticeship Council; (5) Estimated penalties under Labor Code Sections 1775, 1776, and (d) The withholding of contract payments when, after investigation, it is established that underpayment or other violations have occurred requires the prior approval of the Labor Commissioner under Sections and of these regulations. NOTE: Authority cited: section , Labor Code. Reference: sections 1729, , 1773, , 1775, 1776, , 1778, 1813 and 1815, Labor Code Forfeitures Requiring Approval by the Labor Commissioner. (a) For purposes of this section and section below, "forfeitures" means the amount of wages, penalties, and forfeitures assessed by the and proposed to be withheld pursuant to Labor Code section (a), and includes the following: (1) the difference between the prevailing wage rates and the amount paid to each worker for each calendar day or portion thereof for which each worker was paid less than the prevailing wage rate by the contractor or subcontractor; and (2) penalties assessed under Labor Code Sections 1775, 1776 and (b) If the aggregate amount of forfeitures assessed as to a contractor or subcontractor is less than $ , the forfeitures shall be deemed approved by the Labor Commissioner upon service and the Labor Commissioner's receipt of copies of the following: (1) the Notice of Withholding of Contract Payments authorized by Labor Code Section (a); (2) an Audit as defined in section 16432(e) of these regulations, and (3) a brief narrative identifying the Bid Advertisement Date of the contract for public work and summarizing the nature of the violation, the basis of the underpayment, and the factors considered in determining the assessment of penalties, if any, under Labor Code Section (c) For all other forfeitures, approval by the Labor Commissioner shall be requested and obtained in accordance with section below Determination of Amount of Forfeiture by the Labor Commissioner. (a) Where the requests a determination of the amount of forfeiture, the request shall include a file or report to the Labor Commissioner which contains at least the information specified in subparts (1) through (9) below. Appendix D is a suggested format for a Request for Approval of Forfeiture under this section Chapter 14

48 (1) Whether the public work has been accepted by the awarding body and whether a valid notice of completion has been filed, the dates if any when those events occurred, and the amount of funds being held in retention by the Awarding Body; (2) Any other deadline which if missed would impede collection; (3) Evidence of violation, in narrative form; (4) Evidence of violation obtained under section of these regulations and a copy of the Audit prepared in accordance with section 16432(e) setting forth the amounts of unpaid wages and applicable penalties; (5) Evidence that before the forfeiture was sent to the Labor Commissioner (A) the contractor and subcontractor were given the opportunity to explain why there was no violation, or that any violation was caused by good faith mistake and promptly corrected when brought to the contractor or subcontractor's attention, and (B) the contractor and subcontractor either did not do so or failed to convince the Labor Compliance Program of its position; (6) Where the seeks not only wages but also a penalty as part of the forfeiture, and the contractor or subcontractor has unsuccessfully contended that the cause of violation was a good faith mistake that was promptly corrected when brought to the contractor or subcontractor's attention, a short statement should accompany the proposal for a forfeiture, with a recommended penalty amount pursuant to Labor Code Section 1775(a); (7) Where the seeks only wages or a penalty less than $50 per day as part of the forfeiture because the contractor or subcontractor has successfully contended that the cause of the violation was a good faith mistake that was promptly corrected when brought to the contractor or subcontractor's attention, the file should include the evidence as to the contractor or subcontractor's knowledge of his or her obligation, including the program's communication to the contractor or subcontractor of the obligation in the bid invitations, at the pre-job conference agenda and records, and any other notice given as part of the contracting process. With the file should be a statement, similar to that described in (6), and recommended penalty amounts, pursuant to Labor Code Section 1775(a); (8) The previous record of the contractor and subcontractor in meeting their prevailing wage obligations; and (9) Whether the has been granted approval on only an Chapter 14

49 interim or temporary basis under sections or above or whether it has been granted extended approval under section above. (b) The file or report shall be served on the Labor Commissioner as soon as practicable after the violation has been discovered, and not less than 30 days before the final payment, but in no event not less than 30 days before the expiration of the limitations period set forth in Labor Code Section (c) A copy of the recommended forfeiture and the file or report shall be served on the contractor and subcontractor at the same time as it is sent to the Labor Commissioner. The may exclude from the documents served on the contractor and subcontractor copies of documents secured from the contractor or subcontractor during an audit, investigation, or meeting if those are clearly referenced in the file or report. (d) The Labor Commissioner shall affirm, reject, or modify the forfeiture in whole or in part as to the wages and penalties due. (e) The Labor Commissioner's determination of the forfeiture is effective on one of the two following dates: (1) For all programs other than those having extended authority under section of these regulations, on the date the Labor Commissioner serves by first class mail, on the, on the Awarding Body if different, on the contractor and on the subcontractor, if any, an endorsed copy of the proposed forfeiture, or a newly drafted forfeiture statement which sets out the amount of forfeiture approved. Service on the contractor or subcontractor is effective if made on the last address supplied by the contractor or subcontractor in the record. The Labor Commissioner's approval, modification or disapproval of the proposed forfeiture shall be served within 30 days of receipt of the proposed forfeiture. (2) For programs with extended authority under section above, approval is effective 20 days after the requested forfeitures are served upon the Labor Commissioner, unless the Labor Commissioner serves a notice upon the parties, within that time period, that this forfeiture request is subject to further review. For such programs, a notice that approval will follow such a procedure will be included in the transmittal of the forfeiture request to the contractor. If the Labor Commissioner notifies the parties of a decision to undertake further review, the Labor Commissioner's final approval, modification or disapproval of the proposed forfeiture shall be served within 30 days of the date of notice of further review Deposits of Penalties and Forfeitures Withheld. (a) Where the involvement of the Labor Commissioner has been limited to a determination of the Chapter 14

50 actual amount of penalty, forfeiture or underpayment of wages, and the matter has been resolved without litigation by or against the Labor Commissioner, the shall deposit penalties and forfeitures with the Awarding Body. (b) Where collection of fines, penalties or forfeitures results from administrative proceedings or court action to which the Labor Commissioner and Awarding Body or its Labor Compliance Program are both parties, the fines, penalties or forfeitures shall be divided between the general funds of the state and the Awarding Body, as the Hearing Officer or court may decide. (c) All penalties recovered in administrative proceedings or court action brought by or against the Labor Commissioner and to which the Awarding Body or its is not a party, shall be deposited in the general fund of the state. (d) All wages and benefits which belong to an employee and are withheld or collected from a contractor or subcontractor, either by withholding or as a result of administrative proceedings or any court action, and which have not been paid to the employee or irrevocably committed on the employee's behalf to a benefit fund, shall be deposited with the Labor Commissioner, who shall handle such wages and benefits in accordance with Labor Code Section Chapter 14

51 CHAPTER 15 Frequently asked Questions (FAQs) Q. A. Who must receive prevailing ages on public works projects? The prevailing wage must be paid to all workers on public works projects, including partners who are performing the work. Q. A. What is the penalty for not paying the prevailing wage? This is defined in Labor Code Section Q. A. How often are Certified Payroll Records due and who should receive them? Certified Payroll Records should be sent each week to the awarding body or their their 3rd party LCP. Q. A. As a contractor or subcontractor when should I hire and train apprentices? When employing workers in an apprenticeable craft or trade, the contractor or subcontractor must apply to the appropriate joint apprenticeship committee for certification to employ and train apprentices in the affected industry. Contractors not signatory to a trust agreement shall contribute a training fee to the California Apprenticeship Council for each hour worked on the project. Awards of less than thirty thousand dollars or 20 working days are exempt from this provision. Q. A. How do I know what is the correct prevailing wage rate? The current prevailing wage rates are available on the internet at: A copy is available from the contracting department. Copies of all wage determinations are also available from: Department of Industrial Relations Division of Labor Statistics and Research Prevailing Wage Unit P. O. Box San Francisco, CA Q. A. How do I know what is the correct craft or classification for the work my employees are doing? The Scope of Work for each craft is listed on the DIR website and on some of the wage determinations. If you have questions about the type of work that many be performed by each craft please call: Lin Robertson at (408) Chapter 15

52 Q. A. If owners or partners work on a project do they have to be paid prevailing wages? Yes, anyone who works on a project must be paid the prevailing wage rate for all hours worked. This does not include office staff and supervisor who are not hands on employees. Q. A. What should I do if an employee performs more than one type of work each day? You must keep accurate records of how many hours the employee works in each classification. The employee must be paid the prevailing wage rate for each craft, classification, and type of work performed. If accurate records are not kept, the highest wage rate may be required. Q. What if an employee is just learning a trade or is just a helper on the project. Can I pay him/her a lesser wage? No. All employees must be paid the prevailing wage rate for the type of work they perform. Only apprentices who are enrolled in a state-approved program are allowed to be paid less than journeyman rates (which are higher). Applicable wage rates for apprentices apply. A. Q. A. What happens if I don t understand the prevailing wage rates? If you are unsure of the rates you should pay, you should contact the LCP administrator for clarification or you can call the Department of Industrial Relations, Division of Labor Statistics & Research at (415) Q. A. What is the methodology for determining the prevailing wage rates? The prevailing wage rate is the basic hourly rate paid on public works projects to a majority of workers engaged in a particular craft, classification or type of work within the locality and the nearest labor market area (if a majority of such workers are paid at a single rate). If there is no single rate paid to a majority, then the single or modal rate being paid to the greater number of workers is prevailing. Q. A. How does the prevailing wage affect me? California s prevailing wage laws ensure that the ability to get a public workers contract is not based on paying lower wage rates that a competitor. All bidders are required to use the same wage rates when bidding on a public works project. California law requires that not less than the general prevailing rate of per diem wages be paid to all workers employed on a public works project. Q. A. What is a general prevailing wage determination? When the Director of the California Department of Industrial Relations determine that the general prevailing rate of per diem wages for a particular craft, classification or type of worker is uniform throughout an area, the Director issues a determination enumerated county by county, but covering the entire area. General determinations are issued twice a year on February 22 and August Chapter 15

53 Q. A. What is a special prevailing wage determination? When a particular craft, classification or type of worker is not covered by a general determination, the awarding body may request a special prevailing wage determination. Requests must be made at least 45 days prior the bid advertisement date. Q. A. What is an issue date? The date upon which copies of the determinations of the Director are deposited in the mail. Determinations are issued twice a year on February 22 and August 22. Q. A. Why is there an expiration date for each prevailing wage determination? The expiration date indicates when the determination of the Director of the California Department of Industrial Relations is subject to change. Q. What does it mean when there is a single asterisk ( * ) or double asterisk ( **) after the expiration date of a prevailing wage determination? Prevailing wage determinations with a single asterisk (*) after the expiration date which are in effect on the date of advertisement for bids remain in effect for the life of the project. Prevailing wage determinations with double asterisks (**) after the expiration date indicate that the basic hourly wage rate, overtime and holiday pay rates, and employer payments to be paid for work performed after this date have been predetermined. If work is to extend past this date, the new rate must be paid and should be incorporated in contracts entered into now. The contractor should contact the Prevailing Wage Unit, DLSR (415) , or the awarding body to obtain predetermined wage A. Q. A. What is a predetermined change? Definitely changes to the basic hourly wage rate, overtime, holiday pay rates and employer payments which are know and specified in the applicable collective bargaining agreement at the time of the bid advertisement date and which are referenced in the general prevailing rate of per diem wages. Q. A. What is the effective date of a prevailing wage determination? The date upon which the determinations of the Director of the California Department of Industrial Relations go into effect. This date is 10 days after the issue date of the determination. Q. A. What is a coverage determination? A process in which the awarding body or any other interested party (such as a contractor, employee, union or labor-management compliance organization) may request a written determination by the Director of the Department of Industrial Relations about a specific construction project or type of work performed Chapter 15

54 Q. A. When does overtime pay apply? Compensation for all hours worked in excess of eight hours per day and 40 hours during any one week should not be less than one-and-one half times the basic rate of pay. For specific overtime requirements, refer to the prevailing wage determinations. Q. A. What are the threshold requirements for a public works project? Prevailing wages must be paid to all workers employed on a public works project when the public works project is over $1,000. If an awarding body elects to initiate and enforce a labor compliance program, that has been approved by the Director of the Department of Industrial Relations, for every public works project under the authority of the awarding body, prevailing wages are not required to be paid for any public works project of $25,000 or less when the project is for construction work, or for any public works project of $15,000 or less when the project is for alteration, demolition, repair, or maintenance work Chapter 15

55 CHAPTER 16 Common Violations The California Labor Code requires that workers employed by contractors or subcontractors in the execution of a public works contract must be paid the State-determined prevailing wage rate. All contractors and subcontractors are responsible for ascertaining and complying with all current general prevailing wage rates for crafts and any rate changes that occur during the life of the contract. Failure to pay the correct prevailing wage rates can have numerous causes. The following are common mistakes contractors tend to make: Using the incorrect wage determination Not understanding the double asterisk (**) rule Not applying Predetermined Increases Ignoring the footnotes in the wage determination Not utilizing the Important Notices issued by the Department of Industrial Relations (DIR) and Advice Letters Failure to submit Certified Payroll Reports Misclassification of workers Not following Apprenticeship Requirements To avoid these mistakes work closely with the LCP administrator and awarding body to review what requirements must be met to comply with each of the areas listed above Chapter 16

56 APPENDIX A Terms and Definitions Awarding body CAC CCR CFR CPR DAS DIR DLSE DLSR DSA FBS IOR JATC LCP LEA PW PWD T&M TLCM Owner of project, body awarding contract California Apprenticeship Council California Code of Regulations Code of Federal Regulations Certified payroll record Division of Apprenticeship Standards Department of Industrial Relations Division of Labor Standards Enforcement Division of Labor Statistics & Research Department of State Architect Fringe benefit statement Inspector of Record, DSA assigned building inspector Joint apprenticeship training committee Labor compliance program Local education agency Public works or prevailing wage, depending on context Prevailing wage division Time & material The Labor Compliance Managers Appendix A

57 APPENDIX B Relevant Websites The current prevailing wage rates are available on the Internet, or from LCM. For specific information about prevailing wage requirements you can visit the websites listed below: Prevailing Wage Rates Apprentice Schedules Apprenticeship Programs, Requirements & Forms Contractors State License Status Public Works Interactive Databases Forms Appendix B

58 APPENDIX C DIR Determinations The appropriate Prevailing Wage Determinations for use in the course of an audit are determined by the first of the two bid advertisement dates for the contract/project. Bid advertisement dates from February 22 to August 21 call for the determination that is listed as yyyy-01 (yyyy stands for the year for example ). Dates from August 22 to February 21 call for the yyyy-02 determination. DIR Website to verify Prevailing Wage Rates for Journeymen: DIR Website to verify Prevailing Wage Rates for Apprentices: DIR Website to verify Apprentices are properly registered with DAS: DIR Website to verify Electricians are certified by DAS: Links to download reference material: Statewide: Northern California: San Francisco (example): Appendix C

59 APPENDIX D LCP Forms & Handouts The following pages will show the forms listed below: Pre-Construction Checklist of Labor Law Requirements Public Works Contract Award - DAS Form140 Request for Dispatch of an Apprentice - DAS Form142 Training Funds Contribution Form CAC-2 Apprentice Agreement (front and back side) Fringe Benefit Statement (Statement of Employer Payments) Statement of Compliance Certified Payroll Record (DIR Form A1-131) Notice to Construction Employees (posted on project site) Request for Approval of Forfeiture Amount Notice of Withholding of Contract Payments (language for when needed) Notice of Right to Obtain Review Formal Hearing (language for when needed) Opportunity for Settlement Meeting (language for when needed) Notice of Opportunity to Review Evidence Pursuant to Labor Code Section 1742(b) Request to Review Evidence (language for when needed) Notice of Transmittal (language for when needed) Appendix D

60 Pre-Construction Checklist of Labor Law Requirements The federal and state labor law requirements applicable to the contract are composed of but not limited to the following items: (1) The contractor's duty to pay prevailing wages under Labor Code Section 1770 et seq., should the project exceed the exemption amounts; (2) The contractor's duty to employ registered apprentices on the public works project under Labor Code Section ; (3) The penalties for failure to pay prevailing wages (for non-exempt projects) and employ apprentices including forfeitures and debarment under Labor Code Sections 1775 and ; (4) The requirement to keep and submit copies upon request of certified payroll records under Labor Code Section 1776, and penalties for failure to do so under Labor Code Section 1776(g); (5) The prohibition against employment discrimination under Labor Code Section ; the Government Code, and Title VII of the Civil Rights Act of 1964; (6) The prohibition against accepting or extracting kickback from employee wages under Labor Code Section 1778; (7) The prohibition against accepting fees for registering any person for public work under Labor Code Section 1779; or for filling work orders on public works under Labor Code Section 1780; (8) The requirement to list all subcontractors under Public Contracts Code Section 4104; (9) The requirement to be properly licensed and to require all subcontractors to be properly licensed and the penalty for employing workers while unlicensed under Labor Code Section 1021 and under the California Contractors License Law, found at Business and Professions Code Section 7000 et seq; (10) The prohibition against unfair competition under Business and Professions Code Section ; Appendix D

61 (11) The requirement that the contractor be properly insured for Workers Compensation under Labor Code Section 1861; (12) The requirement that the contractor abide by the Occupational, Safety and Health laws and regulations that apply to the particular construction project; (13) The federal prohibition against hiring undocumented workers, and the requirement to secure proof of eligibility/citizenship from all workers. (14) The requirement to provide itemized wage statements to employees under Labor Code Section 226. Certification: I acknowledge that I have been informed and am aware of the foregoing requirements and that I am authorized to make this certification on behalf of [name of subcontractor]. Date Name of person signing and company signing and company Appendix D

62 Appendix D

63 Appendix D

64 Appendix D

65 Front Appendix D

66 Back Appendix D

67 Fringe Benefit Statement Appendix D

68 Statement of Compliance Appendix D

69 Appendix D

70 NOTICE TO CONSTRUCTION EMPLOYEES Please call Lin Robertson at (408) if you have questions about the prevailing wages you should be receiving for this Public Works project. The wages are posted next to this announcement. ANUNCIO PARA LOS TRABAJADORES DE CONSTRUCCION Llama Lin Robertson a (408) si tiene preguntas sobre el pago que necesita recibir para este proyecto de Obras Publicas. Los sueldos son sobre el anuncio a lado de esta información. 通告 建筑員工請注意 你們在 份政府建筑項目中應得主要的工资,已被張貼在 個通告旁邊, 如有任何問題, 請電 (408) 與 Lin Robertson 女士 聯絡 Appendix D

71 LABOR COMPLIANCE PROGRAM REQUEST FOR APPROVAL OF FORFEITURE AMOUNT Awarding body or 3rd Party Administrator: Name: Date Requested: Name of Affected Public Agency: Project Information Project Name Contract Number Project Location (County) Bid Advertisement Estimated Completion Date Date Project Accepted/Completion Date Notice of Recordation by County Recorder Funds in Retention Contractor Information Name & address of General Contractor General description of scope of work of the entire project Name & address of Subcontractor or Affected Contractor General description of scope of work for the Subcontractor or affected contractor LCP Investigation and Findings Has Final Approval been granted? Yes ( ) No ( ) Date of Notice of Withholding Contract Payments Wages assessed $ Training $ 1775 Penalties assessed $ 1813 Penalties $ 1776 Penalties assessed $ TOTAL NOTICE OF WITHHOLDING CONTRACT PAYMENTS $ Appendix D

72 Brief Statement of Issues Report of Audit including supporting documents showing the wage underpayment issues that have been identified at this point in your investigation. Include an Audit Spreadsheet showing the calculations of the wages found due, dates that you have discussed the issues with the employer, the employer s response, and an analysis of all the factually based evidence that support your conclusion.1 Report of Investigation stating each penalty related issues that have been identified at this point in your investigation. Include an audit spreadsheet showing that calculates the 1775 and 1813 penalties assessed, description of the opportunities you have given to the contractor to address the criteria listed below, the employer s response to each issue, and an analysis of all the factually based evidence that the employer has submitted to refute your conclusion.2 Please explain the reason of Labor Code 1775 penalty recommendations: State whether the Labor Code Section 1775 penalties are based upon either: Whether the failure of the contractor or subcontractor to pay the correct rate of per diem wages was a good faith mistake. Explain. If so, the error was promptly and voluntarily corrected upon being brought to the attention of the contractor or subcontractor. Explain. Whether the contractor or subcontractor has a prior record of failing to meet its prevailing wage obligations. 1 2 If the issue is misclassification be sure to include a detailed description of the work performed by each victim/witness and the basis for your determination that the work was misclassified. Including all evidence of the awarding body s contact with the prime contractor and/or the subcontractor relative to the obligation to pay the prevailing wage, and/or the prime contractor s contacts with the subcontractor s relative to the obligation to pay the prevailing wage, and/or the complaining witness s contacts with the affected contractor relative to the obligation to pay the prevailing wage, and/or the DLSE s contacts with the affected contractor relative to the obligation to pay the prevailing wage Appendix D

73 Disposition of the Case by the Labor Commissioner Approved: Wages $ 1775 Penalties $ 1776 Penalties $ TOTAL $ Training $ 1813 Penalties Approved as alternative (modified) penalty amount: Wages $ Training $ 1775 Penalties $ 1813 Penalties $ 1776 Penalties $ TOTAL $ Rejected: State Labor Commissioner Date Appendix D

74 LCP Administrator Contact Information Awarding Body Seal In Reply Refer to Case No.: Date: Notice of Withholding of Contract Payments Awarding Body Project Name Work Performed in County of: Project No. Prime Contractor Subcontractor After an investigation concerning the payment of wages to workers employed in the execution of the contract for the above-named public works project, the for (awarding body name) has determined that violations of the California Labor Code have been committed by the contractor and/or subcontractor identified above. In accordance with Labor Code sections and , the hereby issues this Notice of Withholding of Contract Payments. The nature of the violations of the Labor Code and the basis for the assessment are as follows: The has determined that the total amount of wages due was: (Verification of restitution pending). The has determined that the total amount of outstanding penalties due under Labor Code sections 1775 and 1813 is: The has determined that the amount of penalties assessed under Labor Code section 1776 is: By: Appendix D

75 Notice of Right to Obtain Review - Formal Hearing In accordance with Labor Code sections 1742 and , an affected contractor or subcontractor may obtain review of this Notice of Withholding of Contract Payments by transmitting a written request to the office of the that appears below within 60 days after service of the notice. To obtain a hearing, a written Request for Review must be transmitted to the following: Contact Information A Request for Review either shall clearly identify the Notice of Withholding of Contract Payments from which review is sought, including the date of the notice, or it shall include a copy of the notice as an attachment, and shall also set forth the basis upon which the notice is being contested. In accordance with Labor Code section 1742, the contractor or subcontractor shall be provided an opportunity to review evidence to be utilized by the at the hearing within 20 days of the 's receipt of the written Request for Review. Failure by a contractor or subcontractor to submit a timely Request for Review will result in a final order which shall be binding on the contractor and subcontractor, and which shall also be binding, with respect to the amount due, on a bonding company issuing a bond that secures the payment of wages and a surety on a bond. Labor Code section In accordance with Labor Code section 1742(d), a certified copy of a final order may be filed by the Labor Commissioner in the office of the clerk of the superior court in any county in which the affected contractor or subcontractor has property or has or had a place of business. The clerk, immediately upon the filing, shall enter judgment for the State against the person assessed in the amount shown on the certified order Appendix D

76 Opportunity for Settlement Meeting In accordance with Labor Code Section (b), the shall, upon receipt of a request from the affected contractor or subcontractor within 30 days following the service of this Notice of Withholding of Contract Payments, afford the contractor or subcontractor the opportunity to meet with the 's designee to attempt to settle a dispute regarding the notice. The settlement meeting may be held in person or by telephone and shall take place before the expiration of the 60-day period for seeking a hearing as set forth above under the heading Notice of Right to Obtain Review. No evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, the settlement meeting is admissible or subject to discovery in any administrative or civil proceeding. No writing prepared for the purpose of, in the course of, or pursuant to, the settlement meeting, other than a final settlement agreement, is admissible or subject to discovery in any administrative or civil proceeding. This opportunity to timely request an informal settlement meeting is in addition to the right to obtain a formal hearing, and a settlement meeting may be requested even if a written Request for Review has already been made. Requesting a settlement meeting, however, does not extend the 60-day period during which a formal hearing may be requested. A written request to meet with the 's designee to attempt to settle a dispute regarding this notice must be transmitted to: Contact Information Liquidated Damages Labor Code Section requires the following: (a) After 60 days following the service of a civil wage and penalty assessment under Section 1741 or a notice of withholding under subdivision (a) of Section , the affected contractor, subcontractor, and surety on a bond or bonds issued to secure the payment of wages covered by the assessment or notice shall be liable for liquidated damages in an amount equal to the wages, or portion thereof, that still remain unpaid. If the assessment or notice subsequently is overturned or modified after administrative or judicial review, liquidated damages shall be payable only on the wages found to be due and unpaid. Additionally, if the contractor or subcontractor demonstrates to the satisfaction of the director that he or she had substantial grounds for appealing the assessment or notice with respect to a portion of the unpaid wages covered by the assessment or notice, the director may exercise his or her discretion to waive payment of the liquidated damages with respect to that portion of the unpaid wages. Any liquidated damages shall be distributed to the employee along with the unpaid wages. Section shall not apply to claims for prevailing wages under this chapter Appendix D

77 (b) Notwithstanding subdivision (a), there shall be no liability for liquidated damages if the full amount of the assessment or notice, including penalties, has been deposited with the Department of Industrial Relations, within 60 days following service of the assessment or notice, for the department to hold in escrow pending administrative and judicial review. The department shall release such funds, plus any interest earned, at the conclusion of all administrative and judicial review to the persons and entities who are found to be entitled to such funds. (c) The Labor Commissioner shall, upon receipt of a request from the affected contractor or subcontractor within 30 days following the service of a civil wage and penalty assessment under Section 1741, afford the contractor or subcontractor the opportunity to meet with the Labor Commissioner or his or her designee to attempt to settle a dispute regarding the assessment without the need for formal proceedings. The awarding body shall, upon receipt of a request from the affected contractor or subcontractor within 30 days following the service of a notice of withholding under subdivision (a) of Section , afford the contractor or subcontractor the opportunity to meet with the designee of the awarding body to attempt to settle a dispute regarding the notice without the need for formal proceedings. The settlement meeting may be held in person or by telephone and shall take place before the expiration of the 60-day period for seeking administrative review. No evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, the settlement meeting is admissible or subject to discovery in any administrative or civil proceeding. No writing prepared for the purpose of, in the course of, or pursuant to, the settlement meeting, other than a final settlement agreement, is admissible or subject to discovery in any administrative or civil proceeding. The assessment or notice shall advise the contractor or subcontractor of the opportunity to request a settlement meeting. (d) This section shall become operative on January 1, The Amount of Liquidated Damages Available Under this Notice is Distribution: General Contractor and their bonding company Affected Contractor and their bonding company Appendix D

78 Notice of Opportunity to Review Evidence Pursuant to Labor Code Section 1742(b) To: Prime Contractor Subcontractor Please be advised that this office has received your Request for Review, dated, and pertaining to the Notice of Withholding of Contract Payments issued by the in Case No.. In accordance with Labor Code section 1742(b), this notice provides you with an opportunity to review evidence to be utilized by the at the hearing on the Request for Review, and the procedures for reviewing such evidence. Rule of the Prevailing Wage Hearing Regulations provides as follows: (a) Within ten (10) days following its receipt of a Request for Review, the Enforcing Agency shall also notify the affected contractor or subcontractor of its opportunity and the procedures for reviewing evidence to be utilized by the Enforcing Agency at the hearing of the Request for Review. (b) An Enforcing Agency shall be deemed to have provided the opportunity to review evidence required by this Rule if it (1) gives the affected contractor or subcontractor the option at said party's own expense to either (i) obtain copies of all such evidence through a commercial copying service or (ii) inspect and copy such evidence at the office of the Enforcing Agency during normal business hours; or if (2) The Enforcing Agency at its own expense forwards copies of all such evidence to the affected contractor or subcontractor. (c) The evidence required to be provided under this Rule shall include the identity of witnesses whose testimony the Enforcing Agency intends to present, either in person at the hearing or by declaration or affidavit. This provision shall not be construed as requiring the Enforcing Agency to prepare or provide any separate listing of witnesses whose identities are disclosed within the written materials made available under subpart (a). (d) The Enforcing Agency shall make evidence available for review as specified in subparts (a) through (c) within 20 days of its receipt of the Request for Review; Appendix D

79 provided that, this deadline may be extended by written request or agreement of the affected contractor or subcontractor. The Enforcing Agency's failure to make evidence available for review as required by Labor Code Section 1742(b) and this Rule, shall preclude the enforcing agency from introducing such evidence in proceedings before the Hearing officer or the Director. (e) This Rule shall not preclude the Enforcing Agency from relying upon or presenting any evidence first obtained after the initial disclosure of evidence under subparts (a) through (d), provided that, such evidence is promptly disclosed to the affected contractor or subcontractor. This Rule also shall not preclude the Enforcing Agency from presenting previously undisclosed evidence to rebut new or collateral claims raised by another party in the proceeding. In accordance with the above Rule, please be advised that the Labor Compliance Program's procedure for you to exercise your opportunity to review evidence is as follows: Within five calendar days of the date of this notice, please transmit the attached Request to Review Evidence to the following address: Attention: Appendix D

80 Request to review evidence To: From: Regarding Notice of Withholding of Contract Payments Dated Our Case No.: The undersigned hereby requests an opportunity to review evidence to be utilized by the Labor Compliance Program at the hearing on the Request for Review. Phone No.: Fax No.: Appendix D

81 LCP Contact Information Awarding body seal if applicable Date: Re: Request for Review dated Notice of Transmittal To: Department of Industrial Relations Office of the Director-Legal Unit Attention: Lead Hearing Officer P. O. Box San Francisco, CA Enclosed herewith please find a Request for Review, dated, and received by the, (LCP Administrator with LCP ID number) for the School District, on (date). Also enclosed please find the following: Copy of Notice of Withholding of Contract Payments Copy of Audit Summary By: LCP Administrator Rep cc: Prime Contractor: Affected Contractor: Surety(s) on Bond: Please be advised that the attached Request for Review identified above has been received and transmitted to the address indicated. Please be further advised that the governing procedures applicable to these hearings are set forth at Title 8, California Code of Regulations sections These hearings are not governed by Chapter 5 of the Government Code, commencing with section Appendix D

82 Appendix E Notice of Proposed Rulemaking Approved January 21, 2009 Source: Appendix E