Senate Bill 776: Victory for Construction Workers; Defeat for ABC

Starting January 1, 2014, contractors who cheat their workers by paying less than the law requires on public works construction projects will find that a little harder thanks to Senate Bill (“SB”) 776 (Corbett).  SB 776 amends Labor Code section 1773.1 to prevent construction contractors from getting credit toward their fringe benefit obligations, i.e. contributions, under the prevailing wage law when they put money into sham labor compliance programs instead of putting the money on the workers’ paychecks.

According to the author's office, this bill will protect the wages and fringe benefits of workers on public works projects by clarifying that fringe benefits must be bona fide in order for an employer to receive credit when the Labor Commissioner or the Courts enforce the law.  Increasingly, contractors performing prevailing wage projects claimed credit against their obligation to pay prevailing wages for payments to employer-only "contract compliance committees.”  These employers asserted that such payments meet the definition of fringe benefits under Labor Code section 1773.1.  And because of the prior language in Section 1773.1, some of these contractors were successful in their claims.  Such anti-union contractors will no longer be allowed to exploit this loophole and deduct money from workers’ wages to fund sham committees to “monitor and enforce” worker protection laws.  SB 776 stops this dishonest practice by clarifying that employer payments qualify as a fringe benefit and meet the prevailing wage requirement only if they are made to a joint labor management program or committee established under the federal Labor Management Cooperation Act of 1978.

SB 776 was vehemently opposed by the Associated Builders and Contractors (ABC) who defended their sham programs by vigorously but unsuccessfully opposing the bill. Click here for the full text of the bill.

For more information regarding SB 776 and other public works compliance matters, contact your labor law counsel.

By Patty Gates | October 21, 2013

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