HomeMy WebLinkAboutMINUTES - 01231996 - D3 TO: ;1 BOARD OF SUPERVISORS
D-3 `�` s Contra
FROM: j 1 �•
SUPERVISOR TOM TORLAKSON Costa
•:��.• County
r••. }
DATE: January 18, 1996
SUBJECT:
OPPOSE EFFORTS OF THE STATE ADMINISTRATION TO UNDERMINE
PREVAILING WAGE RULES AND REGULATIONS
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMENDATION:
OPPOSE efforts by the Governor and the State Department of Industrial Relations
to undermine the State's existing prevailing wage rules and regulations by reducing
the requirements to the basic level required by the Federal Government and
authorize the Chair of the Board of Supervisors to submit written testimony to the
State Department of Industrial Relations setting forth the Board's reasons for
opposing the currently pending regulations on this subject.
BACKGROUND:
The State Department of Industrial Relations is proposing to adopt two changes to
its regulations relating to the requirement for prevailing wages to be paid on public
works projects.
Labor Code Section 1773 requires the Director of Industrial Relations to determine
the general prevailing rate of per diem wages and the general prevailing rate for
holiday and overtime work in the locality in which the work is being performed for
each craft, classification or type of workman needed to execute a public works
project. The law does not specify what methodology must be used to determine the
prevailing wage. The law references several sources the Director can use to
determine the general prevailing wage. These include the collective bargaining
CONTINUED ON ATTACHMENT: YES SIGNATURE:
-RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE(S): -rteTefleltsen
ACTION OF BOARD ON APPROVED AS RECOMMENDED OTHER X
Please see Addendum (Attached) for a• ,,list of speakers and
Board action.
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A TRUE
UNANIMOUS(ABSENT ) AND 1.CORRECT COPY OF AN ACTION TAKEN
AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD
ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN.
ATTESTED January 23, 1996
Contact: PHIL BATCHELOR,CLERK OF THE BOARD OF
cc: Supervisor Torlakson
County Administrator SUP AND COUNTY ADMI ISTRATOR
Public Works Director
General Services Director
County Counsel BY
Comm nity Develo.pment Department
-Municipal Advisory Councils (via CDD)
D-3
agreements from the locality, the rates published for federal projects and other data
from labor organizations and employers or employer organizations. The current
regulations require the use of the modal rate, the single rate paid to the greatest
number of workers. The proposed charge would alter the basis for determining the
general prevailing rate from the modal rate concept to single rate if a majority of
workers are paid at one rate or to a weighted average of the rates paid if there is no
majority. This will make state methodology consistent with Federal Davis-Bacon
methodology.
The second change involves the use of what is commonly referred to as the "double
asterisk" requirement. Under current regulations, when the basis of a prevailing
wage determination is a collective bargaining agreement, the Director is required to
incorporate into the prevailing wage determination any definite predetermined
changes to the wage rate contained in the agreement, such as wage increases in
subsequent years of the agreement. The predetermined changes are incorporated
by reference with a double asterisk notation after the expiration date on the
determination. The proposed change in the regulations will clarify the prevailing
wage requirements on public works by providing that the wage rate in existence at
the time a determination is issued will remain effective for the life of the project. The
amended regulation will clarify that the prevailing wage rate of per diem wages are
those contained in the determination in effect at the project's bid advertisement date.
It is clearly the intent of the State Administration to reduce the prevailing wage
requirements on public works projects, thereby savings money for awarding bodies.
However, it is clearly also the intent to do so by reducing the wages which are paid
to workers on these projects. The local economy can only thrive when the jobs that
are created in the area are at wage rates which allow individuals to live in this
County and raise their families on a reasonable standard of living. Any efforts to
undermine those wage rates will reduce the income of workers in this County and
make it more difficult for them to buy homes and raise their families in this area. It
is therefore recommended that the Board oppose these regulations and authorize
the Chair to forward the Board's opposition in the form of written testimony to the
hearings scheduled on this subject in Los Angeles and San Francisco next month.
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ADDENDUM
The Board heard comments from the following persons regarding this
matter:
1 . Paul Katz, Local 1 , P.O. Box 222 Martinez, CA.
2. Greg Feere, Contra Costa Building Trades, 935 Alhambra Avenue,
Martinez, CA.
3. George DeLacruz, member, Bay Point Municipal Advisory Council,
3569 Sharon Court, Bay Point, CA.
Public comment on the matter was concluded after every person desiring
to.address the Board on this matter was heard.
The Board had further discussion on this issue and then took the
following action:
IT IS BY THE BOARD ORDERED that the Board of Supervisors ADOPTS
a position in opposition to efforts by the Governor and the State
Department of Industrial Relations to undermine the State's existing
prevailing wage rules and regulations which propose to reduce the
prevailing wage requirements to the basic level required by the Federal
Government;
IT IS FURTHER ORDERED that staff is DIRECTED to invite
representatives from the State Department of Industrial Relations to
make a presentation regarding their proposed changes to the prevailing
wage rules and regulations to the Board of Supervisors at the February
6, 1996, Board meeting;
IT IS FURTHER ORDERED that staff will DEFER the submission of
written testimony to the State Department of Industrial Relations
outlining the Board's reasons for opposing the pending changes to these
regulations until the February 6, 1996, Board meeting; and
IT IS FURTHER ORDERED that this matter is REFERRED to the County
Municipal Advisory Councils for adoption of a similar resolution in
opposition to the proposed changes to the prevailing wage rules and
regulations.
F 1
......
GOVERNOR'S OFFICE
January 11, 1996
CONTRA COSTA COUNTY
RECEIVED
JAN 1 61996 I
C
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OFFICE OF
COUNTY ADMINISTRATOR
TO: City Managers
County Administrators
The Department of Industrial Relations has provided additional information to be attached
to the proposed regulations mailed to you on January 10, 1996. Enclosed please find the
second half of the California's prevailing wage revised regulations.
If you have questions or comments,please contact John Duncan at the California
Department of Industrial Relations (415)972-8835.
As before,your comments,suggestions and/or support are welcome.
Sincerely,
Carol G. Whiteside
Director
Intergovernmental Affairs
Enclosure
GOVERNOR PETE_ WILSON • SACRAMENTO. CALIFORNIA 95814 • (916) 445-2841
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TITLE 8. DEPARTMENT OF INDUSTRIAL RELATIONS
NOTICE OF PROPOSED RULEMAKING
The Department of Industrial Relations ("DIR") proposes to adopt the proposed
regulations described below after considering all comments, objections or
recommendations regarding. the proposed action.
PROPOSED REGULATORY ACTION
The DIR proposes to adopt the amendments in Group 3, Articles 1 and 4 in Title 8 of
the California Code of Regulations (CCR). These articles and sections pertain to the
requirements for the payment of prevailing wages upon public . works.
PUBLIC HEARING
The DIR will hold a public hearing on the following dates and locations to receive
public comments on the proposed regulations: .
On February 20, 1996 at 9:00 a.m. at the Auditorium of the Public Utilities Commission
Building, 505 Van Ness Ave., San Francisco, CA; and
On February 26, 1996 at 10:00 a.m. at the Auditorium of the California State Building, 107
South Broadway, Los Angeles, CA
WRITTEN COMMENT PERIOD
Interested persons wishing to submit written comments relevant to the proposed
regulatory action may submit them to: Dorothy Vuksich, Chief, Division of Labor
Statistics and Research, P. O. Box 420603, San Francisco, CA 94142. All written comments
must be 'received no later than 5:00 p.m. on February 27, 1995.
AUTHORITY AND REFERENCE
Labor Code sections 1773.5 and 1777.1 authorize the Director of Industrial
Relations, or his designee, to adopt the proposed regulations to implement, interpret and
make specific Labor Code sections 1720 through 1780 and 1810 through 1861.
DISCLOSURES REGARDING THE PROPOSED ACTION
1. Mandate on Local Agencies and School Districts
In accordance with Government Code Section 11346.5(a)(5), DIR has determined that the
proposed regulatory changes will not impose a mandate on local agencies or school
districts. The. existing statutes and regulations mandate that prevailing wages be paid on
public works projects. The proposed amendments will not cause, on average, an increase
in the prevailing wage rates determined by DIR and required to be paid by contractors
for local agencies and school districts. Unions and other organizations who have filed
suit over these proposed changes and similar changes in the federal regulations have
not contended that these changes would have such an effect.
The prevailing wage is a minimum. wage that must be paid on public works projects.
While the proposed changes will result in lower rates in some instances,. there is no
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requirement that such lower rates be paid under any circumstances. Thus, the proposed
changes will not impose upon awarding bodies an obligation to require lower rates.
2. Cost or Savings to any state agency.
A. Costs are defined in State Administrative Manual 6050 as supplemental financing or
additional or redirected staff. DIR estimates that its own costs could increase by
approximately $1.2 million per year for additional wages surveys to be . done statewide, if
federal surveys are not adopted. DIR estimates that the proposed changes will not cause
any other state agencies to incur additional costs, because no additional burdens will be .
imposed.
B. Savings are defined in SAM as actual budget reductions (direct) and freeing .up of
staff or resources for reassignment (indirect). DIR estimates that there will be no
indirect savings by reassignment, as there will be no change in the administrative
burdens imposed upon agencies.
There will be opportunities for savings not necessarily required by the changes because
the changes will only affect the minimum wages required to be paid in certain
circumstances. An agency could enter into a project labor agreement to use only union
labor, or could have federal funding which brings with it a 'requirement to pay higher
Davis-Bacon rates. While state agencies will experience opportunities for savings in
construction costs, the extent of such potential savings is subject to many variables, and
is subject to debate by experts.
Few studies address all the variables-- such as the wage rates paid, and the productivity
associated with different rates-- at the same time, and those which do have reached no
consensus. As pointed out in a January 7, 1991 report from the California Legislative
Analyst Elizabeth G. Hill on the potential impact of changing the definition of
"prevailing gate" to a modified weighted average to Assembly Member Tom McClintock,
the legislative analyst states; "Unfortunately, reliable data for measuring the .effects of
these latter two factors (Labor Productivity and Nonlabor Construction Costs) are simply
not available. . It is primarily for this reason that economists have been unable to develop ,
meaningful quantitative estimates of the effects of prevailing wage laws." (Hill 1991, P. .
6) In this report Ms. Hill further indicates that despite general agreement that wage
rates under a modal definition of 'prevailing' are higher than rates under a mean
definition, considerable disagreement persists among economists about the net economic
costs of prevailing wage laws." (Hill 1991, p. 5)
Professor Steven G. Allen of North Carolina State University discussed the impact of the
modal rate within the broader context of the impact of federal prevailing wage
requirements on construction costs:
Davis-Bacon is certain to increase public construction
costs to some extent because it sets as the minimum wage
some measure of the central tendency of the wage
distribution. As a result, some public construction projects
will not be completed at minimum costs. Since separate
minimums exist for each occupation (and sometimes for
different categories of work within each occupation), the
impact of such constraint is a function of the degree of
variation in wages within such groupings and the position
of the minimum in the wage distribution. The distribution
tends tobe non-normal because in most cases all union
workers in an occupation receive the same rate. If a
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majority or a very small minority of workers are covered
by a collective bargaining agreement,. this presents no
problem • in defining the appropriate prevailing wage.
However, "if 30-50 percent receive union scale, it will be
adopted as the prevailing rate. In practice this means that
the maximum wage in the distribution may 'become the
minimum wage for public construction. If this is
frequently the case, the Davis-Bacon could have an
enormous impact on public construction costs because
union wages are 20-90 percent higher than non-union
labor.'
(Allen, 1983, JLE, 26:707, 709-710)
Even though exact estimates have been . lacking, there is broad agreement that changes
in wage rates are related to the degree of unionization, which is generally higher in
urban areas than in rural areas.
According to a Congressional Budget Office `study a change in the definition of
"prevailing rate" from a 30 percent to a 50 percent modified weighted average under the
Davis-Bacon Act would affect about one-third (33%) of all wage determinations reducing
the total wages on federal construction by one to two percent (1-2%) -- with the_ impact
concentrated in rural and small urban areas. (CBO, 1983) The cumulative reduction for
fiscal years 1984 - 1988 was estimated at $560 million dollars. (One survey for these
counties by DIR has indicated that the proposed changes in its definition of "prevailing"
would result in an overall 20% reduction in prevailing rates. (DLSR, 1990)
There is general agreement that a change from a pure modal rate to a weighted average
when there is no majority rate would result in a reduction in labor costs, although there
is disagreement as to the amount of the reduction. Redefining the Federal Davis-Bacon
prevailing rate from a 30% rate to a 50% modified weighted average was estimated to
result in substantial costs savings on federal and federally .assisted construction' of at
least $120 million in Fiscal Year 1982. (FR 1982, 104: 23644, 23648.)
During the federal review process, however, some commentors argued that government
estimates were too high. The construction unions, through the Building and
Construction Trades Department, estimated the cost savings at 45 million dollars per year.
Contractor Associations (that generally advocated a more drastic revision to the
methodology) argued that . cost savings ranged from no savings to $50 million dollars per
year. (FR 1982, 104: 23644, 23648.)
With the direction of change established as „toward lower wages in some labor markets,
nonetheless the degree of change, .and thus the opportunities for savings, can only be
addressed as a range. At the outside limit the range could not be greater than the 5%
drop in overall wages detected in a study, funded .by AFL-CIO unions, which investigated
the effects of total abolition of state prevailing wage laws. (Philips et al. 1995 p. 68) The
Congressional study also showed that though the total impact of the Davis-Bacon act on
federal construction is difficult to assess, the CBO estimates that it might raise costs by
approximately 3.7% -- equivalent to an increase in federal construction outlays of about
'. For citations, see the list of identified' documents which is an appendix to the ISOR. The
identification is with full, traditional citation form. The list incorporates, as well as cited
documents, the location, of public records, including reports, documentation, and other
materials, related to the proposed action. The agency officer makes available this
location on request; here it is provided to all recipients of the initial package.
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• $1 billion during FY 1982. (CBO, 1983, p. 22) As discussed' below, however, some of the data
for calculating this impact are 'limited, so the estimate should be regarded as uncertain.
"On the basis of the evidence available the CBO estimates that Davis-Bacon increased the
total costs of federal construction by 3.75, or just $1 billion in FY 1982. Estimates of the
three major cost factors-- wages, labor use and compliance costs were added together to
derive a total cost estimate. Of course, this estimate is too low to the extent that some costs
cannot be quantified and too high to the extent that offsetting factors cannot be
concluded..." (CBO, 1983, p. 29)
Effects will often be local. Within one locality, a survey measurement would have
resulted in a 20% change. (Vuksich, 1995 Savings Estimates).. A final analysis of the
disparity between federal determinations based on Collective Bargaining Agreements
(CBA's) and averages showed a lower figure of 8.8% for building construction and 12.7%
for residential construction, in areas" with modest non-union employment rates of 10%.
(Final regulatory and Impact and Regulatory Flexibility Analysis...N. d.)
Estimation is confined to ranges also because of continuing debates over the amount of
total construction costs which are represented by labor costs. Ranges assessed have
included 30% (Spry The History,. Costs and Effects of Ohio's Prevailing Wage Law, citing
,Bureau of Labor Statistics surveys .and others); 33%, Kentucky (Capital Construction and
Equipment. Purchase Oversight Committed, (1981). Although the division has in the past
used a figure of 22% as the proportion of labor to total construction (DLSR, 1995,
Percentage of Labor Costs), there are other estimates which show approximately one
third (1/3). In testimony on February 17, 1995 before the Senate on the repeal of the
Davis Bacon Act, Assistant Secretary of Labor for Employment Standards, Bernard E.
Anderson stated that Labor Costs are a "significant component (usually about one third)
of project costs (ESA, 1995)." . With 33% as the proportion of construction project costs
which represent labor costs, the task then becomes to estimate public construction costs.
Those have varied, with a figure of $6.5 billion in 1992 rising to $9.05 billion in 1994.
(CIRB 1994). The figures include both federal and state funded public works. After
subtracting $4.188 billion in federal and state matching monies (Vuksich, 1995 Savings
Estimates), we have 'total State monies to be used for 1994 estimates of $4.862 Billion.
Applying a conservative estimate of 22% as the proportion of labor costs to total
construction costs, and applying a 20% savings estimate from a change in the method for
determining the prevailing rate from surveys of the more rural areas, a savings of
approximately .$200 million dollars would be generated. However, it is expected that in
non-rural areas (where the degree of unionization is higher) the differential produced
by a methodology change may be as low as 0%, although more likely a minimum of 2%
-5%.
Instead of using .the conservative estimate of 22%, it is valid to use the 33% estimate for
the proportion of labor to total construction costs, along with a midpoint level of labor
cost savings at 10%." Ten percent would be based on construction savings extending over
both urban and rural areas. This produces a different savings estimate. (again, based on
1994 public construction) at approximately $160 million dollars. This rough estimate of
10% is selected in view of the declining unionization of construction overall, as well as
the increasing public construction of, for example, prisons, in rural areas. Based on a
rough estimate of the future size of the public sector construction market, the ranges of
$160 million to $200 million dollars are reasonable estimates based on recent and
projected construction activity.
3. Cost to any local agency or school district which must be reimbursed in accordance
with Government' Code Section 17561.
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DIR has determined that the proposed amendments would not impose a mandate on local
agencies or school" districts, and for this reason the estimated reimbursable- cost for such
a mandate is zero.
Under the Department of Finance instructions, mandates enacted within the time period
covered by section 18500 are addressed. There is no mandate because the proposed
amendments would not implement a new requirement or require a higher level of
service.
In addition, were a local body or school district to seek a legal requirement, the exception
to a duty to reimburse such requirements would most likely obtain. The Iikelihood that
local bodies or school districts seek this change is suggested by the public response to the
Department's 1988 fact finding. The majority (79%) of public entities responding then,
including local agencies and school districts, favored the change in methodology now
being considered.
4. Other non-discretionary costs or savings imposed upon local agencies:
There is an opportunity for savings for agencies awarding public works contracts. A
change in, the definition of prevailing rate is expected to reduce labor costs as
referenced above. The monitoring of the prevailing wage requirements would become
less burdensome. This could reduce both administrative and construction costs on public
works projects.
There are no non-discretionary . costs associated with the amended regulation. The new
regulation would not require local agencies to expend any additional resources.
5. Costs or Savings in federal "funding to the state
A. Costs to Federal Government
For the reasons set forth in 2 above as to the unlikelihood that this change will increase
costs, together' with the inapplicability of state public works laws to projects which are
solely federally funded, DIR estimates that there will be no additional costs to the federal
government.
B. Savings to Federal Government.
Federal savings are subject to several . contingencies, above and beyond those discussed
above as to savings to state agencies, local governments and school boards. Some
federally assisted state public works projects do not involve the contractors' simultaneous
compliance with state prevailing wage. laws. Where the state funding is a loan, the
project is not subject to state prevailing wage laws. Where a federal grant is one of those
specified housing grants as to which "federal law preempts state requirements for a
higher .wage level (FR 1988, 53:154; CFR Prts. 905, 941, 965 and 968) there will be no
savings. For 'federal funding of projects through block grants, the federal amount is
fixed, and there is no 'potential savings.
Only where the federal percentage of funds is not limited, and the federal
contribution is as a proportion of the total project cost, will there be savings, and
then only when any Davis-Bacon obligations which attach to all wages paid on the
project are at or below the state-required rate.
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6. There is no potential cost impact of the proposed regulation on private persons or
businesses affected, as considered during the regulatory development process. Potential
"cost impact" under Govt. Code section 11346.5(a) (9) is limited to costs that a private
person or business necessarily incur in reasonable compliance with the proposed
regulation.
Private persons do not comply with a regulation regarding the calculation of prevailing
wages, nor do businesses. Where an individual works on a job subject to rates calculated
under the proposed changes, there are no additional costs to complying with a rate
calculated in one manner rather than another.
Businesses likewise do not have compliance costs associated with a requirement to
calculate prevailing wages under one definition rather than another, because 'they only
need comply with the resulting rates. (Any effects of those possible rates are discussed
elsewhere in this notice.) The only .possible costs will be an expansion of the present
costs of filling out wage surveys, which may increase (if more are requested.) The cost
of filling out voluntary surveys approximates the cost of filling out the schedule A
federal tax form, for which the IRS has published a current range of just over an hour.
(Form 1040, Privacy and Paperwork Production Notice).
However, there is a very different meaning of "cost impact ...on private persons" as
understood by private persons who have written in response to the rulemaking on this
subject begun in. October, 1995. Although not required to be addressed in this Notice by
the terms of the statute, the Division. can respond, because it assessed the' potential for
adverse impact on individuals, and disclosure seems warranted by the level of interest.
Where individuals are working under Collective Bargaining Agreements, a drop of
the prevailing wage for that portion of .their work which .is public works below their
CBA rate occurs, only after other actors made a series of decisions, or a series of
factors. came into play. Those are that non=union contractors compete for this type
of public work; no single rate is being paid to a majority of the workers in that
classification and locality; the awarding party would have to be not a charter' city,
outside the Labor Code's - prevailing wage requirements when doing their own
projects; the awarding body (charter city or no) must have decided not to require a
project labor agreement; the awarding body must have decided against contractual
requirements for rates above the minimum set by the Department's determinations.
Finally, the signatory contractor for whom these individuals work may
competitively bid on a given public works project because the superior efficiency of
these private persons' offsets the contractually obligated wages higher than a
particular prevailing rate.
Of these contingencies, the one most likely to occur is that no single rate would be
paid to a majority of the workers, because the U.S. Department of Labor, Bureau of
Labor Statistics (BLS) has determined that in 1983, 40.5 percent of California
construction workers were unionized but in 1994, 24.2 percent of the construction
workers in California were unionized. This is a decline of approximately 40 percent
from 1983. However, that risk is concentrated in rural, and non-union areas, based
on investigations of Davis-Bacon effects of a similar change in the definition of
prevailing. Based on the results of a study (Final Regulatory Impact and Regulatory
Flexibility Analysis...at page 65) the DOL determined that in areas where a high
percentage of construction workers are unionized, typically urbanized areas, the
current rates in the Davis-Bacon determinations would be expected to prevail even
under the new methodology. However, in less unionized areas, typically rural
localities, the changes in the Davis-Bacon determinations under the new rule were
expected to be significant.
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Individuals working under CBA's may suffer the economic effect of a lower wage rate,
but nonetheless be protected from loss of employment on. public works, if other
contingencies occur. First, the parties to their' CBA may agree to a clause in their
collective bargaining agreement authorizing the payment of the prevailing wage rate
on a public works job when that rate is lower than the otherwise applicable bargained-
for rate. Over one third of CBA's currently used as the basis for general prevailing wage
rate determinations contain provisions for lowering their rates when prevailing wages
are lower than their regular rates. (DLSR, 1995, CBA provision) Second, such private
parties' unions and union employers together can use Job Targeting to concentrate the
economic power of union' contractors from jobs where there is no non-union
competition on those where there is such competition.
Private persons who do not work under CBAs, to the degree work shifts from those' who
do, .will gain jobs.
Where wage rates decline to those paid in the market, elasticity of demand should
produce more employment, if that economic phenomena applies to labor. It appears to
apply to labor. (Hamermesh, Ashenfelter & Layard 1986, HLE, 1). According to the most
severe critics of more radical measures, such as abolition of prevailing wages, those
measures would result in overall more employment for private individuals. (Philips et.,
1995).
The DIR has determined that the proposed regulations will have an effect on small
businesses. Small businesses will derive a benefit from the enforcement of the
regulation. The regulations written in plain English are available from the agency
contact person named in this notice.
7. The agency finds and declares there 'to be no significant adverse economic impact on
business, including the ability of California business to compete in other states.
Pursuant to Govt. Code §1.1346.5, the facts, evidence, documents, testimony or other
evidence upon which the agency relies to support this finding is in the. record. The
record is the rulemaking file, referred to below. Some of the following discussion is
cross-referenced to information also found under paragraph 8, which . addresses the
assessment required by subdivision (b) of Govt. Code §11346.3.
The significance of the impact of a change in the definition of prevailing on business is
measured against the size of the construction business. Public and private construction
in California amounts to $31 billion dollars of business (Vuksich, 1995 Savings Estimates).
The change affects the public sector. Federal and state public construction amounts to
approximately $9.05 billion; the states share of that is $4.8 billion. (Vuksich, 1995
Savings Estimates). Within that state share, some state contracting agencies are exempt,
or elect to set wage. rates over and above minima set by the state prevailing wage. In
addition other variations, also discussed above, occur between urban and rural areas,
unionized and non-union sectors. Ranges of possible amounts of savings, discussed in
paragraph 5, are between $160 million and $2.00 million, with the highest figure reported
at $340 million (Cline 1992). Even the largest of these is not a significant impact, adverse
or otherwise, on California construction.
Effects on business can be considered at a micro-level as well, :and the statute references
one subsection of the business community, defined as small business. (Govt. Code Section
11342(h)(1) and (a)1) subsections (ii) and (iii) exclude general construction, nine
million five hundred thousand dollars ($9,500,000) and special trades construction,
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$5,000,000 respectively.) The closest study of the effect on small business was the
examination of
the 1982 change by the U. S. Department of Labor (DOL) from the 30 percent rule to the 50
percent rule for determining the prevailing rate under the Federal Davis-Bacon Act, DOL
determined that small business would benefit from the changes and produce the greatest
cost savings. In this section, the DOL used the 1977 Census Bureau's Economic Census of
Construction which indicated that there were 53,665 construction establishments
employing fewer than 20 workers. They noted that. "... smaller contractors are more
likely 'to pay wages normally below Davis-Bacon rates, resulting in relatively larger costs
savings for small contractors from any lowering of the Davis-Bacon rates." (Final
Regulatory Impact ... at p. 67).
The proposal does not differentiate between . union and non-union sectors of the
business regulated. To the degree that there is a differential effect on union-
signatory business, as against non-union, the effects are contingent for the same
reasons that effects on private persons working under CBAs, discussed in
paragraph 6, are contingent. The effect where wage rates cause a shift to non-
union (FR 1982, 104:23644-51) is to shift contracts from one sector of the
construction business to another, not to diminish construction. To the degree that
changes such as those proposed favor small business, there is a correlation
between small size and non-union status in construction. The July 1983 CBO study,
notes "Though open shop contractors tend to be smaller than union contractors--
that is, firms employing union member only--their numbers seem to be growing
along with their share of the market. Of the largest 400 construction firms in
terms of volume, 24 percent were open shops in 1982, .compared with 13 percent in
1979 and 4 percent in 1969." (CBO, .1983) The study also noted that "Recent estimates
place the open shop share of contract construction at 60 percent. (BNA 1982: A-2 to
A-3)
For labor markets where wages decline to the average wage, one response of
California construction may be higher profits, which would be a positive
effect. Another, more likely effect as competition takes effect over time,
would be that the public agencies would get more infrastructure for the same
expenditure. More public infrastructure positively affects business
competitiveness in California, just as it positively effects private individuals.
8. Statement of Results of Assessment required by subdivision (b) of Section 11346.3.
Note: These results were, in relevant part, also a portion of the general assessment. of the
economic impact of the rulemaking on businesses. The bases for those other assessments
are available in the .,rulemaking file.
The assessment resulted in a conclusion that there would only be a
small and unquantifiable effect on the overall amount of the following:
(A) The creation or elimination of jobs within the State of California.
(B) The creation of new businesses or the elimination of existing
businesses within the State of California.
(C) The expansion of businesses currently doing business within the
State of California.
The effect on jobs (also discussed under paragraphs 6 and 7) is principally to affect the
allocation between union and non union jobs, and between the public works
opportunities for small business and other businesses, but not the creation or
elimination of jobs or construction businesses in the aggregate. No such effects were
reported from a similar change in prevailing wage methodology under Davis-Bacon, in
1982. The number of jobs involved in state-funded public works which will be affected
8 .
}
by a changed wage rate, is so small compared to the overall numbers of jobs, and
businesses, within California, that studies can not sort out that effect from all the others
affecting the larger ebb and flow of other economic effects.
While the effect on jobs and businesses is not quantifiable, the direction of the effects
was assessed.
In the locations and trades where wages are lowered toward a labor market average, in
some trades and in some areas, studies have suggested that the result is to have the same
work done with a larger number of lower paid workers, due to training effects on
productivity. In those cases, net jobs would increase .slightly.
In the locations and types of construction where wages are lowered, competition
eventually forces contractors to pass those savings back to public entities in the form of
lower construction bids and costs. Given governments' fiscal straits during hard
economic times, the monies returned should produce an expansion of the extent public
works per dollar, which in turn would tend to create new businesses, or expand
businesses, which then indirectly creates jobs.
The business- and jobs effects are within California, because the rule affects state public
works, whose sites are in California.
10. Statement of no significant effect on housing costs.
The Division states that the proposal will have no significant effect on housing costs, for
the following reason. Pursuant to Govt. Code §11346.5(a) (11), the agency will make
available, on request, as part of the rulemaking file the evaluation of the effect of the
proposed action on housing costs.
The lack of significant effect is based on the following major factors: The majority of
housing in the state is private, not a public works. The cost effect. on housing of public
works then is not separate from the effect of the cost of local public works, which are tax
supported, on any other economic activity--as public works costs contribute to higher
taxes, and some of those taxes are property taxes on housing, housing costs rise. This
indirect effect is controlled by the limitation on taxes under the constitution.
Of the housing which is public, rather than private, federally funded housing has
historically occupied a significant share. Some federally funded housing brings with it a
preemption of the enforcement of state prevailing rates, if higher. (FR 1988, 53:154; 24
CFR 'prts 905, 941, 964 and 968). Thus, if state public works rates are higher under the
present system, they nonetheless have no effect.
For the residuum of housing which is both public, and subject to state prevailing rates
permitted to be higher than Davis Bacon, or only state rates, information available point
in very different directions as to effect. On one hand, residential rates now determined
involve a significant input from surveys, and use of federal Davis-Bacon rates, which
argues for small effect in a change towards both. Tending to the opposite conclusion are
studies suggesting that prevailing wage requirements (as a whole) add significant
amounts to costs. Both points are discussed in the evaluation to be made available to
requesting parties.
CONSIDERATION OF ALTERNATIVES
In accordance with Government Code Section 11346.5, subdivision (a)(7), DIR must
determine that no alternative considered would be more effective in carrying out the
9
" purpose for which the action is proposed or would be as effective and less burdensome to
affected private persons than the proposed action.
The Division has considered definitions of "prevailing" set out as those of other states
(DLSR 1995, States that have prevailing wage laws) such as non-majority rates and, pure
averages. It .has tentatively rejected those as less compatible with the legal concerns
with majority rates which are reflected in the proposal.
The DIR invites interested persons to present statements or arguments with respect to
alternatives to the proposed regulations during the written comment period.
CONTACT PERSON
DIR has prepared an Initial :Statement of Reasons for each proposed action, and has
available, upon request, both the expressed terms of each proposed action in a
strikeout/underline format and the location of the rulemaking file containing all
the information upon which the proposals are based.
Requests for copies of the proposed text of the regulations, the initial statement of
reasons, questions concerning the proposed action or the hearings, and requests to
review the rulemaking file at DIR between 8:30 a.m. and 4:30 p.m. Monday through Friday
should be directed to:
Raida Kennedy, Division of Labor Statistics and Research, P. O. Box
420603, San Francisco, CA 94142 or at (415) 972-8623 by telephone.
AVAILABILITY OF STATEMENT OF REASONS AND TEXT OF PROPOSED REGULATIONS.
The DIR will have the entire rulemaking file available for inspection and copying
throughout the rulemaking process at its office,' please contact the Division of Labor
Statistics and Research at the phone number listed above if you wish to view the
rulemaking file. As of the date this notice is published in the Notice Register, the
rulemaking file consists of this notice, the proposed text of the regulations, the initial
statement of reasons and certain documents and estimates and analyses (listed in
Appendix A which are required to be made part of the record. Copies may be obtained by
contacting Raida Kennedy at the address or phone number listed above.
AVAILABILITY OF CHANGED OR MODIFIED TEXT
Following the end of the public comment period, or the hearing if' one is requested,
the DIR may adopt the proposed regulations substantially as described in this notice.
If modifications are made which are sufficiently related to the originally proposed
text, the modified .text-- with the changes clearly indicated-- shall be made available
to the public for at least 15 days prior to the date on which DIR adopts the
regulations. Requests for copies of any modified regulations should be addressed to
the agency's contact person identified in this notice. The DIR will accept written
comments of the modified regulations for 15. days after the date on which the
modified text are made available.
10
INFORMATIVE DIGEST/PLAIN ENGLISH OVERVIEW
1. Article 1. DEFINITIONS
Labor Code Sections 1720 et. es�c . and sections 16000 gI. sea. of the California Code of
Regulations specify the State's prevailing wage law requirements for public works
projects.
Existing regulations state definitions of terms commonly used by DIR, awarding bodies
and contractors, in the public works contracting process.
Section 16000. Definitions.
It is proposed to amend the •definition of "Prevailing Wage. Includes:" from the
definitions in this Article.
Labor Code Section 1773 requires the Director of Industrial Relations to determine the
general prevailing rate .of per diem wages and the general prevailing . rate for holiday
and overtime work in the locality in which the work is being performed for each craft,
classification or type of workman needed to execute a public works project. This
provision does not include or specify a methodology for determining the general
prevailing rate. The statute makes reference to several sources which the Director may
consider when determining the prevailing rate. These include the collective bargaining
agreements from the locality, the rates published for federal projects and other data
from labor organizations and employers or employer associations. This regulatory
definition sets forth that the prevailing wage rate is the "modal rate",. the single rate paid
to the greatest number of workers.
The effect of_ the proposed change will be to alter the basis for determining the general
prevailing rate from the modal rate concept to single rate if a majority of workers are
paid at one rate or to a weighted average of the rates paid if there is no majority. This
will make state methodology consistent with federal Davis-Bacon methodology.
The DIR has determined that the proposed regulations will have an effect on small
businesses. Small businesses will derive a benefit from the enforcement .of the
regulation. The regulations written in plain English are available from the agency
contact person named in this notice.
2. Article 4. WAGE DETERMINATIONS
Labor Code. Sections 1773 and existing regulations specify the procedures the Director
follows in making prevailing wage determinations.
Section 16200. General. Basis for Determining Prevailing Wage Rate.
Existing regulations specify as the basis for the Director's prevailing wage rate
determination: collective bargaining agreements; federal' rates; data collection; the wage
rate factors; and other information from interested parties.
Section 16200(b) Federal Rates.
This subsection is amended to add language, providing for the adoption of rates
determined for federal projects.
11
f f
The effect of the proposed change is to provide for the adoption of rates determined
for federal projects or where federal law preempts application of state prevailing
wage rates, as well as, those determined for specific projects funded by the U.S.
Department of Housing and Urban Development, as prevailing for state projects
without the need to conduct additional investigations.
i
THE DEPARTMENT OF INDUSTRIAL RELATIONS
Lloyd W. Aubry, Jr., Director
12
1
INITIAL STATEMENT OF REASONS
Title 8: Chapter 8, Group 3, Articles 1 and 4 Sections 16000 and 16204
of the Regulations of the Office of the Director Regarding Payment of
Prevailing Wages upon Public Works
Problems Addressed by Proposed Action
Existing regulations under Title 8,Group 3 regarding the payment of prevailing wages are repealed
and modified to address specific issues and concerns expressed by the regulated public and to
make the Department's regulations conform more closely with the Code of Federal Regulations.
The use of the modal rate as the basis for determining the prevailing rate has resulted in prevailing
wage determinations based on a very small number of workers employed in the work force. In
these cases,the wage determinations are not reflective of the rates paid in the locality (Allen, 1983
JLE 707-36). In addition,this methodology is inconsistent with that used for determining the
prevailing wage rate for federal projects.
Purpose of Proposed Action
The purpose of this action is to address the problems enumerated in the"Problems Addressed"
statement. Specifically,the definition of Prevailing Rate which provides the methodology for
determining the prevailing wage rate is amended to more accurately reflect the rates paid in the
labor market and make them more consistent with those determined for federal projects.
Historically, collectively bargained rates represented a'single rate for a specific classification of
worker. Currently more and more project and special reduced rates are being used in the collective
bargaining agreement context which result in fewer workers at any given rate. Union labor has
declined in construction in California faster over the last decade than the comparable national rate
to the point where only 25.4 % of construction workers in California were unionized in .1993. In
1994, 24.2% of construction workers in California were unionized This is based on figures
compiled by the Bureau of Labor Statistics. (BLS N.d. Employee wage and salary).
Currently 32 states (including the District of Columbia)have a prevailing wage law, 19 states do
not have prevailing wage statutes,9 never had these laws and 10 have either repealed or nullified
them in the courts. Only three of the 32 states utilize modal rate methodology (California,
Minnesota, and Wisconsin). The remaining 29 states use either the current Davis - Bacon
methodology, the previous Davis-Bacon methodology, adopt the federal rates, a weighted
average or leave the determination to the individual agency letting the contract. (DLSR 1995,
States that have Prevailing)
An informal investigation and analysis of the data collected from previous surveys indicates that a
change from the modal rate to a weighted average rate could result in up to a 20 percent reduction
in construction labor costs in some areas, as discussed in the Notice.
In addition to this informal review of wage survey data, the Division reviewed a number of studies
and articles concerning the effect of the Davis-Bacon Act and prevailing wage requirements on
public works construction costs,employment and the general economy, as well as,information
pertaining to the adopting of the proposed methodology and definition of"prevailing rate"by the
U.S.Department of Labor for Federal Davis-Bacon projects in 1982. The Division also reviewed
the testimony and studies relevant to the current proposal to repeal the Federal Davis-Bacon Act.
There appears to be no single definitive study which addresses the effect of the change in
definition of"prevailing" which is proposed here on an economy with a construction segment and
` y
the labor market like California's;where state prevailing wage rates are inoperative against the
background of a federal prevailing wage. For that reason, the Division did not rely on any single
technical,theoretical,or empirical studies,reports,or documents in proposing the adoption of
these amended regulations: While the Department did not rely upon any single document as a basis
for the proposed regulations,it did rely on some parts of them, and so they have been referenced
for portions of the facts, analyses, and interpretations discussed in this statement, the Notice, and
in the rulemaking file. See Appendix A .Those identified as in the public record are available to
the public from the custodian of those records. Those identified as in the rulemaking record are
available under the rules for such files.
Article 1. Definitions
Section 16000. Definitions.
The definitions under this section clarify the meaning of a number of terms in existing regulations
which are commonly used in public works contracting and would not otherwise be clear to the
affected public.
The terms defined in this section are commonly used in public works contracting and are defined in
the manner intended by the Department. This benefits the affected public as it clarifies the intent of
the terms used: The Department proposes to delete one and amend one of the existing definitions.
Prevailing Rate Includes: The amended definition clarifies for the regulated public the
methodology used by the Department to determine the prevailing wage rate. .
The Department has proposed changing the basis for determining the prevailing rate from a modal
rate concept to a rate paid a majority of workers engaged in a craft,classification or type of work
and,if no majority rate exists, to a weighted average of the rates paid. The amended definition will
be consistent with the methodology used by the U.S. Department of Labor for determining rates
for federal projects. The new definition will result in prevailing wage rates whose computation,
when there is no majority rate,takes account of all wage rates being paid in the locality.
The facts,evidence,documents, testimony,or other evidence upon.which the Division relies to
support a finding that the rulemaking will not have a significant adverse economic impact on
business are:
A)The references listed in Appendix A which are cited for facts and evidence in paragraphs 2B, 6
and 8 of the accompanying Notice.
B)The economic analyses in the rulemaking files.
C)The analyses used by the federal government,in finding that adjustment of the Davis-Bacon
measurement more correctly reflected the labor market(FR 1982, 104:23644-51; Final Regulatory
and Impact and Regulatory Flexibility Analysis...: CBO 1983; FR 1988,53:154; GAO 1979 HRD
79-18:194-275), which are the best predictors of an improved level of competition on public works
bidding, with beneficial effects on business opportunities as a whole.
The Department has determined that there were no alternatives considered which would be more
effective in carrying out the purpose of,or less burdensome to affected private,persons,than the
proposed regulation.
Article 4. Wage Determinations
16200(b) Federal Rates
The amended definition clarifies for the regulated public that the Director will consider rates
determined for federal public works projects as the basis for a prevailing wage determination. The
amended regulation provides for the adoption of federal rates on projects funded in whole or in part
out of federal funds where federal law preempts the application of state prevailing wage rates.
The amended regulation will make it easier to adopt rates determined for federal public works
projects when appropriate. This will reduce duplication of effort in the area of wage investigations
.and thereby reduce the burden upon the regulated public. In addition,existing federal provisions
mandate that not more than the federally determined rate may be paid on specific types of projects
funded or partially funded by the Federal Government. Existing state regulations require that not
less than the higher of the two rates(state or federal)be paid on dual funded projects. The
amended regulation will provide for the adoption of federally determined rates,whether higher or
lower,when federal law preempts the application of state prevailing wage rates.
The Department has determined that there were no alternatives considered which would be more
effective in carrying out the purpose of,or less burdensome to affected private persons,than the
proposed regulation.
1 1
INITIAL STATEMENT OF REASONS
Title 8: Chapter 8, Group 3, Articles 1 and 4 Sections 16000, 16200 and
16204
of the Regulations of the Office of the Director Regarding Payment of
Prevailing Wages upon Public Works
Problems Addressed by Proposed Action
Existing regulations under Title 8, Group 3 regarding the payment of prevailing
wages are repealed and modified to address specific issues and concerns expressed by
the regulated public and to make the Department's regulations conform more closely
with the Code of Federal Regulations.
The "predetermined changes" in wages or benefit payments occur only when the
determination is based on a collective bargaining agreement. Those predicted
changes are not printed in the determinations; instead, by putting a double asterisk
next to the relevant rates, and a footnote at the bottom or back of the determination,
parties who may be involved with the contract are directed to telephone the Division
of Labor Statistics and Research to determine the amount, and timing of the change.
In a twelve month period, a minimum of 1,000 calls and, more likely, 1,500 calls, are
received seeking this information. (DLSR 1995. Predetermined Wage Increase Calls)
Contractors who fail to call, or otherwise do not learn of the rate increase, create
liability upon the general contractor for . penalties and withholding to enforce the
prevailing wage obligations to pay those changes.
This law differs from the federal prevailing wage law, and when both laws apply to
the same project., because of mixed funding, the higher requirement must be paid.
Federal Davis - Bacon law has no "double asterisk" wage escalation provision. For
example, when the public works project is partially federally funded the use of
"predetermined" wage rates, not required under the federal regulations, can cause
confusion among the awarding body, the contractors and the enforcement
personnel. The use and inclusion of what has been referred to as the "double
asterisk" (predetermined wage rate) in the state prevailing wage system causes
confusion and inconsistencies in pay rates if contractors think there is .only one.
government prevailing wage rate applicable for the life of the project.
Because predetermined changes are not in effect when determinations issue, the
prediction that they will be, based on the collective bargaining agreement, may not
be true because the parties to the agreement retain the ability to change their
agreement, and this right recently has been more exercised than in the past:
Because the State's prevailing wage laws require the contractor awarded the job to
pay the rate in effect as of the date of contract award, including any which have
been "predetermined," such exercises of collective bargaining rights to rescind or
reduce the predetermined change results in the contractor and, ultimately, the
awarding body being required to pay a rate that is not paid by any other contractor
of purchaser of construction in the labor market. In other instances, the parties to
the collective bargaining agreement have diverted the wage increase from- the
taxable wage to fringe benefits. The Division knows of these changes only when
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notified by the union or employer association; if not notified, it continues to publish
an inaccurate rate.
The most recent attempt to ameliorate this difficulty administratively was to
promulgate a policy to notify parties when there was a recision, in time for the
awarding body, contractor, and the enforcement arm to take account of the recision.
(Stranberg, 1994, Enforcement of Corrected Predetermined Rates...) As the policy
explains, the prevailing wage permit this policy to work only if unions and
contractor associations send notifications in a timely fashion. Eight of the twenty-
five CAB changes submitted for modification of the prevailing wage to keep it
parallel to the rates actually being paid, between February 1994 and August -30, 1995
either came too late, or otherwise did not meet the criteria in the memorandum. Thus
no Modification Notice could be issued, and the policy proved. Thus, the policy
proved ineffective. (DLSR 1995, Double Asterisk Recissions and Changes....)
The problems created by contractors or awarding bodies too unfamiliar with state
prevailing wage peculiarities to phone; by predetermined changes as to which no
notice is sent; and, by the significant level of failure of the administrative policy
attempted as of February, 1994, each present substantial enforcement problems for
the Division of Labor Standards Enforcement, as well as, increasing the cost to the
taxpayer for public works projects.
Purpose of Proposed Action
The purpose of this action is to address the problems enumerated in the "Problems
Addressed" statement. Specifically, the proposed regulations will reduce confusion
over the appropriate prevailing rate of per diem wages to be paid to a particular
craft, classification or type of worker employed upon a public works project. The
regulated public has encountered difficulty in determining, monitoring and paying
the correct prevailing wage rate when the published prevailing wage determination
includes a predetermined wage rate change. The proposed changes will clarify the
prevailing wage rate for all classifications employed' on a public works site for the
life of the project.
There appears to be no single definitive study which addresses the effect of the
change in definition of "prevailing" which is proposed here on an economy with a
construction segment and the labor market like California's. For that reason, the
Department did not rely on any single technical, theoretical, or empirical study,
report, or document in proposing the adoption of these amended regulations. While
the Department did not rely upon any single document as a basis for the proposed
regulations, it did note and refer to parts of them, and so they have being referenced
for portions of the facts, analyses, and interpretations discussed in this statement, the
Notice, and in the rulemaking file. See Appendix B. Those identified as in the public
record are available to the public from the custodian of those records. Those
identified as in the rulemaking record are available under the rules for such files.
The Department proposes to repeal and amend the regulations requiring the
inclusion of future wage changes in the prevailing wage determinations. In
addition, those sections defining and clarifying the types of wage changes included
and the method by which the changes are referenced in the determinations will also
be amended or deleted. In addition to the effects noted above, this change will
probably reduce construction costs and . certainly reduce some of the administrative
burdens upon the regulated public, while still maintaining that workers employed on
a public works project receive the prevailing wage rate for the type of work in the
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locality at the time the project is put out for bids, in accordance with Labor Code
Section 1773. The Department proposes nonsubstantive grammatical changes to
several sections and subsections in existing regulations to increase the clarity of
these sections and to provide for the renumbering of affected sections.
The facts, evidence, documents, testimony, or other evidence upon which the
Department relies to support a finding that the rulemaking will not have a
significant adverse economic impact on business are:
A) The references listed in Appendix B which are cited for facts and evidence in
paragraphs 2B, 6 and 8 of the accompanying Notice.
B) The economic analyses in the rulemaking files.
C) The analyses used by the federal government, in finding that adjustment of the
Davis-Bacon measurement to more correctly reflect the labor market( FR 1982,
104:23644-51; [Doe]N.d, Final Regulatory and Impact and Regulatory Flexibility
Analysis...: CBO 1983; FR 1988, 53:154; GAO 1979 HRD 79-18:194-275), which the
Department believes to be the best predictor of an improved level of competition on
public works bidding, which in turn produces beneficial effects on business
opportunities as a whole.
Article 1. Definitions
Section 16000. Definitions.
The definitions under this section clarify the meaning of a number of terms in
existing regulations that are commonly used in public works contracting and would
not otherwise be clear to the affected public.
The terms defined in this section are commonly used in public works contracting and
are defined in the manner intended by the Department. This benefits the affected
public as it clarifies the intent of the terms used. The Department proposes to delete
one and amend one of the existing definitions.
Predetermined Changes This definition identified what types of changes to the wage
rate would be incorporated by reference into the general prevailing wage
determinations when a determination was based on a collective bargaining
agreement.
The Department has proposed repealing the regulations requiring the inclusion of
future wage rate changes in the prevailing wage determinations. The removal of
these regulations would make this definition irrelevant.
Article 4. Wage Determinations
The Department proposes the deletion of subsection 16200(a)(3)(B) from the
regulations. This subsection requires the inclusion of wage rate changes in the
prevailing wage determinations when a determination is based on a collective
bargaining agreement and the changes are definite and predetermined. The
regulated public has experienced difficulty in determining the appropriate rate for
specific projects. The future changes are not published, as specific requirements on
individual projects within the same locality may vary based on a project's
advertisement date under the existing system. This has caused confusion. In the
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l I+
past, predetermined changes have been rescinded or modified by the parties. This
has resulted in contractors and awarding bodies being required to pay rates which do
not prevail. In addition, this proposal will make the Department's regulations more
consistent with the Federal regulations governing public works.
The repeal of this provision will clarify for the regulated public the prevailing rate
of per diem wages to be paid for all workers employed on a public works project. It
will establish the rate of pay for all crafts and classifications of workers for the life
of the project. This is intended to reduce problems encountered by the regulated
public during all phases of the construction process including, but not limited to,
bidding, monitoring and enforcing the prevailing wage requirements. It will also
reduce the complexity of enforcement for the Division of Labor Standards
Enforcement and awarding bodies with approved labor compliance programs. There
will be cost savings to awarding bodies from both the construction and
administrative cost reduction on public works projects.
The Department has determined that no alternatives considered would be more
effective in carrying out the purpose of, or which would be less burdensome to
affected private persons, than the proposed regulation.
Subsection 16200 (a) (3) (C).
This subsection is proposed to be renumbered and amended as a result of the removal
of Subsection 16200 (a) (3) (B). This is a nonsubstantive technical change. The
removal of the requirement to include predetermined changes in the prevailing
wage determinations makes the reference to known predetermined changes excluded
from the determinations unnecessary. The inclusion of "prevailing wage" is a
grammatical change to add clarity to the regulation and is a nonsubstantive change.
Subsection 16200 (a) (3) (D)
This subsection is proposed to be renumbered as a result of the removal of Subsection
16200 (a) (3) (B). This is a nonsubstantive technical change.
Subsection 16200 (a) (3) (E) Holidays.
This subsection is proposed to be renumbered as a result of the removal of Subsection
16200 (a) (3) (B). This is a nonsubstantive technical change.
Subsection 16200 (a) (3) (F) Overtime.
This subsection is proposed to be renumbered as a result of the removal of Subsection
16200 (a) (3) (B). This is a nonsubstantive technical change.
Subsection 16200 (a) (3) (H) Rates for helpers.
This subsection is proposed to be renumbered as a result of the removal of Subsection
16200 (a) (3) (B). This is a nonsubstantive technical change.
Subsection 16200 (a) (3) (I) Credit Available For Actual Payment of Fringe Benefit
Costs up to the Prevailing Amount.
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This subsection is proposed to be renumbered as a result of the removal of Subsection
16200 (a) (3) (B). This is a nonsubstantive technical change.
Section 16204. Effective Date of Determination and of the Rates Within the
Determination. This regulation clarifies the effective date of determinations and the
prevailing wage requirements for a project. The determination of the prevailing
wage rate for each craft or- classification is made pursuant to Labor Code Section 1773.
This regulation establishes the individual determination effective for a specific
public works project.
Subsection (a)(3) is amended to clarify that subsequent determinations reflecting
new prevailing wage requirements are not applicable to projects for which the
notice to bidders has been published, unless the determination is modified pursuant
to the petition to review process in Labor Code Section 1773.4.
The petition to review process provides for the Director to issue a new determination
for a specific project if it is found that an existing determination does not prevail.
This determination is applicable to the petitioned project or projects and any
subsequent projects advertised for bids after the effective date of a new general
determination issued by the Director. This is intended to avoid confusion over which
prevailing wage determination is applicable to a particular project. This will reduce
uncertainty over the prevailing wage requirements for a specific project in all areas
of the public works process.
Subsection 16204 (b). Modification of Effective Date of Determination by Asterisks.
Meaning of single and double asterisks.
The Division proposes to amend this regulation. The Director is required to determine
the prevailing wage rate of per diem wages for each Craft, , classification or type of
workman needed to execute a public works contract, in accordance with Labor Code
Section 1773. Under the current regulations, when the basis of a prevailing wage
determination is a collective bargaining agreement, the Director is required to
incorporate into the prevailing wage determination any definite predetermined
changes to the wage rate contained in the agreement, such as wage increases in
subsequent years of the agreement. The predetermined changes are incorporated by
reference with a double asterisk notation after the expiration date on the
determination. The increases are not published as applicable rates vary depending
on the bid advertisement date of a project. The regulated public have experienced
difficulty and have expressed confusion over the implementation of this provision.
For example, the parties to the collective bargaining agreement may rescind the
wage increases already incorporated into the Director's determination, but the
existing regulation would require the now-rescinded wage increases to be paid. This
change will clarify the prevailing wage requirements on public works by providing
that the wage rate in existence at the time a determination is issued will remain
effective for the life of a project.
The purpose of the proposed action is to simplify the prevailing wage requirements
on public works projects. The amended regulation will clarify that the prevailing
wage rate of per diem wages are those contained in the determination in effect at the
project's bid advertisement date.
The Department did not rely upon any technical, theoretical, or empirical studies,
reports, or documents in proposing the adoption of this regulation.
-5-
The Department has determined that no alternatives considered would be more
effective in carrying out" the purpose of, or which would be less burdensome to
affected private persons, than the proposed regulation.
-6-
Appendix A
1. November 21, 1995 memorandum from Dorothy Vuksich to Lloyd W.Aubry entitled
Savings estimate and September 21, 1995 memo from DLSR staff to Dorothy Vuksich
and Maria Robbins regarding Cost of Private.Construction. (Vuksich 1995,Savings
estimates;DLSR 1995 Cost of Private . . . )
2. Percentage of Labor Costs as a Component of Project Value (22% document),
prepared by the Division of Labor Statistics and Research. (DLSR 1995,Percentage
of Labor Costs as a Component...)
3. Definition of Prevailing Rate,Methods and Summary paper,prepared by the Division
of Labor Statistics and Research,October 3, 1990. (DLSR 1990)
4. Federal Register, Vol. 47 no 104,Friday May 28, 1982, Rules and regulations,
23644-23651. (FR 1982, 47:104, 23644-51)
5. "The California Affordable Housing Cost Study: Initial Comparison of Market Rate
and Affordable Projects"prepared in January 1993 by Bay Area Economics/ARCH
Research for Local Initiative Support Corporation and the California Tax Credit
Allocation Committee and December 28, 1995 memo from DLSR staff member
regarding Significant effect on housing costs: (Bay Area Economics/ARCH
Research for Local Initiative Support Corporation and the California Tax Credit
Allocation Committee 1993; DLSR 1995 Significant effect on housing . . .)
6. Robert C. Cline paper"Redrafting Regulations for Prevailing Wage Rates for Public
Works Projects". (Cline 1992)
7. January 7, 1991 report from the California Legislative Analyst Elizabeth G.Hill to
Assembly Member Tom McClintock. (Hill 199 1)
8. U.S.Department of Labor Employment Standards Administration Labor Department
Official Testifies Before Senate Committee;Administration Opposes Repeal of Davis
Bacon Act, Fri, Feb.17, 1995. (ESA 1995)
9. Final Regulatory Impact and Regulatory Flexibility Analysis on the Davis-Bacon
Related Regulations ,obtainable from Adminr. Wage and Hour Div,U.S.DOL, 200
Constitution Ave N.W. Wash D.C. 20210 (Employment Standards Admin.,Final .
Regulatory and Impact and Regulatory Flexibility Analysis . . . N.d.)
10. Congressional Budget Office,July 1983 Study"Modifying the Davis-Bacon Act:
Implications for the Labor Market and Federal Budget. (CBO 1983)
11. Effect of the Davis-Bacon Acton Construction Costs in Non-Metropolitan Areas of
the United States, Martha Norby Fraundorf, John P. Farrell and Robert Mason,
Department of Economics, Oregon State University, Corvallis, January 1982.
(Fraundorf,Farrell, and Mason 1982)
12. The History, Costs and Effects of Ohio's Prevailing Wage Law,John Spry, pgs 33-
35. (Spry N.d. The History, Costs and Effects of Ohio's Prevailing Wage Law))
13. The Economic Impact of the Kentucky Prevailing Wage Law, Capital Construction
and Equipment Purchase Oversight Committee,October 1981. (Capital Construction
and Equipment Purchase Oversight Committee 198 1)
9
Page 2 of 2
Appendix A
14. Losing Ground: Lessons from the Repeal of Nine"Little Davis-Bacon"Acts,
February 1995,University of Utah. Peter Philips,Garth Mangum,Norm Waitzman,
and Anne Yeagle. (Philips et al. 1995)
15. Cracked Foundation: Repealing the Davis-Bacon Act,by Richard Vedder and Lowell
Gallaway, Center for the Study of American Business, Policy Study Number 127,
November 1995. (Center for the Study of American Business 1995:127)
16. States that Have Prevailing Wage Laws,prepared by the Division of Labor Statistics
and Research, November 15, 1995. (DLSR 1995,States that Have Prevailing Wage
Laws)
17. December 11, 1995 document"Agreements having special rates or provisions on public
works projects. (DLSR 1995, CBA provisions).
18. Supporting Material for Assembly Bill 138: Prevailing Wage Reform. Department of
Industrial Relations,Lloyd. W. Aubry, Jr.Director. (Aubry 1995:AB 138)
19. Robert Goldfarb and John Morrall,"The Davis-Bacon act: An Appraisal of
Recent Studies," Industrial and Labor Relations Review, (34): 1981, 191-206. (Goldfarb
and Morrall 1981,ILR, 34:191-206)
20. Steve Allen,Much Ado about the Davis-Bacon:, A Critical Review and
New Evidence," Journal of Law and Economics (26), 1983,707-736. (Allen, 1983,JLE,
26:707-36)
21. Martha Fraundorf, John Farrell, and Robert Mason, "The Effect of the
Davis-Bacon Act on Construction Costs in Rural Areas," Review of
Economics and Statistics, (66) 1984, 142-146. (Fraundorf,Farrell, and Mason 1984,
RES, 66:142-6)
22. GAO Report "The Davis-Bacon Act should be Repealed," Report HRD-79-18
April 27, 1979, pp. 194-275. (GAO 1979 HRD-79-18:194-275)
23. Federal Register,Vol. 53 No. 154 on August 10, 1988 rule changes 24 Code of Federal
Regulations Parts 905, 941, 965 and 968. (FR 1988, 53:154; 24 CFR Prts. 905, 941,
965, and 968)
24. Bureau of Labor Statistics, Current Population Survey(CPS) microdata files, Employed
wage and salary workers in the construction industry in California, by union affiliation,
1973 to 1980 and 1983 to 1994 (Table) (BLS N.d.Employed wage and salary workers in
the construction . . . )
25. Bureau of National Affairs,Daily Labor Report,December 3; 1982,pgs. A-2 to A-3,
(BNA ,1982:A-2 to A-3).
26. Dan Hamermesh, O. Ashenfelter and R.Layard (eds),Handbook of Labor Economics,
Vol. 1,North Holland , 1986, "The demand of Labor in the Long Run". (Hamermesh,
Ashenfelter and Layard 1986,HLE, 1)
27. Construction Industry Research Board, California Construction Review,December 8,
1994, Construction Summary,Residential/Nonresidential Building,Heavy Construction
and Construction Employment Tables. (CIRB 1994)
EXCERPT FROM CALIFORNIA CODE OF REGULATIONS, TITLE 8
GROUP 3. PAYMENT OF PREVAILING WAGES UPON
PUBLIC WORKS
Article 1. Definitions
16000. Definitions. The following terms are defined for general
use in these regulations within Group 3, Payment of Prevailing
Wages Upon Public Works and Group 4, Awarding Body Labor
Compliance Programs:
Prevailing Rate. Includes
(1) The basic hourly rate being paid to a majority of workers
engaged in the particular craft, classification or type of work within
the locality and in the nearest labor market area to the public work,'
if a majority of such workers is paid at a single rate; if t=ie is no
single rate being
paid ti�rity, then_the sin rate (modal rate)
being paid to the—greater- LOF—of workers is prevailing. if there
no lid^'lrvdal ratwn—an alternate rate will if a single wage rate is
not paid to a majority then the average of the wages paid. weighted
by the total employment in the craft, classification or type of worker,
is prevailing. If a single wage rate is not paid to a majority. the
weighted average wage may be established by considering the
payments made under appropriate collective bargaining agreements,
Fedea-1-rn� or rates paid to workers on federal public works jobs
or other data such as wage survey data, including the nearest labor
market area to the public work, or expanded survey as provided in
Article 4 of these regulations, or by_adopting federal rates which
have been obtained by procedures of similar accuracy to ones
provided under Article 4 of these regulations.
(2) Other employer payments as defined' in. Section 16000 of
these regulations and as are included as part of the total hourly wage
rate, only if a majority of workers engaged in the particular craft
classification or type of work are receiving such payments.
(A) If a majority of workers engaged in the particular craft,
classification or type of work are receiving the same employer
payments, then those paymentsrep vail.
(B) If there is no majority of workers engaged in the particular
craft, classification or type of work receiving the same employer
1
payments, then the weighted average of the employer payments is
or fofhi cprevailing; n � < + < i�_hourly" « n nn rn+n Q�Lu•
n
derived. in the event Lt ^« « n <o rate Q^et not inclu
any eemployer- payments, dh..en—thp Director- may establish.
1p-nvn�Taili ig
employer- payment rate by the same prersedwre e-1-1flined in
subseetion (1) above;
(C) When federal rates have been adopted as provided for in
subsection (l). by adopting,, federal employer payments which have
been obtained by procedures of similar. accuracy to ones provided
under Article 4 of these regulations.
(3) The rate for holiday or overtime work shall be those rates
specified in the collective bargaining agreement when the basic
hourly rate is based on a collective bargaining agreement rate. In the
event the basic hourly rate is not based on a collective bargaining
agreement, the holidays shall be the legal holidays established by
both Government Code Section 6700 and 5 U.S.C. Section 6103: a
holiday occurring on a Saturday or Sunday shall be recognized in
accordance with the provisions of 5 U.S.C. Section 6103(b). Overtime
n—
hours -af-- -included- withthe
prevailing
r nng—basic—hourly rate ^f'
sha'ir-w--pFevailing—and hours worked on a holiday shall be at the--,
rate provided in Labor Code Section 1815.
NOTE: Holidays, when the basic hourly rate is not based on a
collective bargaining agreement. shall be only the legal holidays
established and listed in both State and Federal codes referenced
above.
Authority Cited: Section 1773.5. Labor Code
Reference: Sections 1720 et. seq., Labor Code
Article 4. Wage Determinations
16200. General. Basis for Determining Prevailing Wage
Rate. The Director shall follow those procedures specified in
Sections 1773 and 1777.5 of the Labor Code and in these regulations
when making a prevailing wage determination.
(b) Federal. Rates, and Surveys. In reviewing rates
predetermined for federal public works, the Director -will
shall consider those rates published pursuant to the Davis-
Bacon Act. For purposes of establishing state prevailing_wage
rates, the Director may, in his or her discretion. adopt the
results of wage surveys conducted by the United States
J
2
1
Department of Labor in lieu of conducting separate state
surveys. Where federal law preempts application of higher
state prevailing wage rates to federally funded projects, the
federal rate is the state prevailing wage rate. Where the
federal department of Housing and Urban Development has
determined residential construction rates. that is the rate
predetermined for federal public works to which the Director
will refer under section 1773.
Authority Cited: Section 1773.5. Labor Code
Reference: Section 1773. Labor Code
. 3
Appendix B
1. December 21, 1995,Memorandum from DLSR staff with survey results showing a
percentage comparison table between determinations with single and double
asterisks and December 22, 1995 from DLSR staff to Dorothy Vuksich and Maria Robbins
regarding Predetermined Wage Increases call from 1112 95-1212195.(DLSR 1995,
Percentage comparison Table between determinations;DLSR 1995 Predetermined Wage
Increase calls . . . )
2. February 18, 1994, Memorandum from Robert Stranberg, Chief Deputy Director to
Victoria Bradshaw,Labor Commissioner,DLSE,and Maria Robbins, Deputy
Chief,DLSR regarding enforcement of corrected predetermined rates after modi-
fication of original predetermined (Stranberg 1994,Enforcement of Corrected
Predetermined Rates . . .)
3. March 22, 1995,Memorandum from the Department of Transportation,Legal
Division to Maria Robbins,Deputy Chief,DLSR containing a double asterisk
study, an escalated wage analysis, a comparison of State versus Federal wages in
construction costs and a Federal/State wage rate analysis. (CALTRANS 1995,
Double Asterisk Study)
4. Federal Register,Vol. no 104,Friday May 28, 1982, Rules and regulations, 23644-
23651. (FR 1982, 104: 23644-51)
5. Final Regulatory Impact and Regulatory Flexibility Analysis on the Davis-Bacon
Related Regulations ,obtainable from Adminr. Wage and Hour Div, U.S.DOL, 200
Constitution Ave N.W. Wash D.C. 20210 (Employment Standards Admin.,Final
Regulatory and Impact and Regulatory Flexibility Analysis . . . N.d.)
6. Congressional Budget Office,July 1983 Study"Modifying the Davis-Bacon Act:
Implications for the Labor Market and Federal Budget. (CBO 1983)
7. GAO Report "The Davis-Bacon Act should be Repealed,"Report HRD-79-18
April 27, 1979,pp. 194-275. (GAO 1979 HRD-79-18:194-275)
8. . Steve Allen,Much Ado about the Davis-Bacon: A Critical Review and New
Evidence,"Journal of Law and Economics (26), 1983, 707-736. (Allen, 1983,
JLE, 26:707-36)
9. January 7, 1991 report from the California Legislative Analyst Elizabeth G.Hill to
Assembly Member Tom McClintock. (Hill 199 1)
10. The Economic Impact of the Kentucky Prevailing Wage Law, Capital Construction
and Equipment Purchase Oversight Committee,October 1981. (Capital Construction
and Equipment Purchase Oversight Committee 198 1)
-7-
Page 2 of 2
Appendix B
11. The History, Costs and Effects of Ohio's Prevailing Wage Law, John Spry, pgs 33-
35. (Spry N.d. The History, Costs and Effects of Ohio's Prevailing Wage Law))
12. December 11, 1995, Memorandum from staff regarding CBA provisions for using
Government Rates: Preliminary Information. (DLSR 1995, CBA provisions t. . .)
13. Construction Industry Research Board,California Construction Review, December
8, 1994, Construction Summary,Residential/Nonresidential Building,Heavy
Construction and Construction Employment Tables. (CIRB 1994)
14. U.S.Department of Labor Employment Standards Administration Labor Department
Official Testifies Before Senate Committee;Administration Opposes Repeal of Davis
Bacon Act, Fri,Feb.17, 1995. (ESA 1995)
15. November 21, 1995 memorandum from Dorothy Vuksich to Lloyd W.Aubry entitled-
Savings
ntitledSavings estimate. (Vuksich 1995,Savings estimates)
16. Percentage of Labor Costs as a Component of Project Value(22% document),
prepared by the Division of Labor Statistics and Research. (DLSR 1995,Percentage"
of Labor Costs as a Component...)
. 17. Losing Ground: Lessons from the Repeal of Nine"Little Davis-Bacon"Acts,
February 1995,University of Utah. Peter Philips,Garth Mangum, Norm Waitzman,
and Anne Yeagle. (Philips et al. 1995)
18. Bureau of National Affairs,Daily Labor Report,December 3, 1982,pgs.A-2 to A-
3, . (BNA ,1982:A-2 to A-3).
19. Federal Register/Vol. 53, No. 154/Wednesday,August 10. 1988/Rules and
Regulations (F R 1988, 53:154)
20. "The California Affordable Housing Cost Study: Initial Comparison of Market Rate
and Affordable Projects"prepared in January 1993 by Bay Area Economics/ARCH
Research for Local Initiative Support Corporation and the California Tax Credit
Allocation Committee and December 28, 1995 memo from DLSR staff member
regarding Significant effect on housing costs: (Bay Area Economics/ARCH
Research for Local Initiative Support Corporation and the California Tax Credit
Allocation Committee 1993; DLSR 1995 Significant effect on housing . . .)
-8-
EXCERPT FROM CALIFORNIA CODE OF REGULATIONS,TITLE 8
GROUP 3. PAYMENT OF PREVAILING WAGES UPON
PUBLIC WORKS
Article 1. Definitions
16000. Definitions. The following terms are defined for general
use in these regulations within Group 3, Payment of Prevailing
Wages Upon Public Works and Group 4, Awarding Body Labor
Compliance Programs:
Predetermined Changes. Definite changes to the basio hGU14Y
wage Fate, over-time,,' holiday pay rates, andemployer paymnnto
which are known
and enumerated ;n the�plioab=e cozrvctmiy
�
b r/rn;t,;nn n- pmp nt at tion t; o e bid advertisement date
an
DAT�A2IiiIr�ZT�I"�TG a1rG2IL�lIQ �:iZ'i"IO—V "'lil L"TiTLZTTTi'1�'��r�
rich iefeieneed in the gennrnprevailingto ozf per-
fined ;,, Section
000 f these regulations. ■ o trnet..rn
fidefined in �r-a�trn�
fed tpay In to amount that .iron pFedntnrmiaed ;f_
a��--eb�gatecr-C�"' Z ®-azrr ,�i�, ^� p'nirfu��,7rc�srrcr7rrrrrco--iz
these changes
modified
;f;ed-�riof�th�ffeVtive da
't�
Prodowmined changes
which- aF®-r®frn iffdef -prior- to tnon
iF eff®6ii8
tint shall not inn a force
aTCG®'— T"TI not V G^"'Gril'V rGTiQ
Authority Cited: Section 1773.5. Labor Code
Reference: Sections 1720 et. seq.. Labor Code
Article 4. Wage Determinations
16200. General. Basis for Determining Prevailing Wage
Rate. The Director shall follow those procedures specified in
Sections 1773 and 1777.5 of the Labor Code and in these regulations
when making a prevailing wage determination.
(a) Collective Bargaining Agreements or Wage Surveys.
(1) Filing. of collective bargaining agreements.
(A) To enable the Director to ascertain and consider the
applicable wage rates established by collective
bargaining agreements when making prevailing wage
determinations, the representatives of any crafts, .
classifications, or types of workers needed to execute
1
any public works contracts shall file with the
Department of Industrial Relations fully executed
copies of all their collective bargaining agreements,
including any and all addenda which modify the
agreements, within 10 days of their execution and shall
be considered as the basis for a prevailing wage
determination whenever on file 30 days before the call
for bids on a project.
(3) Adoption of Collective Bargaining Agreements.
(A) If the Director determines pursuant to Section 1773
of the Labor Code that the rate established by a
collective bargaining agreement is the general
prevailing rate of per diem wages for each craft,
classification or type of worker and the Director adopts
such rate by referral, the Director will publish such
rate. Only those rates and employer payments
specifically enumerated in the definition of "general
prevailing rate of per diem wages" in Section 16000
shall be included in the rate adopted.
When such
rate
is adopt and in them
' � '�TiGII�GTGZ1-TCC[G'�lT-RCTQj7CVa�'TCla'Q irt-lill7-Vi.L.��i-iY17GTP-'[[IG
eelleetive bar-gaining agreement eentains definite an
predetermined--change s during which wi t 1.
affeet the rate adopted, the Dir-eeter shall ineerperat
SUGh r an¢es in the determination.
NOTE: A statement must be filed with the Director for any
adjustments made to a contract which are not contained in the
agreement currently on file with DLSR.
(C) When such rate is adopted, and in the case where
the collective bargaining agreement contains changes
during its term which will affect the rate adopted,
which are not definite—orpr aster-minim the changes
shall not be adopted. The prior determination will
remain in effect until a new determination is issued.
Any interested party may request that the Director
make a new determination when contract changes
become definite and determined by filing a statement
as set forth in Section 16200(a)(1) The statement must
summarize the amounts and effective dates of any
cost-.of-living adjustments, allocations of interim wage
increases to wages and employer payments, and other
relevant changes which will affect the prevailing_wage
rate adopted by the Director. The statement must be
2
signed by an officer or agent of the bargaining
representative and certified, under penalty of perjury,
as true- and correct to the best of his or her knowledge
and belief.
(D) LQ When such agreement is adopted as the basis of
the prevailing wage determination, all wage
classifications may be considered.
(B) CM Holidays. Holidays specifically named in the
collective bargaining agreement or determined by
wage surveys shall be included in the wage
determination. Overtime pay may be required as
provided in Section 16200 (a) (3) (F-) (El of these
regulations.
(F) Overtime. Overtime will be paid as indicated in
the wage determination.
EXCEPTION 1: If a workweek other than Monday
through Friday is a fixed business practice or is required
by the awarding body, no overtime payment is required
for the first eight hours on Saturday or Sunday.
EXCEPTION- 2: If the collective bargaining agreement
provides for Saturday and Sunday work at straight-time,
no overtime payment is required for the first eight hours
on Saturday or Sunday.
EXCEPTION 3: If the awarding body determines that
work cannot be performed during normal business hours
or work is necessary at off hours to avoid danger to life or
property, no overtime is required for the first eight hours
in any one calendar day, and 40 hours during any one
calendar week.
EXCEPTION 4: No overtime payment is required for less
than 40 hours in a standard work week or for less than
eight hours in a calendar workday unless specified in the
collective bargaining agreement used as the.-basis for the
prevailing wage determination.
(F) L Wage rates, training contributions and
apprenticeship contributions. Apprenticeship
rates will be determined by the Director of Industrial
.Relations using apprentice wage standards set forth in
the collective bargaining agreement and/or approved
by the California Apprenticeship Council. A contractor
or -subcontractor on a public works contract must pay
training fund contributions or apprenticeship
contributions in one of the following manners:
3
(1) into the appropriate craft apprenticeship program
in the area of the site of the public work; or
(2) if the trust fund is unable to accept such
contributions an equivalent amount shall be paid
to the California Apprenticeship Council (CAC)
administered by DAS.
(3) If neither of the above will accept the funds, cash
pay shall be as provided for in Section
16200(a)(3)(I) of these regulations.
0=1) CG . Rates for helpers. Rates for helpers will be
published when the information available to the
Director indicates that a practice of using such a
subclassification prevails in a particular area, such as
contained in a collective bargaining agreement, and
within the parameters of the applicable collective
bargaining agreement. In the absence of such
determination, the helper classification may not be
used as a substitute for a journeyman or apprentice.
This section does not exempt the contractor from the
1-5 apprentice-journeyman ratio requirements set
forth in Labor Code Section 1777.5.
Credit Available For Actual Payment of Fringe
Benefit Costs up to the Prevailing Amount. The
contractor obligated to pay the full prevailing rate of per
diem wages may take credit for amounts up to the total of
all fringe benefit amounts listed as prevailing in the
appropriate wage determination. This credit may be taken
only as to amounts which are actual payments under
Employer Payments Section 16000 (1) - (3). In the event the
total of Employer Payments by a contractor for the fringe
benefits listed as prevailing is less than the aggregate
amount set out as prevailing 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 nor shall any credit
decrease the amount of direct payment of hourly wages of
those amounts found to be prevailing for straight time or
overtime wages.
Authority Cited: Section 1773.5. Labor Code
Reference: Section 1773, Labor Code
4
t .
16204. Effective Dates of Determination and of Rates
Within Determination.
(a) Effective date of determination.
(1) All determinations issued will be effective ten (10) days
after issuance, provided that requests for copies, reprints
or reissuance of prior determinations shall not affect the
original effective date unless a new effective date is
reflected upon the determination (see subdivision (3)
below). Any call for bids put out on or after the effective
date of the determination must reflect that determination
unless the Director determines that subdivision (4) of this
section is applicable, after notification and request by an
awarding body.
(2) Determinations issued by the Director will show an issue
date and will ordinarily show an expiration date.
(3) All determinations will remain in effect until their
expiration date or until modified, corrected, rescinded or
superseded' by the Director. New determinations are not
applicable to contracts upon which the notice to bidders
has been published, unless the determination is issued
pursuant to Labor Code Section 1773.4.
(4) Determinations modified, corrected, rescinded or
superseded on the basis of information contained in copies
of collective bargaining agreements filed with the
Department shall not be effective as. to any project in
which a call for bids takes place less than 30 days after the
filing of the agreement.
NOTE: See Section 1773.1 of the Labor Code.
(5) It shall be the responsibility of the awarding body to
ensure that the correct determination is used.
(b) 141MoQdy.i€(plcati-on�—A of Effective Date—^of—n�■Determination
by
Asterisks.isles. i Meaning of single
and d^ub-Ile ,�fiLQfP lull S�•�y.
Prevailing 7�a \ n+ne`=�1�111w ill a will
�TIgle aster riski1� ,�TLOl
t iv-expiration dp�G��G11which
are in effect on the, date of .♦1.,
advertisement bids remain in el=ect for the life of th
project. Prevailing • age deter tions witl�do {alp .
asterisks (**) of the expiration rent indicate that basic
Ga�lc� t@i—crier-c+�rrucrvr�—c1uc��r�u��hO—vu�n,
hourly
o rlY w rate, overtime
and
/ ay pay rates, . n
employer- payments be paid for- Tor-4 performed a
f�ter-}} i
date have been pr-edeteFmined. if wo-F-k- is wo extend past thi
date, the new rate must be paid and should b aw
i-n,-contracts
entered into now. . The Evitr a$t9r—snvaYtdse_on
tGt
thePrevailingage Unit, DISR, OF the
awarding bbd
5
v
1
obtain predetermined w rte changes.
All det'pVminations TY3"a
do nothavedoubleasterisks (**) after- the expiration
remninin effeet for the life of the p*ojeet.
No Adoption of Predetermined Changes in Collective
Bargaining Agreements._ The rate fixed for each craft.
classification, -or type of worker as prevailing in a
determination shall remain in effect for the life of the
project. When the rate is based on a collective bargaining
agreement, it does not include predetermined changes in the
basic hourly wages, overtime, holiday pay rates, or amounts
of employer payments, even if known and enumerated in the
applicable collective bargaining agreement.
Authority Cited: Section 1773.5. Labor Code
Reference: Sections 1773, 1773.4 and 1773.6, Labor Code
6
O....ST9TA
�e
C�r)S1A C0UN
RECEIVED
GOVERNOR'S OFFICE
JAN '
January 5, 1996
OFFICE OF
COUNTY ADta INISTRATOR
To: City Managers
County Administrators
Enclosed for your information and use is a copy of the revised regulations which would
bring important components of California's prevailing wage regulations in line with federal
requirements and other states.
This revised version contains additional economic information which you may find useful
for your own analysis.
If you have questions or comments,please contact John Duncan at the California
Department of Industrial Relations (415)972-8835.
As before,your comments and support are welcome.
Sincerely,
C`
Carol G. Whiteside
Director
Intergovernmental Affairs
Enclosure
GOVERNOR PETE WILSON • SACRAMENTO, CALIFORNIA 95814 . (916) 445-2841
nj 13:.5 tA1 41.5 j-" 'j547 DIR _ADMIN
neie�i:�\ �-
Califwnia` Department of Industrial Relations, P.O. Box 420603, San Francisco, CA 94142
FOR INEVIEDIATE RELEASE CONTACT:
Friday,January 5, 1996 John Duncan
IR# 96-01 (415) 972-8835
Intemet: http://ww-w.dir.ca.gov Rick Rice
(714) 935-2812
Historic Reform of California's Prevailing Wage Rules Proceeds --
Public Hearings Slated for February In Los Angeles and San Francisco
SAN FRA 'CISCO -- The California Department of Industrial Relations
(DIR), proceeding with Governor Pete Wilson's order to amend the state's
prevailing % age requirements for the benefit of state and local taxpayers, has
scheduled public hearings to be held in Las Angeles and San Francisco during the
last two weeks of February.
"The two changes that we have proposed will bring important components of
California's prevailing wage regulations in line with federal requirements and those
of all but two of the other states which have prevailing wage laws" said DIR director
Lloyd W. Aubry, Jr. "Furthermore, our initial economic analyses conducted on
these issues indicate that the proposed changes have the potential for saving the
state and hard-pressed local governments and California taxpayers millions of
dollars in the state's infrastructure needs during coming years. "
In his Tanuary 1995 budget message, the Governor requested that DIR
-more-
U1 l5 '9I 13:7:. FA-1 41. 97 -554 Dlh AD?11N 4=1 113
2 96-01
review existing prevailing wage requirements for any needed regulatory or
legislative changes. In budget documents, the Goti'ernor noted, "The state must
reconsider the requiremem that bidders pay prevailing wage. Competition is about
getting the best available service at the lowest cost. Artificial barriers to competition,
including specified wage requirements, work against government efficiency and
eliminate otherwise qualified providers -- including minority- and women-owned
businesses -- from competing for state contracts."
The regulatory reforms to be discussed-at the public hearings include a new
method for calculating the prevailing wage and repeal of a rule that requires an
automatic increase in prevailing wageswhich are not in effect, but only scheduled in.
union contracts.
The proposed regulations change the method for determining the prevailing
wage from the modal approach to a modified Nveigllted average, which is the same
approach used by the federal government. In other words, the prevailing rate will
be the rate paid to a majority of the workers or, if no single rate is paid a majority,a
weighted average will be used. This has been the federal rule since the early 1980's.
The modal approach required that the most frequently occurring wage rate be
considered prevailing, taking no account of wages above and below that rate, even if
paid to many more workers. This method often resulted in the wage rate under
collective bargaining agreements qualifying as the prevailing wage, even if they
were significantly higher than the wages paid to a majority of workers in a locality.
Other than California, only Minnesota and Wisconsin use the modal method.
-more-
A 4 1-54
VIE AWN:\
3 96-01
Hearing: wl I
'11 he V,IwId on ihe cliaiige frorn flie modal to the
method on February 2(1, 1996 at 9:00 a.m. in the Auditorium of the Public Utilities
Conunission Buildin-, 505 Van Ne.,�s Avenue in San Fi:aricl_cu and on Fcbruaxy 26,
1996 at 10:00 a.m. at the Auditorium of the California State Building, 107 South
Broadway in Los -Angeles.
Public hearings concerning repeal of the rule requiring that prevailing wage
rates must, automatically increase under certain conditions will occur on February
22, 1996 at 9:00 a.m. in the Auditorium of
f the Public Utilities Commission Building,
503 Van Ness Avenue in ,;an Francisco and again on February 27 at 10:00 a.m. in the
Auditorium of the California State Building at 107 South Broadway in Los Angeles.
Anyone wishing to submit Nvritten comments relevant to the proposed
changes to prevailing wage regulation!, may submit them to: Dorothy Vuk-sich,
Chief, Di\,Lion of Labor Statistics and Research, P.O. Box 41206003, San Francisco, CA
94142. All written comments must be received no later than 5:00 p.m. on February
27, 1996. A cop), of the proposed regulations and related material may be obtained by
writing to the same address.