Workers Comp Zone


One down, a bunch more to go.

That’s the legislative update as of this morning.

Governor Brown has signed AB 436: … ptered.pdf

According to the bill summary:
“This bill would also provide that, upon an order of the Director of Finance, a loan in an amount not to exceed $4,300,000 shall be made from the Uninsured Employers Benefit Trust Fund to the State Public Works Enforcement Fund, thereby depositing additional moneys into a continuously appropriated fund.”

AB 436 is a bill that organized labor wanted, particularly the various building trades unions.The bills allows a loan from the UEBT of up to $4.3 million to create a program for monitoring prevailing wages on public works projects.

Here is a bit of background from the Assembly analysis:
“The laws regulating public works contracts require, among other
things, that contractors and subcontractors pay their workers
not less than the general prevailing wage rates as determined under
the Labor Code. State prevailing wage requirements are enforced
both by contracting agencies, known as “awarding bodies,” through
review of certified payroll records and taking cognizance of
violations, and by the state Labor Commissioner (also known as the
Chief of the Division of Labor Standards Enforcement), through the
investigation of complaints and issuance of civil wage and penalty

“Since the adoption of Labor Code Section 1771.5 in 1989, the
Director of DIR also has approved “labor compliance programs”
(LCPs) to monitor and enforce compliance with state prevailing wage
requirements on behalf of awarding bodies. The first DIR-approved
LCPs were established on a voluntary basis to obtain higher
exemptions from prevailing wage requirements under the law.
However, the Legislature later began to require awarding bodies to
use LCPs to monitor and enforce compliance on specified projects,
including school construction projects funded by the
Kindergarten-University Public Education Facilities Bond Acts of
2002 and 2004, projects funded by the Water Security, Clean
Drinking Water, Coastal and Beach Protection Act of 2002, and
projects built under a variety of statutes authorizing design-build

“Dissatisfaction with the overall performance of LCPs led to the
adoption of SB 9 X2 (Padilla), Chapter 7, Statutes of the 2009-2010
Second Extraordinary Session in 2009. Essentially, SB 9 X2
replaced the LCP requirement in a variety of statutes with a
requirement to pay a fee for compliance monitoring and enforcement
by DIR on the same types of projects covered by those statutes.
SB 9 X2 also expanded the number of projects that would be covered
by this requirement by extending it to any project funded in whole
or in part by a state public works bond rather than just the four
bonds that previously had been subject to an LCP requirement.”

“SB 9 X2 required the Director to establish the fees with the
approval of the Department of Finance for this service and to adopt
reasonable regulations setting forth the manner in which DIR would
enforce compliance on covered projects. The legislation further
provided that the new fee-based monitoring and enforcement system
would only apply to projects awarded after the fees and regulations
had been adopted. Thereafter, the Director proposed and adopted
regulations that, among other things, addressed the new system’s
applicability, notices, fees, fee waivers, the establishment of a
Compliance Monitoring Unit (CMU), payroll record review and other
CMU monitoring and investigative activities, complaints, and the
withholding of contract payments when payroll records are
delinquent or inadequate. These regulations were approved on June
29, 2010, and became effective on August 1, 2010, making the
provisions of SB 9 X2 effective for projects for which the contract
was awarded on or after that date.”

“However, subsequent to the adoption of these regulations, bond
counsel for the State Public Works Board indicated that it was
unwilling to write an unqualified opinion letter for specified bond
sales due to potential questions about the legality of using bond
funds to pay for fees in the manner prescribed in SB 9 X2 and the

“As a result, DIR sought to amend and delete portions of the
regulations on a temporary emergency basis, for the purpose of
suspending and postponing the commencement of fee-based compliance
monitoring and enforcement by DIR on public works projects until
these legal issues were resolved.”

“According to DIR, discussions have occurred over the past several
months with bond counsel and other interested stakeholders
regarding resolving the potential legal questions at issue with the
funding mechanism. Therefore, according to DIR this bill would
make the necessary statutory changes to address these potential
issues and allow the enforcement mechanism to move forward.”

AB 436 is a bill that employers opposed. Since the UEBT is one of the funds that relies on employer assessments, there was opposition from some employer groups who oppose use of assessment funds for other purposes, even if for a loan that is to be paid back.

Dean Fryer of the California Department of Industrial Relations is quoted in WorkCompCentral ( this morning as saying that
the money will be repaid and that the prevailing wage compliance fund will be self-sustaining.

Stay tuned.

Julius Young

Category: Political developments