Employer Payments to Labor-Management Cooperation Committees Part of Prevailing Wage Rates in California

Although employer payments to Labor-Management Cooperation Committees as mandated in collective bargaining agreements do not directly benefit employees, the State of California incorporates those payments into prevailing wage determinations for construction trade occupations on public works projects. Contractors that make payments to these trusts can take them as a credit against the obligatory per diem total wage rate.

The lobbyist for the California State Council of Laborers had California State Senator Joe Dunn “gut-and-amend” the language of his Senate Bill 868 on September 4, 2003, shortly before the legislature adjourned for the year. Existing language in the bill (sponsored by the California State Council of Laborers) was stripped that would have required governments to provide Labor-Management Cooperation Committees with an exclusive right to obtain contractors’ certified payroll records with the names of the employees not obliterated. (Employee addresses already had to be provided to Labor-Management Cooperation Committees because of Senate Bill 588, signed into law by Governor Gray Davis in 2001.)

All-new language in Senate Bill 868 would – for the first time – includes employer payments to Labor-Management Cooperation Committees into the state’s prevailing wage determinations. Three new categories of employer payments were added as California Labor Code Section 1773.1(a)(7-9):

(7) Worker protection and assistance programs or committees established under the federal Labor Management Cooperation Act of 1978 (Section 175a of Title 29 of the United States Code), to the extent that the activities of the programs or committees are directed to the monitoring and enforcement of laws related to public works.

(8) Industry advancement and collective bargaining agreements administrative fees, provided that these payments are required under a collective bargaining agreement pertaining to the particular craft, classification, or type of work within the locality or the nearest labor market area at issue.

(9) Other purposes similar to those specified in paragraphs (1) to (8), inclusive.

As shown in the transcript of the one legislative committee hearing on California Senate Bill 868, even the lobbyists pushing the bill had some difficulty explaining it. Bill analyses dated September 10, 2003 for the Senate Floor and for the Assembly Floor identified the California State Council of Laborers as the “source” or “sponsor” of the bill and stated the following:

According to the bill’s sponsor, the California State Council of Laborers, incorporating the above new types of employer payments into the definition of prevailing wage will make more funds available to enforce the prevailing wage requirement as well as secure future construction work, thereby benefiting workers with greater pay and greater long-term job security. The sponsor also states that, arguably, labor-management cooperation committee funds are already included within the definition of prevailing wage, but industry advancement funds are not. This bill clarifies that both are included.

In seven days, Democrats dutifully whipped the bill through the legislative process, without adequate scrutiny, at the demand of lobbyists for unions and unionized construction companies. Governor Gray Davis signed it into law only a few weeks before he was recalled.

In February 2004, after Senate Bill 868 took effect, the California Department of Industrial Relations began identifying employer payments to these various trust funds as designated in the applicable collective bargaining agreement for a specific construction trade in a specific geographic region, totaling up the payments, and indicating the total amount in a column designated “Other” in the prevailing wage determinations. This practice continues as of 2013.

Employers that make such payments are authorized to take credit for those payments against the total per diem prevailing wage rate. Employers that don’t make payments to such trust funds have to pay the “Other” amount as additional wages to employees.

Instructions for “Gut and Amend” of Senate Bill 868

Assembly Labor and Employment Committee Analysis of Senate Bill 868

Transcript of the One Legislative Hearing on California Senate Bill 868 – Assembly Labor and Employment Committee – September 8, 2003

Senate Bill 868 as signed into law by soon-to-be-recalled Governor Gray Davis

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