Update to California's Prevailing Wage Laws: AB219 Fixes the Loophole for Ready-Mixed Concrete Drivers

ALERT: Please note that enforcement of AB219 is currently stayed, based on the California Central District Court case, Allied Concrete and Supply Co. et al v. Edmund Gerald Brown Jr., et al, Case No. 2:16:CV-04830. The Central District Court granted a preliminary injunction on October 18, 2016, staying enforcement of Labor Code § 1720.9 to promote the public interest, as the plaintiffs raised serious questions that this section violates the Equal Protection Clause of the Fourteenth Amendment and the public’s interest in keeping public works project costs low while the constitutionality of this code provision is adjudicated. The court applied a sliding scale, four-factor test in granting its preliminary injunction. Further updates will follow as the case progresses.

The Registry (August 14, 2016) - California's prevailing wage laws were established to “level the playing field” when bidding on a public works project. In general, public works means construction, installation, demolition, alteration or repair work performed under a contract partially or completely paid out of public funds. This includes pre and post-construction work pertaining to the public works project (See California Labor Code §1720). All bidders on a public works project must use the same wage rates (as determined by the California Department of Industrial Relations), creating certainty that a contractor will not be awarded a public works contract based on paying lower wage rates than a competitor. Moreover, California law requires that all workers employed on a public works project are paid no less than the general prevailing rate of per diem wages.

Until July 1, 2016, a ready-mixed concrete driver on a public works contract was exempt from California’s prevailing wage laws (per Labor Code § 1720 et al). Now, these drivers must receive the applicable prevailing wage for each roundtrip delivery to the project site.

AB219, signed last October by California Governor Jerry Brown, went into effect July 1, 2016. AB219 expanded the definition of “public works” under Labor Code § 1770 to include “the hauling and delivery of ready-mixed concrete to carry out a public works contract.” (Labor Code § 1720.9(a)). The statute specifically defines “ready-mixed concrete” as “concrete that is manufactured in a factory or a batching plant, according to a set recipe, and then delivered in a liquefied state by mixer truck for immediate incorporation into a project.” (Labor Code § 1720.9(b)).

Before AB219, ready-mixed concrete drivers hired by a materials supplier were exempt from prevailing wage statutes, but those hired by a contractor were subject to these statutes. The law closes this loophole, unifying prevailing wage laws to apply to all ready-mixed concrete drivers serving public works projects, including drivers employed by contractors and manufacturers.

Opponents of AB219 argued the bill ignored a longstanding distinction in prevailing wage law:  materials suppliers are not subject to prevailing wage law statutes. They contended that ready-mixed concrete is a finished product, delivered to the project in an unfinished state pursuant to a purchase order. The opponents also stressed that the bill imposed significant new liability and administrative burdens on general contractors and concrete suppliers to public works projects.

Aware of this opposition, the legislature made it clear that the law does not expand prevailing wage statutes to all materials drivers. Instead, it merely closed a loophole in the prior statutory scheme as to ready-mixed concrete drivers.

But beware the high-costs of noncompliance with AB219. At the public works project’s completion, a contractor must file a notice of completion with the county recorder’s office in the county where the project is located. (Labor Code § 1741(a)). This begins an unpaid party’s 18 month time limit to bring suit against the contractor for a prevailing wage violation. (Id.)  Note that if the notice of completion is not filed, the time limit to bring a prevailing wage claim is tolled until its filing. (Id.) 

The Labor Commission determines whether a contractor violated the prevailing wage laws. If it concludes a contractor violated AB219, it will issue an assessment against the contractor and subcontractor who employed the ready-mixed concrete driver. (Id.)  That contractor and subcontractor are held jointly and severally liable for the prevailing wage violation. (Labor Code § 1743). Contractors should take heed that the assessment may include: unpaid wages plus a 10% per annum interest accruing from the date the wages were due and payable, liquidated damages of the amount of unpaid wages, civil penalties of $40 - $200 per day for each day prevailing wages were not paid, as well as costs and fees. (Labor Code § 1741). If the Labor Commission determines the contractor willfully violated these laws, contractors can face criminal misdemeanor charges.

Finally, the Labor Commission maintains a public list of the names of each contractor and subcontractor who commit a wrongful violation of the prevailing wage statute. (Labor Code § 1741(c)). The contractor’s name remains on this list for 3 years, along with the date and amount of the assessment and the amount collected until satisfied. (Id.)

Contractors should take note of the following specifications provided for within AB219:

1. Confirm that all ready-mixed concrete drivers receive the prevailing wage for the geographic area where the batching plant is located and ensure they are paid that prevailing wage from receipt of the concrete at the batching plant to his or her return trip to the plant. (Labor Code § 1720.9(d)).
2. Ensure that each ready-mix supplier enters into a written subcontract with its contractor consumer, ensuring payments of prevailing wages on that certain public works project. (Labor Code § 1720.9(e)).
3. Confirm that the ready-mix supplier provides certified payroll within three working days after the employee on the project is paid, based on a driver’s  formal certification of hours worked and based on Labor Code § 1776(a). (Labor Code § 1720.9(f)).

Double-check that the prevailing wage is paid to avoid the high-cost of noncompliance with AB219 and all prevailing wage laws. (Labor Code §§ 1741, 1743).