Recent legislation modifies the skilled and trained workforce requirement for certain public works projects, shifting much of the burden for compliance to subcontractors. The new law also authorizes the California Labor Commissioner to investigate suspected violations of the statute and impose civil penalties in specified circumstances.Background
In recent years, contractors have been required to utilize a "skilled and trained workforce" for "design-build" and "lease-leaseback" public works projects (see 2015 Client News Brief No. 8
; 2015 Client News Brief No. 71
; and 2016 Client News Brief No. 63
.) These requirements do not apply to publicly bid projects. Also, the skilled and trained workforce requirements may not apply if the public entity has entered into a project labor agreement covering the project.
These skilled and trained workforce requirements include two elements. First, all
of the workers performing work in designated apprenticeable occupations must have "at least as many hours of on-the-job experience as would be required to graduate from an apprenticeship program...;." Second, a minimum percentage of that workforce must be graduates of an apprenticeable program for the applicable occupation. This minimum threshold was originally set at 30% but is set to increase to 60% by 2020 for some trades. Other trades, including bricklayers, carpenters, drywall installers, plasterers, roofers, and stone masons, will remain at 30%.
Under current law, a contractor is required to provide monthly reports to the project owner that demonstrate compliance with these skilled and trained workforce requirements. In the event the contractor fails to provide the report or the report does not demonstrate compliance with the percentage requirements, the project owner must withhold all
further payments until the contractor provides a plan to achieve substantial compliance. As a result, noncompliance by one subcontractor, for even a small portion of work, has had the potential to hold up payment to the contractor for all of the work on the project.Assembly Bill 3018
Effective January 1, 2019, Assembly Bill (AB) 3018 amends Public Contract Code sections 2601 and 2602, and adds new section 2603, shifting some of the responsibility for skilled and trained workforce compliance to subcontractors. If the general contractor fails to comply with the monthly report requirements as a result of one noncompliant subcontractor, the project owner is required withhold 150% of the value of the monthly billing for that subcontractor only,
until that subcontractor demonstrates a plan to achieve substantial compliance, or until the subcontractor is substituted out in accordance with applicable law. The contractor is permitted (but not required) to withhold payment from the subcontractor. However, now the project owner will be permitted to pay the contractor for the other work on the project performed by the contractor or by other subcontractors.
AB 3018 also gives the Labor Commissioner authority to investigate suspected violations of the skilled and trained workforce requirements and impose a separate civil penalty up to $5,000 per month on non-compliant contractors. In situations where the Labor Commissioner finds that violations of the skilled and trained workforce requirements are willful, the contractor or subcontractor may be temporarily disqualified from bidding on public works projects.Takeaways
These changes to the skilled and trained workforce requirements shift the consequence of noncompliance to the responsible party. As a result, AB 3018 may make design-build and lease-leaseback projects more attractive for prospective general contractors. However, the increased burden on subcontractors to demonstrate compliance and the Labor Commissioner's oversight may deter subcontractors from participating in such projects. Public entities in regions of the state where there are a limited number of graduates from apprenticeship programs should carefully consider these changes before proceeding with a delivery method subject to skilled and trained workforce requirements.
If you have any questions about the skilled and trained workforce requirements, please contact the authors of this Client News Brief or an attorney at one of our eight offices
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