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<ns0:Id>20250AB__088996CHP</ns0:Id>
<ns0:VersionNum>96</ns0:VersionNum>
<ns0:History>
<ns0:Action>
<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2025-02-19</ns0:ActionDate>
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<ns0:Action>
<ns0:ActionText>AMENDED_SENATE</ns0:ActionText>
<ns0:ActionDate>2025-09-05</ns0:ActionDate>
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<ns0:ActionText>PASSED_ASSEMBLY</ns0:ActionText>
<ns0:ActionDate>2025-09-13</ns0:ActionDate>
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<ns0:Action>
<ns0:ActionText>PASSED_SENATE</ns0:ActionText>
<ns0:ActionDate>2025-09-10</ns0:ActionDate>
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<ns0:Action>
<ns0:ActionText>ENROLLED</ns0:ActionText>
<ns0:ActionDate>2025-09-16</ns0:ActionDate>
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<ns0:Action>
<ns0:ActionText>CHAPTERED</ns0:ActionText>
<ns0:ActionDate>2025-10-11</ns0:ActionDate>
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<ns0:Action>
<ns0:ActionText>APPROVED</ns0:ActionText>
<ns0:ActionDate>2025-10-11</ns0:ActionDate>
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<ns0:Action>
<ns0:ActionText>FILED</ns0:ActionText>
<ns0:ActionDate>2025-10-11</ns0:ActionDate>
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<ns0:LegislativeInfo>
<ns0:SessionYear>2025</ns0:SessionYear>
<ns0:SessionNum>0</ns0:SessionNum>
<ns0:MeasureType>AB</ns0:MeasureType>
<ns0:MeasureNum>889</ns0:MeasureNum>
<ns0:MeasureState>CHP</ns0:MeasureState>
<ns0:ChapterYear>2025</ns0:ChapterYear>
<ns0:ChapterType>CHP</ns0:ChapterType>
<ns0:ChapterSessionNum>0</ns0:ChapterSessionNum>
<ns0:ChapterNum>626</ns0:ChapterNum>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Assembly Members Hadwick, Chen, and Flora</ns0:AuthorText>
<ns0:AuthorText authorType="COAUTHOR_ORIGINATING">(Coauthor: Assembly Member Gallagher)</ns0:AuthorText>
<ns0:AuthorText authorType="COAUTHOR_OPPOSITE">(Coauthor: Senator Rubio)</ns0:AuthorText>
<ns0:Authors>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Hadwick</ns0:Name>
</ns0:Legislator>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Chen</ns0:Name>
</ns0:Legislator>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Flora</ns0:Name>
</ns0:Legislator>
<ns0:Legislator>
<ns0:Contribution>COAUTHOR</ns0:Contribution>
<ns0:House>ASSEMBLY</ns0:House>
<ns0:Name>Gallagher</ns0:Name>
</ns0:Legislator>
<ns0:Legislator>
<ns0:Contribution>COAUTHOR</ns0:Contribution>
<ns0:House>SENATE</ns0:House>
<ns0:Name>Rubio</ns0:Name>
</ns0:Legislator>
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<ns0:Title> An act to amend Section 1773.1 of the Labor Code, relating to prevailing wage. </ns0:Title>
<ns0:RelatingClause>prevailing wage</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Prevailing wage: per diem wages.</ns0:Subject>
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<ns0:DigestText>
<html:p>Existing law requires workers employed on public works to be paid not less than the general prevailing rate of per diem wages for work of a similar character in the locality that the public work is performed, as prescribed, unless an exception applies. Existing law requires the Director of the Department of Industrial Relations to determine the general prevailing rate of per diem wages for work of a similar character in the locality in which the public work is to be performed.</html:p>
<html:p>Under existing law, per diem wages include certain employer payments made pursuant to a collective bargaining agreement or for a program or committee established under the federal Labor Management Cooperation Act of 1978, as specified. Existing law provides that these payments are a credit against the obligation to pay the general prevailing rate of per diem wages.</html:p>
<html:p>Existing law requires the credit for employer payments to be computed on an annualized basis where the employer seeks credit for employer payments that are higher for public works projects than for private construction performed by the same employer, except under certain circumstances, including a determination by the director that annualization would not serve the purposes of the provisions relating to public works projects.</html:p>
<html:p>This bill would remove that exception and revoke annualization exemptions authorized by the director prior to January 1, 2026. The bill would authorize an employer to take full credit for the hourly amounts contributed to defined contribution pension plans that provide for both immediate participation and essentially immediate vesting even if the employer contributes at a lower rate or does not make
contributions to private construction. The bill would require the employer to prove that the credit for employer payments was calculated properly. The bill would authorize the Labor Commissioner to deny the employer credit for employment payments if the employer does not produce payment records.</html:p>
<html:p>The bill would make related findings and declarations.</html:p>
</ns0:DigestText>
<ns0:DigestKey>
<ns0:VoteRequired>MAJORITY</ns0:VoteRequired>
<ns0:Appropriation>NO</ns0:Appropriation>
<ns0:FiscalCommittee>YES</ns0:FiscalCommittee>
<ns0:LocalProgram>NO</ns0:LocalProgram>
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<ns0:ImmediateEffect>NO</ns0:ImmediateEffect>
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<ns0:Urgency>NO</ns0:Urgency>
<ns0:TaxLevy>NO</ns0:TaxLevy>
<ns0:Election>NO</ns0:Election>
<ns0:UsualCurrentExpenses>NO</ns0:UsualCurrentExpenses>
<ns0:BudgetBill>NO</ns0:BudgetBill>
<ns0:Prop25TrailerBill>NO</ns0:Prop25TrailerBill>
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</ns0:Description>
<ns0:Bill id="bill">
<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
<ns0:BillSection id="id_5F900137-7C15-41FF-8C2F-87F5E8484593">
<ns0:Num>SECTION 1.</ns0:Num>
<ns0:Content>
<html:p>The Legislature finds and declares the following:</html:p>
<html:p>
(a)
<html:span class="EnSpace"/>
Annualization is a principle adopted by the federal Department of Labor in enforcing the Davis-Bacon Act for crediting contributions made to fringe benefit plans based on effective rate of contributions for all hours worked during a year by an employee on both public (Davis-Bacon) and private projects.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
The annualization principle requires that when converting an employer’s fringe benefit contribution into an hourly amount, the amount of employer payments must be divided by the total number of hours worked in a year on all projects,
public and private, not just the number of hours worked during that year on public projects.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
The annualization rule prevents a contractor from using the prevailing wage work as the disproportionate or exclusive source of funding for benefits. Contractors are not required to provide benefits on a prevailing wage job nor are they required to make benefit payments on private jobs. However, if a contractor chooses to provide fringe benefits on prevailing wage jobs, it must undertake a proper annualization calculation.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
The calculation must be done on a yearly basis, the reason for the term annualization. Since plan benefit years vary, any consistent 12-month period may be used.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
The calculation must be
done separately for every individual worker as employer-provided benefits and hours worked may vary.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
It is the intent of this bill to update and clarify the state public works annualization process.
</html:p>
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</ns0:BillSection>
<ns0:BillSection id="id_23CF3E3E-8B84-4431-A1A0-739AAC7F4B78">
<ns0:Num>SEC. 2.</ns0:Num>
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Section 1773.1 of the
<ns0:DocName>Labor Code</ns0:DocName>
is amended to read:
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<ns0:Num>1773.1.</ns0:Num>
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<ns0:Content>
<html:p>
(a)
<html:span class="EnSpace"/>
Per diem wages, as the term is used in this chapter or in any other statute applicable to public works, includes employer payments for the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Health and welfare.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Pension.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Vacation.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Travel.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
Subsistence.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
Apprenticeship or other training programs authorized by Section 3093, to the extent that the cost of training is reasonably related to
the amount of the contributions.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
Worker protection and assistance programs or committees established under the federal Labor Management Cooperation Act of 1978 (29 U.S.C. Sec. 175a), to the extent that the activities of the programs or committees are directed to the monitoring and enforcement of laws related to public works.
</html:p>
<html:p>
(8)
<html:span class="EnSpace"/>
Industry advancement and collective bargaining agreements administrative fees, provided that these payments are made pursuant to a collective bargaining agreement to which the employer is obligated.
</html:p>
<html:p>
(9)
<html:span class="EnSpace"/>
Other purposes similar to those specified in paragraphs (1) to (5), inclusive; or other purposes similar to those specified in paragraphs (6) to (8), inclusive, if the payments are made pursuant
to a collective bargaining agreement to which the employer is obligated.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
Employer payments include all of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The rate of contribution irrevocably made by the employer to a trustee or third person pursuant to a plan, fund, or program.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The rate of actual costs to the employer reasonably anticipated in providing benefits to workers pursuant to an enforceable commitment to carry out a financially responsible plan or program communicated in writing to the workers affected.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Payments to the California Apprenticeship Council pursuant to Section 1777.5.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
Employer
payments are a credit against the obligation to pay the general prevailing rate of per diem wages. However, credit shall not be granted for benefits required to be provided by other state or federal law, for payments made to monitor and enforce laws related to public works if those payments are not made to a program or committee established under the federal Labor Management Cooperation Act of 1978 (29 U.S.C. Sec. 175a), or for payments for industry advancement and collective bargaining agreement administrative fees if those payments are not made pursuant to a collective bargaining agreement to which the employer is obligated. Credits for employer payments also shall not reduce the obligation to pay the hourly straight time or overtime wages found to be prevailing. However, an increased employer payment contribution that results in a lower hourly straight time or overtime wage shall not be considered a
violation of the applicable prevailing wage determination if all of the following conditions are met:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
The increased employer payment is made pursuant to criteria set forth in a collective bargaining agreement.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The basic hourly rate and increased employer payment are no less than the general prevailing rate of per diem wages and the general prevailing rate for holiday and overtime work in the director’s general prevailing wage determination.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The employer payment contribution is irrevocable unless made in error.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
An employer may take credit for an employer payment specified in subdivision (b), even if contributions are not made, or costs
are not paid, during the same pay period for which credit is taken, if the employer regularly makes the contributions, or regularly pays the costs, for the plan, fund, or program on no less than a quarterly basis.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
The credit for employer payments shall be computed on an annualized basis when the employer seeks credit for employer payments that are higher for public works projects than for private construction performed by the same employer, unless one or more of the following circumstances exist:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The employer has an enforceable obligation to make the higher rate of payments on future private construction performed by the employer.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The higher rate of payments is required by a project
labor agreement.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
The payments are made to the California Apprenticeship Council pursuant to Section 1777.5.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Paragraph (1) shall apply to all employer payments not made directly to the worker, regardless of whether any contributions are made or benefits are provided with respect to private construction, with the exception of contributions to defined contribution pension plans that provide for both immediate participation and essentially immediate vesting. An employer may take full credit for the hourly amounts contributed to those defined contribution pension plans for public works projects even if the employer contributes at a lower rate or does not make contributions
to private construction. For purposes of this section, “essentially immediate vesting” means the benefit vests within the first 500 hours worked.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The employer shall have the burden of demonstrating that the credit for employer payments was properly calculated pursuant to this subdivision. The employer shall, upon the request of the Labor Commissioner, produce records of employee hours and employer payments on private construction sufficient for the Labor Commissioner to verify that the credit for employer payments was properly calculated on an annualized basis pursuant to this subdivision. The Labor Commissioner may deny the employer credit for the employer payments if those records are not produced.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
Any exemptions to the annualization requirements of subdivision (e) issued by the director prior to January 1, 2026, are revoked.
</html:p>
<html:p>
(g)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
For the purpose of determining those per diem wages for contracts, the representative of any craft, classification, or type of worker needed to execute contracts shall file with the Department of Industrial Relations fully executed copies of the collective bargaining agreements for the particular craft, classification, or type of work involved. The collective bargaining agreements shall be filed after their execution and thereafter may be taken into consideration pursuant to Section 1773 whenever they are filed 30 days prior to the call for bids. If the collective bargaining agreement has not been formalized, a typescript of the final draft may be filed temporarily,
accompanied by a statement under penalty of perjury as to its effective date.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
When a copy of the collective bargaining agreement has previously been filed, fully executed copies of all modifications and extensions of the agreement that affect per diem wages or holidays shall be filed.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
The failure to comply with filing requirements of this subdivision shall not be grounds for setting aside a prevailing wage determination if the information taken into consideration is correct.
</html:p>
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