A Quick Guide to Prevailing Wages in California

23 Oct 2018

Electricians, mechanics, plumbers, pavers, and others laborers working in the construction industry are constantly inundated with complex federal and state regulations. Because of their workload, they are often so consumed on a daily basis that they do not bother to understand their own labor rights. Most know for example that getting prevailing wages in California typically means fairer pay, but know little else about their employers’ duties. Questions may arise such as: what exactly are these prevailing wages? When are they required? Am I entitled to overtime and meal periods? What happens if my employer does not pay me correctly? By the time you finish reading this article, you will have answers to these questions and more.

Pursuant to California Labor Code sections 1723 and 1771, contractors who are awarded public work projects of more than $1,000 must pay all workers (including laborers, and mechanics) on those projects “not less than the general prevailing rate of per diem wages for work of a similar character in the locality in which the public work is performed.” The Department of Industrial Relations (“DIR”) defines prevailing rate as “the basic hourly rate paid on public works projects to a majority of workers engaged in a particular craft, classification or type of work within the locality and in the nearest labor market area (if a majority of such workers are paid at a single rate). If there is no single rate paid to a majority, then the single or modal rate being paid to the greater number of workers is prevailing.”

What this means in more simple terms is that the state of California has predetermined a fixed hourly rate (“prevailing rate”) for workers employed on public works projects engaged depending on their particular craft and the location of the work they perform. The idea is that because these projects are publicly funded it is imperative that the contractors that have been awarded these project pay their workers a fair wage rather than stiff them and reap unreasonable profits on the backs of taxpayers. As a result, all competitors bidding on a particular public works contract must be paying their workers the same hourly wage rate. All residential and commercial construction projects paid entirely or partially out of public funds must also be bid and paid with prevailing wages in mind.

Labor Code section 1772 states that any worker employed “by contractors or subcontractors in the execution of any contract for public work” is deemed to be employed on a public works project. In Lusardi Constr. Co. v Aubry (1992) 1 C4th 976, 987, the California Supreme Court held that it is irrelevant that a particular worker does not have a contract with his employer to pay him/her prevailing wages. The prevailing wage rate applies so long as the worker is employed on a public works job.

Guidelines delineating what is and is not considered “public works” can be found in Labor Code sections: 1720 through 1720.9. “Public works” is defined in part as “[c]onstruction, alteration, demolition, installation, or repair work done under contract and paid for in whole or in part out of public funds.” According to the opinion in the case of Azusa Land Partners v Department of Indus. Relations (2010) 191 CA4th 1, even public improvements that are privately funded (without public funds) and constructed to satisfy regulatory improvements are subject to prevailing wages. The definition is broad enough to include renovation of existing buildings, not just the construction of new ones. (Oxbow Carbon & Minerals, LLC v Department of Indus. Relations (2011) 194 CA4th 538). In fact, the definition is so broad that it includes workers hauling and delivering ready-mixed concrete to perform public works contracts. (Lab Code §1720.9). Even maintenance work such as cutting tree branches alongside a highway is considered public works. (Reliable Tree Experts v Baker (2011) 200 CA4th 785).

Volunteers – These laws are not applicable to volunteer workers. The code defines volunteers as individual does work for a civic, charitable, or humanitarian reasons for a public agency or corporation qualified under Section 501(c)(3) of the Internal Revenue Code as a tax-exempt organization. This is work that is performed without promise, expectation, or receipt of any compensation. (Lab C §1720.4).

Charter Cities – Prevailing wage laws do not apply to Charter cities.

Federal Projects – These laws are also inapplicable to projects that are under the complete control of the federal government. (8 Cal Code Regs §16001(b)). A separate set of laws apply to those projects that is not discussed in this article.

In February of each year the California Department of Industrial Relations posts updated prevailing wage determinations that can be accessed here. These rates are specifically organized by geographic location (Northern California, Southern, California, etc.) and classification (i.e. mason, carpenter, drywall installer, etc.)

Step 1 – Find your craft & location:
First, head over to this link and follow the steps listed in one through six in the information table until you find your classification/craft and the location of the work you performed.

Step 2 – Determine your prevailing rate: Second, it is important to note that the determinations provide two important numbers, the first being the “basic hourly rate”, and the second being the “total hourly rate.” Employers in California are required to provide their employees the basic hourly rate as a minimum wage for work performed. This is the minimum amount of hourly monetary compensation that an employee must be paid. The total hourly rate is the minimum rate an employee must receive but also factors in fringe benefits including but not limited to health insurance, paid vacation time, or pension. When a company provides its employee a fringe benefit it is in effect providing it non-cash compensation, the total hourly rate allows the employer to offset the amount of actual cost of the fringe benefit. If the employer does not provide fringe benefits or chooses not to offset the fringe benefits, it must provide the total hourly rate to the employee as monetary compensation.

There can be serious ramifications for employers who engage in wage theft. Public works contractors/subcontractors that pay less than the prevailing rate in California may be assessed penalties, can be suspended from bidding or working on public works projects, and can also be subject in some circumstances to criminal prosecution if they failed to maintain code compliant payroll records. (See Ogundare v Department of Indus. Relations (2013) 214 CA4th 822; Lab Code §1771.1). Claimants can file a complaint with the DIR, or hire an employment lawyer to handle their claim for them. Often times workers will be surprised to learn that their employer may have also violated California overtime law, or that waiting time penalties may have accrued for their benefit because their employer failed to pay them a final paycheck of all the wages they were due on their termination or resignation.

As previously mentioned, claimants who believe they have not been paid appropriately can file a public works complaint with the Division of Labor Standards Enforcement (Public Works—Initial Report (DLSE-PW Form 1). Filing of the complaint initiates an investigation of the contractor/subcontractor. If violations are found, the Labor Commissioner will issue a citation and assessment notifying the public agency that awarded the public works project to the contract. The DLSE will instruct the agency to withhold funds due from the contractor to payout wages and penalties. The assessment is in writing, describes the basis of the violations and the amount of wages, forfeitures, and penalties due. The public agency then serves the contractor with a copy of the assessment and citation. If appropriate payments are not made within sixty days the contractor, subcontractor, and bonding company which secured the payment of wages will become liable for liquidated damages for an amount equal to the amount of unpaid wages. (Lab Code §1742.1(a)).

Yes, public works contractors are required by law to maintain accurate payroll records. These records must include the names, addresses, social security numbers, work classifications, straight and overtime hours worked, and the actual wages paid to each worker. (Lab Code §1776(a)). In addition, these payroll records must be certified by written declarations made under penalty of perjury of the company that the information is true and correct. ((Lab Code §1776(b.)). Contractors and subcontractors that fail to keep accurate payroll records are subject to criminal prosecution.