Labor Code Section 1720.9 Expands Prevailing Wage Obligations to Ready-Mix Drivers

06.01.2016

Assembly Bill 219, codified as Labor Code section 1720.9, expands the definition of "public works" to include "the hauling and delivery of ready-mixed concrete to carry out a public works contract, with respect to contracts involving any state agency, including the California State University and the University of California, or any political subdivision of the state." This new statute supersedes an earlier Department of Industrial Relations determination that distinguished work performed at a public works construction site from the supply of construction materials, in this case ready-mixed concrete.

his expansion of prevailing wage law is a landmark change from how prevailing wages have been set, departing from the general rule that prevailing wages are set by work performed at the location of the job site, and here, establishing a procedure to set wages based on the location of the de facto manufacture of the product, the ready mix batch plant.

In short, for public works contracts that are awarded on or after July 1, 2016, the hauling and delivery of ready-mixed concrete from a commercial plant to a public works job will be subject to California’s prevailing wage law. Hauling and delivery essentially means the work that ready-mix drivers do, including receiving the concrete at the supplier, transporting it to the project, and returning to the plant or supplier. As explained in a recent fact sheet issued by the DIR, "the entire delivery process and the return trip are covered and must be paid at the applicable prevailing wage rate."

(https://www.dir.ca.gov/ConcreteDeliveryPrevailingWage/AB_219_Fact_Sheet.html)

This legislative expansion means new costs and risks for contractors and ready-mix suppliers (and, perhaps eventually, other material suppliers) who are working on public works projects in California. It could also be a precursor to a new legislative push to expand the scope of prevailing wages to off-site fabrication, most recently rejected by California Courts in Russ Will Mechanical (2014) 229 Cal.App.4th 192.

What do contractors need to know about Labor Code section 1720.9?

• Ready-mix haulers delivering materials to public works projects will be considered public works contractors under Labor Code section 1722.1 and must register with the Department of Industrial Relations, as is required under Labor Code section 1725.5. Go to https://efiling.dir.ca.gov/PWCR/ to register, the cost is $300/year and failure to comply may result in a fine of $2000
• and disqualification from future prevailing wage jobs;
• Ready-mix suppliers must enter into a written subcontract agreement with the contractor. The agreement must comply with prevailing wage laws. It remains uncertain whether purchase orders and invoices that are commonly used will suffice. The "subcontractor" status is "solely for purposes of [Labor Code sections 1720-1861]," which means that the subcontractors will have to register with the DIR and pay prevailing wage rates, but that will not, for example, make the company a "subcontractor" under the mechanics lien and other laws;
• The rate of pay applicable to the ready mix drivers is pursuant to the prevailing wage determination for "Drivers – Mixer Trucks," and this will apply to all of the work they do. Pursuant to a 2001 opinion letter from the DIR, these workers are covered by Wage Order 1, not Wage Order 16. The applicable prevailing wage rate for the ready-mix drivers will be the rate for the geographic area in which the factory or batch plant is located.
• Within three working days after ready-mix drivers have been paid for the work performed on public jobs, the suppliers must submit certified payroll records ("CPR") to the contractor engaging the supplier, as well as the general contractor, accompanied by a written time record certified by the driver. (For most ready-mix suppliers, CPR’s will be an entirely new system they will have to implement.) It remains unclear in what form those records will need to be provided. Once the DIR’s electronic CPR system is fully in place, which is expected to occur in August 2016, contractors will have access to the subcontractors’ CPR’s when they are submitted to the DIR, however that will not necessarily meet the 3-day deadline nor will it include the certified driver time records. AB 219 does not indicate what the ramifications will be for failing to meet the 3-day deadline. The driver’s certified time records are not required to be in any specific form, either, but they must "be certified by each driver for the performance of job duties" used by the DIR in determining wage rates under Labor Code section 1773.
• As many already do, ready-mix suppliers will need to make sure that they are tracking the hours worked by their drivers on public works and private works projects so that they are submitting accurate CPR’s.
• Public works contractors will need to take steps to confirm that their ready-mix subcontractors are complying with these new requirements because of joint liability for improper payments or incomplete payroll records.

Ready-mix suppliers and contractors who use ready-mix suppliers need to be ready to address these requirements for contracts awarded on or after July 1, 2016. These requirements are novel and may be the subject of clean up legislation to address some of the open issues.

The AALRR Public Works Team will be actively engaged in following this process and in its continued advocacy for the construction industry. You may contact Thomas W. Kovacich, Andres C. Hurwitz, or Robert Fried at AALRR with any questions you may have regarding AB 219 or other prevailing wage issues.