California Department of Industrial Relations Announces Public Works Enforcement Task Force

By Scott K. Dauscher and Christopher S. Andre

On May 18, 2010, the California Department of Industrial Relations issued a press release announcing it filed this week proposed regulations to establish a "Compliance Monitoring Unit" or "CMU," the stated purpose of which is "ensuring compliance with the State's prevailing wage laws on public works projects in California." According to the the press release, "[t]he CMU will review certified payroll records, verify that workers on the projects are paid the correct rate of pay for the work performed, and will enforce compliance with pay, overtime, record keeping and hours limitation requirements." The press release states the CMU is expected to be operational this August after the proposed regulations are approved.

In light of this development, employers working on construction projects funded in whole or in part by public funds should consider taking steps to ensure they are complying with applicable public works law and regulations. Penalties for non-compliance can be substantial and can include a contractor being barred from working on public works projects in the future.

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DIR Director Reverses Original Decision: Now Prevailing Wages Are NOT Required for Certain Off-Site Fabrication

By Robert Fried

California contractors were stunned in November 2008 when the Director of the California Department of Industrial Relations ("DIR") issued a determination that a specific contractor, Russ Will Mechanical, should have paid prevailing wages to its workers who fabricated HVAC parts in the company’s permanent off-site fabrication shop for a specific public works project. Russ Will Mechanical filed an administrative appeal of the determination.

Now, the DIR has granted the appeal and reversed the 2008 determination. Russ Will Mechanical did not have to pay prevailing wage to its workers in this specific case. This is excellent news for California contractors concerned about the cost and ambiguities of the original determination. Click here to download and read the DIR Decision on Administrative Appeal - Russ Will Mechanical.

In his May 3, 2010 decision, the DIR Director responded favorably to the argument that the DIR should interpret California prevailing wage law consistently with the federal prevailing wage law, known as the Davis-Bacon Act. According to the decision, California courts have relied on federal cases interpreting the Davis-Bacon Act when they have interpreted California prevailing wage law. As a result, interpretations of the state prevailing wage law are “in harmony” with federal prevailing wage law. When this approach is taken to the Russ Will Mechanical case, the conclusion is that the specific case of off-site fabrication at issue was not done in the execution of public works construction as defined under California law.

Editor's note: Robert served as interested party counsel in this case.