Tag Archive for California Department of Industrial Relations

How to Get Your Money if You Were a Construction Trades Worker Building the Hilton San Diego Bayfront Hotel

Did you work on the construction of the Hilton San Diego Bayfront Hotel? A June 17, 2013 press release issued by the California Department of Industrial Relations (DIR) – Labor Commissioner Collects Over $8 Million in Wages for Public Works Job at Hilton Hotel in San Diego – states that you may be owed money, but it did not explain how workers can collect their money.

As a result of my June 17, 2013 blog post about the State of California determining that the Hilton San Diego Bayfront Hotel was a public works project (Contractor Has to Shell Out $8 Million After Unions Win Argument That Hilton San Diego Bayfront Hotel Was a “Public Works” Project), I’m receiving communications from some of the 2000+ workers on that project who want to know how to get their payments. The California Division of Labor Standards Enforcement (Labor Commissioner’s office) gave me the following information about what to do if you are one of those 2000+ workers:

Send your contact information to this California Division of Labor Standards Enforcement district office address (presumably via a letter or postcard) explaining that you were a trades worker on the Hilton San Diego Bayfront Hotel:

California Division of Labor Standards Enforcement
7575 Metropolitan Drive, Room 210
San Diego, CA  92108

According to a representative in the DIR Legal Division, payments to former workers (in the form of checks) are supposed to be available 60-90 days after the June 17, 2013 official announcement. A third-party administrator is handling the processing of the payments.

The phone number for this San Diego district office is (619) 220-5451 and the web site for all California Division of Labor Standards Enforcement district offices is http://www.dir.ca.gov/dlse/districtOffices.htm.

As one attorney remarked to me, it’s unclear how the Department of Industrial Relations is going to determine exactly what is owed, because contractors would not necessarily have maintained certified payroll records for a project that was originally assumed to be a private construction job and not a public works job. For example, how will job classifications be determined for work done several years ago? Are any of the alleged 172 subcontractors on that project now out of business after several years of economic distress in the construction industry? Have employment records been saved? Will all workers be regarded as journeymen? How does the agency know there were 2,051 workers in total?

Contractor Has to Shell Out $8 Million After Unions Win Argument That Hilton San Diego Bayfront Hotel Was a “Public Works” Project

Are you one of the 2000+ construction trade workers who built the Hilton San Diego Bayfront Hotel? The California Division of Labor Standards Enforcement (Labor Commissioner’s office) gave me the following information about what to do:

Send your contact information to this California Division of Labor Standards Enforcement district office address (presumably via a letter or postcard) explaining that you were a trades worker on the Hilton San Diego Bayfront Hotel:

California Division of Labor Standards Enforcement
7575 Metropolitan Drive, Room 210
San Diego, CA 92108

According to a representative in the DIR Legal Division, payments to former workers (in the form of checks) are supposed to be available 60-90 days after the June 17, 2013 official announcement. A third-party administrator is handling the processing of the payments.

The phone number for this San Diego district office is (619) 220-5451.


This morning (June 17, 2013) the California Department of Industrial Relations (DIR) issued a press release declaring that the Labor Commissioner Collects Over $8 Million in Wages for Public Works Job at Hilton Hotel in San Diego. Surely unions will portray this settlement as a victory for exploited workers against greedy capitalists. Actually, it is a symptom of absurd, ambiguous, union-backed definitions of public works in state law.

Right off the bat, you notice something odd: the headline of the press release includes the clarification that the hotel was a “public works job.” How did a Hilton hotel become a public works job? You thought “public works jobs” were government projects such as schools, courthouses, libraries, and post offices.

You thought wrong. In 2001, Governor Gray Davis signed the union-backed Senate Bill 975 into law. It expanded the definition of a “public works” project to include just about any assistance of any financial value from a government:

For purposes of this section, “paid for in whole or in part out of public funds” means the payment of money or the equivalent of money by a state or political subdivision directly to or on behalf of the public works contractor, subcontractor, or developer, performance of construction work by the state or political subdivision in execution of the project, transfer of an asset of value for less than fair market price; fees, costs, rents, insurance or bond premiums, loans, interest rates, or other obligations that would normally be required in the execution of the contract, which are paid, reduced, charged at less than fair market value, waived or forgiven; money to be repaid on a contingent basis; or credits applied against repayment obligations.

In 2012, the Assembly Labor and Employment Committee rejected (on a party-line vote – Democrats opposed and Republicans in support) Assembly Bill 987, sponsored by Associated Builders and Contractors of California and introduced by Assemblywoman Shannon Grove (R-Bakersfield). This bill would have simplified a section of California Labor Code 1720 defining “public works” that two court decisions have described as “As statutes go, Section 1720 is hardly a triumph of the drafter’s art.” Unions like the law as written, and their triumph described below shows why they oppose any reasonable amendments to the law.

The United Port of San Diego owns property on the San Diego waterfront next to the San Diego Convention Center. In 2002, the Port issued a Request for Proposals for an entity to lease the land and build a hotel on the site. After choosing Hilton San Diego Convention Center, LLC to lease the land and build the hotel, the Port negotiated a lease that included a rent credit equal to 60 percent of the rent due each month for 11 years, not to exceed a total of $46.5 million. Subsequently the Port provided a “rent credit acceleration” for the hotel developer.

Hilton San Diego Convention Center, LLC chose Hensel Phelps, an investor in the project, as the general contractor. In April 2004, Hensel Phelps asked the Port if the hotel project was a public works job subject to the payment of state-mandated construction wage rates (so-called “prevailing wages”) to trade workers. In a memorandum dated May 12, 2004, the Port considered the available information and concluded that “the Hilton Hotel development is not considered a public works project subject to the payment of prevailing wages.” See that memo here: May 12, 2004 – Port Says Hilton San Diego Not Public Works.

After construction began in 2006, the Carpenters Contractors Cooperation Committee (CCCC) and Southern California Labor/Management Operating Engineers Contract Compliance Committee, two union-affiliated labor-management cooperation committees, referenced the rent credit and asked the California Department of Industrial Relations (DIR) to determine whether or not the Hilton Hotel was a public works project subject to state-mandated prevailing wage laws. The DIR began its own analysis of the project. See September 14, 2006 DIR Request to Port of San Diego for Hilton San Diego Documents.

In a response to the DIR dated October 2, 2007, Port of San Diego staff stated that it “believes that given the specific conditions of the RFP; challenges caused by extensive site remediation; the extent of public improvements; location; and size of the site, the transaction that was negotiated with Hilton represents the market for this particular site,” thus denying that the rent credit exceeded fair market value. The Port also warned that if the state decided to declare the hotel a public works project, it would discourage additional development of the area:

Port staff has received inquiries from other tenants, who are in the process of developing leaseholds, regarding this matter. We are concerned that attempts to treat private leaseholds as public projects will set off a chain reaction and have a chilling effect on redevelopment and reduce rental revenue to the Port, which will in turn negatively impact the Port’s ability to further its own capital projects.

Associated Builders and Contractors (ABC) of California (my former employer) and Associated General Contractors (AGC) of California submitted letters to the DIR arguing that the Hilton hotel was not a public works project. The Southern California Labor/Management Operating Engineers Contract Compliance Committee submitted a rebuttal to the ABC and AGC arguments.

November 30, 2007 San Diego Hilton Not a Public Works – ABC of CA Comment

December 7, 2007 San Diego Hilton Not a Public Works – AGC of CA Comment

December 19, 2007 San Diego Hilton is a Public Works – Operating Engineers Union Response

On April 1, 2008, the Director of the California Department of Industrial Relations determined that “the construction of the Hilton San Diego Convention Center Hotel and related development” is “a public work subject to prevailing wage requirements.” See April 1, 2008 DIR Director’s Decision – San Diego Hilton – Public Works.

Hensel Phelps filed an administrative appeal of the decision, and the DIR sought additional comments. See April 25, 2008 DIR Notice of Appeal – San Diego Hilton. Among the commenters were Associated Builders and Contractors of California: see May 8, 2008 San Diego Hilton Not a Public Works – Comments on Appeal – ABC of California.

On June 23, 2008, the DIR Director denied the appeal and affirmed his original decision that the Hilton San Diego Convention Center Hotel was a public work subject to prevailing wage requirements. Four days later, Hensel Phelps filed a lawsuit (Hensel Phelps Construction Company vs. California Department of Industrial Relations) in San Diego County Superior Court to overturn the DIR Director’s decision.

On February 25, 2010, a San Diego County Superior Court judge ruled that the Hilton San Diego Convention Center Hotel and related construction was not a “public work” subject to prevailing wage requirements. On April 23, 2010, the Director rescinded his earlier decision and ruled that the Hilton San Diego Convention was not a public works project. See April 23, 2010 DIR Rescinds Coverage Determination for San Diego Hilton.

But the Carpenters Contractors Cooperation Committee appealed the judgment to the Court of Appeal, Fourth Appellate District. On July 26, 2011, the court reversed the Superior Court decision and ruled that the rent credit was a payment of public funds, regardless of whether or not the rent reduction had a realizable monetary worth. See July 26, 2011 Hensel Phelps v San Diego Port District Appeals Court Decision – Prevailing Wage on Hilton San Diego Bayfront Hotel.

The State Building and Construction Trades Council of California had filed an amicus brief in the case. In its July 21, 2011 bulletin Court of Appeal Rules Prevailing Wage is Required on San Diego Hilton Project, it expressed outrage that “the Schwarzenegger Administration refused to file an appeal to defend the Department of Industrial Relations’ coverage decision” and that “the Port District and the Developer should be ashamed of themselves.”

The DIR press release explains what happened next:

Hensel Phelps Construction Company and the Labor Commissioner then negotiated the amount of wages due to the workers. All 2,051 workers will receive the full prevailing wages they earned on this project. They performed every aspect of construction, from foundation drilling to concrete pouring to steel erection to landscaping.

Hensel Phelps Construction Company will pay a third party administrator to process payments to the workers. The prime contractor will also pay an additional $400,000.00 to the Labor Commissioner as reimbursement for investigative costs.

Now we know that state-mandated construction wage rates cost an extra $8 million for a specific $350 million hotel project built in downtown San Diego in the mid-2000s. You can imagine the cost of prevailing wage for a project in a rural area during the recent economic downturn.

Is it surprising that the developers of the proposed Turtle Bay Sheraton Hotel in Redding suspended their plans earlier this year to build the hotel when unions managed (on their second try) to get the DIR to determine that hotel would be a “public works” project? See my February 15, 2013 post Unions Rise to Defense of “Prevailing Wage” Rates Jeopardizing Hotel Project in Redding and my January 31, 2013 post Redding Needs a Charter to End Nonsense Definition of Private Hotel as a “Public Works” Project.

Redding Needs a Charter to End Nonsense Definition of Private Hotel as a “Public Works” Project

UPDATE: My letter to the editor Kevin Dayton: Redding Needs a City Charter is in the February 4, 2013 Redding Record-Searchlight. Comments in response misrepresent “prevailing wage” as “living wage” just like at the Newport Beach City Council meeting on January 22, 2013. It’s possible that a political consultant has suggested using this strategy to take advantage of public ignorance about the calculation of “prevailing wages” and the resulting rates.


The City of Redding has been hit with a union-instigated obstacle to economic growth and job creation imposed by Senate Bill 975, enacted into law in 2001. This law (described below in greater detail) expanded the state’s definition of “public works” to include many private construction projects, thereby requiring companies working on these projects to pay state-mandated construction wage rates (so-called “prevailing wages”) instead of wages that reflect local market conditions.

On January 27, 2013, the California Department of Industrial Relations reversed an earlier decision from December 27, 2011 and determined that a proposed Sheraton hotel to be built in Redding by the Turtle Bay Exploration Park is a “public works” project after all.

Turtle Bay Exploration Center in Redding Loses to Unions

Turtle Bay Exploration Center in Redding Loses to Unions

This new decision was sought by three unions: the Plumbers & Pipefitters Union Local No. 228, the International Brotherhood of Electrical Workers (IBEW) Union Local No. 340, and the Sheet Metal Workers Union Local No. 162 (now absorbed into Sheet Metal Workers Union Local No. 104). As a result of a 22-page appeal of the original decision by the law firm of Adams Broadwell Joseph & Cardozo, the state has now decided that the privately-owned hotel would a public works project, equivalent to a courthouse, because the City of Redding waived rental payments on the land where the hotel will be built.

Now the proposed hotel project may be in jeopardy because the anticipated increased cost of construction may compromise the financial success of the hotel. A January 30, 2013 article in the Redding Record-Searchlight newspaper (Fate of Hotel at Turtle Bay in Limbo – Ruling: Park Must Pay Workers Prevailing Wage to build Sheraton Hotel) outlined the current status of the planned 130-room hotel:

…a park spokesman said he could not say when construction will start or whether the project is in jeopardy. Groundbreaking for the hotel had been scheduled this month.

“At this point we still hope to build the hotel, and operate a hotel there,” Turtle Bay’s Toby Osborn said Wednesday. “There is just a lot of uncertainty due to the ruling.”

…“Everybody woke up this morning and it was a different ballgame,” Osborn said. “Now we need to sit down and identify all the knowns and try to identify all the unknowns.”

But don’t worry, magnanimous union officials say they will help:

Andrew Meredith of the International Brotherhood of Electrical Workers Union Local 340 – one of the unions that appealed the ruling – said they were always confident the state would overturn its prevailing wage decision.

“That said, we are still committed to working with Turtle Bay to find a way to get this project off the ground,” Meredith said. “We know this is something that is important to the community.”

Turtle Bay met with the unions Wednesday to discuss how to move forward, including how the ruling will affect costs of building the hotel and restaurant.

What Is Senate Bill 975 and Why Is It an Obstacle to Private Construction Projects?

In 2001, Governor Gray Davis signed into law Senate Bill 975, a bill sponsored by the State Building and Construction Trades Council of California that expanded the definition of “public works” under California Labor Code Section 1720 to include many private projects. Existing law had defined “public works” as various types of construction “done under contract and paid for in whole or in part out of public funds.” Senate Bill 975 added a list of various kinds of non-monetary government assistance that qualified as public funds:

“paid for in whole or in part out of public funds” means the payment of money or the equivalent of money by a state or political subdivision directly to or on behalf of the public works contractor, subcontractor, or developer, performance of construction work by the state or political subdivision in execution of the project, transfer of an asset of value for less than fair market price; fees, costs, rents, insurance or bond premiums, loans, interest rates, or other obligations that would normally be required in the execution of the contract, which are paid, reduced, charged at less than fair market value, waived or forgiven; money to be repaid on a contingent basis; or credits applied against repayment obligations.

As business groups and Republican legislators predicted, the increased costs of construction labor resulting from prevailing wage requirements triggered by Senate Bill 975 scuttled numerous private commercial projects and private affordable housing projects, especially in the Central Valley, North State region (Redding and Chico), and other rural areas.

In these parts of the state, away from the coastal metropolitan cities, the disparity between state-mandated construction wage rates (so-called prevailing wages but actually based on union collective bargaining agreements) and actual median wages in the local market region is quite significant – as much as 30% or more, depending on the trade. See An Analysis of Market and Prevailing Wage Rates for the Construction Trades in California (2004) and The Effects of Prevailing Wage Requirements on the Cost of Low-Income Housing (2005).

Unions Derailed an Easy Local Solution to This Problem in 2011

Sundial Bridge in Redding, California

Sundial Bridge in Redding, California

There has been an ongoing grassroots effort in Redding to ask voters to enact a charter in order to circumvent costly and intrusive state meddling in local affairs. A charter would free the City of Redding from the mandates of the union-controlled California State Legislature, including state-mandated construction wage rates (so-called “prevailing wages”). See Are Charter Cities Taking Advantage of State-Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions?

In 2011, various local groups and individuals wanted voters to consider approving a robust charter, but union officials ultimately derailed the movement through a Charter City Exploratory Committee appointed by the city council.

The citizens of Redding need to enact a charter so their city has the same authority as the 121 California charter cities to establish its own prevailing wage policies. Why are the people of Redding acquiescing to the demands of unions and allowing the state legislature and a state agency to determine the fate of this hotel?

News Coverage of the Turtle Bay Hotel Prevailing Wage Saga:

Redding City Council Abandons Charter, Saves Prevailing Wage – State Building and Construction Trades Council web site – June 8, 2011

Cost of Turtle Bay Hotel Rests with Department of Industrial Relations; Prevailing Wage in Dispute – Redding Record-Searchlight – August 18, 2011

Turtle Bay Wins Ruling on Wages; Hotel Plan Not Subject to Prevailing Pay – Redding Record-Searchlight – December 28, 2011

Hotel construction cost estimates range from $13 million to $14.8 million. Total project costs are pegged at $21.2 million. Prevailing wage would have added roughly $1.25 million to that price tag, Osborn has said.

Hotel at Turtle Bay May Break Ground in JanuaryRedding Record-Searchlight – December 12, 2012

Unions Win Prevailing-Wage Case vs. Turtle BayRedding Record-Searchlight – January 29, 2013

Fate of Hotel at Turtle Bay in Limbo – Ruling: Park Must Pay Workers Prevailing Wage to build Sheraton Hotel – Redding Record-Searchlight – January 30, 2013

One More Costly Delay on Road to Turtle Bay Hotel – Redding Record-Searchlight (editorial) – January 30, 2013

Turtle Bay Nearing Compromise with Unions Over Hotel Construction – Redding Record-Searchlight – February 7, 2013

Finally, the Redding Employees Association of the Service Employees International Union (SEIU) is now suing the City of Redding for approving a contract with Vertex Business Solutions (Orcom Solutions), a provider of outsourced billing and customer care services to utilities, to take over billing and a call center from the city-owned Redding Electric Utility. It appears this contract would have been umambiguously legal if Redding operated as a charter city. See Union Sues Redding Over Outsourcing REU Call CenterRedding Record-Searchlight – January 18, 2013.

For First Time Ever, a Bill Sponsored by Associated Builders and Contractors of California Becomes California Law: A Compilation of Public Works Categories

The Northern California Chapter of Associated Builders and Contractors (ABC) just announced that Governor Jerry Brown signed into law Senate Bill 1370, introduced by Senator Tom Berryhill (R-Modesto/Fresno). Based on my experience in California since 1997 and my archived files back to the 1980s, I believe this is the first stand-alone legislative bill sponsored by Associated Builders and Contractors to become law in California.

Senate Bill 1370 requires the California Department of Industrial Relations to post on its web site a list of every California code section and the language of those sections that require construction contractors to pay state-mandated wage rates (so-called prevailing wages) to workers in the construction trades and in certain professional construction services. The list must be posted by June 1, 2013 and updated annually each February 1.

According to the last legislative analysis of Senate Bill 1370, provided to the full Senate on August 17, 2012, “The author and sponsor of the bill argue that there is no one specific location where all projects subject to state mandated prevailing wage are listed. Proponents believe this one-stop web-based listing would increase government transparency and improve compliance with both project owners and contractors alike.”

California law is peppered with numerous and inconsistent references outside of the Labor Code to projects for which contractors are required to pay state-mandated construction wage rates. There are even two prevailing wage requirements embedded in the text of the California Fish and Game Code (Sections 1350 and 1501.5).

With the enactment of Senate Bill 1370, contractors will be able to better comply with state requirements for construction wage rates. Workers will have a better chance of knowing when their employer needs to pay state-mandated wage rates, no matter how obscure the project. And the public will learn that state-mandated construction wage rates apply to much more than what is typically considered to be a public works project. Fish and Game.

San Diego Unified School District: the Only Local Government in California Evading Labor Compliance Fees to the California Department of Industrial Relations

The Ziggurat Exterior

I requested public records from the State Allocation Board‘s Office of Public School Construction (part of the California Department of General Services) to find out which educational districts in California were slipping out of the state’s new requirement to pay fees to the State Public Works Enforcement Fund, which supports the Compliance Monitoring Unit of the California Department of Industrial Relations.

The Ziggurat Interior

School districts (K-12), community college districts, and other local governments pay these fees to support the agency’s monitoring and enforcement of contractors complying with laws related to state-mandated construction wage rates (so-called “prevailing wages”).

Personnel at the state’s obscure but powerful Office of Public School Construction were prompt and efficient in getting me the information, and I was able to obtain the records in person at the Department of General Services offices in the beautiful Ziggurat in West Sacramento.

Only one school district is avoiding the fees: the San Diego Unified School District (SDUSD). It submitted four applications for state grants to the State Allocation Board via the Office of Public School Construction to fund “New Construction (Overcrowding Relief Grant)” on four projects: The Language Academy (low bid $10 million), Euclid Elementary School (low bid $7 million), Zamorano Elementary School (low bid $8.4 million), and Encanto Elementary School (low bid $5.7 million). See the four applications here.

Administrative offices of the San Diego Unified School District.

In the funding applications for each of those projects, the San Diego Unified School District checked off a box in Question 17 (“Prevailing Wage Monitoring and Enforcement Costs”) indicating that the monitoring requirement to be used by the school district will be “Collective bargaining agreement, pursuant to Labor Code Section 1771.3(b)(3).”

This means that the San Diego Unified School District won’t need to pay fees to the state for labor law compliance activity on these projects because contractors working on them have to sign a Project Labor Agreement with unions. (See the special SDUSD “Project Stabilization Agreement” web page here for details.) In other words, the state is exempting the San Diego Unified School District from paying mandatory labor compliance fees because the school board requires contractors to sign a union agreement!

Under state law (Assembly Bill 436) and California Code of Regulations Title 8, Section 16452, the fee assessed by the Department of Industrial Relations cannot exceed one-quarter of one percent of the total amount of the total project construction costs. The State Allocation Board includes the costs of these fees in the funds it distributes to school districts.

The total cost of these four San Diego Unified School District projects is $31.1 million, meaning the school district was able to evade costs of $777,500 in fees to the California Department of Industrial Relations as a result of the school board requiring contractors to sign a Project Labor Agreement with unions.

Unions Have Promoted Complex Labor Compliance Schemes in California for Twenty Years

Since the early 1990s, construction trade unions have lobbied the California State Legislature to implement various schemes meant to supplement the California Division of Labor Standards Enforcement (headed by the Labor Commissioner) in its monitoring and enforcement of construction contractor compliance with California’s laws related to state-mandated construction wage rates (“prevailing wages”) on public works projects.

Basically, union leaders and lobbyists imposed and expanded complicated, convoluted, burdensome wage rate mandates on public works contractors for each trade in various geographical regions (based on the jurisdictions of unions as defined in collective bargaining agreements). Then they complained when the state bureaucracy could not actively scrutinize all of their non-union competitors for possible violations of those laws.

For example, as cited in the committee bill analyses for Senate Bill 588 (2001), which allowed union-affiliated labor-management cooperation committees to obtain addresses and (initially) names of workers on certified payroll records, unions argued that “Because DLSE has only 20 field investigators and 6 auditors in the public works unit, that agency cannot adequately enforce the law on more than 22,000 public works projects each year.”

Reflecting the political priorities of unions during the administrative of Governor Gray Davis (1999-2003), the University of California Labor Program – flush with taxpayer funding starting in 2000 – produced a report about the history and status of the state’s labor law enforcement agencies. Even while continually pushing for new labor laws, union officials and lobbyists called for more state funding for labor law enforcement, perhaps as part of the plot outlined in the guidebook first widely circulated in the early 2000s entitled Using the California Labor Laws Offensively: Organizing Through Enforcement of State Employment Laws.

Unions Exempted Their Construction Monopolies Under Project Labor Agreements from Labor Compliance Fees with Assembly Bill 436

The latest union-backed labor compliance scheme was enacted in 2011, after the California State Legislature gutted and amended Assembly Bill 436 on August 30, 2011 and turned it into a bill establishing new guidelines for local governments building projects using funding from four statewide bond measures. Here is a list of the four state bond measures covered by this law:

  1. The $13.05 billion Kindergarten-University Public Education Facilities Bond Act of 2002 (Proposition 47, approved by 59% of voters in November 2002).
  2. The $12.3 billion Kindergarten-University Public Education Facilities Bond Act of 2004 (Proposition 55, approved by 50.9% of voters in March 2004).
  3. The $3.34 billion Water Security, Clean Drinking Water, Coastal and Beach Protection Act of 2002 (Proposition 50, approved by 55% of voters in November 2002 – note, don’t confuse this proposition with the $2.6 billion Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Act of 2002 – Proposition 40 – on the statewide ballot in March 2002).
  4. The $9.95 billion Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century (Proposition 1A, approved by 54% of voters in November 2008).

AB 436 requires school districts, community college districts, water districts, the California High Speed Rail Authority, and the now-disbanded San Diego Model School Development Agency to pay a fee to the California Department of Industrial Relations, in an amount “sufficient to support the department’s costs in ensuring compliance with and enforcing prevailing wage requirements” as well as “labor compliance enforcement” on projects funded by the four state bond measures listed above.

The bill included a couple of exceptions under which these local governments do not have to pay a fee to the state for labor law monitoring and enforcement. One exception applies to local governments that already established in-house labor compliance programs under old laws that the state enacted in 2002 (but subsequently repealed) – a technical matter.

But there was also an exception based on politics that earned the criticism of business associations and various newspaper editorial boards. Assembly Bill 436 was peppered with this provision for every kind of local government: “if it enters into a collective bargaining agreement that binds all of the contractors performing work on the project and that includes a mechanism for resolving disputes about the payment of wages.”

A “collective bargaining agreement that binds all of the contractors performing work on the project” is a Project Labor Agreement.

Assembly Bill 436 was authored by Assemblyman Jose Solorio (D-Anaheim) and supported by the State Building and Construction Trades Council of California.

A Project Labor Agreement Doesn’t Ensure Contractors Are Complying with Labor Laws

I’ve heard union officials say at local government meetings over the years that there would be no need for the government to monitor contractors for labor law compliance if the government required all of its contractors to sign Project Labor Agreements (PLAs) with unions. Allegedly, unions check the paperwork and certified payroll records of their signatory contractors to make sure those companies aren’t violating the law.

Associated Builders and Contractors – California Cooperation Committee (ABC-CCC) investigated contractor labor law compliance for projects at the City of Milpitas and the Los Angeles Unified School District on which contractors were required to sign Project Labor Agreements with unions. ABC-CCC found numerous violations and disproved this contention. In fact, the discovery suggested that having a Project Labor Agreement (ironically) encourages labor law violations because chances are lower than people will be snooping around looking for them.

Despite these cases, the California State Legislature passed AB 436 to ensure that school districts that require contractors to sign a Project Labor Agreement with unions are rewarded for reducing the number of bidders and participating subcontractors (i.e. cutting competition) and raising costs of behalf of construction unions.

Did the San Diego Unified School District Operate a Flawed Labor Compliance Program?

A study commissioned by the San Diego Unified School District and released by Rea & Parker Research in November 2011 about the performance of the district’s Project Labor Agreement reports “There has been an increase in reporting violations and deficiencies pertaining to labor compliance since the PSA was adopted.” Without evidence, the report goes on to contend that “the increase is due to increased attention to worker payroll and benefits under the PSA than before…” It also suggests that “It is known that PSA projects grant access to union representatives and that deficiencies may be due to increased attention to labor issues, and it may be that this increased attention may have resulting (sic) in increased protection of the wages and benefits of workers than may have existed prior to the PSA.”

Well, the unions will certainly cite this sentence as (unsubstantiated) “proof” that Project Labor Agreements provide sufficient monitoring and enforcement of contractor compliance with laws concerning state-mandated construction wage rates. But how did Rea & Parker isolate the Project Labor Agreement as a cause of the increase in discovered violations? There is at least one additional variable Rea & Parker Research should have considered: the operations of the twelve-year old San Diego Unified School District’s in-house labor compliance program.

The California Department of Industrial Relations has allowed the San Diego Unified School District to operate its own in-house labor compliance program under the strict criteria of California Labor Code 1771.5(b) since it first approved the program on September 14, 2000. When the school district sought permanent approval for its own labor compliance program a year later, it claimed that the program was “successfully operated since September 14, 2000” and provided documentation to the Department of Industrial Relations that “demonstrates SDUSD’s ability to monitor and enforce Public Works Prevailing Wage law consistent with CCR §16434 and Labor Code §1771.5.”

Was the San Diego Unified School District labor compliance program failing to fulfill its claims of successful operation, and if so, should the California Department of Industrial Relations retroactively revoke the program’s approval for the nine years before the school district implemented the Project Labor Agreement for the first project in the fall of 2009?

This is a serious matter that has implications for school district finances and for the paychecks of construction trade employees of many contractors that worked for the school district over the past twelve years. The standard project cost threshold for state-mandated construction wage rates is $1000. But local governments operating labor compliance programs approved under California Labor Code Section 1771.5 are qualified to set a higher project cost threshold of $25,000 for construction work and $15,000 for alteration, demolition, repair, or maintenance work.

For example, according to this report, in 2009-10 the San Diego Unified School District was able to exempt 114 contracts worth a total of $11,583,770.80 from state-mandated construction wage rates. In 2010-11, the San Diego Unified School District was able to exempt 258 contracts worth $61,822,251.08 from state-mandated construction wage rates, as reported here.

I expect there will be much more extensive research into the labor compliance program at San Diego Unified School District, now that the school board has placed a $2.8 billion bond measure on the November 6, 2012 ballot and passed a resolution to lock that taxpayer-funded work under a union Project Labor Agreement.