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May 4, 2017

The Impact of SB54 on the Construction Industry


SB54—the 2014 law requiring oil refiners to pay contractors "prevailing wages"—continues to impact the construction industry. The impact will accelerate due to the court decision in December 2016 upholding the validity of the statute and the imminent expiration of the Red Circle contracts.

Contractors working in refineries should prepare for the following:

  • LAWSUITS. AALRR is now defending contractors from lawsuits alleging violations of SB 54. The litigation alleges that the employees are not being paid the prevailing wage and that the contractor`s reliance on the exception for contracts executed before January 1, 2014 is not valid, as the contract is just an open-ended purchase order and the refinery is not obligated to use the contractor for a specific scope of work.
  • These lawsuits include referrals from union representatives to Plaintiffs’ lawyers. We expect many more of these lawsuits. If the contract defense is unsuccessful, it will put many contractors under extreme financial pressure.
  • MANPOWER. When the Red Circle contracts expire, contractors will be required to use a workforce of 60 percent graduated journeyman. Most contractors are on top of this issue, but some are not.
  • PLAs. PBF Energy signed a Project Labor Agreement [PLA] requiring that all work be done by the trades. There continue to be industry rumors that Chevron and Tesoro will sign similar PLAs. As a result, many contractors are forming dual shops so they can compete in both markets. We expect this trend to continue.

AALRR has formed an SB54 compliance team consisting of Steve Atkinson, Thomas Lenz, Ron Novotny, Robert Fried, Brent Garrett, Andres Hurwitz, and Brian Wheeler. If you have any questions about recent developments, feel free to contact any of these attorneys.

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