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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.