New Law Subjects Public Agencies to Penalties Relating to Prevailing Wage Projects

On June 27th, Governor Brown signed into law SB 96 which, as a budget trailer bill, took effect immediately.  Almost hidden in the 50-plus page bill are amendments to the Labor Code that significantly impact every public agency regarding (1) the late filing of a special form entitled “PWC-100” and (2) the use of contractors or subcontractors not registered with the Department of Industrial Relations (DIR).  Under SB 96, for the first time, DIR has the authority to impose monetary and non-monetary penalties, including stop orders, criminal prosecution and denial of state funding, on a public agency that does not comply with the new requirements.

Prior Law – No Penalties

PWC 100 is a form, filed electronically, with DIR by a public agency subsequent to the award of a contract that is subject to prevailing wage requirements.  The form, essentially, provides notice to DIR of a prevailing wage project and information about that project.  Prior to SB 96, applicable law required a public agency to file the PWC 100 with DIR within five days of award of the contract.  Applicable law also specified that a public agency could only use contractors and subcontractors on prevailing wage projects that were registered with DIR.  However, there was no penalty on a public agency for noncompliance with either requirement.  SB 96 dramatically changed that.

New Law – Numerous Penalties

Under the new law, DIR may impose the following penalties on a public agency that awards a contract which is either (a) greater than $25,000 when the contract is for construction, alteration, demolition, installation, or repair work or (b) greater than $15,000 if the contract is for maintenance work.

• PWC 100 PenaltiesUnder SB 96, a public agency must still file a PWC 100 with DIR; however, the public agency now must file the form within the lesser of 30 days of the contract’s award or the first day on which the contractor has workers employed on the project. The penalty is $100 per day, with a cap of $10,000, for filing a late PWC 100. In addition, DIR may impose a penalty of $100 per day, for up to one hundred days, if less than 30 days from late filing of a PWC 100, a public agency makes the final payment to an unregistered contractor or subcontractor.
• Unregistered Contractors/Subcontractors PenaltiesUnder the new law, DIR may impose a penalty of $100 per day, with a cap of $10,000, for contracting with an unregistered contractor or subcontractor.  SB 96 also adds a non-monetary penalty for noncompliance.  SB 96 provides that DIR may issue a stop order on a public works project, prohibiting the use of an unregistered contractor or subcontractor, until the contractor or subcontractor has registered with DIR.  A public agency which fails to comply with the stop order is subject to criminal prosecution, punishable as a misdemeanor, by imprisonment not to exceed 60 days, or a fine not to exceed $10,000, or both.
• Willful Violation PenaltiesIf DIR determines that a public agency has willfully violated these new requirements with respect to two or more public works contracts in any 12-month period, the public agency shall be ineligible to receive state funding or financial assistance for any construction project undertaken by or on behalf of the public agency for one year.

Please note again, SB 96 is effective immediately and only applies to contracts for the dollar amounts specified above.  It is important to note that the requirement to pay prevailing wages applies not only to contracts subject to public bidding requirements under the Public Contract Code, but also to “public projects”, as more broadly defined in the Labor Code.

We strongly encourage each public agency to become familiar with the new requirements, and to review its procedures to assure compliance.  If you have questions regarding the new requirements, or would like recommendations on the development of procedures to avoid violation of SB 96, please contact Eric S. Casher.